-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S2QPYtV+jlq/TfxBYzUIed7ZOvA6L92TqXK9QMXydDpLKk37wwjXvmjQd26w6L4A BlDL0Xtn6+AT3xL38MAhVA== 0000950152-03-005406.txt : 20030513 0000950152-03-005406.hdr.sgml : 20030513 20030513170024 ACCESSION NUMBER: 0000950152-03-005406 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DCB FINANCIAL CORP CENTRAL INDEX KEY: 0001025877 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 311469837 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22387 FILM NUMBER: 03696175 BUSINESS ADDRESS: STREET 1: 110 RIVERBEND AVE. CITY: LEWIS CENTER STATE: OH ZIP: 43035 BUSINESS PHONE: 740-657-7000 MAIL ADDRESS: STREET 1: 110 RIVERBEND AVE. CITY: LEWIS CENTER STATE: OH ZIP: 43035 10-Q 1 l00853ae10vq.txt DCB FINANCIAL CORP | FORM 10-Q Page 1 of 23 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [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 Commission file number: 0-22387 ----------- DCB Financial Corp ----------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 31-1469837 - ---------------------------------- --------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 110 Riverbend Avenue, Lewis Center, Ohio 43035 ---------------------------------------------- (Address of principal executive offices) (740) 657-7000 --------------------------------- (Registrant's telephone number) Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Common stock, no par value Outstanding at May 12, 2003 4,172,034 common shares DCB FINANCIAL CORP FORM 10-Q QUARTER ENDED MARCH 31, 2003 - ------------------------------------------------------------------------------ Table of Contents PART I - FINANCIAL INFORMATION ITEM 1 - Financial Statements
Page ---- Consolidated Balance Sheets................................................................................. 3 Consolidated Statements of Income and Comprehensive Income.................................................. 4 Condensed Consolidated Statements of Cash Flows............................................................. 5 Notes to the Consolidated Financial Statements.............................................................. 6 ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................................... 10 ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk......................................... 14 ITEM 4 - Controls and Procedures ........................................................................... 15 PART II - OTHER INFORMATION................................................................................. 16 SIGNATURES ................................................................................................. 18
DCB FINANCIAL CORP CONSOLIDATED BALANCE SHEETS (Dollars in thousands) - ------------------------------------------------------------------------------- Item 1. Financial Statements
March 31, December 31, 2003 2002 ---- ---- (unaudited) ASSETS Cash and due from financial institutions $ 19,972 $ 28,622 Federal funds sold 8,682 3,881 ------------- -------------- Total cash and cash equivalents 28,654 32,503 Securities available for sale 91,084 96,477 Loans held for sale 6,758 6,442 Loans and leases 371,003 370,581 Less allowance for loan and lease losses (4,226) (4,094) ------------- -------------- Net loans and leases 366,777 366,487 Premises and equipment, net 12,230 12,615 Investment in unconsolidated affiliates 1,951 1,951 Accrued interest receivable and other assets 6,933 6,523 ------------- -------------- Total assets $ 514,387 $ 522,998 ============= ============== LIABILITIES Deposits Noninterest-bearing $ 72,172 $ 73,531 Interest-bearing 364,786 365,092 ------------- -------------- Total deposits 436,958 438,623 Federal funds purchased and other short-term borrowings 811 2,000 Federal Home Loan Bank advances 20,671 27,802 Accrued interest payable and other liabilities 2,284 2,045 ------------- -------------- Total liabilities 460,724 470,470 SHAREHOLDERS' EQUITY Common stock, no par value, 7,500,000 shares authorized, 4,273,200 shares issued 3,780 3,780 Retained earnings 50,426 49,303 Treasury stock, 101,166 shares at March 31, 2003 and 104,966 shares at December 31, 2002, at cost (2,080) (2,152) Accumulated other comprehensive income 1,537 1,597 ------------- -------------- Total shareholders' equity 53,663 52,528 ------------- -------------- Total liabilities and shareholders' equity $ 514,387 $ 522,998 ============= ==============
- ------------------------------------------------------------------------------- See notes to the consolidated financial statements. 3. DCB FINANCIAL CORP CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------
Three Months Ended March 31, --------------------------------- 2003 2002 -------------- --------------- INTEREST AND DIVIDEND INCOME Loans, including fees $ 5,945 $ 6,372 Taxable securities 832 1,512 Tax-exempt securities 150 139 Federal funds sold and other 35 18 -------------- --------------- Total interest income 6,962 8,041 INTEREST EXPENSE Deposits 1,843 2,297 Borrowings 209 357 -------------- --------------- Total interest expense 2,052 2,654 NET INTEREST INCOME 4,910 5,387 Provision for loan and lease losses 333 300 -------------- --------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES 4,577 5,087 NONINTEREST INCOME Service charges on deposit accounts 538 557 Trust department income 155 185 Net gains on sales of securities 13 15 Net gains on sale of loans 486 201 Cash management fees 127 120 Data processing servicing fees 123 73 Other 209 184 -------------- --------------- 1,651 1,335 NONINTEREST EXPENSE Salaries and other employee benefits 2,065 2,190 Occupancy and equipment 979 831 Professional services 70 54 Advertising 79 103 Postage, freight and courier 73 135 Supplies 36 71 State franchise taxes 121 133 Other 639 734 -------------- --------------- 4,062 4,251 -------------- --------------- INCOME BEFORE INCOME TAXES 2,166 2,171 Income tax expense 667 716 -------------- --------------- NET INCOME 1,499 1,455 Other comprehensive loss (60) (352) --------------- ---------------- Comprehensive income $ 1,439 $ 1,103 ============== =============== Basic and diluted earnings per common share $ 0.36 $ 0.35 ============== ===============
