U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON , D.C. 20549
-------------------
F O R M 10 - QSB
[x]Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the Quarterly Period Ended March 31, 2003
Commission file number 0-49784
SOUTHERN CONNECTICUT BANCORP, INC.
(Name of Small Business Issuer as Specified in Its Charter)
Connecticut 06-1594123
(State or Other Jurisdiction of Incorporation (I.R.S. Employer Identification
or Organization) Number)
215 Church Street
New Haven, Connecticut 06510
(Address of Principal Executive Offices) (Zip Code)
(203) 782-1100
--------------
(Issuer's Telephone Number)
The number of shares of the issuer's Common Stock, par value $.01 per share,
outstanding as of May 6, 2003: 966,667
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Transitional Small Business Disclosure Format
Yes __ No X
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Table of Contents
Part I
Financial Information
Page
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 2003 (unaudited) and December 31, 2002 3
Consolidated Statements of Operations
for the three months ended March 31, 2003 and 2002 (unaudited) 4
Consolidated Statements of Changes in
Shareholders' Equity for the three months ended March 31, 2003
and 2002 (unaudited) 5
Consolidated Statements of Cash Flows for the three months ended
March 31, 2003 and 2002 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis or plan of operation 10
Item 3. Controls and Procedures 18
Part II
Other Information
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 21
Section 302 Certification by Chairman and Chief Executive Officer 22
Section 302 Certification by President and Chief Operating Officer 23
Section 302 Certification by Controller 24
Section 906 Certification by Chairman and Chief Executive Officer 25
Section 906 Certification by President and Chief Operating Officer 26
Section 906 Certification by Controller 27
Exhibit Index 28
-2-
PART I
Financial Information
Item 1. Financial Statements
SOUTHERN CONNECTICUT BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2003 (unaudited) and December 31, 2002
2003 2002
---- ----
Assets
Cash and due from banks $ 1,424,942 $ 1,245,010
Federal funds sold 4,363,000 1,144,000
Short-term investments 1,440,166 662,419
--------------------------------------
Cash and cash equivalents 7,228,108 3,051,429
Available for sale securities 6,873,363 9,501,492
FHLB stock 21,500 500
Loans receivable (net of allowance for loan losses of
$294,900 in 2003 and $232,000 in 2002) 24,212,984 19,049,212
Accrued interest receivable 168,373 187,672
Premises and equipment, net 3,123,044 3,052,921
Other assets 643,414 656,889
--------------------------------------
Total assets 42,270,786 $ 35,500,115
======================================
Liabilities and Stockholders' Equity
Liabilities
Deposits
Noninterest bearing deposits $ 5,685,492 $ 6,401,759
Interest bearing deposits 26,851,202 18,591,172
--------------------------------------
Total deposits 32,536,694 24,992,931
Capital lease obligation 1,191,852 1,191,852
Repurchase agreements 365,526 822,259
Accrued expenses and other liabilities 144,779 178,489
Deferred tax liability 1,552 39,905
--------------------------------------
Total liabilities 34,240,403 27,225,436
--------------------------------------
Commitments and Contingencies
Stockholders' Equity
Preferred stock, no par value; 500,000 shares authorized; none issued - -
Common stock, par value $.01; 5,000,000, shares authorized
966,667 shares issued and outstanding 9,667 9,667
Additional paid-in capital 10,705,382 10,705,382
Accumulated deficit (2,687,098) (2,502,915)
Accumulated other comprehensive income - net unrealized
gain on available for sale securities 2,432 62,545
--------------------------------------
Total stockholders' equity 8,030,383 8,274,679
--------------------------------------
Total liabilities and stockholders' equity $ 42,270,786 $ 35,500,115
======================================
See Notes to Consolidated Financial Statements.
-3-
SOUTHERN CONNECTICUT BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31 , 2003 and 2002 (unaudited)
Three Months Ended
March 31,
2003 2002
---- ----
Interest Income
Interest and fees on loans $ 436,388 $ 70,164
Interest on securities 81,929 28,610
Interest on federal funds sold and short-term investments 5,949 44,297
----------------------------------
Total interest income 524,266 143,071
----------------------------------
Interest Expense
Interest on deposits 92,464 49,958
Interest on capital lease obligations 41,958 31,806
Interest on repurchase agreements 802 -
----------------------------------
Total interest expense 135,224 81,764
----------------------------------
Net interest income 389,042 61,307
----------------------------------
Provision for loan losses 62,900 18,000
----------------------------------
Net interest income after
Provision for loan losses 326,142 43,307
----------------------------------
Noninterest Income:
Service charges and fees 18,080 3,838
Gains in sale of securities available for sale 39,505 -
----------------------------------
Total noninterest income 57,585 3,838
----------------------------------
Noninterest Expense
Salaries and benefits 296,633 171,738
Professional services 65,642 64,406
Occupancy and equipment 74,585 38,095
Advertising and promotional expense 19,184 15,909
Data processing and other outside services 39,010 24,385
Forms, printing and supplies 11,818 7,484
Other operating expenses 61,038 38,726
----------------------------------
Total noninterest expenses 567,910 360,743
----------------------------------
Net loss $(184,183) $(313,598)
==================================
Basic and Diluted Loss per Share $ (0.19) $ (.32)
==================================
Dividends per Share - -
==================================
See Notes to Consolidated Financial Statements.
