United States Securities and Exchange Commission Washington, DC 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 March 31, 2000
{ } 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 52-1862338
(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)
Indicated 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 April 11, 2000 is
1,965,349 shares.
<PAGE>
Table Of Contents
Union National Bancorp, Inc.
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets 2
Consolidated Statements of Income 3
Consolidated Comprehensive Statements of Income 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis 5-9
PART II - OTHER INFORMATION 9
Item 6. Exhibits and Reports on Form 8-K 9
</TABLE>
<PAGE>
1
PART 1 FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS
UNION NATIONAL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------------ ------------------
ASSETS (Unaudited)
<S> <C> <C>
Cash and due from banks $ 14,737,200 $ 7,496,284
Interest bearing deposits with banks 44,825 23,983
Federal funds sold 2,311,223 799,873
Investment securities available for sale-at fair value 69,051,175 70,380,902
Investment securities held to maturity-at amortized cost - fair value
of $31,111,392 (2000) and $31,260,668 (1999) 32,389,828 32,619,087
Loans 179,614,866 179,720,903
Less: allowance for credit losses (1,808,646) (1,792,921)
------------------ ------------------
Loans - net 177,806,220 177,927,982
Premises and equipment 4,013,625 4,059,081
Accrued interest receivable 2,205,450 2,000,671
Goodwill 2,182,347 2,204,923
Deferred tax 2,608,337 2,536,222
Other assets 2,820,581 2,879,100
------------------ ------------------
TOTAL ASSETS 310,170,811 302,928,108
================== ==================
LIABILITIES
Deposits:
Non-interest bearing deposits $ 28,892,256 $ 28,526,731
Interest bearing deposits 200,702,891 203,651,221
------------------ ------------------
TOTAL DEPOSITS 229,595,147 232,177,952
Short-term borrowings 27,826,499 18,269,157
Federal Home Loan Bank Borrowing 25,000,000 25,000,000
Accrued expenses and other liabilities 1,651,559 1,898,117
------------------ ------------------
TOTAL LIABILITIES 284,073,205 277,345,226
------------------ ------------------
STOCKHOLDERS' EQUITY
Common stock - $.01 par; 10,000,000 shares authorized; 1,965,349
shares in March 31, 2000 1,964,128 shares on
December 31, 1999 issued and outstanding 19,652 19,640
Capital surplus 17,590,562 16,831,138
Accumulated other comprehensive income (loss) (2,132,970) (2,020,588)
Retained earnings 10,620,362 10,752,692
------------------ ------------------
TOTAL STOCKHOLDERS' EQUITY 26,097,606 25,582,882
------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $310,170,811 $302,928,108
================== ==================
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
UNION NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ending
March 31,
2000 1999
------------------ -------------------
INTEREST INCOME:
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest and fees on loans $3,765,975 $3,499,238
Interest and dividends on investment securities:
Taxable interest on mortgage backed securities 780,823 784,209
Other taxable interest & dividends 624,839 450,747
Nontaxable interest 224,204 223,391
Interest on deposits in other banks 771 370
Interest on federal funds sold 43,796 138,618
------------------ ------------------
TOTAL INTEREST INCOME 5,440,408 5,096,573
------------------ ------------------
INTEREST EXPENSE:
- ---------------------------------------------------------------------------------------------------------------------
Interest on deposits:
Time certificates of deposit of $100,000 and more 291,663 307,787
Other deposits 1,690,591 1,700,987
------------------ ------------------
Total interest on deposits 1,982,254 2,008,774
Interest on short-term borrowings 244,719 126,657
Interest on Federal Home Loan Bank borrowings 349,149 282,479
------- -------
TOTAL INTEREST EXPENSE 2,576,122 2,417,910
------------------ ------------------
Net Interest Income 2,864,286 2,678,663
Provision for Credit Losses 57,000 59,000
------- ------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 2,807,286 2,619,663
--------- ---------
NONINTEREST INCOME:
- ---------------------------------------------------------------------------------------------------------------------
