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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------------
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2003
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 0-12220
THE FIRST OF LONG ISLAND CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
NEW YORK 11-2672906
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
10 Glen Head Road, Glen Head, New York 11545
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (516) 671-4900
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT MAY 5, 2003
----- --------------------------
Common stock, par value 4,068,096
$.10 per share
THE FIRST OF LONG ISLAND CORPORATION
MARCH 31, 2003
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 2003 And December 31, 2002 1
Consolidated Statements Of Income
Three Months Ended March 31, 2003 And 2002 2
Consolidated Statements Of Changes In
Stockholders' Equity
Three Months Ended March 31, 2003 And 2002 3
Consolidated Statements Of Cash Flows
Three Months Ended March 31, 2003 And 2002 4
Notes To Consolidated Financial Statements 5
Item 2. Management's Discussion And Analysis Of
Financial Condition And Results Of Operations 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 16
Item 4. Controls and Procedures 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
CERTIFICATIONS 19
ITEM 1. - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2003 2002
------------- -------------
Assets:
Cash and due from banks ..................................................... $ 36,881,000 $ 33,229,000
Federal funds sold .......................................................... 60,000,000 34,000,000
------------- -------------
Cash and cash equivalents ................................................. 96,881,000 67,229,000
------------- -------------
Investment securities:
Held-to-maturity, at amortized cost (fair
value of $266,985,000 and $282,438,000) ........................... 257,720,000 273,102,000
Available-for-sale, at fair value (amortized cost
of $162,889,000 and $173,794,000) ................................. 169,567,000 180,406,000
------------- -------------
427,287,000 453,508,000
------------- -------------
Loans:
Commercial and industrial ............................................ 37,908,000 37,329,000
Secured by real estate ............................................... 225,928,000 217,730,000
Consumer ............................................................. 5,757,000 6,414,000
Other ................................................................ 494,000 628,000
------------- -------------
270,087,000 262,101,000
Unearned income ...................................................... (933,000) (993,000)
------------- -------------
269,154,000 261,108,000
Allowance for loan losses ............................................ (2,155,000) (2,085,000)
------------- -------------
266,999,000 259,023,000
------------- -------------
Bank premises and equipment, net ............................................ 6,260,000 6,398,000
Other assets ................................................................ 6,264,000 6,184,000
------------- -------------
$ 803,691,000 $ 792,342,000
============= =============
Liabilities:
Deposits:
Checking ............................................................. $ 264,474,000 $ 256,444,000
Savings and money market ............................................. 417,499,000 412,815,000
Time, other .......................................................... 17,033,000 17,359,000
Time, $100,000 and over .............................................. 14,253,000 13,107,000
------------- -------------
713,259,000 699,725,000
Accrued expenses and other liabilities ...................................... 2,024,000 4,492,000
Current income taxes payable ................................................ 1,064,000 289,000
Deferred income taxes payable ............................................... 2,357,000 2,394,000
------------- -------------
718,704,000 706,900,000
------------- -------------
Commitments and Contingent Liabilities
Stockholders' Equity:
Common stock, par value $.10 per share:
Authorized, 20,000,000 shares;
Issued and outstanding, 4,067,535 and 4,161,173 shares .................. 407,000 416,000
Surplus ..................................................................... 124,000 724,000
Retained earnings ........................................................... 80,447,000 80,354,000
------------- -------------
80,978,000 81,494,000
Accumulated other comprehensive income net of tax ........................... 4,009,000 3,948,000
------------- -------------
84,987,000 85,442,000
------------- -------------
$ 803,691,000 $ 792,342,000
============= =============
See notes to consolidated financial statements
1
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31,
----------------------------
2003 2002
---------- ----------
Interest income:
Loans ........................................................................ $4,803,000 $3,977,000
Investment securities:
Taxable .................................................................. 3,098,000 3,222,000
Nontaxable ............................................................... 1,504,000 1,438,000
Federal funds sold ........................................................... 120,000 167,000
---------- ----------
9,525,000 8,804,000
---------- ----------
Interest expense:
Savings and money market deposits ............................................ 939,000 1,028,000
Time deposits ................................................................ 114,000 190,000
---------- ----------
1,053,000 1,218,000
---------- ----------
Net interest income ...................................................... 8,472,000 7,586,000
Provision for loan losses ........................................................ 75,000 100,000
---------- ----------
Net interest income after provision for loan losses .............................. 8,397,000 7,486,000
---------- ----------
Noninterest income:
Investment Management Division income ........................................ 320,000 284,000
Service charges on deposit accounts .......................................... 889,000 895,000
Net gains on sales of available-for-sale securities .......................... 123,000 --
Other ........................................................................ 153,000 150,000
---------- ----------
1,485,000 1,329,000
---------- ----------
Noninterest expense:
Salaries ..................................................................... 2,512,000 2,393,000
Employee benefits ............................................................ 1,193,000 1,052,000
Occupancy and equipment expense .............................................. 834,000 744,000
Other operating expenses ..................................................... 1,146,000 1,112,000
---------- ----------
5,685,000 5,301,000
---------- ----------
Income before income taxes ............................................... 4,197,000 3,514,000
Income tax expense ............................................................... 1,104,000 866,000
---------- ----------
Net income ............................................................... $3,093,000 $2,648,000
========== ==========
Weighted average (Note 2):
Common shares ................................................................ 4,116,325 4,186,443
Dilutive stock options ....................................................... 83,144 47,906
