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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 15, 1999
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UNION FINANCIAL BANCSHARES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-5735 57-1001177
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(State or other Jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification No.)
203 West Main Street, Union, South Carolina 29379-0886
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (864) 427-9000
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Not Applicable
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(Former name or former address, if changed since last report.)
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The Registrant hereby amends the items, financial statements, exhibits or
other portions of its Current Report on Form 8-K dated November 12, 1999 and
filed on November 15, 1999 as set forth herein.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(a) The following documents have been filed with the Securities and Exchange
Commission (the "Commission") by South Carolina Community Bancshares, Inc.
("SCCB") pursuant to the Securities and Exchange Act of 1934, as amended,
and are incorporated by reference in this Form 8-K/A. All documents that
are for the year ended June 30, 1999 and 1998 are incorporated by
reference to SCCB's Annual Report on Form 10-KSB, as amended, filed with
the Commission on September 24, 1999. All documents that are for the year
ended June 30, 1997 are incorporated by reference to SCCB's Annual Report
on Form 10-KSB for the year ended June 30, 1997 filed with the Commission
on September 28, 1998.
(i) Consolidated Balance Sheets as of June 30, 1999 and 1998 and notes
thereto.
(ii) Consolidated Statements of Income for the Years Ended June 30, 1999,
1998 and 1997 and notes thereto.
(iii) Consolidated Statements of Cash Flows for the Years Ended June 30,
1999, 1998 and 1997 and notes thereto.
(iv) Independent Auditors' Report dated as of July 23, 1999 relating to
the consolidated balance sheets of SCCB and subsidiaries as of June
30, 1999 and 1998, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for each of
the years in the two-year period ended June 30, 1999, incorporated
by reference to the SCCB Annual Report on Form 10-KSB for the year
ended June 30, 1999.
(v) Independent Auditors' Report dated as of August 14, 1998 relating to
the consolidated balance sheets of SCCB and subsidiaries as of June
30, 1998, and the related consolidated statements of income and cash
flows for the year ended June 30, 1997, incorporated by reference to
the SCCB Annual Report on Form 10-KSB for the year ended June 30,
1997.
(b) The following pro forma financial information that is required to be
included herein pursuant to Article II of Regulation S-X is attached
hereto as Exhibit No. 99.2 and is incorporated herein by reference.
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(c) Exhibit No. Description
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2.1 Agreement and Plan of Merger by and between Union
Financial Bancshares, Inc. and South Carolina
Community Bancshares, Inc., dated as of July 1,
1999*
99.1 Press release issued on November 15, 1999.**
99.2 Union Financial Bancshares, Inc. and South
Carolina Community Bancshares, Inc. Unaudited Pro
Forma Condensed Combined Consolidated Statement of
Financial Condition as of September 30, 1999 and
Union Financial Bancshares, Inc. and South
Carolina Community Bancshares, Inc. Unaudited Pro
Forma Condensed Combined Consolidated Statement of
Income for the Twelve Months Ended September 30,
1999, and related notes.
- -----------------------------
*Incorporated by reference to the Form 8-K (SEC File No. 1-5735) filed by Union
Financial on July 9, 1999.
**Incorporated by reference to the Form 8-K (SEC File No. 1-5735) filed by Union
Financial on November 15, 1999.
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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 hereunto duly authorized.
UNION FINANCIAL BANCSHARES, INC.
Dated: January 25, 2000 By: /s/ Dwight V. Neese
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Dwight V. Neese
Director, President and Chief
Executive Officer
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EXHIBIT 99.2 PRO FORMA FINANCIAL INFORMATION
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<TABLE>
<CAPTION>
UNION FINANCIAL BANCSHARES, INC.
