FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended: June 30, 1997
Commission File Number: 333-15067
UNITED COMMUNITY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1380239
(state or other juris- (I.R.S. Employer
diction of incorporation) Identification No.)
2600 Eagan Woods Drive, Suite 155
Eagan, Minnesota 55121
(Address of principal executive offices)(zip code)
(612) 905-3100
Registrant's telephone number, including area code:
--------------
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.
Yes X No
As of August 8, 1997, the Registrant had 604,698 shares of Common Stock, $.01
par value, outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS. Page
Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 3
Consolidated Statements of Income -
Three Months Ended June 30, 1997 and 1996 4
Six Months Ended June 30, 1997 and 1996 5
Consolidated Statements of Cash Flow -
Six Months Ended June 30, 1997 and 1996 6
Consolidated Statements of Stockholders' Equity -
Year Ended December 31, 1996 and Six Months
Ended June 30, 1997 7
Notes to Unaudited Consolidated Financial Statements 8
The financial information for the interim periods is unaudited. In the opinion
of management, all adjustments necessary (which are of a normal recurring
nature) have been included for a fair presentation of the results of operations.
The results of operations for an interim period are not necessarily indicative
of the results that may be expected for a full year or any other interim period.
<PAGE>
UNITED COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
UNAUDITED
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------------------------------------
ASSETS
<S> <C> <C>
Cash and due from banks $39,923,315 $27,542,088
Interest-bearing deposits with banks 2,568,842 231,972
Federal funds sold 3,650,000 15,725,000
Investment securities available for sale (amortized cost of $150,930,259 151,751,704 102,360,467
and $101,694,831)
Loans and leases 420,674,002 286,204,870
Allowance for loan losses (5,305,810) (3,168,098)
------------------------------------------
Net loans and leases 415,368,192 283,036,772
------------------------------------------
Property and equipment, net 13,720,019 11,630,681
Accrued interest receivable 5,055,898 3,369,793
Cash surrender value of life insurance 9,773,282 9,577,434
Intangible assets, net 26,301,492 3,516,113
Other assets 3,390,153 2,147,453
------------------------------------------
Total assets $671,502,897 $459,137,773
==========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $536,387,694 $372,792,254
Securities sold under repurchase agreements 34,052,774 21,797,343
Accrued expenses and other liabilities 6,826,937 6,165,548
Notes payable and other borrowings 33,550,095 17,516,476
------------------------------------------
Total liabilities 610,817,500 418,271,621
------------------------------------------
Company-obligated mandatorily redeemable
preferred securities of United Capital Trust I 11,000,000 -
Common stock owned by employee stock
ownership plan participants - 7,360,127
Stockholders' equity:
Common stock, par value $.01 per share;
5,000,000 shares authorized; 604,698 and 476,271
shares issued 6,047 4,763
Additional paid-in capital 27,135,848 17,525,797
Retained earnings 22,246,548 15,579,526
Unrealized gain on securities available for sale,net 296,954 395,939
------------------------------------------
Total stockholders' equity 49,685,397 33,506,025
------------------------------------------
Total liabilities and stockholders' equity $671,502,897 $459,137,773
==========================================
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
(3)
<PAGE>
UNITED COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1997 1996
----------------------------------------
<S> <C> <C>
Interest income on:
Loans and leases $10,260,106 $6,646,928
Investment securities 2,369,194 1,498,059
Federal funds sold 284,757 136,430
----------------------------------------
Total interest income 12,914,057 8,281,417
----------------------------------------
Interest expense on:
Deposits 4,381,167 2,872,721
Federal funds purchased and securities sold
under repurchase agreements 513,248 310,666
Notes payable and other borrowings 629,899 252,914
----------------------------------------
Total interest expense 5,524,314 3,436,301
----------------------------------------
Net interest income 7,389,743 4,845,116
Provision for loan and lease losses 260,325 50,415
----------------------------------------
Net interest income after provision for
loan and lease losses 7,129,418 4,794,701
Noninterest income:
Service charges and other fees 1,367,696 821,141
Net investment securities losses (93) -
Other 474,682 622,776
----------------------------------------
Total noninterest income 1,842,285 1,443,917
----------------------------------------
Noninterest expenses:
Salaries and employee benefits 3,557,219 2,554,600
Occupancy 360,530 275,761
Depreciation 494,009 376,549
Amortization of intangibles 478,735 189,024
Other 1,870,036 1,071,561
----------------------------------------
Total noninterest expenses 6,760,529 4,467,495
----------------------------------------
Income before income taxes 2,211,174 1,771,123
Income tax expense 877,665 484,667
----------------------------------------
Net income $1,333,509 $1,286,456
========================================
Average shares outstanding 603,487 546,669
Earnings per share $2.21 $2.35
Dividends per share $ - $ -
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
(4)
<PAGE>
UNITED COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1997 1996
----------------------------------------
<S> <C> <C>
Interest income on:
Loans and leases $19,573,237 $13,190,219
Investment securities 4,687,478 2,967,237
Federal funds sold 422,593 293,714
----------------------------------------
Total interest income 24,683,308 16,451,170
----------------------------------------
Interest expense on:
Deposits 8,399,490 5,734,866
Federal funds purchased and securities sold
under repurchase agreements 919,337 634,696
Notes payable and other borrowings 1,212,300 505,302
----------------------------------------
Total interest expense 10,531,127 6,874,864
----------------------------------------
Net interest income 14,152,181 9,576,306
Provision for loan and lease losses 473,550 94,648
----------------------------------------
Net interest income after provision for
loan and lease losses 13,678,631 9,481,658
Noninterest income:
Service charges and other fees 2,644,105 1,611,671
Net investment securities losses (993) -
Other 787,807 778,411
----------------------------------------
Total noninterest income 3,430,919 2,390,082
----------------------------------------
Noninterest expenses:
Salaries and employee benefits 6,895,358 4,964,532
