UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
__X__ QUARTERLY REPORT PERSUANT TO SECTION 13 OR 15 (d) OF
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______.
Commission file number: 0-28080
UNITED FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
MINNESOTA 81-0507591
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 2779; 120 1st Ave. North, Great Falls, Montana 59403
(Address of principal executive offices) (Zip Code)
(406) 727-6106
Registrant's telephone number, including area code:
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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 [X] No [ ]
The number of shares outstanding of each of the Issuer's
Classes of Common Stock, as of the latest date is:
Class: Common Stock, No par value; Outstanding at May 11, 1998
-- 1,698,312 shares
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UNITED FINANCIAL CORP.
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION
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ITEM 1 FINANCIAL STATEMENTS............................................................................................1
Consolidated Condensed Statements of Financial Condition at
March 31, 1998 (unaudited) and December 31, 1997...............................................................1
Consolidated Condensed Statements of Income - Three Months Ended
March 31, 1998 and March 31, 1997 (unaudited)..................................................................2
Consolidated Condensed Statements of Cash Flows - Three Months Ended
March 31, 1998 and March 31, 1997 (unaudited)..................................................................3
Notes to Consolidated Condensed Financial Statements.............................................................4
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............................................................................8
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.....................................................13
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS..............................................................................................13
ITEM 2 CHANGE IN SECURITIES...........................................................................................13
ITEM 3 DEFAULTS ON SENIOR SECURITIES..................................................................................13
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS..........................................................13
ITEM 5 OTHER INFORMATION..............................................................................................14
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K...............................................................................14
SIGNATURES...............................................................................................................15
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
UNITED FINANCIAL CORP.
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL
CONDITION (Dollars in thousands except per share data)
(Unaudited, except December 31)
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<CAPTION>
MARCH 31, December 31,
------------------- -------------------
1998 1997
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------------------- -------------------
ASSETS
Cash and cash equivalents:
Cash and amounts due from banks $ 1,861 $2,485
Interest-earning deposits with banks 20,730 7,384
------------------- -------------------
Total cash and cash equivalents 22,591 9,869
Time deposits in banks 98 98
Investment securities available-for-sale 55,880 14,219
Loans receivable, net 106,811 56,796
Loans held for sale 3,225 1,467
Premises and equipment, net 3,328 1,636
Real estate owned, net 889 -
Accrued interest receivable 1,609 688
Federal Home Loan Bank stock, at cost 1,024 404
Goodwill, net of accumulated amortization of $168,114 and 150,444 at March 31,
1998 and December 31, 1997, respectively 984 494
Cash surrender value of life insurance 260 257
Other assets 572 341
------------------- -------------------
Total assets $197,271 $86,269
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
NOW and money market demand accounts $ 36,156 $24,166
Savings deposits 39,546 12,008
Time deposits 72,147 34,212
------------------- -------------------
Total deposits 147,849 70,386
FHLB advances 9,425 6,425
Securities sold under agreements to repurchase 6,900 3,173
Accrued interest payable 1,062 807
Advance payments by borrowers for taxes and insurance 712 138
Income taxes payable 217 34
Other liabilities 990 208
Long-term debt - 2,350
------------------- -------------------
Total liabilities 167,155 83,521
Stockholders' equity:
Preferred stock, no par value (2,000,000 shares
authorized; none outstanding) - -
Common stock, no par value (8,000,000 shares authorized; 1,698,312
outstanding) 28,002 1,080
Retained earnings-partially restricted 2,035 1,540
Accumulated comprehensive income 79 128
------------------- -------------------
Total stockholders' equity 30,116 2,748
------------------- -------------------
Total liabilities and stockholders' equity $197,271 $86,269
=================== ===================
Equity/Assets 15.3% 3.2%
Gross Book Value/Share $17.74 $5.79
</TABLE>
See Notes to Consolidated Condensed Financial Statements
<PAGE>
UNITED FINANCIAL CORP.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
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<CAPTION>
THREE MONTHS ENDED MARCH 31,
1998 1997
------------------- -------------------
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INTEREST INCOME
Loans $1,953 $984
Mortgage-backed securities 433 219
Investment securities 214 37
Other Interest earning assets 215 42
------------------- -------------------
Total interest income 2,815 1,282
INTEREST EXPENSE
Deposits 1,240 601
Short-term borrowings 191 42
Long-term debt 12 48
------------------- -------------------
Total interest expense 1,443 691
------------------- -------------------
Net interest income 1,372 591
Provision for losses on loans 45 -
------------------- -------------------
Net interest income after provision for losses on loans 1,327 591
NON-INTEREST INCOME
Fees and discounts 450 221
FHLB stock dividends 15 6
Loss on sales of investment securities, net (6) -
Other income 53 24
------------------- -------------------
Total non-interest income 512 251
NON-INTEREST EXPENSE
Salaries and employee benefits 559 278
Net occupancy and equipment expense 114 56
Data processing expense 71 47
Other expenses 305 178
------------------- -------------------
Total non-interest expense 1,049 559
------------------- -------------------
Income before income taxes 790 283
Provision for income tax expense 295 130
------------------- -------------------
Net income $495 $153
=================== ===================
Net income per share $.40 $.32
------------------- -------------------
Weighed average shares outstanding 1,250 475
------------------- -------------------
</TABLE>
See Notes to Consolidated Condensed Financial Statements
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UNITED FINANCIAL CORP.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands, Unaudited)
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THREE MONTHS ENDED
-----------------------------------------
March 31, 1998 March 31, 1997
------------------- -------------------
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OPERATING ACTIVITIES
Net income $495 $153
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Provision for loan losses 45 -
Amortization of goodwill 18 11
Amortization of premiums on loans 15 3
Amortization of core deposit premium 3 -
Depreciation and amortization of bank premises and equipment 52 28
Depreciation of real estate held for investment 11 -
Deferred loan fees, net - (31)
Amortization of discounts and premiums on investments, net (9) 2
Losses on sales of available-for-sale, net 6 -
Net change in loans held for sale (60) 617
Federal Home Loan Bank stock dividends (18) (6)
Net change in income taxes payable 109 63
Net change in accrued interest receivable (123) 1
Net change in accrued interest payable (29) 90
Increase in the cash surrender value of life insurance (3) (3)
Net change in other assets (101) (6)
Net change in other liabilities (1,401) (110)
------------------- -------------------
Net cash provided by (used in) operating activities (990) 812
------------------- -------------------
INVESTING ACTIVITIES
Purchases of investment securities available-for-sale (3,500) (699)
Purchases of mortgage-backed securities available-for-sale (8,884) (2,501)
Purchase of Federal Home Loan Bank stock (67) -
Proceeds from maturities, calls, and paydowns of securities available-for-sale 7,100 160
Mortgage-backed securities principal payments 2,623 1,921
Proceeds from sale of investment securities available-for-sale 5,308 -
Net change in loans receivable (10,524) (1,723)
Purchases of premises and equipment (68) (28)
Purchase of loan production offices (225) -
Acquired United Financial Corp.'s cash and cash equivalents 8,113 -
------------------- -------------------
Net cash provided by (used in) investing activities (124) (2,870)
------------------- -------------------
FINANCING ACTIVITIES
Net increase in deposits 6,874 2,035
Net increase in Federal Home Loan Bank advances 3,000 0
Net increase in securities sold under repurchase agreements 3,727 (4,257)
Net increase in advance by borrowers for taxes and insurance 310 149
Payments on long-term debt (2,350) -
Capital Contribution 2,275 -
------------------- -------------------
Net cash provided by (used in) financing activities 13,836 (2,073)
------------------- -------------------
Increase (decrease) in cash and cash equivalents 12,722 (4,131)
Cash and cash equivalents at beginning of year 9,869 10,089
------------------- -------------------
Cash and cash equivalents at end of period $22,591 $5,958
=================== ===================
SUPPLEMENTAL CASH FLOW DISCLOSURE
- ------------------------------------------------------------------------------
Cash payments for interest $1,471 $601
Cash payments for income taxes $180 $45
See Notes to Consolidated Condensed Financial Statements
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UNITED FINANCIAL CORP.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
United Financial Corp. is a savings bank holding company
headquartered in Great Falls, Montana. Its wholly owned subsidiaries,
United Savings Bank, F.A. (United Bank) and Heritage Bank, F.S.B.
(Heritage Bank), are federally chartered stock savings banks. United Bank
has a wholly owned subsidiary, Community Service Corporation, which owns
and manages real estate held for investment. United Financial Corp. and
its subsidiaries are collectively referred to as the Company, as
constituted post-Merger, or United Financial, as constituted pre-Merger.
United Bank and Heritage Bank are collectively referred to herein as the
Banks. Full service branches are located in Shelby, Chester, Havre and
Glendive, Montana, and loan production offices are located in Bozeman,
Missoula, Hamilton and Libby, Montana. The Banks' deposits are insured by
the Federal Deposit Insurance Corporation - Savings Association Insurance
Fund (SAIF). The Banks are members of the Federal Home Loan Bank of
Seattle, Washington and are subject to comprehensive supervision,
regulation, and examination by the Office of Thrift Supervision and the
FDIC. The Banks are also subject to the regulations of the Board of
Governors of the Federal Reserve System. See Note 2 for information
regarding the merger of the Banks.