---------- ----------
4,199,469 4,234,349
========== ==========
Earnings per share (Note 2):
Basic ........................................................................ $ .75 $ .63
========== ==========
Diluted ...................................................................... $ .74 $ .62
========== ==========
See notes to consolidated financial statements
2
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
------------------------------------------------------------------------------------------------
Three Months Ended March 31, 2003
------------------------------------------------------------------------------------------------
Accumulated
Other
Common Stock Compre- Compre-
------------ hensive Retained hensive
Shares Amount Surplus Income Earnings Income Total
--------- --------- ----------- ----------- ------------ ----------- ------------
Balance, January 1, 2003 ....... 4,161,173 $ 416,000 $ 724,000 $ 80,354,000 $ 3,948,000 $ 85,442,000
Net Income ................... $ 3,093,000 3,093,000 3,093,000
Repurchase and retirement
of common stock ............ (111,112) (11,000) (3,964,000) (3,975,000)
Exercise of stock options .... 17,474 2,000 322,000 324,000
Tax benefit of stock options . 42,000 42,000
Unrealized gains on available-
for-sale-securities, net of
income taxes ............. 61,000 61,000 61,000
Transfer from retained
earnings to surplus ........ 3,000,000 (3,000,000) --
-----------
Comprehensive income ......... $ 3,154,000
--------- --------- ----------- =========== ------------ ----------- ------------
Balance, March 31, 2003 ........ 4,067,535 $ 407,000 $ 124,000 $ 80,447,000 $ 4,009,000 $ 84,987,000
========= ========= =========== ============ =========== ============
------------------------------------------------------------------------------------------------
Three Months Ended March 31, 2002
------------------------------------------------------------------------------------------------
Accumulated
Other
Common Stock Compre- Compre-
------------ hensive Retained hensive
Shares Amount Surplus Income Earnings Income Total
--------- --------- ----------- ----------- ------------ ----------- ------------
Balance, January 1, 2002 ........ 2,792,902 $ 279,000 $ 955,000 $ 72,550,000 $ 962,000 $ 74,746,000
Net Income .................... $ 2,648,000 2,648,000 2,648,000
Repurchase and retirement
of common stock ............. (10,777) (1,000) (400,000) (401,000)
Exercise of stock options ..... 8,464 1,000 127,000 128,000
Unrealized losses on available-
for-sale-securities, net of
income taxes .............. (384,000) (384,000) (384,000)
-----------
Comprehensive income .......... $ 2,264,000
===========
Tax benefit of stock options .. 2,000 2,000
--------- --------- ----------- ------------ ----------- ------------
Balance, March 31, 2002 ......... 2,790,589 $ 279,000 $ 684,000 $ 75,198,000 $ 578,000 $ 76,739,000
========= ========= =========== ============ =========== ============
See notes to consolidated financial statements
3
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
------------------------------------
2003 2002
------------ ------------
Cash Flows From Operating Activities:
Net income ...................................................................... $ 3,093,000 $ 2,648,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses .................................................... 75,000 100,000
Deferred income tax provision (credit) ....................................... (41,000) 31,000
Depreciation and amortization ................................................ 326,000 320,000
Premium amortization on investment securities, net ........................... 1,097,000 601,000
Gains on sales of available-for-sale securities .............................. (123,000) --
Decrease in prepaid income taxes ............................................. -- 1,000
Increase in other assets ..................................................... (80,000) (281,000)
Decrease in accrued expenses and other liabilities ........................... (1,068,000) (627,000)
Increase in income taxes payable ............................................. 832,000 678,000
------------ ------------
Net cash provided by operating activities .................................. 4,111,000 3,471,000
------------ ------------
Cash Flows From Investing Activities:
Proceeds from sales of available-for-sale securities ............................ 124,000 --
Proceeds from maturities and redemptions of investment securities:
Held-to-maturity ............................................................. 26,535,000 49,148,000
Available-for-sale ........................................................... 18,249,000 2,350,000
Purchase of investment securities:
Held-to-maturity ............................................................. (11,985,000) (27,232,000)
Available-for-sale ........................................................... (7,611,000) (36,009,000)
Net increase in loans to customers .............................................. (8,051,000) (8,433,000)
Purchases of bank premises and equipment ........................................ (188,000) (32,000)
Proceeds from sale of equipment ................................................. -- 3,000
------------ ------------
Net cash provided by (used in) investing activities .......................... 17,073,000 (20,205,000)
------------ ------------
Cash Flows From Financing Activities:
Net increase in total deposits .................................................. 13,534,000 46,649,000
Proceeds from exercise of stock options ......................................... 324,000 128,000
Repurchase and retirement of common stock ....................................... (3,975,000) (401,000)
Cash dividends paid ............................................................. (1,415,000) (1,200,000)
------------ ------------
Net cash provided by financing activities .................................... 8,468,000 45,176,000
------------ ------------
Net increase in cash and cash equivalents .......................................... 29,652,000 28,442,000
Cash and cash equivalents, beginning of year ....................................... 67,229,000 55,209,000
------------ ------------
Cash and cash equivalents, end of period ........................................... $ 96,881,000 $ 83,651,000
============ ============
Supplemental Schedule of Noncash:
Investing Activities
Unrealized gains (losses) on available-for-sale securities ...................... $ 66,000 $ (653,000)
Writeoff of premises and equipment against reserve .............................. -- 60,000
Financing Activities
Tax benefit from exercise of employee stock options ............................. 42,000 2,000
The Corporation made interest payments of $1,060,000 and $1,237,000 and income
tax payments of $314,000 and $157,000 during the first quarters of 2003 and
2002, respectively.
See notes to consolidated financial statements
4
THE FIRST OF LONG ISLAND CORPORATION AND SUBSIDIARY
MARCH 31, 2003
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accounting and reporting policies of the Corporation reflect banking
industry practice and conform to generally accepted accounting principles in the
United States. In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported asset and
liability balances and revenue and expense amounts and the disclosure of
contingent assets and liabilities. Actual results could differ significantly
from those estimates.
