U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 005-55641
UNITED FINANCIAL HOLDINGS, INC.
(Name of Small Business Issuer in its Charter)
Florida
(State or Other Jurisdiction of
Incorporation or Organization)
59-2156002
(IRS Employer
Identification No.)
333 Third Avenue North, Suite 200
St. Petersburg, Florida
(Address of Principal Executive Offices)
33701-3346
(Zip Code)
(727) 898-2265
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
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 [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Common Stock, $0.01 Par value
4,060,307 Class Outstanding as of March 31, 1999.
<PAGE>
UNITED FINANCIAL HOLDINGS, INC.
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited) PAGE
Condensed Consolidated Balance Sheets -
At March 31, 1999 and December 31, 1998 1
Condensed Consolidated Statements of Earnings -
For the three months ended March 31, 1999 and 1998 2
Condensed Consolidated Statements of Comprehensive Income -
For the three months ended March 31, 1999 and 1998 3
Condensed Consolidated Statement of Stockholders' Equity -
For the three months ended March 31, 1999 4
Condensed Consolidated Statements of Cash Flows -
For the three months ended March 31, 1999 and 1998 5-6
Notes to Condensed Consolidated Financial Statements 7-9
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-13
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 13
ITEM 2. Changes in Securities and Use of Proceeds 13
ITEM 3. Defaults Upon Senior Securities 14
ITEM 4. Submission of Matters To A Vote of Shareholders 14
ITEM 5. Other Information 14
ITEM 6. Exhibits and Reports On Form 8-K 14-15
SIGNATURES 16
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
United Financial Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)(in thousands)
March 31, December 31,
1999 1998
=============== ==============
ASSETS
Cash and due from banks $ 9,515 $ 7,967
Federal funds sold 5,820 4,011
Trading securities 105 157
Securities held to maturity, market value
of $12,914 and $11,437 respectively 12,900 11,206
Securities available for sale, at market 11,902 14,527
Loans, net 123,408 116,546
Premises and equipment, net 9,771 9,275
Federal Home Loan Bank stock 507 433
Federal Reserve Bank stock 159 159
Intangible assets 1,542 1,451
Other real estate owned 1,094 1,015
Other assets 5,734 5,155
--------------- --------------
Total assets $ 182,457 $ 171,902
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand $ 31,645 $ 27,742
NOW and money market 50,601 48,550
Savings & Time Deposits 68,421 62,803
--------------- --------------
Total deposits 150,667 139,095
Securities sold under agreements to repurchase 7,209 8,796
Convertible subordinated debentures 630 630
Long-term debt - 34
Other liabilities 1,781 2,576
--------------- --------------
Total liabilities 160,287 151,131
Company-obligated Mandatory Redeemable Capital Securities of Subsidiary
Trust Holding Solely Subordinated Debentures
Of The Company 6,750 6,000
STOCKHOLDERS' EQUITY
7% convertible preferred stock 209 209
Common stock 41 40
Paid-in capital 9,289 9,192
Common stock subscription receivable - (393)
Accumulated other comprehensive income 64 141
Retained earnings 5,817 5,582
--------------- --------------
Total stockholders' equity 15,420 14,771
--------------- --------------
Total liabilities and stockholders' equity $ 182,457 $ 171,902
=============== ==============
See accompanying notes to condensed consolidated financial statements.
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United Financial Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited) (in thousands, except per share data)
For the three months ended
MARCH 31,
1999 1998
=============== ==============
Interest income
Loans and loan fees $ 2,873 $ 2,425
Securities 421 370
Federal funds sold and securities purchased
under reverse repurchase agreements 48 131
--------------- --------------
Total interest income 3,342 2,926
Interest expense
Deposits 1,135 1,116
Long-term debt and other borrowings 66 84
Subordinated debentures issued to subsidiary trust 157 -
--------------- --------------
Total interest expense 1,358 1,200
--------------- --------------
Net interest income 1,984 1,726
Provision for loan losses 225 90
--------------- --------------
Net interest income after provision
for loan losses 1,759 1,636
Other income
Service charges on deposit accounts 176 175
Trust and investment management income 663 549
Gain on Sale of Loans 112 16
All other fees and income 172 148
--------------- --------------
Total other income 1,123 888
Other expense
Salaries and employee benefits 1,366 1,135
Occupancy expense 130 148
Furniture and equipment expense 141 129
Data Processing 131 112
Marketing and business development 41 57
Other operating expenses 438 395
--------------- --------------
2,247 1,976
--------------- --------------
Earnings before income taxes 635 548
Income tax expense 230 214
--------------- --------------
NET EARNINGS $ 405 $ 334
=============== ==============
Earnings Per Share:
Basic $ .10 $ .09
Diluted $ .09 $ .09
See accompanying notes to condensed consolidated financial statements.
