Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended September 30, 2005 Commission File Number: 0-19212
-------
JEFFERSONVILLE BANCORP
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
New York 22-2385448
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
P. O. Box 398, Jeffersonville, New York 12748
- --------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (845) 482-4000
--------------
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 proceeding 12 months (or for such shorter period that the
Registrant was required to file such report(s), 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 No X
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
Yes No X
Number of Shares Outstanding
Class of Common Stock as of November 8, 2005
--------------------- ----------------------------
$0.50 par value 4,434,321
INDEX TO FORM 10-Q
Page
Part 1 FINANCIAL INFORMATION
Item 1 Consolidated Interim Financial Statements (Unaudited)
Consolidated Balance Sheets at
September 30, 2005 and December 31, 2004 1
Consolidated Statements of Income for the Three
Months Ended September 30, 2005 and 2004 2
Consolidated Statements of Income for the Nine
Months Ended September 30, 2005 and 2004 3
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 2005 and 2004 4
Notes to Unaudited Consolidated Interim Financial Statements 5-7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-17
Item 3 Quantitative and Qualitative Disclosures about Market Risk 17
Item 4 Controls & Procedures 17
Part 2 OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 18
Signatures 19
Jeffersonville Bancorp and Subsidiary
Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
2005 2004
ASSETS
Cash and due from banks $ 14,449,000 $ 14,040,000
Federal funds sold -- --
------------ ------------
Total cash and cash equivalents 14,449,000 14,040,000
Securities available for sale, at fair value 91,534,000 100,705,000
Securities held to maturity, estimated fair value of $8,350,000
at September 30, 2005 and $5,998,000 at December 31, 2004 8,241,000 5,957,000
Loans, net of allowance for loan losses of $3,709,000 at
September 30, 2005 and $3,645,000 at December 31, 2004 241,791,000 220,591,000
Accrued interest receivable 2,140,000 2,085,000
Premises and equipment, net 2,938,000 2,869,000
Federal Home Loan Bank stock 2,785,000 2,175,000
Cash surrender value of bank-owned life insurance 13,099,000 12,747,000
Other assets 3,299,000 2,698,000
------------ ------------
TOTAL ASSETS $380,276,000 $363,867,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Demand deposits $ 69,906,000 $ 65,208,000
NOW and super NOW accounts 33,813,000 36,594,000
Savings and insured money market deposits 88,611,000 87,115,000
Time deposits 103,634,000 104,177,000
------------ ------------
TOTAL DEPOSITS 295,964,000 293,094,000
------------ ------------
Federal Home Loan Bank borrowings 28,500,000 18,500,000
Short-term debt 7,633,000 8,424,000
Accrued expenses and other liabilities 6,060,000 4,203,000
------------ ------------
TOTAL NON-DEPOSIT LIABILITIES 42,193,000 31,127,000
------------ ------------
TOTAL LIABILITIES 338,157,000 324,221,000
------------ ------------
Stockholders' equity:
Series A preferred stock, no par value;
2,000,000 shares authorized, none issued -- --
Common stock, $0.50 par value; 11,250,000 shares
authorized, 4,767,786 shares issued at September 30, 2005
and at December 31, 2004 2,384,000 2,384,000
Paid-in capital 6,483,000 6,483,000
Treasury stock, at cost; 333,465 shares at September 30, 2005
and at December 31, 2004 (1,108,000) (1,108,000)
Retained earnings 35,178,000 32,342,000
Accumulated other comprehensive loss (818,000) (455,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 42,119,000 39,646,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $380,276,000 $363,867,000
============ ============
See accompanying notes to unaudited consolidated interim financial
statements.
1
Jeffersonville Bancorp and Subsidiary
Consolidated Statements of Income
(Unaudited)
For the Three Months
Ended September 30,
2005 2004
---------- ----------
Unaudited Unaudited
INTEREST AND DIVIDEND INCOME
Loan interest and fees $4,515,000 $3,926,000
Securities:
Taxable 643,000 822,000
Non-taxable 492,000 499,000
Federal funds sold 2,000 7,000
Dividends 13,000 8,000
---------- ----------
TOTAL INTEREST AND DIVIDEND INCOME 5,665,000 5,262,000
---------- ----------
INTEREST EXPENSE
Deposits 1,040,000 732,000
Federal Home Loan Bank borrowings 350,000 298,000
Other interest expense 48,000 1,000
---------- ----------
TOTAL INTEREST EXPENSE 1,438,000 1,031,000
---------- ----------
NET INTEREST INCOME 4,227,000 4,231,000
Provision for loan losses 60,000 90,000
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,167,000 4,141,000
---------- ----------
NON-INTEREST INCOME
Service charges 470,000 551,000
Increase in cash surrender value
of bank-owned life insurance 107,000 119,000
Net security gains -- 5,000
Other real estate owned income, net 16,000 2,000
Other non-interest income 424,000 371,000
---------- ----------
TOTAL NON-INTEREST INCOME 1,017,000 1,048,000
---------- ----------
NON-INTEREST EXPENSES
Salaries and employee benefits 1,995,000 1,834,000
Occupancy and equipment expenses 467,000 433,000
Other non-interest expenses 816,000 845,000
---------- ----------
TOTAL NON-INTEREST EXPENSES 3,278,000 3,112,000
---------- ----------
Income before income tax expense 1,906,000 2,077,000
Income tax expense 497,000 545,000
=========== ===========
NET INCOME $ 1,409,000 $ 1,532,000
=========== ===========
Basic earnings per common share $ 0.32 $ 0.35
=========== ===========
Average common shares outstanding 4,434,000 4,434,000
=========== ===========
See accompanying notes to unaudited consolidated interim financial
statements.
