<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
------ ACT OF 1934
For the quarterly period ended June 30, 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 1-5735
UNION FINANCIAL BANCSHARES, INC.
--------------------------------
Delaware 57-1001177
--------------------------------------------------------------------------------
(Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
203 West Main Street, Union, South Carolina 29379
------------------------------------------- ------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (864)429-1864
Check whether the issuer: (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
---- ------
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: The Corporation had issued and
outstanding 1,906,533 shares, $0.01 par value, common stock as of July 13, 2000.
<PAGE> 2
UNION FINANCIAL BANCSHARES, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
--------------------- ----
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets as of June 30, 2000
and September 30, 1999 3
Consolidated Statements of Income for the three and nine months
ended June 30, 2000 and 1999 4
Consolidated Statements of Cash Flows for the nine
months ended June 30, 2000 and 1999 5
Consolidated Statements of Shareholders' Equity for the
nine months ended June 30, 2000 and 1999 6
Notes to Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-13
PART II. OTHER INFORMATION 14
-----------------
Signatures 15
<PAGE> 3
<TABLE>
<CAPTION>
UNION FINANCIAL BANCSHARES, INC.
CONSOLIDATING BALANCE SHEETS
June 30, 2000 (unaudited) and September 30, 1999
June 30, September 30,
ASSETS 2000 1999
------------------- --------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash $ 2,773 $ 3,149
Short term interest-bearing deposits 5,080 2,421
------------------- --------------------
Total cash and cash equivalents 7,853 5,570
------------------- --------------------
Investment and mortgage-backed securities:
Held to maturity 38,241 5,586
Available for sale 28,924 27,335
------------------- --------------------
Total investment and mortgage-backed securities 67,165 32,921
Loans , net
Held for sale 1,172 216
Held for investment 167,639 149,185
------------------- --------------------
Total loans receivable, net 168,811 149,401
Office properties and equipment, net 6,108 4,524
Federal Home Loan Bank Stock, at cost 2,138 2,050
Accrued interest receivable 1,728 1,574
Mortgage servicing rights 3,552 3,842
Goodwill intangible 4,202 1,818
Other assets 2,907 3,594
------------------- --------------------
TOTAL ASSETS $ 264,464 $ 205,294
=================== ====================
LIABILITIES
Deposit accounts $ 193,373 $ 142,624
Advances from the Federal Home Loan Bank and other borrowings 47,864 46,503
Accrued interest on deposits 286 226
Advances from borrowers for taxes and insurance 435 548
Other liabilities 1,887 655
------------------- --------------------
TOTAL LIABILITIES 243,845 190,556
------------------- --------------------
SHAREHOLDERS' EQUITY
Serial preferred stock, no par value,
authorized - 500,000 shares, issued
and outstanding - None 0 0
Common stock - $0.01 par value,
authorized - 2,500,000 shares,
issued and outstanding - 1,906,533 shares at 6/30/00 and 1,357,214 at 9/30/99 20 14
Additional paid-in capital 11,298 5,484
Accumulated other comprehensive income (2,434) (1,779)
Retained earnings, substantially restricted 11,735 11,019
------------------- --------------------
TOTAL SHAREHOLDERS' EQUITY 20,619 14,738
------------------- --------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 264,464 $ 205,294
=================== ====================
See notes to consolidated financial statements.
