SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 March 31, 2003.
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-20990
HARBOR BANKSHARES CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 52-1786341
- -------- ----------
(State of other jurisdiction of (IRS Employer identification No.)
incorporation or organization)
25 W. Fayette Street, Baltimore, Maryland 21201
- ----------------------------------------- -----
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (410) 528-1800
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date.
Common stock, non-voting, $.01 Par value - 33,795 shares as of March 31, 2003.
Common stock, $.01 Par value - 702,518 shares as of March 31, 2003.
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HARBOR BANKSHARES CORPORATION AND SUBSIDIARY
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INDEX
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Statements of Condition - March 31, 2003
(Unaudited) and December 31, 2002
Consolidated Statements of Income, (Unaudited) - Three
months Ended March 31, 2003 and 2002
Consolidated Statement of Cash Flows (Unaudited) - Three
months Ended March 31, 2003 and 2002
Notes to Unaudited Consolidated Financial Statements
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3 Control and Procedures
PART II OTHER INFORMATION
SIGNATURES
CERTIFICATIONS
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HARBOR BANKSHARES CORPORATION AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF CONDITION
March 31 December 31
2003 2002
---- ----
(Unaudited)
-----------
Dollars in Thousands
ASSETS
- ------
Cash and Due from Banks $ 13,713 $ 7,273
Interest Bearing Deposits in Other Banks 2,300 2,300
Investment Securities:
Held to maturity (market values of $2,179
as of March 31, 2003 and $2,189 as of
December 31, 2002) 2,055 2,057
Available for Sale 52,847 53,627
--------- ---------
Total Investment Securities 54,902 55,684
--------- ---------
Federal Funds Sold 235 12,653
Loans Held for Sale 3,391 2,372
Loans 127,442 119,199
Allowance for Loan Losses (1,014) (1,049)
--------- ---------
Net Loans 126,428 118,150
--------- ---------
Property and Equipment - Net 930 985
Other Real Estate Owned 61 70
Goodwill 2,506 2,506
Intangible Assets 695 716
Accrued Interest Receivable and Other Assets 7,850 7,525
--------- ---------
TOTAL ASSETS $ 213,011 $ 210,234
========= =========
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing Demand $ 29,487 $ 27,420
Interest Bearing Transaction Accounts 23,856 21,846
Savings 87,790 88,911
Time, $100,000 or more 26,326 25,842
Other Time 28,651 29,275
--------- ---------
Total Deposits 196,110 193,294
Accrued Interest and Other Liabilities 792 848
Notes Payable 1,908 1,943
--------- ---------
TOTAL LIABILITIES 198,810 196,085
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, non voting, - par value $.01 per share:
Authorized 10,000,000 shares; at 702,518
at March 31, 2003 and 702,018 at December 31, 2002
and 33,795 common non-voting at March 31, 2003 and
December 31, 2002 7 7
Paid in Capital 7,209 7,204
Retained Earnings 6,581 6,436
Accumulated other comprehensive income 404 502
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 14,201 14,149
--------- ---------
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $ 213,011 $ 210,234
========= =========
See Notes to Unaudited Consolidated Financial Statements
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HARBOR BANKSHARES CORPORATION AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
2003 2002
---- ----
(Unaudited)
In Thousands
Except per Share Data
INTEREST INCOME
Interest and Fees on Loans $ 2,382 $2,198
Interest on Investment Securities (Taxable) 487 509
Interest on Deposits in Other Banks 19 11
Interest on Federal Funds Sold 30 90
Other Interest Income 9 9
-------- ------
TOTAL INTEREST INCOME 2,927 2,817
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INTEREST EXPENSE
Interest on Deposits
Savings 197 270
Interest Bearing Transaction Accounts 11 12
Time $100,000 or More 191 278
Other Time 238 271
Interest on Notes Payable 34 35
-------- ------
TOTAL INTEREST EXPENSE 671 866
-------- ------
NET INTEREST INCOME 2,256 1,951
Provision for Loan Losses 223 93