- ------------------------------------------------------------------------------- See notes to the consolidated financial statements. 4. DCB FINANCIAL CORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) - -------------------------------------------------------------------------------
Three Months Ended March 31, --------------------------- 2003 2002 ------------ ----------- CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 1,570 $ 2,736 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES Securities available for sale Purchases (14,644) (14,783) Maturities, principal payments and calls 13,329 9,440 Sales 6,365 875 Securities held to maturity Maturities, principal payments and calls - 4,737 Net change in loans (137) (450) Premises and equipment expenditures (74) (397) ------------ ----------- Net cash flows provided by (used in) investing activities 4,839 (578) CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES Net change in deposits (1,665) 3,857 Net change in federal funds and other short-term borrowings (1,189) (2,127) Repayment of Federal Home Loan Bank advances (7,101) (96) Sale of treasury stock 72 - Cash dividends paid (375) (335) ------------ --------- Net cash provided by (used in) financing activities (10,258) 1,299 ------------ ----------- Increase (decrease) in cash and cash equivalents (3,849) 3,457 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 32,503 17,945 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 28,654 $ 21,402 =========== ===========
- ------------------------------------------------------------------------------- See notes to the consolidated financial statements. 5. DCB FINANCIAL CORP NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands) - ------------------------------------------------------------------------------- NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These interim financial statements are prepared without audit and reflect all adjustments which, in the opinion of management, are necessary to present fairly the financial position of DCB Financial Corp. (the "Corporation") at March 31, 2003, and its results of operations and cash flows for the three month periods ended March 31, 2003 and 2002. All such adjustments are normal and recurring in nature. The accompanying consolidated financial statements have been prepared in accordance with the instructions of Form 10-Q and, therefore, do not purport to contain all necessary financial disclosures required by accounting principles generally accepted in the United States of America that might otherwise be necessary in the circumstances, and should be read in conjunction with financial statements, and notes thereto, of the Corporation for the year ended December 31, 2002, included in its 2002 annual report. Refer to the accounting policies of the Corporation described in the notes to financial statements contained in the Corporation's 2002 annual report. The Corporation has consistently followed these policies in preparing this Form 10-Q. The accompanying consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiary, The Delaware County Bank and Trust Company (the "Bank"). The financial statements of the Bank include accounts of its wholly-owned subsidiaries, D.C.B. Corporation and 362 Corp. All significant intercompany accounts and transactions have been eliminated in consolidation. Management considers the Corporation to operate in one segment, banking. To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect amounts reported in the financial statements and disclosures provided, and future results could differ. The allowance for loan and lease losses, fair values of financial instruments and status of contingencies are particularly subject to change. Income tax expense is based on the effective tax rate expected to be applicable for the entire year. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. Earnings per common share is net income divided by the weighted average number of shares of common stock outstanding during the period. The weighted average number of common shares outstanding was 4,170,919 and 4,178,200 for the three months ended March 31, 2003 and 2002. The Corporation has no potentially dilutive securities. APPLICATION OF CRITICAL ACCOUNTING POLICIES DCB's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and follow general practices within the financial services industry. The application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. The most significant accounting policies followed by the Corporation are presented in Note 1 contained in the Corporation's 2002 annual report to the consolidated financial statements. These policies, along with the disclosures presented in the other financial statement notes and in this financial review, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. - ------------------------------------------------------------------------------- 6. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands) - ------------------------------------------------------------------------------- NOTE 2 - SECURITIES The amortized cost and estimated fair values of securities available for sale were as follows:
Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value ---- ----- ------ ----- -------------------March 31, 2003----------------- U.S. government agencies $ 29,290 $ 584 $ - $ 29,874 States and political subdivisions 14,569 718 (2) 15,285 Mortgage-backed and related securities 42,534 1,036 (23) 43,547 ---------- ---------- ----------- ---------- Total debt securities 86,393 2,338 (25) 88,706 Other securities 2,362 16 - 2,378 ---------- ---------- ---------- ---------- Total securities available for sale $ 88,755 $ 2,354 $ (25) $ 91,084 ========== ========== =========== ========== Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value ---- ----- ------ ----- ------------------December 31, 2002--------------- U.S. government agencies $ 29,263 $ 735 $ (3) $ 29,995 States and political subdivisions 14,041 390 (6) 14,425 Corporate bonds 236 11 - 247 Mortgage-backed and related securities 48,177 1,291 (20) 49,448 ---------- ---------- ----------- ---------- Total debt securities 91,717 2,427 (29) 94,115 Other securities 2,341 31 (10) 2,362 ---------- ---------- ----------- ---------- Total securities available for sale $ 94,058 $ 2,458 $ (39) $ 96,477 ========== ========== =========== ==========
- ------------------------------------------------------------------------------- 7. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands) - ------------------------------------------------------------------------------- Substantially all mortgage-backed securities are backed by pools of mortgages that are insured or guaranteed by the Federal National Mortgage Association ("FNMA"), the Government National Mortgage Association ("GNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). At March 31, 2003, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of shareholders' equity. The amortized cost and estimated fair value of debt securities at March 31, 2003, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Mortgage-backed securities are shown separately since they are not due at a single maturity date.
Available for sale Amortized Fair Cost Value ---------- ------ Due in one year or less $ 2,326 $ 2,379 Due from one to five years 8,410 8,634 Due from five to ten years 23,045 23,591 Due after ten years 27,478 28,150 Mortgage-backed and related securities 25,134 25,952 ---------- ---------- $ 86,393 $ 88,706 ========== ==========
- ------------------------------------------------------------------------------- 8. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands) - ------------------------------------------------------------------------------- NOTE 3 - LOANS AND LEASES Loans and leases were as follows:
March 31, December 31, 2003 2002 ---- ---- Commercial and industrial $ 46,833 $ 45,543 Commercial real estate 146,737 144,646 Residential real estate and home equity 84,485 87,548 Real estate construction and land development 37,430 37,603 Consumer and credit card 49,134 48,409 Lease financing, net 5,727 6,412 ----------- ------------ 370,346 370,161 Less (deduct): Net deferred loan origination costs 1,212 1,132 Unearned income on leases (555) (712) ------------ ------------ Total loans receivable $ 371,003 $ 370,581 =========== =============
NOTE 4 - ALLOWANCE FOR LOAN AND LEASE LOSSES Activity in the allowance for loan and lease losses was as follows:
Three months ended March 31, 2003 2002 ---- ---- Balance at beginning of period $ 4,094 $ 3,596 Provision for loan losses 333 300 Loans charged off (257) (192) Recoveries 56 38 ------------ ------------ Balance at end of period $ 4,226 $ 3,742 ============ ============
Nonperforming loans were as follows:
March 31, December 31, 2003 2002 ---- ---- Loans past due 90 days or more and still accruing $ 1,237 $ 187 Nonaccrual loans 2,877 3,387 Impaired loans (most of which are included in nonperforming loans above) were as follows: Period-end loans with no allocated allowance for loan losses $ 370 $ 464 Period-end loans with allocated allowance for loan losses 3,659 3,735 ---------------- ----------------- Total $ 4,029 $ 4,199 ================ ================= Amount of the allowance for loan losses allocated $ 1,177 $ 1,088 ================ ================= Average of impaired loans during the period $ 4,058 $ 5,204 ================ =================
- ------------------------------------------------------------------------------- 9. DCB FINANCIAL CORP MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except per share data) - ------------------------------------------------------------------------------- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations INTRODUCTION In the following pages, management presents an analysis of the consolidated financial condition of DCB Financial Corp (the "Corporation") at March 31, 2003, compared to December 31, 2002, and the consolidated results of operations for the three months ended March 31, 2003, compared to the same period in 2002. This discussion is designed to provide shareholders with a more comprehensive review of the operating results and financial position than could be obtained from reading the consolidated financial statements alone. This analysis should be read in conjunction with the consolidated financial statements and related footnotes and the selected financial data included elsewhere in this report. FORWARD-LOOKING STATEMENTS Certain statements in this report constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to the financial condition and prospects, lending risks, plans for future business development and marketing activities, capital spending and financing sources, capital structure, the effects of regulation and competition, and the prospective business of both the Corporation and its wholly-owned subsidiary The Delaware County Bank & Trust Company (the "Bank"). Where used in this report, the word "anticipate," "believe," "estimate," "expect," "intend," and similar words and expressions, related to the Corporation or the Bank or their respective management, identify forward-looking statements. Such forward-looking statements reflect the current views of the Corporation and are based on information currently available to the management of the Corporation and the Bank and upon current expectations, estimates, and projections about the Corporation and its industry, management's belief with respect thereto, and certain assumptions made by management. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to: (i) significant increases in competitive pressure in the banking and financial services industries; (ii) changes in the interest rate environment which could reduce anticipated or actual margins; (iii) changes in political conditions or the legislative or regulatory environment; (iv) general economic conditions, either nationally or regionally (especially in central Ohio), becoming less favorable than expected resulting in, among other things, a deterioration in credit quality of assets; (v) changes occurring in business conditions and inflation; (vi) changes in technology; (vii) changes in monetary and tax policies; (viii) changes in the securities markets; and (ix) other risks and uncertainties detailed from time to time in the filings of the Corporation with the Commission. The Corporation does not undertake, and specifically disclaims any obligation, to publicly revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. ANALYSIS OF FINANCIAL CONDITION The Corporation's assets totaled $514,387 at March 31, 2003, compared to $522,998 at December 31, 2002, a decrease of $8,611, or 1.65%. The decrease in assets was primarily the result of a decrease in securities. These funds were utilized to reduce FHLB advances. Cash and cash equivalents decreased $3,849 from December 31, 2002 to March 31, 2003. This decline is mainly attributed to the large amount of due from transactions present because of year end timing issues. Fed Funds balances increased $4,801 million as management intended to increase liquidity to fund other balance sheet initiatives. - ------------------------------------------------------------------------------- 10. DCB FINANCIAL CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except per share data) - ------------------------------------------------------------------------------- Total securities decreased $5,393, or 5.59%, from $96,477 at December 31, 2002 to $91,084 at March 31, 2003. The decrease was the result of the proceeds from sales, maturities, calls and principal repayments not being reinvested in order to repay borrowings, in the form of fed funds purchased and FHLB advances. The Corporation invests primarily in U.S. Treasury notes, U.S. government agencies, municipal bonds, corporate obligations and mortgage-backed securities. Mortgage-backed securities include Federal Home Loan Mortgage Corporation ("FHLMC"), Government National Mortgage Association ("GNMA") and Federal National Mortgage Association ("FNMA") participation certificates. Securities classified as available for sale at March 31, 2003 totaled $91,084, or 100% of the total securities portfolio. Management classifies securities as available for sale to provide the Corporation with the flexibility to move funds into loans as demand warrants. The mortgage-backed securities portfolio, totaling $25,134 at March 31, 2003, provides the Corporation with a constant cash flow stream from principal repayments and interest payments. The Corporation held no derivative securities or structured notes during any period presented. Total loans increased $422, or .11%, from $370,581 at December 31, 2002 to $371,003 at March 31, 2003. The slight increase is attributed mainly to the continued growth of commercial real estate loans, which was partially off set by a general decline in various consumer lending categories. Other loan categories in which the Corporation participates, commercial, industrial, and consumer financing, remained relatively stable or experienced small declines in loans outstanding. The Bank's local market continues to experience increases in the amount of commercial real estate development activity. The Bank has no significant loan concentration in any one industry. Total deposits decreased $1,665, or .38%, from $438,623 at December 31, 2002 to $436,958 at March 31, 2003. Noninterest-bearing deposits decreased $1,359, or 1.85%, in addition to interest-bearing deposits decreasing $306, or .08%. The decrease in interest-bearing deposits was primarily in the Corporation's "Bank Investment" deposit accounts, which offer a variable interest rate tied to the 3 Month Treasury Bill. COMPARISON OF RESULTS OF OPERATIONS NET INCOME. Net income for the three months ended March 31, 2003 totaled $1,499, compared to net income of $1,455 for the same period in 2002. Earnings per share was $.36 for the three months ended March 31, 2003 compared to $.35 for the three months ended March 31, 2002. NET INTEREST INCOME. Net interest income represents the amount by which interest income on interest-earning assets exceeds interest paid or accrued on interest-bearing liabilities. Net interest income is the largest component of the Corporation's income, and is affected by the interest rate environment, the volume, and the composition of interest-earning assets and interest-bearing liabilities. Net interest income was $4,910 for the three months ended March 31, 2003, compared to $5,387 for the same period in 2002. The $477 decrease in the first quarter 2003 compared to 2002 was mainly attributed to a declining interest rate environment that has caused the spreads earned on the loan and investment portfolios to also decline. The Asset/Liability Management Committee, which is responsible for determining deposit rates, continues to closely monitor the Bank's cost of funds to take advantage of pricing and cash flow opportunities. PROVISION AND ALLOWANCE FOR LOAN AND LEASE LOSSES. The provision for loan and lease losses represents the charge to income necessary to adjust the allowance