2
Jeffersonville Bancorp and Subsidiary
Consolidated Statements of Income
(Unaudited)
For the Nine Months
Ended September 30,
2005 2004
----------- -----------
Unaudited Unaudited
INTEREST AND DIVIDEND INCOME
Loan interest and fees $12,807,000 $11,328,000
Securities:
Taxable 1,976,000 2,631,000
Non-taxable 1,447,000 1,511,000
Federal funds sold 21,000 14,000
Dividends 67,000 24,000
----------- -----------
TOTAL INTEREST AND DIVIDEND INCOME 16,318,000 15,508,000
----------- -----------
INTEREST EXPENSE
Deposits 2,800,000 2,112,000
Federal Home Loan Bank borrowings 890,000 875,000
Other interest expense 88,000 9,000
----------- -----------
TOTAL INTEREST EXPENSE 3,778,000 2,996,000
----------- -----------
NET INTEREST INCOME 12,540,000 12,512,000
Provision for loan losses 180,000 270,000
----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 12,360,000 12,242,000
----------- -----------
NON-INTEREST INCOME
Service charges 1,418,000 1,663,000
Increase in cash surrender value
of bank-owned life insurance 353,000 377,000
Net security gains 6,000 11,000
Other real estate owned income, net 141,000 22,000
Other non-interest income 1,012,000 894,000
----------- -----------
TOTAL NON-INTEREST INCOME 2,930,000 2,967,000
----------- -----------
NON-INTEREST EXPENSES
Salaries and employee benefits 5,848,000 5,304,000
Occupancy and equipment expenses 1,445,000 1,326,000
Other non-interest expenses 2,383,000 2,350,000
----------- -----------
TOTAL NON-INTEREST EXPENSES 9,676,000 8,980,000
----------- -----------
Income before income tax expense 5,614,000 6,229,000
Income tax expense 1,449,000 1,643,000
----------- -----------
NET INCOME $ 4,165,000 $ 4,586,000
=========== ===========
Basic earnings per common share $ 0.94 $ 1.03
=========== ===========
Average common shares outstanding 4,434,000 4,434,000
=========== ===========
See accompanying notes to unaudited consolidated interim financial
statements.
3
Jeffersonville Bancorp and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months
Ended September 30,
2005 2004
------------ ------------
OPERATING ACTIVITIES
Net income $ 4,165,000 $ 4,586,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 180,000 270,000
Gain on sales of other real estate owned (125,000) (67,000)
Depreciation and amortization 431,000 516,000
Net increase in cash surrender value
of bank-owned life insurance (352,000) (337,000)
Net security gains (6,000) (11,000)
(Increase) decrease in accrued interest receivable (55,000) 31,000
Increase in other assets (333,000) (451,000)
Increase in accrued expenses and other liabilities 1,857,000 981,000
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITES 5,762,000 5,518,000
------------ ------------
INVESTING ACTIVITIES
Proceeds from maturities and calls:
Securities available for sale 6,717,000 16,042,000
Securities held to maturity 2,842,000 574,000
Proceeds from sales of securities available for sale 4,782,000 --
Purchases:
Securities available for sale (2,954,000) (7,475,000)
Securities held to maturity (5,126,000) (1,013,000)
Disbursements for loan originations, net of
principal collections (21,380,000) (22,526,000)
Purchase of Federal Home Loan Bank stock (4,176,000) (725,000)
Redemption of Federal Home Loan Bank stock 3,566,000 975,000
Net purchases of premises and equipment (500,000) (429,000)
Proceeds from sales of other real estate owned 125,000 67,000
------------ ------------
NET CASH USED IN INVESTING ACTIVITES (16,104,000) (14,510,000)
------------ ------------
FINANCING ACTIVITES
Net increase (decrease) in deposits 2,870,000 15,262,000
Proceeds from (repayment of) Federal Home Loan Bank borrowings 10,000,000 (5,000,000)
Net decrease in short-term debt (791,000) (3,158,000)
Cash dividends paid (1,328,000) (1,198,000)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,751,000 5,906,000
------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 409,000 (3,086,000)
Cash and cash equivalents at beginning of period 14,040,000 15,992,000
------------ ------------
Cash and cash equivalents at end of period $ 14,449,000 $ 12,906,000
============ ============
Supplemental information:
Cash paid for:
Interest $ 3,668,000 $ 2,981,000
Income taxes 1,198,278 1,532,000
See accompanying notes to unaudited consolidated interim financial
statements.
4
JEFFERSONVILLE BANCORP
AND SUBSIDIARY
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2005
(Unaudited)
A. Financial Statement Presentation
The accompanying unaudited interim consolidated financial statements
include the accounts of Jeffersonville Bancorp and its wholly owned
subsidiary, The First National Bank of Jeffersonville (collectively,
Jeffersonville Bancorp and its subsidiary are referred to herein as the
"Company"). In the opinion of Management of the Company, the
accompanying unaudited consolidated interim financial statements contain
all adjustments necessary to present the financial position as of
September 30, 2005 and December 31, 2004, the results of operations for
the three month and nine month periods ended September 30, 2005 and
2004, and the cash flows for the nine month periods ended September 30,
2005 and 2004. Reclassifications are made whenever necessary to conform
prior periods' financial statements to current period's presentation.
All adjustments are normal and recurring. Third quarter results are not
indicative of full year results. The accompanying unaudited consolidated
interim financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America
for interim financial information and with the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X and should be read in conjunction with
the Company's consolidated year-end financial statements, including
notes thereto, which are included in the 2004 Annual Report on Form
10-K.
B. Earnings per Share
Basic earnings per share amounts were calculated for the three and nine
month periods ended September 30, 2005 and 2004 based on weighted
average common shares outstanding of 4,434,321. There were no dilutive
securities during any of the periods. Earnings per share were $0.32 for
the quarter ended September 30, 2005, as compared to $0.35 per share for
the same period in 2004. Earnings per share were $0.94 for the nine
months ended September 30, 2005, as compared to $1.03 for the same
period in 2004.
C. Comprehensive Income
Comprehensive income for the three-month periods ended September 30,
2005 and 2004 was $751,000 and $3,316,000, respectively.
