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 JUNE 30, 2000
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 59-2156002
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
333 THIRD AVENUE NORTH, SUITE 200
ST. PETERSBURG, FLORIDA 33701-3346
(Address of Principal Executive Offices)
(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 4,230,000
-------------------------------------- -------------------------------
Class Outstanding as of August 4, 2000
<PAGE>
UNITED FINANCIAL HOLDINGS, INC.
INDEX
PAGE
================================================================================
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets -
At June 30, 2000 and December 31, 1999 1
Condensed Consolidated Statements of Earnings -
For the three month and six months ended
June 30, 2000 and 1999 2
Condensed Consolidated Statements of Comprehensive
Income For the three month and six months ended
June 30, 2000 and 1999 3
Condensed Consolidated Statement of Stockholders'
Equity - For the six months ended June 30, 2000 4
Condensed Consolidated Statements of Cash Flows -
For the six months ended June 30, 2000 and 1999 5-6
Notes to Condensed Consolidated Financial Statements 7-9
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-15
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 16
ITEM 2. Changes in Securities and Use of Proceeds 16
ITEM 3. Defaults Upon Senior Securities 16
ITEM 4. Submission of Matters to a Vote of Shareholders 16
ITEM 5. Other Information 17
ITEM 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
United Financial Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
June 30, December 31,
ASSETS 2000 1999
---------- -----------
Cash and due from banks $ 9,815 $ 8,866
Federal funds sold - 2,917
Trading securities - 82
Securities held to maturity, market value
of $15,862 and $14,072 respectively 16,341 14,541
Securities available for sale, at market 10,216 9,924
Loans, net 167,865 153,497
Premises and equipment, net 9,410 9,619
Federal Home Loan Bank stock 507 507
Federal Reserve Bank stock 226 204
Intangible assets 2,019 1,748
Other real estate owned 416 1,528
Other assets 6,233 6,048
----------- ------------
Total assets $ 223,048 $ 209,481
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand $ 35,384 $ 32,936
NOW and money market 63,152 67,914
Savings & Time Deposits 80,954 74,248
----------- ------------
Total deposits 174,490 175,098
Securities sold under agreements to repurchase 15,119 7,307
Convertible subordinated debentures 630 630
Other liabilities 3,131 2,874
------------ ------------
Total liabilities 198,370 185,909
Company-obligated Mandatory Redeemable Capital
Securities of Subsidiary Trust Holding Solely
Subordinated Debentures Of The Company 6,750 6,750
STOCKHOLDERS' EQUITY
7% convertible preferred stock 100 100
Common stock 42 42
Paid-in capital 10,019 9,672
Treasury shares (100) -
Accumulated other comprehensive income (272) (232)
Retained earnings 8,139 7,240
------------ --------------
Total stockholders' equity 17,928 16,822
------------ --------------
Total liabilities and stockholders' equity $ 223,048 $ 209,481
============ ==============
See accompanying notes to condensed consolidated financial statements.
-1-
<PAGE>
United Financial Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
--------- --------- --------- ---------
Interest income
Loans and loan fees $ 4,021 $ 3,001 $ 7,820 $ 5,874
Securities 405 440 781 861
Federal funds sold securities
purchased under reverse
repurchase agreements 201 85 282 133
--------- --------- --------- ---------
Total interest income 4,627 3,526 8,883 6,868
Interest expense
Deposits 1,710 1,187 3,151 2,272
Long-term debt and
other borrowings 114 59 204 125
Subordinated debentures
issued to subsidiary trust 159 158 317 365
--------- --------- --------- ---------
Total interest expense 1,983 1,404 3,672 2,762
--------- --------- --------- ---------
Net interest income 2,644 2,122 5,211 4,106
Provision for loan losses 200 180 350 405
--------- --------- --------- ---------
Net interest income after
provision for loan losses 2,444 1,942 4,861 3,701
Other income
Service charges on
deposit accounts 230 197 455 373
Trust and investment
management income 787 697 1,557 1,360
Gain on Sale of Loans 138 139 164 251
All other fees and income 162 174 308 346
--------- --------- --------- ---------
Total other income 1,317 1,207 2,484 2,330
Other expense
Salaries & employee benefits 1,370 1,198 3,075 2,564
Occupancy expense 123 130 240 260
Furniture & equipment expense 149 157 313 298
Data Processing 153 107 293 238
Marketing & business developmnt 180 90 225 131
Other operating expenses 622 611 1,267 1,049
--------- --------- --------- ---------
2,597 2,293 5,413 4,540
--------- --------- --------- ---------
Earnings before income taxes 1,164 856 1,932 1,491
Income tax expense 404 319 691 549
--------- --------- --------- ---------
NET EARNINGS $ 760 $ 537 $ 1,241 $ 942
========= ========= ========= =========
Earnings Per Share:
Basic $ .18 $ .13 $ .29 $ .23
Diluted $ .17 $ .12 $ .28 $ .22
See accompanying notes to condensed consolidated financial statements.
