<PAGE>
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 September 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 Number: 000-16931
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United National Bancorp
-----------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2894827
--------------------------------------------------------------------------------
(State or 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)
N/A
---
(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 November 1, 2000, there were 15,315,119 shares of common stock, $1.25 par
value, outstanding.
<PAGE>
UNITED NATIONAL BANCORP
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE(S)
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 Consolidated Financial Statements and Notes to
Consolidated Financial Statements 1-9
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-18
ITEM 3 Quantitative and Qualitative Disclosure About Market Risk 19
PART II - OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K 20
SIGNATURES 21
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
United National Bancorp
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------------- ----------------
<S> <C> <C>
ASSETS
Cash and Due from Banks $ 51,239 $ 53,490
Federal Funds Sold 2,800 -
Securities Available for Sale, at Market Value 595,316 631,661
Securities Held to Maturity 46,818 37,908
Trading Account Securities, at Market Value - 929
Loans, Net of Unearned Income 1,302,076 1,237,536
Less: Allowance for Possible Loan Losses 13,159 10,386
------------- -------------
Loans, net 1,288,917 1,227,150
Mortgage Loans Held for Sale - 23,807
Premises and Equipment, Net 27,977 29,024
Other Real Estate, Net 407 56
Intangible Assets, Primarily Core Deposit Premiums 6,740 7,202
Cash Surrender Value of Life Insurance Policies 52,062 35,253
Other Assets 47,320 43,903
------------- -------------
TOTAL ASSETS $ 2,119,596 $ 2,090,383
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand $ 240,763 $ 235,386
Savings 584,901 562,673
Time 690,658 683,150
------------- -------------
Total Deposits 1,516,322 1,481,209
Short-Term Borrowings 291,216 199,931
Other Borrowings 135,749 236,397
Other Liabilities 30,706 34,381
------------- -------------
Total Liabilities 1,973,993 1,951,918
Company-Obligated Mandatorily Redeemable Preferred Series B
Capital Securities of a Subsidiary Trust Holding Solely Junior
Debentures of the Company 20,000 20,000
STOCKHOLDERS' EQUITY
Preferred Stock, authorized 1,000,000 shares,
None issued and outstanding - -
Common Stock, $1.25 Par Value, Authorized Shares 25,000,000
Issued Shares 16,145,434 in 2000 and 16,145,931 in 1999,
Outstanding Shares 15,307,711 in 2000 and 15,646,073 in 1999 20,182 20,182
Additional Paid-in Capital 129,219 129,460
Retained Earnings 14,650 5,592
Treasury Stock, at Cost - 837,723 shares in 2000 and
499,858 shares in 1999 (15,933) (9,817)
Restricted Stock (73) (97)
Accumulated Other Comprehensive Loss (22,442) (26,855)
------------- -------------
Total Stockholders' Equity 125,603 118,465
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,119,596 $ 2,090,383
============= =============
</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 Nine Months Ended
September 30, September 30,
--------------------------- -----------------------------
2000 1999 2000 1999
------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $ 28,632 $ 23,680 $ 81,013 $ 67,950
Interest and Dividends on Securities Available for Sale
Taxable 9,417 9,468 29,388 27,135
Tax-Exempt 1,005 1,231 2,977 3,644
Interest and Dividends on Securities Held to Maturity
Taxable 413 216 1,210 939
Tax-Exempt 275 270 879 781
Dividends on Trading Account Securities 7 9 25 26
Interest on Federal Funds Sold and
Deposits with Federal Home Loan Bank 16 8 38 426
--------- -------- --------- ---------
TOTAL INTEREST INCOME 39,765 34,882 115,530 100,901
--------- -------- --------- ---------
INTEREST EXPENSE
Interest on Savings Deposits 4,224 2,553 12,079 7,948
Interest on Time Deposits 10,076 7,817 29,184 23,566
Interest on Short-Term Borrowings 4,172 3,043 9,401 6,189
Interest on Other Borrowings 3,335 2,681 10,642 8,230
--------- -------- --------- ---------
TOTAL INTEREST EXPENSE 21,807 16,094 61,306 45,933
--------- -------- --------- ---------
Net Interest Income 17,958 18,788 54,224 54,968
Provision for Possible Loan Losses 2,330 900 4,730 2,775
--------- -------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE
LOAN LOSSES 15,628 17,888 49,494 52,193
--------- -------- --------- ---------
NON-INTEREST INCOME
Trust Income 1,875 1,185 5,145 4,318
Service Charges on Deposit Accounts 1,020 1,276 3,081 3,566
Other Service Charges, Commissions and Fees 1,875 1,575 5,161 4,713
Net Gains (Losses) from Securities Transactions 2,466 (196) 3,904 1,118
Income on Life Insurance 581 431 1,809 1,147
Other Income 356 537 1,418 1,435
--------- -------- --------- ---------
TOTAL NON-INTEREST INCOME 8,173 4,808 20,518 16,297
--------- -------- --------- ---------
NON-INTEREST EXPENSE
Salaries, Wages and Employee Benefits 6,042 6,031 17,650 18,295
Occupancy Expense, Net 1,348 1,236 4,028 3,765
Furniture and Equipment Expense 1,098 1,068 3,420 3,242
Data Processing Expense 2,028 1,653 5,662 4,501
Distributions of Series B Capital Securities 501 501 1,502 1,502
