U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 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 4,227,757
---------------------------------- ----------------------------------
Class Outstanding as of November 3, 2000
================================================================================
<PAGE>
UNITED FINANCIAL HOLDINGS, INC.
INDEX
PAGE
-------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets -
At September 30, 2000 and December 31, 1999 1
Condensed Consolidated Statements of Earnings -
For the three and nine months ended September 30, 2000 and 1999 2
Condensed Consolidated Statements of Comprehensive Income -
For the three and nine months ended September 30, 2000 and 1999 3
Condensed Consolidated Statement of Stockholders' Equity -
For the nine months ended September 30, 2000 4
Condensed Consolidated Statements of Cash Flows -
For the nine months ended September 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 15
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 16
ITEM 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
United Financial Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
2000 1999
(unaudited) (audited)
ASSETS --------------- ---------------
Cash and due from banks $ 8,803 $ 8,866
Federal funds sold 2,679 2,917
Trading securities - 82
Securities held to maturity, market value
of $16,089 and $14,072 respectively 16,366 14,541
Securities available for sale, at market 9,922 9,924
Loans, net 172,407 153,497
Premises and equipment, net 9,512 9,619
Federal Home Loan Bank stock 507 507
Federal Reserve Bank stock 226 204
Intangible assets 1,990 1,748
Other real estate owned 256 1,528
Other assets 6,277 6,048
--------------- ---------------
Total assets $ 228,945 $ 209,481
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand $ 37,062 $ 32,936
NOW and money market 68,722 67,914
Savings and time deposits 81,248 74,248
--------------- ---------------
Total deposits 187,032 175,098
Securities sold under agreements to
repurchase and fed funds purchased 12,256 7,307
Convertible subordinated debentures 630 630
Other liabilities 3,451 2,874
--------------- ---------------
Total liabilities 203,369 185,909
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 (146) (232)
Retained earnings 8,911 7,240
--------------- ---------------
Total stockholders' equity 18,826 16,822
--------------- ---------------
Total liabilities and stockholders'equity $ 228,945 $ 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 Nine Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Interest income
Loans and loan fees $ 4,608 $ 3,293 $ 12,428 $ 9,167
Securities 442 431 1,223 1,292
Federal funds sold and
securitiespurchased under
reverse repurchase
agreements 120 70 402 204
------------ ------------ ------------ ------------
Total interest income 5,170 3,794 14,053 10,663
Interest expense
Deposits 1,837 1,245 4,989 3,567
Long-term debt and
other borrowings 136 57 340 182
Subordinated debentures
issued to subsidiary trust 159 158 476 474
------------ ------------ ------------ ------------
Total interest expense 2,132 1,460 5,805 4,223
------------ ------------ ------------ ------------
Net interest income 3,038 2,334 8,248 6,440
Provision for loan losses 250 205 600 610
Net interest income after
provision for loan losses 2,788 2,129 7,648 5,830
Other income
Service charges on
deposit accounts 275 210 730 584
Trust & investment mangement 789 1,089 2,346 2,450
Gain on sale of loans 117 40 281 290
All other fees and income 153 156 462 502
------------ ------------ ------------ ------------
Total other income 1,334 1,495 3,819 3,826
Other expense
Salaries and employee
benefits 1,560 1,535 4,635 4,098
Occupancy 136 128 377 388
Furniture and equipment 143 140 456 438
Data processing 140 132 433 371
Marketing and business
development 78 156 303 287
Other 474 552 1,740 1,601
------------ ------------ ------------ ------------
Total other expense 2,531 2,643 7,944 7,183
------------ ------------ ------------ ------------
Earnings before income taxes 1,591 981 3,523 2,473
Income tax expense 604 343 1,295 892
------------ ------------ ------------ ------------
NET EARNINGS $ 987 $ 638 $ 2,228 $ 1,581
============ ============ ============ ============
Earnings per share:
Basic $ .23 $ .15 $ .53 $ .38
Diluted $ .22 $ .15 $ .50 $ .37
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 Nine Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Net earnings $ 987 $ 638 $ 2,228 $ 1,581
Other comprehensive income
Unrealized holding
gains (losses) 192 (27) 131 (359)
Income tax (expense) benefit
related to items of
other comprehensive income (65) 9 (45) 122
------------ ------------ ------------ ------------
Comprehensive income $ 1,114 $ 620 $ 2,314 $ 1,344
