U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2003
Commission File Number: 000-31929
SONOMA VALLEY BANCORP
(Exact name of Registrant as specified in its charter)
CALIFORNIA 68-0454068
(State of Incorporation) (I.R.S. Employer Identification No.)
202 West Napa Street Sonoma, California 95476
(Address of principal executive offices) (Zip Code)
(707)935-3200
(Registrant's telephone number, including area code)
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 preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes o No |_|
Indicate by a check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No o
The number of shares outstanding of the registrant's Common Stock, no par value,
as of May 1, 2003 was 1,392,138.
page 1
INDEX
Part 1 Financial Information Page Number
-----------
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets at March 31, 2003,
December 31, 2002 and March 31, 2002....................................3
Consolidated Statements of Operations for the
three months ended March 31, 2003 and 2002..............................4
Consolidated Statements of Changes in Shareholders Equity
for the three months ended March 31, 2003,
and the years ended December 31, 2002 and 2001..........................5
Consolidated Statements of Cash Flows for the
three months ended March 31, 2003 and 2002..............................7
Notes to Consolidated Financial Statements..............................8
Average Balances, Yields and Rates Paid
for the three months ended March 31, 2003 and 2002.....................10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation.....................11
Item 3. Quantitative and Qualitative Disclosure About Market Risk............21
Item 4. Controls and Procedures..............................................21
Part II Other Information
Item 1. Legal Proceedings....................................................22
Item 2. Changes in Securities and Use of Proceeds............................22
Item 3. Default Upon Senior Securities.......................................22
Item 4. Submission of Matters to a Vote of Security Holders..................22
Item 5. Other Information....................................................22
Item 6. Exhibits and Reports on Form 8-K.....................................22
Signatures....................................................................23
Certifications................................................................24
The information furnished in these interim statements reflects all adjustments
and accruals which are, in the opinion of management, necessary for a fair
statement of the results for such periods. The results of operations in the
interim statements are not necessarily indicative of the results that may be
expected for the full year.
page 2
Part I
Item 1. FINANCIAL STATEMENTS
SONOMA VALLEY BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, 2003 (Unaudited), December 31, 2002 (Audited)
and March 31, 2002(Unaudited)
March 31, December 31, March 31,
2003 2002 2002
------------ ------------ ------------
ASSETS
Cash and due from banks $ 9,000,734 $ 8,422,599 $ 7,815,648
Federal funds sold 37,160,000 23,095,000 7,185,000
------------ ------------ ------------
Total cash and cash equivalents 46,160,734 31,517,599 15,000,648
Investment securities available-for-sale, at fair value 4,058,495 3,823,259 8,546,820
Investment securities held-to-maturity (fair value
of $10,695,000, 10,440,000 and $12,043,000,
respectively) 10,223,240 9,923,737 11,697,786
Loans and lease financing receivables, net 122,183,245 125,269,181 108,948,371
Premises and equipment, net 904,503 875,697 599,113
Accrued interest receivable 894,671 799,282 908,685
Cash surrender value of life insurance 7,473,434 7,387,712 7,096,768
Other assets 2,655,610 3,006,260 2,501,287
------------ ------------ ------------
Total assets $194,553,932 $182,602,727 $155,299,478
============ ============ ============
LIABILITIES
Noninterest-bearing demand deposits $ 40,078,981 $ 38,760,806 $ 30,596,689
Interest-bearing transaction deposits 29,887,026 24,627,589 23,346,522
Savings and money market deposits 57,029,834 51,802,714 46,269,529
Time deposits, $100,000 and over 24,745,449 25,018,603 17,800,230
Other time deposits 20,144,430 19,778,540 17,264,733
------------ ------------ ------------
Total deposits 171,885,720 159,988,252 135,277,703
Accrued interest payable
and other liabilities 3,055,775 3,374,165 2,805,173
------------ ------------ ------------
Total liabilities 174,941,495 163,362,417 138,082,876
Commitments and contingencies ( see
accompanying notes )
SHAREHOLDERS' EQUITY
Common stock, no par value; 10,000,000 shares
authorized; 1,392,138 shares at March 31, 2003
1,401,146 shares at December 31, 2002 and
1,395,965 shares at March 31, 2002 issued and
outstanding 12,895,500 12,936,225 11,003,572
Retained earnings 6,635,241 6,215,790 6,120,490
Accumulated other comprehensive income 81,696 88,295 92,540
------------ ----------- ------------
Total shareholders' equity 19,612,437 19,240,310 17,216,602
------------ ------------ ------------
Total liabilities and shareholders' equity $194,553,932 $182,602,727 $155,299,478
============ ============ ============
Page 3
SONOMA VALLEY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the three months ended March 31, 2003 and 2002
2003 2002
----------- -----------
INTEREST INCOME
Loans and leases $ 2,442,703 $ 2,276,200
Taxable securities 53,436 147,595
Tax-exempt securities 108,601 137,187
Federal funds sold 76,160 36,751
Dividends 0 4,024
----------- -----------
Total interest income 2,680,900 2,601,757
INTEREST EXPENSE
Interest-bearing transaction deposits 12,862 22,772
Savings and money market deposits 126,213 176,457
Time deposits, $100,000 and over 195,915 154,613
Other time deposits 130,402 139,953
----------- -----------
Total interest expense 465,392 493,795
----------- -----------
NET INTEREST INCOME 2,215,508 2,107,962
Provision for loan and lease losses 20,000 60,000
----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN AND
LEASE LOSSES 2,195,508 2,047,962
NON-INTEREST INCOME 404,096 397,796