Nine months Ended September 30, 2005
Net Income $ 4,165,000
Net unrealized holding losses arising during the period,
net of tax (pre-tax amount of $626,000) (359,000)
Reclassification adjustment for net gains realized in net income
income during the period, net of tax (pre-tax amount of $6,000) (4,000)
-----------
Other comprehensive loss (363,000)
-----------
Total comprehensive income $ 3,802,000
===========
Nine months Ended September 30, 2004
Net Income $ 4,586,000
Net unrealized holding gains arising during the period,
net of tax (pre-tax amount of $148,000) 89,000
Reclassification adjustment for net gains realized in net
income during the period, net of tax (pre-tax amount of $11,000) (7,000)
-----------
Other comprehensive income 82,000
-----------
Total comprehensive income $ 4,668,000
===========
5
D. New Accounting Pronouncements
In December 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the Act) became law in the United States. The
Act introduced a prescription drug benefit under Medicare as well as a
federal subsidy to sponsors of retiree health care benefit plans that
provide a benefit that is at least actuarially equivalent to Medicare
Part D under the Act. In accordance with FASB Staff Position FAS 106-2,
"Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003," the
Company has elected to defer recognition of the effects of the Act in
any measures of the benefit obligation or cost. The Company is still
analyzing the specific authoritative guidance on the accounting for the
federal subsidy, which was issued in January 2005, but the Company
anticipates that, in order to make the plan actuarially equivalent, it
may make minor changes to its non-pension postretirement plan.
Accordingly, the measures of the accumulated non-pension postretirement
benefit obligation and net periodic non-pension postretirement benefit
cost do not reflect any amount associated with the subsidy.
E. Pension and Other Postretirement Benefits
The Company has a noncontributory defined benefit pension plan covering
substantially all of its employees. The Company also sponsors a
postretirement medical and life insurance benefit plan for retirees in
the pension plan. The components of the net periodic benefit cost for
these plans were as follows for the nine and three month periods ended
September 30:
For the nine months ended September 30, 2005:
Pension benefits Postretirement benefits
2005 2004 2005 2004
Service cost $ 223,000 $ 201,000 $124,000 $183,000
Interest cost 306,000 282,000 132,000 156,000
Expected return on plan assets (275,000) (240,000) -- --
Amortization of prior service cost 19,000 18,000 (33,000) --
Amortization of transition (asset) obligation (3,000) (3,000) -- 12,000
Recognized net actuarial loss 101,000 99,000 40,000 45,000
--------- --------- -------- --------
Net periodic benefit cost $ 371,000 $ 357,000 $263,000 $396,000
========= ========= ======== ========
For the three months ended September 30, 2005:
Pension benefits Postretirement benefits
2005 2004 2005 2004
Service cost $ 74,000 $ 67,000 $ 41,000 $ 61,000
Interest cost 102,000 94,000 44,000 52,000
Expected return on plan assets (92,000) (80,000) -- --
Amortization of prior service cost 7,000 6,000 (11,000) --
Amortization of transition (asset) obligation (1,000) (1,000) -- 4,000
Recognized net actuarial loss 34,000 33,000 14,000 15,000
-------- -------- -------- --------
Net periodic benefit cost $124,000 $119,000 $ 88,000 $132,000
======== ======== ======== ========
The Company previously disclosed in its consolidated financial
statements for the year ended December 31, 2004, that it expected to
contribute $341,000 to its pension plan and $73,000 to its other
postretirement benefits plan in 2005. As of September 30, 2005,
contributions of $341,000 have been made to the pension plan and $34,000
of contributions have been made to the other postretirement benefits
plan.
6
F. Guarantees
FASB Interpretation No. 45 (FIN No. 45), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others; an interpretation of FASB Statements No. 5, 57,
and 107 and rescission of FASB Interpretation No. 34" requires certain
disclosures and liability recognition for the fair value at issuance of
guarantees that fall within its scope. Under FIN No. 45, the Company
does not issue any guarantees that would require liability recognition
or disclosure, other than its standby letters of credit. Standby letters
of credit are conditional commitments issued by the Company to guarantee
the performance of a customer to a third party. Standby letters of
credit generally arise in connection with lending relationships. The
credit risk involved in issuing these instruments is essentially the
same as that involved in extending loans to customers. Contingent
obligations under standby letters of credit totaled approximately
$1,441,000 at September 30, 2005 and $808,000 at December 31, 2004 and
represent the maximum potential future payments the Company could be
required to make. Typically, these instruments have terms of twelve
months or less and expire unused; therefore, the total amounts do not
necessarily represent future cash requirements. Each customer is
evaluated individually for creditworthiness under the same underwriting
standards used for commitments to extend credit and on-balance sheet
instruments. Company policies governing loan collateral apply to standby
letters of credit at the time of credit extension. Loan-to-value ratios
are generally consistent with loan-to-value requirements for other
commercial loans secured by similar types of collateral. The fair value
of the Company's standby letters of credit at September 30, 2005 and
December 31, 2004 was insignificant.
7
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Statements
In addition to historical information, this report includes certain
forward-looking statements with respect to the financial condition,
results of operations and business of the Company based on current
management's expectations. The Company's ability to predict results or
the effect of future plans and strategies is inherently uncertain and
actual results, performance or achievements could differ materially from
those management expectations. Factors that could cause future results
to vary from current management expectations include, but are not
limited to, general economic conditions, legislative and regulatory
changes, monetary and fiscal policies of the federal government, changes
in tax policies, rates and regulations, changes in interest rates,
deposit flows, the cost of funds, demand for loan products, demand for
financial services, competition, changes in the quality or composition
of the Company's loan and securities portfolios, changes in accounting
principles, and other economic, competitive, governmental, and
technological factors affecting the Company's operations, markets,
products, services and prices.