============ ============ ============ ============
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)
7% Accumulated
Con- Other
vertible Compre-
Common Preferred Paid-In hensive Treasury Retained
Stock Stock Capital Income Shares Earnings Total
------- -------- ------- -------- -------- -------- --------
Balance at
December 31,
1999 $ 42 $ 100 $ 9,672 $ (232) $ - $ 7,240 $ 16,822
Net earnings - - - - - 2,228 2,228
Dividends on common
and preferred
stock - - - - - (557) (557)
Accumulated other
comprehensive
income - - - 86 - - 86
Treasury shares
redeemed - - - - (100) - (100)
Performance shares
issued - - 347 - - - 347
------- -------- ------- -------- -------- -------- --------
Balance at
September 30,
2000 $ 42 $ 100 $10,019 $ (146) $ (100) $ 8,911 $ 18,826
======= ======== ======= ======== ======== ======== ========
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)
Nine Months Ended
September 30, September 30,
2000 1999
------------- --------------
Cash flows from operating activities:
Net earnings $ 2,228 $ 1,581
Adjustments to reconcile net earnings
to net cash provided by operating
activities
Provision for loan losses 600 610
Provision for depreciation and
amortization 592 581
Unrealized gain on trading securities - (32)
Accretion of securities discount (10) (21)
Amortization of unearned loan fees (75) (100)
Amortization of securities premiums 9 14
Gain on sales of loans (426) (491)
(Increase) in interest receivable (159) (44)
Increase in interest payable 224 22
Decrease (increase) in other assets 1,220 (1,199)
Increase (decrease) in other liabilities 353 (502)
------------- --------------
Net cash provided by
operating activities 4,556 419
Cash flows from investing activities:
Purchase of Federal Reserve Bank stock
and FHLB stock (23) (118)
Net decrease (increase) in Federal funds sold 238 (1,696)
Principal repayments of held to maturity
securities 24 1,265
Principal repayments of available for
sale securities 558 2,017
Proceeds from sale of trading securities 75 -
Proceeds from maturities of available for
sale securities 1,500 4,000
Proceeds from maturities of held to
maturity securities 1,266 130
Purchases of available for sale securities (2,767) (4,991)
Purchases of held to maturity securities (2,310) (1,899)
Proceeds from sales of loans 5,429 5,180
Net (increase) in loans (24,438) (33,695)
Capital expenditures (396) (1,015)
-------------- -------------
Net cash used in investing activities (20,844) (30,822)
(continued on Page 6)
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)
Nine Months Ended
September 30, September 30,
2000 1999
------------- --------------
Cash flows from financing activities:
Net (decrease) increase in demand deposits,
NOW accounts, money market accounts and
savings accounts $ 4,866 $ 24,674
Net increase in certificates of deposit 7,067 7,783
Net increase (decrease) in securities sold
under agreements to repurchase 4,949 (2,945)
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 - 767
Dividend paid on preferred stock (7) (10)
Dividend paid on common stock (550) (496)
Purchase of Treasury Shares (100) -
------------- --------------
Net cash provided by financing activities 16,225 30,489
------------- --------------
Net increase (decrease) in cash and
due from banks (63) 86
Cash and due from banks at beginning
of period 8,866 7,967
------------- --------------
Cash and due from banks at end of period $ 8,803 $ 8,053
============= ==============
Cash paid during the period for:
Interest $ 5,581 $ 4,201
Income taxes $ 1,568 $ 876
Supplemental Disclosure of Non-cash Activity
Reclassification of loans to foreclosed
real estate $ - $ 1,038
Non-cash common stock issued $ 347 $ 399
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
UNITED FINANCIAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 1 - HOLDING COMPANY AND SUBSIDIARIES BACKGROUND INFORMATION
United Financial Holdings, Inc. (the "Company") is a registered financial
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 EPW Investment Management,
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 nine months ended September 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, 1999 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 of
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 the conversion of the convertible debt and
the preferred stock and the exercise of 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 September 30,
2000 1999
Weighted Per Weighted Per
Average Share Average Share
Earnings Shares Amt Earnings Shares Amnt
-------- --------- ----- -------- --------- -----
Basic EPS
Net earnings available to
common stockholders $ 983 4,230,000 $ .23 $ 635 4,165,619 $ .15
===== =====
Effect of dilutive securities
Incremental shares from
assumed exercise or
conversion of:
