UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from________to_________
Commission File Number 000-32957
Globe Bancorp, Inc.
-------------------
(Exact name of small business issuer as specified in its charter)
LOUISIANA (72-1498296)
--------- ------------
(State or other jurisdiction of (I R S Employer
incorporation or organization) Identification No.)
4051 VETERANS BOULEVARD, SUITE 100, METAIRIE, LOUISIANA 70002
-------------------------------------------------------------
(Address of principal executive offices)
Issuer's telephone number, including area code: 504-887-0057
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Shares of common stock, par value $.01 per share, outstanding as of November 15,
2004: 273,800
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
1
GLOBE BANCORP, INC.
Form 10 - QSB
Quarter Ended September 30, 2004
Interim Financial Information required by Rule 10-01 of Regulation S-X and Item
303 of Regulation S-B is included in this Form 10-QSB as referenced below:
PART I - FINANCIAL INFORMATION Page
----
Item 1 Financial Statements
Consolidated Statements of Financial Condition at September 30, 2004
(Unaudited) and December 31, 2003 3
Consolidated Statements of Income and Comprehensive Income (Unaudited)
for the Three and Nine Months ended September 30, 2004 and 2003 4
Consolidated Statements of Changes in Equity (Unaudited) for the Nine Months
ended September 30, 2004 and 2003 6
Consolidated Statements of Cash Flows (Unaudited) for the Nine Months ended
September 30, 2004 and 2003 7
Notes to Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis or Plan of Operation 9
Item 3 Controls and Procedures 13
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 14
Item 2 Changes in Securities and Small Business Issuer Purchaser of Equity Securities 14
Item 3 Defaults Upon Senior Securities 14
Item 4 Submission of Matters to a Vote of Security Holders 14
Item 5 Other Information 14
Item 6 Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit 31.1 Section 302 Certification of the Chief Executive Officer
Exhibit 31.2 Section 302 Certification of the Chief Financial Officer
Exhibit 32.1 Section 906 Certification of Chief Executive Officer
Exhibit 32.2 Section 906 Certification of Chief Financial Officer
2
GLOBE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
SEPTEMBER DECEMBER
30, 2004 31, 2003*
--------- ---------
(Unaudited) (Unaudited)
ASSETS
Cash $ 203,033 $ 56,561
Interest-bearing deposits 495,495 550,518
Federal funds sold 862,688 1,042,445
----------- -----------
Total cash and cash equivalents 1,561,216 1,649,524
Securities available for sale 1,793,529 3,135,448
Securities held to maturity 1,127,704 1,433,816
Loans receivable, net 24,660,748 24,985,908
Accrued interest receivable 112,459 126,859
Federal Home Loan Bank stock, restricted, at cost 366,400 362,100
Prepaid expenses and other assets 112,395 127,450
Premises and equipment, net 104,419 119,911
---------- -----------
Total assets $29,838,870 $31,941,016
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $20,373,678 $22,437,642
Federal Home Loan Bank advances 3,440,314 3,736,533
Advances from borrowers for taxes and insurance 177,730 157,274
Accrued expenses and other liabilities 193,137 59,070
----------- ------------
Total liabilities 24,184,859 26,390,519
----------- ------------
Preferred stock - $.01 par value, 500,000 shares
authorized, none issued or outstanding - -
Common stock - $.01 par value, 3,000,000 shares
authorized, 304,175 shares issued and outstanding
at September 30, 2004 3,042 3,042
Additional paid-in capital 2,738,142 2,738,142
Retained earnings, substantially restricted 3,587,514 3,492,919
Treasury stock - 30,375 shares, at cost (468,216) (468,216)
Accumulated other comprehensive loss (11,799) (20,718)
Unearned compensation (194,672) (194,672)
----------- -----------
Total stockholders' equity 5,654,011 5,550,497
----------- -----------
Total liabilities and stockholders' equity $29,838,870 $31,941,016
=========== ============
The accompanying notes are an integral part of these consolidated financial
statements.
*The consolidated statement of financial condition at December 31, 2003 has been
taken from the audited consolidated statement of financial condition of that
date. See notes to unaudited consolidated financial statements.