-------- ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,033 1,858
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NON-INTEREST INCOME
Service Charges on Deposit Accounts 205 212
Other Income 205 217
Gain of Sale of Loans 21 22
Realized Gains on Security Sales 83 28
-------- ------
514 479
-------- ------
NON-INTEREST EXPENSES
Salaries and Employee Benefits 1,040 995
Occupancy Expense of Premises 213 187
Equipment Expense 97 130
Data Processing Expense 244 219
Amortization of Other Intangible Assets 20 --
Other Expenses 463 408
-------- ------
2,077 1,939
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INCOME BEFORE INCOME TAXES 470 398
Applicable Income Taxes 141 114
-------- ------
NET INCOME $ 329 $ 284
======== ======
BASIC EARNINGS PER SHARE .44 $ .39
DILUTED EARNINGS PER SHARE $ .43 $ .38
AVERAGE COMMON SHARES
OUTSTANDING 736 724
Dividends Declared per Share $ .25 $ .25
(See notes to unaudited consolidated Financial Statements)
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HARBOR BANKSHARES CORPORATION AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31
2003 2002
---- ----
(Unaudited)
In Thousands
OPERATING ACTIVITIES
Net Income $ 329 $ 284
Adjustments to Reconcile Net Income to Net Cash
And Cash Equivalents Provided by (Used in) Operating
Activities:
Origination of Loans Held for Sale (796) (764)
Proceeds from the Sale of Loans Held for Sale 817 786
Gains on sale of loans (21) (22)
Gains on sale of securities (83) (28)
Provision for Possible Loan Losses 223 93
Depreciation and Amortization 119 120
Increase in Interest Receivable and Other Assets (330) (741)
(Decrease) Increase in Interest Payable and Other
Liabilities (56) 32
-------- --------
Net Cash Provided by (Used in) Operating Activities 202 (240)
-------- --------
INVESTING ACTIVITIES
Net Decrease in Deposits at Other Banks -- 80
Purchase of Investments Securities Available for Sale (12,980) (4,000)
Proceeds from Securities called 9,000 4,000
Proceeds from sale of Investment Securities
Available for sale 4,083 7,000
Net (Increase) Decrease in Loans (8,842) 1,477
Purchase of Premises and Equipment (43) (146)
-------- --------
Net Cash (Used in) Provided By Investing Activities (8,782) 8,411
-------- --------
FINANCING ACTIVITIES
Net Increase in Non-Interest Bearing
Transaction Accounts 2,067 469
Net (Decrease) Increase in Interest Bearing
Transaction Accounts 2,010 (1,404)
Net Increase (Decrease) in Savings Deposits (1,121) 4,839
Net Decrease in Time Deposits (140) (6,161)
Payment of Cash Dividends (184) (3)
Repayment of Long-Term Debt (35) --
Proceeds from the Sale of Common Stock 5 --
-------- --------
Net Cash Provided By (Used in) by Financing Activities 2,602 (2,260)
-------- --------
(Decrease) Increase in Cash and Cash Equivalents (5,978) 5,911
Cash and Cash Equivalents at Beginning of Period 19,926 17,545
-------- --------
Cash and Cash Equivalents at End of Period $ 13,948 $ 23,456
======== ========
(See notes to unaudited consolidated Financial Statements)
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HARBOR BANKSHARES CORPORATION AND SUBSIDIARY
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Notes to Unaudited Consolidated Financial Statements
March 31, 2003
Note A: Basis of Presentation
The accompanying unaudited consolidated 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 - QSB. Accordingly, they do not
include all the information required for complete financial
statements. In the opinion of management, all adjustments and
reclassifications considered necessary for a fair presentation have
been included. Operating results for the three month period ended
March 31, 2003, are not necessarily indicative of the results that may
be expected for the year ending December 31, 2003. The enclosed
unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and footnotes
thereto incorporated by reference in the Corporation's Annual Report
on Form 10 - KSB for the year ended December 31, 2002.
Note B: Comprehensive Income
The Company's comprehensive income is defined as the change in equity
from transactions and other events and circumstances from non-equity
sources, and consists of its net income and unrealized holding gains
(losses) and it available for sale securities.