The Company's principal business is attracting deposits from the
general public through its offices and using those deposits, together
with other available funds, to originate commercial (including lease
financing), commercial real estate, residential, agriculture and consumer
loans. The residential loans and certain of the agricultural and
commercial loans are secured by mortgages. The Company also invests in
mortgage-backed securities, U.S. Treasury obligations, other U.S.
Government agency obligations and interest-earning deposits.
The Company's financial condition and results of operations are
dependent primarily on net interest income and fee income. Net interest
income is the difference between the interest income earned on loans,
mortgage-backed securities, other investment securities and
interest-earning deposits, less cost of funds, consisting of interest
paid on deposits and borrowed money. The Company's financial condition
and results of operations are also significantly influenced by local and
national economic conditions, changes in market interest rates,
governmental policies, tax laws and the actions of various regulatory
agencies.
2. HERITAGE MERGER
On February 3, 1998, United Financial and Heritage Bancorporation
(Heritage) merged (the Merger). In connection with the Merger, which was
structured as a merger of Heritage into United Financial, each
outstanding share of Heritage common stock was converted into 47.5 shares
of United Financial's common stock. An aggregate of 475,000 shares (or
28%) of United Financial's common stock was issued in connection with the
Merger. A capital contribution of $2,275,000 was made just prior to the
Merger and the proceeds were used to pay-off the outstanding long-term
debt as part of the conditions of the Merger.
The Merger was treated as a reverse acquisition and accounted for
as a purchase by Heritage in accordance with generally accepted
accounting principles (GAAP). Heritage was considered the accounting
acquirer because Heritage effectively acquired the operations of United
Financial as a result of the change in control and other related
consequences of the Merger.
The merger of the Banks was completed on May 4, 1998, with United
Bank merging into Heritage Bank. On that date, the operations of the
Banks merged into one main
<PAGE>
branch located at 120 First Avenue North, Great Falls, Montana and
United Bank's former location was closed, except for its drive-up
facility. In addition, United Bank was converted to Heritage Bank's
data center.
3. BASIS OF PRESENTATION
The Company's consolidated financial statements included herein
have been prepared in accordance with GAAP for interim financial
information and the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X of the Securities and Exchange Commission. Accordingly,
they do not include all of the information and footnotes required by GAAP
for complete financial statements. In the opinion of management, the
information contained herein reflects all postings and disclosures
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the consolidated financial condition, results of
operations, changes in stockholders' equity, and changes in cash flows
for the periods disclosed. Operating results for the three months ended
March 31, 1998, are not necessarily indicative of the results anticipated
for the year ending December 31, 1998. For additional information, refer
to the consolidated audited financial statements and footnotes thereto
included in the Company's Annual Report to Shareholders and Annual Report
on Form 10-K for the year ended December 31, 1997.
Consistent with Heritage being the acquiring corporation for
accounting purposes, the historical financial statements of the Company
commencing with this Report are those of Heritage, and not United
Financial as it existed prior to the Merger. Accordingly, the historical
statements of operations of the Company reflect only the operations of
United Financial commencing with the closing date of the Merger. Under
the purchase method of accounting, the assets and liabilities of United
Financial and its subsidiary were adjusted to their estimated fair value
and combined with the historical book values of the assets and
liabilities of Heritage. The actual revaluation of United Financial's net
assets acquired is subject to the completion of studies and evaluations
of management.
4. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board (FASB)
issued SFAS No. 130, "Reporting Comprehensive Income," which establishes
standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. This
statement requires that all items required to be recognized under
accounting standards as components of comprehensive income be reported in
a financial statement that is displayed with the some prominence as other
financial statements. This Company adopted the provisions of SFAS No. 130
as of January 1, 1998.
<PAGE>
COMPREHENSIVE INCOME DISCLOSURE:
(Dollars in thousands)
(Unaudited)
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MARCH 31, 1998 March 31, 1997
--------------------------------------- ---------------------------------------
BEFORE TAX TAX EXPENSE AFTER TAX Before Tax Tax Expense After Tax
----------- ------------- ----------- ----------- ------------- -----------
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Unrealized holding gains arising during
period $125 $46 $79 $84 $31 $53
Less: reclassification adjustment for
gains included in net income
- - - - - -
----------- ------------- ----------- ----------- ------------- -----------
Net unrealized gains on securities
$125 $46 $79 $84 $31 $53
=========== ============= =========== =========== ============= ===========
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5. RECLASSIFICATIONS
Certain reclassifications have been made to the March 31, 1997 and
December 31, 1997 financial statements to conform with the March 31, 1998
presentation.
6. CASH EQUIVALENTS
For purposes of the Consolidated Condensed Statements of Cash
Flows, the Company considers all cash, daily interest and non-interest
bearing demand deposits with banks with original maturities of three
months or less to be cash equivalents.
7. STOCKHOLDERS' EQUITY
Stockholder's equity increased $27,368,000 of which $24,647,000
was the purchase price consideration of the stock deemed to be issued to
United Financial in connection with the Merger. A capital contribution of
$2,275,000 was made just prior to the Merger and the proceeds were used
to pay-off the outstanding long-term debt of Heritage as part of the
conditions of the Merger. The Company had net income for the quarter of
$495,000. There was a $49,000 decrease in the unrealized gain on
investment securities available for sale. The balance of paid-in capital
was capitalized into common stock due to the fact that the Company's
stock has no par value.
On February 3, 1998 the Company issued a warrant (the Warrant) to
purchase 10,000 shares of its common stock to D.A. Davidson & Co.,
exercisable at the price of $26.25 per share, in exchange for investment
banking services provided to the Company.
8. COMPUTATION OF NET INCOME PER SHARE
Basic earnings per share (EPS) excludes dilution and is computed
by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock
that then shared in the earnings of the equity. Basic and diluted EPS are
the same, as the potential common shares do not have a material impact.
9. DIVIDENDS DECLARED
On April 27, 1998, the Board of Directors of the Company declared
a second-quarter cash dividend of $.25 per share, payable May 25, 1998,
to shareholders of record on May 11, 1998.
<PAGE>
10. RELATED PARTIES
Central Financial Services, Inc. (CFS) provides various management
services to the Company, including accounting and tax services,
investment consulting, personnel consulting, insurance advisory services
and regulatory consulting. CFS is owned by the Company's Chairman of the
Board of Directors and largest shareholder. CFS fees were $48,000, and
$19,000 for the three months ended March 31, 1998 and 1997, respectively.
11. COMMITMENTS AND CONTINGENCIES
The Bank has sold loans to various investors in the secondary
market under sales agreements which contain recourse provisions. Under
the recourse provisions, the Bank may be required to repurchase a loan if
a borrower fails to make three monthly payments within 120 days after the
sale of the loan. The balance of loans sold with recourse provisions
remaining at March 31, 1998 is approximately $7,124,000.
In June 1997, Heritage Bank entered into a five-year service
contract for data processing services. In the event of early termination
of the service contract by Heritage Bank, the bank has agreed to pay an
amount equal to fifty percent of the average monthly fee paid for
services multiplied by the number of months remaining under the term of
the contract.
The Company has a Salary Continuation Agreement with the Banks'
President, Kevin P. Clark. The agreement contains a lifetime retirement
benefit, a disability benefit, a change of control benefit and a death
benefit. The benefits are based on Mr. Clark's years of service. The
Company holds a fully funded life insurance policy in connection with
this agreement.
12. SIGNIFICANT TRANSACTIONS
In February 1998, the Company purchased the assets of three loan
production offices located in Missoula, Hamilton, and Libby, Montana, for
approximately $225,000.
13. SUBSEQUENT EVENT
On April 22, 1998, the Company and Chouteau County Bancshares,
Inc. (Chouteau) announced that they had reached an agreement in principle
to merge. Chouteau is a bank holding company. Its wholly owned
subsidiary, First State Bank of Fort Benton is a commercial bank with
approximately $68 million in assets and one banking office in Fort
Benton, Montana. Under the proposed terms of the agreement, the Company
will serve as the parent company of the combined entity, which would
include Heritage Bank and its subsidiary, Community Service Corporation,
and First State Bank of Fort Benton and its subsidiary, Fort Benton
Insurance Agency, Inc.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
1. MATERIAL CHANGES IN FINANCIAL CONDITION. COMPARISON OF THE
THREE MONTHS ENDED MARCH 31, 1998 TO THE YEAR ENDED DECEMBER 31, 1997.
(Dollars in thousands)
(Unaudited, except December 31)
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<CAPTION>
SELECTED FINANCIAL CONDITION RECAP
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United Financial
March 31, December 31, Acquired
1998 1997 Change Feb. 3, 1998
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Total assets $197,271 $86,269 $111,002 $98,640
Cash and cash equivalents 22,591 9,869 12,722 8,113
Mortgage-backed securities 37,126 9,890 27,236 20,967
Investment securities 18,629 4,125 14,504 23,417
Loans receivable, net 106,811 56,796 50,015 39,551
Loans held for sale 3,224 1,467 1,757 1,698
FHLB stock 1,024 404 620 535
Real estate owned 889 - 889 900
Premises and equipment 3,328 1,636 1,692 1,635
Goodwill 984 494 490 166
All other assets 2,665 1,588 1,077 1,658
Deposits 147,849 70,386 77,463 70,586
Borrowed funds 16,325 9,598 6,727 -
Long-term debt - 2,350 (2,350) -
All other liabilities 2,981 1,187 1,794 3,228
Total liabilities 167,155 83,521 83,634 73,814
Stockholders' equity, net 30,116 2,748 27,368 24,826
</TABLE>
GENERAL - The consolidated financial statements for the year ended
December 31, 1997 contained in this Report reflect the historical
financial position and results of operations of Heritage and thus do not
reflect or include the financial position and results of operations of
United Financial.