NON-INTEREST EXPENSE
Salaries and employee benefits 843,996 851,432
Premises and equipment 181,645 140,112
Other 535,856 387,757
----------- -----------
Total non-interest expense 1,561,497 1,379,301
----------- -----------
Income before provision
for income taxes 1,038,107 1,066,457
Provision for income taxes 344,378 358,135
----------- -----------
NET INCOME $ 693,729 $ 708,322
=========== ===========
NET INCOME PER SHARE $ .50 $ .51
=========== ===========
NET INCOME PER SHARE
ASSUMING DILUTION $ .45 $ .47
=========== ===========
page 4
SONOMA VALLEY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the three months ended March 31, 2003 (Unaudited), and the years ended
December 31, 2002 (Audited) and 2001 (Audited)
Accumulated
Other
Comprehensive Common Stock Retained Comprehensive
Income Shares Amount Earnings Income Total
------------- ---------- ------------- ------------- -------------- -------------
BALANCE AT
JANUARY 1, 2001 1,281,680 $ 9,585,003 $ 4,641,551 $ 78,692 $ 14,305,246
5% stock dividend 63,104 1,381,976 (1,381,976)
Fractional shares (11,955) (11,955)
Redemption and retirement
of stock (27,717) (207,323) (364,085) (571,408)
Stock options exercised and
related tax benefits 16,437 266,229 266,229
Net income for the year $ 2,600,244 2,600,244 2,600,244
Other comprehensive loss,
net of tax:
Unrealized holding gains
on securities available-
for-sale arising during
the year, net of taxes
of $57,842 82,706
-------------
Other comprehensive loss,
net of taxes 82,706 82,706 82,706
------------- ---------- ------------- ------------- ------------- -------------
Total comprehensive income $ 2,682,950
=============
BALANCE AT
DECEMBER 31, 2001 1,333,504 $ 11,025,885 $ 5,483,779 $ 161,398 $ 16,671,062
5% stock dividend 65,742 1,775,026 (1,775,026)
Fractional shares (13,951) (13,951)
Redemption and retirement
of stock (14,596) (121,257) (223,345) (344,602)
Stock options exercised and
related tax benefits 16,496 256,571 256,571
Net income for the year $ 2,744,333 2,744,333 2,744,333
Other comprehensive income,
net of tax:
Unrealized holding losses
on securities available-
for-sale arising during
the year, net of taxes
of $51,125 (73,103)
-------------
Other comprehensive income,
net of taxes (73,103) (73,103) (73,103)
------------- ---------- ------------- ------------- -------------- ------------
Total comprehensive income $ 2,671,230
=============
Page 5
SONOMA VALLEY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Continued)
For the three months ended March 31, 2003 (Unaudited), and the years ended
December 31, 2002 (Audited) and 2001 (Audited)
Accumulated
Other
Comprehensive Common Stock Retained Comprehensive
Income Shares Amount Earnings Income Total
------------- ---------- ------------- ------------- -------------- -------------
BALANCE AT
DECEMBER 31, 2002 1,401,146 $ 12,936,225 $ 6,215,790 $ 88,295 $ 19,240,310
Redemption and retirement
of stock (14,892) (137,453) (274,278) (411,731)
Stock options exercised and
related tax benefits 5,884 96,728 96,728
Net income for the period $ 693,729 693,729 693,729
Other comprehensive income,
net of tax:
Unrealized holding gains
on securities available-
for-sale arising during
the year, net of taxes
of $ 4,614 (6,599)
------------
Other comprehensive income,
net of taxes (6,599) (6,599) (6,599)
------------ ---------- ------------- ------------- -------------- -------------
Total comprehensive income $ 687,130
============
BALANCE AT
MARCH 31, 2003 1,392,138 $ 12,895,500 $ 6,635,241 $ 81,696 $ 19,612,437
========== ============= ============= ============== =============
page 6
SONOMA VALLEY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the three months ended March 31, 2003 and 2002
2003 2002
------------ ------------
OPERATING ACTIVITIES
Net income $ 693,729 $ 708,322
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan and lease losses 20,000 60,000
Depreciation 53,306 36,744
Amortization and other 13,287 13,329
Net change in interest receivable (95,390) 43,376
Net change in cash surrender value
of life insurance (85,722) (66,237)
Net change in other assets 355,265 400,009
Net change in interest payable and other liabilities (318,390) (218,990)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 636,085 976,553
INVESTING ACTIVITIES
Purchases of securities held-to-maturity (778,009) 0
Purchases of securities available-for-sale (1,001,231) (4,000)
Proceeds from maturing securities held-to-maturity 470,000 90,000
Proceeds from maturing securities available-for-sale 750,000 2,000,000
Net change in loans and leases 3,065,937 (3,976,162)
Purchases of life insurance 0 (2,000,000)
Purchases of premises and equipment (82,112) (15,205)
------------ ------------
NET CASH USED FOR INVESTING ACTIVITIES 2,424,585 (3,905,367)
FINANCING ACTIVITIES
Net change in demand, interest-bearing
transaction and savings deposits $ 11,804,732 $ (1,472,910)
Net change in time deposits 92,736 (904,366)
Stock repurchases (411,731) (114,549)
Stock options exercised 96,728 20,625
----------- ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 11,582,465 (2,471,200)
----------- ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 14,643,135 (5,400,014)
Cash and cash equivalents at beginning of period 31,517,599 20,400,662
----------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $46,160,734 $ 15,000,648
=========== ============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest expense $ 466,326 $ 504,461
SUPPLEMENTAL DISCLOSURES OF
NONCASH ACTIVITIES:
Net change in unrealized gains and losses on securities $ (11,213) $ (117,015)
Net change in deferred income taxes on unrealized
gains and losses on securities $ 4,614 $ 48,157
page 7
SONOMA VALLEY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(Unaudited)
Note 1 - Basis of Presentation
In the opinion of Management, the unaudited interim consolidated financial
statements contain all adjustments of a normal recurring nature, which are
necessary to present fairly the financial condition of Sonoma Valley Bancorp and
Subsidiary (the "Company") at March 31, 2003 and results of operations for the
three months then ended.