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United Financial Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)(in thousands)
For the three months ended
MARCH 31,
1999 1998
=============== ==============
Net earnings $ 405 $ 334
Other comprehensive income
Unrealized holding gains (losses) (117) 6
Income tax (expense) benefit related to
items of other comprehensive income 40 (2)
--------------- --------------
Comprehensive income $ 328 $ 338
=============== ==============
See accompanying notes to condensed consolidated financial statements.
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United Financial Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(unaudited)
(in thousands)
7% Accumulated
Con- Other Stock
vertible Compre- Sub-
Common Preferred Paid-In hensive scription Retained
Stock Stock Capital Income Receivable Earnings Total
-------- -------- -------- -------- --------- --------- ------
Balance at December
31, 1998 $ 40 $ 209 $ 9,192 $ 141 $ ( 393) $ 5,582 $14,771
Net Earnings - - - - - 405 405
Dividends on Common &
Preferred Stock - - - - - (170) (170)
IPO subscriptions
& costs - - (15) - 393 - 378
Accumulated other
comprehensive
income - - - (77) - - (77)
Performance Shares
Issued 1 - 112 - - - 113
-------- -------- -------- -------- --------- --------- ------
Balance at
March 31, 1999 $ 41 $ 209 $ 9,289 $ 64 $ - $ 5,817 $15,420
======== ======== ======== ======== ========= ======= ========
See accompanying notes to condensed consolidated financial statements.
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United Financial Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(unaudited)(in thousands)
For the three months ended
MARCH 31,
1999 1998
=============== ==============
Cash flows from operating activities:
Net earnings $ 405 $ 334
Adjustments to reconcile net earnings to
net cash provided by (used in) operating
activities
Provision for loan losses 225 90
Provision for depreciation & amortization 183 153
Unrealized gain on trading securities (5) -
Accretion of securities discount (4) (11)
Amortization of unearned loan fees (37) (38)
Amortization of securities premiums 5 5
Gain on sales of loans (206) (21)
Decrease (increase) in interest receivable 86 173
(Decrease) increase in interest payable (1) (14)
Increase in other assets (855) (162)
Decrease in other liabilities (796) 94
--------------- --------------
Net cash provided by (used in) operating
activities (1,000) 603
Cash flows from investing activities:
Purchase of Federal Reserve Bank stock
and FHLB stock (73) (69)
Net decrease (increase) in Federal funds sold (1,809) (6,350)
Principal repayments of held to maturity
securities 509 286
Principal repayments of available for
sale securities 320 152
Proceeds from maturities of available for
sale securities 2,404 -
Proceeds from maturities of held to
maturity securities 50 1,435
Purchases of available for sale securities (2,000) (498)
Purchases of held to maturity securities (372) (4,043)
Proceeds from sales of loans 2,001 200
Net (increase) decrease in loans (8,845) 141
Capital expenditures (659) (20)
--------------- --------------
Net cash used in investing activities (8,474) (8,766)
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United Financial Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(unaudited) (in thousands)
For the three months ended
MARCH 31,
1999 1998
=============== ==============
Cash flows from financing activities:
Net increase in demand deposits, NOW accounts,
money market accounts and savings accounts $ 6,327 $ 6,044
Net (decrease) increase in certificates of
deposit 5,245 451
Net increase (decrease) in securities sold
under agreements to repurchase (1,586) 2,297
Increase in borrowings - -
Repayment of long-term debt (34) (304)
Issuance of Company-obligated mandatory
redeemable capital securities of sub-
sidiary trust holding solely subordinated
debentures of the Company 750 -
Issuance of common stock 490 325
Dividend paid on preferred stock (7) (8)
Dividend paid on common stock (163) (116)
--------------- --------------
Net cash provided by financing activities 11,022 8,689
--------------- --------------
Net increase in cash and cash equivalents 1,548 526
Cash and cash equivalents at beginning of period 7,967 7,337
--------------- --------------
Cash and cash equivalents at end of period $ 9,515 $ 7,863
=============== ==============
Cash paid during the period for:
Interest $ 1,359 $ 1,214
Income taxes $ 65 $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY
Performance shares issued $ 112 $ 41
See accompanying notes to condensed consolidated financial statements.