Convertible debt 8 152,789 8 152,789
Preferred stock 3 84,345 3 84,345
Stock options - 2,688 - -
--------- --------- -------- ---------
Diluted EPS
Net earnings available
to common stockholders
and assumed conversions $ 994 4,469,822 $ .22 $ 646 4,402,753 $ .15
========= ========= ===== ======== ========= =====
For the nine months ended September 30,
2000 1999
Weighted Per Weighted Per
Average Share Average Share
Earnings Shares Amt Earnings Shares Amnt
-------- --------- ----- -------- --------- -----
Basic EPS
Net earnings available to
common stockholders $ 2,221 4,229,493 $ .53 $ 1,570 4,093,108 $ .38
===== =====
Effect of dilutive securities
Incremental shares from
assumed exercise or
conversion of:
Convertible debt 23 152,789 23 152,789
Preferred stock 7 84,345 11 144,685
Stock options - 2,566 - -
-------- --------- ----- -------- --------- -----
Diluted EPS
Net earnings available
to common stockholders
and assumed conversions $ 2,251 4,469,193 $ .50 $ 1,604 4,390,582 $ .37
======== ========= ===== ======== ========= =====
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 nine months ended September 30,
2000 and 1999, respectively:
8
<PAGE>
For the three months ended September 30, 2000
Commercial Investment Trust Corporate
Banking Management Services & Overhead Total
---------- ---------- --------- ---------- ---------
Net interest income $ 3,136 $ - $ 62 $ (160) $ 3,038
Non interest income 572 426 375 (39) 1,334
---------- ---------- --------- ---------- ---------
Total revenue 3,708 426 437 (199) 4,372
Loan loss provision 250 - - - 250
Non interest expense 1,883 335 280 33 2,531
---------- ---------- --------- ---------- ---------
Pretax income (loss) 1,575 91 157 (232) 1,591
Income taxes (benefit) 586 35 67 (84) 604
---------- ---------- --------- ---------- ---------
Segment net income $ 989 $ 56 $ 90 $ (148) $ 987
========== ========== ========= ========== =========
For the three months ended September 30, 1999
Commercial Investment Trust Corporate
Banking Management Services & Overhead Total
---------- ---------- --------- ---------- ---------
Net interest income $ 2,426 $ - $ 47 $ 139) $ 2,334
Non interest income 430 395 706 (36) 1,495
---------- ---------- --------- ---------- ---------
Total revenue 2,856 395 753 (175) 3,829
Loan loss provision 205 - - - 205
Non interest expense 1,766 520 347 10 2,643
---------- ---------- --------- ---------- ---------
Pretax income (loss) 885 (125) 406 (185) 981
Income taxes (benefit) 304 (46) 156 (71) 343
---------- ---------- --------- ---------- ---------
Segment net income $ 581 $ (79) $ 250 $ (114) $ 638
========== ========== ========= ========== =========
(Continued on Page 9b)
9 a
<PAGE>
Continued from from Page 9a........
For the nine months ended September 30, 2000
Commercial Investment Trust Corporate
Banking Management Services & Overhead Total
---------- ---------- --------- ---------- ---------
Net interest income $ 8,561 $ - $ 170 $ (483) $ 8,248
Non interest income 1,559 1,269 1,113 (122) 3,819
---------- ---------- --------- ---------- ---------
Total revenue 10,120 1,269 1,283 (605) 12,067
Loan loss provision 600 - - - 600
Non interest expense 5,643 1,278 928 95 7,944
---------- ---------- --------- ---------- ---------
Pretax income (loss) 3,877 (9) 355 (700) 3,523
Income taxes (benefit) 1,397 (3) 156 (255) 1,295
---------- ---------- --------- ---------- ---------
Segment net income $ 2,480 $ (6) $ 199 $ (445) $ 2,228
========== ========== ========= ========== =========
For the nine months ended September 30, 1999
Commercial Investment Trust Corporate
Banking Management Services & Overhead Total
---------- ---------- --------- ---------- ---------
Net interest income $ 6,755 $ - $ 133 $ (448) $ 6,440
Non interest income 1,448 1,202 1,284 (108) 3,826
---------- ---------- --------- ---------- ---------
Total revenue 8,203 1,202 1,417 (556) 10,266
Loan loss provision 610 - - - 610
Non interest expense 5,033 1,248 881 21 7,183
---------- ---------- --------- ---------- ---------
Pretax income (loss) 2,560 (46) 536 (577) 2,473
Income taxes (benefit) 907 (16) 213 (212) 892
---------- ---------- --------- ---------- ---------
Segment net income $ 1,653 $ (30) $ 323 $ (365) $ 1,581
========== ========== ========= ========== =========
9 b
<PAGE>
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.
COMPARISON OF BALANCE SHEETS AT SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
Overview
Total assets of the Company were $228.9 million at September 30, 2000,
compared to $209.5 million at December 31, 1999, an increase of $19.4 million or
9.3%. This increase was primarily the result of the Company's internal growth of
earning assets (primarily loans) funded by an increase in deposits and
securities sold under agreements to repurchase.