-4-
SOUTHERN CONNECTICUT BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the three Months Ended March 31, 2003 and 2002 (unaudited)
Accumulated
Number Additional Other
Of Common Paid-in Accumulated Comprehensive
Shares Stock Capital Deficit Income Total
------ ----- ------- ------- ------ -----
Balance December 31, 2001 966,667 $ 9,667 $ 10,705,382 $ (1,118,902) $ - $ 9,596,147
Net Loss
- - - (313,598) - (313,598)
---------------------------------------------------------------------------------------------
Balance March 31, 2002 966,667 $ 9,667 $ 10,705,382 $ (1,432,500) - $ 9,282,549
=============================================================================================
Balance December 31, 2002 966,667 $ 9,667 $ 10,705,382 $ (2,502,915) $ 62,545 $ 8,274,679
Comprehensive Income:
Net Loss - - - $ (184,183) - $ (184,183)
Unrealized holding loss on available
for sale securities - - - - ( 60,113) (60,113)
----------------
Total comprehensive income (loss) (244,296)
-------------------------------------------------------------------------------------------
Balance March 31, 2003 966,667 $ 9,667 $ 10,705,382 $ (2,687,098) $ 2,432 $ 8,030,383
=============================================================================================
See Notes to Consolidated Financial Statements.
-5-
SOUTHERN CONNECTICUT BANCORP, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three Months Ended March 31, 2003 and 2002 (unaudited)
Three Months Ended
March 31,
2003 2002
---- ----
Cash Flows From Operations
Net Loss $ (184,183) $ (313,598)
Adjustments to reconcile net loss to net cash used in
operating activities
Amortization and accretion of premiums and discounts
on investments, net 49,377 15,816
Gains on sale of available for sale securities (39,505) -
Provision for loan losses 62,900 18,000
Depreciation and amortization 40,651 24,296
Changes in assets and liabilities
Increase (decrease) in deferred loan fees 8,645 (55)
Decrease in accrued interest receivable 19,299 22,995
Decrease (increase) in other assets 13,475 (16,514)
Decrease in accrued expenses and other liabilities
(33,710) (92,595)
------------------------------------
Net cash used in operating activities (63,051) (341,655)
------------------------------------
Cash Flows From Investing Activities
Purchases of available for sale securities (2,524,661) (1,497,188)
Proceeds from maturities of available for sale securities 2,491,452 -
Proceeds from sales of available for sale securities 2,553,000 -
Purchase of FHLB stock (21,000) -
Net increase in loans receivable (5,235,317) (2,800,702)
Purchases of premises and equipment (110,774) (4,788)
------------------------------------
Net cash used in investing activities (2,847,300) (4,302,678)
------------------------------------
Cash Flows From Financing Activities
Net increase in demand, savings and money market deposits 7,503,889 3,826,095
Net increase in certificates of deposit 39,874 638,019
Decrease in repurchase agreements (456,733) -
------------------------------------
Net cash provided by financing activities 7,087,030 4,464,114
-----------------------------------
Net increase (decrease) in cash and cash equivalents 4,176,679 (180,219)
Cash and cash equivalents
Beginning 3,051,429 10,436,331
-----------------------------------
Ending $ 7,228,108 $ 10,256,112
====================================
Supplemental disclosures of cash flow information: 2003 2002
---- ----
Cash paid during the three months ended March 31, for:
Interest $ 131,776 $ 69,246
===================================
Income taxes $ - $ -
===================================
See Notes to Consolidated Financial Statements.
-6-
Southern Connecticut Bancorp, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Nature of Operations
Southern Connecticut Bancorp, Inc. (the "Company"), a Connecticut
corporation, is a bank holding company incorporated on November 8, 2000 for the
purpose of forming, and becoming the sole shareholder of, the Bank of Southern
Connecticut (the "Bank"). The Bank provides a full range of banking services to
commercial and consumer customers, primarily concentrated in the New Haven
County area of Connecticut, through its main office in New Haven, Connecticut
and branch offices in New Haven (Amity) and Branford, Connecticut.
Note 2. Basis of Financial Statement Presentation
The consolidated balance sheet at December 31, 2002 has been derived
from the audited consolidated financial statements of Bancorp at that date, but
does not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements.
The accompanying consolidated unaudited financial statements as of and
for the three months ended March 31, 2003 and March 31, 2002 and related notes
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC"). Accordingly, certain information and note
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been omitted. The accompanying consolidated financial statements and notes
thereto should be read in conjunction with the audited financial statements of
Bancorp and notes thereto as of December 31, 2002.
The accompanying unaudited consolidated financial information reflects,
in the opinion of management, all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the interim periods presented.
The results of operations for the three months ended March 31, 2003 are not
necessarily indicative of the results of operations that may be expected for all
of 2003.
Note 3. Available Borrowings
During the quarter ended March 31, 2003 the Bank obtained secured
and unsecured lines of credit with other financial institutions with total
available borrowings of $4,400,000. There are no borrowings against these lines
as of March 31, 2003.
Note 4. Commitments and Contingencies
The Company entered into an employment agreement (the "President
Agreement") with the new President of the Bank effective in February 2003, and
expiring on December 31, 2004. The President Agreement provides for a base
salary and an annual bonus as determined by the Board of Directors. The
President Agreement also provides for vacation and various insurance benefits
and reimbursement for automobile, travel, entertainment, club dues and
Bank-related education and convention expenses. Also, under the President
Agreement, the Company intends to issue to the President options to purchase
20,000 shares of the Company's stock under the terms of the Company's 2002 Stock
Option Plan.
Bancorp's wholly-owned subsidiary, The Bank of Southern Connecticut
("Bank"), is being sued by former President and Chief Operating officer Gary D.
Mullin for breach of contract in connection with Mr. Mullin's dismissal for
cause. Pursuant to Mr. Mullin's employment agreement with the Bank, the matter
is in arbitration. Mr. Mullin notified the Bank of his claim in March 2003. The
only parties to the dispute are the Bank and Mr. Mullin. Mr. Mullin is seeking
$500,000 for alleged economic loss, plus attorney's fees. The Bank is seeking
attorney's fees. The matter is currently pending.
-7-
Note 5. Income (Loss) Per Share
The Company is required to present basic income (loss) per share and
diluted income (loss) per share in its statements of operations. Basic per share
amounts are computed by dividing net income (loss) by the weighted average
number of common shares outstanding. Diluted per share amounts assume exercise
of all potential common stock in weighted average shares outstanding, unless the
effect is antidilutive.