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UNITED FINANCIAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - HOLDING COMPANY AND SUBSIDIARIES BACKGROUND INFORMATION
United Financial Holdings, Inc. (the "Company") is a registered bank holding
company formed in 1982, the principal subsidiary of which is United Bank
("Bank"), a Florida-chartered commercial bank headquartered in St. Petersburg,
Florida. The Bank was founded in 1979 and is a community-oriented, full service
commercial bank with four branch offices serving the southern Pinellas County
area of the State of Florida. (A building, housing a fifth branch, was acquired
in January 1999 and the branch opened in April 1999).
The Company's other operating subsidiaries are Eickhoff, Pieper, & Willoughby,
Inc., an investment advisory firm registered under the Investment Advisers Act
of 1940 ("EPW") headquartered in Tampa, Florida, with an office in Jacksonville,
Florida, and United Trust Company, a Florida-chartered trust company ("United
Trust") located in St. Petersburg, Florida. EPW offers investment management
services to corporate, municipal and high net worth individual clients
throughout the State of Florida. United Trust is a wholesale provider of data
processing, administrative and accounting support and asset custody services to
professionals holding assets in trust (primarily legal and accounting firms). In
addition, United Trust also provides retail trust and investment management
services to individual and corporate clients.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. In the opinion of management, all adjustments, consisting
primarily of normal recurring adjustments, necessary for a fair presentation of
the results for the interim periods have been made to fairly state the results
for the interim periods. The results of operations of the three months ended
March 31, 1999 are not necessarily indicative of the results expected for the
full year.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the Company's December 31,
1998 Form 10-KSB. This quarterly report should be read in conjunction with such
annual report.
NOTE 3 - EARNINGS PER SHARE
Basic earnings per share are based on the weighted average number common shares
outstanding during the periods. Diluted earnings per share includes the weighted
average number of common shares outstanding during the periods and the further
dilution from stock options using the treasury stock method. The following is a
reconciliation of the numerators and denominators of the basic and diluted
earnings per share computations for the periods presented (dollars in thousands,
except per share data).
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For the three months ended MARCH 31,
1999 1998
======================== =========================
Weighted Per Weighted Per
Average Share Average Share
Earnings Shares Amount Earnngs Shares Amount
======== ========= ====== ======= =========== ======
Basic EPS
Net earnings available to
Common Stockholders $ 398 4,051,133 $ .10 $ 326 3,470,622 $ .09
====== ======
Effect of dilutive Securities
Incremental shares from assumed
exercise or conversion of:
Convertible Debt 8 152,790 8 152,790
Preferred Stock 7 175,860 8 196,946
Stock Options - - - 7,589
-------- --------- ------- ---------
Diluted EPS
Net earnings available to Common
Stockholders and assumed
Conversions $ 413 4,379,782 $ .09 $ 342 3,827,946 $ .09
======== ========= ====== ======= ========= =======
NOTE 4 - CAPITAL
In December 1998, the Company sold 450,000 shares of common stock at $7.25 per
share and $6,000,000 of 9.40% Trust Preferred securities in an underwritten
public offering. In January 1999, the underwriter closed on the over allotment
and the Company issued an additional 57,705 shares of common stock and $749,600
of additional Trust Preferred securities. Of the net proceeds of approximately
$9.5 million, $1.5 million has been contributed as capital to the Bank and
approximately $2.7 million was used to repay existing debt with an unrelated
bank. The balance was used for general corporate purposes.
NOTE 5 - COMPREHENSIVE INCOME
Under Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income", certain transactions and other economic events that
bypass the income statement must be displayed as other comprehensive income. The
Company's comprehensive income consists of net earnings and unrealized gains and
losses on securities available-for-sale, net of income taxes.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
COMPARISON OF BALANCE SHEETS AT MARCH 31, 1999 AND DECEMBER 31, 1998
Overview
Total assets of the Company were $182.5 million at March 31, 1999,
compared to $171.9 million at December 31, 1998, an increase of $10.6 million or
6.2%. This increase was primarily the result of the Company's internal growth of
earning assets (primarily loans) funded by an increase in deposits.
