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 June 30, 2000
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 month (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 August 7, 2000
-- 1,645,312 shares
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UNITED FINANCIAL CORP.
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS................................................................1
Consolidated Condensed Statements of Financial Condition at
June 30, 2000 and December 31, 1999 (unaudited)....................................1
Consolidated Condensed Statements of Income - Three and Six Months Ended
June 30, 2000 and June 30, 1999 (unaudited).........................................2
Consolidated Condensed Statements of Cash Flows - Six Months Ended
June 30, 2000 and June 30, 1999 (unaudited).........................................3
Notes to Consolidated Condensed Financial Statements.................................4
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................................................6
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.........................17
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS..................................................................18
ITEM 2 CHANGE IN SECURITIES AND USE OF PROCEEDS...........................................18
ITEM 3 DEFAULTS UPON SENIOR SECURITIES....................................................18
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS..............................18
ITEM 5 OTHER INFORMATION..................................................................18
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K...................................................18
SIGNATURES...................................................................................19
</TABLE>
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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)
<TABLE>
<CAPTION>
JUNE 30, December 31,
--------- ---------
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 8,792 $ 11,457
Investment securities available-for-sale 70,484 53,044
Loans receivable, net 248,288 186,348
Loans held for sale 2,690 1,191
Premises and equipment, net 5,372 4,873
Real estate and other personal property owned 1,159 14
Accrued interest receivable 3,169 2,259
Federal Home Loan Bank of Seattle stock, at cost 3,145 3,046
Investment in Valley Bancorp, Inc. -- 4,549
Goodwill, net of accumulated amortization of $431 and
$336 at June 30, 2000, and December 31, 1999,
respectively 3,229 1,289
Identifiable intangibles, net of accumulated
amortization of $134 and $100 at June 30, 2000, and
December 31, 1999, respectively 503 537
Deferred income taxes, net 1,242 740
Other assets 1,682 879
--------- ---------
$ 349,755 $ 270,226
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
NOW and money market demand accounts $ 77,022 $ 42,083
Savings deposits 48,457 48,296
Time deposits 117,282 89,503
--------- ---------
242,761 179,882
Federal Home Loan Bank advances 57,345 46,425
Securities sold under agreements to repurchase 11,504 11,546
Other borrowings 1,430 --
Accrued interest payable 2,288 1,528
Advances from borrowers for taxes and insurance 512 408
Income taxes payable 260 476
Other liabilities 910 602
--------- ---------
317,010 240,867
Minority interest 3,483 --
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 shares issued 28,002 28,002
1,698,312 outstanding)
Retained earnings, substantially restricted 3,558 3,251
Treasury stock, at cost, 53,000 shares (1,037) (932)
Accumulated other comprehensive loss (1,261) (962)
--------- ---------
29,262 29,359
--------- ---------
$ 349,755 $ 270,226
========= =========
Equity/Assets 8.37% 10.86%
Book Value/Share $17.78 $17.77
</TABLE>
See Notes to Consolidated Condensed Financial Statements
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UNITED FINANCIAL CORP.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans receivable $ 5,015 $ 3,313 $ 9,711 $ 6,403
Mortgage-backed securities 980 717 1,937 1,363
Investment securities 119 109 247 207
FHLB of Seattle stock dividends 52 34 99 57
Other Interest earning assets 37 39 77 125
-------- -------- -------- --------
Total interest income 6,203 4,212 12,071 8,155
INTEREST EXPENSE
Deposits 2,574 1,681 4,976 3,343
Other borrowings 1,035 612 1,923 1,051
-------- -------- -------- --------
Total interest expense 3,609 2,293 6,899 4,394
-------- -------- -------- --------
Net interest income 2,594 1,919 5,172 3,761
Provision for losses on loans 364 75 528 115
-------- -------- -------- --------
Net interest income after provision
for losses on loans 2,230 1,844 4,644 3,646
NON-INTEREST INCOME
Fees and discounts 975 817 1,666 1,533
Other income 75 102 189 203
-------- -------- -------- --------
Total non-interest income 1,050 919 1,855 1,736
NON-INTEREST EXPENSE
Salaries and employee benefits 1,242 934 2,469 1,836
Net occupancy and equipment expense 271 190 527 367
Data processing expense 166 99 331 213
Other expenses 599 543 1,158 1,031
-------- -------- -------- --------
Total non-interest expense 2,278 1,766 4,485 3,447
-------- -------- -------- --------
Income before income taxes 1,002 997 2,014 1,935
Provision for income tax expense 348 373 746 738
-------- -------- -------- --------
Income before minority interest 654 624 1,268 1,197
Minority interest (47) -- (102) --
======== ======== ======== ========
Net income $ 607 $ 624 $ 1,166 $ 1,197
======== ======== ======== ========
Net income per share $ 0.37 $ 0.37 $ 0.71 $ 0.70
-------- -------- -------- --------
Weighted average shares outstanding 1,652 1,698 1,652 1,698
-------- -------- -------- --------
</TABLE>
See Notes to Consolidated Condensed Financial Statements
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UNITED FINANCIAL CORP.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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<CAPTION>
SIX MONTHS ENDED
------------------------------
JUNE 30, 2000 June 30, 1999
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,166 $ 1,197
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Provision for loan losses 528 115
Amortization of goodwill and identifiable intangibles 129 90
Depreciation 221 140
Equity in income of Valley Bancorp Inc. -- (60)
Amortization of discounts and premiums on investments securities 71 162
Gain on sale of investment securities -- (30)
Mortgage loans originated and held for sale (51,796) (55,373)
Proceeds from sales of mortgage loans held for sale 50,298 59,168
Federal Home Loan Bank stock dividends (99) (58)
Net change in accrued interest receivable (525) (269)
Net change in other assets (734) (209)
Net change in income taxes (246) (67)
Net change in accrued interest payable 702 266
Net change in other liabilities 178 (266)
Net change in minority interest 102 --
-------- --------
Net cash provided by (used in) operating activities (5) 4,806
-------- --------
INVESTING ACTIVITIES