The consolidated financial statements include the accounts of The First of
Long Island Corporation (the "Corporation") and its wholly-owned subsidiary, The
First National Bank of Long Island (the "Bank") (collectively referred to as the
"Corporation"). The Corporation's financial condition and operating results
principally reflect those of the Bank. All intercompany balances and amounts
have been eliminated.
The consolidated financial information included herein as of and for the
periods ended March 31, 2003 and 2002 is unaudited; however, such information
reflects all adjustments which are, in the opinion of management, necessary for
a fair statement of results for the interim periods. The December 31, 2002
consolidated balance sheet was derived from the Company's December 31, 2002
audited consolidated financial statements.
2. STOCK SPLIT
On June 18, 2002, the Corporation declared a 3-for-2 stock split paid by
means of a 50% stock dividend on July 24, 2002. Where applicable, all
comparative share and per share amounts included in the consolidated financial
statements, notes thereto and management's discussion and analysis of financial
condition and results of operations for the three months ended March 31, 2002
have been adjusted to reflect the effect of the split.
3. STOCK-BASED COMPENSATION
At March 31, 2003, the Corporation had two stock option and appreciation
rights plans. The Corporation accounts for those plans under the recognition and
measurement principles of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related Interpretations. No
stock-based employee compensation cost is reflected in net income for stock
options, as all options granted under those plans have an exercise price equal
to the market value of the underlying common stock on the date of grant. If
there were any stock appreciation rights outstanding, compensation costs would
be recorded annually based on the quoted market price of the Corporation's stock
at the end of the period.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 148 "Accounting for Stock-Based
Compensation--Transition and Disclosure" ("SFAS No. 148") in December 2002. SFAS
No. 148 amends the disclosure and certain transition provisions of Statement of
Financial Accounting Standards No. 123 "Accounting for Stock Based
Compensation". The new disclosure provisions are effective for financial
statements for fiscal years ending after December 15, 2002 and for
5
financial reports containing condensed financial statements for interim periods
beginning after December 15, 2002.
The following table provides the disclosures required by SFAS No. 148 and
illustrates the effect on net income and earnings per share if the Corporation
had applied the fair value recognition provisions of SFAS No. 123 to stock-based
employee compensation.
Three Months Ended
-----------------------------
3/31/03 3/31/02
--------- ---------
(in thousands)
Net income, as reported ....................................... $ 3,093 $ 2,648
Deduct: Total cost of stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects .............................. (84) (52)
--------- ---------
Pro forma net income .......................................... $ 3,009 $ 2,596
========= =========
Earnings per share:
Basic - as reported ......................................... $ 0.75 $ 0.63
Basic - pro forma ........................................... $ 0.73 $ 0.62
Diluted - as reported ....................................... $ 0.74 $ 0.62
Diluted - pro forma ......................................... $ 0.72 $ 0.61
4. NEW ACCOUNTING PRONOUNCEMENTS
In November 2002, the Financial Accounting Standards Board issued FASB
Interpretation No. 45 ("FIN No. 45"), "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others." The Corporation adopted the disclosure provisions of FIN No. 45 in the
fourth quarter of 2002 and, for guarantees issued or modified after December 31,
2002, adopted the initial recognition and measurement provisions on January 1,
2003. Adoption of the initial recognition and measurement provisions did not
impact the Corporation's financial condition or results of operations at or for
the three months ended March 31, 2003.
While certain guarantees are only subject to the disclosure provisions of
this Interpretation, others are subject to both the disclosure and initial
recognition and measurement provisions. For guarantees that fall within the
scope of the initial recognition and measurement provisions, FIN No. 45 requires
a guarantor to recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the guarantee. Under the
previous accounting rules, the Corporation did not record a liability when
guaranteeing obligations unless it became probable that the Corporation would
have to perform under the guarantee.
The Corporation issues financial and performance standby letters of
credit, both of which are subject to the disclosure and initial recognition and
measurement provisions of FIN No. 45. Financial and performance standby letters
of credit are conditional commitments issued by the Bank to assure the financial
and performance obligations of a customer to a third party. At March 31, 2003,
the Corporation was contingently liable on financial and performance standby
letters of credit totaling $735,000 and $86,000, respectively, $148,000 of which
were originated in the first quarter of this year. The Corporation's commitments
under standby letters of credit expire at various dates through March 31, 2004.
The Bank generally holds collateral and/or obtains personal guarantees
6
supporting these commitments. The extent of collateral held for these
commitments at March 31, 2003 varied from 0% to 100%, and on a weighted average
basis was 80%. In the event that the Bank is required to fulfill its contingent
liability under a standby letter of credit, it could liquidate the collateral
held if any and/or enforce the personal guarantee(s) held, if any, to recover
all or a portion of the amount paid under the letter of credit.
In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN No.
46"). FIN No. 46, which is an interpretation of Accounting Research Bulletin No.
51, "Consolidated Financial Statements", addresses the accounting and reporting
for variable interest entities, as defined. FIN No. 46 is not currently
applicable to the Corporation.
7
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors that have affected the Corporation's financial condition and
operating results during the periods included in the accompanying consolidated
financial statements, and should be read in conjunction with such financial
statements. The Corporation's financial condition and operating results
principally reflect those of its wholly-owned subsidiary, The First National
Bank of Long Island (the "Bank"). The Corporation's primary service area has
been Nassau and Suffolk Counties, Long Island. However, the Bank expects to open
three commercial banking branches in Manhattan in the upcoming quarter.