-2-
<PAGE>
United Financial Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
--------- --------- --------- ---------
Net earnings $ 760 $ 537 $ 1,241 $ 942
Other comprehensive income
Unrealized holding
gains (losses) 45 (215) (60) (332)
Income tax (expense) benefit
related to items of other
comprehensive income (15) 73 20 113
--------- --------- --------- ---------
Comprehensive income $ 790 $ 395 $ 1,201 $ 723
========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE>
United Financial Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(unaudited)
(in thousands)
Accumu-
7% lated
Convert- Other
ible Compre- Re-
Common Preferred Paid-In hensive Treasury tained
Stock Stock Capital Income Shares Earnings Total
-------- --------- -------- -------- ------- -------- --------
Balance at
December 31,
1999 $ 42 $ 100 $ 9,672 $ (232)$ - $ 7,240 $16,822
Net Earnings - - - - - 1,241 1,241
Dividends on Common
& Preferred Stock - - - - - (342) (342)
Accumulated other
comprehensive income - - - (40) - - (40)
Treasury shares
redeemed - - - - (100) - (100)
Performance shares
issure - - 347 - - - 347
-------- --------- -------- -------- ------- -------- --------
Balance at
June 30, 2000 $ 42 $ 100 $ 10,019 $ (272)$ (100) $ 8,139 $17,928
======== ========= ======== ======== ======= ======== =======
See accompanying notes to condensed consolidated financial statements.
-4-
<PAGE>
United Financial Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Six Months Ended
June 30, June 30,
2000 1999
----------- -----------
Cash flows from operating activities:
Net earnings $ 1,241 $ 942
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities
Provision for loan losses 350 405
Provision for depreciation and amortization 408 384
Unrealized gain on trading securities - (8)
Accretion of securities discount (4) (7)
Amortization of unearned loan fees (50) (75)
Amortization of securities premiums 7 10
Gain on sales of loans (246) (434)
(Increase) in interest receivable (46) (88)
Increase in interest payable 35 23
Decrease (increase) in other assets 990 (217)
Increase (decrease) in other liabilities 222 (681)
----------- -----------
Net cash provided by
operating activities 2,907 254
Cash flows from investing activities:
Purchase of Federal Reserve Bank stock
and FHLB stock (23) (118)
Net decrease (increase) in Federal funds sold 2,917 (95)
Principal repayments of held to
maturity securities 178 870
Principal repayments of available for
sale securities 345 1,981
Proceeds from sale of trading securities 75 -
Proceeds from maturities of available for
sale securities 1,511 3,000
Proceeds from maturities of held to
maturity securities 631 50
Purchases of available for sale securities (2,483) (4,491)
Purchases of held to maturity securities (2,310) (1,899)
Proceeds from sales of loans 3,069 4,457
Net (increase) in loans (17,490) (16,455)
Capital expenditures (140) (922)
----------- -----------
Net cash used in investing activities (13,720) (13,622)
See accompanying notes to condensed consolidated financial statements.