Amortization of Intangible Assets 335 286 998 970
Net Cost to Operate Other Real Estate 14 21 115 122
Non-Recurring Charges - - - 17,258
Other Expenses 3,606 3,349 11,368 10,176
--------- -------- --------- ---------
TOTAL NON-INTEREST EXPENSE 14,972 14,145 44,743 59,831
--------- -------- --------- ---------
Income Before Provision for Income Taxes 8,829 8,551 25,269 8,659
Provision for Income Taxes 2,507 2,306 6,991 3,137
--------- -------- --------- ---------
NET INCOME $ 6,322 $ 6,245 $ 18,278 $ 5,522
========= ======== ========= =========
NET INCOME PER COMMON SHARE:
Basic $ 0.41 $ 0.39 $ 1.18 $ 0.34
========= ======== ========= =========
Diluted $ 0.41 $ 0.39 $ 1.18 $ 0.34
========= ======== ========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 15,308 16,036 15,431 16,026
Diluted 15,399 16,218 15,551 16,204
</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>
Accumulated
Additional Other Total
Common Paid-In Retained Treasury Restricted Comprehensive Stockholders'
Stock Capital Earnings Stock Stock Loss Equity
----------- ----------- ---------- ---------- ---------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1999 $20,182 $129,460 $5,592 $(9,817) $(97) $(26,855) $118,465
Net Income - - 18,278 - - - 18,278
Cash Dividends Declared
($0.20 Per Share) - - (9,220) - - - (9,220)
Exercise of Stock Options
(22,235 Shares) - (241) - 435 - - 194
Change in Unrealized Loss on
Securities Available for Sale,
Net of Tax - - - - - 4,413 4,413
Purchase of Treasury Stock - - (6,551) - - (6,551)
(360,100 shares)
Restricted Stock Activity, Net - - - - 24 - 24
----------- ----------- ---------- ---------- ---------- ---------------- -------------
Balance-September 30, 2000 $20,182 $129,219 $ 14,650 $(15,933) $(73) $(22,442) $125,603
=========== =========== ========== ========== ========== ================ =============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
United National Bancorp
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------- -- -----------------
2000 1999
----------------- -----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $18,278 $ 5,522
Adjustments to Reconcile Net Income to Net Cash Provided
By Operating Activities:
Depreciation and Amortization 2,808 3,093
(Accretion) Amortization of Securities Premiums, Net (535) 1,084
Provision for Possible Loan Losses 4,730 2,775
Benefit for Deferred Income Taxes (572) (1,050)
Net Gain on Disposition of Premises and Equipment - (6)
Net Gains from Securities Transactions (3,904) (1,118)
Net Gain on the Sale of Loans Held for Sale (263) -
Trading Account Securities Activity, Net 743 297
Increase in Other Assets (7,602) (1,655)
(Decrease) Increase in Other Liabilities (3,103) 4,549
Restricted Stock Activity, Net 24 199
------- -------
Net Cash Provided by Operating Activities 10,604 13,690
------- -------
INVESTING ACTIVITIES
Securities Available for Sale:
Proceeds from Sales of Securities 116,403 209,059
Proceeds from Maturities of Securities 21,907 76,051
Purchases of Securities (90,534) (376,813)
Securities Held to Maturity:
Proceeds from Maturities of Securities 8,818 33,908
Purchases of Securities (17,745) (9,479)
Purchase of Corporate-Owned Life Insurance (15,000) -
Net Increase in Loans (66,497) (132,216)
Proceeds from Sale of Loans Held for Sale 24,070 -
Expenditures for Premises and Equipment (1,299) (2,082)
Proceeds from Sale of Premises and Equipment - 38
(Increase) Decrease in Other Real Estate, Net (351) 425
------- -------
Net Cash Used in Investing Activities (20,228) (201,109)
------- -------
FINANCING ACTIVITIES
Net Increase (Decrease) in Demand and Savings Deposits 27,605 (16,791)
Net Increase in Time Deposits 7,508 69,511
Net Increase in Short-Term Borrowings 91,285 25,270
Net (Decrease) Increase in Other Borrowed Funds (100,648) 81,491
Cash Dividends on Common Stock (9,220) (9,379)
Proceeds from Exercise of Stock Options 194 1,777
Treasury Stock Acquired, at Cost (6,551) -
------- -------
Net Cash Provided by Financing Activities 10,173 151,879
------- -------
Net Increase (Decrease) in Cash and Cash Equivalents 549 (35,540)
Cash and Cash Equivalents at Beginning of Period 53,490 102,967
------- -------
Cash and Cash Equivalents at End of Period $54,039 $67,427
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid During the Period:
Interest $62,899 $45,933
Income Taxes 11,392 5,352
</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.
Certain reclassifications have been made to the prior years' financial
statements to conform with the classifications used in 2000.
(2) COMPREHENSIVE INCOME (LOSS)
Total comprehensive income (loss) amounted to the following for the periods
indicated (amounts in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- -------------------------------
2000 1999 2000 1999
-------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
Net Income $ 6,322 $ 6,245 $ 18,278 $ 5,522
Change In Unrealized Loss On
Securities Available for Sale, Net Of Taxes 8,434 (6,410) 4,413 (25,812)
-------------- ------------ --------------- ---------------
Comprehensive Income (Loss) $ 14,756 $ (165) $ 22,691 $(20,290)
============== ============ =============== ===============
</TABLE>
(3) NET INCOME PER COMMON SHARE
Basic net income per common share is computed by dividing net income by the
weighted average number of shares outstanding during each period.