Net increase in time deposits in banks -- (113)
Purchases of securities available-for-sale (5,423) (32,922)
Proceeds from maturities, pay downs and sales of securities
available-for-sale 4,845 25,374
Net increase in loans receivable (23,009) (28,555)
Purchases of Federal Home Loan Bank stock -- (994)
Purchase of Valley Bancorp, Inc. stock (1,722) (141)
Cash paid to FDIC on failed bank -- (333)
Purchases of premises and equipment (1,051) (594)
Proceeds from sale of real estate and other personal property owned -- 37
Additions of real estate and other personal property owned -- (362)
Acquired cash and cash equivalents of Valley 1,206 --
-------- --------
Net cash used in investing activities (25,154) (38,603)
-------- --------
FINANCING ACTIVITIES
Net increase in deposits 12,796 2,943
Net increase in Federal Home Loan Bank advances 10,920 19,135
Net change in securities sold under agreements to repurchase (42) 706
Net change in federal funds purchased (1,350) --
Net change in advances from borrowers for taxes and insurance 104 (5)
Advances on long-term debt 1,105 --
Payments on long-term debt (75) --
Purchase of treasury stock (105) --
Dividends paid to stockholders (859) (883)
-------- --------
Net cash provided by financing activities 22,494 21,896
-------- --------
Decrease in cash and cash equivalents (2,665) (11,901)
Cash and cash equivalents at beginning of year 11,457 19,255
-------- --------
Cash and cash equivalents at end of period $ 8,792 $ 7,354
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURE
---------------------------------
Cash payments for interest $ 6,189 $ 4,128
Cash payments for income taxes $ 986 $ 735
</TABLE>
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. ("United") is a bank holding company
headquartered in Great Falls, Montana, with operations in 11 other Montana
communities. Substantially all of United's banking business is conducted through
its wholly-owned subsidiaries Heritage Bank F.S.B. ("Heritage Bank") and
Heritage State Bank ("State Bank"), a banking subsidiary formed in 1998,
collectively referred to herein as the "Banks". United had assets of
approximately $349.8 million, deposits of approximately $242.8 million and
stockholders' equity of approximately $29.3 million at June 30, 2000. United is
now the majority shareholder of Valley Bancorp, Inc. (See Note 2).
Heritage Bank is a federally chartered stock savings bank with full
service banking offices in Bozeman, Chester, Glendive, Great Falls, Havre,
Missoula and Shelby, Montana, and loan production offices in Hamilton,
Kalispell, and Libby, Montana. The full service banking offices in Missoula and
Bozeman were opened in February and June, 2000, respectively. State Bank is a
state chartered bank with full service banking operations in Fort Benton and
Geraldine, Montana. The Banks are engaged in the community banking business of
attracting deposits from the general public through their offices and using
those deposits, together with other available funds, to originate commercial
(including lease financing), commercial real estate, residential, agricultural
and consumer loans primarily in their market areas in Montana. A majority of
United's banking business is conducted in the Great Falls area. The Banks also
invest in mortgage-backed securities, U.S. Treasury obligations, other U.S.
Government agency obligations and other interest-earning assets.
The Banks' financial condition and results of operations, and therefore
the financial condition and results of operations of United, are dependent
primarily on net interest income and fee income. The Banks' 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.
In June 2000, Heritage Bank and Heritage State Bank filed applications
to merge into Heritage State Bank's state banking charter. Heritage State Bank
will then change its name to Heritage Bank and will relocate its main office to
Great Falls, Montana. After the merger, Heritage Bank will be regulated by the
Federal Deposit Insurance Corporation (FDIC) and the State of Montana.
Confirmation date for the merger is expected to be December 31, 2000. The (FDIC)
in its letter dated July 31, 2000 and the Office of Thrift Supervision (OTS) in
its letter dated August 1, 2000 have both approved the merger applications.
United's principal offices are located at 120 First Avenue North, Great
Falls, Montana, and its telephone number is (406) 727-6106. Heritage Bank has a
wholly owned subsidiary, Community Service Corporation ("CSC"), which owned and
managed real estate held for investment during 1999, but which is inactive at
June 30, 2000. Heritage Bank holds an 11% ownership interest in Bankers'
Resource Center, a computer data center. United, Heritage Bank, State Bank and
CSC are collectively referred to herein as "United."
2. VALLEY BANCORP, INC.
During 1999, United increased its ownership in Valley Bancorp Inc.
("Valley") to 39.93% of Valley's outstanding shares at December 31, 1999. On
January 10, 2000, United increased its ownership to 50.6% and combined with
additional shares acquired thereafter United currently owns 54.49% of the
outstanding shares of Valley as of June 30, 2000. Valley is a bank holding
company located in Phoenix, Arizona and is the parent company of Valley Bank of
Arizona, a state chartered commercial bank. Valley had assets of approximately
$61.0 million, deposits of approximately $52.7 million and stockholders' equity
of approximately $7.7 million at June 30, 2000. The aggregate purchase price of
the shares of Valley purchased to date is $6.1 million, including $1.7 million
for shares acquired in 2000, $1.7 million for shares acquired in 1999, and $2.7
million for shares acquired in 1998. As a result of acquiring over 50% of the
outstanding shares of Valley, United has consolidated Valley with its financial
statements effective January 1, 2000.
3. BASIS OF PRESENTATION
United's consolidated financial statements, included herein, have been
prepared in accordance with generally accepted accounting principles ("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
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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, and cash flows for the periods disclosed. Operating results for the
six months ended June 30, 2000, are not necessarily indicative of the results
anticipated for the year ending December 31, 2000. For additional information,
refer to the consolidated audited financial statements and footnotes thereto
included in United's Annual Report to Shareholders and Annual Report on Form
10-K for the year ended December 31, 1999.
4. STOCK INCENTIVE PLAN
On January 25, 2000, United's Board of Directors adopted the United
Financial Corp. 2000 Long-Term Incentive and Stock Option Plan (the "Plan"),
subject to approval by the Company's shareholders. The Plan was approved by the
Company's shareholders May 23, 2000. (See Part II-Other Information, Item 4
Submission of Matters To A Vote of Securities Holders).
