<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 March 31, 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
United National Bancorp
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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)
</TABLE>
(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 May 1, 2000, there were 15,424,711 shares of common stock, $1.25 par
value, outstanding.
<PAGE>
UNITED NATIONAL BANCORP
FORM 10-Q
INDEX
<TABLE>
PART I - FINANCIAL INFORMATION PAGE(S)
<S> <C>
ITEM 1 Consolidated Financial Statements and Notes to
Consolidated Financial Statements 1-6
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-13
ITEM 3 Quantitative and Qualitative Disclosure About Market Risk 14
PART II - OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
<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,
2000 1999
--------- -----------
<S> <C> <C>
ASSETS
Cash and Due from Banks $ 48,172 $ 53,490
Federal Funds Sold 1,600 --
Securities Available for Sale, at Market Value 630,388 631,661
Securities Held to Maturity 51,338 37,908
Trading Account Securities, at Market Value 876 929
Loans, Net of Unearned Income 1,255,998 1,237,536
Less: Allowance for Possible Loan Losses 10,814 10,386
----------- -----------
Loans, Net 1,245,184 1,227,150
Mortgage Loans Held for Sale -- 23,807
Premises and Equipment, Net 28,280 29,024
Other Real Estate, Net 267 56
Intangible Assets, Primarily Core Deposit Premiums 7,097 7,202
Cash Surrender Value of Life Insurance Policies 50,815 35,253
Other Assets 48,162 43,903
----------- -----------
TOTAL ASSETS $2,112,179 $2,090,383
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $ 231,621 $ 235,386
Savings 588,493 562,673
Time 723,103 683,150
----------- -----------
Total Deposits 1,543,217 1,481,209
Short-Term Borrowings 156,563 199,931
Other Borrowings 244,386 236,397
Other Liabilities 31,734 34,381
----------- -----------
Total Liabilities 1,975,900 1,951,918
Company-Obligated Mandatorily Redeemable Preferred Series B
Capital Securities of a Subsidiary Trust Holding Solely Junior
Subordinated 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 15,479,711 in 2000 and 15,646,073 in 1999 20,209 20,182
Additional Paid-in Capital 129,191 129,460
Retained Earnings 8,387 5,592
Treasury Stock, at Cost - 665,723 shares in 2000 and
499,858 shares in 1999 (12,689) (9,817)
Restricted Stock (73) (97)
Accumulated Other Comprehensive Loss (28,746) (26,855)
----------- -----------
Total Stockholders' Equity 116,279 118,465
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,112,179 $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
March 31,
---------------------------
2000 1999
------------ -----------
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $25,860 $21,712
Interest and Dividends on Securities Available
for Sale:
Taxable 10,134 8,565
Tax-Exempt 989 1,105
Interest and Dividends on Securities Held to
Maturity:
Taxable 379 498
Tax-Exempt 297 255
Dividends on Trading Account Securities 11 8
Interest on Federal Funds Sold and
Deposits with Federal Home Loan Bank 11 397
--------- --------
TOTAL INTEREST INCOME 37,681 32,540
--------- --------
INTEREST EXPENSE
Interest on Savings Deposits 3,583 2,789
Interest on Time Deposits 9,493 7,656
Interest on Short-Term Borrowings 2,230 1,729
Interest on Other Borrowings 3,494 2,547
--------- --------
TOTAL INTEREST EXPENSE 18,800 14,721
--------- --------
Net Interest Income 18,881 17,819
Provision for Possible Loan Losses 1,200 975
--------- --------
NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE
LOAN LOSSES 17,681 16,844
--------- --------
NON-INTEREST INCOME
Trust Income 1,635 1,566
Service Charges on Deposit Accounts 991 1,151
Other Service Charges, Commissions and Fees 1,575 1,475
Net Gains from Securities Transactions 929 675
Other Income 1,247 789
--------- --------
TOTAL NON-INTEREST INCOME 6,377 5,656
--------- --------
NON-INTEREST EXPENSE
Salaries, Wages and Employee Benefits 6,748 6,544
Occupancy Expense, Net 1,376 1,283
Furniture and Equipment Expense 1,129 1,078