3
GLOBE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three Months Ended Nine Months Ended
September September September September
30, 2004 30, 2003 30, 2004 30, 2003
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
INTEREST INCOME:
Loans receivable $361,387 $358,630 $1,081,272 $1,128,801
Securities available for sale 11,367 17,331 41,501 77,887
Securities held to maturity 16,163 22,462 52,999 85,975
Other interest earning assets 6,870 11,540 18,736 31,783
--------- ---------- ---------- ----------
Total interest income 395,787 409,963 1,194,508 1,324,446
--------- --------- ----------- -----------
INTEREST EXPENSE:
Deposits 113,937 150,594 352,416 498,131
Federal Home Loan Bank advances 38,881 45,022 119,805 140,643
--------- --------- ----------- ----------
Total interest expense 152,818 195,616 472,221 638,774
--------- --------- ----------- ----------
Net interest income 242,969 214,347 722,287 685,672
Provision for loan losses - - - -
--------- --------- ----------- ----------
Net interest income after provision for loan losses 242,969 214,347 722,287 685,672
--------- --------- ----------- ----------
NONINTEREST INCOME:
Service charges 520 1,897 3,009 4,864
Net realized gain on sales of securities available for sale - - - 351
--------- -------- ----------- ----------
Total noninterest income 520 1,897 3,009 5,215
------ ------ ------ -------
NONINTEREST EXPENSES:
Salaries and employee benefits 65,949 89,168 229,845 265,721
Occupancy expense 24,729 28,673 78,794 82,705
Taxes and assessments 17,157 15,000 53,010 46,974
Professional fees 13,541 13,069 54,092 48,671
Service bureau expense 13,787 15,671 35,947 37,524
Office expense 3,934 1,757 9,660 12,103
General insurance 5,926 4,694 17,351 14,081
SAIF deposit insurance and examination fees 5,584 4,179 15,439 11,833
Other 779 1,334 12,083 3,335
------ ------ ------- --------
Total noninterest expenses 151,386 173,545 506,221 522,947
--------- --------- --------- ---------
Income before income taxes 92,103 42,699 219,075 167,940
Income tax expense 31,731 11,908 76,565 53,417
------- ------- ------- --------
NET INCOME $ 60,372 $ 30,791 $ 142,510 $114,523
======== ======== ========= =========
Basic earnings per common share $0.24 $0.12 $0.56 $0.45
===== ===== ===== =====
Diluted earnings per common share $0.24 $0.12 $0.56 $0.45
===== ===== ===== =====
The accompanying notes are an integral part of these consolidated financial
statements.
4
GLOBE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three Months Ended Nine Months Ended
September 30, September 30, September September 30,
2004 2003 30, 2004 2003
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
COMPREHENSIVE INCOME:
NET INCOME $60,372 $30,791 $142,510 $114,523
Other comprehensive income (loss)
Unrealized gain (loss) on investment securities
available for sale, net of deferred tax expense (benefit)
and reclassification adjustments 13,182 5,406 8,919 (33,630)
--------- ---------- --------- ----------
COMPREHENSIVE INCOME $73,554 $36,197 $151,429 $80,893
======= ======= ======== =======
The accompanying notes are an integral part of these consolidated financial
statements.
5
GLOBE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Nine Months Ended September 30, 2004 and 2003
(UNAUDITED)
Retained Accumulated
Additional Earnings Other
Preferred Common Paid-In Substantially Treasury Comprehensive Unearned Total
Stock Stock Capital Restricted Stock Income (Loss) Compensation Equity
--------- ------ ---------- ------------- -------- ------------- ------------ ----------
Balance, January 1,
2003 $ - $ 3,042 $ 2,725,844 $ 3,422,821 $(408,984) $ 15,213 $ (210,895) $5,547,041
Cash dividends (44,784) (44,784)
Net income 114,523 114,523
Other comprehensive
loss, net of tax:
Unrealized loss on
securities (33,630) (33,630)
--------- ------ ---------- ------------- -------- ------------- ------------ ----------
Balance, September 30,
2003 $ - $ 3,042 $ 2,725,844 $ 3,492,560 $(408,984) $ (18,417) $ (210,895) $5,583,150
========== ======= =========== =========== ========= ============ =========== ===========
Balance, January 1,
2004 $ - $ 3,042 $ 2,738,142 $ 3,492,919 $(468,216) $ (20,718) $ (194,672) $5,550,497
Cash dividends (47,915) (47,915)
Net income 142,510 142,510
Other comprehensive
gain, net of tax:
Unrealized gain on
securities 8,919 8,919
---------- ------- ----------- ------------ ---------- ------------ ----------- -----------
Balance, September 30,
2004 $ - $ 3,042 $ 2,738,142 $ 3,587,514 $(468,216) $ (11,799) $ (194,672) $5,654,011
========== ======= =========== ============ ========== ============ =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