-5-
<PAGE>
United Financial Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(unaudited)
(in thousands)
(continued)
Six Months Ended
June 30, June 30,
2000 1999
----------- ------------
Cash flows from financing activities:
Net (decrease) increase in demand deposits,
NOW accounts, money market accounts and
savings accounts $ (2,060) $ 8,597
Net increase in certificates of deposit 6,453 6,620
Net increase (decrease) in securities sold 7,812 (3,477)
under agreements to repurchase
Repayment of long-term debt - (34)
Issuance of Company-obligated mandatory redeemable
capital securities of subsidiary trust holding solely
subordinated debentures of the Company - 750
Issuance of common stock - 367
Dividend paid on preferred stock (4) (7)
Dividend paid on common stock (339) (328)
Purchase of Treasury Shares (100) -
----------- -----------
Net cash provided by financing activities 11,762 12,488
----------- -----------
Net increase (decrease) in cash and due from banks 949 (880)
Cash and due from banks at beginning of period 8,866 7,967
----------- -----------
Cash and due from banks at end of period $ 9,815 $ 7,087
=========== ===========
Cash paid during the period for:
Interest $ 3,638 $ 2,739
Income taxes $ 1,068 $ 535
Supplemental Disclosure of Non-cash Activity
--------------------------------------------
Performance shares issued $ 347 $ 113
See accompanying notes to condensed consolidated financial statements.
-6-
<PAGE>
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 five branch offices serving the southern Pinellas County
area of the State of Florida.
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 and six months
ended June 30, 2000 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,
1999Form 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).
-7-
<PAGE>
For the three months ended June 30
----------------------------------
2000 1999
-------------------------- ----------------------------
Weighted Per Weighted Per
Average Share Average Share
Earnings Shares Amount Earnings Shares Amount
--------- --------- ------ --------- --------- ------
Basic EPS
Net earnings
available to
Common
Stockholders $ 760 4,230,963 $ .18 $ 537 4,061,313 $ .13
====== ======
Effect of dilutive securities
Incremental shares
from assumed exercise or
conversion of:
Convertible Debt 8 152,789 8 152,789
Preferred Stock - 84,345 - 174,854
Stock Options - 165 - -
--------- --------- --------- ---------
Diluted EPS
Net earnings available to Common
Stockholders and assumed
conversions $ 768 4,468,262 $ .17 $ 545 4,388,956 $ .12
========= ========= ====== ========= ========= ======
For the six months ended June 30
----------------------------------
2000 1999
-------------------------- ----------------------------
Weighted Per Weighted Per
Average Share Average Share
Earnings Shares Amount Earnings Shares Amount
--------- --------- ------ --------- --------- ------
Basic EPS
Net earnings
available to Common
Stockholders $ 1,238 4,229,237 $ .29 $ 935 4,056,251 $ .23
====== ======
Effect of dilutive securities
Incremental shares
from assumed exercise or
conversion of:
Convertible Debt 16 152,789 16 152,789
Preferred Stock 3 84,345 7 175,355
Stock Options - 112 - -
--------- --------- --------- ---------
Diluted EPS
Net earnings available to Common
Stockholders and assumed
conversions $ 1,257 4,466,483 $ .28 $ 958 4,384,395 $ .22
========= ========= ====== ========= ========= ======
-8-
<PAGE>
NOTE 4 - BUSINESS SEGMENT INFORMATION
United Financial has three reportable segments: Commercial Banking, Trust
Services, and Investment Management Services. Corporate and Other includes
corporate expenses such as corporate overhead, intercompany transactions, and
certain goodwill amortization. The following table presents the Company's
Business Segment Information for the three and six months ended June 30, 2000
and 1999, respectively:
For the three months ended June 30, 2000
Commercial Investment Trust Corporate &
Banking Management Services Overhead Total
---------- ---------- -------- ----------- ---------
Net interest income $ 2,748 $ - $ 56 $ (160) $ 2,644
Non interest income 556 424 375 (38) 1,317
---------- ---------- -------- ----------- ---------
Total revenue 3,304 424 431 (198) 3,961
Loan loss provision 200 - - - 200
Non interest expense 1,940 334 292 31 2,597
---------- ---------- -------- ----------- ---------
Pretax income (loss) 1,164 90 139 (229) 1,164
Income taxes (benefit) 397 32 59 (84) 404
---------- ---------- -------- ----------- ---------