Total assets increased $111.0 million to $197.3 million at March
31, 1998 from $86.3 million at December 31, 1997. The increase in assets
was primarily the result of the acquisition of $98.6 million of assets
from United Financial in connection with the Merger. Mortgage-backed
securities increased $27.2 million, investment securities increased $14.5
million and loans receivable increased $50.0 million. In addition,
deposits increased $77.5 million and stockholders' equity increased $27.4
million.
MORTGAGE-BACKED SECURITIES - Mortgage-backed securities increased
$27.2 million to $37.1 million at March 31, 1998 from $9.9 million at
December 31, 1997. The increase was the result of the acquisition of
$21.0 million of mortgage-backed securities associated with the Merger
and $8.9 million of purchases, partially offset by $2.6 million of
principal repayments.
INVESTMENT SECURITIES - This category increased $14.5 million to
$18.6 million at March 31, 1998 from $4.1 million at December 31, 1997.
The increase was the result of the acquisition of $23.4 million of
investment securities related to the Merger and the purchase of $3.5
million of investments. These increases were offset by the sale of the
$5.3 million Kemper U.S. Government bond mutual fund at a realized
<PAGE>
loss of $6,000 and $7.1 million of calls, maturities, and principal
payments on other investments and securities.
LOANS RECEIVABLE AND LOANS HELD FOR SALE - Net loans receivable
increased $50.0 million to $106.8 million at March 31, 1998 from $56.8
million at December 31, 1997. This increase was primarily due to the
acquisition of $39.6 million of net loans receivable in connection with
the Merger. The increase in gross loan balances was offset by the net
increase in the reserve for loan losses of $40,000.
During the three months ended March 31, 1998, loans held for sale
increased $1.8 million to $3.2 million at March 31, 1998 from
approximately $1.4 at December 31, 1997. This increase was primarily due
to the acquisition of $1.7 million of loans held for sale in connection
with the Merger. Approximately $16.5 million loans were originated for
sale and $16.4 million of loans were sold to the secondary market,
thereby increasing net loans held for sale for the quarter approximately
$60,000.
REAL ESTATE HELD FOR INVESTMENT - The $889,000 increase in the
first quarter of 1998 was primarily the result of $900,000 of real estate
acquired in connection with the Merger. At March 31, 1998 real estate
owned was comprised of two 24-unit apartment complexes in Glendive,
Montana, owned as depreciating investments by United Bank's wholly owned
subsidiary, Community Service Corporation.
FHLB STOCK - FHLB stock increased $620,000 to $1,024,000 at March
31, 1998 from $404,000 at December 31, 1997. This increase was the result
of $535,000 of FHLB stock acquired in connection with the Merger, $67,000
of FHLB stock purchases, and $18,000 of reinvested stock dividends.
PREMISES AND EQUIPMENT - This category increased $1.7 million to
$3.3 million at March 31, 1998 from $1.6 million at December 31, 1997.
This increase was primarily due to the acquisition of $1.6 million of
premises and equipment related to the Merger. Approximately $67,000 of
the increase was due to the purchase of computer and office equipment and
remodeling of the main banking facility in Great Falls, Montana,
approximately $41,000 was for computers and office furniture acquired in
conjunction with the purchase of the loan production facilities. The
purchases of premises and equipment were offset by approximately $52,000
of depreciation.
GOODWILL - Goodwill increased $490,000 to $984,000 at March 31,
1998 from $494,000 at December 31, 1997. This increase is due to $324,000
of goodwill acquired in relation to the Merger and $183,000 acquired in
the purchase of the loan production offices. The goodwill is being
amortized over 10 years.
DEPOSITS - Deposits increased $77.4 million to $147.8 million at
March 31, 1998 from $77.4 million at December 31, 1997. This increase was
primarily the result of the acquisition of $70.6 million of deposits from
United Financial. The $77.4 million increase was comprised of increases
of $11.9 million in NOW and money market demand accounts, $27.5 million
in savings accounts and $37.9 million in certificates of deposit.
BORROWED FUNDS - Borrowed funds increased $6.7 million to $16.3
million at March 31, 1998 from $9.6 million at December 31, 1997. United
Financial did not have any outstanding debt at the time of the Merger.
The $6.7 million increase was due to $3.0 million in new FHLB advances
and a net increase of $3.7 million in securities sold under repurchase
agreements.
LONG-TERM DEBT - This category decreased $2.35 million to zero
from $2.35 million at December 31, 1997. The note was secured by the
outstanding shares of Heritage Bank and was guaranteed by certain
principal shareholders of Heritage. In January 1998, a principal
reduction payment of $75,000 was made by Heritage. The
<PAGE>
balance of the long-term debt was paid on February 3, 1998 immediately
preceding the Merger with funding from a corresponding $2,275,000
contribution of capital.
STOCKHOLDERS' EQUITY - Stockholders' equity increased $27.4
million to $30.1 million at March 31, 1998 from $2.7 million at December
31, 1997. This increase is due to $495,000 of net income for the three
months ended March 31, 1998, $49,000 related to the change in unrealized
gains associated with assets classified as available-for-sale being
adjusted to market value, a $2.3 million contribution of capital, and
$24.6 million of net stockholders' equity acquired in connection with the
Merger.
2. MATERIAL CHANGES IN RESULTS OF OPERATIONS - COMPARISON OF THE
THREE MONTHS ENDED MARCH 31, 1998, AND MARCH 31, 1997
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
INCOME RECAP
---------------------------------------------------
THREE MONTHS ENDED MARCH 31,
---------------------------------------------------
1998 1997 Change
--------------- --------------- ---------------
<S> <C> <C> <C>
Interest income $2,815 $1,282 $1,533
Interest expense 1,443 691 752
--------------- --------------- ---------------
Net interest income 1,372 591 781
Provision for loan losses 45 - 45
Non-interest income 512 251 261
Non-interest expense 1,049 559 490
--------------- --------------- ---------------
Income before income taxes 790 283 507
Provision for income taxes 295 130 165
--------------- --------------- ---------------
Net income $495 $153 $342
=============== =============== ===============
</TABLE>
The following unaudited pro forma combined financial information
gives effect to the Merger based on the purchase accounting adjustments,
estimates and other assumptions. The unaudited pro forma combined
statements of income for the three months ended March 31, 1998 and 1997
are based upon the unaudited consolidated condensed statements of income
of Heritage and United Financial. The unaudited pro forma combined
statements of income for the three months ended March 31, 1997 combines
the historical consolidated statements of income of Heritage and United
Financial as if the Merger had become effective on January 1, 1997. The
unaudited pro forma combined statements of income for the three months
ended March 31, 1998 combines the historical consolidated statements of
income of Heritage and United Financial as if the Merger had become
effective on January 1, 1998.
<PAGE>
UNITED FINANCIAL CORP.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------------
1998 1997
------------------- -------------------
<S> <C> <C>
Interest income 3,359 3,067
Interest expense 1,699 1,498
------------------- -------------------
Net interest income 1,660 1,569
Provision for losses on loans 50 -
------------------- -------------------
Net interest income after provision for losses on loans 1,610 1,569
Non-interest income 600 392
Non-interest expense 1,338 1,113
------------------- -------------------
Income before income taxes 872 848
Provision for income tax expense 331 342
------------------- -------------------
Net income $541 $506
=================== ===================
Net income per share $.32 $.30
------------------- -------------------
Weighed average shares outstanding 1,698 1,698
------------------- -------------------
See Notes to Consolidated Condensed Financial Statements
</TABLE>
GENERAL - Consistent with the purchase method of accounting, the
historical information being presented reflects only the operations of
Heritage for the three months ended March 31, 1997. Also, the Statement
of Operations for the three months ended March 31, 1998 includes the
results of operations of Heritage combined with the results of operations
of United Financial commencing after the Merger on February 3, 1998.
NET INCOME - Net income increased $342,700, or 69.2%, to $495,400
for the three months ended March 31, 1998 from $152,700 for the same
period last year. Pro forma net income increased $34,600 to $540,600 for
the three months ended March 31, 1998 from $506,000 for the same period
last year.
INTEREST INCOME - Interest income increased $1.5 million to $2.8
million for the three months ended March 31, 1998 from $1.3 million for
the same period last year. The increase was primarily the result of
income from the interest earning assets acquired in the Merger and an
increase in interest earning assets from the same period in 1997. Pro
forma interest income increased 8.7%, or $292,000, to $3.4 million for
the three months ended March 31, 1998 from $3.1 million for the same
period in 1997. Interest income on loans receivable increased $1.0
million to $2.0 million for the three months ended March 31, 1998 from
$1.0 million for the same period last year. Interest income on
mortgage-backed securities increased $214,000 to $433,000 for the three
months ended March 31, 1998 from $219,000 for the same period last year.