Presented below is a reconciliation of net income to comprehensive
income
Three Months Ended March 31,
----------------------------
2003 2002
---- ----
Net Income $ 329 $ 284
Unrealized gains (losses) on securities 695 (1,002)
Available-for-sale
Related income tax (expense) benefit (236) 341
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459 (661)
------- -------
Reclassifications adjustment for gains
Included in net income (83) (28)
Related income tax expense 28 10
------- -------
(55) (18)
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Other Comprehensive Income (loss) 404 (679)
------- -------
Total Comprehensive Income $ 733 $ (395)
======= =======
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HARBOR BANKSHARES CORPORATION AND SUBSIDIARY
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Note C: Basic earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding for the period.
Basic earnings per share does not include the effect of potentially
diluted transactions or conversions. This computation of diluted
earnings per share reflects the potential dilution of earnings per
share under the treasury stock method which could occur if contracts
to issue common stock, such as stock options, were exercised and
shared in corporate earnings.
The following table presents a summary of per share data and amounts for the
period indicated:
Three Months Ended
------------------
March 31, March 31,
2003 2002
---- ----
Basic:
Net income applicable to common stock $ 328,698 $ 283,696
============ ===========
Average common shares outstanding 736,130 723,570
============ ===========
Basic net income per share $ .44 $ .39
============ ===========
Diluted:
Net income applicable to common stock $ 328,698 $ 283,696
============ ===========
Average common shares outstanding 736,130 723,570
Stock option adjustment 21,722 24,097
------------ -----------
Diluted average common shares outstanding 757,852 747,667
============ ===========
Diluted net income per share $ .43 $ .38
============ ===========
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HARBOR BANKSHARES CORPORATION AND SUBSIDIARY
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Note D:
RECENT ACCOUNTING PRONOUNCEMENTS
On October 1, 2002, the Financial Accounting Standards Board issued SFAS No.
147, Acquisitions of Certain Financial Institutions which amends certain
provisions of SFAS No. 72, SFAS No. 144, and FASB Interpretation No. 9. SFAS No.
147 removes acquisitions of financial institutions from the scope of SFAS No. 72
and requires that such acquisitions be accounted for in accordance with SFAS No.
141, Business Combinations. If the acquisition meets the definition of a
business combination, it shall be accounted for by the purchase method in
accordance with the provisions of SFAS No. 141. Any goodwill that results will
be accounted for in accordance with the provisions of SFAS No. 142. If the
acquisition does not meet the definition of a business combination, the cost of
the assets acquired shall be allocated to the individual assets acquired and
liabilities assumed based on their relative fair values and shall not give rise
to goodwill.
In addition, this proposed statement would amend SFAS No. 144 to include in its
scope long-term customer-relationship intangible assets of financial
institutions such as depositor-and borrower-relationship intangible assets and
credit-cardholder intangible assets. Accordingly, those intangible assets would
be subject to the same undiscounted cash flow recoverability tests and
impairment loss recognition and measurement provisions that SFAS No. 144
requires for long-term tangible assets and other finite-lived intangible assets
that are held and used.
Existing unidentifiable intangible assets, as that term is defined in SFAS No.
72, previously recognized under the provision of SFAS No. 72 shall continue to
be amortized (consistent with the existing clarifying provision of Emerging
Issues Task Force Topic D-100) unless the transaction in which the intangible
asset arose meets the definition of a business combination.
Management believes its 1995 branch office acquisition meets the definition of a
business combination and has discontinued amortizing the intangible, subject to
periodic review for impairment.
In December 2002, the Financial Accounting Standards Board issued SFAS No. 148,
Accounting for Stock-Based Compensation - Transition and Disclosure, which
provides guidance on how to transition from the intrinsic value method of
accounting for stock-based employee compensation under APB 25 to SFAS 123's fair
value method of accounting, if a company so elects. The Corporation will not
adopt the fair value method of recording stock options, under SFAS 123 and,
accordingly, this standard will not have a material impact on results of
operations, financial position or liquidity.
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HARBOR BANKSHARES CORPORATION AND SUBSIDIARY
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Part I. FINANCIAL INFORMATION
Item II. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Harbor Bankshares Corporation earnings for the first quarter of 2003
totaled $329 thousand, an increase of $45 thousand or 15.8 percent. The
continuing re-pricing of liabilities coupled with increased loan demand
were the major factors for the earnings increase. The annualized return
on average assets (ROAA) and average stockholders equity (ROAE) during
the first quarter were .63 percent and 11.2 percent respectively,
compared to .48 percent and 7.35 percent achieved during the first
quarter of 2002.