For the three month periods ended March 31, 2003 and 2002, common stock
equivalents have been excluded from the computation of the net loss per share
because the inclusion of such equivalents is antidilutive. Weighted average
shares outstanding for the periods presented follow:
March 31
-------------------------------
2003 2002
---- ----
Three month period ended 966,667 966,667
Note 6. Other Comprehensive Income
Other comprehensive income, which is comprised solely of the change in
unrealized gains and losses on available for sale securities, is as follows:
March 31, 2003
-------------------------------------------------------------
Before-Tax Amount Taxes Net-of-Tax Amount
-------------------------------------------------------------
Unrealized holding losses arising during the period $ (58,961) $ 22,966 $ (35,995)
Less: Reclassification adjustment for gains recognized in net income (39,505) 15,387 (24,118)
-------------------------------------------------------------
Unrealized holding loss on available for sale securities, net of
taxes $ (98,466) $ 38,353 $ (60,113)
=============================================================
There were no elements of comprehensive income during the three months ended
March 31, 2002.
Note 7. Stock Options
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-Based Compensation", encourages all entities to adopt a fair value
based method of accounting for employee stock compensation plans, whereby
compensation cost is measured at the grant date based on the value of the award
and is recognized over the service period, which is usually the vesting period.
However, it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," whereby compensation cost is the excess, if any, of the quoted
market price of the stock at the grant date (or other measurement date) over the
amount an employee must pay to acquire the stock. Stock options issued to
employees and directors under the Company's stock option and warrant plans have
no intrinsic value at the grant date, and under Opinion No. 25 no compensation
cost is recognized for them. During 2002, the Company adopted SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure, an
Amendment of FASB Statement No. 123." The Company has elected to continue with
the accounting methodology in Opinion No. 25 and, as a result, has provided pro
forma disclosures of net loss and earnings per share and other disclosures, as
if the fair value based method of accounting had been applied.
Had compensation cost for issuance of such options and warrants been
recognized based on the fair values of awards on the grant dates, in accordance
with the method described in SFAS No. 123, reported net loss and per share
amounts for the quarter ended March 31, 2003 would have been increased to the
pro forma amounts shown below:
-8-
For the quarter ended March 31, 2003
2003
-------------------
Net loss, as reported $ (184,183)
Deduct: total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects (32,968)
-------------------
Pro forma net loss $ (217,151)
===================
Basic and diluted loss per share:
As reported $ (.19)
===================
Pro forma $ (.22)
===================
-9-
Item 2. Management's Discussion and Analysis or Plan of Operation
(a) Plan of Operation
Southern Connecticut Bancorp, Inc. ("Bancorp"), a Connecticut
corporation, was incorporated on November 8, 2000 to serve as a bank holding
company. Bancorp owns one hundred percent of the capital stock of The Bank of
Southern Connecticut ("Bank"), a state chartered bank in New Haven, Connecticut,
which commenced operations on October 1, 2001 after receiving its Final
Certificate of Authority from the Connecticut Banking Commissioner and its
deposit insurance from the Federal Deposit Insurance Corporation ("FDIC").
Bancorp invested $10,000,000 of the net proceeds of its July 26, 2001 stock
offering to purchase the capital stock of the Bank and an additional $360,000 to
cover the Bank's pre-opening deficit. The $10,000,000 of initial equity capital
for the Bank required under the Bank's Temporary Certificate of Authority
substantially exceeded the statutory minimum equity capital for a new
Connecticut bank of $5,000,000. Bancorp chose a holding company structure
because it provides flexibility that would not otherwise be available. For
example, Bancorp could acquire additional banks, establish de novo banks and
other businesses, including mortgage companies, leasing companies, insurance
agencies and small business investment companies. Bancorp may in the future
decide to engage in additional businesses permitted to bank holding companies or
financial holding companies. Before Bancorp could acquire interests in other
banks, establish de novo banks or expand into other businesses, it may need to
obtain regulatory approvals and might need additional capital.
Bancorp has leased a free-standing building located at 215 Church
Street, New Haven, Connecticut, located in the central business and financial
district of New Haven. It has assigned this lease to the Bank, and the Bank has
assumed all rights and obligations under this lease. Both Bancorp and the Bank
operate from this facility. On October 7, 2002 the Bank opened a new branch
office in Branford, Connecticut at West Main Street and Summit Place. On August
15, 2002 the Bank also purchased a building at 1475 Whalley Avenue in the
Westville section of New Haven for a branch office site which was opened on
March 24, 2003.
The following table sets forth the location of the Bank's branch
offices and other related information:
Office Location Status
------ -------- ------
Main Office 215 Church Street, New Haven, Connecticut Leased
Branford Office 445 West Main Street, Branford, Connecticut Leased
Amity Office 1475 Whalley Avenue, New Haven, Connecticut Owned
Management believes that Bancorp's short-term assets have sufficient
liquidity to cover potential fluctuations in deposit accounts and loan demand
and to meet other anticipated operating cash requirements. For a more detailed
discussion of Bancorp's liquidity, see Liquidity on page 16 of this Form 10-QSB.
Currently, there are no plans involving the significant purchase or sale of
property or equipment in the next twelve months. Outside of staffing the new
branches, Bancorp does not anticipate a significant change in the number of its
employees.
The Bank does not expect to compete with large institutions for the
primary banking relationships of large corporations, but it competes for niches
in this business segment and for the consumer business of employees of such
entities. The Bank focuses on small to medium-sized businesses, professionals
and individuals and their employees. This focus includes retail, service,
wholesale distribution, manufacturing and international businesses. The Bank
attracts these customers based on relationships and contacts which the Bank's
directors and management have within and beyond the Bank's primary service area.