Interest income on all other interest earning investments including
investment securities increased $351,000 to $429,000 for the three months
ended March 31, 1998 from less than $78,000 for the same period last
year.
<PAGE>
INTEREST EXPENSE - Total interest expense increased approximately
$752,000, or 52.0%, to $1.4 million for the three months ended March 31,
1998 from $691,000 for the same period last year. The increase was
primarily the result of the deposit expense associated with the deposit
base acquired in the Merger. Pro forma interest expense increased
approximately $201,000, or 11.8%, to $1.7 million for the three months
ended March 31, 1998 from $1.5 million for the same period last year.
This increase is primarily due to an increase in average interest bearing
liabilities. Interest expense on deposits increased $639,000 to $1.2
million for the three months ended March 31, 1998 from $601,000 for the
same period last year. Interest expense on FHLB advances and securities
sold under agreements to repurchase increased $149,000 to $191,000 for
the three months ended March 31, 1998 from $42,000 for the same period
last year. Interest expense on long-term debt decreased $36,000 to
$12,000 for the three months ended March 31, 1998 from $48,000 for the
same period last year. The decrease in interest expense on long-term debt
is primarily due to the fact that the debt was paid off on February 3,
1998 from cash provided by a capital contribution to the Company.
PROVISION FOR LOAN LOSSES - The provision for loan losses
increased to $45,000 for the three months ended March 31, 1998 as
compared to no provision for the same period last year. The Company
increased the provision for loan losses due to the increase in total
loans held in its portfolio.
The provision for loan losses is determined by management as the
amount to be added to the allowance for loan losses after net charge-offs
have been deducted to bring the allowance to a level which is considered
adequate to absorb losses inherent in the loan portfolio in accordance
with GAAP. Future additions to the Company's allowance for loan losses
and any change in the related ratio of the allowance for loan losses to
non-performing loans are dependent upon the performance and composition
of the Company's loan portfolio, the economy, inflation, changes in real
estate values and interest rates and the view of the regulatory
authorities toward adequate reserve levels.
NON-INTEREST INCOME - Non-interest income increased $261,000, or
51%, to $512,000 for the three months ended March 31, 1998 from $251,000
for the same period last year. This increase was primarily the result of
loan fees and other service charges increasing $229,000, or 51%, in the
first quarter of 1998 compared to last year. The Company sold the Kemper
U.S. Government mutual bond fund for a loss of $6,000 in the first
quarter of 1998. Pro forma non-interest income increased $208,000 to
$600,000 for the three months ended March 31, 1998 from $392,000 for the
same quarter last year.
NON-INTEREST EXPENSE - This category increased 490,000, or 47%, to
$1,049,000 for the three months ended March 31, 1998 from $559,000 for
the same quarter last year. This increase was primarily due to the
Merger. Salary and employee benefits increased $282,000 to $559,000 for
the three months ended March 31, 1998 compared to $277,000 for the same
quarter last year. This increase was primarily due to the addition of the
employees of United Bank. Annual salary increases have been offset by
attrition of employees of the Banks. Net occupancy and equipment
increased $58,000 to $114,000 for the three months ended March 31, 1998
from $56,000 for the same quarter last year. This increase was primarily
due to the Merger and the acquisition of United Bank's four branches as
well as the purchase of three loan production offices. Also included in
non-interest expense were one-time Merger related costs incurred in the
first quarter of approximately $85,000, two months of goodwill
amortization totaling approximately $5,000, increased data processing
expense and other services due to duplication of services prior to the
merger of the Banks. Pro forma non-interest expense increased $225,000 to
$1.3 million for the three months ended March 31, 1998 from $1.1 million
for the same quarter last year.
<PAGE>
INCOME TAXES - Income tax expense increased $165,000 due to the
$507,000 increase in income before taxes, which is tax affected for
non-deductible goodwill amortization and tax-free interest on municipal
bonds and loans. Pro forma income tax expense was approximately $331,000
for the first quarter 1998 compared to $342,000 for the same period last
year.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management believes there has been no material change in interest
rate risk since December 31, 1997. For additional information, see
Management's Discussion and Analysis of Financial Condition and Results
of Operations included herein in Item 2 and refer to the Interest Rate
Risk Management discussion included in United Financial's Annual Report
on Form 10-K for the year ended December 31, 1997.
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS.
The Company is involved from time to time in litigation normal for its
type of business.
ITEM 2 CHANGE IN SECURITIES.
In exchange for all of the outstanding stock of Heritage and in
connection with the Merger, the Company issued 475,000 shares of its common
stock to the former shareholders of Heritage on February 3, 1998. The issuance
of shares of common stock did not involve a public offering and therefore was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933,
as amended (the "Securities Act"). On February 3, 1998, the Company issued a
warrant (the "Warrant") to purchase 10,000 shares of its common stock to D.A.
Davidson & Co., exercisable at the price of $26.25 per share, in exchange for
investment banking services provided to the Company. The issuance of the Warrant
did not involve a public offering and therefore was exempt from registration
pursuant to Section 4(2) of the Securities Act.
ITEM 3 DEFAULTS ON SENIOR SECURITIES.
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
On February 3, 1998, at separate special meetings of the shareholders of
United Financial and Heritage, the shareholders of United Financial approved the
Restated Agreement and Plan of Merger, dated as of August 25, 1997, between
United Financial and Heritage (the Merger Agreement). The shareholders of
Heritage approved the Merger Agreement and the nomination of five directors to
be elected by the Board of Directors of United Financial to serve upon the
Company's Board of Directors upon consummation of the Merger.
The shareholders of United Financial voted as follows with respect to the
approval of the Merger Agreement:
For: 684,933
Against: 14,364
Abstain: 5,530
<PAGE>
The shareholders of Heritage voted as follows with respect to the
approval of the Merger Agreement:
For: 10,000
Withheld: 0
The shareholders of Heritage voted as follows with respect to the
nomination of directors to serve on the Company's Board of Directors:
John M. Morrison For: 10,000
Withheld: 0
Kurt R. Weise For: 10,000
Withheld: 0
Janice M. Graser For: 10,000
Withheld 0
Larry D. Albert For: 10,000
Withheld: 0
Jerome H. Hentges For: 10,000
Withheld: 0
ITEM 5 OTHER INFORMATION.
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K.
A. The following exhibits are included herein:
Exhibit
Number Description of Exhibit
- ------- -------------------------------------------------------
2.1 Articles of Combination of United Bank with
and into Heritage Bank
2.2 Plan of Reorganization and Merger Agreement (Dated October
9, 1997 and entered into by and among Heritage Bank,
Great Falls, Montana, and United Bank, Great Falls,
Montana)
10.1 Service Agreement (between CFS and the
Company, dated February 3, 1998)
10.2 Service Agreement (between CFS and United
Bank, dated February 3, 1998)
10.3 Service Agreement (between CFS and Heritage
Bank, dated December 18, 1996)
10.4 Salary Continuation Agreement (of Kevin P.
Clark, dated January 1, 1996)
27.1 Financial Data Schedule
B. Reports on Form 8-K
On February 18, 1998 the Company filed a Current Report on Form 8-K
disclosing the completion of the Merger.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
United Financial Corp.
Date May 15, 1998 /s/ John M. Morrison
--------------- ----------------------------
John M. Morrison
President and Chief Executive Officer
(Duly Authorized Representative)
Date May 15, 1998 /s/ Kurt R. Weise
--------------- ----------------------------
Kurt R. Weise
President and Chief Operating Officer
(Duly Authorized Representative)
Article 2.1
ARTICLES OF COMBINATION OF
UNITED SAVINGS BANK, F.A.
WITH AND INTO
HERITAGE BANK, F.S.B.
Pursuant to 12 C.F.R. ss. 552.13, United Savings Bank, F.A., a federally
chartered savings bank ("USB"), and Heritage Bank, F.S.B., a federally chartered
savings bank (the "Acquiring Bank"), hereby adopt the following Articles of
Combination for the purpose of merging USB with and into the Acquiring Bank,
which shall be the resulting association.
1. The combination agreement, or plan of reorganization and merger
agreement, required as a part of these Articles of Combination by
12 C.F.R. ss. 552.13(j) (the "Plan"), is attached hereto as
Exhibit A.
2. As of the date hereof, there were 1,223,312 shares of the common
stock of USB issued and outstanding and 200,000 shares of the
common stock of the Acquiring Bank issued and outstanding.
3. The number of shares of common stock of each association voted for
and against the Plan are set forth below:
Entity For Against
------------- ----------- ------------
USB 1,223,312 0
Acquiring Bank 200,000 0
4. Accordingly, the Plan has been duly approved and adopted by USB
and the Acquiring Bank.
5. These Articles of Combination may be executed in two or more
counterparts, each of which shall be deemed an original and all of
which shall constitute one instrument.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused these Articles of
Combination to be executed by its duly authorized officers as of May 3, 1998.
UNITED SAVINGS BANK, F.A. HERITAGE BANK, F.S.B.