Data Processing Expense 1,795 1,502
Distributions of Series B Capital Securities 501 501
Amortization of Intangible Assets 330 603
Net Cost to Operate Other Real Estate 67 26
Non-Recurring Charges -- 11,073
Other Expenses 3,938 3,450
--------- --------
TOTAL NON-INTEREST EXPENSE 15,884 26,060
--------- --------
Income Before Provision for Income Taxes 8,174 (3,560)
Provision for Income Taxes 2,272 (114)
========= ========
NET INCOME $ 5,902 $(3,446)
========= ========
NET INCOME PER COMMON SHARE:
Basic $ 0.38 $ (0.22)
========= ========
Diluted $ 0.38 $ (0.22)
========= ========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 15,596 15,784
Diluted 15,725 15,784
</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 -- -- 5,902 -- -- -- 5,902
Cash Dividends Declared
($0.20 Per Share) -- -- (3,107) -- -- -- (3,107)
Exercise of Stock Options
(22,235 Shares) 27 (269) -- 435 -- -- 193
Change in Unrealized Loss on
Securities Available for
Sale, Net of Tax -- -- -- -- -- (1,891) (1,891)
Purchase of Treasury Stock -- -- (3,307) -- -- (3,307)
(188,100 shares)
Restricted Stock Activity, Net -- -- -- -- 24 -- 24
----------- ----------- ---------- ---------- ---------- ---------------- -------------
Balance-March 31, 2000 $20,209 $129,191 $ 8,387 $(12,689) $(73) $(28,746) $116,279
=========== =========== ========== ========== ========== ================ =============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
United National Bancorp
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------------
2000 1999
----------------- -----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) $ 5,902 $ (3,446)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided
By (Used in) Operating Activities:
Depreciation and Amortization 871 1,325
(Accretion) Amortization of Securities Premiums, Net (155) 230
Provision for Possible Loan Losses 1,200 975
(Benefit) Provision for Deferred Income Taxes (36) (752)
Net Gain on Disposition of Premises and Equipment -- (6)
Net Gains from Securities Transactions (982) (675)
Net Gain on the Sale of Loans Held for Sale (287) --
Trading Account Securities Activity, Net 53 56
Increase in Other Assets (3,856) (5,834)
(Decrease) Increase in Other Liabilities (2,611) 341
Restricted Stock Activity, Net 24 199
--------------- ---------------
Net Cash Provided by (Used in) Operating Activities 123 (7,587)
--------------- ---------------
INVESTING ACTIVITIES Securities Available for Sale:
Proceeds from Sales of Securities 82,269 104,326
Proceeds from Maturities of Securities 1,500 34,641
Purchases of Securities (84,216) (194,229)
Securities Held to Maturity:
Proceeds from Maturities of Securities 3,650 12,005
Purchases of Securities (17,132) (5,533)
Purchase of Corporate-Owned Life Insurance (15,000) --
Net Increase in Loans (19,234) (21,958)
Proceeds from Sale of Loans Held for Sale 24,094 --
Expenditures for Premises and Equipment (22) (544)
Proceeds from Sale of Premises and Equipment -- 38
(Increase) Decrease in Other Real Estate, Net (158) 357
--------------- ---------------
Net Cash Used in Investing Activities (24,249) (70,897)
--------------- ---------------
FINANCING ACTIVITIES
Net Increase in Demand and Savings Deposits 22,055 808
Net Increase in Time Deposits 39,953 13,282
Net (Decrease) Increase in Short-Term Borrowings (43,368) 6,688
Net Increase in Other Borrowed Funds 7,989 33,295
Cash Dividends on Common Stock (3,107) (3,311)
Proceeds from Exercise of Stock Options 193 1,598
Treasury Stock Acquired, at Cost (3,307) --
--------------- ---------------
Net Cash Provided by Financing Activities 20,408 52,360
--------------- ---------------
Net Decrease in Cash and Cash Equivalents (3,718) (26,124)
Cash and Cash Equivalents at Beginning of Period 53,490 102,967
--------------- ---------------
Cash and Cash Equivalents at End of Period $49,772 $ 76,843
=============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid During the Period:
Interest $15,438 $ 14,359
Income Taxes 5,400 4,200
</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.
