SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 000-16931
United National Bancorp
(Exact name of registrant as specified in its charter)
New Jersey 22-2894827
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
1130 Route 22 East, Bridgewater, New Jersey 08807-0010
(Address of principal executive offices) (Zip Code)
(908) 429-2200
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 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.
[X] Yes [ ] No
As of April 30, 1996 there were 3,592,391 shares of common stock,
$2.50 par value, outstanding.
<PAGE>
UNITED NATIONAL BANCORP
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION PAGE(S)
ITEM 1 Financial Statements and Notes to Consolidated
Financial Statements 1-6
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-12
PART II - OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K 13
SIGNATURES 14
<PAGE>
Part I - Financial Information
Item 1 - Financial Statements
United National Bancorp
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Cash and Due from Banks $ 40,256 $ 45,572
Federal Funds Sold - 7,000
Securities:
Available for Sale, at Market Value 337,046 334,156
Held to Maturity 32,222 24,838
Trading Account Securities,
at Market Value 452 417
---------- ----------
Total Securities 369,720 359,411
Loans (Net of Unearned Income) 546,582 551,222
Less: Allowance for Possible
Loan Losses 7,348 7,412
---------- ----------
Net Loans 539,234 543,810
Investment in Joint Venture 3,151 3,151
Premises and Equipment, Net 22,369 22,730
Other Real Estate 2,738 2,747
Intangible Assets, Primarily
Core Deposit Premiums 12,520 12,967
Other Assets 11,187 13,157
---------- ----------
Total Assets $1,001,175 $1,010,545
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $ 153,380 $ 153,095
Savings 363,274 369,561
Time 338,886 331,972
---------- ----------
Total Deposits 855,540 854,628
Short-Term Borrowings 43,301 53,347
Obligation under Capital Lease 9,683 9,680
Other Liabilities 10,530 11,491
---------- ----------
Total Liabilities 919,054 929,146
Stockholders' Equity:
Preferred Stock, authorized 300,000
shares, none issued and outstanding - -
Common Stock, $2.50 Par Value,
Authorized 4,000,000 Shares,
Issued 3,633,794 in 1996 and 1995,
Outstanding Shares 3,590,414 and
3,584,889 in 1996 and 1995,
respectively. 9,085 9,085
Additional Paid-In Capital 52,416 52,411
Retained Earnings 21,301 19,563
Treasury Stock (43,380 shares in 1996
and 48,905 in 1995) (1,399) (1,578)
Restricted Stock (186) (317)
Net Unrealized Gain on Securities
Available for Sale,
Net of Income Tax Provision of $466
in 1996 and $1,152 in 1995 904 2,235
---------- ----------
Total Stockholders' Equity 82,121 81,399
---------- ----------
Total Liabilities and Stockholders'
Equity $1,001,175 $1,010,545
========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
1
<PAGE>
United National Bancorp
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1996 1995
---------- ----------
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $ 11,937 $ 10,933
Interest and Dividends on
Securities Available for Sale:
Taxable Income 4,950 3,649
Tax-Exempt Income 536 271
Interest and Dividends on
Securities Held to Maturity:
Taxable Income 427 1,442
Tax-Exempt Income 62 300
Dividends on Trading Accounts
Securities 3 3
Interest on Federal Funds Sold
and Deposits with Federal Home
Loan Bank 14 411
---------- ----------
Total Interest Income 17,929 17,009
---------- ----------
INTEREST EXPENSE
Interest on Deposits:
Interest on Savings Deposits 1,719 2,252
Interest on Time Deposits 4,580 3,656
Interest on Short-Term Borrowings 632 361
Interest on Obligation Under
Capital Lease 232 -
---------- ----------
Total Interest Expense 7,163 6,269
---------- ----------
Net Interest Income 10,766 10,740
Provision for Possible Loan Losses 450 450
Net Interest Income After ---------- ----------
Provision for Possible Loan Losses 10,316 10,290
---------- ----------
NON-INTEREST INCOME
Trust Income 1,200 1,150
Service Charges on Deposit Accounts 926 844
Other Service Charges, Commissions
and Fees 965 479
Net Gains from Securities Transactions 143 391
Other Income 329 515
---------- ----------
Total Non-Interest Income 3,563 3,379
---------- ----------
NON-INTEREST EXPENSE
Salaries and Employee Benefits 5,149 5,356
Occupancy Expense, Net 856 548
Furniture and Equipment Expense 694 865
Data Processing Expense 643 183
Amortization of Intangibles 447 361