The Plan provides for a maximum of 120,000 shares of United's Common
Stock for issuance under options or other awards, subject to adjustment in
certain circumstances. Any employee, officer, director, consultant or
independent contractor of the Company and its subsidiaries is eligible to
receive awards under the Plan. Awards under the Plan will be available for grant
until January 25, 2010. However, an option of the award granted may extend
beyond such time.
United's existing stock appreciation rights plan was rescinded by the
Board of Directors upon its approval of this stock option plan.
5. COMPREHENSIVE INCOME
United's only significant element of comprehensive income is unrealized
gains and losses on available-for-sale securities.
<TABLE>
<CAPTION>
(In thousands)
(Unaudited) THREE MONTHS ENDED Three Months Ended
JUNE 30, 2000 June 30, 1999
--------------------------------------- ---------------------------------------
BEFORE TAX TAX EXPENSE AFTER TAX Before Tax Tax Expense After Tax
----------- ------------- ----------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 955 $ 348 $ 607 $ 997 $ 373 $ 624
Unrealized and realized
holding losses arising
during period (240) (91) (149) (586) (226) (360)
Less: reclassification adjustment
for gains included in net income - - - (15) (6) (9)
----------- ------------- ----------- ------------ ------------- ----------
Net unrealized losses on securities (240) (91) (149) (601) (232) (369)
----------- ------------- ----------- ------------ ------------- ----------
Total comprehensive income $ 715 $ 257 $ 458 $ 396 $ 141 $ 255
=========== ============= =========== ============ ============= ==========
SIX MONTHS ENDED Six Months Ended
JUNE 30, 2000 June 30, 1999
--------------------------------------- ---------------------------------------
BEFORE TAX TAX EXPENSE AFTER TAX Before Tax Tax Expense After Tax
----------- ------------- ----------- ------------ ------------- -----------
Net income $1,912 $ 746 $1,166 $1,935 $ 738 $1,197
Unrealized and realized
holding losses arising
during period (485) (186) (299) (645) (248) (397)
Less: reclassification adjustment
for gains included in net income - - - (30) (12) (18)
----------- ------------- ----------- ------------ ------------- ----------
Net unrealized losses on
securities (485) (186) (299) (675) (260) (415)
----------- ------------- ----------- ------------ ------------- ----------
Total comprehensive income $1,427 $ 560 $ 867 $1,260 $ 478 $ 782
=========== ============= =========== ============ ============= ===========
</TABLE>
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6. CASH EQUIVALENTS
For purposes of the Consolidated Condensed Statements of Cash Flows,
United 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
On February 3, 1998, United 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 United.
8. COMPUTATION OF NET INCOME PER SHARE
Basic earnings per share ("EPS") is computed by dividing net income by
the weighted average number of common shares outstanding for the period. Diluted
EPS is calculated by dividing net income by the weighted average number of
common shares used to compute basic EPS plus the incremental amount of potential
common stock determined by the treasury stock method. The potential common
shares are the warrants issued to D.A. Davidson, and the vested portion of the
shares included in the stock incentive plan. Basic and diluted EPS are the same,
as the potential common shares do not have a material impact.
9. DIVIDENDS DECLARED
On July 25, 2000, the Board of Directors of United declared a
third-quarter cash dividend of $.26 per share, payable August 21, 2000, to
shareholders of record on August 7, 2000.
10. RELATED PARTIES
Central Financial Services, Inc. ("CFS") provides various management
services to United, including accounting and tax services, investment
consulting, personnel consulting, insurance advisory services and regulatory
consulting. CFS is owned by United's Chairman of the Board of Directors and
largest shareholder. CFS fees were $179,000, and $140,000 for the six months
ended June 30, 2000 and 1999, respectively.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
1. FORWARD LOOKING STATEMENTS
When used in this form 10-Q or future filings made by the Company with
the Securities and Exchange Commission, in the Company's press releases or other
public shareholder communications, or in oral statements made with the approval
of an authorized executive officer, the words or phrases "will likely result,"
"are expected to," "will continue," "is anticipated," "estimate," "project" or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. The Company
wishes to caution readers not to place undue reliance on any forward-looking
statements, which speak only as of the date made, and to advise readers that
various factors-including regional and national economic conditions, changes in
levels of market interest rates, credit risks of lending activities and
competitive and regulatory factors-could affect the Company's financial
performance and could cause the Company's actual results for future periods to
differ materially from those anticipated or projected.
The Company does not undertake, and specifically disclaims, any
obligation to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
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2. MATERIAL CHANGES IN FINANCIAL CONDITION. COMPARISON OF JUNE 30,2000 TO
DECEMBER 31, 1999.
<TABLE>
<CAPTION>
(In thousands) SELECTED FINANCIAL CONDITION RECAP
(Unaudited) Valley Bancorp
JUNE 30, Dec. 31, Inc. Acquired Net
2000 1999 Change January 1,2000 Change
--------------- -------------- --------------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 8,792 $ 11,457 $ (2,665) $1,206 $(3,871)
Investment securities, available-for-sale, net 70,484 53,044 17,440 17,134 306
Loans receivable, net 248,288 186,348 61,940 39,863 22,077
Loans held for sale 2,690 1,191 1,499 - 1,499
Premises and equipment, net 5,372 4,873 499 200 299
Real estate and other
personal property owned 1,159 14 1,145 211 934
Federal Home Loan Bank stock 3,145 3,046 99 - 99
Investment in Valley - 4,549 (4,549) - (4,549)
Goodwill, net 3,229 1,289 1,940 - 1,940
Identifiable intangibles, net 503 537 (34) - (34)
All other assets 6,093 3,878 2,215 875 1,340
Total assets 349,755 270,226 79,529 59,489 20,040
Deposits 242,761 179,882 62,879 50,083 12,796
Federal Home Loan Bank advances 57,345 46,425 10,920 - 10,920
Securities sold under
agreements to repurchase 11,504 11,546 (42) - (42)
Other borrowings 1,430 - 1,430 - 1,430
All other liabilities 3,970 3,014 956 1,964 (1,008)
Total liabilities 317,010 240,867 76,143 52,047 24,096
</TABLE>
GENERAL - The various increases in financial statement amounts
discussed are primarily the result of consolidating Valley as of January 1,
2000. Financial statement changes strictly from United operations, without the
impact of the consolidation of Valley, will be identified and discussed
separately. Such changes include the changes of Valley since January 1, 2000.