Service charges on deposit accounts 286,049 268,290
Other service charges 87,252 63,240
Insurance service commission 333,914 -
Other income 23,192 44,737
------- ------
TOTAL NONINTEREST INCOME 730,407 376,267
-------- -------
NONINTEREST EXPENSE:
- ---------------------------------------------------------------------------------------------------------------------
Salaries and employee benefits 1,393,826 1,151,487
Occupancy expense 217,881 221,449
Equipment expenses 191,050 148,384
Other expenses 595,535 548,304
-------- ---------
TOTAL NONINTEREST EXPENSES 2,398,292 2,069,624
---------- ---------
INCOME BEFORE INCOME TAXES 1,139,401 926,306
PROVISION FOR INCOME TAXES 309,400 248,591
-------- --------
NET INCOME $830,001 $677,715
========= ========
EARNINGS PER COMMON SHARE BASIC AND DILUTED $0.42 $0.37
====== =====
DIVIDENDS PER COMMON SHARE $0.12 $0.11
====== =====
COMPREHENSIVE STATEMENTS OF INCOME (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
Net Income $830,001 $677,715
OTHER COMPREHENSIVE INCOME (LOSS), BEFORE TAX:
Unrealized holding gains/(loss) arising during period (184,362) (609,954)
Less: reclassification adjustment for gains included in net income - -
------------------ -----------------
Other comprehensive income/(loss), before tax (184,362) (609,954)
Income tax (expense)/benefit related to items
of other comprehensive income 71,200 235,564
------------------ -----------------
Other comprehensive income/(loss), net of taxes (113,162) (374,390)
COMPREHENSIVE INCOME $716,839 $303,325
========= ========
</TABLE>
<PAGE>
3
<TABLE>
<CAPTION>
UNION NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ending
March 31,
2000 1999
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $830,001 $677,715
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses 57,000 59,000
Depreciation and amortization 221,815 204,673
Provision for deferred income taxes (71,820) -
Net increase in accrued interest receivable (204,779) (98,339)
Net increase (decrease) in accrued expenses & other liabilities (246,558) 179,570
Other - net 176,787 936,592
------------------ ------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES
762,446 1,959,211
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available for sale securities - (13,997,536)
Proceeds from maturities of available for sale securities 1,133,361 11,011,091
Proceeds from maturities of held to maturity securities 225,523 801,156
Purchases of held to maturity securities - (2,494,074)
Net decrease (increase) in loans 56,494 (1,192,670)
Premises and equipment acquired (176,359) (85,150)
------------------ ------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 1,239,019 (5,957,183)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (2,582,805) 1,325,898
Net increase (decrease) in short-term borrowings 9,557,342 14,152,882
Dividend reinvestment plan 32,948 66,217
Cash dividends paid (235,842) (203,912)
------------------ ------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,771,643 15,341,085
------------------ ------------------
Net Increase In Cash And Cash Equivalents 8,773,108 11,343,113
Cash And Cash Equivalents At Beginning Of Year 8,320,140 14,864,586
------------------ ------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $17,093,248 $26,207,699
================== ==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $2,589,843 $2,378,552
================== ==================
Income taxes paid 309,400 249,400
================== ==================
</TABLE>
<PAGE>
4
Union National Bancorp, Inc.
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 does 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.
Note 2 - Recent accounting pronouncements: The FASB has issued Statement of
Financial Accounting Standard No. 133 "Accounting for Derivative Instruments and
Hedging" for the year ending on or after June 15,1999. Union National Bancorp
has reviewed this pronouncement and will adopt this standard when it is
applicable to its operations as required.
Note 3 - On January 20, 2000, the Company entered into an agreement and plan of
affiliation and merger with Mercantile Bancshares Corporation. Under the
proposal, the Company's shareholders will receive 1.15 shares of Mercantile's
$2.00 par common stock for each share of common stock of the Company.
