Table Of Contents
Union National Bancorp
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet 4
Consolidated Statement of Income 5
Consolidated Statement of Cash Flows 6
Consolidated Statement of Changes on Stockholders' Equity 7
Item 2. Management's Discussion and Analysis 8-12
PART II - OTHER INFORMATION
Item 1. Exhibits and Reports on Form 8-K 12
<PAGE>
United States Securities and Exchange Commission Washington, D.C. 20549
FORM 10-Q
{ X } QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30,1997
{ } 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: 000-22523
UNION NATIONAL BANCORP, INC. (Exact name of registrant as specified in its
charter)
Maryland 52-0514247
(State of incorporation) (I.R.S. Identification Number)
117 East Main Street, Westminster, MD 21157 (410) 848-7200
(Address of principal executive offices) (Telephone Number)
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 filing
requirements for the past 90 days.
YES { X } NO { }
The number of shares of common stock outstanding as of June 30, 1997 is
834,000 shares.
<PAGE>
Part 1 Financial Information Item 1 Financial Statements
Union National Bancorp
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
ASSETS (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Cash and due from banks $6,471,761 $6,910,561
Interest bearing deposits with banks 43,627 160,821
Federal funds sold 11,081,530 8,882,550
Investment securities available for sale-at fair value 48,607,907 38,866,761
Investment securities held to maturity - at amortized
cost - fair value of $ (1997) and $17,304,150 (1996) 14,837,241 17,073,011
Loans 148,093,328 147,350,540
Less: allowance for credit losses (1,848,177) (1,772,433)
------------ ------------
Loans - net 146,245,152 145,578,107
Bank premises and equipment 3,903,890 3,928,561
Foreclosed real estate 646,528 391,236
Accrued interest receivable 1,837,098 1,292,194
Other assets 1,890,061 1,951,826
------------ ------------
TOTAL ASSETS $235,564,796 $225,035,628
============ ============
LIABILITIES
Deposits:
Non-interest bearing deposits $ 24,618,474 $ 23,694,607
Interest bearing deposits 180,977,331 175,596,828
------------ ------------
Total deposits 205,595,805 199,291,435
Short-term borrowings 10,012,991 6,808,596
Federal Home Loan Bank Borrowing -- --
Accrued expenses and other liabilities 891,860 882,930
------- -------
Total liabilities 216,500,656 206,982,961
----------- -----------
STOCKHOLDERS' EQUITY
Common stock - $.01 par; 10,000,000 shares authorized;
834,000 shares issued and outstanding 8,340 8,340
Surplus 8,342,055 8,342,055
Unrealized appreciation (depreciation) on securities available
for sale (net of related tax effects) 36,702 (58,586)
Retained earnings 10,677,043 9,760,858
---------- ---------
Total stockholders' equity 19,064,140 18,052,667
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 235,564,796 $225,035,628
============= ============
</TABLE>
<PAGE>
Union National Bancorp
Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $3,387,604 $3,475,763 $6,734,470 $6,936,787
Interest and dividends on investment securities:
Taxable interest on mortgage backed securities 316,979 370,890 646,958 756,777
Other taxable interest & dividends 605,831 290,311 1,140,245 566,035
Nontaxable interest 75,353 94,713 152,931 191,561
Interest on deposits at other banks 517 36,722 2,756 57,396
Interest on federal funds sold 109,423 87,179 199,897 156,087
---------------------------------------------------------------
Total interest income 4,495,706 4,355,580 8,877,257 8,664,643
INTEREST EXPENSE:
Interest on deposits:
Time certificates of deposit of $100,000 and more 270,731 410,079 575,569 642,778
Other deposits 1,687,560 1,512,880 3,238,282 3,216,516
----------------------------------------------------------------
Total interest on deposits 1,958,291 1,922,959 3,813,851 3,859,294
Interest on short-term borrowings 99,248 84,716 231,706 156,039
Interest on Federal Home Loan Bank borrowings 0 0 0 26,300
---------------------------------------------------------------
Total interest expense 2,057,539 2,007,675 4,045,557 4,041,633
NET INTEREST INCOME 2,438,166 2,347,905 4,831,700 4,623,010
PROVISION FOR CREDIT LOSSES 55,000 122,000 115,000 191,000
---------------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 2,383,166 2,225,905 4,716,700 4,432,010
---------------------------------------------------------------
NON-INTEREST INCOME:
Service charges on deposit accounts 234,512 174,323 460,852 332,105
Other service charges 66,334 26,529 91,333 56,456
Gains on sales of loans - - - 13,668
Other income 14,806 35,963 84,170 94,802
---------------------------------------------------------------
Total other operating income 315,653 236,815 636,355 497,031
---------------------------------------------------------------
NON-INTEREST EXPENSES:
Salaries and employee benefits 1,041,316 902,512 2,064,670 1,890,865
Occupancy expense of bank premises 182,584 190,772 358,585 387,270
Equipment expenses 105,849 82,237 197,008 179,757
Other expenses 489,351 472,734 982,872 953,243
---------------------------------------------------------------
Total other operating expenses 1,819,100 1,648,256 3,603,135 3,411,135
---------------------------------------------------------------
INCOME BEFORE INCOME TAXES 879,719 814,464 1,749,920 1,517,906
APPLICABLE INCOME TAXES 289,081 291,453 575,195 526,567
---------------------------------------------------------------