Certain information and footnote disclosures presented in the Company's annual
financial statements are not included in these interim financial statements.
Accordingly, the accompanying unaudited interim consolidated financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's 2002 Annual Report on Form 10-K. The results
of operations for the three months ended March 31, 2003 are not necessarily
indicative of the operating results through December 31, 2003.
Note 2 - Consolidation
The consolidated financial statements include the accounts of Sonoma Valley
Bancorp and its wholly owned subsidiary Sonoma Valley Bank. All material
intercompany accounts and transactions have been eliminated in consolidation.
Note 3 - Commitments
The Company has no outstanding performance letters of credit at March 31, 2003
and March 31, 2002.
Note 4 - Net Income Per Common Share
Net income per share is calculated by using the weighted average common shares
outstanding. The weighted average number of common shares used in computing the
net income per common share for the period ending March 31, 2003 was 1,396,996
and for the period ending March 31, 2002 was 1,398,329.
Net income per share (diluted) is calculated by using the weighted average
common shares (diluted) outstanding. The weighted average number of common
shares (diluted) used in computing the net income per common share (diluted) for
the period ending March 31, 2003 was 1,528,857 and for the period ending March
31, 2002 was 1,495,303.
page 8
Note 5 - Stock Option Accounting
The Company has two stock-based employee and director compensation plans. In
December 2002 the Financial Accounting Standards Board issued SFAS No. 148,
Accounting for Stock-Based Compensation, an Amendment of SFAS No. 123 ("SFAS No.
123") in an effort to encourage the recognition of compensation expense for the
issuance of stock options. The Company adopted SFAS No. 148 effective January 1,
2003 using the prospective application method. Under this method, the
compensation expense and related tax benefit associated with stock option grants
issued on or after January 1, 2003 will be recognized in the income statement.
Prior to January 1, 2003, the Company accounted for those plans under the
recognition and measurement principles of APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations. No stock-based
compensation cost is reflected in net income for stock options granted prior to
January 1, 2003, as all options granted under those plans had an exercise price
equal to the market value of the underlying common stock on the date of grant.
The following table illustrates the effect on net income and earnings per share
if the Company had applied the fair value recognition provisions of FASB
Statement No. 123, Accounting for Stock-Based Compensation, to stock-based
compensation on stock options granted prior to January 1, 2003.
March 31, March 31,
2002 2003
------------ ------------
Net Income, as reported $ 708,322 $ 693,729
Deduct: Total stock-based compensation expense
determined under fair value based method for all
awards, net of related tax effects (46,480) (44,978)
------------ ------------
Pro forma net income $ 661,842 $ 648,751
============ ============
Net income per share:
Basic - As reported .51 .50
Basic - Pro forma .47 .46
Diluted - As reported .47 .45
Diluted - Pro forma .44 .42
page 9
SONOMA VALLEY BANCORP
AVERAGE BALANCES/YIELDS AND RATES PAID
For the three months ended March 31, 2003 and 2002
(dollars in thousands)
2003 2002
---- ----
ASSETS Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
--------- ---------- ------ -------- --------- -----
Interest-earning assets:
Loans(2):
Commercial $ 85,981 $ 1,632 7.70% $ 69,941 $ 1,393 8.08%
Consumer 12,410 238 7.78% 13,674 281 8.33%
Real estate construction 20,403 411 8.17% 16,213 407 10.18%
Real estate mortgage 5,290 110 8.43% 6,650 139 8.48%
Tax exempt loans (1) 3,184 66 8.41% 3,403 71 8.46%
Leases 97 6 25.09% 207 7 13.71%
Tax exempt leases (1) 63 3 19.31% 120 4 13.52%
Unearned loan fees (424) (457)
--------- ---------- --------- ---------
Total loans 127,004 2,466 7.87% 109,751 2,302 8.51%
Investment securities
Available for sale:
Taxable 3,655 50 5.55% 9,617 147 6.20
Hold to maturity:
Taxable 205 3 5.93% 202 3 6.02%
Tax exempt (1) 9,463 165 7.07% 11,502 203 7.16%
--------- ---------- --------- ---------
Total investment securities 13,323 218 6.64% 21,321 353 6.71%
Federal funds sold 26,425 76 1.17% 9,138 37 1.64%
FHLB Stock 282 0 0.00% 269 4 6.03%
Total due from banks/Interest bearing 34 0 0.00% 202 1 2.01%
--------- ---------- --------- ---------
Total interest earning assets 167,068 $ 2,760 6.70% 140,681 $ 2,697 7.77%
========== =========
Noninterest-bearing assets:
Reserve for loan losses (2,798) (2,438)
Cash and due from banks 8,660 7,329
Premises and equipment 903 617
Other assets 10,828 9,139
--------- ---------
Total assets $ 184,661 $ 155,328
========= =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Interest bearing deposits
Interest bearing transaction $ 26,862 $ 13 0.20% $ 22,190 $ 23 0.42%
Savings deposits 54,092 126 0.94% 47,950 176 1.49%
Time deposits over $100,000 25,351 196 3.14% 17,731 155 3.55%
Other time deposits 19,974 130 2.64% 17,676 140 3.21%