Diluted net income per common share is computed by dividing net income by the
weighted average number of shares outstanding, as adjusted for the assumed
exercise of options for common stock, using the treasury stock method. Potential
shares of common stock resulting from stock option agreements totaled 120,000
and 178,000 for the nine months ended September 30, 2000 and September 30, 1999,
respectively. Potential shares of common stock resulting from stock option
agreements totaled 91,000 and 182,000 for the three months ended September 30,
2000 and September 30, 1999, respectively.
Share amounts for all periods presented have been adjusted for the 6% stock
dividend declared in September 1999.
5
<PAGE>
(4) RECENT ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 44 "Accounting for Certain Transactions Involving Stock
Compensation, an Interpretation of APB Opinion No. 25". The interpretation
clarifies certain issues with respect to the application of Accounting
Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" (APB
Opinion No. 25). The interpretation results in a number of changes in the
application of APB Opinion No. 25 including, the accounting for modifications to
equity awards, as well as extending APB Opinion No. 25 accounting treatment to
options granted to outside directors for their services as directors. The
provisions of the interpretation were effective July 1, 2000 and apply
prospectively, except for certain modifications to equity awards made after
December 15, 1998. The initial adoption of the interpretation did not have a
significant impact on the Company's financial statements.
In June 2000, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 138 "Accounting for Certain Derivative Instruments and Certain
Hedging Activities, an Amendment to FASB Statement No. 133". Statement No. 138
amends certain aspects of Statement No. 133 to simplify the accounting for
derivatives and hedges under Statement No. 133. Statement No. 138 is effective
upon the Company's adoption of Statement No. 133 (January 1, 2001). The initial
adoption of Statements No. 133 and No. 138 are not expected to have a material
impact on the Company's financial statements.
In September 2000, the FASB issued SFAS No. 140 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities (A Replacement
of FASB Statement 125)." SFAS No. 140 supersedes and replaces the guidance in
SFAS No. 125 and accordingly, provides guidance on the following topics:
securitization transactions involving financial assets; sales of financial
assets such as receivable, loans, and securities; factoring transactions; wash
sales; servicing assets and liabilities; collateralized borrowing agreements;
securities lending transactions; repurchase agreements; loan participations; and
extinguishments of liabilities. While most of the provisions of SFAS No. 140 are
effective for transactions entered into after March 31, 2001, companies with
fiscal year ends that hold beneficial interests from previous securitizations
will be required to make additional disclosures in their December 31, 2000
financial statements. The initial adoption of SFAS No. 140 is not expected to
have a material impact on the Company's financial statements.
(5) DISSOLUTION OF JOINT VENTURE
In the latter part of 1998, the Company decided to terminate its interest in
United Financial Services, Inc. ("UFS"), its joint venture data service
provider. At that time, the Company anticipated that its joint venture partner
would continue to operate UFS. In connection with its decision to exit the joint
venture, the Company evaluated the estimated lives and salvage values of
equipment, software and leases held by UFS, as well as related goodwill during
the fourth quarter of 1998. Based upon this evaluation, the Company accelerated
depreciation and amortization charges totaling approximately $1,200,000 through
the first quarter of 1999. In April 1999, the Company completed the conversion
of its own data processing operations to an independent third-party provider.
In June 1999, the Company was advised that its joint venture partner signed a
definitive agreement with a third party servicer. UFS subsequently ceased
operations in the fourth quarter of 1999. In light of that development, the
Company expects that the value of the Company's interest in UFS may be
substantially less than it would have been had UFS continued in operation. The
Company may incur liabilities in connection with the obligations of UFS under
operating leases which remain in effect at the time UFS was dissolved, to the
extent such liabilities are not assumed by the joint venture partner's servicer.
UFS is currently negotiating the termination of its lease obligations.
The Company reevaluated the potential losses associated with UFS based upon its
joint venture partner's decision to exit the operations of UFS. Based upon this
reevaluation, the Company recognized an additional charge of $4,500,000,
pre-tax, during the second quarter of 1999 relating to the pending dissolution
of UFS.
6
<PAGE>
The additional charge related primarily to write-offs of leasehold improvements
of $500,000, equipment and software of $900,000 and accrual for lease buyouts of
$2,900,000 and severance payments of $200,000.
Ultimately, the Company's potential loss on its investment in UFS and liability
for 50% of UFS' obligations to lessors could be reduced based upon, among other
things, the ability of UFS to negotiate discounts with lessors, and the
Company's ability to obtain compensation for the use of the equipment and leases
of UFS by a third party subsequent to dissolution. The third-party processor
retained by our joint venture partner has assumed some leases and purchased some
of the UFS equipment. In addition, certain of the equipment lease buyouts have
been negotiated and are in the process of final approval. Our estimated losses
are currently on target and additional losses are not anticipated at this time.
No charges against the reserve have occurred during the nine months ended
September 30, 2000. It is anticipated that the above charges will be realized
during the fourth quarter of 2000.
7
<PAGE>
(6) SEGMENT REPORTING
The Company, for management purposes, is segmented into the following lines of
business: Retail Banking, Commercial Banking, Investments, and Trust and
Investment Services. Activities not included in these lines are reflected in
Corporate. In 1999, the Company completed its acquisition of Raritan Bancorp
Inc., combined computer systems of Raritan into the Company's computer system,
and completed the conversion of the Company's own data processing operations to
an independent third-party provider. Based upon these facts, no segment
information is provided for 1999, as such information was not deemed meaningful.