Total assets increased $79.5 million to $349.7 million at June 30, 2000
from $270.2 million at December 31, 1999. The increase in assets was primarily
the result of the acquisition of $59.5 million of assets from the consolidation
of Valley and a $22.0 million increase in loans receivable.
INVESTMENT SECURITIES - Investment securities available-for-sale
increased $17.4 million to $70.4 million at June 30, 2000 from $53.0 million at
December 31, 1999. The Valley consolidation accounted for an increase of $17.1
million. The net increase of $.3 million was the result of $5.4 million of
purchases, offset by $4.8 million of maturities, sales, and principal
repayments, $.1 million of amortization and a $.2 million increase in unrealized
loss on securities.
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A comparison of the amortized cost and estimated fair value of the
consolidated available for sale investment portfolio at the dates indicated is
as follows:
<TABLE>
<CAPTION>
(In thousands)
(Unaudited)
JUNE 30, 2000
----------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND FEDERAL
AGENCIES $ 24,199 $ - $ (790) $ 23,409
MORTGAGE-BACKED SECURITIES 43,787 55 (1,235) 42,607
MUNICIPAL BONDS 2,538 - (117) 2,421
OTHER INVESTMENTS 2,256 - (209) 2,047
---------------- ---------------- ---------------- ----------------
$ 72,780 $ 55 $ (2,351) $ 70,484
================ ================ ================ ================
December 31, 1999
----------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------- ---------------- ---------------- ----------------
U.S. Government and Federal
Agencies $ 10,210 $ - $ (416) $ 9,794
Mortgage-backed securities 40,261 90 (896) 39,455
Municipal bonds 2,095 2 (162) 1,935
Other investments 2,041 - (181) 1,860
---------------- ---------------- ---------------- ----------------
$ 54,607 $ 92 $ (1,655) $ 53,044
================ ================ ================ ================
</TABLE>
LOANS RECEIVABLE AND LOANS HELD FOR SALE - Net loans receivable
increased $61.9 million to $248.3 million at June 30, 2000 from $186.4 million
at December 31, 1999. The Valley consolidation accounted for $39.9 million of
this increase. The remaining loans receivable increase of $22.0 million is a
direct result of strong loan demand generated through officer call programs,
increased market area and continued purchase of participation loans and lease
financing loans. The diverse loan portfolio includes: real estate residential
mortgages, commercial and agricultural mortgages, agricultural and commercial
non-mortgage, consumer loans secured by real estate, and various consumer
installment loans. Heritage Bank also purchases and participates in commercial
and lease financing loans. Heritage Bank had $43.8 million of participation and
purchased loans as of June 30, 2000.
Heritage Bank sells and retains servicing for a portion of its
residential real estate loans to agencies of Montana such as the Montana Board
of Investments and the Montana Board of Housing. United recognizes mortgage
servicing rights as an asset regardless of whether the servicing rights are
acquired or retained on loans originated and subsequently sold. The mortgage
servicing rights are assessed for impairment based on the fair value of the
mortgage servicing rights. As of June 30, 2000 and December 31, 1999, the
carrying value of originated servicing rights was approximately $176,000 and
$102,000, respectively.
During the six months ended June 30, 2000, loans held for sale by
United increased $1.5 million to $2.7 million at June 30, 2000 from
approximately $1.2 million at December 31, 1999. Approximately $51.8 million of
loans were originated for sale and $50.3 million of loans were sold to the
secondary market during the six month period ending June 30, 2000.
ALLOWANCE FOR LOAN LOSSES - The loan loss reserve increased $.7 million
to $2.3 million at June 30, 2000 compared to $1.6 million at December 31, 1999.
The increase includes Valley's loan loss reserve at consolidation of $.4
million. The remaining change includes a $.5 million loan loss provision for the
six months ended June 30, 2000, less loans in the amount of $.2 million which
were determined by United's management to be uncollectable and subsequently
charged-off. However, management pursues recoveries which totaled approximately
$10,000 for this same three month period. The loan loss
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reserve at June 30, 2000 is an amount which management believes is adequate
given the low level of non-performing assets and management's assessment of loan
risk. The United allowance for loan losses to total loans at June 30, 2000 was
.90%.
NON-PERFORMING ASSETS - When a borrower fails to make a scheduled
payment on a loan and does not cure the delinquency within 15 days, United's
policy is to contact the borrower between the 15th and 30th day of delinquency
to establish a repayment schedule. If a loan is not current, or a realistic
repayment schedule is not being followed by the 90th day of delinquency, United
will generally proceed with legal action to foreclose the property after the
loan has become contractually delinquent 90 days. Loans contractually past due
90 days are classified as non-performing. However, not all loans past due 90
days automatically result in the non-accrual of interest income. If a 90 day
past due loan has adequate collateral, or is FHA insured or VA guaranteed,
leading to the conclusion that loss of principal and interest would likely not
be realized, then interest income will continue to be accrued.
United follows regulatory guidelines with respect to placing loans on
non-accrual status. When a loan is placed on non-accrual status, all previously
accrued and uncollected interest is reversed. At June 30, 2000 United had
non-accrual loans totaling $2.3 million and loans totaling $125,000 past due 90
days and still accruing.