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<PAGE>
Investment Securities
Investment securities, consisting of U.S. Treasury and federal agency
securities, obligations of state and political subdivisions and mortgage-backed
and corporate debt securities, were $24.8 million at March 31, 1999, compared to
$25.7 million at December 31, 1998, a decrease of $0.9 million or 3.5%. At March
31, 1999, the Company held certain securities totaling $11.9 million as
available for sale. These securities have been recorded at market value.
Loans
Total loans were $126.3 million at March 31, 1999, compared to $119.2
million at December 31, 1998, an increase of $7.1 million or 6.0%. For the same
period, real estate mortgage loans increased by $1.9 million or 2.4%, commercial
loans increased by $5.1 million or 14.6%, and all other loans including consumer
loans increased by $0.1 million or 1.6%. Net loans were $123.4 million at March
31, 1999, compared to $116.5 million at December 31, 1998.
Allowance for Loan Losses
The allowance for loan losses amounted to $2.21 million at March 31, 1999,
compared to $1.98 million at December 31, 1998, an increase of $0.23 million or
11.6%. During the first quarter of 1999, $2 thousand in loans were charged off,
$225 thousand was added to the allowance for loan losses through a provision,
which was accounted for as an expense, reducing net income, and there were no
recoveries from loans previously charged off.
Nonperforming Assets
Nonperforming assets were $5.6 million at March 31, 1999, compared to $5.5
million at December 31, 1998. Nonperforming assets at March 31, 1999 consisted
of nonperforming loans of $4.5 million and other real estate owned of $1.1
million. A nonperforming loan in the amount of $1.3 million is being paid on a
monthly basis on a pre-judgment stipulation and interest and principal are being
recorded on a cash basis as received. ORE owned consisted of one property which
has been listed for sale. Management believes that this property is carried at a
value that is equal to its current market value.
Bank Premises and Equipment
Bank premises and equipment was $9.8 million at March 31, 1999, compared
to $9.3 million at December 31, 1998, an increase of $.5 million or 5.3%. This
increase was primarily due to the acquisition of a new bank branch office
building and related equipment, partially offset by depreciation and
amortization of leasehold improvements.
Deposits
Total deposits were $150.7 million at March 31, 1999, compared to $139.1
million at December 31, 1998, an increase of $11.6 million or 8.3%. From March
31, 1999 to December 31, 1998, demand deposits increased $3.9 million, NOW and
money market deposits increased $2.1 million, savings deposits and time deposits
increased $5.6 million.
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Long-term Debt and Convertible Subordinated Debentures
There was no long-term debt outstanding (excluding convertible
subordinated debentures) at March 31, 1999, compared to $34 thousand at December
31, 1998, a decrease of $34 thousand. The decrease was due to the repayment of
debt with an unrelated bank. In addition, $630 thousand in convertible
subordinated debentures were outstanding during both periods.
Mandatory Redeemable Capital Securities of Subsidiary Trust
In December 1998, the Company, through a statutory business trust created
and owned by the Company, issued $6.7 million (including an overallotment of
$750 thousand that closed on January 14, 1999) of 9.40% Cumulative Trust
Preferred Securities which will mature on December 10, 2028.
Stockholders' Equity
Stockholders' equity was $15.4 million at March 31, 1999, or 8.44% of
total assets, compared to $14.8 million, or 8.61% of total assets at December
31, 1998. At March 31, 1999, the Bank's Tier I (core) Capital ratio was 7.70%,
its Tier I Risk-based Capital ratio was 9.24%, and its Total Risk-based Capital
ratio was 10.49%. The capital ratios of the Bank at that date all exceeded the
minimum regulatory guidelines for an institution to be considered "well
capitalized". The increase in stockholders' equity was due to proceeds from the
exercise of an over allotment option related to the Company's initial public
offering and first quarter 1999 net income, less dividends declared.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1999 AND 1998
Overview
Net income for the three months ended March 31, 1999 was $405 thousand or
$0.09 per share diluted, compared to $334 thousand or $0.09 per share diluted
for the same period in 1998. On a pre-tax basis, United Trust earned $47
thousand in 1999 versus nil in 1998, EPW's pre-tax operating profits (before
deducting $90 thousand and $19 thousand of costs associated with a cash payment
in lieu of the issuance of performance shares in 1999 and 1998, respectively)
increased to $61 thousand from $46 thousand during this period and the Bank's
pre-tax profits increased to $785 thousand from $605 thousand during this same
period.