Occupancy 705,306 444,598
Depreciation 995,279 754,866
Amortization of intangibles 925,499 378,047
Other 3,488,352 2,013,815
----------------------------------------
Total noninterest expenses 13,009,794 8,555,858
----------------------------------------
Income before income taxes 4,099,756 3,315,882
Income tax expense 1,562,917 1,034,411
----------------------------------------
Net income $2,536,839 $2,281,471
========================================
Average shares outstanding 600,239 545,862
Earnings per share $4.23 $4.18
Dividends per share $ - $ -
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
(5)
<PAGE>
UNITED COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1997 1996
----------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $2,536,839 $2,281,471
Adjustments to reconcile net income to net
cash flows from operating activities:
Net investment securities losses 993 -
Net amortization and accretion of bond
premiums and discounts (68,273) (79,219)
Provision for loan and lease losses 473,550 94,648
Depreciation 995,279 754,866
Amortization 925,499 378,047
Earnings on cash surrender value of life insurance (195,848) (198,081)
Net gain on sale of loans (414,364) (229,594)
Net gain on sale of other real estate - (49,657)
Net gain on sale of property and equipment (65,161) (13,439)
Provision for deferred income taxes (42,280) (200,000)
Other, net (2,591,017) (796,105)
----------------------------------
Net cash flows from operating activities 1,555,217 1,942,937
----------------------------------
Cash Flows Used for Investing Activities
Net increase in interest-bearing deposits with banks (990,870) -
Net decrease in federal funds sold 16,075,000 5,300,000
Net cash flows from investment securities 14,783,248 (4,159,348)
Net increase in loans and leases (15,256,014) (9,887,934)
Purchases of property and equipment (948,599) (671,767)
Proceeds from sales of property and equipment 168,983 25,400
Proceeds from sales of other real estate - 49,657
Cash paid, net of cash acquired, upon purchase of
subsidiary (40,275,107) -
----------------------------------
Net cash flows used for investing activities (26,443,359) (9,343,992)
----------------------------------
Cash Flows From Financing Activities
Net increase(decrease) in deposits 416,933 (488,583)
Net increase in securities sold under
repurchase agreements 3,437,426 6,109,619
Proceeds from notes payable and other borrowings 27,260,619 1,336,035
Payments made on notes payable and other borrowings (11,227,000) (1,000,000)
Proceeds from issuance of Company-obligated
mandatorily redeemable preferred securities of
United Capital Trust I 11,000,000 -
Proceeds from issuance of common stock 7,890,994 226,443
Repurchase of common stock (1,509,603) (49,659)
----------------------------------
Net cash flows from financing activities 37,269,369 6,133,855
----------------------------------
Net increase(decrease) in cash and cash
equivalents 12,381,227 (1,267,200)
Cash and Cash Equivalents
Beginning 27,542,088 20,513,154
----------------------------------
Ending $39,923,315 $19,245,954
==================================
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
(6)
<PAGE>
UNITED COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1996 AND SIX MONTHS ENDED JUNE 30, 1997
UNAUDITED
<TABLE>
<CAPTION>
Unrealized gain
on securities
Common Stock Additional Retained available for
Shares Par value paid-in capital earnings sale, net Total
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 478,952 $ 4,790 $ 17,808,360 $ 12,419,736 $ 612,546 $ 30,845,432
Net income -- -- -- 4,196,676 -- 4,196,676
Common stock issued 2,467 25 226,418 -- -- 226,443
Common stock repurchased (2,998) (30) (310,193) -- -- (310,223)
Increase in stock owned by ESOP
participants (2,150) (22) (200,057) -- -- (200,079)
Net change in fair value of stock
owned by ESOP participants -- -- -- (1,036,886) -- (1,036,886)
Net change in unrealized gain on
securities available for sale -- -- -- -- (216,607) (216,607)
Tax effect of stock options exercised -- -- 1,269 -- -- 1,269
----------------------------------------------------------------------------------------
Balance, December 31, 1996 476,271 4,763 17,525,797 15,579,526 395,939 33,506,025
Net income -- -- -- 2,536,839 -- 2,536,839
Common stock issued 74,455 745 7,890,249 -- -- 7,890,994
Common stock repurchased (13,976) (140) (1,509,463) -- -- (1,509,603)
Transfer of stock owned by ESOP
participants 67,948 679 3,229,265 4,130,183 -- 7,360,127
Net change in unrealized gain on
securities available for sale -- -- -- -- (98,985) (98,985)
----------------------------------------------------------------------------------------
Balance, June 30, 1997 604,698 $ 6,047 $ 27,135,848 $ 22,246,548 $ 296,954 $ 49,685,397
========================================================================================
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
(7)
<PAGE>
Notes to Unaudited Consolidated Financial Statements
Note 1. Acquisition
On January 16, 1997, United Community Bancshares, Inc. (United) acquired Park
Financial Corporation (PFC), a bank holding company headquartered in St. Louis
Park, Minnesota, which owns one hundred percent of Park National Bank. A summary
of the assets acquired, liabilities assumed and purchase price paid in
connection with the acquisition is as follows:
Assets acquired:
Cash and cash equivalents $ 7,613,238
Interest-bearing deposits with banks 1,346,000
Federal funds sold 4,000,000
Investment securities 64,279,368
Loans, net of allowance for loan losses of $2,255,336 117,134,592
Property and equipment 2,239,840
Other assets 2,968,438
Deposit base premium 4,528,715
Cost in excess of net assets acquired 19,182,163
------------
Total assets $223,292,354
============
Liabilities assumed:
Deposits $163,178,507
Securities sold under repurchase agreements 8,818,005
Other liabilities 3,407,497
------------
Total liabilities 175,404,009
Cash paid by United 47,888,345
------------
$223,292,354
============
The acquisition was accounted for as a purchase and, accordingly, the results of
PFC from January 16, 1997 through June 30, 1997 are included in the accompanying
unaudited consolidated financial statements. To facilitate this transaction, and
provide operating funds, United issued 70,989 additional shares of its common
stock for cash proceeds totaling $7,529,010, received $11,000,000 from the
proceeds of the sale of United's junior subordinated deferrable interest
debentures, and incurred acquisition indebtedness totaling $22,000,000. The
remaining balance of $7,359,335 was obtained from cash on hand. The deposit base
premium will be amortized on an accelerated basis over a ten year period and the
cost in excess of net assets acquired will be amortized over a twenty-five year
period.