6
GLOBE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended
September 30,
2004 2003
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $ 142,510 $ 114,523
Adjustments to reconcile net income to net cash
provided by operating activities:
Premium and discount amortization on securities 8,255 23,832
Accretion on loans (5,939) (116)
Capitalization of loan origination costs (9,250) (31,264)
Loan fees received 4,700 57,051
Net (gain) on sales of securities available for sale - (351)
Depreciation and amortization 15,492 22,709
Federal Home Loan Bank stock dividends (4,300) (6,100)
Decrease in accrued interest receivable 14,400 19,420
Decrease (increase) in prepaid expenses and other assets 15,055 (468)
Increase in accrued expenses and other liabilities 129,470 88,118
------------ --------------
Net cash provided by operating activities 310,393 287,354
------------- ------------
Cash flows from investing activities:
Loan originations (3,278,347) (10,224,760)
Principal repayments on loans 3,613,996 9,092,588
Purchases of securities available for sale - (2,796,887)
Proceeds from sales of securities available for sale - 477,425
Principal repayments on securities available for sale 1,350,307 2,574,123
Principal repayments on securities held to maturity 302,985 1,099,531
Additions to equipment and leasehold improvements
- (18,026)
------------ ------------
Net cash provided by investing activities 1,988,941 203,994
------------ ------------
Cash flows from financing activities:
Net decrease in deposit accounts (2,063,964) (593,755)
Net decrease in Federal Home Loan Bank advances (296,219) (272,180)
Net increase in advances from borrowers for taxes and insurance 20,456 180,040
Cash dividends (47,915) (44,784)
-------- ---------
Net cash used in financing activities (2,387,642) (730,679)
----------- ----------
Net decrease in cash and cash equivalents (88,308) (239,331)
Cash and cash equivalents at beginning of the period 1,649,524 3,724,506
----------- ----------
Cash and cash equivalents at end of period $1,561,216 $3,485,175
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
7
GLOBE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
(UNAUDITED)
Note 1 - Principles of Consolidation -
The accompanying consolidated financial statements at September 30, 2004
and December 31, 2003 and for the three and nine month periods ended September
30, 2004 and 2003 include the accounts of Globe Bancorp, Inc. (the Company) and
its wholly owned subsidiary, Globe Homestead Savings Bank (the Bank). Currently,
the business and management of the Company is primarily the business and
management of the Bank. The Company's business is conducted principally through
the Bank. All significant intercompany transactions and balances have been
eliminated in the consolidation.
Note 2 - Basis of Presentation -
The accompanying unaudited financial statements were prepared in accordance
with instructions for Form 10-QSB and, therefore, do not include information or
footnotes necessary for a complete presentation of financial position, results
of operations and cash flows in conformity with U.S. generally accepted
accounting principles. However, all adjustments (consisting only of normal
recurring accruals), which, in the opinion of management, are necessary for a
fair presentation of the financial statements, have been included. The results
of operations for the three and nine month periods ended September 30, 2004 are
not necessarily indicative of the results to be expected for the year ended
December 31, 2004.
Note 3 - Employee Stock Ownership Plan -
The Company sponsors a leveraged employee stock ownership plan (ESOP) that
covers all employees who have at least one year of service with the Bank. The
ESOP shares were initially pledged as collateral for its debt. The debt is being
repaid based on a fifteen-year amortization and the shares are being released
for allocation to active employees annually over the fifteen-year period. The
shares pledged as collateral are deducted from stockholders' equity as unearned
compensation in the accompanying balance sheets.
As shares are released from collateral, the Company reports compensation
expense equal to the current market price of the shares released. The Bank has
accrued $19,000 of ESOP expense through September 30, 2004.
The ESOP shares as of September 30, 2004 were as follows:
Shares released for allocation or committed to be released 4,867
Unreleased shares 19,467
Total ESOP shares 24,334
======
Fair value of unreleased shares $330,939 (1)
========
- --------------
(1) Based on market price on September 30, 2004.