Other Expenses 1,987 2,797
---------- ----------
Total Non-Interest Expense 9,776 10,110
---------- ----------
Income Before Provision for
Income Taxes 4,103 3,559
Provision for Income Taxes 1,391 1,012
---------- ----------
Net Income $ 2,712 $ 2,547
========== ==========
Net Income Per Common Share $ 0.76 $ 0.71
========== ==========
Weighted Average Shares Outstanding 3,588 3,606
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
United National Bancorp
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Additional Net Unrealized Total
Common Paid-In Retained Treasury Restricted Gain on Securities Stockholders'
Stock Capital Earnings Stock Stock Available for Sale Equity
------- ------- -------- ------- --------- ------------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance-January 1, 1996 $ 9,085 $52,411 $19,563 $(1,578) $ (317) $ 2,235 $81,399
Net Income - - 2,712 - - - 2,712
Cash Dividends Declared -
$.27 Per Share - - (974) - - - (974)
Change in Unrealized Gain
on Securities Available
for Sale - - - - - (1,331) (1,331)
Treasury Stock Purchased
(100 Shares) - - - (3) - - (3)
Treasury Stock Sold
(5,650 Shares) - 5 - 182 - - 187
Restricted Stock
(4,027 Shares) - - - - 131 - 131
------- ------- ------- ------- ------ ------- -------
Balance-March 31, 1996 $ 9,085 $52,416 $21,301 $(1,399) $ (186) $ 904 $82,121
======= ======= ======= ======= ====== ======= =======
</TABLE>
3
<PAGE>
United National Bancorp
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1996 1995
-------- --------
OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 2,712 $ 2,547
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation and Amortization 946 662
(Accretion) Amortization of
Securities (Discounts) Premiums, Net (8) 180
Provision for Possible Loan Losses 450 450
Provision(Benefit) for Deferred Income Taxes 124 (29)
Net Gain on Disposition of Premises and Equipment (6) (21)
Net Gain on Sale of Securities Available for Sale (133) (340)
Trading Account Securities Activity, Net (35) (43)
Decrease (Increase) in Other Assets 2,532 (1,293)
(Decrease) Increase in Other Liabilities (964) 6,005
-------- --------
Net Cash Provided by Operating Activities 5,618 8,118
-------- --------
INVESTING ACTIVITIES
Securities Available for Sale:
Proceeds from Sales of Securities 41,964 547
Proceeds from Maturities of Securities 7,365 4,576
Purchases of Securities (54,094) (14,434)
Securities Held to Maturity:
Proceeds from Maturities of Securities 8,140 2,115
Purchases of Securities (15,525) (28,293)
Net Decrease (Increase) in Loans 4,126 (14,741)
Deposit Premium from Branch Acquisition - (11,659)
Expenditures for Premises and Equipment (292) (500)
Proceeds from Disposal of Premises and Equipment 160 679
Decrease (Increase) in Other Real Estate 9 (2,331)
-------- --------
Net Cash Used in Investing Activities (8,147) (64,041)
-------- --------
FINANCING ACTIVITIES
Net Decrease in Demand and Savings Deposits (6,002) (9,893)
Net Increase in Certificates of Deposit 6,914 116,723
Net Decrease in Short-Term Borrowings (10,046) (39,289)
Stock Issued from Debenture Conversion - 1,048
Stock Issued from Equity Contracts - 221
Cash Dividends on Common Stock (968) (741)
Proceeds from Exercise of Stock Options - 17
Restricted Stock Activity 131 32
Sale of Treasury Stock 187 -
Purchase of Treasury Stock (3) -
-------- --------
Net Cash (Used in) Provided by Financing Activities (9,787) 68,118
-------- --------
Net (Decrease) Increase in Cash and Cash Equivalents (12,316) 12,195
Cash and Cash Equivalents at Beginning of Period 52,572 61,041
-------- --------
Cash and Cash Equivalents at End of Period $ 40,256 $ 73,236
======== ========
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid During the Period:
Interest $ 8,653 $ 6,453
Income Taxes 950 960
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
UNITED NATIONAL BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements included
herein have been prepared by United National Bancorp (the "Company"), in
accordance with generally accepted accounting principles and pursuant to
the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements have been condensed or omitted pursuant to such rules and
regulations. These consolidated financial statements should be read in
conjunction with the financial statements and the notes thereto included in
the Company's latest annual report on Form 10-K.