SCCB BANCSHARES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION
AT SEPTEMBER 30, 1999
UNION FINANCIAL SCCB PRO FORMA PRO FORMA
ASSETS BANCSHARES, INC. BANCSHARES, INC. ADJUSTMENT COMBINED
----------------- ---------------- ----------- ------------
(DOLLARS IN THOUSANDS,EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Cash $ 3,149 $ 297 $ 0 $ 3,446
Short term interest-bearing deposits 2,421 1,407 0 3,828
----------------- ---------------- ----------- ------------
Total cash and cash equivalents 5,570 1,704 0 7,274
----------------- ---------------- ----------- ------------
Investment and mortgage-backed securities:
Held to maturity 5,586 2,711 0 8,297
Available for sale 27,335 66 0 27,401
----------------- ---------------- ----------- ------------
Total investment and mortgage-backed securities 32,921 2,777 0 35,698
Loans receivable:
Real estate mortgage loans held for sale 216 0 0 216
Real estate mortgage loans held for investment 125,305 38,666 0 163,971
Other loans 24,716 1,190 0 25,906
Less allowance for loan losses (836) (291) 0 (1,127)
----------------- ---------------- ----------- ------------
Total loans receivable, net 149,401 39,565 0 188,966
Office properties and equipment, net 4,524 501 0 5,025
Federal Home Loan Bank Stock, at cost 2,050 330 0 2,380
Accrued interest receivable 1,574 338 0 1,912
Excess of cost over fair value of net
assets acquired and other intangibles 0 0 1,545 1,545
Mortgage servicing rights 3,842 0 0 3,842
Other real estate owned 0 121 0 121
Other assets 5,412 97 (528) 4,981
----------------- ---------------- ----------- ------------
TOTAL ASSETS $ 205,294 $ 45,433 $ 1,017 $ 251,744
================= ================ =========== ============
LIABILITIES
Deposit accounts $ 142,624 $ 35,864 $ 0 $ 178,488
Advances from the Federal Home Loan Bank
and other borrowings 46,503 0 3,582 50,085
Accrued interest on deposits 226 306 0 532
Advances from borrowers for taxes and insurance 548 41 0 589
Other liabilities 655 185 472 1,312
----------------- ---------------- ----------- ------------
TOTAL LIABILITIES 190,556 36,396 4,054 231,006
----------------- ---------------- ----------- ------------
SHAREHOLDERS' EQUITY
Serial preferred stock, no par value,
authorized - 500,000 shares, issued
and outstanding - None 0 0 0 0
Common stock - $0.01 par value,
authorized - 2,500,000 shares,
issued and outstanding - 1,357,214 shares 14 8 0 22
Additional paid-in capital 5,484 2,619 3,037 5,066
Accumulated other comprehensive income (1,779) 5 0 (1,774)
Retained earnings, substantially restricted 11,019 6,934 0 17,953
Unallocated common-stock held by ESOP 0 (337) 0 (337)
Unamortized Management Retention Plan Shares 0 (192) 0 (192)
----------------- ---------------- ----------- ------------
TOTAL SHAREHOLDERS' EQUITY 14,738 9,037 3,037 20,738
----------------- ---------------- ----------- ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 205,294 $ 45,433 $ (1,017) $ 251,744
================= ================ =========== ============
</TABLE>
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<TABLE>
<CAPTION>
UNION FINANCIAL BANCSHARES, INC.