Summary financial information on a fully taxable equivalent basis for the lines
of business is presented below.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2000 RETAIL COMMERCIAL INVESTMENTS TRUST CORPORATE CONSOLIDATED
<S> <C> <C> <C> <C> <C> <C>
Interest Income $ 15,325 $ 13,349 $ 11,818 $ - $ - $ 40,492
Interest Expense 14,036 - 7,771 - - 21,807
Funds Transfer Pricing Allocation 12,266 (9,473) (3,810) - 1,017 -
-----------------------------------------------------------------------------------------------------------------------------
Net Interest Income 13,555 3,876 237 - 1,017 18,685
Provision for Loan Losses 1,144 1,186 - - - 2,330
-----------------------------------------------------------------------------------------------------------------------------
Net Interest Income
After Provision for Loan Losses 12,411 2,690 237 - 1,017 16,355
Non-Interest Income 2,777 96 3,047 2,085 168 8,173
Non-Interest Expense 11,452 1,747 584 1,188 1 14,972
-----------------------------------------------------------------------------------------------------------------------------
Net Income Before Taxes $ 3,736 $ 1,039 $ 2,700 $ 897 $ 1,184 $ 9,556
-----------------------------------------------------------------------------------------------------------------------------
Average Balances:
Gross Funds Provided $ 1,502,096 $ - $ 415,797 $ - $ 225,778 $ 2,143,671
Funds Used: Interest-Earning Assets 751,437 575,082 684,788 - - 2,011,307
Non-Interest-Earning Assets 13,445 2,904 51,770 - 64,245 132,364
-----------------------------------------------------------------------------------------------------------------------------
Net Funds Provided (Used) $ 737,214 $ (577,986) $ (320,761) $ - $ 161,533 $ -
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2000 RETAIL COMMERCIAL INVESTMENTS TRUST CORPORATE CONSOLIDATED
<S> <C> <C> <C> <C> <C> <C>
Interest Income $ 44,237 $ 36,890 $ 36,563 $ - $ - $ 117,690
Interest Expense 41,388 - 19,918 - - 61,306
Funds Transfer Pricing Allocation 36,170 (25,332) (14,548) (3) 3,713 -
-----------------------------------------------------------------------------------------------------------------------------
Net Interest Income 39,019 11,558 2,097 (3) 3,713 56,384
Provision for Loan Losses 1,836 2,894 - - - 4,730
-----------------------------------------------------------------------------------------------------------------------------
Net Interest Income
After Provision for Loan Losses 37,183 8,664 2,097 (3) 3,713 51,654
Non-Interest Income 8,045 480 5,884 - 391 20,518
Non-Interest Expense 34,360 4,704 1,736 - 288 44,743
-----------------------------------------------------------------------------------------------------------------------------
Net Income Before Taxes $ 10,868 $ 4,440 $ 6,245 $ (3) $ 3,816 $ 27,429
-----------------------------------------------------------------------------------------------------------------------------
Average Balances:
Gross Funds Provided $ 1,534,857 $ 10,418 $ 388,479 $ 117 $ 214,327 $ 2,148,198
Funds Used: Interest-Earning Assets 737,279 602,647 673,771 - - 2,013,697
Non-Interest-Earning Assets 14,248 10,671 56,089 - 53,494 134,501
-----------------------------------------------------------------------------------------------------------------------------
Net Funds Provided (Used) $ 783,330 $ (602,900) $ (341,381) $ 117 $ 160,833 $ -
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion of the operating results and financial condition at
September 30, 2000 is intended to help readers analyze the accompanying
financial statements, notes and other supplemental information contained in this
document. Results of operations for the three- and nine-month period ended
September 30, 2000 are not necessarily indicative of results to be attained for
any other period.
Forward-Looking Statements
This report contains forward-looking statements within the meaning of The
Private Securities Litigation Reform Act of 1995. Such statements are not
historical facts and include expressions about our confidence and strategies and
our expectations about new and existing programs and products, relationships,
opportunities, technology and market conditions. These statements may be
identified by an "asterisk" ("*") or such forward-looking terminology as
"expect", "believe", "anticipate", or by expressions of confidence such as
"continuing" or "strong" or similar statements or variations of such terms. Such
forward-looking statements involve certain risks and uncertainties. These
include, but are not limited to, expected cost savings not being realized or not
being realized within the expected time frame; income or revenues being lower
than expected or operating costs higher; competitive pressures in the banking or
financial services industries increasing significantly; business disruption
related to program implementation or methodologies; weakening of general
economic conditions nationally or in New Jersey; changes in legal and regulatory
barriers and structures; and unanticipated occurrences delaying planned programs
or initiatives or increasing their costs or decreasing their benefits. Actual
results may differ materially from such forward-looking statements. The Company
assumes no obligation for updating any such forward-looking statements at any
time.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999:
OVERVIEW
The Company realized net income of $6,322,000 for the three months ended
September 30, 2000, as compared to $6,245,000 reported for the same period in
1999. Net income per diluted share was $0.41 for the three months ended
September 30, 2000 compared to $0.39 per diluted share for the prior year
period.
EARNINGS ANALYSIS
Interest Income
Interest income for the quarter ended September 30, 2000 was $39,765,000, an
increase of $4,883,000 or 14.0% from the $34,882,000 reported in the same period
of 1999. This increase is primarily attributable to increases in earning asset
volume, with most of the growth coming in the consumer and real estate
categories. For the three months ended September 30, 2000, average interest
earning assets were up $115,614,000 or 6.1%, compared with the same period in
1999. The increase in interest income resulting from increases in earning asset
volume was coupled with an increase in average yield. For the three months ended
September 30, 2000, the average yield on earning assets increased 54 basis
points to 8.04% from 7.50% for the same period last year.