In the opinion of the Company, all adjustments (consisting only of normal
recurring accruals) which are necessary for a fair presentation of the
operating results for the interim periods, have been included. The results
of operations for periods of less than a year are not necessarily
indicative of results for the full year.
In November 1995, the Company, through United National Bank (the "Bank"),
acquired a 50% ownership in United Financial Services, Inc., ("United
Financial") a third party data processing service bureau. The investment
is being accounted for by the equity method.
Effective June 30, 1995, the Company acquired New Era Bank ("New Era").
The acquisition has been accounted for under the pooling of interests
method of accounting and, accordingly, all prior period financial
statements presented have been restated.
(2) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash and due from banks and Federal funds sold. Generally, Federal funds
are sold for a one day period.
(3) Securities
The amortized cost and approximate market value of securities are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
--------------------- ---------------------
Amortized Market Amortized Market
Cost Value Cost Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Securities Available for Sale
U.S. Treasury Securities
and U.S. Government
Agencies and Corporations $ 82,144 $ 82,639 $ 81,067 $ 82,435
Obligations of States and
Political Subdivisions 44,996 45,192 39,449 39,923
Mortgage-Backed Securities 180,992 179,748 186,217 186,523
Other Securities 27,544 29,467 24,036 25,275
-------- -------- -------- --------
Total Securities Available
For Sale 335,676 337,046 330,769 334,156
-------- -------- -------- --------
5
<PAGE>
Securities Held to Maturity
U.S. Treasury Securities and
U.S.Government Agencies
and Corporations 18,955 18,816 21,151 21,462
Obligations of States and
Political Subdivisions 8,122 8,049 3,612 3,831
Mortgage-Backed Securities 5,070 4,899 - -
Other Securities 75 76 75 77
-------- -------- -------- --------
Total Securities
Held to Maturity 32,222 31,840 24,838 25,370
-------- -------- -------- --------
Trading Securities 364 452 339 417
-------- -------- -------- --------
TOTAL SECURITIES $368,262 $369,338 $355,946 $359,943
======== ======== ======== ========
</TABLE>
(4) Income Per Common Share
Net income per common share is computed by dividing net income by the
weighted average number of shares outstanding during each period,
retroactively adjusted for the New Era acquisition and for the impact of
subsequent stock dividends. The impact of stock grants is not significant.
The stock options and equity contracts (which were issued by New Era and
were exercised prior to consumption of the acquisition of New Era), which
were dilutive, have been considered in computing the weighted average
number of common shares outstanding.
(5) Commitments and Contingencies
In the normal course of business, there are outstanding various commitments
and contingent liabilities, such as commitments to extend credit and
guarantees (including unused loan commitments of $109,010,000 and
$111,187,000 and letters of credit of $2,340,000 and $2,791,000 at March
31, 1996 and December 31, 1995, respectively), which are not reflected in
the accompanying consolidated financial statements.
6
<PAGE>
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF 0PERATIONS.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 and March 31, 1995.
OVERVIEW
The Company realized net income of $2,712,000 for the first quarter of
1996, an increase of $165,000 or 6.5% from the $2,547,000 reported for the
same period in 1995 Earnings per share were $.76 as compared to the $.71
for the respective periods.
The increase in net income for the three months ended March 31, 1996,
compared to 1995, resulted from a number of factors including a slight
increase in net interest income combined with a more substantial increase
in non-interest income and certain reductions in non-interest expenses.
