<PAGE>
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended June 30, 2000.
Or
[_] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the transition period from ____________________ to ____________________
Commission File No. 0-13395
UNITED FINANCIAL BANKING COMPANIES, INC.
A Virginia Corporation IRS Employer Identification
No. 54-1201253
8399 Leesburg Pike, Vienna, Virginia 22182
Telephone: (703) 734-0070
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Common Stock $1.00 Par Value
1,001,499 Shares Outstanding
as of June 30, 2000
Transitional Small Business Disclosure Format: Yes No X
--- ---
<PAGE>
Part 1. Financial Information
Item 1: Financial Statements
UNITED FINANCIAL BANKING COMPANIES, INC., AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income / Results
of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ----------
Interest income:
Interest and fees on
loans/leases $1,001,283 $ 814,828 $1,937,208 $1,617,930
Interest on investment
securities 130,990 104,567 248,055 204,222
Interest on federal
funds sold 138,627 50,452 215,696 122,195
---------- --------- ---------- ----------
Total interest income 1,270,900 969,847 2,400,959 1,944,347
---------- --------- ---------- ----------
Interest expense:
Interest on deposits 447,148 376,075 845,758 773,790
Interest on short-term
borrowings - 7,334 - 7,334
---------- --------- ---------- ----------
Total interest expense 447,148 383,409 845,758 781,124
---------- --------- ---------- ----------
Net interest income 823,752 586,438 1,555,201 1,163,223
Provision for
loan/lease losses 33,000 22,200 66,000 34,279
---------- --------- ---------- ----------
Net interest income
after provision
for loan/lease losses 790,752 564,238 1,489,201 1,128,944
Noninterest income:
Gain (loss) on sale of
real estate
owned and other
earning assets - 500 (280) (2,464)
Loan servicing and
other fees 17,007 18,174 32,020 36,554
Other income 41,541 31,444 84,685 67,621
---------- --------- ---------- ----------
Total noninterest
income 58,548 50,118 116,425 101,711
---------- --------- ---------- ----------
Noninterest expense:
Salaries 285,554 247,558 561,757 477,210
Employee benefits 49,534 46,285 99,314 92,948
Occupancy 99,429 94,201 197,276 173,122
Furniture and
equipment 31,992 19,113 75,063 38,911
Legal 8,983 5,484 14,640 12,669
FDIC insurance 2,446 4,979 4,863 9,876
Other insurance 7,076 6,835 13,129 15,800
Data processing 38,240 28,523 76,475 61,379
Real estate owned
holding expense 5,359 853 12,162 8,514
Other expense 105,852 75,741 209,884 147,674
---------- --------- ---------- ----------
Total noninterest
expense 634,465 529,572 1,264,563 1,038,103
---------- --------- ---------- ----------
Income (loss) before
income taxes 214,835 84,784 341,063 192,552
Provision (credit) for
income taxes - 4,608 - 4,608
---------- --------- ---------- ----------
Net income (loss) $ 214,835 $ 80,176 $ 341,063 $ 187,944
========== ========= ========== ==========
Net income (loss) per
common share (Note 3)
Basic $ 0.21 $ 0.10 $ 0.34 $ 0.23
========== ========= ========== ==========
Diluted $ 0.21 $ 0.10 $ 0.34 $ 0.23
========== ========= ========== ==========
Comprehensive Income
(Note 4)
Net income $ 214,835 $ 80,176 $ 341,063 $ 187,944
Other comprehensive
income, net of tax
Unrealized gains
(losses) on
available-for-sale
securities 3,166 (55,263) (13,563) (71,658)
---------- --------- ---------- ----------
Comprehensive income $ 218,001 $ 24,913 $ 327,500 $ 116,286
========== ========= ========== ==========
2
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UNITED FINANCIAL BANKING COMPANIES, INC., AND SUBSIDIARIES
Consolidated Balance Sheets / Financial Condition
(Unaudited) (Audited)
June 30, December 31
Assets 2000 1999
------ ----------- -----------
Cash and due from banks $ 2,323,153 $ 2,104,515
Federal funds sold 9,950,000 5,033,000
Investment Securities:
Available-for-sale (AFS) 6,982,612 6,813,528
Held-to-maturity (HTM) 1,678,959 -
Loans and lease financing, net of unearned
income of $63,136 and $38,805 46,245,397 40,652,769
Less: Allowance for loan/lease losses (849,651) (783,143)
------------ ------------
Net loans and lease financing 45,395,746 39,869,626
Real estate owned held for sale, net 1,332,407 1,424,650
Premises and equipment, net 270,341 310,784
Deferred income taxes 511,424 511,424
Other assets 419,324 388,365
------------ ------------
Total assets $ 68,863,966 $ 56,455,892
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Deposits:
Demand $ 17,277,170 $ 12,248,025
Savings and NOW 5,572,905 4,902,524
Money market 16,672,852 11,473,851
Time deposits:
Under $100,000 14,567,351 15,513,608
$100,000 and over 6,754,566 5,053,294
------------ ------------
Total deposits 60,844,844 49,191,302
------------ ------------
Other liabilities 419,172 336,525
------------ ------------
Total liabilities 61,264,016 49,527,827
------------ ------------
Stockholders' Equity:
Preferred stock of no par value,
authorized
5,000,000 shares, no shares issued - -
Common Stock, par value $1; authorized
3,500,000 shares, issued 1,001,499
shares at 6/30/00 and 963,234 at
12/31/99 1,001,499 963,234
Capital in excess of par value 15,975,810 15,669,690
Retained earnings (9,263,224) (9,604,287)
Unrealized holding gain (loss) - AFS
securities (114,135) (100,572)
------------ ------------
Total stockholders' equity 7,599,950 6,928,065
------------ ------------
Total liabilities and stockholders' equity $ 68,863,966 $ 56,455,892
============ ============
3
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UNITED FINANCIAL BANKING COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
----------------------------
June 30, 2000 June 30, 1999
------------- -------------
Cash flows from operating activities:
Net Income $ 341,063 $ 187,943
Adjustment to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation & amortization 53,058 24,322
Provision for loan/lease losses 66,000 34,279
Amortization of investment security
discount (6) 3,608
Amortization of loan fees and discounts,
net 33,864 (48,396)
Net (gain) loss on disposal of equipment (2,735) -
Net (gain) loss on sale of other real
estate owned 280 2,964
(Increase) decrease in other assets (30,959) (39,936)
Increase (decrease) in other liabilities 82,647 30,419
------------ ------------
Net cash provided by (used in) operating
activities 543,212 195,203
------------ ------------
Cash flows from investing activities:
Loans originated - non-bank subsidiaries (428,187) (50,000)
Principal collected - non-bank
subsidiaries 245,177 23,169
Loans and lease originations, net of
collections (5,442,974) 557,574
Purchases of securities
available-for-sale (1,167,326) 9,397
Purchases of securities held-to-maturity (1,751,539) (2,969,945)
Investment made in other real estate
owned (34,657) -
Proceeds received from maturity of
securities available-for-sale 987,399 (41,552)
Proceeds received from maturity of
securities held to maturity 69,866 1,019,451
Proceeds from real estate owned 126,620 1,105,000
Purchases of premises and equipment (15,880) 303,236
Proceeds from disposal of equipment 6,000 (111,598)
------------ ------------
Net cash provided by (used in) investing
activities (7,405,501) (155,268)
------------ ------------
Cash flow from financing activities:
Net increase (decrease) in demand
deposits, savings accounts, NOW
accounts and money market accounts 10,898,527 470,279
Certificates of deposit sold (matured),
net 755,015 (2,831,657)
Net change in short-term borrowings - 1,100,000
Proceeds from sale of common stock 344,385 -
------------ ------------
Net cash provided by (used in) financing
activities 11,997,927 (1,261,378)
------------ ------------
Net increase (decrease) in cash and cash
equivalents 5,135,638 (1,221,443)
Cash and cash equivalents at beginning of
the year 7,137,515 10,170,910
------------ ------------
Cash and cash equivalents at end of the
quarter $ 12,273,153 $ 8,949,467
============ ============
Supplemental disclosures of cash flow
information:
Cash paid during the years for:
Interest on deposits and other borrowings $ 826,017 $ 800,804
Income taxes 1,513 10,885
Non-Cash Items:
Effect on stockholders' equity of an
unrealized gain (loss)
on debt and equity securities
available-for-sale $ (13,563) $ 71,658
4
<PAGE>
Notes to Consolidated Financial Statements
------------------------------------------
Note 1 - The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions for Form 10-QSB and,
therefore, do not include all information and footnotes required by
generally accepted accounting principles for complete financial
statements. The interim financial statements have been prepared
utilizing the interim basis of reporting and, as such, reflect all
adjustments which are, in the opinion of management, necessary for a
fair presentation of the results for the periods presented. The
results of operations for the interim periods are not necessarily
indicative of the results for the full year.
