Exhibit to Form 12b-25
Part IV (3)
It is anticipated the Registrant's results of operations for the three and
nine month periods ended December 31, 2003 will be significantly different from
the corresponding previous fiscal year. The net earnings for the current fiscal
year will be significantly more than the previous fiscal year primarily as a
result of the following:
Three months ended December 31, 2003:
- -------------------------------------
The Company's net earnings of $14,660 for the period ended December 31, 2003
compared to a net loss of $146,610 for the period ended December 31, 2002, an
increase in net earnings of 110%. The major components of this increase included
the following.
In the Wealth Management Group segment, trust fee income was approximately
$162,000 greater in the current quarter resulting from two primary items: first,
the addition of a single trust relationship which commenced in January 2003,
accounting for approximately $138,000 of the increase, and second, one-time
death related trust service fees accounting for approximately $20,000 of the
increase.
In the Corporate Trust segment, general and administrative expenses decreased in
the aggregate approximately $179,000 for the period ended December 31, 2003, a
decrease of 33% compared to the prior three month period, primarily as a result
of the following two items: first, in the previous quarter, the Company incurred
approximately $86,000 for the Stevens Bankruptcy Proceeding and the Adversary
Proceeding, including the settlement payment net of insurance reimbursements,
and second, in the previous quarter, the Company incurred expenses of
approximately $91,000 as a result of reconciliation item write-offs.
The above positive impacts on earnings were partially offset by the following:
In the Wealth Management Group segment, general and administrative expenses
increased in the aggregate approximately $96,000 for the period ended December
31, 2003, an increase of 29% compared to the prior three month period, primarily
as a result of the following four items: first, an increase in personnel costs
of approximately $45,000, including a new business development officer and
support staff; second, increased commission expense and investment advisory fees
of approximately $41,000 associated with administering the single trust
relationship added in January 2003, and third, litigation expense of
approximately $38,000 related to the Dorothy Long lawsuit which is most recently
explained in "Part II - Item 1. Legal Proceedings" in the Company's Form 10-QSB
filed for the period ended September 30, 2003. These items were partially offset
by higher soft dollar expense reimbursements of approximately $27,000.
Nine months ended December 31, 2003:
- ------------------------------------
The Company's net earnings of $116,605 for the period ended December 31, 2003
compared to a net loss of $111,224 for the period ended December 30, 2002, an
increase in net earnings of 205%. The major components of this aggregate
increase included the following:
In the Corporate Trust segment, bond servicing revenue increased approximately
$60,000 for the period ended December 31, 2003, an increase of 5% compared to
the prior nine month period. This increase resulted primarily from the following
three factors: first, interest income collected on accounts receivable for
delinquent bond issuers in the nine months ended December 31, 2003 was
approximately $67,000 greater than the previous period. This item was
reclassified during the current period from "Other" under the Business Segments
because it relates directly to the bond servicing business. Second, the Company
generated approximately $39,000 more in bond call fees as a result of bond
issuers refinancing into traditional loans or other products that do not
generate fees for the Company; bond calls of approximately $115 million and $55
million in original principal amounts occurred in the nine-month periods ended
December 31, 2003, and 2002 respectively. Third, the Company's revenues from
miscellaneous trust services were approximately $26,000 higher in the current
period as compared with the prior nine-month period. These items were partially
offset by the following factors. First, interest earnings on investments were
approximately $35,000 less than the previous period due to lower interest rates,
partially offset by higher investment balances generating these earnings in the
current period. Second, annual maintenance fees were approximately $39,000 less
in the current period despite an increase of approximately $3 million in new
non-profit bond issues in the current period over the prior period. This
decrease was caused by a greater number of bond calls (more fully explained
above) in the current period, which reduced the overall total of outstanding
bond issues in the current period on which the Company earns annual fees. The
above factors are expected to continue to negatively impact such revenues in the
foreseeable future.
The Corporate Trust segment's IRA servicing fees decreased in aggregate
approximately $33,000 for the period ended December 31, 2003, compared to the
prior period, a decrease of 7%. This decrease was primarily due to a reduction
in interest earnings of approximately $66,000 caused by lower interest rates,
partially offset by earnings on higher un-invested customer cash balances. The
decrease in Corporate Trust segment's IRA interest earnings was partially offset
by approximately $23,000 in higher account termination or conversion fees in the
current period. In the nine-month period ended December 31, 2003, there was a
net decrease of 465 in the number of IRA accounts managed by the Corporate Trust
segment; however, the aggregate value of accounts under management increased by
approximately $10 million during the same period
Revenue from the Wealth Management Group segment's IRA servicing fees increased
by approximately $20,000 for the period ended December 31, 2003, compared to the
prior period, an increase of 9%. The increase in the Wealth Management Group
segment's IRA revenue was primarily due to an increase in the number and market
value of accounts serviced by the Company.
The Wealth Management Group segment's trust fee income increased approximately
$466,000 for the period ended December 31, 2003, compared to the prior period,
an increase of 49%. The increase in trust fee income was primarily due to the
following factors. First, the Company added a single trust relationship that
commenced January 2003, accounting for approximately $411,000 of the increase in
the current period (it should be noted that revenue from this relationship will
most likely cease in the first calendar quarter of 2004). Second, trust fee
income also increased during the current period because of termination fees of
approximately $34,000 received by the Company on a single agency trust account
in the current period.
The Corporate Trust segment's general and administrative expenses decreased in
the aggregate approximately $231,000 for the period ended December 31, 2003,
compared to the prior period, a decrease of 18%. These expenses decreased in the
aggregate primarily as a result of several large expenses included in the
previous nine months but not in the current nine months. First, the Company
incurred expenses of approximately $118,000 in the previous period as a result
of the Stevens Bankruptcy Proceeding and the Adversary Proceeding, including the
settlement payment net of insurance reimbursements. Second, the Company incurred
expenses of approximately $143,000 in the previous period as a result of trust
account reconciliation item write-offs.
The Wealth Management Group segment's general and administrative expenses
increased in the aggregate approximately $298,000 for the period ended December
31, 2003, compared to the prior period, an increase of 31%. The increase in
these expenses was primarily due to increased personnel costs of approximately
$101,000, including a new business development officer and support staff,
increased commission expense and investment advisory fees of approximately
$174,000 associated with administering the single trust relationship added in
January 2003, and litigation expense of approximately $86,000 related to the
Dorothy Long lawsuit, which is most recently explained in "Part II - Item 1.
Legal Proceedings" in the Company's Form 10-QSB filed for the period ended
September 30, 2003). These items were partially offset by higher soft dollar
expense reimbursements of approximately $80,000.