A. Overview - Financial Condition
During the period from December 31, 2004 to September 30, 2005, total
assets increased $16,409,000 or 4.5%. Decreases in securities available
for sale were offset by increases in net loans, held to maturity
securities, Federal Home Loan Bank stock, the cash surrender value of
bank-owned life insurance and other assets. Securities available for
sale decreased from $100,705,000 at year end 2004 to $91,534,000 at
September 30, 2005, a decrease of $9,171,000 or 9.1%. Net loans
increased from $220,591,000 to $241,791,000 from December 31, 2004 to
September 30, 2005, an increase of $21,200,000 or 9.6%. Securities held
to maturity increased from $5,957,000 at year end 2004 to $8,241,000 at
September 30, 2005, an increase of $2,284,000 or 38.3%. Federal Home
Loan Bank stock increased $610,000 or 28.1% and other assets increased
22.3% or $601,000 from year end 2004.
Deposits increased from $293,094,000 at December 31, 2004 to
$295,964,000 at September 30, 2005, an increase of $2,870,000 or 1.0%.
Demand deposits increased from $65,208,000 at December 31, 2004 to
$69,906,000 at September 30, 2005, an increase of $4,698,000 or 7.2%.
These lower cost deposits are an important offset to the cost of higher
priced funds. NOW and super NOW accounts decreased from $36,594,000 at
December 31, 2004 by $2,781,000 or 7.6%, to $33,813,000 at September 30,
2005. Savings deposits increased from $87,115,000 at December 31, 2004
to $88,611,000 at September 30, 2005, an increase of $1,496,000 or 1.7%.
Time deposits decreased $543,000 or 0.5% to $103,634,000 at September
30, 2005 from December 31, 2004. Non deposit liabilities increased from
$31,127,000 at December 31, 2004 to $42,193,000 at September 30, 2005,
an increase of $11,066,000 or 35.6%, largely due to a $10,000,000 or 54%
increase in Federal Home Loan Bank borrowings at September 30, 2005.
8
Total stockholders' equity increased $2,523,000 or 6.4% from $39,646,000
at December 31, 2004 to $42,119,000 at September 30, 2005. This increase
was the result of net income of $4,165,000 less cash dividends of
$1,328,000 and a $363,000 increase in accumulated other comprehensive
loss.
Loan Portfolio Composition:
September 30, 2005 December 31, 2004
Amount Percent Amount Percent
REAL ESTATE LOANS
Residential $ 89,334,000 36.3% $ 83,340,000 37.0%
Commercial 80,314,000 32.5% 75,357,000 33.4%
Home Equity 22,640,000 9.2% 21,127,000 9.4%
Farm Land 3,754,000 1.5% 3,727,000 1.7%
Construction 6,022,000 2.4% 4,524,000 2.0%
------------ ------------
202,064,000 82.1% 188,075,000 83.5%
------------ ------------
OTHER LOANS
Commercial Loans 29,944,000 12.1% 21,317,000 9.5%
Consumer Installment Loans 12,510,000 5.1% 14,116,000 6.3%
Other Consumer Loans 1,198,000 0.5% 1,345,000 0.6%
Agriculture Loans 502,000 0.2% 338,000 0.1%
------------ ------------
44,154,000 17.9% 37,116,000 16.5%
------------ ------------
Total Loans 246,218,000 100.0% 225,191,000 100.0%
------------ ------------
Unearned Income (718,000) (955,000)
Allowance for Loan Losses (3,709,000) (3,645,000)
------------ ------------
TOTAL LOANS, NET $241,791,000 $220,591,000
============ ============
B. Allowance for Loan Losses
The allowance for loan losses reflects management's assessment of the
risk inherent in the loan portfolio, which includes factors such as the
general state of the economy and past loan experience. The provision for
loan losses was $180,000 for the nine months ended September 30, 2005
compared to $270,000 for the nine months ended September 30, 2004. Total
charge-offs for the nine month period ended September 30, 2005 were
$301,000 compared to $352,000 for the same period in the prior year,
while recoveries increased from $113,000 for the 2004 period to $185,000
for the 2005 period. The amounts represent net charge-offs of $116,000
in the first nine months of 2005 versus net charge-offs of $239,000 for
the same period in the prior year. Based on management's analysis of the
loan portfolio, management believes the current level of the allowance
for loan losses is adequate.
Changes in the allowance for loan losses are summarized as follows for
the nine month periods ended September 30:
2005 2004
---------- ----------
Balance at beginning of period $3,645,000 $3,569,000
Provision for loan losses 180,000 270,000
Loans charged-off (301,000) (352,000)
Recoveries 185,000 113,000
---------- ----------
Balance at end of period $3,709,000 $3,600,000
========== ==========
Annualized net charge-offs as a percentage
of average outstanding loans 0.07% 0.15%
Allowance for loan losses to:
Total loans 1.51% 1.64%
Total nonperforming loans 116.1% 224.2%
9
C. Nonaccrual and Past Due Loans
The Company places a loan on nonaccrual status when collectability of
principal or interest is doubtful, or when either principal or interest
is 90 days or more past due and the loan is not well secured and in the
process of collection. Interest payments received on nonaccrual loans
are applied as a reduction of the principal balance when concern exists
as to the ultimate collection of principal.
Nonperforming loans are summarized as follows at September 30:
2005 2004
---------- ----------
Nonaccrual loans $3,186,000 $1,022,000
Loans past due 90 days or more
and still accruing interest 10,000 584,000
---------- ----------
Total nonperforming loans 3,196,000 1,606,000
---------- ----------
Nonperforming loans as a
percentage of total loans 1.30% 0.7%
---------- ----------
As of September 30, 2005, the recorded investment in loans considered to
be impaired under Statement of Financial Accounting Standards ("SFAS")
No.114 totaled $2,382,000 for which the related loan allowance was
$350,000. For the comparable period in 2004, $672,000 of loans were
impaired with a related allowance of $101,000.
D. Capital
Under the Federal Reserve Bank's risk-based capital rules, the Company's
Tier I risk-based capital was 16.9% and total risk-based capital was
18.1% of risk-weighted assets at September 30, 2005. These risk-based
capital ratios are well above the minimum regulatory requirements of
4.0% for Tier I capital and 8.0% for total capital. The Company's
leverage ratio (Tier I capital to average assets) of 11.2% at September
30, 2005 is well above the 4.0% minimum regulatory requirement.