--------- ---------- --------- ---------
Total interest bearing
deposits 126,279 465 1.49% 105,547 494 1.90%
Federal funds purchased 0 0 0.00%
Other short term borrowings 0 0 0.00% 0 0 0.00%
--------- ---------- --------- ---------
Total interest bearing
liabilities 126,279 $ 465 1.49% 105,547 $ 494 1.90%
========== =========
Non interest bearing liabilities:
Non interest bearing demand deposits 35,645 29,880
Other liabilities 3,176 2,847
Shareholders' equity 19,561 17,054
--------- ---------
Total liabilities and
shareholders' equity $ 184,661 $ 155,328
========= =========
Interest rate spread 5.21% 5.87%
==== ====
Interest income $ 2,760 6.70% $ 2,697 7.77%
Interest expense 465 1.13% 494 1.42%
---------- ---- --------- -----
Net interest income/margin $ 2,295 5.57% $ 2,203 6.35%
========== =========
(1) Fully tax equivalent adjustments are based on a federal income tax
rate of 34% in 2003 and 2002.
(2) Non accrual loans have been included in loans for the purposes of the
above presentation. Loan fees of approximately $100,981 and $98,021
for the three months ended March 31, 2003 and 2002, respectively, were
amortized to the appropriate interest income categories.
page 10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the Three Month Periods
Ended March 31, 2003 and 2002
Forward Looking Statements
With the exception of historical facts stated herein, the matters discussed in
this Form 10-Q are "forward looking" statements that involve risks and
uncertainties that could cause actual results to differ materially from
projected results. Such "forward looking" statements include, but are not
necessarily limited to statements regarding anticipated levels of future
revenues and earnings from the operation of Sonoma Valley Bancorp's wholly owned
subsidiary, Sonoma Valley Bank, projected costs and expenses related to
operations of the bank's liquidity, capital resources, and the availability of
future equity capital on commercially reasonable terms. Factors that could cause
actual results to differ materially include, in addition to the other factors
identified in this Form 10-Q, the following; (i) increased competition from
other banks, savings and loan associations, thrift and loan associations,
finance companies, credit unions, offerors of money market funds, and other
financial institutions; (ii) the risks and uncertainties relating to general
economic and political conditions, both domestically and internationally,
including, but not limited to, inflation, or natural disasters affecting the
primary service area of the Bank or its major industries; or (iii) changes in
the laws and regulations governing the Bank's activities at either the state or
federal level. Readers of this Form 10-Q are cautioned not to put undue reliance
on "forward looking" statements which, by their nature, are uncertain as
reliable indicators of future performance. Sonoma Valley Bancorp disclaims any
obligation to publicly update these "forward looking" statements, whether as a
result of new information, future events, or otherwise.
Overview
The Company reported net income of $693,729 for the first three months of 2003
compared with $708,322 for the first three months of 2002. On a per share basis,
net income equaled $.50 compared with $.51 per share during the same period in
2002. The March 2002 per share amount has been adjusted for the 5% stock
dividend declared in June 2002.
Return on average total assets on an annualized basis for the three-month
periods was 1.52% and 1.85% respectively. Return on average shareholders' equity
on an annualized basis for the same periods was 14.39% and 16.84%, respectively.
RESULTS OF OPERATIONS
Net interest Income
Net interest income is the difference between total interest income and total
interest expense. Net interest income, adjusted to a fully taxable equivalent
basis, as shown on the table- Average
page 11
Balance, Yields and Rates Paid, on page 10, is higher than net interest income
on the statement of income because it reflects adjustments applicable to
tax-exempt income from certain securities and loans ($79,000 in 2003 and $95,000
in 2002, based on a 34% federal income tax rate).
The improvement in net interest income for the three months ended March 31, 2003
(stated on a fully taxable equivalent basis) is a result of an increase of
$63,000 in interest income and the $29,000 decline in interest expense.
Net interest income (stated on a fully taxable equivalent basis) expressed as a
percentage of average earning assets, is referred to as net interest margin. The
Company's net interest margin for 2003 declined to 5.57% from 6.35% for the same
period in 2002.
Interest Income
As previously stated, interest income (stated on a fully taxable equivalent
basis) increased by $63,000 to $2.8 million in the three months of 2003, a 2.34%
increase over the $2.7 million realized during the same period in 2002.
The $63,000 increase was a result of the $26.4 million gain in earning assets.
This increase occurred in spite of the 1.07% decline in yield from 7.77% in 2002
to 6.70% in 2003.
Interest Expense
Total interest expense declined by $29,000 to $465,000. The average rate paid on
all interest- bearing liabilities declined from 1.90% in 2002 to 1.49% in 2003.