Overview
The Corporation earned $.74 per share for the first three months of 2003
as compared to $.62 for the same period last year, an increase of approximately
19%. Based on net income of 3,093,000, the Corporation returned 1.59% on average
total assets and 14.81% on average total equity. This compares to returns on
assets and equity of 1.53% and 14.11%, respectively, for the first quarter of
last year. Total assets and deposits each grew by almost 10% when comparing
balances at March 31, 2003 to those at March 31, 2002, and total capital before
unrealized gains and losses on available-for-sale securities grew by
approximately 6%. The Corporation's capital ratios continue to substantially
exceed the current regulatory criteria for a well-capitalized bank.
The most important reason for the growth in earnings was an unusually
large commercial mortgage prepayment fee. Other important causes of the earnings
increase include growth in checking balances, market type savings balances and
residential mortgages as well as a gain on the sale of securities. The large
prepayment fee, the recurrence of which is unlikely, was especially important to
the growth in earnings per share being equivalent to approximately 8 cents per
share. In addition, the fee added .31% to net interest margin for the quarter,
..29% to ROA, and 2.70% to ROE.
The Company continues to be challenged by the very low interest rate
market. The negative effects on net interest margin are expected to become even
more pronounced as loans and securities are repriced or reinvested at lower
yields without an offsetting reduction in the cost of funds. Also beginning to
adversely affect earnings are the expenses of certain growth strategies
including the costs of our three new commercial banking branches in Manhattan.
Net Interest Income
Average Balance Sheet; Interest Rates and Interest Differential. The
following table sets forth the average daily balances for each major category of
assets, liabilities and stockholders' equity as well as the amounts and average
rates earned or paid on each major category of interest-earning assets and
interest-bearing liabilities.
8
Three Months Ended March 31,
--------------------------------------------------------------------------------
2003 2002
------------------------------------- --------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
(dollars in thousands)
Assets
Federal funds sold ....................... $ 40,686 $ 120 1.20% $ 40,033 $ 167 1.69%
Investment Securities:
Taxable ................................ 297,544 3,098 4.22 268,815 3,222 4.86
Nontaxable (1) ......................... 145,188 2,279 6.28 124,723 2,179 6.99
Loans (1)(2) ............................. 263,138 4,806 7.41 228,377 3,982 7.07
--------- ------- ---- --------- ------- ----
Total interest-earning assets ............ 746,556 10,303 5.58 661,948 9,550 5.83
------- ---- ------- ----
Allowance for loan losses ................ (2,100) (2,037)
--------- ---------
Net interest-earning assets .............. 744,456 659,911
Cash and due from banks .................. 32,187 29,951
Premises and equipment, net .............. 6,301 6,984
Other assets ............................. 5,421 5,764
--------- ---------
$ 788,365 $ 702,610
========= =========
Liabilities and
Stockholders' Equity
Savings and money market deposits ........ $ 413,236 939 0.92 $ 362,874 1,028 1.15
Time deposits ............................ 31,230 114 1.48 34,754 190 2.22
--------- ------- ---- --------- ------- ----
Total interest-bearing deposits .......... 444,466 1,053 0.96 397,628 1,218 1.24
--------- ------- ---- --------- ------- ----
Checking deposits (3) .................... 253,341 225,261
Other liabilities ........................ 5,861 3,627
--------- ---------
703,668 626,516
Stockholders' equity ..................... 84,697 76,094
--------- ---------
$ 788,365 $ 702,610
========= =========
Net interest income (1) .................. $ 9,250 $ 8,332
======= =======
Net interest spread (1) .................. 4.62% 4.59%
==== ====
Net interest yield (1) ................... 5.02% 5.10%
==== ====
(1) Tax-equivalent basis. Interest income on a tax-equivalent basis includes
the additional amount of interest income that would have been earned if
the Corporation's investment in tax-exempt loans and investment securities
had been made in loans and investment securities subject to Federal income
taxes yielding the same after-tax income. The tax-equivalent amount of
$1.00 of nontaxable income was $1.52 in each period presented, based on a
Federal income tax rate of 34%.
(2) For the purpose of these computations, nonaccruing loans are included in
the daily average loan amounts outstanding.
(3) Includes official check and treasury tax and loan balances.
As can be seen from the above table, net interest spread was virtually
unchanged when comparing the first quarter of last year to the current quarter.
Net interest yield or margin decreased by .08% during the same period from 5.10%
to 5.02%, and, with the exception of loans, the yield on each asset category
declined. Loan yield increased from 7.07% to 7.41%. In considering these
variances, it is very important to note that during the first quarter of 2003
the Bank collected a $564,000 prepayment fee on one commercial mortgage. This
fee, the recurrence of which is unlikely, is included in interest income on
loans. The fee added .31% to first quarter 2003 net interest margin, .22% to net
interest spread, and .87% to loan yield.
9
Rate/Volume Analysis. The following table sets forth the effect of changes
in volumes, changes in rates, and changes in rate/volume on tax-equivalent
interest income, interest expense and net interest income.
Three Months Ended March 31,
-------------------------------------------------------
2003 Versus 2002
Increase (decrease) due to changes in:
-------------------------------------------------------
Rate/ Net
Volume Rate Volume (2) Change
-------- -------- ---------- --------
(in thousands)
Interest Income:
Federal funds sold ............................ $ 3 $ (49) $ (1) $ (47)
Investment securities:
Taxable ..................................... 344 (423) (45) (124)
Nontaxable (1) .............................. 358 (221) (37) 100
Loans (1) ..................................... 606 189 29 824
-------- -------- ------- --------
Total interest income ......................... 1,311 (504) (54) 753
-------- -------- ------- --------
Interest Expense:
Savings and money
market deposits ............................. 143 (203) (29) (89)
Time deposits ................................. (19) (63) 6 (76)
-------- -------- ------- --------
Total interest expense ........................ 124 (266) (23) (165)
-------- -------- ------- --------
Increase (decrease) in net
interest income ............................. $ 1,187 $ (238) $ (31) $ 918
======== ======== ======= ========
(1) Tax-equivalent basis.