NET INCOME $590,638 $523,011 $1,174,725 $991,339
===============================================================
EARNINGS PER COMMON SHARE $0.71 $0.63 $1.41
</TABLE>
<PAGE>
Union National Bancorp
Consolidated Statements of Cash Flows (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30,
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
-------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,178,231 $991,399
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses 115,000 191,000
Depreciation and amortization 319,187 291,050
Gain on sales of other real estate and other assets (19,157) (35,941)
Deferred income taxes (18,190) (2,015)
Net decrease (increase) in accrued interest receivable (544,903) 76,890
Net increase (decrease) in accrued expenses & other liabilities 8,930 43,572
Other - net (2,433,311) 150,651
-------------- ------------
Net cash provided by operating activities (1,394,213) 1,706,606
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available for sale securities (10,930,000) (8,000,000)
Proceeds from maturities of available for sale securities 2,241,584 3,580,793
Purchase of held to maturity securities - (445,000)
Proceeds from maturities of held to maturity securities 3,327,466 3,782,150
Proceeds from sale of other real estate and other assets 137,510 301,182
Net increase in loans (1,181,149) (1,012,815)
Bank premises and equipment acquired (343,858) (239,773)
Foreclosed real estate acquired (124,451) (124,451)
Net cash used in investing activities (6,872,898) (2,157,914)
-------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 6,339,086 3,841,476
Net increase (decrease) in short-term borrowings 3,705,101 1,595,043
Repayments of Federal Home Loan Bank borrowings - (5,000,000)
Cash dividends paid (258,540) (233,520)
Net cash provided by financing activities 9,785,647 202,999
-------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,642,987 (248,309)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 15,953,932 13,641,267
-------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $17,596,919 $13,392,958
============== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $684,103 $660,179
============== =============
Income taxes paid 515,000 520,000
============== =============
NON-CASH INVESTING ACTIVITIES
Transfer from loans to foreclosed real estate $375,000 $319,708
Transfer from available for sale securities -------------- -------------
to held to maturity securities $- $-
============== =============
</TABLE>
<PAGE>
Union National Bancorp
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Unrealized
Appreciation
(Depreciation)
on Securities
Common Available Undivided
Stock Surplus for Sale Profits Total
----- ------- -------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31,1995 $8,340 $8,342,055 ($183,075) $8,372,716 $16,540,036
Net income - - - 991,339 991,339
Cash dividends ($.50 per share) - - - (233,520) (233,520)
Unrealized depreciation on securities
available for sale (net of tax) - - (252,551) - (252,551)
--------- ----------- ------------ ------------- ------------
Balance at June 30, 1996 8,340 8,342,055 (435,626) 9,130,535 17,045,304
Net income - - - 872,183 872,183
Cash dividends ($.52 per share) - - - (241,860) (241,860)
Unrealized appreciation on securities
available for sale (net of tax) - - 377,040 - 377,040
--------- ----------- ------------ ------------- ------------
Balance at December 31, 1996 $8,340 $8,342,055 $(58,586) $9,760,858 $18,052,667
Net income - - - 1,174,725 1,174,725
Cash dividends ($.57 per share) - - - (258,540) (258,540)
Unrealized appreciation on securities
available for sale (net of tax) - - 95,288 - 95,288
--------- ----------- ------------ ------------ ------------
Balance at June 30, 1997 $8,340 $8,342,055 $36,702 $10,677,043 $19,064,140
========= =========== ============ ============== ============
</TABLE>
<PAGE>
Union National Bancorp
Notes to Consolidated Financial Statements (Unaudited)
Note 1 - The accompanying unaudited consolidated financial statements for Union
National Bancorp, Inc. ("Company") have been prepared in accordance with the
instructions for Form 10-Q and, therefore do not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements. The interim financial statements have been prepared
utilizing the interim basis of reporting and, as such, reflect all adjustments
which are normal and recurring in nature and are, in the opinion of management,
necessary for fair presentation of the results for the periods presented. The
results of operations for the interim periods are not necessarily indicative of
the results for the full year.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Overview
On June 30, 1994, Union National Bancorp, Inc. commenced operations as the
parent company of its sole subsidiary, The Union National Bank of Westminster,
("Bank") which has conducted the business of banking since 1816. Since the Bank
is the primary possession of the holding company, the assets and liabilities of
the holding company are made up almost entirely of the assets and liabilities of
the Bank. The same is true for the income and expense of the Company with the
exception of activities conducted at the holding company level only, such as
mergers and acquisitions. All data is presented in this analysis in consolidated
form and is compared to like data for the Bank for prior years.