Analysis of Net Interest Income
Interest income for the three months ended March 31, 1999 was $3.3
million, compared to $2.9 million for the same period in 1998, a $0.4 million or
13.8% increase. This increase in interest income is primarily due to an increase
in earning assets, consisting mostly of loans. Interest expense was $1.4 million
for the three months ended March 31, 1999, compared to $1.2 million for the same
period in 1998, a $0.2 million or 16.7% increase. This increase is primarily due
to the interest expense associated with the issuance of the Trust Preferred
securities in December 1998.
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Provision for Loan Losses
For the three months ended March 31, 1999, the provision charged to
expense was $225 thousand, compared to $90 thousand for the same period in 1998,
an increase of $135 thousand or 150.0%. The allowance of possible loan losses is
$2.2 million at March 31, 1999. Management's judgement as to the adequacy of the
allowance is based upon a number of assumptions about the future events which it
believes to be reasonable, but which may or may not be accurate. Because of the
inherent uncertainty of assumptions made during the evaluation process, there
can be no assurance that loan losses in future periods will not exceed the
allowance for loan losses or that additional allocations will not be required.
Noninterest Income
Noninterest income for the three months ended March 31, 1999 was $1.1
million compared to $0.9 million for the same period in 1998, an increase of
$0.2 million or 22.2%. This increase was due to increased revenues from EPW and
United Trust whose combined revenues increased $114 thousand during this period
and gains on the sale of SBA loans, which increased by $96 thousand.
Noninterest Expense
Total noninterest expense for the three months ended March 31, 1999 was
$2.2 million, compared to $2.0 million for the same period in 1998, an increase
of $0.2 million or 10.0%. Substantially all of this increase occurred in
salaries and benefits expense, and includes $90 thousand related to the cash
payment in lieu of the issuance of performance shares pursuant to the
acquisition agreement of EPW.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
During the three months ended March 31, 1999, the Company's primary
sources of funds consisted of deposit inflows and proceeds from the maturity and
principal repayment of securities available for sale. The Company used its
capital resources principally to fund existing and continuing loan commitments,
to purchase loan participations and to purchase securities. At March 31, 1999,
the Company had commitments to originate loans totaling $6.6 million. Management
believes the Company has adequate resources to fund all its commitments.
Management also believes that, if so desired, it can adjust the rates on time
deposits to retain deposits in a changing interest rate environment. As a
Florida-chartered commercial bank, United Bank is required to maintain a
liquidity reserve of at least 15% of its total transaction accounts and 8% of
its total nontransaction accounts less those deposits of certain public funds.
The liquidity reserve may consist of cash on hand, cash on demand with other
correspondent banks and other investments and short-term marketable securities
as defined, such as federal funds sold and United States securities or
securities guaranteed by the United States. As of March 31, 1999, the Bank had
liquidity of approximately $27 million, or approximately 17% of total deposits.
Management believes the Bank was in compliance with all minimum capital
requirements which it was subject to at March 31, 1999.
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YEAR 2000 CONSIDERATIONS
During the next year, many businesses, including financial institutions
such as the Company, will face potentially serious issues associated with the
inability of certain existing data processing hardware and software to
appropriately recognize calendar dates beginning in the year 2000. The "Year
2000" problem arose because many existing computer programs use only the last
two digits to refer to a year. Therefore, these computer programs may not
properly recognize a year that begins with "20" instead of "19." Additionally,
many computer programs that can only distinguish the final two digits of the
year may read entries for the year 2000 as the year 1900. For example, computer
systems may compute payment, interest, delinquency or other figures important to
the operations of financial institutions based on the wrong date. If not
corrected, many computer applications, including those owned by the Company and
third parties with which the Company does business, could fail or create
erroneous results, thereby potentially impacting the operations and financial
performance of the Company. Although the Company is currently addressing
potential Year 2000 problems, there can be no assurance that its efforts will
prevent all potential adverse consequences to the Company resulting from the
Year 2000 problem.