SCCB BANCSHARES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENT OF INCOME
TWELVE MONTHS ENDED SEPTEMBER 30, 1999
UNION FINANCIAL SCCB PRO FORMA PRO FORMA
BANCSHARES, INC. BANCSHARES, INC. ADJUSTMENT COMBINED
----------------- ---------------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Interest Income:
Loans $ 11,420 $ 3,077 $ 57 $ 14,554
Deposits and federal funds sold 83 170 0 253
Mortgage-backed securities 1,466 2 0 1,468
Interest and dividends on
investment securities 1,077 177 0 1,254
----------------- ---------------- ----------- ------------
Total Interest Income 14,046 3,426 57 17,529
----------------- ---------------- ----------- ------------
Interest Expense:
Deposit accounts 5,706 1,664 0 7,370
Advances from the FHLB and other borrowings 1,992 0 0 1,992
----------------- ---------------- ----------- ------------
Total Interest Expense 7,698 1,664 0 9,362
----------------- ---------------- ----------- ------------
Net Interest Income 6,348 1,762 57 8,167
Provision for loan losses 105 0 0 105
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Net Interest Income After
Provision for Loan Losses 6,243 1,762 57 8,062
----------------- ---------------- ----------- ------------
Non Interest Income:
Fees for financial services 905 106 0 1,011
Loan servicing fees (64) 0 0 (64)
Gains (losses) on sale of investment and
mortgage-backed securities available for sale 9 0 0 9
Gains (losses) on sale of loans 342 0 0 342
----------------- ---------------- ----------- ------------
Total Non Interest Income 1,192 106 0 1,298
----------------- ---------------- ----------- ------------
Non Interest Expense:
Compensation and employee benefits 2,368 656 0 3,024
Occupancy and equipment 1,133 102 0 1,235
Deposit insurance premiums 77 22 0 99
Professional services 275 0 0 275
Real estate operations 10 0 0 10
Other 951 388 103 1,442
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Total Non Interest Expense 4,814 1,168 103 6,085
----------------- ---------------- ----------- ------------
Income Before Income Taxes 2,621 700 (46) 3,275
Income tax expense 945 277 (16) 1,206
----------------- ---------------- ----------- ------------
Net Income $ 1,676 $ 423 $ (30) $ 2,069
================= ================ =========== ============
Basic Net Income Per Common Share $ 1.26 $ 0.80 $ 0.09 $ 1.10
================= ================ =========== =============
Diluted Net Income Per Common Share $ 1.19 $ 0.79 $ 0.09 $ 1.05
================= ================ =========== =============
Weighted Average Number of
Common Shares Outstanding
Basic 1,328,305 531,000 520,380 1,848,685
Diluted 1,414,121 537,000 526,260 1,940,381
See "Notes to Unaudited Proforma Condensed Combined Consolidated Financial Statements."
</TABLE>
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NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The pro forma information presented is not necessarily indicative of the
results of operations or the combined financial position that would have
resulted had the merger been consummated at the beginning of the periods
indicated, nor is it necessarily indicative of the results of operations in
future periods or the future financial position of the combined company. The
merger was completed on 11/12/99.
Under generally accepted accounting principles, the transaction will be
accounted for under the purchase method of accounting. Certain reclassifications
have been included in the unaudited pro forma condensed combined balance sheet
and unaudited pro forma condensed combined statements of income to conform
presentation.
Assumptions relating to the pro forma adjustments set forth in the Unaudited Pro
Forma Condensed Combined Consolidated Financial Statements are summarized as
follows:
Estimated fair values for the assets and liabilities of SCCB were obtained as
follows:
Cash and short-term instruments - The carrying amounts of cash and short-term
- -------------------------------
instruments approximate their fair value.
Available for sale securities - Fair values for securities are based on quoted
- -----------------------------
market prices.
Loans - Fair values for loans held for investment and other loans are estimated
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by segregating the portfolio by type of loan and discounting scheduled cash
flows using interest rates currently being offered for loans with similar terms,
reduced by an estimate of credit losses inherent in the portfolio. A prepayment
assumption is used as an estimate of the portion of loans that will be repaid
prior to their scheduled maturity.
Federal Home Loan Bank stock - No ready market exists for this stock and it has
- ----------------------------
no quoted market value. However, redemption of this stock has historically been
at par value. Accordingly, the carrying amount is deemed to be a reasonable
estimate of fair value.
Office properties and equipment - Fair values were obtained by recent informal
- -------------------------------
appraisals of the assets containing the most significant values relative to
total value.
Deposits - The fair values for demand deposits are equal to the amounts payable
- --------
on demand at the reporting date (i.e., their stated amounts). The fair value of
certificates of deposit are estimated by discounting the amounts payable at the
certificate rates using the rates currently offered for deposits of similar
remaining maturities.
