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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2002
-------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission File Number: 000-16931
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United National Bancorp
(Exact name of registrant as specified in its charter)
New Jersey 22-2894827
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
1130 Route 22 East, Bridgewater, New Jersey 08807-0010
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(Address of principal executive offices) (Zip Code)
(908) 429-2200
--------------
(Registrant's telephone number, including area code)
N/A
---
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
As of August 1, 2002, there were 14,568,541 shares of common stock, $1.25 par
value, outstanding.
UNITED NATIONAL BANCORP
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION PAGE(S)
ITEM 1 Consolidated Financial Statements and Notes to
Consolidated Financial Statements 1-8
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-24
ITEM 3 Quantitative and Qualitative Disclosure About Market Risk 25
PART II - OTHER INFORMATION
ITEM 4 Submission of Matters to a Vote of Security Holders 26
ITEM 6 Exhibits and Reports on Form 8-K 27
SIGNATURES 28
Part I - Financial Information
Item 1 - Financial Statements
United National Bancorp
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
(Unaudited)
June 30, December 31,
2002 2001
---------- ----------
ASSETS
Cash and Due from Banks $ 44,796 $ 55,764
Short-Term Investments 16,400 --
Securities Available for Sale, at Market Value 594,288 519,993
Securities Held to Maturity 41,730 37,656
Loans, Net of Unearned Income 1,249,385 1,235,925
Less: Allowance for Loan Losses 15,051 12,478
---------- ----------
Loans, Net 1,234,334 1,223,447
Premises and Equipment, Net 25,853 26,397
Other Real Estate, Net 209 127
Intangible Assets, Primarily Core Deposit Premiums 4,478 5,219
Cash Surrender Value of Life Insurance Policies 60,265 56,881
Other Assets 37,937 36,966
---------- ----------
TOTAL ASSETS $2,060,290 $1,962,450
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits
Demand $ 282,209 $ 272,283
Savings 619,161 573,734
Time 541,867 554,687
---------- ----------
Total Deposits 1,443,237 1,400,704
Short-Term Borrowings 117,723 121,955
Other Borrowings 311,952 255,269
Other Liabilities 29,969 28,771
---------- ----------
Total Liabilities 1,902,881 1,806,699
---------- ----------
STOCKHOLDERS' EQUITY
Preferred Stock, authorized 1,000,000 shares in 2002 and 2001
None issued and outstanding -- --
Common Stock, $1.25 Par Value,
Authorized Shares 25,000,000 in 2002 and 2001
Issued Shares 16,234,264 in 2002 and 16,208,434 in 2001
Outstanding Shares 14,586,541 in 2002 and 14,876,211 in 2001 20,293 20,261
Additional Paid-in Capital 130,470 130,138
Retained Earnings 32,054 30,793
Treasury Stock, at Cost - 1,647,723 shares in 2002 and 1,332,223 shares
in 2001 (33,043) (25,929)
Restricted Stock (12) (36)
Accumulated Other Comprehensive Income 7,647 524
---------- ----------
Total Stockholders' Equity 157,409 155,751
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,060,290 $1,962,450
========== ==========
See Accompanying Notes to Consolidated Financial Statements.
1
United National Bancorp
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Share Data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
2002 2001 2002 2001
------- ------- ------- -------
INTEREST INCOME
Interest and Fees on Loans $20,552 $24,584 $41,591 $51,190
Interest and Dividends on Securities Available for
Sale:
Taxable 7,557 8,854 14,890 18,176
Tax-Exempt 1,125 1,050 2,215 2,052
Interest and Dividends on Securities Held to
Maturity:
Taxable 55 190 128 519
Tax-Exempt 351 279 686 544
Interest on Short-Term Investments 7 7 10 52
------- ------- ------- -------
Total Interest Income 29,647 34,964 59,520 72,533
------- ------- ------- -------
INTEREST EXPENSE
Interest on Savings Deposits 1,644 2,854 3,072 6,460
Interest on Time Deposits 5,339 8,633 10,888 19,088
Interest on Short-Term Borrowings 462 2,806 998 6,300
Interest on Other Borrowings 4,496 3,067 8,694 5,679
------- ------- ------- -------
Total Interest Expense 11,941 17,360 23,652 37,527
------- ------- ------- -------
Net Interest Income 17,706 17,604 35,868 35,006
Provision for Loan Losses 4,325 816 8,950 1,362
------- ------- ------- -------
Net Interest Income After Provision for Loan Losses 13,381 16,788 26,918 33,644
------- ------- ------- -------
NON-INTEREST INCOME
Trust Income 1,433 1,884 2,970 3,769
Service Charges on Deposit Accounts 1,006 930 1,960 1,849
Other Service Charges, Commissions and Fees 908 1,362 1,779 3,005
Net Gains from Securities Transactions 20 -- 20 175
Income on Corporate Owned Life Insurance 830 782 1,659 1,563
Dissolution of Joint Venture -- -- 1,171 --
Gain on the Disposition of Credit Card Portfolios 920 542 920 542
Other Income 651 684 1,197 1,141
------- ------- ------- -------
Total Non-Interest Income 5,768 6,184 11,676 12,044
------- ------- ------- -------
NON-INTEREST EXPENSE
Salaries, Wages and Employee Benefits 7,146 6,195 14,278 12,530
Occupancy Expense, Net 1,414 1,428 2,843 2,970
Furniture and Equipment Expense 1,091 978 2,146 2,082
Data Processing Expense 1,449 1,647 2,579 3,513
Amortization of Intangible Assets 370 361 741 718
Non-Recurring Charges 779 792 779 792
Other Expenses 3,818 3,475 6,954 6,996
------- ------- ------- -------
Total Non-Interest Expense 16,067 14,876 30,320 29,601
------- ------- ------- -------
Income Before (Benefit) Provision for Income Taxes 3,082 8,096 8,274 16,087
(Benefit) Provision for Income Taxes (13) 2,180 1,177 4,306
------- ------- ------- -------
NET INCOME $ 3,095 $ 5,916 $ 7,097 $11,781
------- ------- ------- -------
NET INCOME PER COMMON SHARE:
Basic $ 0.21 $ 0.39 $ 0.48 $ 0.78
------- ------- ------- -------
Diluted $ 0.21 $ 0.39 $ 0.48 $ 0.78
------- ------- ------- -------
Weighted Average Shares Outstanding:
Basic 14,607 15,063 14,671 15,093
------- ------- ------- -------
Diluted 14,751 15,174 14,810 15,201
------- ------- ------- -------
See Accompanying Notes to Consolidated Financial Statements.