In 1997, the Company began the process of evaluating its information
technology for Year 2000 readiness. In April 1998, the Company adopted a formal,
comprehensive Year 2000 Policy Statement designed to identify and address Year
2000 issues that might impact the Company (the "Year 2000 Plan"). The Company
has completed the "Awareness," "Inventory" and "Assessment" phases of its Year
2000 Plan, which are designed to appoint and train a group of employees to
oversee and implement the Year 2000 Plan, to provide for the inventory of the
software and hardware of the Company and others that should be assessed for Year
2000 problems, and to provide further assessment of the nature and size of the
Year 2000 issues that might effect the Company, respectively. The Company is
currently in the process of overseeing its internal efforts and the efforts of
third parties to timely and properly address the Year 2000 issues that have been
identified, as well as testing and validating the actions that have been taken
thus far to address those issues. It is expected that those testing and
validation efforts will be completed by June 30, 1999.
The Company outsources its principal data processing activities to a third
party and purchases most of its software applications from third party vendors.
Additionally, the Company outsources its trust business data processing and
custodial management activities to a third party. Each of the two foregoing data
processing servicers has orally advised the Company that it believes its systems
are Year 2000 compliant. The Company is in the process of testing and validating
those claims. Based on these efforts to date, the Company believes that its
vendors and significant customers are actively addressing the problems
associated with the Year 2000 issue and that the Company will be prepared to
respond to Year 2000 problems as they arise. The Company is in the process of
finalizing contingency plans to address the most reasonably likely worst case
scenario relating to the Year 2000 problem. The anticipated completion date for
those plans is by June 30, 1999. If the Company is unable for any reason to
timely complete such a contingency plan and problems associated with the Year
2000 issue arise and are not addressed as expected by the Company, as each of
the Company's business segments is very dependent upon computer systems to
effectively conduct most of their business operations and fulfill most of their
obligations to third parties, the Company's business operations could be
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significantly disrupted and the Company's financial condition and results of
operations could be significantly adversely affected. The Company's Year 2000
efforts are ongoing and have not yet been completed. Accordingly, there can be
no assurance that the Company will be prepared to timely respond to all year
2000 issues that may arise.
The Company is also in the process of identifying Year 2000 problems
stemming from non-information technology systems, such as microcontrollers used
to operate security systems and elevators and embedded systems in its buildings
and equipment and other infrastructure, and establishing a program for testing
these systems for Year 2000 compliance. However, the Company does not currently
anticipate that it will encounter any substantial Year 2000 problems with
respect to such non-information technology systems, and believes the cost to
remedy any such problems will not be material.
The Company has not incurred material testing, compliance or replacement
costs relating to its Year 2000 investigation to date. The Company spent
approximately $255,000 in 1998 and expects to spend $280,000 in 1999 towards
technology related costs, including the updating of software and hardware
systems to ensure Year 2000 compliance. The Company does not expect to incur
additional material related testing, compliance or replacement costs in the
future and does not believe that the potential non-compliance of its information
and non-information technology systems and programs present a material risk to
the Company's financial condition or results of operations. However,
non-material costs may be incurred due to short-term disruptions resulting from
Year 2000 compliance problems, testing and replacement costs.
Notwithstanding the foregoing, there can be no assurance that the Company
will be successful in implementing its Year 2000 Plan and that it will not be
adversely affected by the failure of third party vendors or significant
customers to become Year 2000 compliant. Although the Company is taking steps to
identify and address Year 2000 problems, if unexpected or unresolved Year 2000
problems develop, given the Company's reliance on data processing services to
maintain customer balances, service customer accounts and to perform other
record keeping and service oriented functions associated with the Company's
three primary business segments, the occurrence of any such events could have a
material impact on the Company's results of operations, liquidity and financial
condition.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
United Financial and United Bank are parties to various legal
proceedings in the ordinary course of business. Management does not believe that
there is any pending or threatened proceeding against the Company or the Bank
which, if determined adversely, would have a material effect on the business,
results of operations, or financial position of the Company or the Bank.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The following shares of United Financial common stock, par value $0.01
per share ("United Financial Common Stock"), were issued during the three months
ended March 31, 1999:
On February 26, 1999 an aggregate of 14,744 shares were issued to
certain officers of United Trust pursuant to an incentive stock plan established
in connection with the acquisition of Fiduciary Services Corporation ("FSC").