Net interest income increased by $305 thousand over last year's first
quarter. Interest and fees on loans increased by $184 thousand or 8.4
percent reflecting increased loan demand. Investment income decreased by
$22 thousand or 4.3 percent and Federal Funds sold income decreased by
$60 thousand or 66.7 percent as a result of lower rates and decreased
volume due to funds invested in loan fundings. Interest expense decreased
by $195 thousand or 22.5 percent. Interest expense on savings accounts
decreased by $73 thousand or 27.0 percent, the interest expense for
transaction accounts and notes payable showed a slight decrease when
compared to the prior year. Interest expense on transaction accounts of
$11 thousand decreased by $1 thousand or 8.3 percent and interest expense
on notes payable of $34 thousand, also decreased by $1 thousand or 2.9
percent. Interest expense on time deposits decreased by $120 thousand or
21.9 percent mainly resulting from the re-pricing of these liabilities.
The provision for possible loan losses was $223 thousand compared to $93
thousand for the first quarter of 2002, reflecting an increase of $130
thousand or 139.8 percent. The increase reflects the amount necessary to
cause the allowance for loan losses to the level determined to be
appropriate by management under the Company's allowance methodology after
charge-offs. Charge-offs for the quarter totaled $275 thousand,
reflecting an increase of $192 thousand or 231.3 percent. Consumer loan
charge-offs at $181 thousand, represented 65.8 percent of total
charge-offs for the quarter. Recoveries for the period were $18 thousand,
increasing slightly over the $11 thousand recovered during the first
quarter of 2002.
Future provisions for loan losses will continue to be based upon our
assessment of the overall loan portfolio and its underlying collateral,
the mix of loans within the portfolio, delinquency trends, economic
conditions, current and prospective trends in real estate values, and
other relevant factors under our allowance methodology.
Our allowance for loan loss methodology is a loan classification-based
system. We base the required allowance on a percentage of the loan
balance for each type of loan classification level. Watch, special
mention, substandard and doubtful loans are reserved at 5.0%, 10.0%,
20.0% and 50.0% respectively. Allowance percentages are based on each
individual lending program, its loss history and underwriting
characteristics including loan value, credit score, debt coverage,
collateral, and capacity to service debt. This analysis is used to
validate the loan loss reserve matrix as well as assist in establishing
overall lending direction. In Management's opinion, the loan loss reserve
as of March 31, 2003 is considered adequate.
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HARBOR BANKSHARES CORPORATION AND SUBSIDIARY
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Nonperforming assets consist of nonaccruing loans, loans past due 90 days or
more but still accruing, restructured loans, and foreclosed real estate.
The following table shows the non-performing assets for the first quarter of
2003 compared to December 31, 2002.
March 31, December 31,
2003 2002
--------- ------------
Nonaccruing Loans $ 272 409
Past Due 90 days or more 447 746
Restructured loans -- --
--------- ------------
Total nonperforming loans $ 719 $ 1,155
Foreclosed real estate 61 70
--------- ------------
Total nonperforming assets $ 780 $ 1,225
--------- ------------
Nonperforming loans to total loans .55% .95%
Nonperforming assets to total assets .37% .58%
Allowance for loan losses to nonperforming loans 141.0% 90.8%
Non-interest income increased by $35 thousand or 7.3 percent. Service charges on
deposit accounts decreased by $7 thousand or 3.3 percent. Other income increased
by $42 thousand or 15.7 percent. Included in other income are $83 thousand of
gains on securities available for sale and $21 thousand of gains on real estate
loans sold. Non-interest expense increased by $138 thousand or 7.1 percent.
Salary and benefits increased by $45 thousand or 4.5 percent. Occupancy cost
increased by $26 thousand or 13.9 percent due to general rent increases and
expansion of the Bank. Equipment expense decreased by $33 thousand or 25.4
percent as a result of lesser depreciation cost. Data Processing expense
increased by $25 thousand or 11.4 percent resulting also from the Bank's
expansion. Amortization of intangible assets at $20 thousand represents the
merger of a branch acquired by the Bank during the second quarter of 2002. Other
expenses increased by $55 thousand or 13.5 percent.