By /s/ Kevin P. Clark By /s/ Kevin P. Clark
------------------------- ------------------------
Its President Its President
Attested Attested
By /s/ Amy E. Ward By /s/ Amy E. Ward
------------------------- ------------------------
Its Secretary Its Secretary
The undersigned each hereby affirm that the statements contained in the
foregoing Articles of Combination are true and correct.
UNITED SAVINGS BANK, F.A. HERITAGE BANK, F.S.B.
By /s/ Kevin P. Clark By /s/ Kevin P. Clark
------------------------- ------------------------
Its President Its President
Attested Attested
By /s/ Amy E. Ward By /s/ Amy E. Ward
------------------------- ------------------------
Its Secretary Its Secretary
The foregoing Articles of Combination, relating to United Savings Bank,
F.A., a federally chartered savings bank, and Heritage Bank, F.S.B., a federally
chartered savings bank, were filed with the Corporate Secretary of the Office of
Thrift Supervision and endorsed pursuant to Section 552.13(k) of the Regulations
for Federal Associations, effective as of _____________, 1998, at ________ _.m.,
Washington, D.C. time.
OFFICE OF THRIFT SUPERVISION
Department of the Treasury
By _________________________
Its _____________________
Exhibit 2.2
PLAN OF REORGANIZATION AND MERGER AGREEMENT
This Plan of Reorganization and Merger Agreement is dated as of October 9, 1997,
and is entered into by and among Heritage Bank, F.S.B., Great Falls, Montana
("Heritage"), and United Savings Bank, F.A., Great Falls, Montana ("United", and
when jointly referred to with Heritage, the "Merging Banks").
RECITALS
A. Heritage is a federal savings bank duly organized and existing under the laws
of the United States, which will have, immediately prior to the merger,
authorized capital stock of 2,000,000 shares of common stock, $5.00 par value
("Heritage Common Stock"), of which 10,000 shares will be validly issued and
outstanding.
B. United is a federal savings association duly organized and existing under the
laws of the United States, which will have, immediately prior to the merger,
authorized capital stock of 8,000,000 shares of common stock, $1.00 par value
("United Common Stock"), of which 1,223,312 shares are validly issued and
outstanding.
C. United Financial Corp., a Minnesota corporation ("UFC"), is the owner and
registered holder of the United Common Stock, and, upon consummation of the
Restated Agreement and Plan of Merger between UFC and Heritage Bancorporation
dated as of August 25, 1997 (the "UFC Merger Agreement"), will be the owner and
registered holder of the Heritage Common Stock.
D. The Boards of Directors of Heritage and United deem it fair and equitable to,
and in the best interests of, their respective shareholders that United be
merged with into Heritage, with Heritage being the Surviving Bank (as
hereinafter defined), on the terms and conditions herein set forth. Each such
Board of Directors has approved this Plan of Reorganization and Merger Agreement
and has authorized its execution and delivery.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, provisions and covenants herein contained, the parties hereto adopt
and agree to the following agreements, terms and conditions relating to the
merger of United with and into Heritage (hereinafter the "Merger") and the mode
of carrying the same into effect.
ARTICLE I
MERGER
1.1 Merger. On the Effective Date (as hereinafter defined) Heritage and
United (collectively the "Merging Banks") shall be merged under the charter of
Heritage, which will be the surviving corporation (hereinafter called the
"Surviving Bank" whenever reference is made to it as of the Effective Date or
thereafter). The Surviving Bank shall be a federal savings bank with all of the
rights, privileges, immunities, powers and franchises and subject to all duties,
restrictions and liabilities of the federal savings bank organized under the
laws of the United States of America.
<PAGE>
1.2 Effect of Merger. All rights, privileges, immunities, powers,
franchises and interests of the Merging Banks in and to every type of property
(real, personal and mixed) and chooses an action shall be transferred to
invested in the Surviving Bank by virtue of the Merger, and without any deed or
other transfer, and the Surviving Bank, without any order or other action on the
part of any court or otherwise, shall hold and enjoy all rights, privileges,
immunities, powers, franchises and interests held or enjoyed by the Merging
Banks on the Effective Date.
The Surviving Bank shall be liable for all liabilities of the Merging
Banks, including, without limitation, all deposits, debts, obligations and
contracts of the Merging Banks, whether matured or unmatured, accrued, absolute,
contingent or otherwise, and whether or not reflected or reserved against
unbalanced sheets, books of account or records of the Merging Banks, none of
which shall be released or impaired by the Merger. All rights of creditors and
other obligees and all liens on property of the Merging Banks shall be preserved
and unimpaired.
1.3 Directors and Officers of Surviving Bank. The directors and officers
of Heritage immediately prior to the Effective Date shall be the sole directors
and officers of the Surviving Bank, and shall continue in office until their
successors are duly elected or otherwise duly selected. The number of directors
of the Surviving Bank shall be five. The names and addresses of those persons
who shall serve as directors of the Surviving Bank and the expiration dates of
their terms are listed on Appendix 1 attached hereto and incorporated herein by
reference.
1.4 Charter. Effective as of the Effective Date, the Charter of the
Surviving Bank shall be the Charter of Heritage.
1.5 Bylaws. The Bylaws of Heritage, as in effect immediately prior to the
Effective Date will, from and after the Effective Date, be and continue to be
the Bylaws of the Surviving Bank until the same are altered, amended or
rescinded as therein provided or as provided in the Charter of the Surviving
Bank.
1.6 Name. The name of the Surviving Bank shall be "Heritage Bank, F.S.B."
1.7 Location of Offices. On the Effective Date, all offices of United
shall be combined into the Surviving Bank. On the Effective Date, the location
of the home office of the Surviving Bank shall be at 120 First Avenue North,
Great Falls MT 59401, and the location of the branch offices of the Surviving
Bank shall be as set forth in Appendix 2 attached hereto and incorporated herein
by reference.
1.8 Accounts. On the Effective Date, all accounts of United, without
reissue, shall be and become accounts of the Surviving Bank without change in
their respective terms, including without limitation, maturity, minimum required
balances, or withdrawal value. Each account of United shall, as of the Effective
Date, be considered, for all purposes thereafter, as if it had been an account
of the Surviving Bank at the time it was opened and at all times thereafter
until such account ceases to be an account of the Surviving Bank.
<PAGE>
ARTICLE II
MANNER AND BASIS OF CONVERSION OF SHARES
2.1 Conversion of Common Stock of the United. On the Effective Date, each
share of Common Stock of United validly issued and outstanding immediately prior
to the Effective Date will, by virtue of the Merger and without any action by
the holders thereof, be canceled.
2.2 Conversion of Common Stock of the Heritage. On the Effective Date,
each share of Common Stock of the Heritage validly issued and outstanding
immediately prior to the Closing Date will, by virtue of the Merger and without
any action by the holders thereof, remain outstanding as shares of common stock,
$1.00 par value, of the Surviving Bank.
ARTICLE III
CONDITIONS PRECEDENT
This Agreement is subject to and conditioned upon the following:
3.1 Approval and ratification of this Agreement by the shareholders of
Heritage and United;
3.2 Receipt of all required regulatory approvals and consents, and the
satisfaction of all other requirements as are prescribed by applicable law in
connection with this Agreement, including, without limitation, approval of the
Merger by the Office of Thrift Supervision;
3.3 Consummation of the merger of Heritage Bancorporation and UFC
pursuant to the UFC Merger Agreement; and
3.4 Performance by each party hereto of all its obligations under this
Agreement.
ARTICLE IV
TERMINATION
4.1 Event of Termination. This Plan of Reorganization and Merger
Agreement may be terminated and the Merger abandoned by the mutual consent of
the respective Boards of Directors of Heritage and United at any time prior to
the Effective Date.
4.2 Liability. Upon termination pursuant to this Article IV, this
agreement shall be void and of no further force and effect, and there shall be
no liability by reason of this agreement or the termination hereof on the
parties hereto or their respective directors, officers, employees, agents or
shareholders.
ARTICLE V
MISCELLANEOUS
5.1 Waivers; Amendments. Either of the Merging Banks may, at any time
prior to the Effective Date, by action taken by its Board of Directors or
officers thereunto authorized, waive the performance of any of the obligations
<PAGE>
of the other or waive compliance by the other with any of the covenants or
conditions contained in this Plan of Reorganization and Merger Agreement or
agree to the amendment or modification of this Plan of Reorganization and Merger
Agreement by an agreement in writing executed in the same manner as this Plan of
Reorganization and Merger Agreement.
5.2 Captions. The captions in this Plan of Reorganization and Merger
Agreement are for convenience only and will not be considered a part of or
affect the construction or interpretation of any provision of this Plan of
Reorganization and Merger Agreement.
5.3 Governing Law. This Plan of Reorganization and Merger Agreement is to
be construed and interpreted in accordance with the laws of the United States of
America and the State of Minnesota.
5.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original, and such executed
counterparts shall together constitute a single document.
5.5 Further Action. If at any time the Surviving Bank shall consider or
be advised that any further assignment or other action is necessary or desirable
to vest, perfect or confirm in the Surviving Bank the title to any property or
rights of the Merging Banks to be acquired by or as a result of this Agreement,
the proper officers and directors of the Merging Bank shall execute and deliver
such deeds, assignments and insurances in law and take such other action as may
be necessary or proper to vest, perfect or confirm title to such property or
right in the Surviving Bank and otherwise carry out the purposes of this
Agreement.