United is required to review, classify and report to its Board of
Directors its assets on a regular basis and classify them as "substandard"
(distinct possibility that some loss will be sustained), "doubtful" (high
likelihood of loss), or "loss" (uncollectible). Adequate valuation allowances
are required to be established for assets classified as substandard or doubtful
in accordance with generally accepted accounting principles. If an asset is
classified as a loss, the institution must either establish a specific valuation
allowance equal to the amount classified as loss or charge off such amount. At
June 30, 2000 and December 31, 1999, United had no assets classified as loss. At
June 30, 2000, United had $34,000 of assets classified as doubtful. At June 30,
2000 and December 31, 1999, United had $2.3 million and $506,000 of reported
substandard assets, respectively. As a percent of total assets, substandard
assets were approximately .66%, and .19% at June 30, 2000 and December 31, 1999,
respectively.
REAL ESTATE AND OTHER PERSONAL PROPERTY OWNED - The $1.1 million
increase includes $211,000 in other real estate held by Valley as of January 1,
2000 and $403,000 of repossessed personal property acquired by United during the
first six months of 2000. The remaining increase of $530,000 is the former
United Savings Bank property which was moved from premises and equipment to real
estate owned in June 2000. The property is currently leased to a third party
with an option to buy.
FEDERAL HOME LOAN BANK STOCK - Federal Home Loan Bank (FHLB) stock
increased approximately $.1 million to $3.1 million at June 30, 2000 from $3.0
million at December 31, 1999. This increase was the result of $.1 million of
reinvested stock dividends. FHLB stock purchases are made as required to support
the increased scope of operations.
PREMISES AND EQUIPMENT - This category increased $.5 million to $5.4
million at June 30, 2000 from $4.9 million at December 31, 1999. Valley
accounted for $.2 million of the increase. The balance of the increase of $.3
million was primarily due to the construction of the two new branches in Bozeman
and Missoula of $.8 million offset by the $.5 million in real estate moved to
real estate owned as discussed above. Heritage Bank invested approximately
$205,000 in fixed assets during the first six months of 2000. This increase was
primarily due to (1) the purchase of a computer upgrade for all branches, and
(2) furniture and fixtures for the new Bozeman and Missoula offices. The
purchases of premises and equipment were offset by approximately $200,000 of
depreciation.
GOODWILL - Goodwill increased $1.9 million from the consolidation of
Valley to $3.2 million at June 30, 2000 from $1.3 at December 31, 1999. Goodwill
decreased $95,000 due to amortization during the six months ending June 30,
2000. The goodwill is currently being amortized over 15 and 25 years.
Page 9
<PAGE>
DEPOSITS - Deposits increased $62.9 million to $242.8 million at June
30, 2000 from $179.9 million at December 31, 1999, which includes a $50.1
million increase from consolidating Valley. The net increase in deposits was
$12.8 million. The increase in deposits resulted from a combination of the
application of competitive rates on all deposit offerings, and United's
commitment to community banking, both of which have attracted depositors.
BORROWED FUNDS - FHLB advances increased $10.9 million from December
31, 1999 to June 30, 2000. Securities sold under agreements to repurchase
decreased $42,000 to $11.5 million at June 30, 2000 from $11.6 million at
December 31, 1999. The additional borrowings in the first six months of 2000
were used to fund increases in United's loan portfolio. Other borrowings
increased $1.4 million. This increase included $.4 million in federal funds
purchased by Valley and $1.0 million of net borrowings by United to fund
treasury stock purchases and purchases of Valley stock.
STOCKHOLDERS' EQUITY - Stockholders' equity decreased $.1 million to
$29.3 million at June 30, 2000 from $29.4 million at December 31, 1999. This
change includes $1.2 million of net income for the six months ended June 30,
2000 less cash dividends declared of $.9 million. In addition, there was also a
$.3 million increase in unrealized losses net of tax effects, associated with
assets classified as available-for-sale being adjusted to market value and a $.1
million purchase of treasury stock.
3. MATERIAL CHANGES IN RESULTS OF OPERATIONS-COMPARISON OF THE THREE
MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999.
<TABLE>
<CAPTION>
(In thousands) INCOME RECAP
(Unaudited)
------------------------------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30,
------------------------------------------------------------------------------------------
CONSOLIDATED
WITH United
VALLEY Only United Only
--------------------------- ------------- --------------------------------- -------------
2000 1999 Change 2000 1999 Change
------------- ------------- ------------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Interest income $6,203 $4,212 $1,991 $5,039 $4,212 $ 827
Interest expense 3,609 2,293 1,316 3,014 2,293 721
------------- ------------- ------------- ---------------- ---------------- -------------
Net interest income 2,594 1,919 675 2,025 1,919 106
Provision for losses on loans 364 75 289 323 75 248
------------- ------------- ------------- ---------------- ---------------- -------------
Net interest income after
Provision for losses on loans 2,230 1,844 386 1,702 1,844 (142)
Non-interest income 1,050 919 131 989 919 70
Non-interest expense 2,278 1,766 512 1,797 1,766 31
------------- ------------- ------------- ---------------- ---------------- -------------
Income before income taxes
and minority interest 1,002 997 5 894 997 (103)
Provision for income tax expense 348 373 (25) 287 373 (86)
------------- ------------- ------------- ---------------- ---------------- -------------
Net income before minority
Interest $ 654 $ 624 $ 30 $ 607 $ 624 $ (17)
============= ============= ============= ================ ================ =============
</TABLE>
GENERAL - The table above includes United's 1999 operating results
compared to the 2000 operating results consolidated with Valley as well as a
comparison of United only operating results for both three month periods ended
June 30, 1999 and 2000.
NET INTEREST INCOME - Like most financial institutions, the most
significant component of both United's and Valley's earnings is net interest
income, which is the difference between the interest earned on interest-earning
assets (loans, investment securities, mortgage-backed securities and other
interest-earning assets), and the interest paid on deposits and borrowings. This
amount, when divided by average interest-earning assets, is referred to as the
net interest margin, expressed as a percentage. Net interest income and net
interest margins are affected by changes in interest rates, the volume and the
mix of interest-earning assets and interest-bearing liabilities, and the level
of non-performing assets. The difference between the yield on interest-earning
assets and the cost of interest-bearing liabilities expressed as a percentage is
referred to as the net interest-rate spread. Net interest income increased $.7
million from $1.9
Page 10
<PAGE>
million for the three months ended June 30, 1999 to $2.6 million for the three
months ended June 30, 2000. United has used the funds from additional deposits
and borrowings to fund growth in its loan portfolio.