-10-
Greater New Haven is currently served by approximately 70 offices of
commercial banks, none of which is headquartered in New Haven. In addition, New
Haven Savings Bank, a mutual savings bank, has 16 branches in the New Haven
market. All of these banks are substantially larger than the Bank expects to be
in the near future and are able to offer products and services which may be
impracticable for the Bank to provide at this time.
There are numerous banks and other financial institutions serving the
communities surrounding New Haven which also draw customers from New Haven,
posing significant competition for the Bank to attract deposits and loans. The
Bank also experiences competition from out-of-state financial institutions.
Bancorp will have to obtain customers from the customer base of such existing
banks and financial institutions and from growth in New Haven and the
surrounding area. Many of such banks and financial institutions are well
established and well capitalized, allowing them to provide a greater range of
services (including trust services) than the Bank will be able to offer in the
near future.
Intense market demands, economic pressures and significant legislative
and regulatory actions have eroded banking industry classifications which were
once clearly defined and have increased competition among banks and other
financial institutions. Market dynamics and legislative and regulatory changes
impacting banks and other financial institutions have resulted in a number of
new competitors offering services historically offered only by commercial banks;
non-bank corporations offering services traditionally offered only by banks;
increased customer awareness of product and service differences among
competitors; and increased merger activity.
Additional legislative and regulatory changes may affect the bank in
the future; however, the nature of such changes and the effect of their
implementation cannot be assessed. New rules and regulations may, among other
things, revise limits on interest rates on various categories of deposits and
may limit or influence interest rates on loans. Monetary and fiscal policies of
the United States government and its instrumentalities, including the Federal
Reserve, significantly influence the growth of loans, investments and deposits.
The present bank regulatory scheme is undergoing significant change both as it
affects the banking industry itself and as it affects competition between banks
and non-bank financial institutions.
The Bank currently offers products and services described as "core"
products and services which are more completely described below. Through
correspondent and other relationships, it is expected that the Bank will be able
to help our customers meet all of their banking needs, including obtaining
services which the Bank may not offer directly.
The Bank is seeking to establish a sound base of core deposits,
including checking accounts, money market accounts, savings accounts, sweep
accounts, NOW accounts and a variety of certificates of deposits and IRA
accounts. To attract deposits, the Bank is employing an aggressive marketing
plan in its service area and features a broad product line and rates and
services competitive with those offered in the New Haven market. The primary
sources of deposits have been and are expected to be, residents of, and
businesses and their employees located in, New Haven and the surrounding
communities. The Bank is obtaining these deposits through personal solicitation
by its officers and directors, outside programs and advertisements published and
/ or broadcasted in the local media.
Deposits and the Bank's equity capital are the sources of funds for
lending and investment activities. Repayments on loans, investment income and
proceeds from the sale and maturity of investment securities will also provide
additional funds for these purposes. While scheduled principal repayments on
loans and investment securities are a relatively predictable source of funds,
deposit flows and loan prepayments are greatly influenced by general interest
rates, economic conditions and competition. The Bank expects to manage the
pricing of deposits to maintain a desired deposit balance. The Bank offers
drive-in teller services, wire transfers and safe deposit services.
-11-
The Bank's loan strategy is to offer a broad range of loans to
businesses and individuals in its service area, including commercial and
business loans, personal loans, mortgage loans, home equity loans, automobile
loans and education loans. The Bank has received lending approval status from
the Small Business Administration ("SBA") to enable it to make SBA loans to both
the Greater New Haven business community and companies throughout the State of
Connecticut. Our marketing focus on small to medium-size businesses and
professionals may result in an assumption of certain lending risks that are
different from or greater than those which would apply to loans made to larger
companies or consumers. Commercial loans generally entail certain additional
risks because repayment is usually dependent on the success of the enterprise.
The Bank seeks to manage the credit risk inherent in its loan portfolio through
credit controls and loan diversification. Prior to approving a loan the Bank
evaluates: the credit histories of potential borrowers; the value and liquidity
of available collateral; the purpose of the loan; the source and reliability of
funds for repayment and other factors considered relevant in the circumstances.
Loans are made on a variable or fixed rate basis with fixed rate loans
limited to five year terms. All loans are approved by the Bank's management and
the Loan Committee of the Bank's Board of Directors. At the present time, the
Bank is not purchasing participation in loans nor is it syndicating or
securitizing loans. The Bank may consider participation in multi-bank loans for
companies in its service area. Commercial loans and commercial real estate loans
may be written for terms of up to twenty years. Loans to purchase or refinance
commercial real estate are collateralized by the subject real estate. Loans to
local businesses are generally supported by the personal guarantees of the
principal owners and are carefully underwritten to determine appropriate
collateral and covenant requirements.
Other services provided currently or to be provided include, cashier's
checks, money orders, travelers checks, bank by mail, direct deposit and U. S.
Savings Bonds. The Bank is associated with a shared network of automated teller
machines that its customers are able to use throughout Connecticut and other
regions. The Bank does not currently expect to offer trust services but may
offer trust services through a joint venture with a larger institution. To offer
trust services in the future, the Bank would need the approval of the
Connecticut Banking Commissioner.
Another significant activity for the Bank is maintaining an investment
portfolio. Although granting a variety of loans to generate interest income and
loan fees is an important aspect of the Bank's business plan, the aggregate
amount of loans will be subject to maintaining a satisfactory loan-to-deposit
ratio. The Bank's overall portfolio objective is to maximize the long-term total
rate of return through active management of portfolio holdings taking into
consideration estimated asset/liability and liquidity needs, tax equivalent
yields and maturities. Permissible investments include debt securities such as
U. S. Government securities, government sponsored agency securities, municipal
bonds, domestic certificates of deposit that are insured by the FDIC,
mortgage-backed securities and collateralized mortgage obligations. The Bank
expects that investments in equity securities will be very limited. The Bank's
current investment portfolio is limited to U. S. government obligations which
have been classified as available for sale. Accordingly, the principal risk
associated with the Banks current investing activities is market risk
(variations in value resulting from general changes in interest rates) rather
than credit risk.