Note 2. Pro Forma Results of Operations
The unaudited summarized pro forma consolidated statement of income for the
three months ended and six months ended June 30, 1996 is as follows and assumes
that the transaction was consummated on January 1, 1996. This unaudited pro
forma consolidated statement of income does not purport to represent what
United's results of operations would actually have been if the transaction had
occurred on January 1, 1996.
(8)
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF INCOME OF UNITED AND PFC
SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED STATEMENT
OF INCOME
SIX MONTHS THREE MONTHS
ENDED ENDED
UNITED PFC ADJUSTMENTS JUNE 30, 1996 JUNE 30, 1996
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income on:
Loans and leases $13,190,219 $5,512,547 $51,988 $18,656,731 $9,366,798
(98,023)
Investment securities 2,967,237 2,169,878 (75,554) 5,061,561 2,636,225
Federal funds sold 293,714 161,577 455,291 166,665
-------------------------------------------------------- -------------
Total interest income 16,451,170 7,844,002 (121,589) 24,173,583 12,169,688
-------------------------------------------------------- -------------
Interest expense on:
Deposits 5,734,866 2,712,324 58,056 8,505,246 4,242,912
Federal funds purchased and securities sold
under repurchase agreements 634,696 323,781 958,477 486,387
Notes payable and other borrowings 505,302 - 783,271 1,288,573 696,038
-------------------------------------------------------- -------------
Total interest expense 6,874,864 3,036,105 841,327 10,752,296 5,425,337
-------------------------------------------------------- -------------
Net interest income 9,576,306 4,807,897 (962,916) 13,421,287 6,744,351
Provision for loan and lease losses 94,648 240,000 334,648 170,415
-------------------------------------------------------- -------------
Net interest income after provision for
loan and lease losses 9,481,658 4,567,897 (962,916) 13,086,639 6,573,936
Noninterest income:
Service charges and other fees 1,611,671 782,230 2,393,901 1,195,194
Net investment securities gains - 1,000 1,000 1,000
Other 778,411 39,917 818,328 662,693
-------------------------------------------------------- -------------
Total noninterest income 2,390,082 823,147 - 3,213,229 1,858,887
-------------------------------------------------------- -------------
Noninterest expenses:
Salaries and employee benefits 4,964,532 1,627,146 6,591,678 3,358,805
Occupancy 444,598 307,812 752,410 430,414
Depreciation 754,866 272,905 (5,151) 1,026,945 512,981
4,325
Amortization of intangibles 378,046 - 676,654 1,054,700 543,335
Other 2,013,816 782,235 491,563 3,287,614 1,756,709
-------------------------------------------------------- -------------
Total noninterest expenses 8,555,858 2,990,098 1,167,391 12,713,347 6,602,244
-------------------------------------------------------- -------------
Income before income taxes 3,315,882 2,400,946 (2,130,307) 3,586,521 1,830,579
Income tax expense 1,034,411 924,572 (588,264) 1,370,719 691,673
-------------------------------------------------------- -------------
Net income $2,281,471 $1,476,374 ($1,542,043) $2,215,802 $1,138,906
======================================================== =============
Average shares outstanding 545,862 472,710 616,851 617,658
Earnings per share $4.18 $3.12 $3.59 $1.84
</TABLE>
The adjustments recorded reflect the effects of push-down accounting allocating
the purchase price paid to the assets and liabilities acquired, the effect of
additional borrowings resulting in increased interest expense, the dividend paid
on the preferred securities and the related tax effects of the adjustments.
The results of operations for the period January 16, 1997 through June 30, 1997
are not materially different from what they would have been on a pro forma basis
for the period January 1, 1997 through June 30, 1997.
(9)
<PAGE>
Note 3. Company-obligated Mandatorily Redeemable Preferred Securities of United
Capital Trust
On January 16, 1997, United Capital Trust I (the Trust), a Delaware business
trust wholly-owned by United, completed the sale of $11,000,000 of 9.75 percent
preferred securities (the Preferred Securities). The Trust used the proceeds
from the offering to purchase a like amount of 9.75 percent Junior Subordinated
Deferrable Interest Debentures (the Debentures) of United. The Debentures are
the sole assets of the Trust and are eliminated, along with the related income
statement effects, in the consolidated financial statements. United used the
proceeds from the sale of the Debentures to provide a portion of the financing
for the acquisition of PFC.
The Preferred Securities accrue and pay dividends quarterly at an annual rate of
9.75 percent of the stated liquidation amount of $25 per Preferred Security.