Average balances increased from $105.5 million to $126.3 million, a 19.6% gain
in deposits. The increase in volume of average balances was responsible for a
$112,000 increase in interest expense together with a $143,000 decrease in
expense related to lower interest rates resulting in lower interest expense of
$29,000.
Individual components of interest income and interest expense are provided in
the table-Average Balances, Yields and Rates Paid on page 10.
Provision for Loan Losses
The provision for loan losses charged to operations is based on the Company's
monthly evaluation of the loan portfolio and the adequacy of the allowance for
loan losses in relation to total loans outstanding. The provision to the
allowance for loan losses amounted to $20,000 during the three months of 2003
and $60,000 in the same period in 2002. The provision is based on management's
evaluation and assessment of the loan portfolio.
Loans charged-off were $32,850 and recoveries were $1,680 for the three months
of 2003 compared with $14,683 in charge-offs and $2,460 in recoveries for the
same period in 2002.
page 12
Non-interest Income
Non-interest income of $404,000 increased 1.5% over the $398,000 recorded in the
comparable period in 2002. Services Charges were up due to growth in customer
activity and an increase in life insurance proceeds due to additional policies.
Non-interest Expense
Total non-interest expense increased 13.2% to $1.56 million during the three
months of 2003 from $1.38 million for the same period in 2002. Non-interest
expense on an annualized basis represented 3.43% of average total assets in 2003
compared with 3.60% in the comparable period in 2002. The decrease in the 2003
expense ratio reflects normal operating expense as a result of the asset growth
of 18.76% from $140.7 in 2002 to $167.1 in 2003 and reflects the normal increase
in the cost of doing business.
Salaries and benefits declined .82% from $851,000 in 2002 to $844,000 in 2003.
The 2003 decline reflects management's attempt to control expenses related to
benefit expense. At March 31, 2003 and 2002, the total full time equivalent
employees were 46 in 2003 compared to 47 in 2002.
Expense related to premises and equipment increased 29.29% to $181,000 in 2003
from $140,000 in 2002. The increase in expense in 2003 is a result of a remodel
of the Operations Center which created 7 additional work spaces and investment
in technology to allow for check and document imaging.
Other operating expenses increased by 38.1% to $536,000 in 2003 from $388,000 in
2002. The largest increase of other non-interest expense was professional fees,
which is primarily comprised of data processing, item processing and ATM
services, as well as accounting, legal and other professional fees. This
reflects the bank check imaging and Internet development projects.
Provision for Income Taxes
The provision for income taxes declined to an effective tax rate of 33.17% for
the three months of 2003 compared with 33.58% for the three months of 2002.
Income taxes reported in the financial statements include deferred taxes
resulting from timing differences in the recognition of items for tax and
financial reporting purposes.
BALANCE SHEET ANALYSIS
Investments
Investment securities were $14.3 million at March 31, 2003, a 3.9% increase from
the $13.7 million at December 31, 2002 and a 29.5% decline from $20.2 million at
March 31, 2002. The Company will usually maintain an investment portfolio of
securities rated A or higher by
page 13
Standard and Poor's and or Moody's Investors Service. Local tax-exempt bonds are
occasionally purchased without an A rating.
Securities are classified as held to maturity, if the Company has both the
intent and the ability to hold these securities to maturity. As of March 31,
2003, the Company had securities totaling $10.2 million with a market value of
$10.7 million categorized as hold to maturity. Decisions to acquire municipal
securities, which are generally placed in this category, are based on tax
planning needs and pledge requirements.
Securities are classified as available for sale if the Company intends to hold
these debt securities for an indefinite period of time, but not necessarily to
maturity. Investment securities which are categorized as available for sale are
acquired as part of the overall asset and liability management function and
serve as a primary source of liquidity. Decisions to acquire or dispose of
different investments are based on an assessment of various economic and
financial factors, including, but not limited to, interest rate risk, liquidity
and capital adequacy. Securities held in the available for sale category are
recorded at market value, which is $4.1 million compared to an amortized cost of
$3.9 million as of March 31, 2003.
Although the quoted market values fluctuate, investment securities are generally
held to maturity, and accordingly, gains and losses are recognized in the
accounts upon sale, or at such time as management determines that a permanent
decline in value exists.
Loans
The Company's loan portfolio was $125.0 million at March 31, 2003, or 72.7% of
total deposits. This compares with $128.1 million, or 80.0% of total deposits,
at December 31, 2002 and $111.4 million, or 82.4% of total deposits, at March
31, 2002. A comparative schedule of average loan balances is presented in the
table on page 10; period end and year-end balances are presented in the
following table.
March 31, Percentage December 31, Percentage March 31, Percentage
2003 of Total 2002 of Total 2002 of Total
-------------- --------- -------------- ---------- -------------- ----------
Commercial $ 85,802,958 68.4% $ 89,507,230 69.7% $ 73,836,037 66.0%
Consumer 11,868,556 9.5% 13,374,774 10.4% 13,342,991 11.9%
Real estate construction 23,458,920 18.7% 19,507,906 15.2% 18,304,725 16.4%
Real estate mortgage 4,092,951 3.3% 5,911,082 4.6% 6,040,680 5.4%
Leases 149,976 0.1% 174,409 0.1% 314,299 0.3%
-------------- -------- -------------- ---------- -------------- ----------
125,373,361 100.0% 128,475,401 100.0% 111,838,732 100.0%
======== ========== ==========
Deferred loan fees
and costs, net (419,324) (424,258) (427,029)
Allowance for loan
and lease losses (2,770,792) (2,781,962) (2,463,332)
-------------- -------------- --------------
$ 122,183,245 100.0% $ 125,269,181 100.0% $ 108,948,371 100.0%
============== ============== ==============
page 14
Risk Elements
The majority of the Company's loan activity is with customers located within
Sonoma county. Approximately 83% of the total loan portfolio is secured by real
estate located in the Company's service area.