Interest Expense
Interest expense for the quarter ended September 30, 2000 was $21,807,000, an
increase of $5,713,000 or 35.5% from $16,094,000 reported in the same period
last year. The average cost of interest bearing liabilities
10
<PAGE>
increased 90 basis points to 5.07% for the current quarter of 2000 from 4.17%
for the same period last year, primarily as a result of an increase in rates
paid on deposits and short-term borrowed funds. Total average interest bearing
liabilities increased by $161,470,000 for the current quarter of 2000 compared
to the same period in 1999, while non-interest bearing deposits decreased by
$26,653,000.
Net Interest Income
The net effect of the changes in interest income and interest expense for the
three months ended September 30, 2000 compared to the prior year period was a
decrease of $830,000 in net interest income. For the three months ended
September 30, 2000, the net interest margin and net interest spread, on a fully
taxable equivalent basis, decreased 43 basis points and 36 basis points,
respectively, from the same period last year. The decrease in the net interest
margin and spread were the result of interest bearing liabilities repricing
faster than interest earning assets. Additionally, the Company's stock
repurchase program and investment in corporate owned life insurance (the "COLI")
have had an impact on net interest margin, as these investments reduce
investable funds. The COLI has positively impacted non-interest income, which
generated $581,000 in third quarter of 2000 as compared to $431,000 in 1999.
Provision for Possible Loan Losses
For the three months ended September 30, 2000, the provision for possible loan
losses was $2,330,000, compared to $900,000 for the same period last year.
Contributing to the increase was an increase in the loan portfolio outstandings,
as well as a shift in the composition of the portfolio to higher risk commercial
and installment loans, partially offset by a decrease in non-performing loans.
The amount of the loan loss provision and the level of the allowance for
possible loan losses are 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.
Non-Interest Income
For the three months ended September 30, 2000, compared to the same period of
1999, total non-interest income increased $3,365,000 or 70.0%, to $8,173,000
compared to $4,808,000. The increase was due primarily to increases of
$2,662,000 in net security gains, $690,000 in trust income, $300,000 in other
service charges, commission and fees, and $150,000 in income on corporate owned
life insurance. These increases were partially offset by a decline in service
charges on deposit accounts of $256,000, and a decrease of $181,000 in other
income. This decrease in service charges on deposit accounts in 2000 has
resulted from the Company's continued drive to build on its relationship banking
with customers by increasing the efforts on offering its Combined Banking
services, which has resulted in fewer occurrences of service charges assessed.
Non-Interest Expense
For the three months ended September 30, 2000, non-interest expense increased
$827,000 from the same period last year. Data processing expense increased
$375,000 compared to the prior year period primarily due to increased
transaction volume. Occupancy expense increased $112,000. Furniture and
equipment expense increased $30,000. Other expenses increased $257,000, which
consisted primarily of increased telephone, legal and professional fees.
Amortization of intangible assets increased $49,000 compared to 1999.
Income Taxes
The provision for income taxes increased by $201,000 to $2,507,000 for the three
months ended September 30, 2000 as compared to $2,306,000 for the same period in
1999.
11
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999:
OVERVIEW
The Company realized net income of $18,278,000 for the nine months ended
September 30, 2000, as compared to $5,522,000 reported for the same period in
1999. Net income per diluted share was $1.18 for the nine months ended September
30, 2000 as compared to $0.34 per diluted share for the prior year period. The
nine months ended September 30, 1999 included non-recurring charges, net of
taxes, totaling $12,884,000 or $0.80 per diluted share in connection with the
acquisition of the Raritan Bancorp Inc. ("Raritan"), the sale of non-performing
assets, the Bank's conversion to a new operating system and the dissolution of
the Bank's joint venture in United Financial Services.
For the nine months ended September 30, 2000, operating earnings which exclude
non-recurring charges, net of taxes, totaled $18,278,000 as compared to
$18,406,000 for the prior year. For the nine months ended September 30, 2000,
operating earnings increased to $1.18 per diluted share, or 3.5%, compared to
$1.14 per diluted share for the prior year period.
The increase in operating earnings before non-recurring charges for the
nine-month period ended September 30, 2000 compared to 1999 was the result of
increases in non-interest income offset in part by and a decrease in net
interest income and an increase in non-interest expense.
EARNINGS ANALYSIS
Interest Income
Interest income for the nine months ended September 30, 2000 totaled
$115,530,000, an increase of $14,629,000 or 14.5% from the $100,901,000 reported
for the same period in 1999. These increases are primarily attributable to
increases in earning asset volume. For the nine months ended September 30, 2000,
average interest earning assets were up $151,306,000 or 8.2%, compared with the
same period in 1999, with most of the growth coming in the consumer, real estate
and commercial loan categories. The increase in interest income resulting from
increases in earning asset volume was coupled with an increase in average yield.
For the nine months ended September 30, 2000, the average yield on earning
assets increased 41 basis points to 7.88% from 7.47% for the same period last
year.