United has fully and unconditionally guaranteed all of the obligations of the
Trust. The guarantee covers the quarterly distributions and payments on
liquidation or redemption of the Preferred Securities, but only to the extent of
funds held by the Trust.
The Preferred Securities are mandatorily redeemable upon the maturity of the
Debentures, on January 15, 2027 or upon earlier redemption as provided in the
Indenture. United has the right to redeem the Debentures on or after January 15,
2002.
Note 4. Common Stock Owned by Employee Stock Ownership Plan Participants
Under the terms of the Employee Stock Ownership Plan (ESOP), participants who
have terminated may elect to have their distributions made in cash, United
common stock, or both. If stock distributed under the plan to a participant is
not readily tradable on an established market, the participant has the option to
require United to purchase the stock distributed.
The Securities and Exchange Commission's Accounting Series Release No. 268
required that to the extent there are conditions (regardless of their
probability of occurrence) whereby holders of equity securities may demand cash
in exchange for their securities, United must reflect the maximum possible cash
requirements related to those securities outside of stockholders' equity.
Accordingly, the common stock owned by the ESOP participants was reflected on
the accompanying balance sheet at its fair value at December 31, 1996.
As of April 1, 1997, the ESOP was amended to allow it to assume the put option
of United. As a result of this amendment, ASR 268 no longer applies to United.
Accordingly, United reclassified shares of common stock owned by the ESOP
participants to stockholders' equity at its historical cost.
(10)
<PAGE>
Note 5. Earnings Per Share
Earnings per share is computed using net income applicable to common stock and
the weighted average number of common and common stock equivalent shares
outstanding. The common stock equivalent shares outstanding were calculated
using the treasury stock method and are excluded because the aggregate dilution
from the common stock equivalents is less than three percent of earnings per
share outstanding. In addition, common equivalent shares outstanding were
calculated assuming that certain options were converted into shares of United's
common stock at the beginning of the first period shown.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("FAS 128"), "Earnings Per Share." This
Statement is effective for financial statements issued for periods ending after
December 15, 1997 and supersedes APB Opinion No. 15, "Earnings Per Share." The
Statement replaces the presentation of primary EPS with a presentation of basic
EPS. It also requires dual presentation of basic and diluted EPS on the face of
the income statement. Under FAS 128, basic and diluted earnings per share for
the three and six month periods ended June 30 were:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income available to common
stockholders $ 1,333,509 $ 1,286,456 $ 2,536,839 $ 2,281,471
=========== =========== =========== ===========
Weighted average common shares
outstanding 603,487 546,669 600,239 545,862
Adjustments for dilutive
securities:
Assumed exercise of outstanding
stock options -- -- -- --
----------- ----------- ----------- -----------
Diluted common shares $ 603,487 $ 546,669 $ 600,239 $ 545,862
=========== =========== =========== ===========
Earnings per share:
Basic $ 2.21 $ 2.35 $ 4.23 $ 4.18
Diluted 2.21 2.35 4.23 4.18
</TABLE>
(11)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
Basis of Presentation
The following discussion and analysis provides information regarding United's
unaudited results of operations for the quarter and six months ended June 30,
1997 and 1996 and financial condition as of June 30, 1997 and December 31, 1996.
This discussion and analysis should be read in conjunction with United's
Unaudited Consolidated Financial Statements submitted under Item 1 of Part I and
United's 1996 Annual Report on Form 10-K.
The comparison of 1997 data to 1996 data is substantially affected by the
acquisition of PFC on January 16, 1997.
In recent years, significant new federal legislation has imposed numerous new
legal and regulatory requirements on financial institutions. In addition to the
uncertainties posed by possible legislative change, there are many other
uncertainties that may make United's historical performance an unreliable
indicator of its future performance, and forward-looking information, including
projections of future performance, is subject to numerous possible adverse
developments, including but not limited to the possibility of adverse economic
developments which may increase default and delinquency risks in United's loan
portfolio; shifts in interest rates which may result in shrinking interest
margins; deposit outflows; interest rates on competing investments; demand for
financial services and loan products; increases generally in competitive
pressure in the banking and financial services industry; changes in accounting
policies or guidelines, or monetary and fiscal policies of the Federal
government; changes in the quality or composition of United's loan and
investment portfolios; or other significant uncertainties.
Overview
United's net income for the quarter ended June 30, 1997 increased $47,053 or
3.7% to $1,333,509 from $1,286,456 for the quarter ended June 30, 1996.
United's net income for the six months ended June 30, 1997 increased $255,368 or
11.2% to $2,536,839 from $2,281,471 for the six months ended June 30, 1996.
Total assets at June 30, 1997 increased $212,365,124 or 46.3% to $671,502,897
from $459,137,773 at December 31, 1996.
Results of Operations
Net Interest Income
Net interest income for the quarter ended June 30, 1997 increased $2,544,627 or
52.5% to $7,389,743 from $4,845,116 for the quarter ended June 30, 1996. PFC
contributed $2,482,072 to net interest income for the quarter ended June 30,
1997.
(12)
<PAGE>
Net interest income for the six months ended June 30, 1997 increased $4,575,875
or 47.8% to $14,152,181 from $9,576,306 for the six months ended June 30, 1996.
PFC contributed $4,488,945 to net interest income for the period from January
16, 1997 through June 30, 1997. Interest expense on notes payable increased
$706,998 from $505,302 for the six months ended June 30, 1996 to $1,212,300 for
the six months ended June 30, 1997. This increase is due to the additional
borrowing incurred to finance the acquisition of PFC.