The following table shows the Company's actual capital measurements
compared to the minimum regulatory requirements at September 30, 2005
(dollars in thousands).
TIER I CAPITAL
Stockholders' equity, excluding accumulated
other comprehensive loss $ 42,937
TIER II CAPITAL
Allowance for loan losses(1) 3,176
--------
Total risk-based capital $ 46,113
--------
Risk-weighted assets(2) $254,113
--------
Average assets $384,296
--------
RATIOS
Tier I risk-based capital (minimum 4.0%) 16.9%
Total risk-based capital (minimum 8.0%) 18.1%
Leverage (minimum 4.0%) 11.2%
(1) The allowance for loan losses is limited to 1.25% of risk-weighted
assets for the purpose of this calculation.
(2) Risk-weighted assets have been reduced for excess allowance for loan
losses excluded from total risk-based capital
10
Consolidated Average Balance Sheet for the nine months ended September 30, 2005
(Fully Taxable Equivalent)
% of Total Interest
Average Average Earned / Average
Balance Assets Paid Yield/Rate
ASSETS
Investment securities (1)
Taxable securities $ 55,089 14.79% $ 1,976 4.78%
Tax exempt securities (income tax gross up 34%) 48,022 12.89% 2,192 6.09%
-------- -------
Total securities 103,111 27.68% 4,168 5.39%
Short-term investments 1,059 0.28% 21 2.64%
Loans, net of unearned income
Real estate mortgages 167,964 45.09% 8,836 7.01%
Home equity loans 21,396 5.74% 964 6.01%
Time and demand loans 27,122 7.28% 1,554 7.64%
Installment loans 17,099 4.59% 1,289 10.05%
Other loans 2,666 0.72% 231 11.55%
-------- -------
Total loans (2) 236,247 63.42% 12,874 7.27%
-------- -------
Total interest earning assets 340,417 91.39% $17,063 6.68%
-------- =======
Allowance for loan losses (3,661) -0.98%
Unrealized gains and losses on portfolio, net 371 0.10%
Cash and due from banks 13,286 3.57%
Premise and equipment, net 2,944 0.79%
Cash surrender value of bank-owned life insurance 12,915 3.47%
Other assets 6,225 1.67%
--------
Total assets $372,497 100.00%
========
LIABILITIES AND STOCKHOLDERS' EQUITY
NOW and Super NOW deposits $ 37,330 10.02% $ 80 0.29%
Savings and insured money market deposits 88,040 23.64% 631 0.96%
Time deposits 104,065 27.94% 2,089 2.68%
-------- -------
Total interest bearing deposits 229,435 61.59% 2,800 1.63%
Federal funds purchased and other short-term debt 3,575 0.96% 88 3.28%
Long-term debt 24,141 6.48% 890 4.92%
-------- -------
Total interest bearing liabilities 257,151 69.03% $ 3,778 1.96%
-------- =======
Demand deposits 67,258 18.06%
Other liabilities 6,931 1.86%
--------
Total liabilities 331,340 88.95%
Stockholders' equity 41,157 11.05%
--------
Total liabilities and stockholders' equity $372,497 100.00%
========
Net interest income $13,285
Net interest spread 4.72%
Net interest margin (3) 5.20%
(1) Yields on securities available for sale are based on amortized costs.
(2) For purpose of this schedule, interest in nonaccruing loans has been
included only to the extent reflected in the consolidated income
statement. However, the nonaccrual loan balances are included in the
average amount outstanding.
(3) Computed by dividing net interest income by average interest earning
assets
11
Consolidated Average Balance Sheet for the nine months ended September 30, 2004
(Fully Taxable Equivalent)
% of Total Interest
Average Average Earned / Average
Balance Assets Paid Yield/Rate
ASSETS
Investment securities (1)
Taxable securities $ 68,253 19.07% $ 2,631 5.14%
Tax exempt securities (income tax gross up 34%) 49,651 13.87% 2,289 6.14%
-------- -------
Total securities 117,904 32.94% 4,919 5.56%
Short-term investments 2,031 0.57% 14 0.92%
Loans, net of unearned income
Real estate mortgages 150,703 42.10% 8,049 7.12%
Home equity loans 19,301 5.39% 896 6.19%
Time and demand loans 17,998 5.03% 877 6.50%
Installment loans 17,176 4.80% 1,305 10.13%
Other loans 3,169 0.89% 225 9.47%
-------- -------
Total loans (2) 208,347 58.20% 11,352 7.26%
-------- -------
Total interest earning assets 328,282 91.71% $16,285 6.61%
-------- =======
Allowance for loan losses (3,535) -0.99%
Unrealized gains and losses on portfolio, net 195 0.05%
Cash and due from banks 12,932 3.61%
Premise and equipment, net 3,065 0.86%
Cash surrender value of bank-owned life insurance 12,434 3.47%
Other assets 4,598 1.28%
--------
Total assets $357,971 100.00%
========
LIABILITIES AND STOCKHOLDERS' EQUITY
NOW and Super NOW deposits $39,438 11.02% $ 79 0.27%
Savings and insured money market deposits 84,093 23.49% 381 0.60%
Time deposits 103,673 28.96% 1,652 2.12%
-------- -------
Total interest bearing deposits 227,204 63.47% 2,112 1.24%
Federal funds purchased and other short-term debt 1,050 0.29% 9 1.14%
Long-term debt 26,197 7.32% 875 4.45%
-------- -------
Total interest bearing liabilities 254,451 71.08% $ 2,996 1.57%
-------- =======
Demand deposits 62,508 17.46%
Other liabilities 4,507 1.26%
--------
Total liabilities 321,466 89.80%
Stockholders' equity 36,505 10.20%
--------
Total liabilities and stockholders' equity $357,971 100.00%
========
Net interest income $13,289
Net interest spread 5.04%
Net interest margin (3) 5.40%
(1) Yields on securities available for sale are based on amortized costs.
(2) For purpose of this schedule, interest in nonaccruing loans has been
included only to the extent reflected in the consolidated income
statement. However, the nonaccrual loan balances are included in the
average amount outstanding.