Total assets were $235.6 million at June 30, 1997, an increase of $15.8
million or 6.7% over one year earlier. The primary source of these funds was
certificates of deposit. Growth in deposits has declined in recent years as
depositors have sought other avenues of investment to enhance their yields. Loan
growth slowed during the second half of 1996 and remained sluggish throughout
1997. Other investments have increased as loan growth has declined.
Net income rose 15.6% in the first half of 1997 to $1,174,725 from net
income of $991,339 in the same period of 1996. The return on average assets for
the six months ended June 30, 1997 was 1.04% and .91% for the same period in
1996. The return on average equity was 12.84% for the six months ended June
30,1997 and 11.68% for the six months ended June 30,1996.
Net Interest Income
Net interest income is the major component of the Banks's earnings, and it
consists of the excess of interest income from earning assets less the expense
of interest bearing liabilities. Earning assets are composed primarily of loans
and securities, while deposits and short-term borrowings represent the major
portion of interest bearing liabilities. Changes in the volume and mix of these
assets and liabilities, as well as changes in the yields earned and rates paid,
are determinants of the changes in net interest income. The net interest margin
is calculated as
<PAGE>
tax-equivalent net interest income (income plus the tax savings from tax-exempt
loans and investments) divided by average earning assets and represents the
Banks's net yield on its earning assets.
First half net interest income before provision for loan losses was
$4,831,700 in 1997, $4,623,011 in 1996. These levels represent increases of
$208,689 (4.5%) for 1997. On a tax-equivalent basis, the respective net interest
incomes for the first half 1997 and 1996, respectively, were $4,913,508 and
$4,701,286. In 1996, the growth in net interest income slowed because the growth
of earning assets as well as the spread between the rate of interest earned and
that paid were declining. This trend has continued, but it improved in 1997. The
net interest spread rose to 4.03% in the first half of 1997 from 4.01% in the
same period of 1996. The net interest margin as a percentage of earning assets
was 4.62% for the first half, up slightly from 4.59% in 1996.
Non-Interest Income
Total non-interest income for the first six months of 1997 was $636,355 up
$139,323 or 28.0% from $497,032 for the first six months in 1996. This increase
is principally attributed to a $128,747 increase in service charge fees.
Recoveries of prior expenses or losses occurred which totaled $9,444 and an
increase of 17,431 for other servicing commissions were additional factors.
For the second quarter of 1997 total non-interest income was $315,653 up
$78,838 or 33.3% from $236,815 for the second quarter of 1996. This increase is
due to the same factors as the first half, increased servicing fees attributed
60,189 and recoveries attributed 39,805.
Non-Interest Expense
Non-interest expense for the first six months of 1997 was $3,603,135 an
increase of $191,998.00 or 5.6% from $3,411,137 in 1996. These increases are
generally direct reflections of the growth in assets as well as the related
investment in services, branches, and facilities.
In the first half 1997 salaries and benefits totaled $2,064,669, up
$173,804 or 9.2% from $1,890,865 in the second quarter of 1996. Personnel
expense represented 57.3% of total non-interest expense in the second quarter of
1997 compared to 55.6% in the same period of 1996. The average assets per
employee have increased for the first six months from $1.87 million in 1996 to
$1.97 million in 1997. This shows increased automation of functions as well as a
general improvement in the efficient allocation of resources since assets have
grown more rapidly than the revenue of staff to support the business.
Occupancy expense for the first half was $358,585 in 1997, down $28,685 or
7.4% from $387,270 of the first half of 1996. The primary source of this
decrease is due to a 70.4% increase in rental income associated with a increase
activity in non-traditional products. Rental expenses for the first half was
$126,266 in 1997, up $25,209 or 24.9% from $101,057 of the first half of 1996.
This increase in expense was due to expansion of branch locations.
<PAGE>
Other operating expense was $1,174,571 for the first half of 1997, up
$51,667 or 4.6% from $1,122,904 for the first half of 1996. An increase in
checks, account, and cash loss of $58,973 or 87.1% in the first half was
practically offset by a reductions of computer service expense of $39,433 of
14.1%.