Net interest income was positively impacted by an increase of $188.6 million or
49.6% in average interest-earning assets to $568.7 million for the six months
ended June 30, 1997 from $380.1 million for the six months ended June 30, 1996,
and by an increase of .02% in average yields on average interest-earning assets
to 8.75% for six months ended June 30, 1997 from 8.73% for the six months ended
June 30, 1996. The positive impact to net interest income was partially offset
by the increase of $158.4 million or 50.0% in average interest-bearing
liabilities to $475.0 million for the six months ended June 30, 1997 from $316.6
million for the six months ended June 30, 1996 and an increase in the rate paid
on average interest-bearing liabilities of .09% to 4.47% for the six months
ended June 30, 1997 from 4.38% for the six months ended June 30, 1996. Average
interest-earning assets and average interest-bearing liabilities increased due
to the acquisition of PFC. The net interest spread declined .07% to 4.28% for
the six months ended June 30, 1997 from 4.35% for the six months ended June 30,
1996 while net interest margin declined to 5.02% from 5.08%. This increase in
United's overall cost of funds is due primarily to the additional interest
expense incurred on long term debt associated with the acquisition of PFC.
(13)
<PAGE>
The following table presents the changes in net interest income by volume and
rate and the total thereof for the six months ended June 30, 1997 and 1996.
Changes in net interest income due to both volume and rate have been included in
changes due to rate.
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 vs. 1996
------------------
Increase (Decrease)
Due to Change in
Volume Rate Total
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits with banks $ 66 $ 32 $ 98
Federal funds sold 15 16 31
Taxable investment securities 1,082 190 1,272
Non-taxable investment securities 361 88 449
Loans and leases 6,608 (225) 6,383
-------- -------- --------
Total interest-earning assets $ 8,132 $ 101 $ 8,233
======== ======== ========
Interest-bearing liabilities
Deposits - interest-bearing:
Interest-bearing demand deposits $ 92 $ 32 $ 124
Savings 82 35 117
Money market 1,146 (3) 1,143
Time 1,292 (11) 1,281
-------- ------- --------
Total interest-bearing deposits 2,612 53 2,665
Federal funds purchased and
securities sold under
repurchase agreements 280 4 284
FHLB advances (27) (13) (40)
Notes payable 841 (93) 748
-------- ------- --------
Total interest-bearing liabilities $ 3,706 $ (49) $ 3,657
======== ======= ========
Change in net interest income $ 4,426 $ 150 $ 4,576
======== ======= ========
</TABLE>
(14)
<PAGE>
The following table presents, for the periods and as of the dates indicated,
information regarding United's average balance sheet. Ratio, yield and rate
information are based on average daily balances during the six months ended June
30, 1997 and 1996. Non-accrual loans are included in the average balances for
loans and leases, net, for the periods indicated.
<TABLE>
<CAPTION>
Six Months Ended June 30,
1997 1996
Average Average Average Average
Balance Interest Rate Balance Interest Rate
---------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Interest-bearing deposits $ 3,436 $ 99 5.81% $ 51 $ 1 3.95%
Federal funds sold 11,699 324 5.58 11,121 293 5.31
Taxable investments 130,066 4,026 6.24 93,390 2,754 5.95
Nontaxable investments 22,371 662 5.97 8,306 213 5.17
Loans and leases 401,164 19,573 9.84 267,237 13,190 9.95
---------------------------------------------------------------------
Total interest-earning assets 568,736 24,684 8.75 380,105 16,451 8.73
Noninterest-earning assets 70,727 42,366
------- --------
Total assets $ 639,463 $ 422,471
========= =========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits - interest-bearing:
Interest-bearing demand $ 51,146 $ 300 1.18% $ 33,640 $ 176 1.06%
Savings 38,633 405 2.11 30,075 288 1.93
Money market 154,745 3,399 4.43 102,588 2,256 4.43
Time 155,097 4,296 5.59 108,570 3,015 5.60
---------------------------------------------------------------------
Total interest-bearing dep. 399,621 8,400 4.24 274,873 5,735 4.21
Federal funds purchased and
securities sold under
repurchase agreements 37,192 919 4.98 25,797 635 4.96
FHLB advances 11,099 322 5.85 12,000 362 6.08
Notes payable 27,100 891 6.63 3,941 143 7.32
---------------------------------------------------------------------
Total interest-bearing liab. 475,012 10,532 4.47 316,611 6,875 4.38
Noninterest-bearing demand 109,417 63,772
Accrued expenses 6,507 5,391
--------- ---------
Total liabilities 590,936 385,774
Stockholders' equity 48,527 36,697
--------- ---------
Total liabilities and equity $ 639,463 $ 422,471
========= =========
Net interest income $ 14,152 $ 9,576
Net interest spread 4.28% 4.35%
Net interest margin 5.02% 5.08%
</TABLE>
(15)
<PAGE>
Provision for Loan and Lease Losses
The provision for loan and lease losses was $260,325 for the quarter ended June
30, 1997, an increase of $209,910 over the provision for loan and lease losses
of $50,415 for the quarter ended June 30, 1996. PFC contributed $85,000 to the
consolidated provision for the quarter ended June 30, 1997. The provision for
loan and lease losses was $473,550 for the six months ended June 30, 1997, an
increase of $378,902 over the provision for loan and lease losses of $94,648 for
the six months ended June 30, 1996. PFC contributed $160,000 to the consolidated
provision for the period from January 16, 1997 through June 30, 1997.
Fluctuations in the provision for loan and lease losses result from management's
regular assessment of the adequacy of the allowance for loan and lease losses.
See Discussion on Allowance for Loan and Lease Losses.