(2) COMPREHENSIVE (LOSS) INCOME
Total comprehensive (loss) income amounted to the following for the periods
indicated:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
2000 1999
---------------- -------------
(amount in thousands)
<S> <C> <C>
Net Income (Loss) $ 5,902 $(3,446)
Change in Unrealized (Loss) Gain on Securities
Available for Sale (1,891) (5,032)
================ =============
Comprehensive Income (Loss) $ 4,011 $(8,478)
================ =============
</TABLE>
(3) NET INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per common share is computed by dividing net income by
the weighted average number of shares outstanding during each period.
Diluted net income (loss) 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 129,000
for the three months ended March 31, 2000. As the Company reported a net loss
for the three months ended March 31, 1999, potential shares of common stock
resulting from stock option agreements were anti-dilutive and no shares were
assumed to be exercised.
(4) 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.
5
<PAGE>
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, and
that 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. 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 party has assumed some leases and purchased some
of the Company's equipment. In addition, a few 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 quarter ended
March 31, 2000. It is anticipated that the above charges will be realized
through the third quarter of 2000.
(5) RECLASSIFICATION
Certain reclassifications have been made to the prior years' financial
statements to conform with the classifications used in 2000.
As discussed earlier in Note (1), during 1999, the Company completed its
acquisition of Raritan Bancorp Inc., merging its operations into that of the
Company's. Such operations were previously reported as a separate operating
segment of the Company. In addition, the Company completed the conversion of its
own data processing operations to an independent third-party provider and did
not produce any meaningful segment reporting information during the first
quarter of 2000.
Based on above, no segment reporting information is provided as such information
was not deemed meaningful.
6
<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
March 31, 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 months ended March 31, 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 March 31, 2000 and March 31, 1999:
OVERVIEW
The Company realized net income of $5,902,000 for the first quarter of 2000, as
compared to net loss of $3,446,000 reported for the same period in 1999. The
first quarter of 1999 included non-recurring charges, net of taxes, totaling
$8,864,000 or $0.56 per diluted share in connection with the acquisition of the
Raritan Bancorp Inc. ("Raritan") and the sale of non-performing assets. Net
income per diluted share was $0.38 for the first quarter of 2000 as compared to
a net loss per diluted share of $0.22 for the prior year period.
First quarter 2000 operating earnings, net of taxes, totaled $5,902,000 or $0.38
per diluted share. This represents an increase of $484,000 or 8.9% from
operating earnings of $5,418,000 or $0.34 per diluted share for the three months
ended March 31, 1999, before one-time charges.
The increase in operating earnings before non-recurring charges for the
three-month period ended March 31, 2000 compared to 1999 was primarily the
result of increases in net interest income combined with an increase in
non-interest income, partially offset by an increase in non-interest expense.
These improvements are largely attributable to economies of scale and cost
reductions realized as a result of the Raritan Bancorp, Inc. acquisition, which
was completed in the first quarter of 1999.
7
<PAGE>
EARNINGS ANALYSIS
Interest Income
Interest income for the quarter ended March 31, 2000 was $37,681,000, an
increase of $5,141,000 or 15.8% from the $32,540,000 reported for the same
period in 1999. The increase is primarily attributable to increases in earning
asset volume. For the three months ended March 31, 2000, average interest
earning assets were up 9.9%, 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 three months ended March
31, 2000, the average yield on earning assets increased 35 basis points to 7.79%
from 7.44% for the same period last year.
Interest Expense
The Company's interest expense for the first quarter of 2000 increased
$4,079,000 to $18,800,000 from $14,721,000 for the same period last year. The
average cost of interest bearing liabilities increased 50 basis points to 4.50%
for the first three months of 2000 from 4.00% for the three months ended March
31, 1999, primarily as a result of an increase in rates paid on deposits and
short-term borrowed funds. Total average interest bearing liabilities increased
by $191,033,000 for the first three months of 2000 compared to the same period
in 1999, while non-interest bearing deposits increased by $5,876,000.
Net Interest Income
The net effect of the changes in interest income and interest expense for the
first quarter of 2000 was an increase of $1,062,000 or 6.0% in net interest
income as compared to the first quarter of 1999. For the three months ended
March 31, 2000, the net interest margin and net interest spread, on a fully
taxable equivalent basis, decreased 14 basis points and 16 basis points,
respectively, from the same period last year.