As of March 31, 2003, total deposits were $196.1 million, reflecting an increase
of $2.8 million or 1.5 percent when compared to deposits as of December 31,
2002. Non-interest bearing transaction accounts increased by $2.1 million or 7.5
percent while interest bearing transaction accounts increased by $2.0 million or
9.2 percent. Savings accounts which include money market accounts decreased by
$1.1 million or 1.3 percent. Time deposits decreased by $140 thousand or .25
percent.
Net loans increased by $9.3 million or 7.7 percent to $129.8 million from $120.5
million at December 31, 2002. The increase was mainly registered in the Real
Estate loans category.
Stockholders' equity increased by $52 thousand or .37 percent. Earnings of $329
thousand, combined with a decrease of unrealized gains on available-for-sale
securities of $98 thousand and cash dividends of $184 thousand, were the main
reason for the slight increase reflected above. Primary and risk based capital
for the Corporation were 5.05 percent and 8.65 percent respectively.
The Corporation stock is traded privately. During the first quarter of 2003, a
few trades were registered at $18.00 per share.
ITEM III. Controls and Procedures
Within the ninety days prior to the filing of this report, the Company's
management, under the supervision and with the participation of its Chief
Executive Officer and the Treasurer, evaluated the effectiveness of the design
and operation of the Company's disclosure controls and procedures, as defined in
Rule 13a-14 under the Securities Exchange Act of 1934. Based on that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were adequate. There were no
significant changes (including corrective actions with regard to significant or
material weaknesses) in the Company's internal controls or in other factors
subsequent to the date of the evaluation that could significantly affect those
controls.
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HARBOR BANKSHARES CORPORATION AND SUBSIDIARY
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Part II. OTHER INFORMATION
Item 1. Legal Proceedings
The Corporation and its subsidiary, at times and in the
ordinary course of business, are subject to legal actions.
Management does not believe the outcome of such matters will
have a material adverse effect on the financial condition of
the Corporation.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The 2003 Annual Meeting of the Stockholders of Harbor
Bankshares Corporation was held on April 16, 2003.
The stockholders elected the nominees to the Corporation's
Board of Directors. Listed below are the terms and separate
tabulation of votes for each nominee:
Number of Votes
---------------
For Withheld
--- --------
Two Years
---------
Carl W. Struever 505,083 531
Three Years
-----------
Sachinder Gupta 505,083 531
Nathaniel Higgs 504,879 735
Delores G. Kelley 500,141 5,473
Erich March 505,083 531
Stanley W. Tucker 505,083 531
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibits
Exhibit 99, Certifications pursuant to 18 U.S.C Section 1350
Reports on Form 8-K
The Company did not file any report on Form 8-K for the period
ending March 31, 2003.
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HARBOR BANKSHARES CORPORATION AND SUBSIDIARY
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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.
HARBOR BANKSHARES CORPORATION
Date: 4/28/03 /s/ Joseph Haskins, Jr.
--------- ------------------------------------
Joseph Haskins, Jr.
Chairman and Chief Executive Officer
Date: 4/28/03 /s/ Teodoro J. Hernandez
--------- ------------------------------------
Teodoro J. Hernandez
Treasurer
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HARBOR BANKSHARES CORPORATION AND SUBSIDIARY
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CERTIFICATIONS
I, Joseph Haskins, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Harbor Bankshares
Corporation.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure control and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses
in internal controls, and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not their significant changes in internal
controls or in other factors could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
April 28, 2003 /s/ Joseph Haskins, Jr.
--------------------------------------
Joseph Haskins, Jr.
Chairman, President & CEO
HARBOR BANKSHARES CORPORATION AND SUBSIDIARY
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CERTIFICATIONS
I, Teodoro J. Hernandez, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Harbor Bankshares
Corporation.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure control and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses
in internal controls, and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not their significant changes in internal
controls or in other factors could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ Teodoro J. Hernandez
April 28, 2003 -------------------------------------
Teodoro J. Hernandez, Treasurer