Significant concentrations of credit risk may exist if a number of loan
customers are engaged in similar activities and have similar economic
characteristics. The Company believes it has policies in place to identify
problem loans and to monitor concentrations of credits.
Non Performing Assets
There were $2.3 million nonaccrual loans and no loans 90 days or more past due
and still accruing at March 31, 2003. There were $431,000 nonaccrual loans and
no loans 90 days or more past due and still accruing at March 31, 2002.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level considered adequate to
provide for losses that can be reasonably anticipated. The allowance is
increased by provisions charged to operating expense and reduced by charge-offs,
net of recoveries. The allowance is based on estimates, and ultimate losses may
vary from the current estimates. These estimates are reviewed monthly and, as
adjustments become necessary, they are reported in earnings in the periods in
which they become known.
The review process is intended to identify loan customers who may be
experiencing financial difficulties. In these circumstances, a specific reserve
allocation or charge-off may be recommended. Other factors considered by
management in evaluating the adequacy of the allowance include: loan volume,
historical net loan loss experience, the condition of industries and geographic
areas experiencing or expected to experience economic adversities, credit
evaluations and current economic conditions. The allowance for loan losses is
not a precise amount, but based on the factors above, represents management's
best estimate of losses that may be ultimately realized from the current loan
portfolio.
Worsening conditions in certain economic sectors and geographic areas could
adversely affect the loan portfolio, necessitating larger provisions for loan
losses than currently estimated. However, as of March 31, 2003 the Company
believes its overall allowance for loan losses is adequate based on its analysis
of conditions at that time.
At March 31, 2003, the allowance for loan losses was $2.8 million, or 2.22% of
period-end loans, compared with $2.8 million, or 2.17% at December 31, 2002 and
$2.5 million, or 2.21% at March 31, 2002.
page 15
An analysis of the changes in the allowance for loan losses, including
charge-offs and recoveries by loan categories, is presented below.
For the Three For the Year For the Three
Months Ended Ended Months Ended
3/31/03 12/31/02 3/31/02
Balance beginning of year $ 2,781,962 $ 2,415,555 $ 2,415,555
Charge-offs:
Commercial 0 (10,741) (10,740)
Consumer (32,850) (34,872) (3,943)
------------- ------------- -------------
Total charge-offs (32,850) (45,613) (14,683)
Recoveries:
Commercial 640 9,474 930
Consumer 1,040 9,546 1,530
------------- ------------- -------------
Total recoveries 1,680 19,020 2,460
Net charge-offs (31,170) (26,593) (12,223)
Provision charged to operations 20,000 393,000 60,000
------------- ------------- -------------
Balance end of period $ 2,770,792 $ 2,781,962 $ 2,463,332
============= ============= =============
Ratio of net charge-offs
annualized to average loans 0.10% 0.02% 0.05%
Balance in allowance as a percentage 2.22% 2.17% 2.21%
of loans outstanding at period end
Deposits
A comparative schedule of average deposit balances is presented in the table on
page 10; period end and year-end deposit balances are presented in the following
table.
March 31, Percentage December 31, Percentage March 31, Percentage
2003 of Total 2002 of Total 2002 of Total
------------ ---------- ------------- ---------- ------------ ----------
Interest bearing
transaction deposits $ 29,887,026 17.4% $ 24,627,589 15.4% $ 23,346,522 17.2%
Savings deposits 57,029,834 33.2% 51,802,714 32.4% 46,269,529 34.2%
Time deposits,
$100,000 and over 24,745,449 14.4% 25,018,603 15.6% 17,800,230 13.2%
Other time deposits 20,144,430 11.7% 19,778,540 12.4% 17,264,733 12.8%
------------ ------------- ------------
Total interest bearing
deposits 131,806,739 76.7% 121,227,446 75.8% 104,681,014 77.4%
Demand deposits 40,078,981 23.3% 38,760,806 24.2% 30,596,689 22.6%
------------ ------------- ------------
Total deposits $171,885,720 100.0% $159,988,252 100.0% $135,277,703 100.0%
============ ============ ============
page 16
Total deposits increased by $11.9 million, during the three months of 2003, to
$171.9 million from $160.0 million at December 31, 2002. Interest bearing
checking showed the largest increase of $5.3 million or 21.4% to $29.9 million
as of March 31, 2003 from $24.6 million at December 31, 2002. Savings increased
$5.2 million or 10.1% to $57.0 million, non interest demand grew $1.3 million or
3.4% to $40.1 million and other time deposits grew $366,000 or 1.85% from
December 2002. Only time deposits greater than $100,000 declined by $273,000 or
1.1% to $24.7 million.
Risk-Based Capital
The Federal Deposit Insurance Corporation (FDIC) has adopted risk-based capital
guidelines which establish a risk-adjusted ratio relating capital to different
categories of assets and off- balance sheet exposures. Under current guidelines,
as of March 31, 2003, the Company was required to have minimum Tier I and total
risk-based capital ratios of 4% and 8% respectively. To be well capitalized
under Prompt Corrective Action Provisions requires minimum Tier I and total
risk-based capital ratios should be 6% and 10% respectively.