Segment net income $ 767 $ 58 $ 80 $ (145) $ 760
========== ========== ======== =========== =========
For the three months ended June 30, 1999
Commercial Investment Trust Corporate &
Banking Management Services Overhead Total
---------- ---------- -------- ----------- ---------
Net interest income $ 2,230 $ - $ 44 $ (152) $ 2,122
Non interest income 560 409 300 (62) 1,207
---------- ---------- -------- ----------- ---------
Total revenue 2,790 409 344 (214) 3,329
Loan loss provision 180 - - - 180
Non interest expense 1,720 302 261 10 2,293
---------- ---------- -------- ----------- ---------
Pretax income (loss) 890 107 83 (224) 856
Income taxes (benefit) 324 39 35 (79) 319
---------- ---------- -------- ----------- ---------
Segment net income $ 566 $ 68 $ 48 $ (145) $ 537
========== ========== ======== =========== =========
Continued on 9b
-9a-
<PAGE>
Continued from 9a
For the six months ended June 30, 2000
Commercial Investment Trust Corporate &
Banking Management Services Overhead Total
---------- ---------- -------- ----------- ---------
Net interest income $ 5,425 $ - $ 108 $ (322) $ 5,211
Non interest income 987 843 738 (84) 2,484
---------- ---------- -------- ----------- ---------
Total revenue 6,412 843 846 (406) 7,695
Loan loss provision 350 - - - 350
Non interest expense 3,761 943 648 61 5,413
---------- ---------- -------- ----------- ---------
Pretax income (loss) 2,301 (100) 198 (467) 1,932
Income taxes (benefit) 810 (38) 89 (170) 691
---------- ---------- -------- ----------- ---------
Segment net income $ 1,491 $ (62) $ 109 $ (297) $ 1,241
========== ========== ======== =========== =========
For the six months ended June 30, 1999
Commercial Investment Trust Corporate &
Banking Management Services Overhead Total
---------- ---------- -------- ----------- ---------
Net interest income $ 4,329 $ - $ 86 $ (309) $ 4,106
Non interest income 1,018 807 578 (73) 2,330
---------- ---------- -------- ----------- ---------
Total revenue 5,347 807 664 (382) 6,436
Loan loss provision 405 - - - 405
Non interest expense 3,267 729 534 10 4,540
---------- ---------- -------- ----------- ---------
Pretax income (loss) 1,675 78 130 (392) 1,491
Income taxes (benefit) 603 29 57 (140) 549
---------- ---------- -------- ----------- ---------
Segment net income $ 1,072 $ 49 $ 73 $ (252) $ 942
========== ========== ======== =========== =========
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains statements that constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The
words "believe," "estimate," "expect," "intend," "anticipate," "plan" and
similar expressions and variations thereof identify certain of such
forward-looking statements which speak only as of the dates on which they were
made. The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise. Readers are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those
indicated in the forward-looking statements as a result of various factors. Such
factors include, but are not limited to competition, general economic
conditions, potential changes in interest rates, and changes in the value of
real estate securing loans made by the Company.
-9b-
<PAGE>
COMPARISON OF BALANCE SHEETS AT JUNE 30, 2000 AND DECEMBER 31, 1999
Overview
Total assets of the Company were $223.0 million at June 30, 2000, compared
to $209.5 million at December 31, 1999, an increase of $13.5 million or 6.4%.
This increase was primarily the result of the Company's internal growth of
earning assets (primarily federal funds sold and loans) funded by an increase in
deposits.
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 $26.6 million at June 30, 2000, compared to
$24.4 million at December 31, 1999, an increase of $2.2 million or 9.0%.
Included in investment securities at June 30, 2000, were $10.2 million of
securities held as "available for sale" to provide the Bank greater flexibility
to respond to changes in interest rates and liquidity. These securities have
been recorded at market value.
Loans
Total loans were $171.6 million at June 30, 2000, compared to $156.9
million at December 31, 1999, an increase of $14.7 million or 9.4%. For the same
period, real estate mortgage loans increased by $7.7 million or 7.1%, commercial
loans increased by $7.7 million or 18.6%, and all other loans including consumer
loans decreased by $.7 million or 10.1%. Loans net of allowance for loan loss
and unearned fees were $167.9 million at June 30, 2000 compared to $153.5
million at December 31, 1999.