Overall, the Bank's plan of operation is focused on responsible growth
and pricing of deposits and loans, and investment in high quality U. S.
government securities to achieve a net interest margin sufficient to cover
operating expenses, achieve profitable operations and maintain liquidity.
Currently, the Bank has 22 full-time and one part-time employees. Most
routine day-to-day banking transactions are performed at the Bank by its
employees. However, the Bank has entered into a number of arrangements for
banking services such as correspondent banking, data processing and armored
carriers.
-12-
(b) Management's Discussion and Analysis of Financial Condition and
Results of Operations
Summary
Bancorp had a net loss of $184,183 (or a loss per share of $0.19) for
the quarter ended March 31, 2003, compared to a net loss of $313,598 (or a loss
per share of $0.32) for the quarter ended March 31, 2002.
Financial Condition
Assets
Since commencing operations on October 1, 2001, Bancorp has reached
total assets of $42.3 million at March 31, 2003, an increase of $6.8 million
(19%) from $35.5 million in assets as of December 31, 2002. Earning assets
reached $37.2 million, increasing $6.6 million (22%) during the first three
months of 2003.
Bancorp has maintained liquidity by maintaining balances in overnight
Federal Funds and Money Market Mutual Funds to provide funding for higher
yielding loans as they are approved and closed. As of March 31, 2003, Federal
funds sold were $4.4 million and money market mutual fund balances were $1.4
million. In addition, Bancorp has invested $6.9 million in U.S Government Agency
securities classified as available for sale with maturities ranging from three
months to 19 years.
Investments
The $2.6 million decrease in available for sale securities from
December 31, 2002 was the result of sales of securities that generated realized
gains of $39,905. In addition, the sale allowed the Bank to increase liquidity
in anticipation of a seasonal decline in deposits as customers make their State
and Federal income tax payments, and anticipated loan growth.
Loans
The net loan portfolio increased $5.2 million (27%) from $19.0 million
at December 31, 2002 to $24.2 million at March 31, 2003. The loan to deposit
ratio as of March 31, 2003 was 75%. As this ratio increases toward the targeted
80% to 85% range, it is expected that the higher yielding loans versus Federal
Funds Sold, money market funds and investments will produce an increasingly
positive impact on net interest spread. No significant loan concentrations have
developed during this early stage of building the loan portfolio.
Critical Accounting Policy
In the ordinary course of business, Bancorp has made a number of
estimates and assumptions relating to the reporting results of operations and
financial condition in preparing its financial statements in conformity with
accounting principals generally accepted in the United States of America. Actual
results could differ significantly from those estimates under different
assumptions and conditions. Bancorp believes the following discussion addresses
Bancorp's only critical accounting policy, which is the policy that is most
important to the portrayal of Bancorp's financial condition and results and
requires management's most difficult, subjective and complex judgments, often as
a result of the need to make estimates about the effect of matters that are
inherently uncertain
Allowance for Loan Losses
The allowance for loan losses, a material estimate susceptible to
significant change in the near-term, is established as losses are estimated to
have occurred through a provision for losses charged against operations, and is
maintained at a level that management considers adequate to absorb losses in the
loan portfolio. Management's judgment in determining the adequacy of the
allowance is inherently subjective and is based on the evaluation of individual
loans, pools of homogeneous loans, the known and inherent risk characteristics
and size of the loan portfolios, the assessment of current economic and real
estate market conditions, estimates of the current value of underlying
collateral, past loan loss
-13-
experience, review of regulatory authority examination reports and evaluations
of specific loans and other relevant factors. Loans, including impaired loans,
are charged against the allowance for loan losses when management believes that
the uncollectibility of principal is confirmed. Any subsequent recoveries are
credited to the allowance for loan losses when received. In connection with the
determination of the allowance for loan losses, management obtains appraisals
for significant properties, when considered necessary.
Based on this evaluation, management believes the allowance for loan
losses of $294,900 at March 31, 2003, which represents 1.20% of gross loans
outstanding, is adequate, under prevailing economic conditions, to absorb losses
on existing loans. At December 31, 2002, the allowance for loan losses was
$232,000 or 1.20% of gross loans outstanding.
Analysis of Allowance for Loan Losses
2003 2002
---- ----
Balance at beginning of period $232,000 $ 12,000
Charge-offs - -
Recoveries - -
Provision charged to operations 62,900 120,000
----------- --------
Balance at end of period $294,900 $232,000
=========== ========
Non-Accrual, Past Due and Restructured Loans
The following table presents non-accruing and past due loans:
(Thousands of dollars) March 31, 2003 December 31, 2002
--------------------------------------------------------------------------------------------
Loans delinquent over 90 days still accruing $ - $ -
Non-accruing loans
16,000 -
--------------------------------------------
Total $ 16,000 $ -
============================================
% of Total Loans 0.07% 0.00%
% of Total Assets 0.04% 0.00%
Potential Problem Loans
At March 31, 2003, the Bank had no loans, other than disclosed in the
table above, as to which management has significant doubts as to the ability of
the borrower to comply with the present repayment terms.
-14-
Deposits
The earning asset growth in the quarter ended March 31, 2003 has been
funded primarily by deposit growth within Bancorp's market area. Deposits
reached $32.5 million at March 31, 2003, an increase of $7.5 million (30%) from
$25.0 million as of December 31, 2002. The mix of deposits as of March 31, 2003
and December 31, 2002 appears in the table below. Bancorp does not have any
brokered deposits.