Provision for Possible Loan Losses
For the three months ended March 31, 2000, the provision for possible loan
losses was $1,200,000, compared to $975,000 for the same period last year, due
primarily to increases in the loan portfolio. 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 first quarter of 2000, compared to the first quarter of 1999, total
non-interest income increased $721,000 or 12.7%, due primarily to increases of
$254,000 in net securities gains, $100,000 in other service charges, commission
and fees and $458,000 in other income. Other income increased due primarily to
an increase in income on the Company's investment in corporate owned life
insurance. These increases were partial offset by a decline in service charges
on deposits accounts of $160,000. This decrease in 2000 resulted from the
Company's continued drive to build upon on its relationship banking with
customers by increasing the efforts on offering its Combined Banking, which in
turn has resulted in fewer occurrences of service charges assessed.
Non-Interest Expense
For the quarter ended March 31, 2000, non-interest expense decreased $10,176,000
from the same period last year. Included in the first quarter of 1999 were
non-recurring charges totaling $11,073,000, pre-tax, related to the Company's
acquisition of Raritan and the sale of non-performing assets. Excluding these
charges, non-interest expense increased by $897,000 or 6.0% from 1999. Salaries
and benefits expense
8
<PAGE>
increased by $204,000 or 3.1% as a result of filling open staff requisitions and
normal salary increases. Data processing expense increased $293,000 compared to
the prior year period primarily due to increased transaction volume. Other
expenses increased $488,000, which consisted primarily of increased marketing,
telephone, legal and professional fees. Partially offsetting these increases was
a decrease in amortization of intangible assets of $273,000 during the first
quarter of 2000 compared with 1999, due to the reduced amortization resulting
from the Company's dissolution of UFS.
Income Taxes
The provision for income taxes increased by $2,386,000 to $2,272,000 for the
first quarter of 2000 as compared to a benefit for income taxes of $114,000 for
the same period in 1999. The increase in the effective tax rate is attributable
to the prior year containing certain non-deductible one-time charges taken in
1999.
FINANCIAL CONDITION
March 31, 2000 as compared to December 31, 1999:
Total assets increased $21,796,000, or 1.0% from December 31, 1999. Loans, net
of allowance and excluding loans held for sale, increased by $18,034,000,
securities increased by $12,104,000, Federal Funds sold increased by $1,600,000,
corporate owned life insurance increased by $15,562,000 and other assets
increased by $4,259,000. Conversely, there were decreases of $23,807,000 in
mortgage loans held for sale, $5,318,000 in cash and due from banks, $744,000 in
premises and equipment and $105,000 in intangible assets.
Total loans at March 31, 2000, excluding loans held for sale, increased
$18,462,000, or 1.5% to $1,255,998,000 from year-end 1999. Commercial loans
contributed $36,348,000 to the first three months of loan growth, an increase of
15.5% over December 31, 1999. Lease financing grew by $2,874,000 or 15.6%
compared with December 31, 1999. Installment loans increased $20,463,000 or
10.3% from December 31, 1999, real estate loans decreased by $40,440,000 or 5.4%
compared with year-end 1999 and credit card loans declined by $2,415,000 or
5.5%.
The following schedule presents the components of gross loans, by type, for each
period presented.