The following table sets forth information concerning the loan portfolio by
collateral types as of the dates indicated (dollars in thousands):
June 30, 2000 December 31, 1999
Real estate mortgage loans:
Commercial real estate $ 86,741 $ 82,622
One-to-four family residential 10,011 7,933
Multifamily residential 15,504 13,603
Construction and land development 4,220 4,585
------------- -------------
Total real estate mortgage loans 116,476 108,743
Commercial loans 49,063 41,358
Consumer loans 5,130 5,930
Other loans 956 839
------------- -------------
Gross loans 171,625 156,870
Allowances for loan losses (2,658) (2,341)
Unearned fees (1,102) (1,032)
------------- -------------
Total loans net of allowance
and unearned fees $ 167,865 $ 153,497
============= =============
-10-
<PAGE>
Asset Quality and Allowance for Loan Losses
The allowance for loan losses represents management's estimate of an amount
adequate to provide for potential losses within the existing loan portfolio. The
allowance is based upon an ongoing quarterly assessment of the probable
estimated losses inherent in the loan portfolio, and to a lesser extent, unused
commitments to provide financing.
The methodologies for assessing the appropriateness of the allowance
consist of several key elements, which include: 1) the formula allowance; 2)
review of the underlying collateral on specific loans; and 3) historical loan
losses. The formula allowance is calculated by applying loss factors to
outstanding loans and unused commitments, in each case based on the internal
risk grade of those loans. Changes in risk grades of both performing and
non-performing loans affect the amount of the formula allowance. On the larger
criticized or classified credits, a review is conducted of the underlying
collateral that secures each credit. A worse case scenario review is conducted
on those loans to calculate the amount, if any, of potential loss. The
historical loan loss method is a review of the last six years of actual losses.
The loss percentage is calculated and applied to the current outstanding loans
in total.
Various conditions that would affect the loan portfolio are also evaluated.
General economic and business conditions that affect the portfolio are reviewed
including: 1) credit quality trends including trends in past due and
non-performing loans; 2) collateral values in general; 3) loan volumes and
concentration; 4) recent loss experience in particular segments of the
portfolio; 5) duration and strength of the current business cycle; 6) bank
regulatory examination results; and 7) findings of the external loan review
process. Senior management and the Directors' General Loan Committee review
these conditions quarterly. If any of these conditions presents a problem to the
loan portfolio, an additional allocation may be recommended.
The following table sets forth information concerning the activity in the
allowance for loan losses during the periods indicated (dollars in thousands):
For the six months ended
June 30, 2000 June 30, 1999
-------------- --------------
Allowance at beginning of period $ 2,341 $ 1,984
Charge-offs:
Real estate loans - -
Commercial loans 27 -
Consumer loans 17 2
-------------- --------------
Total charge-offs 44 2
Recoveries:
Real estate loans 5 -
Commercial loans 5 -
Consumer loans 1 -
-------------- --------------
Total recoveries 11 -
Net charge-offs 33 2
Provision for loan losses 350 225
-------------- --------------
Allowance at end of period $ 2,658 $ 2,207
============== ==============
-11-
<PAGE>
Nonperforming Assets
Nonperforming assets include 1) loans which are 90 days or more past due
and have been placed into non-accrual status; 2) accruing loans that are 90 days
or more delinquent that are deemed by management to be adequately secured and in
the process of collection; and 3) ORE (i.e., real estate acquired through
foreclosure or deed in lieu of foreclosure). All delinquent loans are reviewed
on a regular basis and are placed on non-accrual status when, in the opinion of
management, the possibility of collecting additional interest is deemed
insufficient to warrant further accrual. As a matter of policy, interest is not
accrued on loans past due 90 days or more unless the loan is both well secured
and in process of collection. When a loan is placed in non-accrual status,
interest accruals cease and uncollected accrued interest is reversed and charged
against current income. Additional interest income on such loans is recognized
only when received.
The following table sets forth information regarding the components of
nonperforming assets at the dates indicated (dollars in thousands):
June 30, 2000 December 31, 1999
-------------- -----------------
Real estate loans $ 1,668 $ 1,462
Commercial loans 818 453
Consumer loans - -
-------------- -----------------
Total non-accrual loans(1) 2,486 1,915
Other Real Estate 416 1,528
Accruing Loans 90 days past due 1 441
-------------- -----------------
Total nonperforming assets $ 2,903 $ 3,884
============== =================
Bank Premises and Equipment
Bank premises and equipment was $9.4 million at June 30, 2000, compared
to $9.6 million at December 31, 1999, a decrease of $.2 million or 2.1%. This
decrease was primarily due to the depreciation of the buildings and equipment
and amortization of leasehold improvements.