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Under the plan, no additional cash or consideration was received by the Company
pursuant to the issuance of such shares. These shares of common stock were
issued in reliance upon the exemption from registration under Section 4(2) of
the Securities Act of 1933 as transactions by an issuer not involving any public
offering. The recipients of the securities issued represented their intentions
to acquire the securities for investment only and not with a view for resale or
distribution and appropriate legends were affixed to the share certificates
issued.
In December 1998, the Company sold 450,000 shares of common stock at
$7.25 per share and $6,000,000 of 9.40% Trust Preferred securities in an
underwritten public offering. In January 1999, the underwriter closed on the
over allotment and the Company issued an additional 57,705 shares of common
stock and $749,600 of additional Trust Preferred securities. Of the net proceeds
of approximately $9.5 million, $1.5 million has been contributed as capital to
the Bank and approximately $2.7 million was used to repay existing debt with an
unrelated bank. The balance was used for general corporate purposes.
In March 1999, the Company purchased a $250,000 equity position, or
approximately 5 percent, in United Insurance Holdings, LC ("Insurance
Holdings"). Insurance Holdings is the parent company of United Property
Insurance and Casualty Company, Inc. The Company has the option to acquire, at
its election, up to an aggregate of 20 percent of the common equity of Insurance
Holdings, if and when bank holding company regulations permit such an
investment. Additionally, the Company has a $1 million loan advance outstanding
to Insurance Holdings. The loan has a maturity date of June 8, 1999. One
Director of the Company also serves as a Director of Insurance Holdings.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Amended and Restated Articles of Incorporation of the Company*
3.2 Bylaws of the Company*
4.1 Form of Indenture with respect to the Company's 9.4% Junior
Subordinated Debentures
4.2 Form of Specimen Junior Subordinated
Debenture (included in Exhibit 4.1)*
4.3 Certificate of Trust of UFH Capital Trust I*
4.4 Trust Agreement of UFH Capital Trust I*
4.5 Form of Amended and Restated Trust Agreement of UFH Capital
Trust I*
4.6 Form of Certificate for Cumulative Trust Preferred Security of
UFH Capital Trust I*
4.7 Form of Guarantee Agreement for UFH Capital Trust I*
4.8 Form of Agreement as to Expenses and Liabilities*
4.9 Specimen of Common Stock to be registered hereunder*
10.1 UFH Stock Option and Incentive Compensation Plan*
-14-
<PAGE>
10.2 Trust Department Stock Option Plan*
10.3 Eickhoff, Pieper & Willoughby Stock Option Plan*
10.4 Modification Agreement*
10.5 Property Management Agreement between Imaginative Investments,
Inc and the Southeast Companies of Tampa Bay, Inc.*
10.6 Employment Agreement of Charles O. Lowe*
10.7 Employment Agreement of Ward J. Curtis, Jr.*
10.8 Employment Agreement of Harold J. Winner*
10.9 Employment Agreement of John H. Pieper*
10.10 Employment Agreement of Neil W. Savage*
10.11 Employment Agreement of William A. Eickhoff*
10.12 Salary Continuation Agreement of Harold J. Winner*
10.1 Salary Continuation Agreement of Neil W. Savage*
10.14 Agreement between Willow Green Partnership, LTD and Irwin
Contracting relating to foreclosed property acquired by
United Bank*
10.15 Pinellas Bancshares Corporation 8% Convertible Debentures
held by Eickhoff & Pieper, a Florida General Partnership*
10.16 Loan Agreement between AmSouth f/k/a AmSouth Bank of Florida and
UFH f/k/as Pinellas Bancshares Corporation*
27 Financial Data Schedule
*This information is incorporated herein by reference to the Company's Report
on Form 10-KSB for the period ended December 31, 1998.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the period ending March 31, 1999.
-15-
<PAGE>
UNITED FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
SIGNATURES
Under 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 HOLDINGS, INC.
(Registrant)
Date: MAY 13, 1999 By: /S/ NEIL W. SAVAGE
---------------- --------------------------------
Neil W. Savage, President and
Chief Executive Officer
Date: MAY 13, 1999 By: /S/ C. PETER BARDIN
---------------- --------------------------------
C. Peter Bardin, Senior Vice
President and Chief Financial
Officer
-16-
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