<TABLE>
<CAPTION>
March 31, December 31,
(In Thousands) 2000 1999
----------------- ---------------
<S> <C> <C>
Commercial $270,304 $ 233,956
Real Estate 712,078 752,518
Installment 220,040 199,577
Lease Financing 21,336 18,462
Retail Credit Card Plan 41,501 43,916
----------------- ---------------
Total Loans Outstanding 1,265,259 1,248,429
Less: Unearned Income 9,261 10,893
----------------- ---------------
Loans, Net of Unearned Income $1,255,998 $1,237,536
================= ===============
</TABLE>
9
<PAGE>
Within the securities portfolio, the majority of the increase was due to
purchases of corporate debt securities and other securities. The amortized cost
and approximate market value of securities are summarized as follows:
<TABLE>
<CAPTION>
March 31, 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 $125,894 $117,463 $ 97,738 $ 88,683
Obligations of States and
Political Subdivisions 84,645 78,502 80,520 75,223
Mortgage-Backed Securities 391,404 362,743 398,106 370,794
Corporate Debt Securities 47,905 43,729 47,908 44,021
Equity Securities 24,764 27,951 48,705 52,940
-------- -------- -------- --------
Total Securities Available For Sale 674,612 630,388 672,977 631,661
======== ======== ======== ========
SECURITIES HELD TO MATURITY
U.S. Treasury Securities 4,000 3,963 5,000 4,961
Obligations of U.S. Government
Agencies and Corporations 19,840 19,843 4,997 4,663
Obligations of States and
Political Subdivisions 25,171 24,782 25,515 24,978
Mortgage-Backed Securities 2,152 2,098 2,221 2,143
Other Securities 175 175 175 173
-------- -------- -------- --------
Total Securities Held To Maturity 51,338 50,861 37,908 36,918
======== ======== ======== ========
Trading Securities 743 876 743 929
-------- -------- -------- --------
Total Securities $726,693 $682,125 $711,628 $669,508
======== ======== ======== ========
</TABLE>
Total deposits increased $62,008,000 or 4.2%. Time deposits increased by
$39,953,000, or 5.8%, and savings deposits increased $25,820,000, or 4.6% while
demand deposits decreased by $3,765,000, or 1.6%. Short-term borrowings
decreased by $43,368,000, or 21.7% while other borrowings increased by
$7,989,000, or 3.4%. Management continues to monitor the shift of deposits and
level of borrowings through its Asset/Liability Management Committee.
10
<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
March 31, 2000 and December 31, 1999, 1998, 1997, and 1996:
<TABLE>
<CAPTION>
March 31, December 31, December 31, December 31, December 31,
(Dollars in Thousands) 2000 1999 1998 1997 1996
--------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Total Assets $2,112,179 $2,090,383 $1,916,809 $1,789,426 $1,550,129
Total Loans (Net of Unearned
Income) (1) $1,255,998 $1,261,343 $1,057,081 $931,266 $898,788
Allowance for Possible Loan
Losses $10,814 $10,386 $11,174 $11,739 $11,874
% of Total Loans 0.86% 0.82% 1.06% 1.26% 1.32%
Total Non-Performing Loans (2) $6,279 $8,142 $8,612 $9,973 $13,018
% of Total Assets 0.30% 0.39% 0.45% 0.56% 0.84%
% of Total Loans 0.50% 0.65% 0.81% 1.07% 1.45%
Allowance for Possible Loan
Losses
To Non-Performing Loans 172.22% 127.56% 129.75% 117.71% 91.21%
Total of Non-Performing Assets $6,546 $8,251 $9,170 $11,650 $15,163
% of Total Assets 0.31% 0.39% 0.48% 0.65% 0.98%
</TABLE>
(1) Includes 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 March 31, 2000, there were $510,000 of loans that are considered to be
impaired under SFAS No. 114. There was one troubled debt restructuring of
$26,000, which is performing in accordance with the restructured agreement.
For the three months ended March 31, 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 March 31, 2000, the allowance for possible
loan losses was $10,814,000, up $428,000 compared to $10,386,000 at year-end
1999. Net charge-offs for the three months ended March 31, 2000 were $772,000.
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 March 31, 2000, the ratio of the allowance for possible loan losses to
non-performing loans was 172.22% as compared to 127.56% at December 31, 1999. In
the opinion of Management, the allowance for possible loan losses at March 31,
2000 was adequate to absorb possible future losses on existing loans and
commitments based upon currently available information.*
11
<PAGE>
Liquidity Management
At March 31, 2000, 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, 1999, liquid investments, comprised of Federal Funds sold and money
market mutual fund instruments, totaled $2,420,000. Additional liquidity is
generated from maturities and principal payments in the investment portfolio.
Scheduled maturities and anticipated principal payments of the investment
portfolio will approximate $72,345,000 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 March 31, 2000, the
Company had $395,156,000 of lines of credit with the Federal Home Loan Bank and
correspondent banks under which $172,403,000 was available.