</TABLE>
3
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<TABLE>
<CAPTION>
UNION FINANCIAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three and Nine Months Ended June 30, 2000 (unaudited) and 1999 (unaudited)
Three Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
------------------- -------------------- ------------------- ----------------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest Income:
Loans $ 3,699 $ 2,742 $ 10,944 $ 8,311
Deposits and federal funds sold 19 17 58 67
Mortgage-backed securities 431 385 968 1,132
Interest and dividends on
investment securities 379 279 1,131 713
------------------- -------------------- ------------------- ----------------
Total Interest Income 4,528 3,423 13,101 10,223
------------------- -------------------- ------------------- ----------------
Interest Expense:
Deposit accounts 2,241 1,419 6,056 4,288
Advances from the FHLB and other borrowings 662 409 1,954 1,376
------------------- -------------------- ------------------- ----------------
Total Interest Expense 2,903 1,828 8,010 5,664
------------------- -------------------- ------------------- ----------------
Net Interest Income 1,625 1,595 5,091 4,559
Provision for loan losses 150 25 200 70
------------------- -------------------- ------------------- ----------------
Net Interest Income After
Provision for Loan Losses 1,475 1,570 4,891 4,489
------------------- -------------------- ------------------- ----------------
Non Interest Income:
Fees for financial services 322 287 938 635
Loan servicing fees (costs) 167 (60) 204 (135)
Net gains (losses) on sale of investments 0 0 0 7
Net gains (losses) on sale of loans 160 119 292 493
------------------- -------------------- ------------------- ----------------
Total Non Interest Income 649 346 1,434 1,000
------------------- -------------------- ------------------- ----------------
Non Interest Expense:
Compensation and employee benefits 709 592 2,195 1,774
Occupancy and equipment 362 292 1,061 828
Deposit insurance premiums 13 17 42 59
Professional services 60 68 238 206
Real estate operations 13 1 28 3
Goodwill amortization 111 81 320 196
Other 181 172 586 519
------------------- -------------------- ------------------- ----------------
Total Non Interest Expense 1,449 1,223 4,470 3,585
------------------- -------------------- ------------------- ----------------
Income Before Income Taxes 675 693 1,855 1,904
Income tax expense 215 251 632 689
------------------- -------------------- ------------------- ----------------
Net Income $ 460 $ 442 $ 1,223 $ 1,215
=================== ==================== =================== ================
Basic Net Income Per Common Share $ 0.24 $ 0.33 $ 0.67 $ 0.90
=================== ==================== =================== ================
Diluted Net Income Per Common Shar $ 0.24 $ 0.31 $ 0.66 $ 0.86
=================== ==================== =================== ================
Weighted Average Number of
Common Shares Outstanding
Basic 1,904,947 1,351,762 1,837,644 1,347,920
Diluted 1,904,947 1,423,053 1,848,053 1,419,216
See notes to consolidated financial statements.
</TABLE>
4
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<TABLE>
<CAPTION>
UNION FINANCIAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended June 30, 2000 (unaudited) and 1999 (unaudited)
Nine Months Ended
June 30, June 30,
2000 1999
-------------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $1,222 $1,215
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 200 70
Amortization of intangibles 242 195
Depreciation expense 332 249
Recognition of deferred income, net of costs (199) (81)
Deferral of fee income, net of costs 443 231
Loans originated for sale 38,583 (90,166)
Sale of loans (38,583) 90,166
Gain on sale of loans 292 493
Changes in operating assets and liabilities:
(Increase) decrease in accrued interest receivable (154) (421)
(Increase) decrease in other assets 687 (1,160)
Increase (decrease) in other liabilities 1,119 (506)
Increase (decrease) in accrued interest payable 60 (91)
-------------------- -------------------
Net cash provided by (used by) operating activities 4,244 194
-------------------- -------------------
INVESTING ACTIVITIES:
Purchase of investment and mortgage-backed securities:
Held to maturity (30,365) 0
Available for sale (4,094) (21,539)
Investments acquired in merger (2,602) 0
Proceeds from sale of investment and mortgage-
backed securities 0 2,090
Proceeds from maturity of investment and mortgage-
backed securities:
Available for sale 100 4,657
Principal repayments on mortgage-backed securities:
Held to maturity 577 165
Available for sale 1,486 4,456
Loans acquired in merger (41,144) 0
Net (increase) decrease in loans 20,998 (2,917)
Net (increase) decrease in mortgage servicing rights 290 (387)
Purchase of FHLB stock (88) (6)
Redemption of FHLB stock 0 0
Purchase of office properties and equipment (1,916) (577)
-------------------- -------------------
Net cash provided by (used by) investing activities ($56,758) ($14,058)
-------------------- -------------------
FINANCING ACTIVITIES:
Proceeds from the dividend reinvestment plan 158 68
Dividends paid in cash ($0..10 per share -2000
and $0.093 per share - 1999) (506) (300)
Proceeds from the exercise of stock options 13 2
Increase in goodwill intangible (2,626) (854)
Proceeds from term borrowings 1,361 1,384
Capital acquired in merger 5,648 0
Deposits acquired in acquisition 35,688 12,622
Increase (Decrease) in deposit accounts 15,061 2,037
-------------------- -------------------
Net cash (used by) provided by financing activities 54,797 14,959
-------------------- -------------------
NET DECREASE \ INCREASE IN CASH
AND CASH EQUIVALENTS 2,283 1,095
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 5,570 3,593
-------------------- -------------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $7,853 $4,688
==================== ===================
SUPPLEMENTAL DISCLOSURES:
Cash paid for:
Income taxes $0 $953
Interest 8,010 5,755
Non-cash transactions:
Loans foreclosed $125 $220
See notes to consolidated financial statements.