INTEREST INCOME - The principal reason for the increase in United's net
interest income from the three month period ended June 30, 1999 compared to the
three month period ended June 30, 2000 was an increase in interest-earning
assets from the Valley consolidation. Interest income increased $2.0 million
from $4.2 million for the three month period ended June 30, 1999 to $6.2 million
for the three month period ended June 30, 2000.
For the three month period ended June 30, 2000, compared to the three
month period ended June 30, 1999, interest on loans receivable increased $1.7
million, interest on mortgage-backed securities and investments increased $.3
million and interest on other interest-earning assets increased only slightly.
INTEREST EXPENSE - The principal reason for the increase in United's
net interest expense from the three month period ended June 30, 1999 to the
three month period ended June 30, 2000 was an increase in interest-bearing
liabilities due to the consolidation of Valley. Interest expense increased $1.3
million from $2.3 million for the three month period ended June 30, 1999 to $3.6
million for the three month period ended June 30, 2000.
For the three month period ended June 30, 2000, compared to the three
month period ended June 30, 1999, interest on deposits increased $.9 million,
and interest on short-term borrowings increased $.4 million.
PROVISION FOR LOAN LOSSES - United provided $364,000 for loan losses
for the three months ended June 30, 2000, as compared to $75,000 for the same
period last year. The increase in the loan loss provision is a result of strong
loan demand and increased non-performing assets.
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 United's allowance for loan losses and any change in the related
ratio of the allowance for loan losses to non-performing assets are dependent
upon the performance and composition of United'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 - In addition to net interest income, United
generates significant non-interest income from a range of retail banking
services, including mortgage banking activities and service charges for deposit
services. Non-interest income increased $.1 million from $.9 million for the
three month period ended June 30, 1999 to $1.0 million for the three month
period ended June 30, 2000. United continued to experience a decline in the home
lending market, and particularly the refinancing market during the three month
period ended June 30, 2000, as interest rates were higher than the same period
last year. This decrease was offset by an increase in customer service charges
and mortgage servicing rights income in the three month period ended June 30,
2000 compared to the three month period ended June 30, 1999.
NON-INTEREST EXPENSE - United's non-interest expense increased $.5
million during the three month period ending June 30, 2000 as compared to the
same period in 1999. This increase was principally due to the consolidation of
Valley.
INCOME TAXES - Income tax expense decreased $25,000 to $348,000 for the
three month period ending June 30, 2000 from $373,000 for the same period of
1999.
Page 11
<PAGE>
BUSINESS SEGMENT RESULTS - United manages its operations and prepares
management reports with a primary focus on geographical areas. Operating
segments information, including earnings performance on an operating cash basis,
is presented in the following schedule. United allocates centrally provided
services to the business segments based upon estimated usage of those services.
The operating segment identified as other includes the Parent Company and
elimination of transactions between segments.
The following table sets forth certain operating segment information
for the three month periods ended June 30, 2000 and 1999 and certain balance
sheet data as of June 30, 2000 and 1999 (in thousands). Operating segment
information is not presented for Valley as of June 30, 1999 as its statements
were not consolidated with United at that time.
<TABLE>
<CAPTION>
Heritage Heritage
2000: Bank State Bank Valley Other Consolidated
----------------- ---------------- ----------------- -------------- --------------------
<S> <C> <C> <C> <C> <C>
Net interest income $ 1,869 149 $ 569 $ 11 $ 2,598
Non-interest income 941 11 98 - 1,050
----------------- ---------------- ----------------- -------------- --------------------
Total revenue 2,810 160 667 11 3,648
Provision for loan losses 323 - 41 - 364
Non-interest expense 1,575 103 463 73 2,214
----------------- ---------------- ----------------- -------------- --------------------
Pretax cash earnings 912 57 163 (62) 1,070
----------------- ---------------- ----------------- -------------- --------------------
Income tax expense 331 19 61 (63) 348
Minority interest - - - (47) (47)
----------------- ---------------- ----------------- -------------- --------------------
Cash earnings(1) 581 38 102 (46) 675
----------------- ---------------- ----------------- -------------- --------------------
Amortization of goodwill and
CDI 42 8 - 18 68
----------------- ---------------- ----------------- -------------- --------------------
Net income $ 539 $ 30 $ 102 $ (64) $ 607
================= ================ ================= ============== ====================
PER SHARE DATA
Cash earnings per share $ 0.41
Net income per share $ 0.37
Weighted average shares
Outstanding 1,652
BALANCE SHEET DATA AS OF
JUNE 30, 2000
Assets $ 271,054 $ 16,910 $ 60,801 $ 990 $ 349,755
Loans receivable, net 194,118 15,191 38,946 33 248,288
Deposits 177,887 12,235 52,697 (58) 242,761
Stockholders' equity 20,015 2,040 7,653 (446) 29,262
(1)Before amortization of
goodwill and core deposit
Intangible
</TABLE>
Page 12
<PAGE>
<TABLE>
<CAPTION>
Heritage Heritage
1999: Bank State Bank Valley Other Consolidated
----------------- ---------------- ----------------- --------------- -------------------
<S> <C> <C> <C> <C> <C>
Net interest income $ 1,730 $ 117 $ - $ 76 $ 1,923
Non-interest income 861 12 - 46 919
----------------- ---------------- ----------------- --------------- -------------------
Total revenue 2,591 129 - 122 2,842
Provision for loan losses 30 45 - - 75
Non-interest expense 1,511 117 - 92 1,720
----------------- ---------------- ----------------- --------------- -------------------
Pretax cash earnings(loss) 1,050 (33) - 30 1,047
----------------- ---------------- ----------------- --------------- -------------------
Income tax expense(benefit) 378 (16) - 11 373
----------------- ---------------- ----------------- --------------- -------------------
Cash earnings(1) 672 (17) - 19 674
----------------- ---------------- ----------------- --------------- -------------------
Amortization of goodwill and
CDI 42 8 - - 50
----------------- ---------------- ----------------- --------------- -------------------
Net income $ 630 $ (25) $ - $ 19 $ 624
================= ================ ================= =============== ===================
PER SHARE DATA
Cash earnings per share $ 0.40
Net income per share $ 0.37
Weighted average shares
Outstanding 1,698
BALANCE SHEET DATA AS OF
JUNE 30, 1999
Assets $ 235,053 $ 19,490 $ - $ 217 $ 254,760
Loans receivable, net 155,987 15,145 - 667 171,799
Deposits 161,535 10,931 - (1,903) 170,563
Stockholders' equity 20,277 1,806 - 8,344 30,427
(1)Before amortization of
goodwill and core deposit
Intangible
</TABLE>
Page 13
<PAGE>
4. MATERIAL CHANGES IN RESULTS OF OPERATIONS-COMPARISON OF THE SIX MONTHS
ENDED JUNE 30, 2000 AND JUNE 30, 1999.