for loan and lease losses to an amount that represents management's assessment of the losses inherent in the Corporation's loan portfolio. All lending activity contains associated risks of losses and the Corporation recognizes these credit risks as a necessary element of its business activity. To assist in identifying and managing potential loan losses, the Corporation maintains a loan review function that regularly evaluates individual credit relationships as well as overall loan-portfolio conditions. One of the primary objectives of this loan review function is to make recommendations to management as to the appropriate level of the loss allowance based on a methodology developed by management and approved by the board of directors. On a monthly basis credit reporting is made through a board level committee. - ------------------------------------------------------------------------------- 11. DCB FINANCIAL CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except per share data) - ------------------------------------------------------------------------------- The provision for loan and lease losses totaled $333 for the three months ended March 31, 2003, compared to $300 for the same period in 2002. The growth in the provision is reflective of the overall growth in the Corporation's loan portfolio, as well as an increase in net-charge offs between the two periods. These factors were partially offset by a decline in nonperforming loans from $3,387 at December 31, 2002 to $2,877 at March 31, 2003. Net charge-offs for the three months ended March 31, 2003 were $201 compared to net charge-offs of $154 for the same quarter in 2002. Management will continue to monitor the credit quality of the lending portfolio and will recognize additional provision in the future as necessary, in the opinion of management, to maintain the provisions for loan and lease losses at an appropriate level. The allowance for loan and lease losses totaled $4,226, or 1.14% of total loans and leases, at March 31, 2003 compared to $4,094, or 1.10% of total loans and leases, at December 31, 2002. The allowance was 103% of nonperforming loans at March 31, 2003, compared to 115% at December 31, 2002, resulting from the aforementioned decline in nonperforming loans, as well as the effects of charge-offs during the 2003 quarter. NONINTEREST INCOME AND NONINTEREST EXPENSE. Total noninterest income increased $316, or 23.67%, for the three months ended March 31, 2003, compared to the same period in 2002. The increase was the result of an increase in transactional volume from the Bank's retail products, and due to a large increase in the volume of sales of loans in the secondary market. Total noninterest expense decreased $189, or 4.45%, for the three months ended March 31, 2003, compared to the same period in 2002. The decrease was primarily the result of decrease in salaries and employee benefits, offset by an increase in professional and legal fees related to shareholder matters. INCOME TAXES. The change of income tax expense is primarily attributable to the growth in income before income taxes. The provision for income taxes totaled $667, for an effective tax rate of 30.79%, for the three months ended March 31, 2003 and $716, for an effective tax rate of 32.98%, for the three months ended March 31, 2002. LIQUIDITY Liquidity is the ability of the Corporation to fund customers' needs for borrowing and deposit withdrawals. The purpose of liquidity management is to assure sufficient cash flow to meet all of the financial commitments and to capitalize on opportunities for business expansion. This ability depends on the financial strength, asset quality and types of deposit and investment instruments offered by the Corporation to its customers. The Corporation's principal sources of funds are deposits, loan and security repayments, maturities of securities, sales of securities available for sale and other funds provided by operations. The Bank also has the ability to borrow from the FHLB. While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and early loan and mortgage-backed security prepayments are more influenced by interest rates, general economic conditions, and competition. The Corporation maintains investments in liquid assets based upon management's assessment of (1) need for funds, (2) expected deposit flows, (3) yields available on short-term liquid assets and (4) objectives of the asset/liability management program. Cash and cash equivalents decreased $3,849, or 11.84%, to $28,654 at March 31, 2003 compared to $32,503 at December 31, 2002. Cash and equivalents represented 5.57% of total assets at March 31, 2003 and 6.22% of total assets at December 31, 2002. The Corporation has the ability to borrow funds from the Federal Home Loan Bank and has various correspondent banking partners to purchase overnight federal funds should the Corporation need to supplement its future liquidity needs. Management believes the Corporation's liquidity position is adequate based on its current level of cash, cash equivalents, core deposits, the stability of its other funding sources and the support provided by its capital base. - ------------------------------------------------------------------------------- 12. DCB FINANCIAL CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except per share data) - ------------------------------------------------------------------------------- CAPITAL RESOURCES Total shareholders' equity increased $1,135 between December 31, 2002 and March 31, 2003. The increase was primarily due to period earnings of $1,499 net of a $60 after-tax reduction in accumulated other comprehensive income and the declaration of $375 in dividends. Tier 1 capital is shareholders' equity excluding the unrealized gain or loss on securities classified as available for sale and