No material legal obligations are created by the proposal and either party may
withdraw from the transaction until a definitive agreement is executed.
Consummation of the proposed sale is subject to regulatory approval and approval
of two-thirds of the Company's shareholders.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
OVERVIEW
This section of the report contains forward looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995, including
statements relating to Union National Bancorp's beliefs, expectations,
anticipations and plans regarding, among other things, general economic trends,
interest rates, product expansions and other matters. Such statements are
subject to numerous uncertainties, such as federal monetary policy, inflation,
employment, profitability and consumer confidence levels, the health of the real
estate and construction market in Union National Bancorp's market area, Union
National Bancorp's ability to develop and market new products and to enter new
markets, and other factors. As such there can be no assurance that future events
will develop in accordance with the forward-looking statements contained below.
Union National Bancorp, Inc. (`the Company") began operations as the
parent company of its sole subsidiary, The Union National Bank of Westminster,
("the Bank") in 1994. Union National Bank has conducted the business of banking
since 1816. The Bank is the primary possession of the holding company. Union
National Bank provides a full range of banking and certain non-banking services
to individuals and businesses. The Banks principal market area includes Carroll
County, Maryland and the surrounding regions. The assets and liabilities of the
holding company are mainly its investment in Union National Bank. Union National
Bancorp's principal source of income is from dividends received from Union
National Bank.
Total assets were $310.2 million at March 31, 2000, an increase of
$10.5 million or 3.5% over one year earlier. The primary funding source for the
asset growth is strong growth in investments from our customers in sweep
accounts and certificates of deposit. However, when advantageous, Union National
Bank has taken advantage of competitive rates on borrowings from the Federal
Home Loan Bank.
Net income rose $152,286 or 22.47% in the first three months of 2000 to
$830,001 from net income of $677,715 in the same period of 1999. The annualized
return on average assets for the three-month periods ended March 31, 2000 was
1.10% and for March 31, 1999 was .97%. The annualized return on average equity
was 12.95% for the three months ended March 31, 2000 and was 12.28% for the
three months ended March 31, 1999.
SECURITIES PORTFOLIO
Total holdings in the investment portfolio at March 31, 1999 were
$101,441,003 and at year-end 1999 were $102,999,989. In aggregate, investment
securities decreased $1,558,986 or 1.5% in the first three months of 2000. The
investment portfolio is comprised of investment securities available for sale,
and investment securities held to maturity. Available for sale represent those
securities that management may sell as part of its asset/liability management
strategy or that may be sold in response to changing interest rates or liquidity
needs. Held to maturity represent securities that are intended to be held until
they mature. The total portfolio has a duration of 5.12 years on March 31, 2000.
These maturities represent estimates of the actual life on instruments
considering mortgaged-backed pay downs.
Union National Bank formed a passive investment company in June of
1998, Union National Delaware Holding, Inc., (UNDH). First Union is
administering general services for Union National Delaware Holding. Union
National Bank has in aggregate in its
<PAGE>
5
portfolio $35,445,128 as of March 31, 2000. Union National Delaware Holding has
in aggregate in its portfolio $67,416,779 as of March 31, 2000. The passive
investment company will reduce cost, producing a benefit to Union National
Bank's net income.
The table below presents the securities portfolios mix as of March 31,
2000 when compared to year-end 1999.