March 31, 2003 December 31, 2002
-------------- -----------------
Balance Mix Balance Mix
-------- ---- -------- ---
Noninterest bearing deposits: $ 5,685,492 17.5% $ 6,401,759 25.6%
---------- ----- -------------- -----
Interest bearing deposits:
Checking 2,800,433 8.6% 2,351,847 9.4%
Money Market 15,299,396 47.0% 8,858,585 35.5%
Savings 2,360,192 7.3% 1,029,433 4.1%
---------- ---- ---------------- ----
Checking, money market & savings 20,460,021 62.9% 12,239,931 49.0%
---------- ---- ---------------- ----
CD'S under $100,000 2,732,295 8.4% 2,610,756 10.4%
CD'S of $100,000 or more 3,658,886 11.2% 3,740,551 15.0%
---------- ----- --------------- -----
Time deposits 6,391,181 19.6% 6,351,307 25.4%
---------- ----- --------------- -----
Interest bearing deposits 26,851,202 82.5% 18,591,172 74.4%
---------- ---- ---------------- ----
Total deposits $32,536,694 100.0% $24,992,931 100.0%
============ ====== =============== =======
Other
The $70,000 increase in premises and equipment, net, primarily reflects
the purchase of furniture and equipment for the Amity branch which opened in
March 2003.
The decrease in accrued interest receivable is due to the decrease in
volume of investment securities and to the timing of interest received on such
securities, which have quarterly or semi annual payments of interest. These
decreases were partially offset by increases in accrued interest receivable on
loans due to increased loan volume.
Repurchase agreements decreased due to the volatile nature of these
accounts.
Results of Operations
De Novo banks in Connecticut have reached profitability on average
within three to four years after commencement of operations. The Company
anticipates that the Bank will reach profitability within that time frame.
Net Interest Income
For the quarter ended March 31, 2003, net interest income was $389,000
versus $61,000 for the same period in 2002, a $328,000 or 85% increase. This was
the result of a $15.5 million increase in average earning assets, primarily
loans of $19.3 million and investments of $4.1 million, partially offset by a
decrease in lower yielding short term investments of $4.9 million and federal
funds sold of $3.0 million.
Total average interest earning assets for the quarter ended March 31,
2003 had an annualized weighted-average yield of 6.36% versus 3.28% for the
quarter ended March 31, 2002. The annualized interest rate on total interest
bearing liabilities was 2.34% for the first quarter of 2003 versus 3.65% for the
same period in 2002.
-15-
Provision for Loan Losses
The $44,900 increase in the provision for loan loss from $18,000 for
the three months ended March 31, 2002 to $62,900 for the three months ended
March 31, 2003 is primarily the result of the $20.5 million increase in loans.
Noninterest Income
The $54,000 increase in noninterest income is the result of increased
deposit volume and activity and gains on the sales of available for sale
securities.
Noninterest Expense
Total noninterest expense was $568,000 for the first quarter of 2003
versus $361,000 for the same period in 2002, an increase of $207,000 or 57%. The
increase in expense is due to the growth in the Bancorp's loan and deposit
volume as well as the addition of the Branford office in late 2002 and Amity
office in March of 2003, requiring additional staffing and other operating
expenses.
Liquidity
Bancorp's liquidity position as of March 31, 2003 and December 31, 2002
consisted of liquid assets totaling $14.1 million and $12.6 million,
respectively. This represents 33.4% and 35.4% of total assets at March 31, 2003
and December 31, 2002, respectively. The liquidity ratio is defined as the
percentage of liquid assets to total assets. The following categories of assets
as described in the accompanying balance sheet are considered liquid assets:
Cash and due from banks, federal funds sold, short-term investments, held to
maturity securities maturing in one year or less and securities available for
sale. Liquidity is a measure of Bancorp's ability to generate adequate cash to
meet financial obligations. The principal cash requirements of a financial
institution are to cover downward fluctuations in deposits and increases in its
loan portfolio.
Capital
The following table illustrates the Bank's regulatory capital ratios at:
March 31, 2003 December 31, 2002
-------------- -----------------
Leverage Ratio 20.77% 23.76%
Tire 1 Risk - Based Capital Ratio 25.04% 31.52%
Total Risk - Based Capital Ratio 25.97% 32.43%
Capital adequacy is one of the most important factors used to determine
the safety and soundness of individual banks and the banking system. Based on
the above ratios, the Bank is considered to be "well capitalized" under
applicable regulations. To be considered "well capitalized" an institution must
generally have a leverage capital ratio of at least 5%, a Tier 1 risk-based
capital ratio of at least 6% and a total risk-based capital ratio of at least
10%.
Bancorp is also considered to be well capitalized under the regulatory
framework specified by the Federal Reserve Bank ("FRB"). Bancorp's actual and
required ratios are not substantially different from those shown above.
Market Risk
Market risk is defined as the sensitivity of income to fluctuations in
interest rates, foreign exchange rates, equity prices, commodity prices and
other market-driven rates or prices. Based upon on the nature of the Company's
business, market risk is primarily limited to interest rate risk, which is the
impact that changing interest rates have on current and future earnings.
-16-
Bancorp's goal is to maximize long-term profitability, while minimizing
its exposure to interest rate fluctuations. The first priority is to structure
and price Bancorp's assets and liabilities to maintain an acceptable interest
rate spread, while reducing the net effect of changes in interest rates. In
order to reach an acceptable interest rate spread, Bancorp must generate loans
and seek acceptable long-term investments to replace the lower yielding balances
in Federal Funds sold and short-term investments. The focus also must be on
maintaining a proper balance between the timing and volume of assets and
liabilities re-pricing within the balance sheet. One method of achieving this
balance is to originate variable loans for the portfolio to offset the
short-term re-pricing of the liabilities. In fact, a number of the interest
bearing deposit products have no contractual maturity. Customers may withdraw
funds from their accounts at any time and deposits balances may therefore run
off unexpectedly due to changing market conditions.