intangible assets. Total capital includes Tier 1 capital plus the allowance for loan losses, not to exceed 1.25% of risk weighted assets. Risk weighted assets are the Corporation's total assets after such assets are assessed for risk and assigned a weighting factor defined by regulation based on their inherent risk. The Corporation and its subsidiaries meet all regulatory capital requirements. The ratio of total capital to risk-weighted assets was 13.48% at March 31, 2003, while the Tier 1 risk-based capital ratio was 12.47%. Regulatory minimums call for a total risk-based capital ratio of 8.0%, at least half of which must be Tier 1 capital. The Corporation's leverage ratio, defined as Tier 1 capital divided by average assets, was 10.05% at March 31, 2003. IMPACT OF NEW ACCOUNTING STANDARDS In April 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendments of FASB Statement No. 13, and Technical Corrections". This Statement eliminates inconsistency between the required accounting for certain lease modifications that have economic effects similar to sale-leaseback transactions and sale-leaseback transactions. The Corporation does not believe this statement has had or will have a material effect on its financial position or results of operations. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". This Statement addresses the timing of recognition of a liability for exit and disposal cost at the time a liability is incurred, rather than at a plan commitment date, as previously required. Exit or disposal costs will be measured at fair value, and the recorded liability will be subsequently adjusted for changes in estimated cash flows. This Statement is required to be effective for exit or disposal activities entered after December 31, 2002, and early adoption is encouraged. The Corporation does not believe this statement will have a material effect on its financial position or results of operations. In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain Financial Institutions". This standard requires any unidentifiable intangible asset previously recorded as a result of a business combination to be reclassified as goodwill and the amortization of this asset will cease. The effect of this standard on the financial position and results of operations of the Corporation was not material, as the Corporation does not have any unidentified intangible assets. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation Transition and Disclosure." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 is effective for fiscal years beginning after December 15, 2002. The expanded annual disclosure requirements and the transition provisions are effective for fiscal years ending after December 15, 2002. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. SFAS No. 148 is not expected to have a material effect on the Corporation's financial position or results of operations, as the Corporation has no securities that are potentially dilutive. - ------------------------------------------------------------------------------- 13. DCB FINANCIAL CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except per share data) - ------------------------------------------------------------------------------- In November 2002, the FASB issued FIN No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others." FIN No. 45 requires a guarantor entity, at the inception of a guarantee covered by the measurement provisions of the interpretation, to record a liability for the fair value of the obligation undertaken in issuing guarantee. The Corporation has financial letters of credit. Financial letters of credit require the Corporation to make payment in the customer's financial condition deteriorates, as defined in the agreements. FIN NO. 45 requires the Corporation to record an initial liability generally equal to the fees received for these letters of credit, when guaranteeing obligations unless it became probable that the Corporation would have to perform under the guarantee. FIN No. 45 applies prospectively to letters of credit the Corporation issues or modifies subsequent to December 31, 2002. The Corporation adopted FIN No. 45 on January 1, 2003, without material effect on its financial statements. The Corporation defines the initial fair value of these letters of credit as the fee received from the customer. The maximum potential undiscounted amount of future payments of these letters of credit as of March 31, 2003 are $2.4 million which expire through March 18, 2004. Amounts due under these letters of credit would be reduced by any proceeds that the Corporation would be able to obtain in liquidating the collateral for the loans, which varies depending on the customer. In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities." FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns, or both. FIN 46 also requires disclosures about variable interest entities that a company is not required to consolidate, but in which it has a significant variable interest. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to existing entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when variable interest entity was established. The Corporation is currently is currently evaluating the impact of FIN 46 and expects no material effect on its financial statements. Item 3. Quantitative and Qualitative Disclosure About Market Risk ASSET AND LIABILITY MANAGEMENT AND MARKET RISK The Corporation's primary market risk exposure is interest rate risk and, to a lesser extent, liquidity risk. Interest rate risk is the possibility that the Corporation's financial condition will be adversely affected due to movements in interest rates. The income of financial institutions is primarily derived from the excess of interest earned on interest-earning assets over the interest paid on interest-bearing liabilities. Accordingly, the Corporation places great importance on monitoring and controlling interest rate risk. The measurement and analysis of the exposure of the Corporation's primary operating subsidiary, The Delaware County Bank and Trust Company, to changes in the interest rate environment are referred to as asset/liability management. One method used to analyze the Corporation's sensitivity to changes in interest rates is the "net portfolio value" ("NPV") methodology. NPV is generally considered to be the present value of the difference between expected incoming cash flows on interest-earning and other assets and expected outgoing cash flows on interest-bearing and other liabilities. For example, the asset/liability model that the Corporation currently employs attempts to measure the change in NPV for a variety of interest rate scenarios, typically for parallel shifts of 100 to 300 basis points in market rates. The Corporation's 2002 Annual Report includes a table depicting the changes in the Corporation's interest rate risk as of December 31, 2002, as measured by changes in NPV for instantaneous and sustained parallel shifts of -100 to +300 basis - ------------------------------------------------------------------------------- 14. DCB FINANCIAL CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except per share data) - ------------------------------------------------------------------------------- points in market interest rates. Management believes that no events have occurred since December 31, 2002 that would significantly change their ratio of rate sensitive assets to rate sensitive liabilities. The Corporation's NPV is more sensitive to rising rates than declining rates. From an overall perspective, such difference in sensitivity occurs principally because, as rates rise, borrowers do not prepay fixed-rate loans as quickly as they do when interest rates are declining. Thus, in a rising interest rate environment, because the Corporation has fixed-rate loans in its loan portfolio, the amount of interest the Corporation would receive on its loans would increase relatively slowly as loans are slowly prepaid and new loans at higher rates are made. Moreover, the interest the Corporation would pay on its deposits would increase rapidly because the Corporation's deposits generally have shorter periods for repricing. Additional consideration should also be given to today's current interest rate levels. Several deposit products are within 200 basis points of zero percent and other products within 300 basis points. Should rates continue to decline, fewer liabilities could be repriced down to offset potentially lower yields on loans. Thus decreases could also impact future earnings and the Corporation's NPV. As with any method of measuring interest rate risk, certain shortcomings are inherent in the NPV approach. For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Further, in the event of a change in interest rates, expected rates of prepayment on loans and mortgage-backed securities and early withdrawal levels from certificates of deposit would likely deviate significantly from those assumed in making risk calculations. Item 4. Controls and Procedures Within the 90-day period prior to the filing date of this report, an evaluation was carried out under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 (c) under the Securities Exchange Act of 1934). Based on their evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are, to the best of their knowledge, effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. There were no significant changes made in the Corporation's internal controls or in other factors that could significantly affect these internal controls subsequent to the date of the evaluation performed by the Company's Chief Executive Officer and Chief Financial Officer. - ------------------------------------------------------------------------------- 15. DCB FINANCIAL CORP FORM 10-Q Quarter ended March 31, 2003 PART II - OTHER INFORMATION - ------------------------------------------------------------------------------- Item 1 - Legal Proceedings: On March 31, 2003, the United States District Court for the Southern District of Ohio (the "Court") entered judgment in favor of the Company and all other defendants in an action (the "Suit") brought by S. Robert Davis ("Davis"). Mr. Davis brought the Suit allegedly as a shareholder derivative action naming the Company, its Board of Directors, the members of the Board of Directors, and the Company's former Chief Executive Officer as defendants. Mr. Davis alleged to have sent correspondence constituting a demand under Ohio law for inspection of the books and records of account of the Company and its subsidiary, The Delaware County Bank and Trust Company, and that defendants did not respond to this correspondence prior to the deadline set forth therein. He alleged that his correspondence was due to inconsistencies in the explanation of what comprises a certain reduction in earnings announced by the Company in a press release issued December 12, 2001. The Court found that Mr. Davis' allegations did not state a cause of action for which the Court has subject matter jurisdiction, and the Suit was dismissed at Mr. Davis' costs in favor of DCB and the other defendants. Item 2 - Changes in Securities: There are no matters required to be reported under this item. Item 3 - Defaults Upon Senior Securities: There are no matters required to be reported under this item. Item 4 - Submission of Matters to a Vote of Security Holders: There are no matters required to be reported under this item. - ------------------------------------------------------------------------------- 16. DCB FINANCIAL CORP FORM 10-Q Quarter ended March 31, 2003 PART II - OTHER INFORMATION - ------------------------------------------------------------------------------- Item 5 - Other Information: In connection with events disclosed by the Company in a Report on Form 8-K filed with the SEC on April 21, 2003, the Company has rescheduled its annual meeting of shareholders for June 25, 2003 at 4:00 p.m. The record date for shareholders entitled to vote at the meeting has also been changed to May 15, 2003. No change has been made to the location for the annual meeting of shareholders. The Company expects to distribute revised proxy materials for use in connection with the rescheduled annual meeting of shareholders on or around May 23, 2003. Item 6 - Exhibits and Reports on Form 8-K: (a) Exhibits - The following exhibits are filed as a part of this report:
Exhibit No. Exhibit ----------- ------- 3.1 Amended and Restated Articles of Incorporation of DCB Financial Corp. (Incorporated by reference to the Registrant's filing on Form S-4 on November 5, 1996. File No. 333-15579.) 3.2 Code of Regulations of DCB Financial Corp. (Incorporated by reference to the Registrant's filing on Form S-4 on November 5, 1996. File No. 333-15579.) 4. Instruments Defining the Rights of Security Holders. (See Exhibits 3.1 and 3.2.) 99.1 Certification pursuant to 18 U.S.C. 1350, as enacted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 99.2 Certification pursuant to 18 U.S.C. 1350, as enacted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (a) Reports on Form 8-K - A report on Form 8-K was filed on February 14, 2003 (report date: 2/14/03) - shareholder letter regarding dividend announcement and year-end earnings. (b) Reports on Form 8-K - A report on Form 8-K was filed on February 18, 2003 (report date: 2/14/03) - year end earnings release. (c) Reports on Form 8-K - A report on Form 8-K was filed on March 20, 2003 (report date: 3/13/03) - change in Company's certifying accountant. (d) Reports on Form 8-K - A report on Form 8-K was filed on March 31, 2003 (report date: 3/13/03) - amendment to the 8-K filed 3/20/03 regarding the change in the Company's certifying accountant.
- ------------------------------------------------------------------------------- 17. DCB FINANCIAL CORP 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. DCB FINANCIAL CORP. -------------------------------------- (Registrant) Date: May 12, 2003 /s/ Jeffrey Benton ------------ -------------------------------------- (Signature) Jeffrey Benton President and Chief Executive Officer Date: May 12, 2003 /s/ John A. Ustaszewski ------------ ------------------------------------- (Signature) John A. Ustaszewski Vice President and Chief Financial Officer - ------------------------------------------------------------------------------- 18. DCB FINANCIAL CORP CERTIFICATION I, Jeffrey Benton, President and Chief Executive Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of DCB Financial Corp; 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 employee who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 12, 2003 /s/ Jeffrey Benton ------------ ------------------ (Signature) Jeffrey Benton Title: President and Chief Executive Officer - ------------------------------------------------------------------------------- 19. DCB FINANCIAL CORP CERTIFICATION I, John A. Ustaszewski, Vice President and Chief Financial Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of DCB Financial Corp; 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): d) 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 e) any fraud, whether or not material, that involves management or other employee who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 12, 2003 /s/ John A. Ustaszewski ------------------ ------------------------- (Signature) John A. Ustaszewski Title: Vice President and Chief Financial Officer - ------------------------------------------------------------------------------- 20. DCB FINANCIAL CORP INDEX TO EXHIBITS - -------------------------------------------------------------------------------
EXHIBIT NUMBER DESCRIPTION PAGE NUMBER - ------ ----------- ----------- 3.1 Amended and Restated Articles of Incorporation of NA DCB Financial Corp. (Incorporated by reference to the Registrant's filing on Form S-3 on November 5, 1996. File No. 333-15579.) 3.2 Code of Regulations of DCB Financial Corp. NA (Incorporated by reference Registrant's filing Form S-4 on November 6, 1996. File No. 333-15579). 4 Instruments Defining the Rights of Security NA Holders. (See Exhibits 3.1 and 3.2.) 11 Statement re: computation of per share earnings Reference is hereby made to Consolidated Statements of Income on page 4 and Note 1 of Notes to Consolidated Financial Statements on page 6, hereof. 99.1 Certification pursuant to 18 U.S.C. 1350, as enacted Reference is hereby made on page 23. Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 99.2 Certification pursuant to 18 U.S.C. 1350, as enacted Reference is hereby made on page 24. Pursuant to section 906 of the Sarbanes-Oxley Act of 2002
- ------------------------------------------------------------------------------- 21. EX-99.1 3 l00853aexv99w1.txt EX-99.1 EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of DCB Financial Corp (the "Company") on Form 10-Q for the period ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jeffrey Benton, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Jeffrey Benton Jeffrey Benton President and Chief Executive Officer May 12, 2003 22 EX-99.2 4 l00853aexv99w2.txt EX-99.2 EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of DCB Financial Corp (the "Company") on Form 10-Q for the period ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John A. Ustaszewski, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ John A. Ustaszewski John A. Ustaszewski Vice-President and Chief Financial Officer May 12, 2003 23 -----END PRIVACY-ENHANCED MESSAGE-----