EARNINGS ANALYSIS
Interest Income
Interest income for the quarter ended March 31, 1996, represented a
$920,000, or 5.4% increase from the $17,009,000 reported for the same
period in 1995. This was attributable to an increase in interest and fees
on loans of $1,004,000 and an increase in interest and dividends on
securities of $313,000, partly offset by a $397,000 decrease in interest on
federal funds sold and deposits with Federal Home Loan Bank. The yield on
average interest earning assets on a fully taxable equivalent basis
decreased 7 basis points from 8.15% for the first quarter of 1995 to 8.08%
for the first quarter of 1996. The increase in interest income was
primarily attributable to the $46,230,000 increase in average interest
earning assets.
Interest Expense
As a result of the obligation under capital lease, increased average
deposits, as well as the movement of deposits from lower rate savings
accounts to higher rate time deposits, the Company's interest expense for
the first quarter of 1996 increased $894,000, or 14.3%, to $7,163,000 from
$6,269,000 for the same period last year. Specifically, interest on
savings and time deposits rose $391,000, interest on short-term borrowings
increased $271,000 and interest on obligation under capital lease increased
$232,000. The Company's average cost of funds increased from 3.60% for the
first quarter of 1995 to 3.86% for the first quarter in 1996, along with an
increase of $39,738,000 in average interest bearing liabilities.
Net Interest Income
The net effect of the changes in interest income and interest expense for
the first quarter of 1996 was an increase of $26,000 or .2%, in net
interest income as compared to the first quarter of 1995. The net
interest margin and net interest spread, on a fully taxable equivalent
basis, declined 25 basis points and 33 basis points, respectively, from the
same period last year.
Provision for Possible Loan Losses
For the three months ended March 31, 1996, the provision for possible loan
losses was $450,000, the same as the comparable period last year. The
amount of the loan loss provision and the level of the allowance for
possible loan
7
<PAGE>
losses is based upon a number of factors including Management's evaluation
of potential losses in the portfolio, after consideration of appraised
collateral values, financial condition and past credit history of the
borrowers as well as prevailing and anticipated economic conditions.
In the opinion of Management, the allowance for possible loan losses at
March 31, 1996 was adequate to absorb possible future losses on existing
loans and commitments that are currently inherent in the loan portfolio.
At March 31, 1996, the ratio of the allowance for possible loan losses to
non-performing loans was 88.38% as compared to 124.82% at March 31, 1995.
Non-Interest Income
For the first quarter of 1996, compared to the first quarter 1995, total
non-interest income increased $184,000 or 5.4%, due primarily to a $486,000
increase in other service charges, commissions and fees, along with
increases of $50,000 in trust income and $82,000 in service charges on
deposit accounts. These increases were partially offset by decreases of
$248,000 in net gains on securities transactions and $186,000 in other
income. The increase in other service charges, commissions and fees is the
result of application fees collected on a new secured credit card
solicitation program, which began in January 1996. The increase in service
charges on deposit accounts is primarily the result of increased fees on
certain customer activities. Other income for the first quarter of 1995
included a $247,000 gain from the sale of the Bank's Bridgewater branch
facility. This impact of the gain in 1995 was partly offset by an increase
of $63,000 in 1996 in gains on sales of the guaranteed portion of Small
Business Administration loans originated by the Bank.
Non-Interest Expense
For the quarter ended March 31, 1996, non-interest expense declined
$334,000, or 3.3% from the same period last year. Salaries and employee
benefits decreased $207,000, or 3.9%, as salaries decreased $245,000,
partly offset by a $38,000 increase in employee benefits expense. The
reduction in salaries was achieved through the elimination of certain
positions resulting from the acquisition of New Era and by outsourcing data
processing through the joint venture investment in United Financial.