(3) Computed by dividing net interest income by average interest earning
assets
12
Consolidated Average Balance Sheet for the three months ended
September 30, 2005
(Fully Taxable Equivalent)
% of Total Interest
Average Average Earned / Average
Balance Assets Paid Yield/Rate
ASSETS
Investment securities (1)
Taxable securities $ 54,618 14.21% $ 643 4.71%
Tax exempt securities (income tax gross up 34%) 49,186 12.80% 745 6.06%
-------- ------
Total securities 103,804 27.01% 1,388 5.35%
Short-term investments 176 0.05% 2 4.56%
Loans, net of unearned income
Real estate mortgages 174,546 45.42% 3,067 7.03%
Home equity loans 22,210 5.78% 339 6.11%
Time and demand loans 30,913 8.04% 608 7.87%
Installment loans 17,364 4.52% 433 9.97%
Other loans 2,658 0.69% 81 12.19%
-------- ------
Total loans (2) 247,691 64.45% 4,528 7.31%
-------- ------
Total interest earning assets 351,671 91.51% $5,918 6.73%
-------- ======
Allowance for loan losses (3,721) -0.97%
Unrealized gains and losses on portfolio, net 500 0.13%
Cash and due from banks 13,746 3.58%
Premise and equipment, net 3,028 0.79%
Cash surrender value of bank-owned life insurance 14,867 3.87%
Other assets 4,205 1.09%
--------
Total assets $384,296 100.00%
========
LIABILITIES AND STOCKHOLDERS' EQUITY
NOW and Super NOW deposits $ 35,787 9.31% $ 31 0.35%
Savings and insured money market deposits 89,978 23.41% 251 1.12%
Time deposits 103,160 26.84% 758 2.94%
-------- ------
Total interest bearing deposits 228,925 59.57% 1,040 1.82%
Federal funds purchased and other short-term debt 5,279 1.37% 48 3.64%
Long-term debt 28,814 7.50% 350 4.86%
-------- ------
Total interest bearing liabilities 263,018 68.44% $1,438 2.19%
-------- ======
Demand deposits 71,776 18.68%
Other liabilities 7,146 1.86%
--------
Total liabilities 341,941 88.98%
Stockholders' equity 42,355 11.02%
--------
Total liabilities and stockholders' equity $384,296 100.00%
========
Net interest income $4,480
Net interest spread 4.54%
Net interest margin (3) 5.10%
(1) Yields on securities available for sale are based on amortized costs.
(2) For purpose of this schedule, interest in nonaccruing loans has been
included only to the extent reflected in the consolidated income
statement. However, the nonaccrual loan balances are included in the
average amount outstanding.
(3) Computed by dividing net interest income by average interest earning
assets
13
Consolidated Average Balance Sheet for the three months ended
September 30, 2004
(Fully Taxable Equivalent)
% of Total Interest
Average Average Earned / Average
Balance Assets Paid Yield/Rate
ASSETS
Investment securities (1)
Taxable securities $ 67,092 18.20% $ 822 4.89%
Tax exempt securities (income tax gross up 34%) 49,735 13.49% 755 6.08%
-------- ------
Total securities 116,827 31.69% 1,577 5.40%
Short-term investments 2,584 0.70% 7 1.08%
Loans, net of unearned income
Real estate mortgages 157,857 42.82% 2,773 7.03%
Home equity loans 20,331 5.51% 311 6.12%
Time and demand loans 20,002 5.43% 346 6.92%
Installment loans 17,301 4.69% 431 9.96%
Other loans 3,186 0.86% 73 9.17%
-------- ------
Total loans (2) 218,677 59.31% 3,934 7.20%
-------- ------
Total interest earning assets 338,088 91.70% $5,518 6.53%
-------- ======
Allowance for loan losses (3,620) -0.98%
Unrealized gains and losses on portfolio, net (766) -0.21%
Cash and due from banks 13,649 3.70%
Premise and equipment, net 3,069 0.83%
Cash surrender value of bank-owned life insurance 12,680 3.44%
Other assets 5,599 1.52%
--------
Total assets $368,699 100.00%
========
LIABILITIES AND STOCKHOLDERS' EQUITY
NOW and Super NOW deposits $ 38,662 10.49% $ 24 0.25%
Savings and insured money market deposits 88,068 23.89% 142 0.64%
Time deposits 105,500 28.61% 546 2.07%
-------- ------
Total interest bearing deposits 232,230 62.99% 712 1.23%
Federal funds purchased and other short-term debt 437 0.12% 1 0.92%
Long-term debt 24,888 6.75% 318 5.11%
-------- ------
Total interest bearing liabilities 257,555 69.86% $1,031 1.60%
-------- ======
Demand deposits 68,637 18.62%
Other liabilities 4,545 1.23%
--------
Total liabilities 330,737 89.70%
Stockholders' equity 37,962 10.30%
--------
Total liabilities and stockholders' equity $368,699 100.00%
========
Net interest income $4,487
Net interest spread 4.93%
Net interest margin (3) 5.31%
(1) Yields on securities available for sale are based on amortized costs.
(2) For purpose of this schedule, interest in nonaccruing loans has been
included only to the extent reflected in the consolidated income
statement. However, the nonaccrual loan balances are included in the
average amount outstanding.
(3) Computed by dividing net interest income by average interest
earning assets
14
Liquidity
The objective of maintaining adequate liquidity is to assure the ability
of the Company and its subsidiary to meet their financial obligations.
These obligations include the payment of interest on deposits
borrowings, withdrawal of deposits on demand or at their contractual
maturity and repayment of borrowings as they mature, the ability to fund
new and existing loan commitments and the ability to take advantage of
new business opportunities. The Company and its subsidiary achieve
liquidity by maintaining a strong base of core customer funds, maturing
short-term assets, the ability to sell securities, the availability of
lines of credit and access to capital markets.