Note 3 - Earnings Per Share
Basic earnings per share are computed by dividing net income by the
weighted average number of shares of common stock outstanding, which were
255,911 for the three and nine month periods ended September 30, 2003. Diluted
earnings per share are calculated by dividing net income by the weighted average
number of shares of common stock outstanding, including the effect of diluted
securities. The weighted average number of shares for diluted earnings per share
calculations was also 254,333 for the three and nine month periods ended
September 30, 2004 as the Company had no dilutive securities during the periods.
8
GLOBE BANCORP, INC. AND SUBSIDIARY
Item 2 - Management's Discussion and Analysis or Plan of Operation
General
The following discussion compares the consolidated financial condition of
Globe Bancorp, Inc. and Subsidiary at September 30, 2004 to December 31, 2003
and the results of operations for the three and nine month periods ended
September 30, 2004 with the same periods in 2003. Currently, the business and
management of the Company is primarily the business and management of the Bank.
This discussion should be read in conjunction with the interim consolidated
financial statements and footnotes included herein.
This quarterly report on Form 10-QSB includes statements that may
constitute forward-looking statements, usually containing the words "believe",
"estimate", "expect", "intend" or similar expressions. These statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements inherently involve risk and
uncertainties that could cause actual results to differ materially from those
reflected in the forward-looking statements. Factors that could cause future
results to vary from current expectations include, but are not limited to, the
following: changes in economic conditions (both generally and more specifically
in the markets in which the Company operates); changes in interest rates,
accounting principles, policies or guidelines and in government legislation and
regulation (which change from time to time and over which the Company has no
control); and other risks detailed in this quarterly report on Form 10-QSB and
the Company's other Securities and Exchange Commission filings. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's analysis only as of the date hereof. The Company undertakes
no obligation to publicly revise these forward-looking statements to reflect
events or circumstances that arise after the date hereof.
Our profitability depends primarily on our net interest income, which is
the difference between interest and dividend income on interest-earning assets,
principally loans, investment securities and interest-earning deposits in other
institutions, and interest expense on interest-bearing deposits and borrowings
from the Federal Home Loan Bank of Dallas. Net interest income is dependent upon
the level of interest rates and the extent to which such rates are changing. Our
profitability also depends, to a lesser extent, on noninterest income, provision
for loan losses, noninterest expenses and income tax expense. During the period
reported herein, net interest income after provision for loan losses exceeded
total noninterest expense. Total noninterest expense consists of general,
administrative and other expenses, such as compensation and benefits, occupancy
and equipment expense, deposit insurance premiums and miscellaneous other
expenses.
Globe Bancorp, Inc. is the holding company for the Bank. Substantially all
of the Company's assets are currently held in, and its operations are conducted
through, its sole subsidiary, the Bank. Historically, the Bank's business has
consisted primarily of originating single-family real estate loans secured by
property in its market area. The Bank's loans are primarily funded by
certificates of deposit, which typically have higher rates than transaction
accounts. Typically, single-family loans involve a lower degree of risk and
carry a lower yield than commercial real estate, construction and consumer
loans. The combination of these factors has resulted in historically lower
interest rate spreads and returns on equity. Although the Bank may attempt to
expand its loan products by emphasizing certain consumer lending, we presently
anticipate that our business will continue to primarily consist of originating
single-family loans funded primarily by deposits.
Our operations and profitability are subject to changes in interest rates,
applicable statutes and regulations and general economic conditions, as well as
other factors beyond our control.
9
GLOBE BANCORP, INC. AND SUBSIDIARY
Changes in Financial Condition
Total assets decreased by $2,102,000 or 6.58% from December 31, 2003 to
September 30, 2004. The decrease was primarily due to decreases of $1,648,000 or
36.07% in securities, available for sale and held to maturity, $325,000 or 1.30%
in net loans receivable and $88,000 or 5.35% in cash and cash equivalents.
The Bank did not have any classified assets on September 30, 2004 or
December 31, 2003.
Total liabilities decreased by $2,206,000 or 8.36% from December 31, 2003
to September 30, 2004 primarily due primarily to a decrease in deposits of
$2,064,000 or 9.20%. The decrease in deposits was due to decreases in
interest-bearing deposits.
Federal Home Loan Bank ("FHLB") advances decreased $296,000 or 7.93% from
December 31, 2003 to September 30, 2004. The decrease was due to normal loan
amortization during the period.