(2) Represents the change not solely attributable to change in rate or change
in volume but a combination of these two factors.
Net interest income on a tax-equivalent basis increased by $918,000, or
11.0%, from $8,332,000 for the first quarter of 2002 to $9,250,000 for the
current quarter. As can be seen from the above rate/volume analysis, the
increase is primarily comprised of a positive volume variance of $1,187,000 and
a negative rate variance of $238,000. It should be noted that the large
commercial mortgage prepayment fee previously discussed made a significant
contribution to the overall increase in net interest income shown above and
caused the rate variance for loans to be positive. Without this fee, the rate
variance for loans would have been a negative $375,000.
Volume Variance. The positive volume variance was largely caused by
substantial growth in average checking deposits and the use of such funds to
purchase investment securities and originate loans. When comparing the first
quarter of 2003 to the same quarter last year, average checking deposits
increased by $28,080,000, or approximately 12%. Funding interest-earning asset
growth with growth in checking deposits has a greater impact on net interest
income than funding such growth with interest-bearing deposits because checking
deposits, unlike interest-bearing deposits, have no associated interest cost.
This is the primary reason that the growth of checking balances has historically
been one of the Corporation's key strategies for increasing earnings per share.
Also making a contribution to the positive volume variance was growth in
savings and money market deposit balances and the use of such funds to purchase
investment securities and originate loans. When comparing the first quarter of
2003 to the same quarter last year, average savings and money market deposit
balances increased by
10
$50,362,000, or almost 14%. Although the largest components of this increase
were growth in "Select Savings", a statement savings account that earns a higher
money market rate, and nonpersonal money market accounts, the Bank also
experienced nice growth in traditional savings and IOLA (interest on lawyer)
accounts.
The Bank's new business program is a significant factor that favorably
impacted the growth in average checking balances. Competitive pricing, customer
demographics, and troubled conditions in the equity markets are believed to be
important factors with respect to the growth in average interest-bearing
deposits. In addition, the growth in checking and interest-bearing deposits is
also believed to be attributable to the Bank's attention to customer service as
well as national and local economic conditions.
Rate Variance. Interest rates began to decline in early 2001. By the end
of the year, short-term interest-rates had fallen significantly as evidenced by
a 475 basis point reduction in both the federal funds target rate and the Bank's
prime lending rate. During 2002, there were no further reductions in short-term
rates until November when both the federal funds target rate and the Bank's
prime lending rate declined by an additional 50 basis points. Rates on
intermediate and longer-term securities and loans also declined during 2001 and
2002, but by contrast to short-term rates, the magnitude of the decline was far
more significant in 2002. Currently both short and long-term rates are at
extremely low levels and could decline even further.
As a result of the sharp decrease in interest rates, net interest margin
trended downward throughout 2002 as interest-earning assets repriced at lower
yields and proceeds from the maturity and amortization of such assets were
reinvested at lower yields without an equal and offsetting reduction in the cost
of funds. Excluding the effect of the large prepayment fee, the decline in net
interest margin continued in the first quarter of 2003. If available yields
remain at relatively low levels or decrease even further, and assets continue to
reprice and be reinvested at lower yields without an offsetting reduction in the
cost of funds, the Bank's net interest margin will continue downward which trend
could become more severe. In addition, the rate variance as depicted above
should become more negative. This obviously exerts a great deal of pressure on
earnings.
Application of Critical Accounting Policies
In preparing the consolidated financial statements, management is required
to make estimates and assumptions that affect the reported asset and liability
balances and revenue and expense amounts. Our determination of the allowance for
loan losses is a critical accounting estimate because it is based on our
subjective evaluation of a variety of factors at a specific point in time. As
discussed more fully in the Allowance and Provision For Loan Losses section
below, some of the factors we evaluate in determining an appropriate allowance
for loans losses include expected future cash flows and/or collateral values on
loans considered to be impaired, national and local economic conditions, the
strength of the local real estate market, and environmental risks. Changes in
the estimated impact of these factors on the ultimate collectibility of loans in
the Bank's portfolio could require a significant change in the allowance, and
this change could have a material impact on the Bank's results of operations.
Asset Quality
The Corporation has identified certain assets as risk elements. These
assets include nonaccruing loans, foreclosed real estate, loans that are
contractually past due 90 days or more as to principal or interest payments and
still accruing and troubled debt restructurings. These assets present more than
the normal risk that the Corporation will
11
be unable to eventually collect or realize their full carrying value. The
Corporation's risk elements at March 31, 2003 and December 31, 2002 are as
follows:
March 31, December 31,
2003 2002
---------- ------------
(dollars in thousands)
Nonaccruing loans .............................................. $ -- $ --
Foreclosed real estate ......................................... -- --
---------- ---------
Total nonperforming assets ................................... -- --
Troubled debt restructurings ................................... 8 --
Loans past due 90 days or more as to
principal or interest payments and still accruing ............ 9 2
---------- ---------
Total risk elements .......................................... $ 17 $ 2
========== =========
Nonaccruing loans as a percentage of total loans ............... .00% .00%
========== =========
Nonperforming assets as a percentage of total loans
and foreclosed real estate ................................... .00% .00%
========== =========
Risk elements as a percentage of total loans and
foreclosed real estate ....................................... .01% .00%
========== =========
Allowance and Provision For Loan Losses
The allowance for loan losses grew by $70,000 during the first three
months of 2003, amounting to $2,155,000 at March 31, 2003 as compared to
$2,085,000 at December 31, 2002. The allowance represented approximately .8% of
total loans at both dates. During the first three months of 2003, the Bank had
loan chargeoffs and recoveries of $14,000 and $9,000, respectively, and recorded
a $75,000 provision for loan losses.