Deposits
Total deposits were $179.5 million at June 30, 2000, compared to $175.1
million at December 31, 1999, an increase of $4.4 million or 2.5%. During the
six months ended June 30, 2000, demand deposits increased $2.4 million, NOW and
money market deposits decreased $4.8 million, and savings deposits and time
deposits increased $6.7 million.
Long-term Debt and Convertible Subordinated Debentures
There was no long-term debt outstanding (excluding convertible subordinated
debentures) at either June 30, 2000 or December 31, 1999. During both periods,
$630 thousand in convertible subordinated debentures were outstanding.
-12-
<PAGE>
Mandatory Redeemable Capital Securities of Subsidiary Trust
In December 1998, the Company, through a statutory business trust created
and owned by the Company, issued approximately $6.7 million (including an
overallotment of approximately $750 thousand that closed on January 14, 1999) of
Trust Preferred Securities that will mature on December 10, 2028. The principal
assets of the Trust are Debentures issued to the Company in an aggregate amount
of $6.96 million, with an interest rate of 9.40% and a maturity date of December
10, 2028.
Stockholders' Equity
Stockholders' equity was $17.9 million at June 30, 2000, or 8.04% of total
assets, compared to $16.8 million, or 8.02% of total assets at December 31,
1999. At June 30, 2000, the Bank's Tier I (core) Capital ratio was 7.50%, its
Tier I Risk-based Capital ratio was 9.15%, and its Total Risk-based Capital
ratio was 10.40%. 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 year to date net
income, less dividends declared and changes in the market value of securities
available for sale, net of deferred taxes.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
JUNE 30, 2000 AND 1999
Overview
Net income for the three months ended June 30, 2000 was $760 thousand or
$0.17 per share diluted, compared to $537 thousand or $0.12 per share diluted
for the same period in 1999. On a pre-tax basis, United Trust earned $139
thousand in 2000 versus $83 thousand in 1999, EPW earned $90 thousand versus
$107 thousand and the Bank's pre-tax profits increased to $1.2 million from $890
thousand during this same period.
Analysis of Net Interest Income
Interest income for the three months ended June 30, 2000 was $4.6 million,
compared to $3.5 million for the same period in 1999, a $1.1 million or 31.4%
increase. This increase in interest income is primarily due to an increase in
earning assets, consisting mostly of loans as well as a general increase in
interest rates. Interest expense was $2.0 million for the three months ended
June 30, 2000, compared to $1.4 million for the same period in 1999, a $0.6
million or 42.8% increase. This increase is primarily due to an increase in
interest bearing liabilities as well as a general increase in interest rates.
Provision for Loan Losses
For the three months ended June 30, 2000, the provision for loan losses
charged to expense was $200 thousand, compared to $180 thousand for the same
period in 1999, an increase of $20 thousand or 11.1%. The allowance of possible
loan losses was $2.7 million at June 30, 2000. Management's judgment 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 provisions will not be
required.
-13-
<PAGE>
Noninterest Income
Noninterest income for the three months ended June 30, 2000 was $1.3
million compared to $1.2 million for the same period in 1999, an increase of
$0.1 million or 8.3%. This increase was primarily due to increased revenues from
EPW and United Trust whose combined revenues increased $90 thousand during this
period as well as an increase in service charges on deposit accounts.
Noninterest Expense
Total noninterest expense for the three months ended June 30, 2000 was $2.6
million compared to $2.3 million for the same period in 1999, an increase of
$0.3 million or 13.0%. This increase was due to increases in salary and benefits
expense of $172 thousand, data processing expense of $46 thousand, and marketing
and business development expense of $90 thousand, which includes a $100 thousand
contribution to a local non-profit organization.
COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
Overview
Net income for the six months ended June 30, 2000 was $1.2 million or $0.28
per share diluted, compared to $942 thousand or $0.22 per share diluted for the
same period in 1999. On a pre-tax basis, United Trust earned $198 thousand in
2000 versus $130 thousand in 1999, EPW's pre-tax operating profits (before
deducting $280 thousand of costs associated with a cash payment in lieu of the
issuance of performance shares) increased to $180 thousand from $168 thousand
during this period and the Bank's pre-tax profits increased to $2.3 million from
$1.7 million during this same period.