Total stockholders' equity increased by $104,000 or 1.86% in the first nine
months of 2004. Equity was increased by net income of $142,000 and by a $9,000
reduction in accumulated other comprehensive loss during the period, and offset
by cash dividends paid of $48,000. Stockholders' equity at September 30, 2004
totaled $5,654,000 or 18.95% of total assets compared to $5,550,000 17.38% of
total assets at December 31, 2003.
Liquidity and Capital Resources
Federal regulations require that a savings institution maintain sufficient
liquidity to ensure the safety and soundness of its operations. At September 30,
2004, the Bank had $3,335,000, or 11.24% of total assets in cash, cash
equivalents and securities available for sale. The Bank believes that it
maintains sufficient liquidity to operate in a safe and sound manner.
At September 30, 2004, the Bank had outstanding no commitments to originate
mortgage loans At the same time, commitments under unused lines of credit and
loans in process amounted to $732,000. In addition, as of September 30, 2004,
the total amount of certificates of deposit and Federal Home Loan Bank advances
that were scheduled to mature in the following twelve months were $4,721,000 and
$410,000, respectively. The Bank believes that it has adequate resources to fund
all of its commitments and that it can adjust the rate on certificates of
deposit to retain deposits in changing interest rate environments. If the Bank
requires funds beyond its internal funding capabilities, advances from the
Federal Home Loan Bank of Dallas are available as an additional source of funds.
The Bank is required to maintain regulatory capital sufficient to meet
tangible, core and risk-based capital ratios of at least 1.5%, 4.0% and 8.0%,
respectively. At September 30, 2004, the Bank exceeded each of its capital
requirements with ratios of 17.23%, 17.23% and 36.98%, respectively.
Results of Operations
Net income increased by $30,000 or 96.07% in the quarter ended September
30, 2004 and increased by $28,000 or 24.44% in the nine month period ended
September 30, 2004 compared to the respective periods in 2003. The increase in
net income was primarily due to an increase in net interest income, a decrease
in salaries and employee benefits expense that resulted from the resignation of
the Bank's chief executive officer on March 19, 2004, and offset by an increase
in income tax expense.
10
GLOBE BANCORP, INC. AND SUBSIDIARY
Interest income decreased $14,000 or 3.46% for the quarter ended September
30, 2004 and decreased by $130,000 or 9.81% in the nine month period ended
September 30, 2004 compared to the same periods in 2003. This was primarily due
to increases and decreases in income from loans receivable, securities,
available for sale and held to maturity, and other interest-earning assets
during the three and nine month period ended September 30, 2004. Interest income
on loans receivable increased $3,000 or .77% for the quarter ended September 30,
2004 and decreased $48,000 or 4.21% for the nine month period ended September
30, 2004 were due primarily to decreases in the balance of such assets as a
result of early repayments. The decreases in interest income on investment
securities of $12,000 or 30.81% for the quarter ended September 30, 2004 and
$69,000 or 42.33% for the nine month period ended September 30, 2004 were due to
a decrease in the balance of such assets as a result of early repayments. The
decreases in interest income on other interest-earning assets of $5,000 or
40.47% for the quarter ended September 30, 2004 and $13,000 or 41.05% for the
nine month period ended September 30, 2004 were due to a decrease in the average
balance of such assets from $3,554,000 for the nine month period ended September
30, 2003 to $1,476,000 for the same period in 2004.
Interest expense decreased $43,000 or 21.88% in the three months ended
September 30, 2004 and decreased $167,000 or 26.07% in the nine month period
ended September 30, 2004 over the comparable periods in 2003. These decreases
were due to decreases in interest expense on deposits and FHLB advances. The
decrease in interest expense on deposits of $37,000 or 24.34% for the quarter
ended September 30, 2004 and $146,000 or 29.25% for the nine month period ended
September 30, 2004 were due to a decrease in the average rate paid on deposits
and a decrease in the average balance of such deposits. The average rate paid on
deposits decreased from 2.58% and 2.81% for the three and nine month periods
ended September 30, 2003 to 2.22% and 2.19% for the same periods in 2004. Such
decreases reflect the declining interest rate environment. The average balance
of deposits decreased to $20,583,000 and $21,406,000 for the three and nine
month periods ended September 30, 2004, respectively, compared to $23,398,000
and $23,631,000, respectively, for the same periods in 2003. Interest expense on
FHLB advances decreased $6,000 or 13.64% for the quarter ended September 30,
2004 and $21,000 or 14.82% for the nine month period ended September 30, 2004
compared to the same periods in 2003. These decreases were due to a decrease in
the average balance of such liabilities resulting from regular amortization.