Noninterest Income
Noninterest income consists mainly of service charges on deposit accounts and
other service fees, earnings on cash surrender value of life insurance and gain
on sale of assets. Noninterest income was $1,842,285 for the quarter ended June
30, 1997, an increase of $398,368 or 27.6% over noninterest income of $1,443,917
for the quarter ended June 30, 1996. PFC contributed $498,586 of noninterest
income for the quarter ended June 30, 1997. The remaining decrease of $100,218
is primarily due to a decrease in other noninterest income. Noninterest income
was $3,430,919 for the six months ended June 30, 1997, an increase of $1,040,837
or 43.6% over noninterest income of $2,390,082 for the six months ended June 30,
1996. PFC contributed $893,000 of noninterest income for the period from January
16, 1997 through June 30, 1997. The remaining increase of $147,837 is primarily
due to an increase of $172,617 in service charges, an increase of $184,770 in
gain on sale of loans, an increase in investment securities losses of $993 and a
decrease of $208,557 in other noninterest income.
Noninterest Expenses
Noninterest expenses consist of salaries and employee benefits, occupancy,
depreciation, amortization of intangibles, minority interest expense of United
Capital Trust I and other miscellaneous expenses. Noninterest expenses were
$6,760,529 for the quarter ended June 30, 1997, an increase of $2,293,034 or
51.3% over noninterest expenses of $4,467,495 for the quarter ended June 30,
1996. PFC contributed $1,927,303 in noninterest expenses for the quarter ended
June 30, 1997. The remaining increase of $365,731 is primarily attributed to the
increase of $268,125 in minority interest expense of United Capital Trust I.
Noninterest expenses were $13,009,794 for the six months ended June 30, 1997, an
increase of $4,453,936 or 52.1% over noninterest expenses of $8,555,858 for the
six months ended June 30, 1996. PFC contributed $3,568,785 in noninterest
expenses for the period from January 16, 1997 through June 30, 1997. The
remaining increase of $885,151 is primarily due to an increase in salaries and
employee benefits of $386,486; an increase of $6,824 in occupancy expenses; an
increase of $53,370 in depreciation expense; a decrease of $129,202 in
amortization of intangibles; an increase of $491,563 in minority interest
expense of United Capital Trust I and an increase of $76,110 in other
miscellaneous expenses. The increase in salaries and employee benefits is
primarily due to salary adjustments and staffing increases. The increase in
depreciation expense is primarily due to the additional space added to Signal
Bank in January, 1997. The decrease in amortization of intangibles is due to one
covenant not to compete being fully amortized as of December 31, 1996. The
increase in minority interest expense of United Capital Trust I is due to the
issuance of $11,000,000 of United Capital Trust's 9.75 percent Preferred
Securities on January 16, 1997.
(16)
<PAGE>
Income Tax Expense
Income tax expense was $877,665 for the quarter ended June 30, 1997, an increase
of $392,998 or 81.1% over income tax expense of $484,667 for the quarter ended
June 30, 1996. The effective tax rate increased from 27.4% for the quarter ended
June 30, 1996 to 39.7% for the quarter ended June 30, 1997. Income tax expense
was $1,562,917 for the six months ended June 30, 1997, an increase of $528,506
or 51.1% over income tax expense of $1,034,411 for the six months ended June 30,
1996. The effective tax rate increased from 31.2% for the six months ended June
30, 1996 to 38.1% for the six months ended June 30, 1997. This increase is due
to the additional goodwill resulting from the acquisition of PFC and the
nondeductibility of the related amortization for tax purposes.
Financial Condition
Loans and Leases
Total loans were $420,674,002 at June 30, 1997, an increase of $134,469,132 or
47.0% over the December 31, 1996 amount of $286,204,870. PFC contributed
$116,857,050 in loans at June 30, 1997. The remaining increase of $17,612,082
represents growth of 6.2%. The following table presents a summary of United's
loan portfolio as of June 30, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
Amount Percent Amount Percent
------ ------- ------ -------
(dollars in thousands)
<S> <C> <C> <C> <C>
Commercial and agricultural $274,107 65.2% $175,339 61.3%
Residential real estate 83,860 19.9 67,569 23.6
Consumer 48,629 11.6 31,071 10.8
Leases 14,078 3.3 12,226 4.3
-------------------------------------------------------------
Total loans and leases $420,674 100.0% $286,205 100.0%
========= ====== ========= =======
</TABLE>
Allowance for Loan and Lease Losses
The current level of the allowance for loan and lease losses is a result of
management's assessment of the risks within the portfolio based on the
information revealed in the credit review processes. United utilizes a
risk-rating system on all loans and a quarterly review and reporting process
which results in the calculation of the guideline reserves based on the risk
within the portfolio. This assessment of risk takes into account the composition
of the loan portfolio, previous loan loss experience, current economic
conditions and other factors that in management's opinion deserve special
recognition.
(17)
<PAGE>
The following table presents a summary of United's allowance for loan and lease
losses for the six months ended June 30, 1997 and 1996:
Six Months Ended
June 30,
----------------
1997 1996
---- ----
(in thousands)
Balance, beginning of period $3,168 $2,899
Allowance for loan losses acquired 2,255 -
Provision for loan and lease losses 473 95
Loan and lease charge-offs (772) (295)
Recoveries 182 291
----- ----
Net charge-offs (590) (4)
----- -----
Balance, end of period $5,306 $2,990
====== ======
While the allowance for loan and lease losses is available to absorb credit
losses in the entire portfolio, the table below presents an estimate of the
allowance for loan and lease losses allocated by loan type. The unallocated
portion of the allowance for loan and lease losses represents allowance
available for the entire portfolio as well as reserves identified for
qualitative factors, unfunded commitments, and letters of credit. A significant
portion of the allowance for loan and lease losses is allocated to the
commercial and agricultural loan portfolios due to their higher degree of risk
as well as their historical loan loss experience.