Note 2 - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Note 3 - On December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, Earnings per share (SFAS 128), which
supersedes Accounting Principles Board Opinion No. 15. Under SFAS 128,
earnings per common share are computed by dividing net income (loss)
available to common stockholders by the weighted average number of
common shares outstanding during the period. Diluted earnings per
share reflects the potential dilution, if any, that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common
stock. Prior period amounts have been restated, where appropriate, to
conform to the requirements of SFAS 128.
Note 4 - On January 1, 1998, United Financial Banking Companies, Inc. adopted
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income (SFAS 130). Under SFAS 130, each company is
required to present a 'Statement of Comprehensive Income'.
Comprehensive income is defined as the change in equity during a
period from transactions and other events and circumstances from
non-owner sources such as foreign currency items, minimum pension
liability adjustments and unrealized gains and losses on certain
investments in debt and equity securities.
5
<PAGE>
----------------------------------------------------
UNITED FINANCIAL BANKING COMPANIES, INC.
CONSOLIDATED AVERAGE BALANCES/NET INTEREST ANALYSIS/
YIELDS AND RATES
----------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, 2000 June 30, 1999
-------------------------------------------------------------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
--------------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans/Leases:
Commercial $26,713,185 $ 1,222,468 9.18% $23,939,845 $ 1,065,581 8.98%
Real estate
construction 5,369,608 285,690 10.67% 3,854,964 196,381 10.27%
Real estate
mortgage 8,526,253 338,734 7.97% 7,163,116 286,306 8.06%
Installment 2,132,454 90,316 8.49% 1,578,338 69,662 8.90%
Leases - - - - - -
----------- ----------- ----------- -----------
Total loans/leases 42,741,500 1,937,208 9.09% 36,536,263 1,617,930 8.93%
----------- ----------- ----------- -----------
Interest-bearing
deposits - - - - - -
Federal funds sold 7,195,942 215,696 6.01% 5,200,585 122,195 4.74%
Investment securities 8,059,869 248,055 6.17% 7,066,139 204,222 5.83%
----------- ----------- ----------- -----------
Total earning assets 57,997,311 2,400,959 8.30% 48,802,987 1,944,347 8.03%
=========== ===========
Noninterest-earning
assets
Cash and due from banks 1,931,199 1,924,608
Other assets 2,499,181 2,156,443
Allowance for loan
losses/lease (813,721) (739,055)
----------- -----------
Total assets $61,613,970 $52,144,983
=========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing
liabilities:
Interest-bearing
deposits:
Savings and NOW
accounts 5,457,900 74,751 2.75% 3,480,845 38,861 2.25%
Money market accounts 13,246,335 218,001 3.30% 8,828,378 134,981 3.08%
Time:
Under $100,000 15,081,675 395,420 5.26% 16,932,376 436,097 5.19%
$100,000 and over 6,011,958 157,586 5.26% 6,484,373 163,851 5.10%
----------- ----------- ----------- -----------
Total
interest-bearing
deposits 39,797,868 845,758 4.26% 35,725,972 773,790 4.37%
Short-term
borrowings - - 300,000 7,334 4.93%
----------- ----------- ----------- -----------
Total
interest-bearing
liabilities 39,797,868 845,758 4.26% 36,025,972 781,124 4.37%
=========== ===========
Non
interest-bearing
liabilities:
Demand deposits 14,138,581 10,691,024
Other liabilities 409,374 323,077
Stockholders'
equity 7,268,147 5,104,910
----------- -----------
Total liabilities and
stockholders' equity $61,613,970 $52,144,983
============ ============
Net interest income $1,555,201 $1,163,223
========== ==========
Net interest margin (1) 5.38% 4.81%
===== =====
Net interest spread (2) 4.04% 3.66%
===== =====
Fees included in
loan income $ 70,530 $ 73,888
========== ==========
Taxable equivalent
adjustment $ - $ -
========== ==========
</TABLE>
Average balances for the years presented are calculated on a monthly basis.