<TABLE>
<CAPTION>
Available-for-Sale Held-to-Maturity
March 31,2000 December 31,1999 March 31,2000 December 31,1999
------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
U.S. government securities & obligations
of U.S. government agencies $ 22,683,552 $ 22,813,987 $ 12,494,025 $ 12,493,956
Obligations of state & political
Subdivisions 605,000 585,698 18,347,338 18,344,666
Mortgaged-backed securities 43,282,986 44,468,124 1,548,465 1,780,465
Other securities 2,479,637 2,513,093 - -
-------------- ------------- -------------- -------------
Total Investment Securities $ 69,051,175 $ 70,380,902 $ 32,389,828 $ 32,619,087
============== ============== ============== =============
</TABLE>
LOAN PORTFOLIO
Total loans outstanding on March 31, 2000 were $179,614,866 and on
December 31, 1999 were $179,720,903. The loan portfolio decreased $106,037 in
the first three months of the year. The loan portfolio represented 57.9% of
total assets on March 31, 2000 and 59.3% of total assets on December 31, 1999.
The table below presents the loan portfolio mix as of March 31, 2000 compared to
year ended 1999.
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- ----------------
<S> <C> <C>
Construction and land development $5,123,271 $4,400,853
Residential real estate - mortgages 51,281,166 50,735,954
Commercial real estate - mortgages 63,808,577 64,920,155
Commercial 34,653,496 33,422,226
Consumer 25,016,152 26,513,490
---------- ----------
Gross Loans 179,882,662 179,992,678
Net deferred loan fees and cost (267,796) (271,775)
--------- ---------
Total Loans 179,614,866 179,720,903
=========== ===========
</TABLE>
Union National Bancorp's loan portfolio is comprised of commercial and
residential real estate secured loans, commercial loans, and consumer
installment loans. Most residential mortgages are held for investment purposes
and the majority has a loan to value ratio of less than 80%. For those having a
loan to value ratio greater than 80%, Private Mortgage Insurance is required to
reduce risk. Union National Bancorp is involved in selling mortgages on the
secondary market. Commercial real estate-secured, lines of credit, tax-exempt
loans through local municipalities, and demand notes consist of well-seasoned
credits and new ventures that are well collaterlized. The consumer portfolio is
comprised of installment loans for purposes such as vehicle purchases, debt
consolidation, home improvement, and indirect auto loans purchased from
approximately six automobile dealerships and one farm supply equipment dealer.
Use of debt to income ratios and recent Credit Bureau scores assist to minimize
losses in the consumer portfolio. Union National Bancorp does not engage in
foreign lending, and involvement with speculative real estate and land
development is minimal. Union National Bancorp strives to meet the needs of the
community by lending in its market area. Management continues to review rates,
terms, and alternative opportunities to remain competitive in our market, while
continuing to assess credit worthiness and risk.
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses on March 31, 2000 was $1,808,646 and on
December 31, 1999 was $1,792,921. The ratio of allowance to total loans was
1.01% for the first three months of 2000 and 1.00% at year-end 1999.
<PAGE>
6
Analysis of the Allowance for Credit Losses
<TABLE>
<CAPTION>
Amount
<S> <C> <C>
Balance at beginning of period 1/1/00 $1,792,921
Loans charged off (49,543)
Recoveries 8,268
Provision charged to operating expenses 57,000
------
Balance at end of period 3/31/00 $1,808,646
==========
Net Charge-offs as a percentage of average total loans First three months 0.02%
</TABLE>
The methodology used in determining the allowance is calculated quarterly
and is applied in accordance with Banking Circular 201. Its assesses risk based
on the following categories: (1) levels of and trends in delinquencies and
nonaccruals, (2) trends in volume and terms of loans, (3) effects of any change
in lending policies and procedures, (4) experience, ability, and depth of
lending management and staff, (5) national and local economic trends and
conditions, and (6) concentrations of credit that may effect loss experience. In
addition, historical loss data is also considered. A "reserve range" is
determined from this process. A comparison is then made of the actual allowance
balance to the estimated potential loss in the entire portfolio to determine the
adequacy of the current reserve as well as a current period provision for credit
losses.
DEPOSITS
Union National Bancorp uses deposits as the primary source for funding
asset growth. Union National Bancorp has experienced growth of deposits year
after year, especially in certificates of deposit. Union National Bancorp offers
individuals, businesses and non-profit organizations a variety of accounts.