Analysis of Net Interest Income
Interest income for the six months ended June 30, 2000 was $8.9 million,
compared to $6.9 million for the same period in 1999, a $2.0 million or 29.0%
increase. This increase in interest income is primarily due to an increase in
earning assets, consisting mostly of loans as well as a general increase in
interest rates. Interest expense was $3.7 million for the six months ended June
30, 2000, compared to $2.8 million for the same period in 1999, a $0.9 million
or 32.1% increase. This increase is primarily due to an increase in interest
bearing liabilities as well as a general increase in interest rates.
Provision for Loan Losses
For the six months ended June 30, 2000, the provision for loan losses
charged to expense was $350 thousand, compared to $405 thousand for the same
period in 1999, a decrease of $55 thousand or 13.6%. The allowance of possible
loan losses was $2.7 million at June 30, 2000. Management's judgment 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 provisions will not be
required.
-14-
<PAGE>
Noninterest Income
Noninterest income for the six months ended June 30, 2000 was $2.5 million
compared to $2.3 million for the same period in 1999, an increase of $0.2
million or 8.7%. This increase was primarily due to increased revenues from EPW
and United Trust whose combined revenues increased $197 thousand during this
period. An increase in service charges on deposit accounts of $82 thousand was
offset by a decrease of $87 thousand in the gain on sale of loans during this
period.
Noninterest Expense
Total noninterest expense for the six months ended June 30, 2000 was $5.4
million compared to $4.5 million for the same period in 1999, an increase of
$0.9 million or 20.0%. This increase was due to increases in salary and benefits
expense of $511 thousand (which includes $190 thousand related to the cash
payment in lieu of the issuance of performance shares pursuant to the
acquisition of EPW), data processing expense of $55 thousand, marketing and
business development expense of $94 thousand, which includes a $100 thousand
contribution to a local non-profit organization and other operating expense of
$218 thousand, which includes REO expense of $90 thousand and $37 thousand in
consulting expense.
LIQUIDITY
During the six months ended June 30, 2000, 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 overnight investments (i.e. federal
funds sold). At June 30, 2000, the Company had commitments to originate loans
totaling $8.0 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, the 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 June 30, 2000, the Bank had
liquidity of approximately $16.6 million, or approximately 15% of total
deposits.
Management believes the Bank was in compliance with all minimum capital
requirements that it was subject to at June 30, 2000.
-15-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and the 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 six months ended
June 30, 2000:
On January 31, 2000, an aggregate of 51,827 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"). 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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
The Annual Meeting of Shareholders (the "Annual Meeting") of the Company
was held on April 25, 2000. At the Annual Meeting 3,045,061 shares were present
in person or by proxy. The following matters were submitted to a vote of
shareholders:
1. To elect six persons as members of the Board of Directors.
The following directors were elected with a summary of the votes cast for
each nominee:
FOR AGAINST ABSTAIN TERM
Ward J. Curtis 3,044,936 125 - 3 years
Edward D. Foreman 3,044,936 125 - 3 years
Ian F. Irwin 3,042,936 2,125 - 3 years
William B. McQueen 3,044,736 325 - 2 years
Ronald R. Petrini 3,044,486 575 - 3 years
Harold J. Winner 3,044,936 125 - 3 years
In addition to the foregoing, the following individuals are directors of
United Financial whose terms continued after the Annual Meeting:
Ronald E. Clampitt Jack A. MaCris, M.D.
David K. Davis, M.D. John B. Norrie
William A. Eickhoff Neil W. Savage
Charles O. Lowe John B. Wier, Jr.
-16-
<PAGE>
2. To ratify the appointment of Grant Thornton L.L.P. as the Company's
independent auditors for 2000.
FOR AGAINST ABSTAIN
3,043,061 2,000 -
Grant Thornton was retained as independent accountants for the Company.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the period ending June 30,
2000.
================================================================================
-17-
<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: August 8, 2000 By: /s/ NEIL W. SAVAGE
------------------- ---------------------
Neil W. Savage
President and Chief
Executive Officer
Date: August 8,2000 By: /s/ C. PETER BARDIN
------------------- ---------------------
C. Peter Bardin
Senior Vice President
and Chief Financial
Officer
(Principal Financial
and Accounting Officer)
-18-