Capital
Total stockholders' equity decreased $2,186,000 to $116,279,000 at March 31,
2000 from $118,465,000 at December 31, 1999. The decrease during the three-month
period was due to the quarterly cash dividends declared totaling $3,107,000, a
decrease of $1,891,000 (net of tax) in the three months ended March 31, 2000
market value of the Company's available for sale securities portfolio from the
evaluation at December 31, 1999 and the repurchase of 188,100 shares of the
Company's common stock, which resulted in $3,307,000. Partially offsetting these
decreases were the exercise of stock options of $193,000, restricted stock
activity of $24,000, and net income of $5,902,000.
The following table reflects the Company's capital ratios, as of March 31,
2000 and December 31, 1999 in accordance with current regulatory guidelines.
<TABLE>
<CAPTION>
(Dollars in Thousands) March 31, 2000 December 31, 1999
------------------------- --------------------------
Amount Ratio Amount Ratio
------------- --------- -------------- ---------
<S> <C> <C> <C> <C>
RISK-BASED CAPITAL
TIER I CAPITAL
Actual $157,932 10.70% $158,123 10.93%
Regulatory Minimum Requirements 59,062 4.00 57,874 4.00
For Classification as Well Capitalized 88,593 6.00 86,811 6.00
COMBINED TIER I AND TIER II CAPITAL
Actual $168,746 11.43% $168,509 11.65 %
Regulatory Minimum Requirements 118,124 8.00 115,748 8.00
For Classification as Well Capitalized 147,655 10.00 144,685 10.00
LEVERAGE
Actual $157,932 7.42% $158,123 7.46%
Regulatory Minimum Requirements 85,102 4.00 84,744 4.00
For Classification as Well Capitalized 106,378 5.00 105,930 5.00
</TABLE>
12
<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.
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. The Company
has incurred costs of approximately $550,000 to date related to Year 2000
readiness.
13
<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 March 31, 2000, the Company's
income simulation model indicates an acceptable level of interest rate risk,
with no significant change from December 31, 1999.*
Computation of prospective effects of hypothetical interest rates 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 changes in interest rates.
14
<PAGE>
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(3)(a) Certificate of Incorporation of the Company as in effect on
the date of this filing. (Incorporated by reference in the
Company's Report on Form 10-Q for the quarter ended June 30,
1997 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.)
(27) Financial Data Schedule
(b) Reports on Form 8-K
None
15
<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 12, 2000 By: THOMAS C. GREGOR
-----------------------------------------
Thomas C. Gregor, Chairman
President and CEO
Dated: May 12, 2000 By: A. RICHARD ABRAHAMIAN
-----------------------------------------
A. Richard Abrahamian
Senior Vice President & Chief
Accounting Officer of United National Bank
(Principal Accounting Officer)
16
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This Schedule contains summary financial information extracted from SEC Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000831959
<NAME> United National Bancorp
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 48,172
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,600
<TRADING-ASSETS> 876
<INVESTMENTS-HELD-FOR-SALE> 630,388
<INVESTMENTS-CARRYING> 51,338
<INVESTMENTS-MARKET> 50,861
<LOANS> 1,255,998
<ALLOWANCE> 10,814
<TOTAL-ASSETS> 2,112,179
<DEPOSITS> 1,543,217
<SHORT-TERM> 156,563
<LIABILITIES-OTHER> 31,734
<LONG-TERM> 244,386
0
0
<COMMON> 20,209
<OTHER-SE> 96,070
<TOTAL-LIABILITIES-AND-EQUITY> 2,112,179
<INTEREST-LOAN> 25,860
<INTEREST-INVEST> 11,810
<INTEREST-OTHER> 11
<INTEREST-TOTAL> 37,681
<INTEREST-DEPOSIT> 13,076
<INTEREST-EXPENSE> 18,800
<INTEREST-INCOME-NET> 18,881
<LOAN-LOSSES> 1,200
<SECURITIES-GAINS> 929
<EXPENSE-OTHER> 15,884
<INCOME-PRETAX> 8,174
<INCOME-PRE-EXTRAORDINARY> 8,174
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,902
<EPS-BASIC> 0.38
<EPS-DILUTED> 0.38
<YIELD-ACTUAL> 3.97
<LOANS-NON> 5,052
<LOANS-PAST> 1,201
<LOANS-TROUBLED> 26
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 10,386
<CHARGE-OFFS> 1,015
<RECOVERIES> 243
<ALLOWANCE-CLOSE> 10,814
<ALLOWANCE-DOMESTIC> 10,814
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