The following table presents the allocation of the allowance for loan and lease
losses to major categories of loans and leases at June 30, 1997 and December 31,
1996:
June 30, December 31,
1997 1996
------- -----------
(in thousands)
Commercial and agricultural $2,485 $1,587
Residential real estate 79 10
Consumer 485 247
Leases 279 224
Unallocated 1,978 1,100
----- -------
Total $5,306 $3,168
====== ======
Nonperforming Assets
Total nonperforming loans and leases were $2,823,000 at June 30, 1997, an
increase of $1,635,000 or 137.6% over the December 31, 1996 amount of
$1,188,000. PFC contributed $823,000 in nonperforming loans and leases at June
30, 1997. Other real estate increased $703,000 over the December 31, 1996 amount
of none. PFC contributed $529,000 of this amount at June 30, 1997.
(18)
<PAGE>
The following table presents the nonperforming assets as of June 30, 1997 and
1996 and December 31, 1996:
<TABLE>
<CAPTION>
June 30, June 30, December 31,
1997 1996 1996
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Nonaccrual loans $1,857 $ 721 $ 913
Accrual loans which are past due 90
days or more as to principal or interest 887 338 275
Troubled debt restructurings 79 134 -
------- ------ ------
Total nonperforming loans and leases 2,823 1,193 1,188
Other real estate owned 703 - -
------- --------- ------
Total nonperforming assets $3,526 $1,193 $1,188
====== ====== ======
Total nonperforming loans and leases/
total loans and leases 0.67% 0.43% 0.42%
Total nonperforming assets/total assets 0.53% 0.28% 0.26%
</TABLE>
Investment Securities
Total investment securities available for sale were $151,751,704 at June 30,
1997, an increase of $49,391,237 or 48.3% over the December 31, 1996 amount of
$102,360,467. PFC contributed $62,081,520 in investment securities available for
sale at June 30, 1997. The remaining decrease of $12,690,283 represents
maturities and paydowns on securities available for sale. The following table
presents a summary of United's investment portfolio as of June 30, 1997:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of U.S.
government agencies $ 77,919 $ 337 $(125) $ 78,131
Obligations of states and
political subdivisions 26,790 705 (129) 27,366
Mortgage-backed securities 30,231 129 (109) 30,251
Corporate equity securities 15,990 93 (79) 16,004
-------- ------ ----- -------
Total investment securities
available for sale $150,930 $1,264 $(442) $151,752
======== ====== ====== ========
</TABLE>
(19)
<PAGE>
Deposits
Deposits were $536,387,694 at June 30, 1997, an increase of $163,595,440 or
43.9% over the December 31, 1996 amount of $372,792,254. PFC contributed
$174,176,135 in deposits at June 30, 1997. The remaining decrease of $10,580,695
is due to a decrease in deposits, primarily noninterest-bearing demand accounts.
Securities Sold Under Repurchase Agreements
Securities sold under repurchase agreements were $34,052,774 at June 30, 1997,
an increase of $12,255,431 or 56.2% over the December 31, 1996 amount of
$21,797,343. PFC contributed $9,182,513 in securities sold under repurchase
agreements at June 30, 1997.
Notes Payable and Other Borrowings
Notes payable and other borrowings were $33,550,095 at June 30, 1997, an
increase of $16,033,619 over the December 31, 1996 amount of $17,516,476. This
increase is due to the additional borrowing needed to finance the acquisition of
PFC. The new term note payable to a bank bears interest at LIBOR plus 1.4%
(7.24375% at June 30, 1997), is due January 16, 2002, with annual installments
of $3,000,000, secured by all the common stock of Signal Bank, Inc., Goodhue
County National Bank, Park Financial Corporation and United Credit Services,
Inc.
Capital Management
Stockholders' equity was $49,685,397 at June 30, 1997, an increase of
$16,179,372 or 48.3% over the December 31, 1996 amount of $33,506,025. This
increase is due to the retention of current period earnings, a $7.5 million
stock offering, the transfer of $7,360,127 of common stock owned by ESOP
participants and the net change in unrealized gains on securities available for
sale.
The following table compares United's regulatory capital ratios as of June 30,
1997 and December 31, 1996 with the minimum requirements for well capitalized
and adequately capitalized financial institutions as defined by the federal
regulatory agencies' Prompt Corrective Action Rules:
<TABLE>
<CAPTION>
Minimum Requirements
June 30, December 31, Well Adequately
Capital Category 1997 1996 Capitalized Capitalized
- ---------------- ---- ----- ----------- -----------
<S> <C> <C> <C> <C>
Tier 1 risk-based 7.61% 13.11% 6.0% 4.0%
Total risk-based 8.79 14.23 10.0 8.0
Leverage ratio 5.52 8.66 5.0 3.0
</TABLE>
(20)
<PAGE>
Liquidity
For the six months ended June 30, 1997 the net cash provided from operating
activities was $1,555,217, net cash used for investing activities was
$26,443,359 and net cash provided by financing activities was $37,269,369.
United used the proceeds from the financing activities to acquire PFC for
$40,275,107.
New Accounting Standards
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 129, "Disclosure of Information
about Capital Structure," ("FAS 129") which codifies existing disclosure
requirements regarding capital structure. FAS 129 will be required to be adopted
at year-end 1997 and is not expected to have a material impact on United's
current capital structure disclosures.