<TABLE>
<CAPTION>
(In thousands) INCOME RECAP
(Unaudited)
------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------------------------------------
CONSOLIDATED
WITH United
VALLEY Only United Only
--------------------------- ------------- --------------------------------- -------------
2000 1999 Change 2000 1999 Change
------------- ------------- ------------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Interest income $12,071 $ 8,155 $ 3,916 $ 9,760 $ 8,155 $ 1,605
Interest expense 6,899 4,394 2,505 5,748 4,394 1,354
------------- ------------- ------------- ---------------- ---------------- -------------
Net interest income 5,172 3,761 1,411 4,012 3,761 251
Provision for losses on loans 528 115 413 443 115 328
------------- ------------- ------------- ---------------- ---------------- -------------
Net interest income after
provision for losses on loans 4,644 3,646 998 3,569 3,646 (77)
Non-interest income 1,855 1,736 119 1,725 1,736 (11)
Non-interest expense 4,485 3,447 1,038 3,515 3,447 68
------------- ------------- ------------- ---------------- ---------------- -------------
Income before income taxes
and minority interest 2,014 1,935 79 1,779 1,935 (156)
Provision for income tax expense 746 738 8 613 738 (125)
------------- ------------- ------------- ---------------- ---------------- -------------
Net income before minority
interest $ 1,268 $ 1,197 $ 71 $ 1,166 $ 1,197 $ (31)
============= ============= ============= ================ ================ =============
</TABLE>
GENERAL - The table above includes United's 1999 operating results
compared to the 2000 operating results consolidated with Valley as well as a
comparison of United only operating results for both six month periods ended
June 30, 2000 and 1999.
NET INTEREST INCOME - Like most financial institutions, the most
significant component of both United's and Valley's earnings is net interest
income, which is the difference between the interest earned on interest-earning
assets (loans, investment securities, mortgage-backed securities and other
interest-earning assets), and the interest paid on deposits and borrowings. This
amount, when divided by average interest-earning assets, is referred to as the
net interest margin, expressed as a percentage. Net interest income and net
interest margins are affected by changes in interest rates, the volume and the
mix of interest-earning assets and interest-bearing liabilities, and the level
of non-performing assets. The difference between the yield on interest-earning
assets and the cost of interest-bearing liabilities expressed as a percentage is
referred to as the net interest-rate spread. Net interest income increased $1.4
million from $3.8 million for the six months ended June 30, 1999 to $5.2 million
for the six months ended June 30, 2000. Net interest margin decreased .24% to
3.2% for the six month period ended June 30, 2000 from 3.44% for the same period
last year. United has used the funds from additional deposits and borrowings to
fund growth in its loan portfolio. Although net interest income increased,
higher funding rates at FHLB and increased competition for loan rates resulted
in a decrease in net interest margin.
INTEREST INCOME - The principal reason for the increase in United's net
interest income from the six month period ended June 30, 1999 compared to the
six month period ended June 30, 2000 was an increase in interest-earning assets
from the Valley consolidation. Interest income increased $3.9 million from $8.2
million for the six month period ended June 30, 1999 to $12.1 million for the
six month period ended June 30, 2000.
For the six month period ended June 30, 2000, compared to the six month
period ended June 30, 1999, interest on loans receivable increased $3.3 million,
interest on mortgage-backed securities and investments increased $.6 million and
interest on other interest-earning assets increased remained constant.
INTEREST EXPENSE - The principal reason for the increase in United's
net interest expense from the six month period ended June 30, 1999 to the six
month period ended June 30, 2000 was an increase in interest-bearing liabilities
due to the consolidation of
Page 14
<PAGE>
Valley. Interest expense increased $2.5 million from $4.4 million for the six
month period ended June 30, 1999 to $6.9 million for the six month period ended
June 30, 2000.
For the six month period ended June 30, 2000, compared to the six month
period ended June 30, 1999, interest on deposits increased $1.6 million, and
interest on short-term borrowings increased $.9 million.
PROVISION FOR LOAN LOSSES - United provided $.5 million for loan losses
for the six months ended June 30, 2000, as compared to $.1 million in the first
six months of 1999. The increase in the loan loss provision is a result of
strong loan demand and increased non-performing assets.
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 United's allowance for loan losses and any change in the related
ratio of the allowance for loan losses to non-performing assets are dependent
upon the performance and composition of United'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 - In addition to net interest income, United
generates significant non-interest income from a range of retail banking
services, including mortgage banking activities and service charges for deposit
services. Non-interest income increased $.1 million from $1.7 million for the
six months ended June 30, 1999 to $1.8 million for the six months ended June 30,
2000. United did experience a decline in the home lending market, and
particularly the refinancing market during the first six months of 2000, as
interest rates were higher than the same period last year. This decrease was
offset by an increase in customer service charges and mortgage servicing rights
income in the first six months of 2000.
NON-INTEREST EXPENSE - United's non-interest expense increased $1.0
million during the six month period ending June 30, 2000 as compared to the same
period in 1999. This increase was principally due to the consolidation of
Valley.