The FDIC has also adopted minimum leverage ratio guidelines for compliance by
banking organizations. The guidelines require a minimum leverage ratio of 4% of
Tier 1 capital to total average assets. Banks experiencing high growth rates are
expected to maintain capital positions well above the minimum levels. The
leverage ratio in conjunction with the risk-based capital ratio constitute the
basis for determining the capital adequacy of banking organizations.
The table below presents Tier 1 capital, total capital and total risk-weighted
assets at March 31, 2003, along with the related risk-based capital ratio and
leverage ratio.
(dollars in thousands)
Total
Risked-based TIER 1 TOTAL Leverage
Assets Capital Ratio Capital Ratio Ratio
------------ --------- ----- ------- ----- --------
$ 156,379 $ 18,897 12.15% $20,852 13.41% 10.49%
page 17
Market Risk Management
Overview. Market risk is the risk of loss from adverse changes in market prices
and rates. The Company's market risk arises primarily from interest rate risk
inherent in its loan and deposit functions. The goal for managing the assets and
liabilities of the Company is to maximize shareholder value and earnings while
maintaining a high quality balance sheet without exposing the Company to undue
interest rate risk. The Board of Directors has overall responsibility for the
interest rate risk management policies. Sonoma Valley Bank has an Asset and
Liability Management Committee (ALCO) that establishes and monitors guidelines
to control the sensitivity of earnings to changes in interest rates.
Asset/Liability Management. Activities involved in asset/liability management
include but are not limited to lending, accepting and placing deposits and
investing in securities. Interest rate risk is the primary market risk
associated with asset/liability management. Sensitivity of earnings to interest
rate changes arises when yields on assets change in a different time period or
in a different amount from that of interest costs on liabilities. To mitigate
interest rate risk, the structure of the balance sheet is managed with the goal
that movements of interest rates on assets and liabilities are correlated and
contribute to earnings even in periods of volatile interest rates. The
asset/liability management policy sets limits on the acceptable amount of
variance in net interest margin and market value of equity under changing
interest environments. The Company uses simulation models to forecast earnings,
net interest margin and market value of equity.
Simulation of earnings is the primary tool used to measure the sensitivity of
earnings to interest rate changes. Using computer-modeling techniques, the
Company is able to estimate the potential impact of changing interest rates on
earnings. A balance sheet forecast is prepared quarterly using inputs of actual
loans, securities and interest bearing liabilities (i.e. depositis/borrowings)
positions as the beginning base. The forecast balance sheet is processed against
four interest rate scenarios. The scenarios include a 100 and 200 basis point
rising rate forecasts, a flat rate forecast and a 100 basis point falling rate
forecast which take place within a one year time frame. The net interest income
is measured during the year assuming a gradual change in rates over the
twelve-month horizon. The Company's 2003 net interest income, as forecast below,
was modeled utilizing a forecast balance sheet projected from year-end 2002
balances. The following table summarizes the effect on net interest income (NII)
of a +/-100 and +200 basis point change in interest rates as measured against a
constant rate (no change) scenario.
Interest Rate Risk Simulation of Net Interest Income as of March 31, 2003
(In thousands)
Variation from a constant rate scenario $ Change in NII
+200bp $1,260
+100bp 606
-100bp (527)
page 18
The simulations of earnings do not incorporate any management actions, which
might moderate the negative consequences of interest rate deviations. Therefore,
they do not reflect likely actual results, but serve as conservative estimates
of interest rate risk.
Interest Rate Sensitivity Analysis. Interest rate sensitivity is a function of
the repricing characteristics of the portfolio of assets and liabilities. These
repricing characteristics are the time frames within which the interest-bearing
assets and liabilities are subject to change in interest rates either at
replacement, repricing or maturity. Interest rate sensitivity management focuses
on the maturity of assets and liabilities and their repricing during periods of
changes in market interest rates. Interest rate sensitivity is measured as the
difference between the volumes of assets and liabilities in the current
portfolio that are subject to repricing at various time horizons. The
differences are known as interest sensitivity gaps.
A positive cumulative gap may be equated to an asset sensitive position. An
asset sensitive position in a rising interest rate environment will cause a
bank's interest rate margin to expand. This results as floating or variable rate
loans reprice more rapidly than fixed rate certificates of deposit that reprice
as they mature over time. Conversely, a declining interest rate environment will
cause the opposite effect. A negative cumulative gap may be equated to a
liability sensitive position. A liability sensitive position in a rising
interest rate environment will cause a bank's interest rate margin to contract,
while a declining interest rate environment will have the opposite effect.
The following table sets forth the dollar amounts of maturing and/or repricing
assets and liabilities for various periods. This does not include the impact of
prepayments or other forms of convexity caused by changing interest rates.
Historically, this has been immaterial and estimates for them are not included.
The Company has more liabilities than assets repricing during the next year.
However, because the Company's asset rates change more than deposit rates, the
Company's interest income will change more than the cost of funds when rates
change. Its net interest margin should therefore increase somewhat when rates
increase and shrink somewhat when rates fall.
The Company controls its long term interest rate risk by keeping long term fixed
rate assets (longer than 5 years) less than its long term fixed rate funding,
primarily demand deposit accounts and capital. The following table sets forth
cumulative maturity distributions as of March 31, 2003 for the Company's
interest-bearing assets and interest-bearing liabilities, and the Company's
interest rate sensitivity gap as a percentage of total interest-earning assets.