The exposure to interest rate risk is monitored by the Asset and
Liability Management Committee ("ALCO") consisting of senior management
personnel and selected members of the Board of Directors. ALCO reviews the
interrelationships within the balance sheet to maximize net interest income
within acceptable levels of risk. ALCO reports to the Board of Directors on a
quarterly basis regarding the status of ALCO activities within the Company.
Impact of Inflation and Changing Prices
Bancorp's financial statements have been prepared in terms of
historical dollars, without considering changes in relative purchasing power of
money over time due to inflation. Unlike most industrial companies, virtually
all of the assets and liabilities of a financial institution are monetary in
nature. As a result, interest rates have a more significant impact on a
financial institution's performance than the effect of general levels of
inflation. Interest rates do not necessarily move in the same direction or in
the same magnitude as the prices of goods and services. Notwithstanding this
fact, inflation can directly affect the value of loan collateral, in particular,
real estate. Inflation, or disinflation, could significantly affect Bancorp's
earnings in future periods.
"Safe Harbor" Statement Under Private Securities Litigation Reform Act of 1995
Certain statements contained in Bancorp's public reports, including
this report, and in particular in this "Management's Discussion and Analysis or
Plan of Operation", may be forward looking and subject to a variety of risks and
uncertainties. These factors include, but are not limited to, (1) changes in
prevailing interest rates which would affect the interest earned on Bancorp's
interest earning assets and the interest paid on its bearing liabilities, (2)
the timing of re-pricing of Bancorp's interest earning assets and interest
bearing liabilities, (3) the effect of changes in governmental monetary policy,
(4) the effect of changes in regulations applicable to Bancorp and the conduct
of its business, (5) changes in competition among financial service companies,
including possible further encroachment of non-banks on services traditionally
provided by banks and the impact of recently enacted federal legislation, (6)
the ability of competitors which are larger than Bancorp to provide products and
services which it is impracticable for Bancorp to provide, (7) the effect of
Bancorp's opening of branches, (8) the effect of any decision by Bancorp to
engage in any business not historically permitted to it. Other such factors may
be described in Bancorp's filings with the SEC.
Although Bancorp believes that it offers the loan and deposit products
and has the resources needed for success, future revenues and interest spreads
and yields cannot be reliably predicted. These trends may cause Bancorp to
adjust its operations in the future. Because of the foregoing and other factors,
recent trends should not be considered reliable indicators of future financial
results or stock prices.
-17-
Item 3. Controls and Procedures
(a) Evaluation of disclosure controls and procedures
Under the supervision and with the participation of our management,
including our Chairman and Chief Executive Officer, President and Chief
Operating Officer, and Controller, the effectiveness of the design and operation
of Bancorp's disclosure controls and procedures (as defined in Rule 13a-14(c)
under the Exchange Act) as of a date (the "Evaluation Date") within 90 days
prior to the filing date of this report has been evaluated. Based upon that
evaluation, the Chairman and Chief Executive Officer, President and Chief
Operating Officer, and Controller concluded that, as of the Evaluation Date,
Bancorp's disclosure controls and procedures are effective.
(b) Changes in Internal Controls
There have not been any significant changes in Bancorp's internal
controls or in other factors that could significantly affect these controls
subsequent to the Evaluation Date referenced in paragraph (a) above.
PART II
Other Information
Item 1. Legal Proceedings
Bancorp's wholly-owned subsidiary, The Bank of Southern Connecticut
("Bank"), is being sued by former President and Chief Operating officer Gary D.
Mullin for breach of contract in connection with Mr. Mullin's dismissal for
cause. Pursuant to Mr. Mullin's employment agreement with the Bank, the matter
is in arbitration. Mr. Mullin notified the Bank of his claim in March 2003. The
only parties to the dispute are the Bank and Mr. Mullin. Mr. Mullin is seeking
$500,000 for alleged economic loss, plus attorney's fees. The Bank is seeking
attorney's fees. The matter is currently pending.
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Effective April 1, 2003, Anthony M. Avellani was appointed the
controller of Bancorp. Mr. Avellani had been serving as Bancorp's Interim
Controller following the departure of Bancorp's former Chief Financial Officer,
Paul V. Erwin.
Effective February 11, 2003, Michael M. Ciaburri was elected a Director
of Bancorp.
-18-
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
No. Description
--- -----------
3(i) Amended and Restated Certificate of Incorporation of the Issuer
(incorporated by reference to Exhibit 3(i) to Issuer's Quarterly Report
on Form 10-QSB dated June 30, 2002)
3(ii) By-Laws of the Issuer (incorporated by reference to Exhibit 3(ii) to
the Issuer's Registration Statement on Form SB-2 (No. 333-59824))
10.1 Lease, dated as of August 17, 2000, between 215 Church Street, LLC and
the Issuer (incorporated by reference to Exhibit 10.1 to the Issuer's
Registration Statement on Form SB-2 (No. 333-59824))
10.2 Letter agreement dated January 3, 2001 amending the Lease between 215
Church Street, LLC and the Issuer (incorporated by reference to Exhibit
10.2 to the Issuer's Registration Statement on Form SB-2 (No.
333-59824))
10.3 First Amendment to Lease dated March 30, 2001 between 215 Church
Street, LLC and the Issuer (incorporated by reference to Exhibit 10.3
to the Issuer's Registration Statement on Form SB-2 (No. 333-59824))
10.4 Second Amendment to Lease dated March 31, 2001 between 215 Church
Street, LLC and the Issuer (incorporated by reference to Exhibit 10.4
to the Issuer's Registration Statement Form SB-2 (No. 333-59824))
10.5 Assignment of Lease dated April 11, 2001 between the Issuer and The
Bank of Southern Connecticut (incorporated by reference to Exhibit 10.5
to the Issuer's Registration Statement on Form SB-2 (No. 333-59824))
10.6 Employment Agreement dated as of January 23, 2001, between The Bank of
Southern Connecticut, the Issuer and Joseph V. Ciaburri (incorporated
by reference to Exhibit 10.6 to the Issuer's Registration Statement on
Form SB-2 (No. 333-59824))
10.7 Employment Agreement dated as of March 29, 2001 between The Bank of
Southern Connecticut, and Gary D. Mullin (incorporated by reference to
Exhibit 10.7 to the Issuer's Registration Statement on Form SB-2 (No.