Nonaccruing loans are included in the average loan balance.
(1) Net interest income divided by total earning assets.
(2) Average rate earned on total earning assets less average rate paid for
interest-bearing liabilities.
6
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward looking statements. This discussion contains forward looking statements,
including statements of goals, intentions and expectations as to future trends,
plans, or results of Company operations and policies and regarding general
economic conditions. These statements are based upon current and anticipated
economic conditions, nationally and in the Company's market, interest rates and
interest rate policy, competitive factors, statements by suppliers of data
processing equipment and services, government agencies and of third parties, as
to Year 2000 compliance, and other conditions which, by their nature, are not
susceptible to accurate forecast, and are subject to significant uncertainty.
Because of these uncertainties and the assumptions on which this discussion and
the forward looking statements are based, actual future operations and results
may differ materially from those indicated herein.
A. Results of Operations for the Six Months Ended June 30, 2000 as Compared to
---------------------------------------------------------------------------
the Six Months Ended June 30, 1999
----------------------------------
General
-------
The following discussion provides an overview of the financial
condition and results of operations of United Financial Banking Companies, Inc.
(UFBC) and its subsidiaries, The Business Bank and Business Venture Capital,
Inc., which is presented on a consolidated basis. UFBC reported net income of
$341,063 for the six-month period ended June 30, 2000. This compares with net
income of $187,943 for the same period of 1999. Basic earnings per share were
$.34 for the first six months ended June 30, 2000 and $.23 for the first six
months of 1999.
Earnings for the first six months of 2000 are primarily due to increased
earning assets and decreased cost of funds. During the past year, UFBC's primary
subsidiary, The Business Bank (the Bank), continued to increase the Company's
earning asset base. At June 30, 2000, average total earning assets increased
$9,194,324 or 18.8% when compared to the first six months of June 30, 1999
(Consolidated Average Balances table). The increase contributed favorably to the
Company's operating earnings. The cost of total interest-bearing liabilities
declined eleven basis points from 4.37% at June 30, 1999 to 4.26% at June 30,
2000. The rate decline also contributed favorably to the Company's net income.
Net Interest Income
-------------------
For the six-month period ended June 30, 2000, net interest income increased
$391,978 or 33.7% from $1,163,223 at June 30, 1999 to $1,555,201 at June 30,
2000. The increase is primarily attributable to increased loan volume. As shown
in the Consolidated Average Balances table, average total loans increased
$6,205,237 or 16.9% from $36,536,263 at June 30, 1999 to $42,741,500 at June 30,
2000. The rate environment also contributed to the increased net interest
income. The prime rate increased 175 basis points from 7.75% at June 30, 1999 to
9.50% at June 30, 2000.
The change in the deposit mix over the past year also contributed to the
increase in net interest income at June 30, 2000 when compared to June 30, 1999.
Though the average volume of deposits increased during the past year, interest
expense on deposits increased minimally, $71,968 or 9.3% during the comparable
period. The minimal increase was due to the growth of money market, savings and
NOW and demand deposit accounts which are less costly funding. The average
volume of money market, savings and NOW and demand deposit accounts increased
$9,842,569 or 42.8% when comparing June 30, 1999 and 2000. The average volume of
certificate of deposit accounts decreased $2,323,116 or 9.9% for the comparable
period and the related interest expense decreased $46,942 or 7.8%. Rate
sensitive certificate of deposits (customers without an established banking
relationship) were allowed to runoff as they matured during the past year.
Provision for Loan/Lease Losses
-------------------------------
Provision expense increased $31,721 or 92.5% from $34,279 at June 30, 1999
to $66,000 at June 30, 2000. During the first quarter of 1999, the parent
company, UFBC, sold its only booked loan which resulted in a $19,529 charge to
its allowance of $30,940. The remaining UFBC allowance of $11,411 was reversed
and credited to the Company's provision expense.