ARTICLE VI
EFFECTIVE DATE
6.1 Effective Date. The Merger shall be effective at the time the
Articles of Combination substantially in the form of Exhibit A hereto are
endorsed by the OTS pursuant to the applicable thrift regulations (the time of
such endorsement, which shall not occur prior to the effective date of the
merger of Heritage Bancorporation into UFC, being the "Effective Date").
<PAGE>
IN WITNESS WHEREOF, the signatures of said Merging Banks as of October 9,
1997, each set by its President and attested to by its Cashier, Secretary or
Assistant Secretary, pursuant to authorization of its Board of Directors.
HERITAGE BANK, F.S.B.
GREAT FALLS, MONTANA
By /s/ Kevin P. Clark
------------------------
President
Attest:
/s/ Amy E. Ward
- --------------------
UNITED SAVINGS BANK, F.A.
GREAT FALLS, MONTANA
By /s/ Kevin P. Clark
------------------------
President
Attest:
/s/ Amy E. Ward
- --------------------
Exhibit 10.1
SERVICE AGREEMENT
THIS AGREEMENT, made as of the 3rd day of February 1998, by and between
UNITED FINANCIAL CORP. ("United"), a Minnesota Corporation, and Central
Financial Services, Inc. ("CFS"), a Florida corporation.
WITNESSETH:
WHEREAS, CFS desires to sell and United desires to purchase certain
services more particularly described herein to be utilized by United in the
management and operation of its business as a savings bank holding company,
commercial bank holding company or other type of financial institution.
NOW, THEREFORE, in consideration of the foregoing premises, and further
in consideration of the mutual promises herein contained, the parties hereto
hereby agree as follows:
1. Services. United, on its own behalf agrees to purchase and CFS
agrees to sell, the following bank advisory and consulting services:
A. Advise management on income tax planning and provide assistance
in the preparation of federal and state income tax returns.
B. Coordinate directors' examinations and/or audits under the
direction of Banks and Banks' Board of Directors.
C. Conduct periodic audits of the loan portfolios (if any) in
order to advise bank management in its process of determining adequacy of
Reserve for Loan Losses, compliance with existing regulations and
adequacy of loan file documentation.
D. Under the direction of bank management, provide a review and
analysis of specific new loans or problem loans and make recommendations
as to how bank management should proceed.
E. Under the direction of management, provide periodic reviews of
internal controls and operations and prepare related reports on findings
to bank management.
F. Advice with respect to the development of operating policies
and marketing and advertising advice.
G. Regulatory relations and planning advice, which includes
updates of regulatory changes, advice in dealings with regulatory
agencies and advice with respect to evaluations of potential expansion or
change in facilities and services.
H. Loan policy advice, which includes advising officials in the
development of proposed loan policies and proposed amendments thereto,
providing information and advice on consumer compliance provisions, and
advice with respect to coordinating participation loan agreements with
management.
I. Advise and consult with management on asset and liability
<PAGE>
management, including rate sensitivity, net interest margin, liquidity
and capital adequacy. Including investment portfolio management, which
will be separately calculated for billing purposes.
J. Personnel consulting, which includes advice on fringe benefit
programs, salary recommendations, and executive recruiting under the
direction of bank management
K. Payroll and 401K processing under the direction of management.
L. Accounting and reporting advice, which includes development of
proposed budgets and financial statement formats and review and analysis
of monthly statements, budgets and expense classification.
M. Insurance advisory services, which includes coordination and
central purchasing of all bank-related insurance needs under the
direction of management.
N. Such other advisory or consulting services as United may
request.
2. Basic Fees: Payment. United hereby agrees to pay CFS for the
above services as follows:
A. Professional employee services will be billed on a direct
hourly rate. The direct hourly rate is based upon a comparable market
rate for similar services; and
B. Any directly incurred "out-of-pocket" expenses incurred by CFS
for providing such services.
C. Management of the investment portfolio will be billed as a
component of the fee expressed as a number of basis points (BP), on a
sliding scale, as it relates to the size of the investment portfolio. The
first 10 million will be charged at 15 BP, the second 10 million will be
charged as 12 BP, the next 20 million will be charged at 9 BP, everything
over will be at 7 BP.
3. Cancellation. The service agreement will be in effect for one
year. Thereafter, it may be canceled by either CFS or Bank (I) as of the end of
any fiscal year hereof upon sixty (60) days prior written notice to the other
party or (ii) upon written notice thereof if no agreement as to the basic annual
fee is reached as required by Section 2 hereof. Until so canceled, the service
agreement will remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, CFS and United have executed and delivered this
Service Agreement as of the day and year first above written.
CENTRAL FINANCIAL SERVICES, INC.
By: /s/ Kurt R. Weise
------------------------
Its: President
UNITED FINANCIAL CORP.
By: /s/ Bruce K Weldele
------------------------
Its: Chairman
WITNESS:
Kevin P. Clark
- ---------------------
Exhibit 10.2
SERVICE AGREEMENT
THIS AGREEMENT, made as of the 3rd day of February 1998, by and between
United Savings Bank ("Bank"), a Montana Corporation, and Central Financial
Services, Inc. ("CFS"), a Florida corporation.
WITNESSETH:
WHEREAS, CFS desires to sell and Bank desires to purchase certain
services more particularly described herein to be utilized by Bank in the
management and operation of its business as a savings bank, commercial bank or
other type of financial institution.
NOW, THEREFORE, in consideration of the foregoing premises, and further
in consideration of the mutual promises herein contained, the parties hereto
hereby agree as follows:
1. Services. Bank, on its own behalf agrees to purchase and CFS agrees to
sell the following bank advisory and consulting services:
A. Advise bank management on income tax planning and provide
assistance in the preparation of federal and state income tax returns.
B. Coordinate directors' examinations and/or audits under the
direction of Banks and Banks' Board of Directors.
C. Conduct periodic audits of the Banks' loan portfolios in order
to advise bank management in its process of determining adequacy of
Reserve for Loan Losses, compliance with existing regulations and
adequacy of loan file documentation.
D. Under the direction of bank management, provide a review and
analysis of specific new loans or problem loans and make recommendations
as to how bank management should proceed.
E. Under the direction of bank management, provide periodic
reviews of internal controls and operations and prepare related reports
on findings to bank management.
F. Advice with respect to the development of Banks' operating
policies and marketing and advertising advice.
G. Regulatory relations and planning advice, which includes
updates of regulatory changes, advice in dealings with regulatory
agencies and advice with respect to evaluations of potential expansion or
change in bank facilities and services.
H. Loan policy advice, which includes advising bank officials in
the development of proposed loan policies and proposed amendments
thereto, providing information and advice on consumer compliance
provisions, and advice with respect to coordinating participation loan
agreements with bank officials.
I. Advise and consult with bank management on asset and liability
<PAGE>
management, including rate sensitivity, net interest margin, liquidity
and capital adequacy. Including investment portfolio management, which
will be calculated separately for billing purposes.
J. Personnel consulting, which includes advice on fringe benefit
programs, salary recommendations, and executive recruiting under the
direction of bank management.
K. Payroll and 401K processing under the direction of management.
L. Accounting and reporting advice, which includes development of
proposed budgets and financial statement formats and review and analysis
of monthly statements, budgets and expense classification.
M. Insurance advisory services, which includes coordination and
central purchasing of all bank-related insurance needs under the
direction of bank management.
N. Such other advisory or consulting services as the Bank may
request.
2. Basic Fees: Payment. Bank hereby agrees to pay CFS for the
above services as follows:
A. Professional employee services will be billed on a direct
hourly rate. The direct hourly rate is based upon a comparable market
rate for similar services; and
B. Any directly incurred "out-of-pocket" expenses incurred by CFS
for providing such services.
C. Management of the investment portfolio will be billed as a
component of the fee expressed as a number of basis points (BP), on a
sliding scale, as it relates to the size of the investment portfolio. The
first 10 million will be charged at 15 BP, the second 10 million will be
charged as 12 BP, the next 20 million will be charged at 9 BP, everything
over will be at 7 BP.
3. Cancellation. The service agreement will be in effect for one year.
Thereafter, it may be canceled by either CFS or Bank (I) as of the end of any
fiscal year hereof upon sixty (60) days prior written notice to the other party
or (ii) upon written notice thereof if no agreement as to the basic annual fee
is reached as required by Section 2 hereof. Until so canceled, the service
agreement will remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, CFS and Bank have executed and delivered this Service
Agreement as of the day and year first above written.
CENTRAL FINANCIAL SERVICES, INC.
By: /s/ Kurt R. Weise
------------------------
Its: President
UNITED SAVINGS BANK
By: /s/ Kevin P. Clark
------------------------
Its: President
WITNESS:
Bruce K. Weldele
- ---------------------
Exhibit 10.3
SERVICE AGREEMENT
THIS AGREEMENT, made as of the 18th day of December 1996, by and between
Heritage Bank, F.S.B. ("Bank"), a Montana corporation, and Central Financial
Services, Inc. ("CFS"), a Florida corporation.
WITNESSETH:
WHEREAS, CFS desires to sell and Bank desires to purchase certain services
more particularly described herein to be utilized by Bank in the management and
operation of its business as a commercial banking organization.