Occupancy expenses rose $308,000, or 56.2%, as a result the expenses
relating to the new headquarters facility and increased costs of clean-up
from winter storms. Furniture and equipment expense decreased $171,000, or
19.8%, as a result of reduced equipment rental and maintenance expense
achieved by outsourcing data processing. Other expenses decreased by
$264,000, or 7.9%, as a result of lower FDIC insurance premiums in 1996, a
loss in the first quarter of 1995 on the sale of the Bank's Knowlton branch
facility, and elimination of redundant expenses as a result of the merger
with New Era. This was offset in part by data processing expenses and
amortization of goodwill resulting from outsourcing data processing through
the joint venture investment in United Financial.
Income Taxes
Income tax expense increased $379,000 to $1,391,000 for the first quarter
of 1996 as compared to $1,012,000 for the same period in 1995. The
increase in income taxes resulted from higher levels of taxable income in
1996.
8
<PAGE>
FINANCIAL CONDITION
March 31, 1996 as compared to December 31, 1995.
Total assets decreased $9,370,000 or .9% from December 31, 1995. There
were decreases of $7,000,000 in federal funds, $4,640,000 in total loans,
$5,316,000 in cash and due from banks and $2,787,000 in all other assets,
which consists of premises and equipment, other real estate, intangible
assets and all other assets. Conversely, investments increased
$10,309,000.
Total loans at March 31, 1996 decreased $4,640,000 or .8%, to $546,582,000
from year-end 1995. Personal loans decreased $16,742,000 or 8.2% from
December 31, 1995 to $187,809,000 at March 31, 1996, as a result of loan
payments on the indirect automobile loan portfolio exceeding new loan
growth. The credit card portfolio decreased $583,000 or 3.5% from December
31, 1995 to $15,887,000 at March 31, 1996. Partially offsetting these
decreases, commercial loans increased $8,408,000 or 6.0% to $148,335,000 at
March 31, 1996. In addition, the residential and commercial real estate
loan portfolio increased by $4,277,000 or 2.2% from $190,274,000 at
December 31, 1995 to $194,551,000 at March 31, 1996. Loan repayments
received during the quarter not reinvested in new loans were utilized to
partially fund the growth in the investment portfolio.
The following schedule presents the components of loans, net of unearned
income, by type, for each periods presented.
<TABLE>
<CAPTION>
March 31, December 31,
(In Thousands) 1996 1995
--------- --------
<S> <C> <C>
Commercial $148,335 $139,927
Real Estate 194,551 190,274
Personal Loans 187,809 204,551
Credit Card Loans 15,887 16,470
-------- --------
Loans, Net of Unearned Income $546,582 $551,222
======== ========
</TABLE>
Within the securities portfolio, the majority of the increase occurred in
the obligations of states and political subdivisions, which increased
$9,779,000. Other securities also increased by $4,192,000, offset in part
by a decrease of $1,705,000 in mortgage-backed securities and a decrease of
$1,992,000 in U.S. treasury securities and U.S. government agencies and
corporations. Trading account securities rose $35,000.
Total deposits increased $912,000 or .1%. Time deposits increased by
$6,914,000, while savings deposits decreased $6,287,000. Demand deposits
also increased by $285,000. Short-term borrowings decreased by
$10,046,000, as the Bank utilized excess available funds to reduce
borrowings. Management continues to monitor the shift of deposits and
level of borrowings through its Asset/Liability Management Committee.
Asset Quality
At March 31, 1996, non-performing loans increased $848,000, as compared to
December 31, 1995 (See Table 1 on page 10). Of the increase in non-performing
loans, $363,000 was in the personal loan portfolio, primarily
indirect automobile loans, and $283,000 was in the Real Estate loan
portfolio. The balance of the increase was in the commercial loan
portfolio. The Loan Review Department reviews the large credits in the
performing loan portfolio, as well as the non-performing loans on a regular
basis.
9
<PAGE>
At March 31, 1996, the recorded investment in loans that are considered to
be impaired under Financial Accounting Standards Board Statement No. 114
was $6,043,000, of which $5,964,000 were on a non-accrual basis. There was
one troubled debt restructured loan for $79,000, which is performing in
accordance with the terms of the restructured agreement. The Allowance
related to these loans amounted to $1,568,000.