</TABLE>
5
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<TABLE>
<CAPTION>
UNION FINANCIAL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
Retained Accumulated
Additional Earnings Other Total
Common Stock Paid-In Substantially Comprehensive Shareholders'
Shares Amount Capital Restricted Income Equity
------ ------ ------- ---------- ------ ------
(In Thousands, Except Share Data)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1998 1,278,250 $13 $4,471 $10,668 $148 $15,300
Net income 1,215 1,215
Other comprehensive income
Unrealized losses on securities:
Unrealized holding losses arising during
period (1,355) (1,355)
------- -------
Comprehensive loss (140)
Options exercised 2,000 2 2
Dividend reinvestment plan contributions 8,652 0 68 68
Five percent stock dividend 64,090
Cash dividend ($.279 per share) (300) (300)
---------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1999 1,352,992 13 4,541 11,583 (1,207) 14,930
=================================================================================
BALANCE AT SEPTEMBER 30, 1999 1,357,214 14 5,484 11,019 (1,779) 14,738
Net income 1,222 1,222
Other comprehensive income
Unrealized losses on securities:
Unrealized holding losses arising during
period (655) (655)
----- -----
Comprehensive income 567
Options exercised 2,200 13 13
Dividend reinvestment plan contributions 20,936 1 158 159
Acquisition of SC Community Bancshares 526,183 5 5,643 5,648
Cash dividend ($.30 per share) (506) (506)
---------------------------------------------------------------------------------
BALANCE AT JUNE 30, 2000 1,906,533 $20 $11,298 $11,735 ($2,434) $20,619
=================================================================================
</TABLE>
6
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UNION FINANCIAL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Presentation of Consolidated Financial Statements
-------------------------------------------------
The accompanying unaudited consolidated financial statements of Union
Financial Bancshares, Inc. (the "Corporation") were prepared in accordance
with instructions for Form 10-QSB and, therefore, do not include all
disclosures necessary for a complete presentation of consolidated
financial condition, results of operations, and cash flows in conformity
with generally accepted accounting principles. However, all adjustments
which are, in the opinion of management, necessary for the fair
presentation of the interim consolidated financial statements have been
included. All such adjustments are of a normal and recurring nature. The
consolidated financial statements include the Corporation's wholly owned
subsidiary, Provident Community Bank (the "Bank"). The results of
operations for the nine months ended June 30, 2000 are not necessarily
indicative of the results which may be expected for the entire fiscal
year. The consolidated balance sheet as of September 30, 1999 has been
derived from the Company's audited financial statements presented in the
annual report to shareholders. Certain amounts in the prior year's
financial statements have been reclassified to conform with current year
classifications.
SFAS No. 133, Accounting for Derivative Instruments and Hedging
--------------------------------------------------------
Activities-This statement establishes accounting and reporting standards
----------
for derivative instruments and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. The accounting
for changes in the fair value of a derivative depends on the intended use
of the derivative. The statement is effective for the Corporation for the
fiscal year beginning October 1, 1999 and may not be applied
retroactively.
SFAS No. 134, Accounting for Mortgage-Backed Securities Retained after the
------------------------------------------------------------
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
--------------------------------------------------------------------------
Enterprise. The new statement establishes accounting and reporting
----------
standards for certain activities of mortgage banking activities. The
statement is effective for the first quarter beginning December 15, 1998.
This statement had no effect on the financial statements of the
Corporation.
2. Income Per Share
----------------
Effective January 31, 1999, the Corporation declared a 5% stock dividend.
The weighted average number of shares and all other share data have been
restated for all periods presented to reflect this dividend.
Income per share amounts for the three and nine months ended June 30, 2000
and 1999 were
7
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computed based on the weighted average number of common shares outstanding
adjusted for the dilutive effect of outstanding common stock options
during the periods.