The allowance for loan losses is an amount that management currently
believes will be adequate to absorb estimated inherent losses in the Bank's loan
portfolio. The process for estimating credit losses and determining the
allowance for loan losses as of any balance sheet date is subjective in nature
and requires material estimates. Actual results could differ significantly from
these estimates.
In determining the allowance for loan losses, there is not an exact amount
but rather a range for what constitutes an appropriate allowance. In estimating
losses the Bank reviews individual credits in its portfolio and, for those loans
deemed to be impaired, measures impairment losses based on either the fair value
of collateral or the discounted value of expected future cash flows. Estimated
losses for loans that are not specifically reviewed are determined on a pooled
basis taking into account a variety of factors including historical losses;
levels of and trends in delinquencies and nonaccruing loans; trends in volume
and terms of loans; changes in lending policies and procedures; experience,
ability and depth of lending staff; national and local economic conditions;
concentrations of credit; and environmental risks. Management also considers
relevant loan loss statistics for the Bank's peer group. The estimated losses on
the loans specifically reviewed plus those determined on a pooled basis make up
the allocated component of the allowance for loan losses. The unallocated or
general component of the allowance for loan losses could cover losses in the
portfolio that have not otherwise been identified through the review of specific
loans or pools of loans.
The amount of future chargeoffs and provisions for loan losses will be
affected by, among other things, economic conditions on Long Island. Such
conditions affect the financial strength of the Bank's borrowers and the value
of real estate collateral securing
12
the Bank's mortgage loans. Loans secured by real estate represent approximately
84% of the Bank's total loans outstanding at March 31, 2003. The majority of
these loans were made to borrowers domiciled on Long Island and are secured by
Long Island properties. In recent years, economic conditions on Long Island have
been good and residential real estate values have grown to unprecedented highs.
Such conditions and values could deteriorate in the future, and such
deterioration could be substantial. If this were to occur, some of the Bank's
borrowers may be unable to make the required contractual payments on their
loans, and the Bank may be unable to realize the full carrying value of such
loans through foreclosure. However, management believes that the Bank's
underwriting policies for residential mortgages are relatively conservative and,
as a result, the Bank should be less affected than the overall market.
Future provisions and chargeoffs could also be affected by environmental
impairment of properties securing the Bank's mortgage loans. Environmental
audits for commercial mortgages were instituted by the Bank in 1987. Under the
Bank's current policy, an environmental audit is required on practically all
commercial-type properties that are considered for a mortgage loan. At the
present time, the Bank is not aware of any existing loans in the portfolio where
there is environmental pollution originating on the mortgaged properties that
would materially affect the value of the portfolio.
Noninterest Income, Noninterest Expense, and Income Taxes
Noninterest income includes service charges on deposit accounts,
Investment Management Division income, gains or losses on sales of
available-for-sale securities, and all other items of income, other than
interest, resulting from the business activities of the Corporation. When
comparing the first three months of 2003 to the same period last year,
noninterest income increased by $156,000, or 11.7%. The increase is primarily
attributable to gains on sales of available-for-sale equity securities of
$123,000.
Noninterest expense is comprised of salaries, employee benefits, occupancy
and equipment expense and other operating expenses incurred in supporting the
various business activities of the Corporation. Noninterest expense increased by
$384,000, or a bit more than 7%, from $5,301,000 for the first three months of
2002 to $5,685,000 for the same period this year. The increase is largely
comprised of an increase in salaries of $119,000, or 5.0%, an increase in
employee benefits expense of $141,000, or 13.4%, and an increase in occupancy
and equipment expense of $90,000, or 12.1%.
The increase in salaries is primarily attributable to normal annual salary
increases. The increase in employee benefit expense is largely attributable to
increases in retirement plan expense and the cost of group health insurance. The
increase in occupancy and equipment expense was principally caused by increases
in utilities expense, maintenance costs, and the fact that the Bank has begun to
pay rent on its two of its three new branches in Manhattan.
Income tax expense as a percentage of book income ("effective tax rate")
was 26.3% for the first three months of 2003 as compared to 24.6% for the same
period last year. These percentages vary from the statutory Federal income tax
rate of 34% primarily because of state income taxes and tax-exempt interest on
municipal securities. The increase in the Bank's effective tax rate is largely
attributable to the fact that income on tax-exempt securities became a smaller
component of the Bank's gross income.
13
Capital
The Corporation's capital management policy is designed to build and
maintain capital levels that exceed regulatory standards. Under current
regulatory capital standards, banks are classified as well capitalized,
adequately capitalized or undercapitalized. Under such standards, a well
capitalized bank is one that has a total risk-based capital ratio equal to or
greater than 10%, a Tier 1 risk-based capital ratio equal to or greater than 6%,
and a Tier 1 leverage capital ratio equal to or greater than 5%. The
Corporation's total risk-based capital, Tier 1 risk-based capital and Tier 1
leverage capital ratios of 28.88%, 28.13% and 10.33%, respectively, at March 31,
2003 substantially exceed the requirements for a well-capitalized bank.