Net interest income increased $28,000 or 13.35% in the three months ended
September 30, 2004 and increased $37,000 or 5.34% for the nine month period
ended September 30, 2004 over the comparable 2003 periods. This was primarily
due to an increase in the interest rate spread resulting from the repricing of
interest-bearing liabilities. The interest rate spread increased to 2.90% and
2.78% for the three and nine month periods ended September 30, 2004,
respectively, from 2.13% and 2.26%, respectively, for the same periods in 2003.
The net interest margin was 3.34% and 3.20% for three and the nine month periods
ended September 30, 2004, respectively, compared to 2.61% and 2.77%,
respectively, for the same periods in 2003.
There was no provision for loan losses for the three month periods ended
September 30, 2004 and 2003. There was no provision for loan losses for the nine
month periods ended September 30, 2004 and 2003. At September 30, 2004 and 2003
the Bank did not have any non-accruing or non-performing loans. The allowance
for loan losses amounted to $100,000 at September 30, 2004, representing 0.41%
of the total loans outstanding. The allowance for loan losses did not change for
the quarter ended September 30, 2004. The Bank believes its allowance for loan
losses was sufficient as of September 30, 2004 to cover all known and inherent
losses in the loan portfolio which are both probable and reasonably estimable.
Non-interest income decreased $2,000 or 42.31% for the nine month period
ended September 30, 2004 compared to the respective period in 2003. This
decrease was attributable to decreases in the net gain on sale of securities
available for sale and a decrease in service charges. The decrease in gain on
sale of securities was due to decreased sales activity during the relevant 2004
period.
11
GLOBE BANCORP, INC. AND SUBSIDIARY
Non-interest expenses decreased $22,000 or 12.77% in the three months ended
September 30, 2004 and decreased $17,000 or 3.20% for the nine month period
ended September 30, 2004 compared to the same periods in 2003. The decrease in
non-interest expenses for the quarter ended September 30, 2004 was primarily due
to a decrease of $23,000 or 26.04% in salaries and employee benefits resulting
from the resignation of the Bank's chief executive officer on March 19, 2004,
offset by various increases and decreases, in other non-interest expenses.
Income tax expense increased in the three and nine month periods ended
September 30, 2004 due to an increase in income before income taxes, compared to
the same periods in 2003. The effective tax rates for the three month periods
ended September 30, 2004 and 2003 were 34.45% and 27.89%, respectively. The
effective tax rates for the nine month periods ended September 30, 2004 and 2003
were 34.95% and 31.81%, respectively.
Impact of Inflation and Changing Prices
The financial statements and related financial data presented herein
regarding the Company have been prepared in accordance with U.S. generally
accepted accounting principles, which generally require the measurement of
financial position and operating results in terms of historical dollars, without
considering changes in relative purchasing power over time due to inflation.
Unlike most industrial companies, virtually all of the Company's assets and
liabilities are monetary in nature. As a result, interest rates generally have a
more significant impact on the Company's performance than does the effect of
inflation. Interest rates do not necessarily move in the same direction or in
the same magnitude as the prices of goods and services, since such prices are
affected by inflation to a larger extent than interest rates.
Critical Accounting Policies
The Company's consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States of America
and follow general practices within the industry in which it operates. Various
elements of our accounting policies, by their nature, are inherently subject to
estimation techniques, valuation assumptions and other subjective assessments.
In particular, the methodology for the determination of our allowance for loan
losses, due to the judgments, estimates and assumptions inherent in that policy,
is critical to preparation of our financial consolidated statements.
The allowance for loan losses represents management's estimate of probable
credit losses inherent in the loan portfolio. Determining the amount of the
allowance for loan losses is considered a critical accounting estimate because
it requires significant judgment and the use of subjective measurements
including management's assessment of the internal risk classification of loans,
changes in the nature of the loan portfolio and the impact of current local,
regional and national economic factors on the quality of the loan portfolio.
Change in these estimates and assumptions are reasonably possible and may have a
material impact on the Company's consolidated financial statements, results of
operations or liquidity.