<TABLE>
<CAPTION>
Table 1 March 31, Dec. 31, Sept. 30, June 30, March 31,
(dollars in thousands) 1996 1995 1995 1995 1995
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Total Assets $1,001,175 $1,010,545 $1,001,684 $980,922 $964,779
Total Loans (Net of Unearned
Income) $ 546,582 $ 551,222 $ 527,981 $509,663 $495,382
Allowance for Possible
Loan Losses $ 7,348 $ 7,412 $ 7,929 $ 8,828 $ 9,379
% of Total Loans 1.34% 1.34% 1.50% 1.73% 1.89%
Total Non-Performing Loans(1)$ 8,314 $ 7,466 $ 7,943 $ 8,071 $ 7,514
% of Total Assets .83% .74% .79% .82% .78%
% of Total Loans 1.52% 1.35% 1.50% 1.58% 1.52%
Allowance for Possible Loan
Losses to Non-Performing
Loans 88.38% 99.28% 99.82% 109.38% 124.82%
Total of Non-Performing
Assets $ 11,159 $ 10,436 $ 11,724 $ 11,775 $ 11,403
% of Total Assets 1.11% 1.03% 1.17% 1.20% 1.18%
</TABLE>
(1) Non-performing loans consist of:
(a)impaired loans, which includes non-accrual and renegotiated loans, and
(b)loans which are contractually past due 90 days or more as to principal
or interest, but are still accruing interest at previously negotiated
rates to the extent that such loans are both well secured and in the
process of collection.
The following chart discloses the aggregate amount of impaired loans measured
under the two measurement methods and applicable Allowance at March 31, 1996
(dollars in thousands).
<TABLE>
<CAPTION>
Number Impaired Allocated
Measurement Method Of Loans Loans Allowance
- --------------------- -------- ------- ---------
<S> <C> <C> <C>
Fair Market Value 42 $5,405 $1,227
Discounted Cash Flow 6 638 341
-- ------ ------
Total Impaired Loans 48 $6,043 $1,568
== ====== ======
</TABLE>
For the quarter ended March 31, 1996, the Company recognized interest
income on impaired loans amounting to $13,000, all of which was recognized
using the cash basis method of income recognition.
Allowance for Possible Loan Losses
The allowance for possible loan losses is maintained at a level considered
adequate to provide for potential loan losses. The level of the allowance is
based on Management's evaluation of potential losses in the portfolio, after
consideration of risk characteristics of the loans and prevailing and
anticipated economic conditions. The allowance is increased by provisions
charged to expense and reduced by charge-offs, net of recoveries.
10
<PAGE>
At March 31, 1996, the allowance for possible loan losses was $7,348,000,
down .9% from the $7,412,000 at year-end 1995. Net charge-offs for the
first quarter of 1996 were $514,000.
Liquidity Management
At March 31, 1996, the amount of liquid assets remained at a level
Management deemed adequate to ensure that contractual liabilities,
depositors' withdrawal requirements, and other operational and customer
credit needs could be satisfied. This liquidity was maintained at the same
time the Company was managing the interest rate sensitivity of interest
earning assets and interest bearing liabilities so as to improve
profitability.
At March 31, 1996, liquid investments, comprised of money market mutual
fund instruments, totaled $21,712,000 and all mature within 30 days.
Interest Rate Sensitivity
Interest rate risk refers to potential changes in current and future net
interest income resulting from changes in interest rates, product spreads
and mismatches in the repricing between interest rate sensitive assets and
liabilities. The Company utilizes simulation modeling to assist in
measuring and evaluating interest rates. The Company's interest rate
sensitivity during the first quarter of 1996 was essentially neutral within
reasonable ranges; for example, at March 31, 1996 interest rate increases
or decreases of 200 basis points would not be expected to have a
significant impact on the Company's net interest income. There can be no
assurance that interest rate increases or decreases would not have a
significant impact on the Company's net interest income.
Capital
Total stockholders' equity increased $722,000 to $82,121,000 at March 31,
1996 from the $81,399,000 recorded at the end of 1995. The increase was
due primarily to net income of $2,712,000 for the first three months of
1996 coupled with net sales of treasury stock of $184,000 and restricted
stock activity of $131,000. These increases were offset in part by cash
dividends of $974,000 and reductions in net unrealized gains on securities
available for sale, net of tax, of $1,331,000.