Liquidity at the subsidiary bank level is managed through the monitoring
of anticipated changes in loans, the investment portfolio, core deposits
and wholesale funds. The strength of the subsidiary banks' liquidity
position is a result of its base of core customer deposits. These core
deposits are supplemented by wholesale funding sources, including credit
lines with the other banking institutions, and the Federal Home Loan
Bank.
The primary sources of liquidity for the parent company are dividends
and lease payments from the bank.
In 2005, cash generated from operating activities amounted to $5.8
million and cash provided by financing activities amounted to $10.7
million. These amounts were partially offset by amounts used in
investing activities of $16.1 million, resulting in a net increase in
cash and cash equivalents of $409,000. See the Consolidated Statements
of Cash Flows for additional information.
Maturity Schedule of Time Deposits of $100,000 or More at
September 30, 2005:
Deposits
Due three months or less $ 8,204,000
Over three months through six months 3,764,000
Over six months though twelve months 4,473,000
Over twelve months 10,283,000
-----------
$26,724,000
===========
E. Result of Operations
Net income for the quarter ended September 30, 2005 decreased by
$123,000 to $1,409,000 compared to $1,532,000 for the corresponding
period in 2004. The Company's annualized return on average assets was
1.5% and 1.7% for the quarters ended September 30, 2005 and 2004,
respectively. The annualized return on average stockholders' equity was
13.3% and 16.1% for the third quarter of 2005 and 2004, respectively.
Total interest income for the third quarter of 2005 increased $403,000
or 7.7% from the corresponding period in 2004 and total interest expense
increased $407,000 or 39.5% from the corresponding period in 2004. Net
interest income decreased $4,000 or 0.1% from the prior year period.
Non-interest income for the third quarter of 2005 decreased $31,000 or
3.0% from the corresponding period in 2004, while total non-interest
expenses increased $166,000 or 5.3% from the third quarter of 2004.
Total interest income increased as did the overall yield on average
interest earning assets on a tax equivalent basis. Total average
interest earning assets were $351,671,000 for the three month period
ended September 30, 2005 compared to $338,088,000 for the corresponding
period in 2004, an increase of $13,583,000 or 4.1%. There was an
increase of $29,014,000 or 13.3% in loan average interest earning
assets, for the period ended September 30, 2005 as compared to September
30, 2004. Total securities decreased by $13,023,000 or 11.1% from
September 30, 2004 to September 30, 2005. The yield on total loans
increased 11 basis points from 7.20% September 30, 2004 to 7.31% for the
respective period in 2005. The yield on total average interest earning
assets increased from 6.53% for the period ended September 30, 2004 to
6.73% for the period ended September 30, 2005 or 20 basis points.
Total interest expense increased primarily as a result of an increase in
the overall rate paid on interest bearing liabilities. The total average
balance for interest bearing liabilities was $263,018,000 for the three
month period ended September 30, 2005 compared to $257,555,000 for the
corresponding period in 2004, an increase of $5,463,000 or 2.1%. The
rate paid on interest bearing liabilities increased by 56 basis points
from 1.63% for the three month period ended September 30, 2004 to 2.19%
for the three month period ended September 30, 2005.
The provision for loan losses was $60,000 for the three months ended
September 30, 2005, a decrease of $30,000 compared to $90,000 for the
three months ended September 30, 2004. This decrease was primarily due
to reduced net charge offs and low delinquency rates, offset to some
degree by an increase in nonperforming loans and overall loan growth.
15
Non-interest income was $1,017,000 for the three month period ended
September 30, 2005 compared to $1,048,000 for the corresponding period
in 2004, a decrease of $31,000 or 3.0%. This decrease was primarily due
to a decrease in deposit account service charges.
Non-interest expenses were $3,278,000 for the three month period ended
September 30, 2005 compared to $3,112,000 for the corresponding period
in 2004, an increase of $166,000 or 5.3%. Salaries and employee benefits
increased $161,000 or 8.8% to $1,995,000 for the quarter due to
increases in salaries and benefits. Occupancy and equipment expense
increased $34,000 from last year. There was a decrease of $29,000 or
3.4% in other non-interest expenses primarily due to a decrease in
consulting fees. The affect of implementing Sarbanes-Oxley regulations
was $85,000 for the three months ended September 30, 2005, as compared to
$45,000 for the same period in 2004.
Income tax expense was $497,000 for the three month period ended
September 30, 2005 compared to $545,000 for the corresponding period in
2004, a decrease of $48,000 or 8.8%. This decrease was primarily due to
a decrease in taxable income. The Company's effective tax rates were
26.1% and 26.2% for the three month periods ended September 30, 2005 and
2004, respectively. This decrease was primarily due to an increase in
the percentage of tax exempt income total income during the three month
period ended September 30, 2005 compared to the corresponding period in
2004.
Comparison of the nine month periods September 30, 2004 and 2005
Net income for the first nine months of 2005 decreased by $421,000 to
$4,165,000 compared to $4,586,000 for the same period in 2004. This
overall decrease was primarily due to an increase of $696,000 in
non-interest expenses which was partially offset by a $28,000 increase
in net interest income, a decrease of $90,000 in provision for loan
losses and reduction of income tax expense of $194,000. The Company's
annualized return on average assets was 1.5% for the nine months ended
September 30, 2005 compared to 1.7% in the same period last year. The
annualized return on average stockholders' equity was 13.5% and 16.8%
for the first nine months of 2005 and 2004, respectively.
Tax equivalent interest income increased $778,000 or 3.7% in the first
nine months of 2005 compared to the same period in 2004, primarily due
to an increase in average earning assets. The yield on investment
securities decreased 17 basis points from 5.56% in 2004 to 5.39% in 2005
as the result of the sale and call of higher yielding securities. The
yield on the total loan portfolio increased by 1 basis point in the
period ended September 30, 2005 compared to the first nine months of
2004. The average yield on real estate mortgage loans, the major portion
of the loan portfolio, decreased 11 basis points for the nine month
period primarily due to the origination of fixed rate loans at lower
interest rates. The overall yield on interest earning assets increased 7
basis points from 2004 to 6.68% for the period ended September 30, 2005.