NOW, THEREFORE, in consideration of the foregoing premises, and further in
consideration of the mutual promises herein contained, the parties hereto hereby
agree as follows:
1. Services. Bank, on its own behalf and on behalf of the Banks, agree to
purchase and CFS agrees to sell, the following bank advisory and consulting
services:
A. Advise bank management on income tax planning and provide assistance
in the preparation of federal and state income tax returns.
B. Coordinate directors' examinations and/or audits under the direction
of Banks and Banks' Board of Directors.
C. Conduct periodic audits of the Banks' loan portfolios in order to
advise bank management in its process of determining adequacy of Reserve for
Loan Losses, compliance with existing regulations and adequacy of loan file
documentation.
D. Under the direction of bank management, provide a review and analysis
of specific new loans or problem loans and make recommendations as to how
bank management should proceed.
E. Under the direction of bank management, provide periodic reviews of
internal controls and operations and prepare related reports on findings to
bank management.
F. Advice with respect to the development of Banks' operating policies
and marketing and advertising advice for affiliated banks.
G. Regulatory relations and planning advice, which includes updates of
regulatory changes, advice in dealings with regulatory agencies and advice
with respect to evaluations of potential expansion or change in bank
facilities and services.
H. Loan policy advice, which includes advising bank officials in the
development of proposed loan policies and proposed amendments thereto,
providing information and advice on consumer compliance provisions, and
advice with respect to coordinating participation loan agreements with bank
officials.
<PAGE>
I. Advise and consult with bank management on asset and liability
management, including rate sensitivity, net interest margin, liquidity and
capital adequacy.
J. Investment consulting under the direction of bank management, as well
as coordinating and completing buy-sell transactions.
K. Personnel consulting, which includes advice on fringe benefit
programs, salary recommendations, and executive recruiting under the
direction of bank management.
L. Accounting and reporting advice, which includes development of
proposed budgets and financial statement formats and review and analysis of
monthly statements, budgets and expense classification.
M. Insurance advisory services, which includes coordination and central
purchasing of all bank-related insurance needs under the direction of bank
management.
N. Such other advisory or consulting services as the Bank may request.
2. Basic Fees: Payment. Bank hereby agrees to pay CFS for the above services
as follows:
A. Professional employee services will be billed on a direct hourly
rate. The direct hourly rate is based upon a comparable market rate for
similar services; and
B. Any directly incurred "out-of-pocket" expenses incurred by CFS for
providing such services.
3. Cancellation. The service agreement will be in effect for one year.
Thereafter, it may be canceled by either CFS or Bank (I) as of the end of any
fiscal year hereof upon sixty (60) days prior written notice to the other party
or (ii) upon written notice thereof if no agreement as to the basic annual fee
is reached as required by Section 2 hereof. Until so canceled, the service
agreement will remain in full force and effect.
IN WITNESS WHEREOF, CFS and Bank have executed and delivered this Service
Agreement as of the day and year first above written.
CENTRAL FINANCIAL SERVICES, INC.
By: /s/ Kurt R. Weise
------------------------
Its: President
HERITAGE BANK, F.S.B
By: /s/ Kevin P. Clark
------------------------
Its: President
WITNESS:
Dee Ann Nieder
- ---------------------
Exhibit 10.4
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is made this 1st day of January, 1996, by and between
Heritage Bank (the "Company"), and Kevin Clark (the "Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the Company
is willing to provide salary continuation benefits to the Executive. The Company
will pay the benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. Whenever used in this Agreement, the following words and
phrases shall have the meanings specified.
1.1.1 "CHANGE OF CONTROL" means the transfer of 51% or more the
Company's outstanding voting common stock.
1.1.2 "CODE" means the Internal Revenue Code of 1986, as amended.
References to a Code section shall be deemed to be to that section as it now
exists or as may be replaced, amended or superseded by any successor
provision.
1.1.3 "DISABILITY" means, if the Executive is covered by a
Company-sponsored disability insurance policy, total disability as defined
in such policy without regard to any waiting period. If the Executive is not
covered by such a policy, Disability means the Executive suffering a
sickness or disease, accident or injury which, in the judgment of a
physician satisfactory to the Company, prevents the Executive from
performing substantially all of the Executive's normal duties for the
Company. As a condition to any benefits, the Company may require the
Executive to submit to such physical or mental evaluations and tests as the
Company's Board of Directors deems appropriate.
1.1.4 "EARLY RETIREMENT DATE" means a date prior to the normal
retirement age of 62.
1.1.5 "NORMAL RETIREMENT DATE" means the Executive attaining age 62.
<PAGE>
1.1.6 "TERMINATION OF EMPLOYMENT" means the Executive's ceasing to be
employed by the Company for any reason whatsoever, voluntary or involuntary,
other than by reason of an approved leave of absence.
ARTICLE 2
LIFETIME BENEFITS
2.1 NORMAL RETIREMENT BENEFIT. If the Executive terminates employment on or
after the Normal Retirement Date, the Company shall pay to the Executive the
benefit described in this Section 2.1.
2.1.1 AMOUNT OF BENEFIT. The benefit under this Section 2.1 is $67,476
per year or $5,623 per month.
2.1.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the
Executive on the first day of each month commencing with the month following
the Retirement Date and until the Company has paid 180 monthly payments
pursuant to Sections 4.1 and 4.2 hereof.
2.2 EARLY RETIREMENT BENEFIT. If the Executive terminates employment after
the Early Retirement Date but before the Normal Retirement Date, the Company
shall pay to the Executive the benefit described in this Section 2.2.
2.2.1 AMOUNT OF BENEFIT. The benefit under this Section 2.2 is the
benefit determined under Schedule A, column D (Lump Sum) or E (Annual),
based on the date of the Executive's Termination of Employment. Schedule A
is calculated using the interest method of accounting, an 8 1/2% discount
rate, and assuming monthly compounding and monthly benefit payments.
2.2.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the
Executive on the first day of each month commencing with the month following
the Executive's Termination of Employment and continuing until the Company
has paid 180 months pursuant to Sections 4.1 and 4.2 hereof.
2.3 DISABILITY BENEFIT. If the Executive terminates employment for
Disability prior to the Normal Retirement Date, the Company shall pay to the
Executive the benefit described in this Section 2.3.
2.3.1 AMOUNT OF BENEFIT. The benefit under this Section 2.3 is the
benefit determined under Schedule A, Column D (Lump Sum) or E (Annual),
based on the date of the Executive's Termination of Employment.
2.3.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the
Executive on the first day of each month commencing with the month following
the Executive's Termination of Employment, for 180 months to be paid
pursuant to Sections 4.1 and 4.2 hereof.
<PAGE>
2.4 CHANGE OF CONTROL BENEFIT. Upon a Change of Control while the Executive
is in the active service of the Company, the Company shall pay to the Executive
the benefit described in this Section 2.4 in lieu of any other benefit under
this Agreement.
2.4.1 AMOUNT OF BENEFIT. The benefit under this Section 2.4 is the
benefit determined under Schedule A, Column D (Lump Sum) or E (Annual),
based on the date of the Executive's Termination of Employment.
2.4.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the
Executive on the first day of each month commencing with the month following
the Change of Control, for 180 months to be paid pursuant to Sections 4.1
and 4.2 hereof.
2.5 VESTING OF BENEFIT. The Executive is 100 percent vested in the amount
accrued to date in Schedule A.
ARTICLE 3
DEATH BENEFITS
3.1 DEATH DURING ACTIVE SERVICE. If the Executive dies while in the active
service of the Company, the Company shall pay to the Executive's beneficiary the
benefit described in this Section 3.1.
3.1.1 AMOUNT OF BENEFIT. The benefit under Section 3.1 is the lifetime
benefit that would have been paid to the Executive under Section 2.1
calculated as if the date of the Executive's death were the Normal
Retirement Date. The benefit under Section 3.1 is $5,623 per month for 180
months.
3.1.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the
Beneficiary within 60 days following the Executive's death.
3.2 DEATH DURING BENEFIT PERIOD. If the Executive dies after benefit
payments have commenced under this Agreement but before receiving all such
payments, the Company shall pay the remaining benefits to the Executive's
beneficiary at the same time and in the same amounts they would have been paid
to the Executive had the Executive survived, subject to a total of 180 monthly
benefits following the Executive's death.
ARTICLE 4
BENEFICIARIES
4.1 BENEFICIARY DESIGNATIONS. The Executive shall designate a beneficiary by
filing a written designation with the Company. The Executive may revoke or
modify the designation at any time by filing a new designation. However,
designations will only be effective if signed by the Executive and accepted by
the Company during the Executive's lifetime. The Executive's beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases
the Executive, or if the Executive names a spouse as beneficiary and the
marriage is subsequently dissolved. If the Executive dies without a valid
beneficiary designation, all payments shall be made to the Executive's surviving
spouse, if any, and if none, the
<PAGE>
Executive's surviving children and the descendants of any deceased child by
right of representation, and if no children or descendants survive, to the
Executive's estate.