3. Assets Pledged
--------------
Approximately $13,985,000 and $12,963,000 of debt securities at June 30,
2000 and September 30, 1999, respectively, were pledged by the Bank as
collateral to secure deposits of the State of South Carolina, Laurens
County and certain other liabilities. The Bank pledges as collateral for
Federal Home Loan Bank advances the Bank's Federal Home Loan Bank stock
and has entered into a blanket collateral agreement with the Federal Home
Loan Bank whereby the Bank maintains, free of other encumbrances,
qualifying mortgages (as defined) with unpaid principal balances equal to,
when discounted at 75% of the unpaid principal balances, 100% of total
advances.
4. Contingencies and Loan Commitments
----------------------------------
The Bank is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These instruments expose the Bank to credit risk in excess of
the amount recognized on the balance sheet.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit
is represented by the contractual amount of those instruments. The Bank
uses the same credit policies in making commitments and conditional
obligations as it does for on-balance-sheet instruments. Total credit
exposure at June 30, 2000 related to these items is summarized below:
Loan Commitments: Contract Amount
---------------- ---------------
Unadvanced portions of loans $ 11,101,000
Total loan commitments $ 11,101,000
------------
Loan commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Loan commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. The Bank evaluates
each customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained upon extension of credit is based on management's
credit evaluation of the counter party. Collateral held is primarily
residential property. Interest rates on loan commitments are a combination
of fixed and variable.
Commitments outstanding at June 30, 2000 consist of fixed and adjustable
rate loans of approximately $11,101,000 at rates ranging from 7% to 9%.
Commitments to originate loans generally expire within 30 to 60 days.
Commitments to fund credit lines (principally variable rate, consumer
lines secured by real
8
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estate and overdraft protection) totaled approximately $23,312,000 at June
30, 2000. Of these lines, the outstanding loan balances totaled
approximately $12,211,000. The Bank also has commitments to fund warehouse
lines of credit for various mortgage banking companies totaling $750,000,
which had an outstanding balance at June 30, 2000 of approximately $ 0. At
June 30, 2000, the Bank had loan commitments to sell $4,711,000 in fixed
rate residential loans which had not been closed to Freddie Mac for the
months of July-September, 2000.
5. Acquisition of South Carolina Community Bancshares, Inc.
--------------------------------------------------------
On November 12, 1999, the Corporation completed the acquisition of South
Carolina Community Bancshares, Inc. and its wholly owned subsidiary,
Community Federal Savings Bank. The Corporation issued a total of 526,290
shares and paid a total of $3,582,081 to the shareholders of South
Carolina Community Bancshares, Inc. The transaction was accounted for
under the purchase method of accounting. The two offices of Community
Federal Savings Bank became offices of Provident Community Bank. At
September 30, 1999, South Carolina Community Bancshares, Inc. had total
assets of $46.6 million, loans of $40.2 million and deposits of $35.9
million. Approximately $1.7 million in goodwill was created with the
transaction and will be amortized straight-line over 15 years.
6. Proposed sale of loan servicing rights
--------------------------------------
The Corporation has signed a letter of intent with Chevy Chase Bank, FSB
of Laurel, Maryland, to sell the rights to service approximately $222
million of mortgage loans serviced by Provident Community Bank. Completion
of the sale is projected for the fourth quarter of the current fiscal
year. The Corporation is currently evaluating the future direction of the
Mortgage Division.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
-------------------
Total assets of the Corporation increased $59,170,000 or 28.82% to
$264,464,000 at June 30, 2000 from $205,294,000 at September 30, 1999
primarily as a result of the acquisition of South Carolina Community
Bancshares, which as completed on November 12, 1999. Investments and
mortgage-backed securities increased approximately $34,244,000 or 104.02%
during the nine months ended June 30, 2000. Loans increased $19,410,000 or
12.99% to $168,811,000 for the nine months ended June 30, 2000. The
increase in loans included approximately $41.1 million from the
acquisition of South Carolina Community Bancshares of which 91.40% were
residential mortgage loans. The Corporation also securitized approximately
$32.3 million of loans during the fiscal year. At June 30, 2000, mortgage
servicing rights decreased $290,000 or 7.55% to $3,552,000 from $3,842,000
at September 30, 1999.The reduction in mortgage servicing rights was due
to a sale of servicing of approximately $30 million that was completed in
October, 1999. Deposits increased $50,749,000 or 35.58% to $193,373,000
for the nine months ended June 30, 2000. Approximately $35,900,000 or
84.3% of the deposit increase was a result of the South Carolina Community
Bancshares acquisition. The remaining growth was a result of various
deposit promotion programs with continued emphasis on core deposits.