12
GLOBE BANCORP, INC. AND SUBSIDIARY
Item 3 - Controls and Procedures
The Company's management evaluated, with the participation of the Chief
Executive Officer and Chief Financial Officer, the effectiveness of the
Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period
covered by this report. Based on such evaluation, the Chief Executive Officer
and Chief Financial Officer have concluded that the Company's disclosure
controls and procedures are designed to ensure that information required to be
disclosed by the Company in the reports that are filed or submitted under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and regulations and are
operating in an effective manner.
No change in the Company's internal control over financial reporting (as
defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of
1934) occurred during the most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, its internal control
over financial reporting.
13
GLOBE BANCORP, INC.
Form 10-QSB
Quarter Ended September 30, 2004
PART II - OTHER INFORMATION
Item 1 - Legal Proceeding:
There are no matters required to be reported under this item.
Item 2 - Changes in Securities and Small Business Issuer Purchases of Equity
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.
Item 5 - Other Information:
There are no matters required to be reported under this item.
Item 6 - Exhibits and Reports on Form 8-K:
(a) the following exhibit is filed herewith:
EXHIBIT NO. DESCRIPTION
31.1 Section 302 Certification of the Chief Executive Officer
31.2 Section 302 Certification of the Chief Financial Officer
32.1 Section 906 Certification of Chief Executive Officer
32.2 Section 906 Certification of Chief Financial Officer
There are no other matters required to be reported under this item.
(b) Reports on Form 8-K:
There are no matters required to be reported under this item.
14
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GLOBE BANCORP, INC.
Registrant
Date: November 15, 2004 /s/ Mae H.Leaveau
----------------------
Mae H. Leaveau
Chief Executive Officer
/s/Joseph McCarthy, III
-------------------------
Joseph McCarthy, III
Chief Accounting Officer
15
EXHIBIT 31.1
SECTION 302
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
I, Mae H. Leaveau, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Globe Bancorp,
Inc;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the small business issuer as of, and for, the periods presented in
this report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
for the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the small business issuer, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report
is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the small business
issuer's internal control over financial reporting that
occurred during the small business issuer's most recent fiscal
quarter (the small business issuer's fourth fiscal quarter in
the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the small business
issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the
audit committee of small business issuer's board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
small business issuer's ability to record, process, summarize
and report financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the small
business issuer's internal control over financial reporting.
Date: November 15, 2004 /s/ Mae H. Leaveau
-------------------
Mae H. Leaveau
Chief Executive Officer
16
EXHIBIT 31.2
SECTION 302
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
I, Joseph McCarthy, III, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Globe Bancorp,
Inc.;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the small business issuer as of, and for, the periods presented in
this report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the small business issuer, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report
is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the small business
issuer's internal control over financial reporting that
occurred during the small business issuer's most recent fiscal
quarter (the small business issuer's fourth fiscal quarter in
the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the small business
issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the
audit committee of small business issuer's board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
small business issuer's ability to record, process, summarize
and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: November 15, 2004 /s/ Joseph McCarthy, III
-------------------------
Joseph McCarthy, III
Chief Accounting Officer
17
EXHIBIT NO. 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
The undersigned executive officer of Globe Bancorp, Inc. (the "Registrant")
hereby certifies that the Registrant's Form 10-QSB for the quarter ended
September 30, 2004 fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934 and that the information contained therein
fairly presents, in all material respects, the financial condition and results
of operations of the Registrant.
/s/ Mae H. Leaveau
--------------------
Name: Mae H. Leaveau
Title: President and Chief Executive Officer
Date: November 15, 2004
A signed original of this written statement required by Section 906 of the
Sarbanes-Oxley Act has been provided Globe Bancorp, Inc. and will be retained by
Globe Bancorp, Inc and furnished to the Securities and Exchange Commission or
its staff upon request.
18
EXHIBIT NO. 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
The undersigned executive officer of Globe Bancorp, Inc. (the "Registrant")
hereby certifies that the Registrant's Form 10-QSB for the quarter ended
September 30, 2004 fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934 and that the information contained therein
fairly presents, in all material respects, the financial condition and results
of operations of the Registrant.
/s/ Joseph McCarthy, III
----------------------------
Name: Joseph McCarthy, III
Title: Chief Accounting Officer
Date: November 15, 2004
A signed original of this written statement required by Section 906 of the
Sarbanes-Oxley Act has been provided Globe Bancorp, Inc. and will be retained by
Globe Bancorp, Inc and furnished to the Securities and Exchange Commission or
its staff upon request.
19