The following table reflects the Company's capital ratios, as of March 31,
1996 and December 31, 1995, and have been presented in accordance with
current regulatory guidelines. Accordingly, the net unrealized gain on
debt securities available for sale has been excluded from the computation
of Tier I and Tier II capital.
<TABLE>
<CAPTION>
(dollars in thousands) March 31, 1996 December 31, 1995
----------------- ------------------
Amount Ratio Amount Ratio
------- ----- ------- ------
<S> <C> <C> <C> <C>
Risk-Based Capital
Tier I Capital
Actual $69,292 10.75% $67,112 10.33%
Regulatory Minimum
Requirements $25,776 4.00% $25,989 4.00%
Combined Tier I and
Tier II Capital
Actual $76,640 11.89% $74,524 11.47%
Regulatory Minimum
Requirements $51,553 8.00% $51,978 8.00%
Leverage
Actual $69,292 7.04% $67,112 6.80%
Regulatory Minimum
Requirements $39,387 4.00% $39,490 4.00%
</TABLE>
11
<PAGE>
The Company's risk-based capital ratios (Tier I and Combined Tier I and
Tier II Capital) and Tier I leverage ratio continue to exceed the minimum
requirements set forth by the Company's regulators. The Tier I ratio and
the combined Tier I and Tier II ratios both increased from 10.33% to 10.75%
and from 11.47% to 11.89%, respectively, while the Tier I leverage ratio
increased from 6.80% to 7.04% from December 31, 1995 to March 31, 1996,
respectively. The Company's capital ratios increased as a result of the
net income for the quarter, offset in part by cash dividends declared.
12
<PAGE>
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(3)(a) Certificate of Incorporation of the Company (Incorporated by
reference in the Company's Report of Form 10-K for the year
ended December 31, 1995 filed with the Securities and Exchange
Commission).
(3)(b) By-Laws of the Company (Incorporated by reference in the
Company's Report on Form 10-K for the year ended December 31, 1994
filed with the Securities and Exchange Commission).
(10) Material Contracts
No material contracts have been entered into during the quarter.
(27) Financial Data Schedule
(b) Reports on Form 8-K
None.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED NATIONAL BANCORP
-----------------------
(Registrant)
Dated: May 14, 1996 By: THOMAS C. GREGOR
--------------------------
Thomas C. Gregor, Chairman
President and CEO
Dated: May 14, 1996 By: DONALD W. MALWITZ
--------------------------
Donald W. Malwitz
Vice President & Treasurer
14
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 40,256
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 452
<INVESTMENTS-HELD-FOR-SALE> 337,046
<INVESTMENTS-CARRYING> 32,222
<INVESTMENTS-MARKET> 31,840
<LOANS> 546,582
<ALLOWANCE> 7,348
<TOTAL-ASSETS> 1,001,175
<DEPOSITS> 855,540
<SHORT-TERM> 43,301
<LIABILITIES-OTHER> 10,530
<LONG-TERM> 9,683
0
0
<COMMON> 9,085
<OTHER-SE> 73,036
<TOTAL-LIABILITIES-AND-EQUITY> 1,001,175
<INTEREST-LOAN> 11,937
<INTEREST-INVEST> 5,975
<INTEREST-OTHER> 14
<INTEREST-TOTAL> 17,929
<INTEREST-DEPOSIT> 6,299
<INTEREST-EXPENSE> 7,163
<INTEREST-INCOME-NET> 10,766
<LOAN-LOSSES> 450
<SECURITIES-GAINS> 143
<EXPENSE-OTHER> 9,776
<INCOME-PRETAX> 4,103
<INCOME-PRE-EXTRAORDINARY> 2,712
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,712
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.76
<YIELD-ACTUAL> 4.88
<LOANS-NON> 6,801
<LOANS-PAST> 1,513
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,412
<CHARGE-OFFS> 614
<RECOVERIES> 100
<ALLOWANCE-CLOSE> 7,348
<ALLOWANCE-DOMESTIC> 7,348
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