7
<PAGE>
Noninterest Income
------------------
Total noninterest income increased $14,714 or 14.4% for the six month
period ended June 30, 2000 compared to the same period of 1999. The increase was
primarily attributable to revenue generated from an increased number of deposit
accounts.
Noninterest Expense
-------------------
Total noninterest expense increased $226,459 or 21.8% during the six
months ended June 30, 2000 when compared to the same period of 1999. The rise
was primarily attributable to costs associated with operating the McLean branch
which opened in July 1999. During the first six months of 2000, branch operating
costs impacted expenses such as salaries, employee benefits, occupancy,
furniture and equipment, communications and advertising.
Salaries and employee benefits increased $90,913 or 15.9% from $570,158
at June 30, 1999 to $661,071 at June 30, 2000. Occupancy increased $24,154 or
13.9% for the comparable period. The increases were due to additional staffing
and leased space necessary for the Company to expands its banking operations,
most notably the McLean branch.
During the third and fourth quarters of 1999, the Company purchased
furniture and equipment for the McLean branch. The Company also purchased
equipment for technological upgrading and Year 2000 compliance. Premises and
equipment rose $63,727 or 30.8% from $206,614 at June 30, 1999 to $270,341 at
June 30, 2000. Equipment represented 83% of the fixed asset purchases. Most of
the equipment was placed on a three year amortization schedule. Depreciation
initiated by the purchases accounted for the increased expense when comparing
the three months and six month periods ended June 30, 1999 and June 30, 2000.
Other expense rose $30,111 or 39.7% during the three month period ended
June 30, 2000 and $62,210 or 42.1% during six-month period ended June 30, 2000
when compared to the first six months of 1999. The increase was primarily
attributable to expanded banking operations and growth. Costs such as data
processing, franchise tax, advertising and communications increased $33,108 or
38.0% when comparing the six month periods ended June 30, 1999 and June 30,
2000.
Income Taxes
------------
The Company does anticipate accruing a tax liability during 2000.
Management expects to utilize UFBC's deferred income tax benefit to off-set any
tax liability that may be incurred during 2000.
B. Financial Condition as of June 30, 2000
---------------------------------------
Assets
------
Total assets increased $12,408,074 or 21.9% during the first six months
of 2000 when compared to the period ended December 31, 1999. The rise in assets
was primarily attributable to the Bank's increased volume of deposits which
increased the volume of assets available for investment. Total deposits
escalated $11,653,542 or 23.7% from $49,191,302 at December 31, 1999 to
$60,844,844 at June 30, 2000 due to new deposit relationships generated by both
the Main and McLean offices. The increased volume of assets were invested into
loans which rose $5,592,628 or 13.8% from $40,652, 769 at December 31, 1999 to
$46,245,397 at June 30, 2000 and federal funds sold which grew $4,917,700 or
97.7% for the comparable period.
Allowance for Loan/Lease Losses
-------------------------------
The allowance for loan/lease losses (allowance) represents an amount
which management believes will be adequate to absorb potential losses inherent
in the loan/lease portfolio. The provision for loan losses represents the charge
to earnings during the year to fund the allowance to cover potential future
losses. The amount charged to expense during the year is dependent upon
management's and the Board of Directors' assessment of the adequacy of the
allowance. Principal factors used in evaluation include prior loss experience,
changes in the composition and volume of the portfolio, overall portfolio
quality, the value of underlying collateral, reviews of portfolio quality by
state and federal supervisory authorities, specific problem loans, and current
and anticipated economic conditions that may affect a borrower's ability to
repay.
8
<PAGE>
At June 30, 2000 and December 31, 1999, the allowance was $849,651 and
$783,143, respectively, or 1.8% and 1.9% of total loans and leases.
Nonperforming loans for the six-month period ended June 30, 2000 totaled
$139,538, of which $121,990 resided in the Bank and of which $17,548 resided in
the subsidiary, Business Venture Capital, Inc. (BVCI). This compares to a
balance of $15,781 at December 31, 1999 which was held by BVCI. The consolidated
allowance for loan/lease losses covered nonperforming loans 6.1 times at June
30, 2000 compared to a coverage of 49.6 times at year end 1999.