These accounts, including checking, savings, money market, and certificates of
deposits, are obtained primarily from the communities that Union National
Bancorp serves.
Total deposits were $229,595,147 on March 31, 2000 and $232,177,952 on
December 31, 1999. This represents a decrease of $2,582,805 or 1.11% in the
first 3 months of 2000. Certificates of deposits, which declined $4.2 million or
3.4%, represents 51.9% of the total deposit portfolio as of March 31, 2000.
However, checking accounts, money market, and regular savings experienced growth
of $3.9 million or 3.7%. The decline in deposits reflects changes in the
competitive environment and in interim management strategies in anticipation of
the proposed merger.
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.
Securities sold under agreement to repurchase averaged $20,092,704 during
the first three months of 2000 compared to $19,051,891 at year-end 1999. At
March 31, 2000 they totaled $27,826,499, and at year-end 1998, they totaled
$18,269,157.
Union National Bank has borrowed $25,000,000 from the Federal Home Loan
Bank. These funds were obtained to promote further growth in the loan and
security portfolios. Management believes the spread between the cost of funds on
these borrowing and investment return in the loan and securities portfolios will
increase Union National Bank's net interest margin.
LIQUIDITY
Traditionally, Union National Bank has maintained a strong liquidity
position due to its concentration of core deposits such as regular savings and
checking accounts. Union National Bank considers a high percentage of its money
market accounts and certificates of deposit as core deposits. Federal funds sold
are Union National Bank's most liquid earning asset. Other sources include
securities classified as available for sale. In addition to these sources, Union
National Bank has lines of credit totaling $50 million available from
correspondent banks as of March 31, 2000, of which $25 million are already in
use.
On March 31, 2000 securities available for sale and federal funds sold
totaled $71,362,398 compared with $71,180,775 on December 31, 1999. These funds
averaged $84,427,281 during the three months ended March 31, 2000 and
$81,990,016 for the year ended December 31, 1999. Managing the maturities of
loans, securities, and certificates of deposit also provides liquidity.
<PAGE>
7
CAPITAL MANAGEMENT
Union National Bancorp's capital position is presented in the following
table:
<TABLE>
<CAPTION>
March 30, December 31 For Capital
2000 1999 ADEQUACY PURPOSES
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 capital to risk-weighted assets 13.1% 13.0% 4.0%
Total capital to risk-weighted assets 14.0% 14.0% 8.0%
Capital leverage ratio 9.0% 8.6% 4.0%
</TABLE>
NET INTEREST INCOME
Net interest income is the major component of Union National Bank'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 based on tax-equivalent net interest
income (income plus the tax savings from tax-exempt loans and investments)
divided by average earning assets and represents Union National Bank's net yield
on its earning assets.
For the first three months, net interest income before provision for loan
losses were $2,864,286 in 2000 and $2,678,663 for the same period in 1999. This
represents an increase of $185,623 or 6.9% for 2000. Managing the net interest
margin is one of the primary focuses of the Asset / Liability Committee.
Monthly, the committee examines the "gap" and it's assumptions for their
validity, and assesses the margins movement relative to these factors. The net
interest spread represents the different between the yield on earning assets and
the cost of interest bearing liabilities, which declined to 3.74% in the first
three months of 2000 from 4.18% at December 31, 1999.