Interest Expense
The Company's interest expense for the nine months ended September 30, 2000,
increased $15,373,000 to $61,306,000 from $45,933,000 for the same period last
year. The average cost of interest bearing liabilities increased 78 basis points
to 4.80% for the first nine months of 2000 from 4.02% for the same period last
year, primarily as a result of an increase in rates paid on deposits and
short-term borrowed funds. Total average interest bearing liabilities increased
by $175,962,000 for the first nine months of 2000 compared to the same period in
1999, while non-interest bearing deposits decreased by $7,125,000.
Net Interest Income
The net effect of the changes in interest income and interest expense for the
nine months ended September 30, 2000 compared to the prior year periods was a
decrease of $744,000 in net interest income. For the nine months ended September
30, 2000, the net interest margin and net interest spread, on a fully taxable
equivalent basis, decreased 39 basis points and 38 basis points, respectively,
from the same period last year. The decreases in the net interest margin and
spread were the result of interest bearing liabilities repricing faster than
interest earning assets. Additionally, the Company's stock repurchase program
and investment in COLI has had an impact on net interest margin, as these
investments reduce investable funds. The COLI has positively impacted
non-interest income, which generated $1,809,000 in nine months ended September
30, 2000 as compared to $1,147,000 for the same period in 1999.
12
<PAGE>
Provision for Possible Loan Losses
For the nine months ended September 30, 2000, the provision for possible loan
losses was $4,730,000, compared to $2,775,000. Contributing to the increase was
an increase in the loan portfolio outstandings, as well as a shift in the
composition of the portfolio to higher risk commercial and installment loans,
partially offset by a decrease in non-performing loans. The amount of the loan
loss provision and the level of the allowance for possible loan losses are 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.
Non-Interest Income
For the nine months ended September 30, 2000, compared to the same period of
1999, total non-interest income increased $4,221,000 or 25.9%, to $20,518,000
compared to $16,297,000. The increase was due primarily to increases of
$2,786,000 in net security gains, $827,000 in trust income, $662,000 in income
on corporate owned life insurance, and $448,000 in other service charges,
commission and fees. These increases were partially offset by a decline in
service charges on deposits accounts of $485,000 and decreases of $17,000 in
other income. The decrease in service charges on deposits accounts in 2000
resulted from the Company's continued drive to build upon its relationship
banking with customers by increasing the efforts on offering its Combined
Banking services, which in turn has resulted in fewer occurrences of service
charges assessed.
Non-Interest Expense
For the nine months ended September 30, 2000, non-interest expense decreased
$15,088,000 from the same period last year. Included in the nine months of 1999
were non-recurring charges totaling $17,258,000, pre-tax, related to the
Company's acquisition of Raritan, the sale of non-performing assets, the Bank's
conversion to a new operating system as well as the dissolution of the Bank's
joint venture in United Financial Services. Excluding these charges,
non-interest expense increased by $2,170,000 or 5.1% from 1999. Data processing
expense increased $1,161,000 compared to the prior year period primarily due to
increased transaction volume. Furniture and equipment expense increased
$178,000. Partially contributing to this increase was the Company's innovation
of improving its customer banking relationships by purchasing a mobile branch.
Occupancy expense increased $263,000. Other expenses increased $1,192,000, which
consisted primarily of increased marketing, telephone, legal and professional
fees. Partially offsetting these increases was a decrease in salaries and
benefits expense by $645,000, or 3.5%, due to a reduction of expense in certain
benefit plans.
Income Taxes
The provision for income taxes increased by $3,854,000 to $6,991,000 for the
nine months ended September 30, 2000 as compared to $3,137,000 for the same
period in 1999. The increase in the effective tax rate for the nine-month period
is attributable to the prior year containing certain non-deductible one-time
charges taken in 1999.
Segment Reporting
The Company, for management purposes, is segmented into the following lines of
business: Retail Banking, Commercial Banking, Investments, and Trust and
Investment Services. Activities not included in these lines are reflected in
Corporate. Retail Banking includes the branches and ATMs, consumer and mortgage
lending, and credit card operations. Commercial Banking includes commercial and
construction lending, commercial credit and the operations of United Commercial
Capital Group, Inc. In 1999, the Company completed its
13
<PAGE>
acquisition of Raritan Bancorp Inc., combined computer systems of Raritan into
the Company's computer system, and completed the conversion of the Company's own
data processing operations to an independent third-party provider. Based upon
these facts, no segment information is provided for 1999, as such information
was not deemed meaningful. Summary financial information on a fully taxable
equivalent basis for the lines of business is presented in Note 6.
The following table shows the percentage contribution of the various lines of
business to consolidated net income before taxes on a fully taxable equivalent
basis:
<TABLE>
<CAPTION>
Retail Commercial Investments Trust Corporate Consolidated
------ ---------- ----------- ----- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended Sept. 30, 2000 39.1% 10.8% 28.3% 9.4% 12.4% 100.0%
Nine Months Ended Sept. 30, 2000 39.6% 16.2% 22.8% 7.5% 13.9% 100.0%
</TABLE>
FINANCIAL CONDITION
September 30, 2000 as compared to December 31, 1999:
Total assets increased $29,213,000, or 1.4% from December 31, 1999. Loans, net
of allowance and excluding loans held for sale, increased by $61,767,000, cash
surrender value of life insurance policies increased by $16,809,000, other
assets and other real estate increased by $3,768,000, cash and cash equivalents
increased by $549,000. Conversely, there were decreases of $28,364,000 in
securities, $23,807,000 in mortgage loans held for sale, $1,047,000 in premises
and equipment and $462,000 in intangible assets.