In June 1997, the FASB issued Statement of Financial Accounting Standard No.
130, "Reporting Comprehensive Income," ("FAS 130") which establishes standards
for reporting and display of comprehensive income and its components in a full
set of general-purpose financial statements. FAS 130 is effective for fiscal
years beginning after December 15, 1997. United is evaluating the effect
adoption of this statement will have on the reporting of its financial
information.
In June 1997, the FASB also issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
("FAS 131") which establishes standards for the way public enterprises report
information about operating segments in annual financial statements and interim
financial reports. FAS 131 is effective for fiscal years beginning after
December 15, 1997. United is evaluating the effect adoption of this statement
will have on the reporting of its financial information.
(21)
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
In January, 1997 United granted common stock options totaling 12,333 shares to
certain key employees and directors of United. The options become exercisable
over a five-year period beginning January 1, 1998 at an exercise price of
$108.32.
In March, 1997 United issued 1,800 shares to the United Community Bancshares,
Inc. Employee Stock Ownership Plan in exchange for an aggregate purchase price
of $194,976, in reliance upon an exemption under Section 4(2) of the Securities
Act of 1934 (the Act).
In June, 1997 United issued 665 shares to two investors in exchange for an
aggregate purchase price of $65,077, in reliance upon an exemption under Section
4(2) of the Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Previously reported.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
See Exhibit Index immediately following the signature page.
(b) Reports on Form 8-K.
United filed a Form 8-K dated April 1, 1997 to report the change of accountants.
(22)
<PAGE>
SIGNATURES
Pursuant to the requirement 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 COMMUNITY BANCSHARES, INC.
Dated: August 8, 1997 By: /s/ Galen T. Pate
Galen T. Pate, President
(principal executive officer)
By: /s/ Marcia L. O'Brien
Marcia L. O'Brien, Executive Vice President and
Chief Financial Officer (principal financial and
accounting officer)
(23)
<PAGE>
UNITED COMMUNITY BANCSHARES, INC.
EXHIBIT INDEX TO FORM 10-Q
FOR THE QUARTER ENDED
JUNE 30, 1997
Exhibit
Number Item
11 Computation of Earnings per Share
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule (filed with electronic version only)
(24)
Exhibit 11.
United Community Bancshares, Inc. and Subsidiaries
Computation of Earnings per Share
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
---- ----
<S> <C> <C>
Primary and fully diluted:
Weighted average number of common shares
outstanding 600,239 545,862
Net effect of assumed exercise of stock options
based on treasury stock method - - (1)
------- -------
600,239 545,862
======= =======
Net income $2,536,839 $2,281,471
Net income per common share $4.23 $4.18
</TABLE>
(1) Common stock equivalents are excluded because the aggregate dilution from
the common stock equivalents is less than three percent of earnings per share
outstanding.
Exhibit 12.
United Community Bancshares, Inc. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
(dollars in thousands)
<S> <C> <C>
Income before income taxes $ 4,100 $ 3,316
Interest expense 10,531 6,875
1/3 rent expense 115 49
-------- --------
Total earnings $ 14,746 $ 10,240
======== ========
Interest expense $ 10,531 $ 6,875
1/3 rent expense 115 49
-------- --------
Total fixed charges $ 10,646 $ 6,924
======== ========
Ratio including interest on deposits 1.39x 1.48x
Income before income taxes $ 4,100 $ 3,316
Interest expense 10,531 6,875
Less interest on deposits (8,399) (5,735)
1/3 rent expense 115 49
-------- --------
Total earnings $ 6,347 $ 4,505
======== ========
Interest expense $ 10,531 $ 6,875
Less interest on deposits (8,399) (5,735)
1/3 rent expense 115 49
-------- --------
Total fixed charges $ 2,247 $ 1,189
======== ========
Ratio excluding interest on deposits 2.82x 3.79x
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<CURRENCY> U.S.Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 39,923,315
<INT-BEARING-DEPOSITS> 2,568,842
<FED-FUNDS-SOLD> 3,650,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 151,751,704
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 420,674,002
<ALLOWANCE> 5,305,810
<TOTAL-ASSETS> 671,502,897
<DEPOSITS> 536,387,694
<SHORT-TERM> 34,052,774
<LIABILITIES-OTHER> 6,826,937
<LONG-TERM> 33,550,095
11,000,000
0
<COMMON> 6,047
<OTHER-SE> 49,679,350
<TOTAL-LIABILITIES-AND-EQUITY> 671,502,897
<INTEREST-LOAN> 19,573,237
<INTEREST-INVEST> 4,687,478
<INTEREST-OTHER> 422,593
<INTEREST-TOTAL> 24,683,308
<INTEREST-DEPOSIT> 8,399,490
<INTEREST-EXPENSE> 10,531,127
<INTEREST-INCOME-NET> 14,152,181
<LOAN-LOSSES> 473,550
<SECURITIES-GAINS> (993)
<EXPENSE-OTHER> 13,009,794
<INCOME-PRETAX> 4,099,756
<INCOME-PRE-EXTRAORDINARY> 2,536,839
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,536,839
<EPS-PRIMARY> 4.23
<EPS-DILUTED> 4.23
<YIELD-ACTUAL> 8.75
<LOANS-NON> 1,857,000
<LOANS-PAST> 887,000
<LOANS-TROUBLED> 79,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,423,434
<CHARGE-OFFS> 773,595
<RECOVERIES> 182,421
<ALLOWANCE-CLOSE> 5,305,810
<ALLOWANCE-DOMESTIC> 3,281,923
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,023,887
</TABLE>