INCOME TAXES - Income tax expense remained at $.7 million for the six
month periods ended June 30, 2000 and 1999. This is the result of income before
income taxes (adjusted for minority interest) remaining at $1.9 million for the
six month periods ended June 30, 2000 and 1999.
Page 15
<PAGE>
BUSINESS SEGMENT RESULTS - United manages its operations and prepares
management reports with a primary focus on geographical areas. Operating
segments information, including earnings performance on an operating cash basis,
is presented in the following schedule. United allocates centrally provided
services to the business segments based upon estimated usage of those services.
The operating segment identified as other includes the Parent Company and
elimination of transactions between segments.
The following table sets forth certain operating segment information
for the six month periods ended June 30, 2000 and 1999 and certain balance sheet
data as of June 30, 2000 and 1999 (in thousands). Operating information is not
presented for Valley as of June 30, 1999 as its statements were not consolidated
with United at that time.
<TABLE>
<CAPTION>
Heritage Heritage
2000: Bank State Bank Valley Other Consolidated
----------------- ---------------- ----------------- -------------- -------------------
<S> <C> <C> <C> <C> <C>
Net interest income $ 3,689 303 $ 1,160 $ 28 $ 5,180
Non-interest income 1,611 34 210 - 1,855
----------------- ---------------- ----------------- -------------- -------------------
Total revenue 5,300 337 1,370 28 7,035
Provision for loan losses 443 - 85 - 528
Non-interest expense 3,055 219 930 151 4,355
----------------- ---------------- ----------------- -------------- -------------------
Pretax cash earnings 1,802 118 355 (123) 2,152
----------------- ---------------- ----------------- -------------- -------------------
Income tax expense 656 40 133 (83) 746
Minority interest - - - (102) (102)
----------------- ---------------- ----------------- -------------- -------------------
Cash earnings(1) 1,146 78 222 (142) 1,304
----------------- ---------------- ----------------- -------------- -------------------
Amortization of goodwill and
CDI 83 15 - 40 138
----------------- ---------------- ----------------- -------------- -------------------
Net income $ 1,063 $ 63 $ 222 $ (182) $ 1,166
================= ================ ================= ============== ===================
PER SHARE DATA
Cash earnings per share $ 0.79
Net income per share $ 0.71
Weighted average shares 1,652
Outstanding
BALANCE SHEET DATA AS OF
JUNE 30, 2000
Assets $ 271,054 $ 16,910 $ 60,801 $ 990 $ 349,755
Loans receivable, net 194,118 15,191 38,946 33 248,288
Deposits 177,887 12,235 52,697 (58) 242,761
Stockholders' equity 20,015 2,040 7,653 (446) 29,262
(1)Before amortization of
goodwill and core deposit
Intangible
</TABLE>
Page 16
<PAGE>
<TABLE>
<CAPTION>
Heritage Heritage
1999: Bank State Bank Valley Other Consolidated
----------------- ---------------- ----------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Net interest income $ 3,426 $ 196 $ - $ 147 $ 3,769
Non-interest income 1,656 20 - 60 1,736
----------------- ---------------- ----------------- ---------------- ------------------
Total revenue 5,028 216 - 207 5,505
Provision for loan losses 70 45 - - 115
Non-interest expense 2,986 237 - 134 3,357
----------------- ---------------- ----------------- ---------------- ------------------
Pretax cash earnings(loss) 2,026 (66) - 73 2,033
----------------- ---------------- ----------------- ---------------- ------------------
Income tax expense(benefit) 742 (32) - 28 738
----------------- ---------------- ----------------- ---------------- ------------------
Cash earnings(1) 1,284 (34) - 45 1,295
----------------- ---------------- ----------------- ---------------- ------------------
Amortization of goodwill and
CDI 83 15 - - 98
----------------- ---------------- ----------------- ---------------- ------------------
Net income $ 1,201 $ (49) $ - $ 45 $ 1,197
================= ================ ================= ================ ==================
PER SHARE DATA
Cash earnings per share $ 0.76
Net income per share $ 0.70
Weighted average shares 1,698
Outstanding
BALANCE SHEET DATA AS OF
JUNE 30, 1999
Assets $ 235,053 $ 19,490 $ - $ 217 $ 254,760
Loans receivable, net 155,987 15,145 - 667 171,799
Deposits 161,535 10,931 - (1,903) 170,563
Stockholders' equity 20,277 1,806 - 8,344 30,427
(1)Before amortization of
Goodwill and core deposit
Intangible
</TABLE>
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management believes there has been no material change in interest rate
risk since December 31, 1999. 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's Annual Report on Form 10-K for the year ended
December 31, 1999.
Page 17
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS.
The Company is involved from time to time in litigation normal for its
type of business, none of which is considered by management to be material.
ITEM 2 CHANGE IN SECURITIES AND USE OF PROCEEDS.
None
ITEM 3 DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
On May 23, 2000, United Financial Corp. held its Annual Meeting. The
shareholders elected three directors and approved the United Financial Corp.
2000 Long-Term Incentive and Stock Option Plan.
The shareholders of United Financial Corp. voted as follows with
respect to:
Approval of Directors:
FOR WITHHELD
John M. Morrison 1,559,008 27,150
Kurt R. Weise 1,556,858 29,300
Janice M. Graser 1,559,958 26,200
To approve the United Financial Corp. 2000 Long-Term Incentive and
Stock Option Plan:
FOR: 1,162,338
AGAINST: 43,198
ABSTAIN: 8,137
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
------ --------------------------------------------------------------
27.1 Financial Data Schedule
B. Reports on Form 8-K
None
Page 18
<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 August 15, 2000 /s/ John M. Morrison
--------------- --------------------
John M. Morrison
Chairman of the Board
(Duly Authorized
Representative)
Date August 15, 2000 /s/ Kurt R. Weise
--------------- -----------------
Kurt R. Weise
President and Chief
Executive Officer
(Duly Authorized
Representative)
Page 19