Other assets and other liabilities - Since these financial instruments will
- ----------------------------------
typically be received or paid within three months, the carrying amounts of such
instruments are deemed to be a reasonable estimate
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of fair value.
The resulting net discount on loans, for purposes of these pro forma financial
statements, is being amortized to interest income on a straight-line basis over
8 years or the estimated life of the loans. The actual discount will be
amortized to interest income to produce a constant yield to maturity. The
resulting goodwill is being amortized into non interest expense on a
straight-line basis over 15 years.
NOTE 2. THE COST TO ACQUIRE SCCB HAS BEEN ALLOCATED AS DESCRIBED IN THE TABLE
BELOW (in thousands):
Value of Union Financial common stock issued to acquire SCCB
common stock (assumes 537,031 shares of SCCB common stock
multiplied by .98 and the price per share of $10.68, the average
market value of Union Financial common stock for the 25 trading
day period ending three days before the
announcement of the merger agreement)....................................$ 5,621
Cash payment to SCCB shareholders at $6.67 per share for the
537,031 shares outstanding ................................................3,582
Acquisition - related costs..................................................143
Transaction costs incurred by Union Financial and SCCB.......................856
---
Total costs.............................................................$ 10,202
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NOTE 3. PURCHASE ACCOUNTING ADJUSTMENTS RECORDED FOR THE SCCB
TRANSACTION WERE AS FOLLOWS (in thousands):
SCCB net assets at September 30, 1999....................................$ 9,037
Adjustment to SCCB's statement of financial condition:
Summation of activity at SCCB from October 1, 1999 - November 12, 1999..(186)
Elimination of unearned compensation due to the termination of
SCCB's ESOP and MRP plans, net of income taxes............................194
---
Adjusted net assets acquired at November 12, 1999.....................$ 8,657
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NOTE 4. EXCESS OF COST OVER BOOK VALUE OF NET ASSETS ACQUIRED FOR THE MERGER WAS
CALCULATED AS FOLLOWS (in thousands):
Total cost .............................................................$ 10,202
Net assets acquired .......................................................8,657
-----
Total excess of cost over book value of net assets acquired generated
from the merger......................................................$1,545
------
The excess of cost over the book value of net assets acquired of $1,545 was
allocated to assets and liabilities on a pro-rata basis after estimating market
value as described in Note 1:
Loans held for investment..................................................$ 472
Goodwill ..................................................................1,073
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Total....................................................................$ 1,545
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For purposes of the pro-forma financial statements discounts on loans are
amortized by the straight-line method over 8 years, Goodwill is amortized by the
straight-line method over 15 years.
NOTE 5. PRO FORMA ADJUSTMENTS WERE CALCULATED FOR THE MERGER
AS FOLLOWS (in thousands):
For the fiscal
year ended
September 30, 1999
------------------
Amortization of discount on loans (8.2 years)(interest income) ..........($57)
Amortization of Goodwill (15 years)(non interest expense).................103
---
Total adjustments ........................................................$ 46
--
NOTE 6. Basic earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding over the period. Diluted
earnings per common share is calculated using the same method as basic earnings
per common share, but reflects potential dilution of common stock equivalents.
Basic and diluted weighted average number of common stock and common stock
equivalents utilized for the calculation of earnings per share for the periods
presented were calculated using Union Financial's historical weighted average
common stock and common stock equivalents, plus 532,136 shares of common stock
when diluted to assume the maximum number of shares of Union Financial common
stock that could be issued to SCCB shareholders under the terms
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of the merger.
NOTE 7. The following table summarizes the estimated impact of the amortization
of the purchase accounting adjustments made in connection with the merger on
Union Financial's results of operations:
Projected future Amortized
amounts for the fiscal and Net Decrease
years ended In Income
September 30, (in thousands) Before Taxes
---------------------------- ------------
2000 $46
2001 46
2002 46
2003 46
2004 46
2005 and thereafter 843
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