Deferred Tax Asset
------------------
At December 31, 1999, the Company had potential off-balance sheet
deferred income tax credits of $2,471,000. The deferred income tax credits
primarily resulted from net operating loss carryforwards. The Company used the
following criteria to determine an appropriate and reasonable amount of deferred
income tax credits to recognize as an asset for the year ended December 31,
1999. The Company projected income three years forward, 2000, 2001 and 2002. A
discount was applied to each year's income projection in consideration for
unknown variables. Other factors such as the Company's historical earnings
performance, growth potential, the local and national economy and market
competition were also used to determine the reasonableness of the Company's
income projections. Once the projected income was ascertained, a 34% tax rate
was applied to the projection to determine the amount of deferred income tax
credits to beneficially recognize. Until all of the deferred tax credits have
either been utilized to off-set income or beneficially recognized as an asset,
the amount of tax credits appropriately recognized as an asset will be
reevaluated annually.
Liabilities and Equity
----------------------
Total deposits increased $11,653,542 or 23.7% during the first six
months of 2000 when compared to the year ended 1999. During the six months ended
June 30, 2000, the deposit mix grew favorably in response to the rate
environment and the Bank's liquidity and investment requirements. Core deposits,
which consist of demand, savings, NOW, money market and certificate of deposits
less than $100,000, grew $9,952,270 or 22.6% during the first six months of 2000
while more volatile and costly certificates of deposits over $100,000 grew
$1,701,272 or 33.7%.
Stockholders' equity increased $671,885 or 9.7% during the six months
ended June 30, 2000 when compared to the year ended 1999. The increase was due
to earnings and sales of common stock. During the first quarter of 2000, the
Company sold 38,265 shares of common stock at $9.00 per share, or $344,385,
through a Public Offering which began in September 1999 for the purpose of
expanding banking operations. $300,000 of the first quarter 2000 proceeds were
downstreamed to BVCI for investment purposes. The balance of the proceeds has
been held as working capital for UFBC. The offering closed in February 2000. In
total, the Public Offering sold 155,909 shares of common stock at $9.00 per
share and raised $1,403,181 of capital. Offering costs totaled approximately
$44,000.
Liquidity and Investment
------------------------
UFBC's operational needs have been significantly reduced in recent
years as overhead has been allocated proportionately between the subsidiaries.
For the near future, management projects that proceeds received from the past
two capital offerings and reimbursements from allocated expenses will provide
sufficient cash flow for UFBC's continuing operational needs.
Consolidated average liquid assets were 27.9% of average total assets
at June 30, 2000 compared to 27.2% for the same period ended June 30, 1999
(Consolidated Average Balances table). The Company's liquidity needs exist
primarily in the Bank subsidiary. To maintain adequate liquidity, the Bank
purchases certain traditional assets such as government and other investment
securities. The Bank's securities portfolio is generally comprised of U.S.
Treasury securities, U.S. Government agency securities, state and municipal
securities and equity securities. The Bank has strategically grown its
securities portfolio to ensure safe levels of liquidity, to enhance the overall
credit quality of its asset base, to generate increased interest income, to
balance assets and liabilities and to hedge interest rate risk. The securities
portfolio includes both instruments available-for-sale and held-to-maturity.
Securities classified as available-for-sale may be sold in response to changes
in market interest rates, changes in prepayment or extension risk, management of
the federal tax position, liquidity needs and other asset/liability management
issues. Securities classified as held-to-maturity are intended for investment
purposes.
At June 30, 2000, the Bank's investment portfolio consisted of the
following:
9
<PAGE>
Available-for-Sale Held-to-Maturity
------------------ ----------------
U.S. Treasury -- --
U.S. Government Agency 6,753,462 1,678,959
State and Municipal -- --
Equity 229,150 --
Capital Requirements
--------------------
The Company is subject to various regulatory capital requirements
administered by the Federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Company's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Company and bank subsidiary must meet specific capital guidelines that involve
quantitative measures of assets, liabilities and certain off-balance sheet items
as calculated under regulatory accounting practices. The Company and bank
subsidiary are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the bank subsidiary to maintain minimum amounts
and ratios of Total and Tier 1 capital to risk-weighted assets, and of Tier 1
capital to average assets. As of June 30, 2000, the Company and the Bank met the
criteria to be well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Company and the
bank subsidiary must maintain Total risk-based, Tier 1 risk-based and Tier 1
average asset ratios as set forth in the table. There have been no conditions or
events since December 31, 1999 that management believes would result in the
institution not being adequately capitalized.