333-59824))
10.8 Issuer's 2001 Stock Option Plan (incorporated by reference to Exhibit
10.8 to the Issuer's Registration Statement on Form SB-2 (No.
333-59824))
10.9 Issuer's 2001 Warrant Plan (incorporated by reference to Exhibit 10.9
to the Issuer's Registration Statement on Form SB-2 (No. 333-59824))
10.10 Sublease dated January 1, 2001 between Michael Ciaburri, d/b/a Ciaburri
Bank Strategies and The Bank of Southern Connecticut (incorporated by
reference to Exhibit 10.10 to the Issuer's Registration Statement on
Form SB-2 (No. 333-59824))
10.11 Sublease dated January 1, 2001 between Laydon and Company, LLC and The
Bank of Southern Connecticut (incorporated by reference to Exhibit
10.11 to the Issuer's Registration Statement on Form SB-2 (No.
333-59824))
10.12 Issuer's 2001 Supplemental Warrant Plan (incorporated by reference to
Exhibit 10.12 to Issuer's Annual Report on Form 10-KSB dated March 29,
2002)
10.13 Issuer's 2002 Stock Option Plan (incorporated by reference to Appendix
B to Issuer's Definitive Proxy Statement dated April 18, 2002).
-19-
10.14 Employment Agreement dated as of February 12, 2003, between The Bank of
Southern Connecticut and Michael M. Ciaburri.
(b) Reports on Form 8-K
-------------------
The issuer filed three reports on Form 8-K during the first
quarter of 2003:
Dated January 10, 2003, disclosing the departure of Gary D.
Mullin as President and Chief Operating Officer of The Bank of
Southern Connecticut.
Dated January 28, 2003, disclosing the appointment of Joseph
V. Ciaburri as President of The Bank of Southern Connecticut.
Dated March 10, 2003, disclosing the appointment of Michael M.
Ciaburri as President and Chief Operating Officer and a
director of The Bank of Southern Connecticut.
-20-
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SOUTHERN CONNECTICUT BANCORP, INC.
By: /S/ Joseph V. Ciaburri
--------------------------
Name: Joseph V. Ciaburri
Title: Chairman & Chief Executive Officer
Date: May 14, 2003
-21-
CERTIFICATION
-------------
I, Joseph V. Ciaburri, Chairman and Chief Executive Officer of Southern
Connecticut Bancorp, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Southern
Connecticut Bancorp, Inc.;
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 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 functions):
(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.
Date: May 14, 2003
By: /S/ Joseph V. Ciaburri
--------------------------
Joseph V. Ciaburri
Chairman and Chief Executive Officer
-22-
CERTIFICATION
-------------
I, Michael M. Ciaburri, President and Chief Operating Officer of The
Bank of Southern Connecticut, a wholly-owned subsidiary of Southern Connecticut
Bancorp, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Southern
Connecticut Bancorp, Inc.;
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 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 functions):
(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.
Date: May 14, 2003
By: /S/ Michael M. Ciaburri
---------------------------
Michael M. Ciaburri
President & Chief Operating Officer
-23-
CERTIFICATION
-------------
I, Anthony M. Avellani, Controller of Southern Connecticut Bancorp,
Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Southern
Connecticut Bancorp, Inc.;
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 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 functions):
(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.
Date: May 14, 2003
By: /S/ Anthony M. Avellani
---------------------------
Anthony M. Avellani
Controller
-24-
CERTIFICATION
-------------
I, Joseph V. Ciaburri, the Chairman and Chief Executive Officer of
Southern Connecticut Bancorp, Inc. (the "Company") certify, pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
(i) the quarterly report on Form 10-QSB of the Company for the period
ended March 31, 2003 fully complies with the requirements of Section 13(a) of
the Securities Exchange Act of 1934; and
(ii) the information contained in such annual report fairly presents,
in all material respects, the financial condition and results of operations of
the Company.
Date: May 14, 2003
By: /S/ JOSEPH V. CIABURRI
-----------------------
Joseph V. Ciaburri
Chairman & Chief Executive Officer
-25-
CERTIFICATION
-------------
I, Michael M. Ciaburri, President and Chief Operating Officer of The
Bank of Southern Connecticut, a wholly-owned subsidiary of Southern Connecticut
Bancorp, Inc. (the "Company") certify, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(i) the quarterly report on Form 10-QSB of the Company for the period
ended March 31, 2003 fully complies with the requirements of Section 13(a) of
the Securities Exchange Act of 1934; and
(ii) the information contained in such annual report fairly presents,
in all material respects, the financial condition and results of operations of
the Company.
Date: May 14, 2003
By: /S/ Michael M. Ciaburri
-----------------------
Michael M. Ciaburri
President & Chief Operating Officer
-26-
CERTIFICATION
-------------
I, Anthony M. Avellani, Controller of Southern Connecticut Bancorp,
Inc. (the "Company") certify, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
(i) the quarterly report on Form 10-QSB of the Company for the period
ended March 31, 2003 fully complies with the requirements of Section 13(a) of
the Securities Exchange Act of 1934; and
(ii) the information contained in such annual report fairly presents,
in all material respects, the financial condition and results of operations of
the Company.
Date: May 14, 2003
By: /S/ Anthony M. Avellani
----------------------------
Anthony M. Avellani
Interim Controller
-27-
Exhibit and Index
No. Description Referral
--- ----------- --------
10.14 Employment Agreement Attached Hereto
-28-