Liquidity
---------
Liquidity is the ability to meet demand for loan disbursements, deposit
withdrawals, repayment of debt, payment of interest on deposits and other
operating expenses. The primary sources of liquidity are savings deposits,
loan repayments, borrowings and interest payments.
The OTS imposes a minimum level of liquidity on the Bank which is
currently 4% of with- drawable deposits plus short-term borrowings. The
liquidity levelmeasuredBank as for regulatory purposes was 24.75% as of
June 30, 2000. As in the past, management expects that the Bank can meet
its obligations to fund outstanding loan commitments while maintaining
liquidity in excess of regulatory requirements.
Capital Resources
-----------------
The capital requirement of the Bank consists of three components: (1)
tangible capital, (2) core capital and (3) risk based capital. Tangible
capital must equal or exceed 1.5% of adjusted total assets. Core capital
must be a minimum of 4% of adjusted total assets and risk based capital
must be a minimum of 8% of risk weighted assets.
As of June 30, 2000, the Bank's capital position, as calculated under
regulatory guidelines,
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exceeds these minimum requirements as follows (dollars in thousands):
REQUIREMENT ACTUAL EXCESS
--------------------------------------------------------------------------------
Tangible capital $3,955 $18,575 $14,620
Tangible capital to adjusted total assets 1.50% 7.04% 5.54%
Core capital $10,547 $18,575 $8,028
Core capital to adjusted total assets 4.00% 7.0% 3.04%
Risk based capital $11,759 $19,974 $8,215
Risk based capital to risk weighted assets 8.00% 13.59% 5.59%
The reported capital requirements are based on information reported in the
OTS June 30, 2000 quarterly thrift financial report.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 2000 AND 1999
----------------------------------------------------------------------
General
-------
Net income increased $8,000 or .66% to $1,223,000 for the nine months
ended June 30, 2000 as compared to the same period in 1999. Non interest
income increased $434,000 or 43.40% and net interest income after
provision for loan losses increased $402,000 or 8.96%. This was offset by
an $885,000 or 24.79% increase in non-interest expense. All current year
comparative references reflect the acquisition of South Carolina Community
Bancshares from the acquisition date, November 12, 1999.
Interest Income
---------------
Interest income increased $2,878,000 or 28.15% for the nine months ended
June 30, 2000 as compared to the same period in 1999. Interest income on
loans increased 31.68% or $2,633,000 to $10,944,000 for the nine months
ended June 30, 2000 from $8,311,000 for the nine months ended June 30,1999
due primarily to growth of the portfolio and the acquisition of South
Carolina Community Bancshares. Interest and dividends on investment and
mortgage-backed securities increased $254,000 or 13.70% for the nine
months ended June 30, 1999 to $2,099,000 from $1,845,000 during the same
period in 1999. The increase was due primarily to an increase in the level
of purchases in investment and mortgage-backed securities made during the
first three quarters of the fiscal year along with the investments
acquired from South Carolina Community Bancshares.
Interest Expense
----------------
Interest expense increased $2,346,000 or 41.42% for the nine months ended
June 30, 2000 as compared to the nine months ended June 30, 1999 due
primarily to the growth in deposits
11
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that were acquired from South Carolina Community Bancshares. Interest
expense on deposit accounts increased $1,768,000 or 41.23% to $6,056,000
for the nine months ended June 30, 2000 from $4,288,000 during the same
period in 1999. Interest expense on borrowings increased $578,000 or
42.01% for the nine months ended June 30, 2000 as compared to the nine
months ended June 30, 1999 due primarily to rising rates during the
period.