Total stockholders' equity decreased by $455,000, or from $85,442,000 at
December 31, 2002 to $84,987,000 at March 31, 2003. The decrease in
stockholders' equity is primarily attributable to the fact that the amount
expended for share repurchases during the quarter exceeded net income.
Stock Repurchase Program. Since 1988, the Corporation has had a stock
repurchase program under which it can purchase, from time to time, shares of its
own common stock in market or private transactions. During the first quarter of
2003, the Corporation purchased 111,112 shares under plans approved by the Board
of Directors in 2002 and during the first quarter of 2003. Including a 50,000
share plan approved in April 2003, the Corporation is authorized to purchase
67,309 shares in the future.
The stock repurchase program has been used by management to enhance
earnings per share. When comparing the first three months of 2003 to the same
period last year, earnings per share are up 12 cents. Of the 12-cent increase,
approximately 1 cent is attributable to shares repurchased in 2002 and thus far
this year. On a full-year basis, these repurchases should add approximately 6
cents to earnings per share.
Market Liquidity. Trading in the Corporation's common stock is limited.
The total trading volume for the twelve months ended March 31, 2003 as reported
by Nasdaq was 1,068,413 shares, with an average daily volume of 4,223 shares.
During this same twelve month period, the Corporation purchased 147,794 shares
under its share repurchase program, 122,400 of which were purchased in market
transactions. These market purchases represent approximately 11.5% of the total
trading volume reported by Nasdaq. Although the Corporation has had a stock
repurchase program since 1988, if the Company discontinues the program it could
adversely affect market liquidity for the Corporation's common stock, the price
of the Corporation's common stock, or both.
Russell 3000(R) and 2000(R) Indices. Frank Russell Company ("Russell")
currently maintains 21 U.S. common stock indices. The indices are reconstituted
each July 1st using objective criteria, primarily market capitalization, and do
not reflect subjective opinions. All indices are subsets of the Russell 3000(R)
Index which represents approximately 98% of the investable U. S. equity market.
The broad market Russell 3000(R) Index includes the largest 3,000
companies in terms of market capitalization and the small cap Russell 2000(R)
Index is comprised of the smallest 2,000 companies in the Russell 3000(R) Index.
The Corporation's capitalization, as computed by Russell, would place it at the
low end of the range for both the Russell 3000(R) and 2000(R) Indices.
Effective July 1, 2002, and for the first time in its history, the
Corporation's common stock was included in the Russell 3000(R) and 2000(R)
Indices. The Corporation believes
14
that inclusion in the Russell indices has positively impacted the price of its
common stock and has increased the stock's trading volume and liquidity.
Conversely, if the Corporation's market capitalization falls below the minimum
necessary to be included in the indices at any future reconstitution date, the
Corporation believes that this could adversely affect the price, volume and
liquidity of its common stock.
Cash Flows and Liquidity
Cash Flows. During the first three months of 2003, cash and cash
equivalents increased by $29,652,000. This occurred primarily because the cash
provided from maturities and pay downs of investment securities, checking
growth, money market type deposit growth, and operations exceeded the cash used
for loan growth and share repurchases.
Liquidity. The Corporation's primary sources of liquidity are its
overnight position in federal funds sold; its short-term investment securities
portfolio which generally consists of securities purchased to mature within two
years and securities with average lives of approximately two years; maturities
and monthly payments on the balance of the investment securities portfolio and
the loan portfolio; and longer-term investment securities designated as
available-for-sale. At March 31, 2003, the Corporation had $60,000,000 in
federal funds sold, a short-term securities portfolio not subject to pledge
agreements of $138,938,000, and longer-term available-for-sale securities not
subject to pledge agreements of $87,520,000. The Corporation's liquidity is
enhanced by its stable deposit base which primarily consists of checking,
savings, and money market accounts. Such accounts comprised 95.6% of total
deposits at March 31, 2003, while time deposits of $100,000 and over and other
time deposits comprised only 2.0% and 2.4%, respectively.
The Bank attracts all of its deposits through its banking offices
primarily from the communities in which those banking offices are located and
does not rely on brokered deposits. In addition, the Bank has not historically
relied on purchased or borrowed funds as sources of liquidity.
Legislation
Commercial checking deposits currently account for approximately 28% of
the Bank's total deposits. Congress is considering legislation that would allow
customers to cover checks by sweeping funds from interest-bearing deposit
accounts each business day and repeal the prohibition of the payment of interest
on corporate checking deposits in the future. Although management currently
believes that the Bank's earnings could be more severely impacted by permitting
the payment of interest on corporate checking deposits than the daily sweeping
of funds from interest-bearing accounts to cover checks, either could have a
material adverse impact on the Bank's future results of operations.
Forward Looking Statements
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" contains various forward-looking statements with respect to
financial performance and business matters. Such statements are generally
contained in sentences including the words "expect" or "could" or "should" or
"would" or "believe". The Corporation cautions that these forward-looking
statements are subject to numerous assumptions, risks and uncertainties, and
therefore actual results could differ materially from those contemplated by the
forward-looking statements. In addition, the Corporation assumes no duty to
update forward-looking statements.
15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Bank invests in interest-earning assets which are funded by
interest-bearing deposits, noninterest-bearing deposits, and capital. The Bank's
results of operations are subject to risk resulting from interest rate
fluctuations generally and having assets and liabilities that have different
maturity, repricing, and prepayment/withdrawal characteristics. The Bank defines
interest rate risk as the risk that the Bank's earnings and/or net portfolio
value will change when interest rates change. The principal objective of the
Bank's asset/liability management activities is to maximize net interest income
while at the same time maintaining acceptable levels of interest rate and
liquidity risk and facilitating the funding needs of the Bank.