Total loans at September 30, 2000, excluding loans held for sale and net of
unearned income, increased $64,540,000, or 5.2% to $1,302,076,000 from
year-end 1999. Commercial loans contributed $45,331,000 to the first nine months
of loan growth, an increase of 19.4% over December 31, 1999. Lease financing
grew by $6,134,000 or 33.2% compared with December 31, 1999. Installment loans
increased $46,597,000 or 23.3% from December 31, 1999. Real estate loans
decreased by $34,306,000 or 4.6% compared with year-end 1999, due primarily
to loan sales totaling $28,504,000 in 2000. Credit card loans declined by
$1,307,000 or 3.0% from 1999.
The following schedule presents the components of gross loans, excluding
mortgage loans held for sale, by type, for each period presented.
<TABLE>
<CAPTION>
September 30, December 31,
(In Thousands) 2000 1999
---------------- ----------------
<S> <C> <C>
Commercial $279,287 $ 233,956
Real Estate 718,212 752,518
Installment 246,174 199,577
Lease Financing 24,596 18,462
Retail Credit Card Plan 42,609 43,916
---------------- ----------------
Total Loans Outstanding 1,310,878 1,248,429
Less: Unearned Income 8,802 10,893
---------------- ----------------
Loans, Net of Unearned Income $1,302,076 $1,237,536
================ ================
</TABLE>
14
<PAGE>
Within the securities portfolio, the majority of the decrease was due to the
sale of equity securities. The amortized cost and approximate market value of
securities are summarized as follows:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
--------------------------------- ---------------------------------
Amortized Market Amortized Market
SECURITIES AVAILABLE FOR SALE Costs Value Costs Value
----------------------------- --------------- -------------- -------------- ---------------
(in thousands)
<S> <C> <C> <C> <C>
Obligations of U.S. Government
Agencies and Corporations $ 95,523 $ 88,460 $ 97,738 $ 88,683
Obligations of States and
Political Subdivisions 84,941 82,075 80,520 75,223
Mortgage-Backed Securities 377,541 359,458 398,106 370,794
Corporate Debt Securities 47,895 41,504 47,908 44,021
Equity Securities 23,942 23,819 48,705 52,940
----------- ----------- ----------- -----------
Total Securities Available For Sale 629,842 595,316 672,977 631,661
----------- ----------- ----------- -----------
SECURITIES HELD TO MATURITY
U.S. Treasury Securities 3,000 3,000 5,000 4,961
Obligations of U.S. Government
Agencies and Corporations 19,898 19,641 4,997 4,663
Obligations of States and
Political Subdivisions 21,736 21,512 25,515 24,978
Mortgage-Backed Securities 1,984 1,937 2,221 2,143
Other Securities 200 200 175 173
----------- ----------- ----------- -----------
Total Securities Held To Maturity 46,818 46,290 37,908 36,918
----------- ----------- ----------- -----------
Trading Securities - - 743 929
----------- ----------- ----------- -----------
Total Securities $ 676,660 $ 641,606 $ 711,628 $ 669,508
=========== =========== =========== ===========
</TABLE>
Total deposits increased $35,113,000 or 2.4%. Savings deposits increased
$22,228,000, or 4.0%, demand deposits increased $5,377,000, or 2.3%, and time
deposits increased $7,508,000, or 1.1%. Short-term borrowings increased by
$91,285,000, or 45.7% while other borrowings decreased by $100,648,000, or
42.6%. Management continues to monitor the shift of deposits and level of
borrowings through its Asset/Liability Management Committee.
15
<PAGE>
Asset Quality
During the first quarter of 1999, the Company sold non-performing assets having
a carrying value of $4,465,000, resulting in a one-time charge of $736,000, net
of tax. The following table provides an analysis of non-performing assets as of
September 30, 2000 and December 31, 1999, 1998, 1997, and 1996:
<TABLE>
<CAPTION>
September 30, December 31, December 31, December 31, December 31,
(Dollars in Thousands) 2000 1999 1998 1997 1996
--------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Total Assets $2,119,596 $2,090,383 $1,916,809 $1,789,426 $1,550,129
Total Loans (Net of Unearned
Income) (1) $1,302,076 $1,237,536 $1,056,953 $931,266 $898,788
Allowance for Possible Loan Losses $13,159 $10,386 $11,174 $11,739 $11,874
% of Total Loans 1.01% 0.84% 1.06% 1.26% 1.32%
Total Non-Performing Loans (2) $6,375 $8,142 $8,612 $9,973 $13,018
% of Total Assets 0.30% 0.39% 0.45% 0.56% 0.84%
% of Total Loans 0.49% 0.66% 0.81% 1.07% 1.45%
Allowance for Possible Loan
Losses
To Non-Performing Loans 206.42% 127.56% 129.75% 117.71% 91.21%
Total of Non-Performing Assets $6,805 $8,251 $9,170 $11,650 $15,163
% of Total Assets 0.32% 0.39% 0.48% 0.65% 0.98%
</TABLE>
(1) Excludes mortgage loans held for sale.
(2) 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.
At September 30, 2000, there were $322,000 of loans that are considered to be
impaired under SFAS No. 114. There was one troubled debt restructuring of
$18,000, which is performing in accordance with the restructured agreement.
For the nine months ended September 30, 2000, the Company recognized no interest
income on impaired loans.