<TABLE>
<CAPTION>
Required for
Capital
Adequacy Required To Be
Actual Purposes Well Capitalized
------------------- ----------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
======================================================================================================
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 2000:
Total capital (to risk-weighted assets)
Company 7,980,038 16.82% 3,795,567 8.00% 4,744,459 10.00%
The Business Bank 7,157,665 15.21% 3,764,009 8.00% 4,705,011 10.00%
Tier 1 capital (to risk-weighted assets)
Company 7,383,813 15.56% 1,897,784 4.00% 2,846,676 6.00%
The Business Bank 6,566,739 13.96% 1,882,004 4.00% 2,823,007 6.00%
Tier 1 capital (to average assets)
Company 7,383,813 11.47% 2,574,586 4.00% 3,218,232 5.00%
The Business Bank 6,566,739 10.27% 2,558,699 4.00% 3,198,374 5.00%
As of June 30, 1999:
Total capital (to risk-weighted assets)
Company 5,704,078 15.72% 2,902,790 8.00% 3,628,487 10.00%
The Business Bank 5,554,609 15.35% 2,894,172 8.00% 3,617,715 10.00%
Tier 1 capital (to risk-weighted assets)
Company 5,246,700 14.46% 1,451,395 4.00% 2,177,092 6.00%
The Business Bank 5,098,617 14.09% 1,447,086 4.00% 2,170,629 6.00%
Tier 1 capital (to average assets)
Company 5,246,700 9.93% 2,112,604 4.00% 2,640,755 5.00%
The Business Bank 5,098,617 9.92% 2,056,242 4.00% 2,570,302 5.00%
</TABLE>
10
<PAGE>
Earnings Per Share
------------------
The following table is a reconciliation of earnings per common
share as computed under SFAS 128. (See note 3).
<TABLE>
<CAPTION>
Income Shares Per Share
(Numerator) (Denominator) Amount
------------ ----------- ---------
<S> <C> <C> <C>
Basic Earnings Per Share:
For the six months ended June 30, 2000
Net Income $ 341,063
Income available to common stockholders $ 341,063 991,407 $ .34
========= ========= =========
For the six months ended June 30, 1999
Net Income $ 187,944
Income available to common stockholders $ 187,944 831,590 $ .23
========= ========= =========
Diluted Earnings Per Share:
For the six months ended June 30, 2000
Net Income available to common stockholders $ 341,063 991,407
Add: Contracts to issue common stock
Warrants - expire 9/30/01 5,333
Warrants - expire 1/27/07 333
Options - expire 12/31/05 - 6/30/08 7,622
---------
Weighted-average diluted shares outstanding 13,288
Diluted earnings per common share: $ 341,063 1,004,695 $ .34
========= ========= =========
For the six months ended June 30, 1999
Net Income available to common stockholders $ 187,944 831,590
Add: Contracts to issue common stock
Warrants expire 12/31/99 2,000
Warrants - expire 9/30/01 4,571
Warrants - expire 1/27/07 286
Options - expire 12/31/05 - 6/30/08 5,383
---------
Weighted-average diluted shares outstanding 12,240
Diluted earnings per common share: $ 187,944 843,830 $ .23
========= ========= =========
</TABLE>
Contingencies & Commitments
---------------------------
In the opinion of management, there were no legal matters pending as of
June 30, 2000 which would have a material adverse effect on the Company's
financial statements.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(4) At the United Financial Banking Companies, Inc. Annual Meeting of
Shareholders held on June 4, 1999, the shareholders elected Manuel V.
Fernandez and William J. McCormick, Jr. to serve as Class One directors
until the 2003 Annual Meeting of Shareholders .
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(6) None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED FINANCIAL BANKING COMPANIES, INC.
By: /s/ HAROLD C. RAUNER
------------------------------
Harold C. Rauner
President and CEO
/s/ LISA M. PORTER
------------------------------
Lisa M. Porter
Chief Financial Officer
Date: July 28, 2000
-----------------------
12