<TABLE>
<CAPTION>
AVERAGE CONSOLIDATED BALANCE SHEETS March 31, 2000 December 31, 1999
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $6,540,880 $7,114,822
Investments 101,802,509 104,699,615
Federal funds sold 3,413,123 5,925,000
Net loans 176,738,728 169,481,614
Other assets 14,046,515 10,024,197
------------------ ------------------
TOTAL ASSETS $302,541,755 $297,245,248
================== ==================
LIABILITIES
Deposits 228,887,299 228,594,467
Other borrowings 45,939,407 42,623,837
Other liabilities 2,162,958 1,941,495
------------------ ------------------
TOTAL LIABILITIES $276,989,664 $273,159,799
------------------ ------------------
Common stock 19,652 19,133
Capital surplus 16,865,102 15,359,566
Retained earnings 11,062,839 9,702,629
Accumulated other comprehensive income (2,395,502) (995,879)
------------------ ------------------
TOTAL CAPITAL $25,552,091 $24,085,449
------------------ ------------------
TOTAL LIABILITIES & CAPITAL $302,541,755 $297,245,248
================== ==================
</TABLE>
NONINTEREST INCOME
Noninterest income for the first three months of 2000 was $730,407 up
$354,140 or 94.1% from $376,267 for the first three months of 1999. Noninterest
income is comprised of service charge income, service fees income and insurance
services income. The three months ended March 31, 2000 service charge income was
$286,049 up $17,759 or 6.6% over the same period in 1999. Service fee income for
the first three months of 2000 was up slightly $2,467 or 2.3% from $107,977 in
1999 to $110,444 in 2000. Insurance services commissions, generated by the
Barnes Bollinger insurance subsidiary acquired June 1, 1999, contributed
$333,914 in the first quarter of 2000.
NONINTEREST EXPENSE
Noninterest expense for the first three months of 2000 was $2,398,292, an
increase of $328,668 or 15.8% from $2,069,624 from the same period in 1999. Of
this increase, $299,617 is expenses charged to the insurance subsidiary. Three
major areas make up noninterest expense. These are salaries and benefits,
occupancy and equipment, and other expense.
<PAGE>
8
Salaries and benefits represent the largest portion of these three areas at
58.1% of total noninterest expense. For the first three months of 2000 salaries
and benefits increased $242,339 or 21.0% to $1,393,826 from $1,151,487 in the
same period of 1999. This increase is primarily due to personnel expenses in the
insurance company.
The second largest portion of noninterest expense is other expense which
represents 24.8% of this expense. For the first three months of 2000 other
operating expense increased $47,231 or 8.6% to $595,535 from $548,304 in the
same period of 1999. Again, insurance company expenses account for the majority
of this increase.
The final portion of noninterest expense is occupancy and equipment, which
makes up 17.1% of total noninterest expense. The largest segment of this portion
is depreciation expense which is 54.2% of occupancy and equipment. Depreciation
expense increased $17,142 or 8.4% to $221,815 in the first three month of 2000
from $204,673 in the same period of 1999. In recent years, depreciation expenses
have risen with the implementation of technology. Management believes that this
additional cost will continue to be offset by an increase in asset growth and
quality customer service as well as staffing efficiencies.
PROPOSED MERGER
On January 20, 2000, the Company entered into an agreement and plan of
affiliation and merger with Mercantile Bancshares Corporation. Under the
proposal, the Company's shareholders will receive 1.15 shares of the
Mercantile's $2.00 par common stock for each share of the common stock of the
Company. Consummation of the proposed sale is subject to regulatory approval and
approval of two-thirds of the Company's shareholders.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(2) Plan merger
Letter of intent with Mercantile, Inc. is incorporated by
reference form Union National Bancorp's Form 8-K, filed with the Commission on
January 17, 2000 (Registration No. 0-22523)
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, Inc. (Registrant)
<TABLE>
<CAPTION>
<S> <C>
April 18, 2000 BY:/s/ VIRGINIA W. SMITH
-------------------------
Virginia W. Smith
President and Chief Executive Officer
April 18, 2000 BY:/s/ GABRIELLE M. PEREGOY
----------------------------
Gabrielle M. Peregoy
Vice President
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FOR UNION
NATIONAL BANCORP'S FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND IS
QUALIFIED IN ITS'S ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 14,737,200
<INT-BEARING-DEPOSITS> 44,825
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0
0
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</TABLE>