Allowance for Possible Loan Losses
The allowance is increased by provisions charged to expense and reduced by
charge-offs, net of recoveries. At September 30, 2000, the allowance for
possible loan losses was $13,159,000, up $2,773,000 compared to $10,386,000 at
year-end 1999. Net charge-offs for the nine months ended September 30, 2000 were
$1,957,000 compared to $3,139,000 for the prior year period, excluding the
charge related to the non-performing asset sale.
The level of the allowance for possible loan 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.
At September 30, 2000, the ratio of the allowance for possible loan losses to
non-performing loans was 206.42% as compared to 127.56% at December 31, 1999. In
the opinion of Management, the allowance for
16
<PAGE>
possible loan losses at September 30, 2000 was adequate to absorb probable
future losses on existing loans and commitments based upon currently available
information.*
Liquidity Management
At September 30, 2000, the amount of liquid assets remained at a level
Management believed 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.
Liquidity is generated from maturities and principal payments in the investment
portfolio. Scheduled maturities and anticipated principal payments of the
investment portfolio will approximate $36,000,000 throughout the next twelve
months.* In addition, all or part of the investment securities available for
sale could be sold to provide liquidity. These sources can be used to meet the
funding needs during periods of loan growth. Liquidity is also available through
additional lines of credit and the ability to incur additional debt. At
September 30, 2000, the Company had $405,156,000 of lines of credit with the
Federal Home Loan Bank and correspondent banks under which $151,935,000 was
available.
Capital
Total stockholders' equity increased $7,138,000 to $125,603,000 at September 30,
2000 from $118,465,000 at December 31, 1999. The increase during the nine-month
period was due to net income of $18,278,000, an increase of $4,413,000 (net of
tax) in the September 30, 2000 market value of the Company's available for sale
securities portfolio from the valuation at December 31, 1999, the exercise of
stock options of $194,000, and restricted stock activity of $24,000. Partially
offsetting these increases were the three quarterly cash dividends declared
totaling $9,220,000, and the repurchase of 360,100 shares of the Company's
common stock amounting to $6,551,000.
17
<PAGE>
The following table reflects the Company's capital ratios, as of September 30,
2000 and December 31, 1999 in accordance with current regulatory guidelines.
<TABLE>
<CAPTION>
(Dollars in Thousands) September 30, 2000 December 31, 1999
------------------------- --------------------------
Amount Ratio Amount Ratio
------------- --------- -------------- ---------
RISK-BASED CAPITAL
TIER I CAPITAL
<S> <C> <C> <C> <C>
Actual $161,308 10.47% $158,123 10.93%
Regulatory Minimum Requirements 61,609 4.00 57,874 4.00
For Classification as Well Capitalized 92,414 6.00 86,811 6.00
COMBINED TIER I AND TIER II CAPITAL
Actual $174,467 11.33% $168,509 11.65%
Regulatory Minimum Requirements 123,218 8.00 115,748 8.00
For Classification as Well Capitalized 154,023 10.00 144,685 10.00
LEVERAGE
Actual $161,308 7.47% $158,123 7.46%
Regulatory Minimum Requirements 86,387 4.00 84,744 4.00
For Classification as Well Capitalized 107,983 5.00 105,930 5.00
</TABLE>
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.
Year 2000 Issue
To date, no Year 2000 related problems have been experienced by the Company. In
addition, the Company has no knowledge of any borrower that is unable to meet
their obligations to the Company because of a Year 2000 issue. The Company will
continue to monitor for Year 2000 issues throughout the year 2000.
18
<PAGE>
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
MARKET RISK - ASSET/LIABILITY MANAGEMENT.
The primary market risk faced by the Company is interest rate risk. The
Company's Asset/Liability Committee ("ALCO") monitors the changes in the
movement of funds and rate and volume trends to enable appropriate management
response to changing market and rate conditions.
The Company's income simulation model analyzes interest rate sensitivity by
projecting net interest income over the next 24 months in a flat rate scenario
versus net interest income in alternative interest rate scenarios. Management
reviews and refines its interest rate risk management process in response to the
changing economic climate. Currently, the Company's model projects a 200 basis
point change in rates during the first year, in even monthly increments, with
rates held constant in the second year. The Company's ALCO has established that
interest income sensitivity will be considered acceptable if net interest income
in the above interest rate scenario is within 10% of net interest income in the
flat rate scenario in the first year. Additionally, the Company's ALCO policy
states that income sensitivity will be considered acceptable if the change in
net income in the above interest rate scenario is within 20% of net income from
the flat rate scenario in the first year. At September 30, 2000, the Company's
income simulation model indicates an acceptable, but increasing, level of
interest rate risk.*
At September 30, 2000, the simulation model reflects increased interest rate
sensitivity over the next 24 months. The six rate increases over the last year,
and a shortening of the Company's liability repricing opportunities, has
resulted in this increased sensitivity. While the interest rate sensitivity is
increasing, it is still within the Company's acceptable range.
Computation of prospective effects of hypothetical interest rate changes are
based on numerous assumptions, including relative levels of market interest
rates, loan prepayments and duration of deposits, and should not be relied upon
as indicative of actual results. Further, the computations do not contemplate
any actions the ALCO could undertake in response to the increasing interest rate
sensitivity.
19
<PAGE>
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
None
20
<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: November 13, 2000 By: THOMAS C. GREGOR
----------------
Thomas C. Gregor, Chairman
President and CEO
Dated: November 13, 2000 By: DONALD W. MALWITZ
-----------------
Donald W. Malwitz
Vice President & Treasurer
(Principal Financial Officer)
21