Income Taxes
Income tax expense for the first half of 1997 and 1995 were $575,195 and
$426,567 respectively. Income taxes were 32.9% of net income before taxes for
the first half of 1997 and 41.2% for the first half of 1996. Federal income tax
accounted for 84.3% of total tax in 1997 first half compared to 76.0% in 1996
first half. As non-taxable income declines as a result of the 1986 Tax Reform
Act, tax expense rises faster than net income, and federal tax is making up an
increasing portion of the total.
Securities Portfolio
Total holdings in the investment portfolio at June 30,1997 were
$63,445,149 and at year-end were $55,939,772 in 1996. In aggregate, investment
securities increased 7,505,377 or 13.4% in the first half of the year. During
1996 and 1997, the portfolio was increased as the spread of longer term
investments to overnight funds widened, and further additions settled early in
1997. The total portfolio had an average maturity of 2.9 years on June 30, 1997
compared with 3.8 years on June 30,1996. These maturities represent estimates of
the actual life of instruments considering mortgage-back pay downs and puts for
tax-free securities
Loan Portfolio
Total loans outstanding on June 30,1997 were $148,093,328 and on December
31,1996 were $147,350,540. The loan portfolio increased 742,788 or .51% in the
first half of the year. The portfolio represented 62.9% of total assets on June
30,1997 and 65.5% of total assets on December 31,1996.
In the first half of 1997 the commercial loan portfolio decreased
$3,617,343 or 15.1% although commercial mortgages increased $5,788,618 or 10.5%.
The greatest majority of commercial loans are collateralized by some form of
real estate. Residential real estate declined $1,574,560 or 5.1%. Most
residential mortgages are kept "in house", however the Bank is involved in
selling mortgages on the secondary market. The installment portfolio increased
$288,912 or .8%. The home equity portfolio increased 2,513,293 or 47.3% while
the direct and indirect portfolio decreased 2,033,112 or 8.1%.
Allowance for Credit Losses
The allowance for loan losses on June 30,1997 was 1,848,176 and on December
31,1996 was 1,772,433. This is an increase of 75,743 or 4.3%. The ratio of
allowance to total loans was 1.21% at year end 1996 and 1.26% at the end of the
first half of 1997.
<PAGE>
Deposits
The Company uses deposits as the primary source of funding of its assets.
The Company has experienced continuous growth of deposits, especially in
certificates of deposit.
Total deposits were $205,595,805 on June 30,1997 and $199,291,435 on December
31, 1996. The main source area in both 1997 and 1996 was certificates of
deposits which grew $3.4 million or 3.1%. In addition, checking accounts rose
$2.3 million or 5.1%. Both regular savings and money market remained
approximately the same, 257,820 or .81% and 112,211 or .64% increases
respectively.
Short-Term Borrowings
Short-term borrowings consist of Federal funds purchased, repurchase
agreements, and borrowings from the Federal Reserve Bank or the Federal Home
Loan Bank and correspondent bank lines.
Repurchase agreements averaged $10,513,697 during 1997 compared to $
8,555,503 in 1996. At June 30,1997 there were $10,012,991 and at year-end 1996,
they were $6,808,596. These funds included customer repurchase agreements in
addition to those funds which were obtained solely to provide liquidity.
Liquidity
Traditionally, The Bank has maintained a strong liquidity position because
of a concentration of core deposits such as regular savings and checking
accounts. A high percentage of money market accounts and certificates of deposit
can also be considered core deposits. Federal funds sold is the Bank's most
liquid earning asset. Other sources include money market instruments and
securities classified available for sale. In addition to these sources, the Bank
has total credit lines of $33 million available from correspondent banks as of
June 30,1997.
On June 30,1997 securities available for sale and federal funds sold
totaled $59,689,437 compared with 47,749,311 on December 31, 1996. These funds
averaged $53,631,971 on June 30,1997 and $40,304,499 on year end 1996. (No
securities were classified available for sale until December 31, 1993.) Asset
liquidity is also provided by managing the maturities of loans, securities, and
certificates of deposit.
<PAGE>
Capital Management
<TABLE>
<CAPTION>
The Company's capital position is presented in the following table:
June 30, December 31 Regulatory
1997 1996 Requirement
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 capital to risk weighted assets 11.9% 11.7% 4.0%
Total capital to risk weighted assets 13.0% 12.9% 8.0%
Capital leverage ratio 8.7% 8.0% 3.0%
</TABLE>
PART II - OTHER INFORMATION
Item 1. Exhibits and Reports on Form 8-K
A Report on Form-8K
(a) There have been no Reports on Form 8-k filed by the Company during the
quarter for which this report is filed.
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.
Union National Bancorp (Registrant)
August 13, 1997 By: /s/ Virginia W. Smith
-------------------------
Virginia W. Smith
President and Chief Executive Officer
August 13, 1997 By: /s/ Gabrielle M. Peregoy
----------------------------
Gabrielle M. Peregoy
Vice President
<PAGE>