The table shows $60.5 million in fixed rate loans over 5 years. Many variable
rate credit lines reached floors in 2002, and were reclassified to the fixed
rate category. As soon as interest rates increase, the loans will no longer be
at floors and will reclass back to the floating rate category.
page 19
MARCH 31, 2003 3 months 12 months 3 years 5 years 15 years >15 years Totals
--------- --------- --------- -------- --------- --------- ---------
(in thousands)
ASSETS:
Fixed rate investments $ 1,035 $ 1,654 $ 5,592 $ 631 $ 4,031 $ 1,339 $ 14,282
Variable rate investments 0 0 0 0 0 282 282
Fixed rate loans 16,484 13,194 8,453 17,720 39,985 2,782 98,618
Variable rate loans 24,265 195 12 0 0 0 24,472
Interest-bearing balances due from banks 35 35
Fed funds sold 37,160 37,160
--------- --------- --------- -------- --------- --------- ---------
Interest bearing assets 78,979 15,043 14,057 18,351 44,016 4,403 174,849
--------- --------- --------- -------- --------- --------- ---------
LIABILITIES:
Interest bearing transaction deposits 29,887 29,887
Savings deposits 57,030 57,030
Time Deposits 0
Fixed rate >100m 8,359 6,451 8,209 1,653 24,672
Fixed rate <100m 6,418 7,400 5,298 1,056 20,172
Floating rate >100m 0
Floating rate <100m 46 46
Borrowings 0 0
--------- --------- --------- -------- --------- --------- ---------
Interest Bearing Liabilities $ 101,740 $ 13,851 $ 13,507 $ 2,709 $ 0 $ 0 131,807
--------- --------- --------- -------- --------- --------- ---------
Rate Sensitivity Gap (22,761) 1,192 550 15,642 44,016 4,403
--------- --------- --------- -------- --------- ---------
Cumulative Rate Sensitivity Gap (22,761) (21,569) (21,019) (5,377) 38,639 43,042
--------- --------- --------- -------- --------- ---------
Cumulative Position to Total Assets -11.70% -11.09% -10.80% -2.76% 19.86% 22.12%
--------- --------- --------- -------- -------- ---------
page 20
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Information regarding Quantitative and Qualitative Disclosures about Market Risk
appears on page 18 through 20 under the caption "Management's Discussion and
Analysis of Consolidated Financial Condition and Results of Operations - Market
Risk Management" and is incorporated herein by reference.
Item 4. CONTROLS AND PROCEDURES
Within the 45 days prior to the date of this Form 10-Q, the Company carried out
an evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer along with the
Company's Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14. Based upon that evaluation, the Company's Chief
Executive Officer along with the Company's Chief Financial Officer concluded
that the Company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company required to be
included in this Form 10-Q.
There have been no significant changes in the Company's internal controls or in
other factors which could significantly affect internal controls subsequent to
the date the Company carried out its evaluation.
page 21
Part II
Item 1. LEGAL PROCEEDINGS
From time to time the Company may be a party to legal proceedings arising in the
ordinary course of business. The Company is not currently a party to, nor is any
of its properties the subject of , any material pending legal proceedings.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
(b) Reports on Form 8-K
Date of Report Date of Event Item Reported
April 16, 2003 April 15, 2003 Press Release
announcing results
of first quarter
page 22
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, the Company has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
SONOMA VALLEY BANCORP
Date: May 13, 2003 /s/ Mel Switzer, Jr.
---------------------- -------------------------------------
Mel Switzer, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 13, 2003 /s/ Mary Quade Dieter
--------------------- -------------------------------------
Mary Quade Dieter
Executive Vice President and
Chief Operating Officer
(Principal Accounting Officer)
page 23
CERTIFICATION
I, Mel Switzer, Jr., Chief Executive Officer for Sonoma Valley Bancorp, certify
that:
1. I have reviewed this quarterly report on Form 10-Q of Sonoma Valley Bancorp;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other 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 there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: May 13, 2003 /s/ Mel Switzer, Jr.
---------------------- -------------------------------------
Mel Switzer, Jr.
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION
I, Mary Quade Dieter., Chief Financial Officer for Sonoma Valley Bancorp,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Sonoma Valley Bancorp;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other 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 there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: May 13, 2003 /s/ Mary Quade Dieter
---------------------- -------------------------------------
Mary Quade Dieter
Chief Financial Officer
(Principal Finance and Accounting Officer)
Exhibit 99
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT 2002
In connection with the quarterly report of Sonoma Valley Bancorp (the
"Company") on Form 10-Q for the period ending March 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), We, Mel
Switzer, Jr., Chief Executive Officer and Mary Quade Dieter, Chief Financial
Officer, of the Company certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 fo the Sarbanes-Oxley Act of 2002 , that to the best of
our knowledge and belief:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934: and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of
operations of the Company.
Dated: May 13, 2003 /s/ Mel Switzer, Jr.
-------------------------- --------------------------------------------
Mel Switzer, Jr.,
Chief Executive Officer
(Principal Executive Officer)
Dated: May 13, 2003 /s/ Mary Quade Dieter
-------------------------- --------------------------------------------
Mary Quade Dieter,
Chief Financial Officer
(Principal Financial and Accounting Officer)