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 $26.3 million at September 30, 2000,
compared to $24.4 million at December 31, 1999, an increase of $1.9 million or
7.8%. Included in investment securities at September 30, 2000, were $9.9 million
of securities held as "available for sale" to provide the Company greater
flexibility to respond to changes in interest rates and liquidity. These
securities have been recorded at market value.
Loans
Total loans were $176.3 million at September 30, 2000, compared to $156.9
million at December 31, 1999, an increase of $19.4 million or 12.4%. For the
same period, real estate mortgage loans increased by $8.4 million or 7.7%,
commercial loans increased by $11.4 million or 27.5%, and all other loans
including consumer loans decreased by $.5 million or 7.4%. Loans net of
allowance for loan loss and unearned fees were $172.4 million at September 30,
2000 compared to $153.5 million at December 31, 1999.
10
<PAGE>
The following table sets forth information concerning the loan portfolio
by collateral types as of the dates indicated (dollars in thousands):
September 30, 2000 December 31, 1999
------------------ -----------------
Real estate mortgage loans:
Commercial real estate $ 85,410 $ 82,622
One-to-four family residential 9,663 7,933
Multifamily residential 16,250 13,603
Construction and land development 5,765 4,585
------------------ -----------------
Total real estate mortgage loans 117,088 108,743
Commercial loans 52,823 41,358
Consumer loans 5,353 5,930
Other loans 986 839
----------------- -----------------
Gross loans 176,250 156,870
Allowances for loan losses (2,755) (2,341)
Unearned fees (1,088) (1,032)
----------------- -----------------
Total loans net of
allowance and unearned fees $ 172,407 $ 153,497
================= =================
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.
11
<PAGE>
The following table sets forth information concerning the activity in the
allowance for loan losses during the periods indicated (dollars in thousands):
For the nine months ended
September 30, 2000 September 30, 1999
------------------ ------------------
Allowance at beginning of period $ 2,341 $ 1,984
Charge-offs:
Real estate loans - 144
Commercial loans 227 269
Consumer loans 17 25
------------------ ------------------
Total charge-offs 244 438
Recoveries:
Real estate loans 25 -
Commercial loans 29 25
Consumer loans 4 -
------------------ ------------------
Total recoveries 58 25
Net charge-offs 186 413
Provision for loan losses 600 610
------------------ ------------------
Allowance at end of period $ 2,755 $ 2,181
================== ==================
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):
September 30, 2000 December 31, 1999
------------------ -----------------
Real estate loans $ 484 $ 1,462
Commercial loans 314 453
Consumer loans - -
------------------ -----------------
Total non-accrual loans 798 1,915
Other real estate 256 1,528
Accruing loans 90 days past due 2 441
------------------ -----------------
Total nonperforming assets $ 1,056 $ 3,884
================== =================
Bank Premises and Equipment
Bank premises and equipment was $9.5 million at September 30, 2000,
compared to $9.6 million at December 31, 1999, a decrease of $0.1 million or
1.0%. This decrease was primarily due to the depreciation of the buildings and
equipment and amortization of leasehold improvements.
12
<PAGE>
Deposits
Total deposits were $187.0 million at September 30, 2000, compared to
$175.1 million at December 31, 1999, an increase of $11.9 million or 6.8%.
During the nine months ended September 30, 2000, demand deposits increased $4.2
million, NOW and money market deposits increased $0.8 million, and savings
deposits and time deposits increased $7.0 million.
Long-term Debt and Convertible Subordinated Debentures
There was no long-term debt outstanding (excluding convertible
subordinated debentures) at either September 30, 2000 or December 31, 1999.
During both periods, $630 thousand in convertible subordinated debentures were
outstanding.
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 $18.8 million at September 30, 2000, or 8.21% of
total assets, compared to $16.8 million, or 8.02% of total assets at December
31, 1999. At September 30, 2000, the Bank's Tier I (core) Capital ratio was
7.67%, its Tier I Risk-based Capital ratio was 9.40%, and its Total Risk-based
Capital ratio was 10.65%. 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 treasury shares redeemed, and increases
in the market value of securities available for sale, net of deferred taxes.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
Overview
Net income for the three months ended September 30, 2000 was $987
thousand or $0.22 per share diluted, compared to $638 thousand or $0.15 per
share diluted for the same period in 1999. On a pre-tax basis, United Trust
earned $157 thousand in 2000 versus $406 thousand in 1999, EPW earned $91
thousand versus $82 thousand (before deducting $207 thousand of costs associated
with the cash payment in lieu of the issuance of revenue shares) and the Bank's
pre-tax profits increased to $1.6 million from $885 thousand during this same
period.