Provision for Loan Loss
-----------------------
During the nine months ended June 30, 2000, provisions for loan losses
were $200,000 as compared to $70,000 for the same period in the previous
year. The increase in loan loss provisions are due to the growth in the
loan portfolio as a result of the acquisition of South Carolina Community
Bancshares. In addition, the loan loss provisions were increased as a
result of higher bankruptcy filings during the current fiscal year that
have increased the level of non-performing assets. Management believes the
Bank's loan loss allowance is adequate to absorb estimated future loan
losses. The Bank's loan loss allowances at June 30, 2000 were
approximately .83% of the Bank's outstanding loan portfolio, net of loans
held for sale compared to .60% for the same period in the previous year.
The following table sets forth information with respect to the Bank's
non-performing assets at the dates indicated (dollars in thousands):
JUNE 30, 2000 SEPTEMBER 30, 1999
------------- ------------------
Non-accruing loans which are
contractually past due 90 days
or more:
Real Estate:
Residential $1,245 $ 42
Commercial 240 --
Construction -- --
Non-mortgage 221 141
--- -----
Total $1,706 $ 183
====== =====
Percentage of loans receivable, net 1.01% 0.12%
==== =====
Allowance for loan losses $1,400 $ 836
====== =====
Real estate acquired through
foreclosure and repossessed
assets, net of allowances $366 $ 241
==== =====
All non-accruing loans and allowance for loan losses for the period ending
June 30, 2000
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reflect loans and balances assumed with the acquisition of South Carolina
Community Bancshares.
Non Interest Income and Expense
--------------------------------
Total non interest income increased $434,000 or 43.40% to $1,434,000 for
the nine months ended June 30, 2000 from $1,000,000 for the same period in
the previous year. The increase in non-interest income was due to
increased fees from financial services which increased from $635,000 at
June 30, 1999 to $938,000 at June 30, 2000. In addition, loan servicing
fee income for the nine months ended June 30, 2000 was $204,000 compared
to loan service fee income of ($135,000) for the nine months ended June
30, 1999. The increase in the loan servicing income was due to lower
premium amortization expense as a result of lower loan prepayments. Gain
on sale of loans decreased $201,000 or 40.77% to $292,000 for the nine
months ended June 30, 2000 from $493,000 for the same period in the
previous year. The reduction was due to lower volumes of loans sold.
For the nine months ended June 30, 2000, total non interest expense
increased $885,000 or 24.69% to $4,470,000 from $3,585,000 for the same
period in 1999. All expenses were affected by the acquisition of South
Carolina Community Bancshares. Compensation and employee benefits
increased $421,000 or 23.73% to $2,195,000 for the nine month period ended
June 30, 2000 from $1,774,000 for the same period in 1999 due primarily to
the additional staff assumed in the merger. Occupancy and equipment
expense increased $233,000 or 28.14% to $1,061,000 for the nine months
ended June 30, 2000 from $828,000 for the same period in 1999 due to
higher data processing costs along with higher depreciation expense.
Professional services expenses increased $32,000 or 15.53% to $238,000 for
the nine month period ended June 30, 2000 from $206,000 for the same
period in 1999. Goodwill amortization increased from $196,000 at June 30,
1999 to $320,000 at June 30, 2000. The increase was due to the additional
amortization expense required for the merger. Other operating expense for
the nine months ended June 30, 2000 increased $67,000 to $586,000 from
$519,000 for the same period in 1999 due to increases in forms and
printing costs.
Year 2000
---------
The Corporation's formal Year 2000 plan provided the framework for a
successful year end changeover. All systems and procedures were tested on
January 1 to ensure compliance with the established plan. To date, all
equipment has worked properly and no service providers or customers have
notified the Corporation of any problems that would have a material
adverse effect on the Corporation.
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
-----------------
The Corporation is involved in various claims and legal
actions arising in the normal course of business. Management
believes that these proceedings will not result in a material
loss to the Corporation.
ITEM 2. Changes in Securities
---------------------
Not applicable.
ITEM 3. Defaults upon Senior Securities
-------------------------------
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
ITEM 5. Other Information
-----------------
None
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibits
--------
27 Financial Data Schedule
Reports on Form 8-K
-------------------
None
14
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SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
UNION FINANCIAL BANCSHARES, INC.
--------------------------------
(REGISTRANT)
Date: August 4, 2000 By: /s/ Dwight V. Neese
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Dwight V. Neese, CEO
Date: August 4, 2000 By: /s/ Richard H. Flake
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Richard H. Flake, CFO
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