4.2 FACILITY OF PAYMENT. If a benefit is payable to a minor, to a person
declared incompetent, or to a person incapable of handling the disposition of
his or her property, the Company may pay such benefit to the guardian, legal
representative or person having the care or custody of such minor, incompetent
person or incapable person. The Company may require proof of incompetency,
minority or guardianship as it may deem appropriate prior to distribution of the
benefit. Such distribution shall completely discharge the Company from all
liability with respect to such benefit.
ARTICLE 5
GENERAL LIMITATIONS
Upon the occurrence of any of the following events or circumstances, the
benefits to be paid hereunder shall be modified, decreased or denied as
indicated:
5.1 EXCESS PARACHUTE PAYMENT. To the extent the benefit would be an excess
parachute payment under Section 280G of the Code, then to that extent and that
extent only the benefit shall be disallowed.
5.2 TERMINATION FOR CAUSE. If the Company terminates the Executive's
employment for:
5.2.1 Gross negligence or gross neglect of duties;
5.2.2 Commission of a felony or of a gross misdemeanor involving moral
turpitude; or
5.2.3 Fraud, disloyalty, dishonesty or willful violation of any law or
significant Company policy committed in connection with the Executive's
employment and resulting in an adverse effect on the Company.
Then no benefits shall be payable for any period subsequent to such acts
of violations.
5.3 SUICIDE. No benefits shall be payable if the Executive commits suicide
within two years after the date of this Agreement, or if the Executive has made
any material misstatement of fact on any application for life insurance
purchased by the Company.
ARTICLE 6
CLAIMS AND REVIEW PROCEDURES
6.1 CLAIMS PROCEDURE. The Company shall notify the Executive's beneficiary
in writing, within ninety (90) days of his or her written application for
benefits, of his or her eligibility or non eligibility for benefits under the
Agreement. If the Company determines that the beneficiary is not eligible for
benefits or full benefits, the notice shall set forth (1) the specific reasons
for such denial, (2) a specific reference to the provisions of the Agreement on
which the denial is based, (3) a description of any additional information or
material necessary for the claimant to perfect his or her claim, and a
<PAGE>
description of why it is needed, and (4) an explanation of the Agreement's
claims review procedure and other appropriate information as to the steps to be
taken if the beneficiary wishes to have the claim reviewed. If the Company
determines that there are special circumstances requiring additional time to
make a decision, the Company shall notify the beneficiary of the special
circumstances and the date by which a decision is expected to be made, and may
extend the time for up to an additional ninety-day period. Payments shall be
retroactive to the date of the claim in the event the procedures of this section
or any other section of this agreement are implemented which delay the
initiation of payments.
6.2 REVIEW PROCEDURE. If the beneficiary is determined by the Company not to
be eligible for benefits, or if the beneficiary believes that he or she is
entitled to greater or different benefits, the beneficiary shall have the
opportunity to have such claim reviewed by the Company by filing a petition for
review with the Company within sixty (60) days after receipt of the notice
issued by the Company. Said petition shall state the specific reasons which the
beneficiary believes entitle him or her to benefits or to greater or different
benefits. Within sixty (60) days after receipt by the Company of the petition,
the Company shall afford the beneficiary (and counsel, if any) an opportunity to
present his or her position to the company orally or in writing, and the
beneficiary (or counsel) shall have the right to review the pertinent documents.
The Company shall notify the beneficiary of its decision in writing within the
sixty-day period, stating specifically the basis of its decision, written in a
manner calculated to be understood by the beneficiary and the specific
provisions of the Agreement on which the decision is based. If, because of the
need for a hearing, the sixty-day period is not sufficient, the decision may be
deferred for up to another sixty-day period at the election of the Company, but
notice of this deferral shall be given to the beneficiary.
ARTICLE 7
AMENDMENTS AND TERMINATION
The Company may amend or terminate this Agreement at any time if, pursuant
to legislative, judicial or regulatory action, continuation of the Agreement
would (i) cause benefits to be taxable to the Executive prior to actual receipt,
or (ii) result in significant financial penalties or other significantly
detrimental ramifications to the Company (other than the financial impact of
paying the benefits). In the event of any such amendment or termination, the
Executive shall be 100% vested in the portion of the Normal Retirement Benefit
accrued to the Executive's benefit under Section 2.1 as of the date of the
amendment or termination.
ARTICLE 8
MISCELLANEOUS
8.1 BINDING EFFECT. This Agreement shall bind the Executive and the Company,
and their beneficiaries, survivors, executors, administrators and transferees.
8.2 NO GUARANTY OF EMPLOYMENT. This Agreement is not an employment policy or
contract. It does not give the Executive the right to remain an employee of the
Company, nor does it interfere with the Company's right to discharge the
Executive. It also does not
<PAGE>
require the Executive to remain an employee nor interfere with the Executive's
right to terminate employment at any time.
8.3 NON-TRANSFERABILITY. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
8.4 TAX WITHHOLDING. The Company shall withhold any taxes that are required
to be withheld from the benefits provided under this Agreement.
8.5 APPLICABLE LAW. The Agreement and all rights hereunder shall be governed
by the laws of Montana, except to the extent preempted by the laws of the United
States of America.
8.6 UNFUNDED ARRANGEMENT. The Executive and beneficiary are general
unsecured creditors of the Company for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Company to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Executive's life is a general
asset of the Company to which the Executive and beneficiary have no preferred or
secured claim.
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have
signed this Agreement.
EXECUTIVE: COMPANY:
HERITAGE BANK FSB
/s/ Kevin P. Clark By: /s/ Steve Feurt
- ------------------------- --------------------
Kevin P. Clark Steve Feurt, Sr. Vice President
<PAGE>
ACCRUAL & VESTING SCHEDULE
MANAGEMENT SUPPLEMENTAL RETIREMENT
SALARY CONTINUATION PLAN
PARTICIPANT: Kevin Clark
-------------------------------------------------------------
BEGINNING AGE: 40
RETIREMENT AGE: 62
LENGTH OF BENEFIT: 15 Years
BENEFIT AMOUNT: $24,220
PRE-RETIREMENT INFLATOR: 5%
RETIREMENT BENEFIT AT AGE 62 $67,476
PRE-RETIREMENT BENEFIT ACCRUAL/ VESTING SCHEDULE
<TABLE>
<CAPTION>
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
A B C D E F G
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
END OF PLAN VESTING CURRENT YEAR IMMEDIATE LUMP IMMEDIATE LUMP SUM ANNUAL BENEFIT
YEAR PERCENTAGE ACCRUAL SUM BENEFIT ANNUAL BENEFIT BENEFIT AGE62 AGE 62
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
1 100 3,327 3,327 393 19,702 2,328
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
2 100 3,805 7,132 843 38,805 4,586
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
3 100 4,355 11,487 1,357 57,428 6,786
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
4 100 4,990 16,477 1,947 75,685 8,944
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
5 100 5,723 22,200 2,623 93,691 11,071
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
6 100 6,571 28,771 3,400 111,561 13,183
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
7 100 7,553 36,324 4,292 129,410 15,292
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
8 100 8,695 45,019 5,320 147,361 17,413
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
9 100 10,024 55,043 6,504 165,540 19,562
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
10 100 11,577 66,619 7,872 184,085 21,753
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
11 100 13,397 80,016 9,455 203,147 24,006
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
12 100 15,540 95,556 11,292 222,897 26,340
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
13 100 18,076 113,631 13,428 243,536 28,778
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
14 100 21,097 134,728 15,921 265,300 31,350
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
15 100 24,724 159,452 18,842 288,485 34,090
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
16 100 29,125 188,577 22,284 313,472 37,043
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
17 100 34,543 223,120 26,366 340,772 40,269
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
18 100 41,346 264,467 31,252 371,117 43,854
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
19 100 50,150 314,616 37,178 405,636 47,933
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
20 100 62,118 376,734 44,518 446,277 52,736
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
21 100 80,008 456,742 53,973 497,114 58,743
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
22 100 114,272 571,014 67,476 571,014 67,476
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST
QUARTER 1998 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,861
<INT-BEARING-DEPOSITS> 20,730
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 55,755
<INVESTMENTS-MARKET> 55,880
<LOANS> 106,811
<ALLOWANCE> 1,188
<TOTAL-ASSETS> 197,271
<DEPOSITS> 147,849
<SHORT-TERM> 16,325
<LIABILITIES-OTHER> 2,981
<LONG-TERM> 0
0
0
<COMMON> 28,002
<OTHER-SE> 2,114
<TOTAL-LIABILITIES-AND-EQUITY> 197,271
<INTEREST-LOAN> 1,953
<INTEREST-INVEST> 647
<INTEREST-OTHER> 215
<INTEREST-TOTAL> 2,815
<INTEREST-DEPOSIT> 1,240
<INTEREST-EXPENSE> 1,443
<INTEREST-INCOME-NET> 1,372
<LOAN-LOSSES> 45
<SECURITIES-GAINS> (6)
<EXPENSE-OTHER> 1,049
<INCOME-PRETAX> 790
<INCOME-PRE-EXTRAORDINARY> 790
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 495
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
<YIELD-ACTUAL> 2.99
<LOANS-NON> 4
<LOANS-PAST> 281
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 173
<ALLOWANCE-OPEN> 846
<CHARGE-OFFS> 5
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,188
<ALLOWANCE-DOMESTIC> 1,188
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