The total average balance for earning assets was $340,417,000 for the
nine month period ended September 30, 2005 compared to $328,282,000 for
the same nine month period in 2004, an increase of $12,135,000 or 3.7%.
An increase in average loans of $27,900,000, which was partially offset
by a decrease in average securities of $14,793,000 accounted for the
increase in average balance for earning assets.
The increasing interest rate environment caused the Company to re-price
its deposits which resulted in a 39 basis point increase in the rate
paid on interest bearing deposits for the nine month period ended
September 30, 2005 as compared to the same period in 2004. Interest rate
expense for interest bearing liabilities increased by $782,000 to
$3,778,000 for the nine month period ended September 30, 2005 or 0.26%
The overall net interest margin decreased 20 basis points from 5.40% in
the first nine months of 2004 to 5.20% in the first nine months of 2005
due to the increase in rates paid on interest bearing liabilities.
The provision for loan losses was $180,000 for the nine months ended
September 30, 2005, a decrease of $90,000 compared to $270,000 for the
nine months ended September 30, 2004. During the first nine months of
2005, nonperforming loans increased from $1.6 million to $3.2 million
and loans, net increased 21.2 million. The increase in non-performing
loans is consistent with management's evaluation of the loan portfolio
in prior periods and in establishing the allowance for loan losses at
past and present levels. The decrease in the current provision reflects
in part a decrease in net charge-offs of $51,000 for the first nine
months of 2005 as compared to the same period in 2004.
Non-interest income was $2,930,000 for the first nine months of 2005
compared to $2,967,000 for the same period in 2004, a decrease of
$37,000 or 1.2%. This decrease was primarily due to the following three
factors. A reduction in service charge income of $245,000 resulted from
a decrease in fees for insufficient funds and returned checks. Gains on
the sale of other real estate owned, which increased $119,000 over 2004,
were the result of the last remaining condominium units at Grandview
Palace being sold. Other non-interest income increased $118,000 due to
an increase in ATM fees. It is anticipated that the pending sale of the
credit card portfolio will close in the fourth quarter of 2005. Income
from the sale will be a one time occurrence. Credit card earnings going
forward will be minimal.
16
Non-interest expenses were $9,676,000 for the first nine months of 2005
compared to $8,980,000 for the same period in 2004, an increase of
$696,000 or 7.8%. This increase reflects a $544,000 increase in salaries
and employee benefits costs due to normal salary increases, and
increased costs for Supplemental Employee Retirement Program (SERP) and
health care benefits. Occupancy and equipment costs increased 9.0%, or
$119,000 to $1,445,000 for the nine months primarily as a result of
increases in software maintenance expense due to the implementation of
new software to better serve our customers. Other non-interest expense
increased by $33,000. The affect of implementing Sarbanes-Oxley regulations
was $128,000 for the nine months ended September 30, 2005, as compared to
$89,000 for the comparable period in 2004.
Income tax expense was $1,449,000 for the nine month period ended
September 30, 2005 compared to $1,643,000 for the corresponding period
in 2004, a decrease of $194,000 or 11.8%. The Company's effective tax
rates were 25.8% and 26.4% for the nine month periods ended September
30, 2005 and 2004, respectively. This decrease was primarily due to a
larger percentage of income before taxes being generated by tax exempt
securities.
F. Critical Accounting Policies
Management of the Company considers the accounting policy relating to
the allowance for loan losses to be a critical accounting policy given
the inherent uncertainty in evaluating the levels of the allowance
required to cover credit losses in the portfolio and the material effect
that such judgments can have on the results of operations. The allowance
for loan losses is maintained at a level deemed adequate by management
based on an evaluation of such factors as economic conditions in the
Company's market area, past loan loss experience, the financial
condition of individual borrowers, and underlying collateral values
based on independent appraisals. While management uses available
information to recognize losses on loans, future additions to the
allowance for loan losses may be necessary based on changes in economic
conditions and values of real estate particularly in Sullivan County.
Collateral underlying certain real estate loans could lose value which
could lead to future additions to the allowance for loan losses. In
addition, Federal regulatory agencies, as an integral part of their
examination process, periodically review the Company's allowance for
loan losses and may require the Company to recognize additions to the
allowance based on their judgments about information available to them
at the time of their examination, which may not be currently available
to management.
Item 3: Quantitative and Qualitative Disclosures about Market Risk
The Company's most significant form of market risk is interest rate
risk, as the majority of the assets and liabilities are sensitive to
changes in interest rates. There have been no material changes in the
Company's interest rate risk position since December 31, 2004. Other
types of market risk, such as foreign exchange rate risk and commodity
price risk, do not arise in the normal course of the Company's business
activities.
Item 4. Controls & Procedures
The Company's management, including the Chief Executive Officer and
Chief Financial Officer, evaluated the effectiveness of the design and
operation of the Company's disclosure controls and procedures (as
defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended) (the "Exchange Act") as of the end of the
period covered by this report. Based upon that evaluation, the Company's
management, including the Chief Executive Officer and Chief Financial
Officer, concluded that, the Company's disclosure controls and
procedures are effective in timely alerting them to any material
information relating to the Company and its subsidiaries required to be
included in the Company's Exchange Act filings.
There were no significant changes made in the Company's internal
controls over financial reporting that occurred during the Company's
most recent fiscal quarters that has materially affected, or is
reasonably likely to materially affect, the Company's internal control
over financial reporting.
17
PART II - OTHER INFORMATION
Item 6. Exhibits
31.1 Certification of Chief Executive Officer pursuant to Section 302 of
Sarbanes-Oxley of 2002
31.2 Certification of Chief Financial Officer pursuant to Section 302 of
Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to Section 906 of
Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to Section 906 of
Sarbanes-Oxley Act of 2002
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.
JEFFERSONVILLE BANCORP
----------------------
(Registrant)
/s/ Raymond Walter
------------------
Raymond Walter
President and Chief Executive Officer
/s/ Charles E. Burnett
----------------------
Charles E. Burnett
Chief Financial Officer and Treasurer
November 8, 2005
19