Because the Bank's loans and investment securities generally reprice
slower than its interest-bearing deposit accounts, a decrease in interest rates
uniformly across the yield curve should initially have a positive impact on the
Bank's net interest income. However, if the Bank does not decrease the rates
paid on its money market type deposit accounts as quickly or in the same amount
as market decreases in the overnight federal funds rate or the prime lending
rate, the magnitude of the positive impact will decline. In addition, rates may
decrease to the point that the Bank can not reduce its money market rates any
further.
If interest rates decline and are sustained at the lower levels and, as a
result, the Bank purchases securities at lower yields and loans are originated
or repriced at lower yields, the impact on net interest income should be
negative because 40% of the Bank's average interest-earning assets are funded by
noninterest-bearing checking deposits and capital.
Conversely, an immediate increase in interest rates uniformly across the
yield curve should initially have a negative effect on net interest income.
However, if the Bank does not increase the rates paid on its money market type
deposit accounts as quickly or in the same amount as market increases in the
overnight federal funds rate, the prime lending rate, and other short-term
market rates, the magnitude of the negative impact will decline. Over a longer
period of time, and assuming that interest rates remain stable after the initial
rate increase and the Bank purchases securities and originates loans at yields
higher than those maturing and reprices loans at higher yields, the impact of an
increase in interest rates should be positive. This occurs primarily because
with the passage of time more loans and investment securities will reprice at
the higher rates and there will be no offsetting increase in interest expense
for those loans and investment securities funded by noninterest-bearing checking
deposits and capital.
It is believed that the Corporation's exposure to interest rate risk has
not changed materially since December 31, 2002.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
The Company's Chief Executive Officer, J. William Johnson, and Chief
Financial Officer, Mark D. Curtis, have reviewed the Corporation's disclosure
controls and procedures within 90 days prior to the filing of this report on
Form 10-Q. Based upon this review, these officers believe that the Corporation's
disclosure controls and procedures are effective in ensuring that material
information related to the Corporation is made known to them by others within
the Corporation.
16
(b) Changes in Internal Controls
There were no significant changes in the Corporation's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of the review performed by the Chief Executive Officer and the Chief
Financial Officer. In addition, there were no corrective actions with regard to
significant deficiencies and material weaknesses in internal controls subsequent
to the review performed by the Chief Executive Officer and the Chief Financial
Officer.
17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time the Corporation and the Bank may be involved in
litigation that arises in the normal course of business. As of the date of this
Form 10-Q, neither the Corporation nor the Bank is a party to any litigation
that management believes could reasonably be expected to have a material adverse
effect on the Corporation's or the Bank's financial position or results of
operations.
Item 5. Other Information
Stock Repurchase Program And Market Liquidity
Trading in the Corporation's common stock is limited. The total trading
volume for the twelve months ended March 31, 2003 as reported by Nasdaq was
1,068,413 shares, with an average daily volume of 4,223 shares. During this same
twelve month period, the Corporation purchased 147,794 shares under its share
repurchase program, 122,400 of which were purchased in market transactions.
These market purchases represent approximately 11.5% of the total trading volume
reported by Nasdaq. Although the Corporation has had a stock repurchase program
since 1988, if the Company discontinues the program it could adversely affect
market liquidity for the Corporation's common stock, the price of the
Corporation's common stock, or both.
For a further discussion of the Corporation's share repurchase program,
including its impact on earnings per share, please see the "Capital" section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Item 6. Exhibits and Reports on Form 8-K
a) The following exhibit is submitted herewith.
Exhibit No. Name
- ----------- ----
99.1 Additional Exhibit - Certification by Chief Executive Officer
and Chief Financial Officer
b) Reports on Form 8-K
On April 24, 2003, the Corporation filed a Form 8-K to report that it had:
(1) issued a press release disclosing material non-public information regarding
the Corporation's financial condition and results of operations as of and for
the quarterly period ended March 31, 2003 and announcing an additional share
repurchase plan; and (2) mailed a quarterly report to shareholders disclosing
substantially similar nonpublic information regarding the Corporation's
financial condition and results of operations. The press release was furnished
as Exhibit 99.1 to the Form 8-K filing and the quarterly report to shareholders
was furnished as Exhibit 99.2 to the Form 8-K filing.
18
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.
THE FIRST OF LONG ISLAND CORPORATION
(Registrant)
Date: May 6, 2003 By /s/ J. WILLIAM JOHNSON
--------------------------------------------
J. WILLIAM JOHNSON, CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
(principal executive officer)
By /s/ MARK D. CURTIS
--------------------------------------------
MARK D. CURTIS
SENIOR VICE PRESIDENT AND TREASURER
(principal financial and accounting officer)
CERTIFICATIONS
1. I, J. William Johnson, have reviewed the quarterly report on Form 10-Q of The
First of Long Island Corporation;
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 in order
to make the statements made, in light of 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 officer 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 officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board of directors:
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 signing officer 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: May 6, 2003
By /s/ J. WILLIAM JOHNSON
- ------------------------------------
J. WILLIAM JOHNSON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
(principal executive officer)
19
1. I, Mark D. Curtis, have reviewed the quarterly report on Form 10-Q of The
First of Long Island Corporation;
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 in order
to make the statements made, in light of 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 officer 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 officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board of directors:
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 signing officer 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: May 6, 2003
By /s/ MARK D. CURTIS
- --------------------------------------------
MARK D. CURTIS
SENIOR VICE PRESIDENT & TREASURER
(principal financial and accounting officer)
20
EXHIBIT INDEX
EXHIBIT BEGINS
ON SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ------- ----------- --------
99.1 Certification by Chief Executive Officer and
Chief Financial Officer 22
21