Analysis of Net Interest Income
Interest income for the three months ended September 30, 2000 was $5.2
million, compared to $3.8 million for the same period in 1999, a $1.4 million or
36.8% 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 $2.1 million for the three months ended
September 30, 2000, compared to $1.5 million for the same period in 1999, a $0.6
million or 40.0% increase. This increase is primarily due to an increase in
interest bearing liabilities as well as a general increase in interest rates.
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Provision for Loan Losses
For the three months ended September 30, 2000, the provision for loan
losses charged to expense was $250 thousand, compared to $205 thousand for the
same period in 1999, an increase of $45 thousand or 21.9%. The allowance of
possible loan losses was $2.8 million at September 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.
Noninterest Income
Noninterest income for the three months ended September 30, 2000 was $1.3
million compared to $1.5 million for the same period in 1999, a decrease of $0.2
million or 13.3%. This decrease was primarily due to an extraordinary fee of
$350 thousand from a trust account for services provided in conjunction with the
sale of a closely held company in 1999, partially offset by an increase in
service charges on deposit accounts and gain on sale of loans.
Noninterest Expense
Total noninterest expense for the three months ended September 30, 2000
was $2.5 million compared to $2.6 million for the same period in 1999, a
decrease of $0.1 million or 3.8%. This decrease was due to lower marketing and
business development expenses and lower consulting expense included in the
"other" category.
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
Overview
Net income for the nine months ended September 30, 2000 was $2.2 million
or $0.50 per share diluted, compared to $1.6 million or $0.37 per share diluted
for the same period in 1999. On a pre-tax basis, United Trust earned $355
thousand in 2000 versus $536 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 $289 thousand from $250
thousand (before deducting $297 thousand of costs associated with the cash
payment in lieu of the issuance of performance shares) during this period and
the Bank's pre-tax profits increased to $3.9 million from $2.6 million during
this same period.
Analysis of Net Interest Income
Interest income for the nine months ended September 30, 2000 was $14.1
million, compared to $10.7 million for the same period in 1999, a $3.4 million
or 31.8% 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 $5.8 million for the nine
months ended September 30, 2000, compared to $4.2 million for the same period in
1999, a $1.6 million or 38.1% 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 nine months ended September 30, 2000, the provision for loan
losses charged to expense was $600 thousand, compared to $610 thousand for the
same period in 1999, a decrease of $10 thousand or 1.6%. The allowance of
possible loan losses was $2.8 million at September 30, 2000. Management's
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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.
Noninterest Income
Noninterest income for the nine months ended September 30, 2000 was $3.8
million unchanged from the same period in 1999. EPW and United Trust's combined
revenues increased $246 thousand in 2000, adjusting for the extraordinary fee of
$350 thousand recorded in 1999. An increase in service charges on deposit
accounts of $146 thousand was partially offset by a decrease of $49 thousand in
the gain on sale of loans and other fees during this period.
Noninterest Expense
Total noninterest expense for the nine months ended September 30, 2000
was $7.9 million compared to $7.2 million for the same period in 1999, an
increase of $0.7 million or 9.7%. This increase was due to increases in salary
and benefits expense of $537 thousand, data processing expense of $62 thousand,
and other operating expense of $139 thousand, which includes REO expense of $129
thousand.
LIQUIDITY
During the nine months ended September 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 September 30, 2000, the Company had commitments to
originate loans totaling $8.2 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
September 30, 2000, the Bank had liquidity of approximately $19.9 million, or
approximately 11% of total deposits.
Management believes the Bank was in compliance with all minimum capital
requirements that it was subject to at September 30, 2000.
For information concerning the recent announcement of the pending
acquisition of First Security Bank in Sarasota, Florida by the Company, please
see PART II. ITEM 5. "OTHER INFORMATION".
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.
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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 nine months
ended September 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
None.
ITEM 5. OTHER INFORMATION
The Company announced on October 6, 2000 an agreement to purchase 100%
of the stock of First Security Bank, located in Sarasota. Completion of the
transaction is subject to First Security Bank shareholder approval and other
customary conditions. The purchase price is anticipated to be in a range of $5
to $5.5 million, payable in a combination of cash and convertible preferred
stock. The agreement also contemplates that additional incentive shares may be
payable based on First Security's achieving certain future financial targets.
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 September
30, 2000.
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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: November 3, 2000 By: /s/ NEIL W. SAVAGE
-------------------- -------------------
Neil W. Savage
President and Chief Executive Officer
Date: November 3, 2000 By: /s/ C. PETER BARDIN
-------------------- --------------------
C. Peter Bardin
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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