2
United National Bancorp
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands, Except Share Data)
(Unaudited)
Accumulated
Additional Other Total
Common Paid-In Retained Treasury Restricted Comprehensive Stockholders'
Stock Capital Earnings Stock Stock Income Equity
------------------------------------------------------------------------------------------------
Balance-December 31, 2001 $20,261 $130,138 $30,793 $(25,929) $(36) $ 524 $155,751
- ------------------------------
Net Income -- -- 7,097 -- -- -- 7,097
- ------------------------------
Cash Dividends Declared
($0.40 Per Share) -- -- (5,836) -- -- -- (5,836)
- ------------------------------
Exercise of Stock Options
(25,830 Shares) 32 332 -- -- -- -- 364
- ------------------------------
Change in Unrealized Gain on
Securities Available for
Sale, Net of Tax -- -- -- -- -- 7,123 7,123
- ------------------------------
Purchase of Treasury Stock
(315,500 shares) -- -- -- (7,114) -- -- (7,114)
- ------------------------------
Restricted Stock Activity,
Net -- -- -- -- 24 -- 24
- ------------------------------------------------------------------------------------------------------------------------------
Balance-June 30, 2002 $20,293 $130,470 $32,054 $(33,043) $(12) $7,647 $157,409
- ------------------------------------------------------------------------------------------------------------------------------
See Accompanying Notes to Consolidated Financial Statements.
3
United National Bancorp
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Six Months Ended
June 30,
-----------------------
2002 2001
--------- --------
OPERATING ACTIVITIES
Net Income $ 7,097 $ 11,781
Adjustments to Reconcile Net Income to Net Cash Provided
By Operating Activities:
Depreciation and Amortization 2,398 2,396
Amortization (Accretion) of Securities Premiums, Net 36 (100)
Provision for Loan Losses 8,950 1,362
(Benefit) Provision for Deferred Income Taxes 1,392 562
(Gain) Loss on Disposition of Premises and Equipment (1) 3
Impairment on Securities 105 --
Net Gains from Securities Transactions (20) (175)
Net Gain on the Sale of Loans -- (200)
Net Gain on the Sale of Credit Cards (920) (542)
Increase in Life Insurance (1,659) (1,563)
Increase in Other Assets (4,806) (2,788)
Decrease in Other Liabilities (151) (2,633)
Restricted Stock Activity, Net 24 13
--------- --------
Net Cash Provided by Operating Activities 12,445 8,116
--------- --------
INVESTING ACTIVITIES
Securities Available for Sale:
Proceeds from Sales of Securities 15,041 20,000
Proceeds from Maturities of Securities 52,818 23,384
Purchases of Securities (131,197) (20,237)
Securities Held to Maturity:
Proceeds from Maturities of Securities 6,928 23,040
Purchases of Securities (11,122) (12,227)
Purchase of Corporate Owned Life Insurance (1,725) --
Net (Increase) Decrease in Loans (33,412) 9,259
Proceeds from the Sale of Loans -- 26,236
Proceeds from the Sale of Credit Card Business, net 14,495 1,798
Expenditures for Premises and Equipment (1,157) (635)
Proceeds from the Sale of Premises and Equipment 2 --
(Increase) Decrease in Other Real Estate, Net (82) 38
--------- --------
Net Cash (Used in) Provided by Investing Activities (89,411) 70,656
--------- --------
FINANCING ACTIVITIES
Net Increase (Decrease) in Demand and Savings Deposits 55,353 (14,539)
Net Decrease in Time Deposits (12,820) (120,543)
Net Decrease in Short-Term Borrowings (4,232) (10,787)
Advances on Other Borrowed Funds 102,317 117,550
Repayments in Other Borrowed Funds (45,634) (45,093)
Cash Dividends on Common Stock (5,836) (6,006)
Proceeds from Exercise of Stock Options 364 302
Treasury Stock Acquired, at Cost (7,114) (3,760)
--------- --------
Net Cash Provided by (Used in) Financing Activities 82,398 (82,876)
--------- --------
Net Increase (Decrease) in Cash and Cash Equivalents 5,432 (4,104)
Cash and Cash Equivalents at Beginning of Period 55,764 50,414
--------- --------
Cash and Cash Equivalents at End of Period $ 61,196 $ 46,310
--------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid During the Period:
Interest $ 25,319 $ 40,378
Taxes Paid 4,990 3,663
See Accompanying Notes to Consolidated Financial Statements.
4
United National Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited Consolidated Financial Statements included herein
have been prepared by United National Bancorp (the "Company"), in accordance
with accounting principles generally accepted in the United States of America
and pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements have been condensed or omitted pursuant to such rules and
regulations. These Consolidated Financial Statements should be read in
conjunction with the financial statements and the notes thereto included in the
Company's latest annual report on Form 10-K.
In the opinion of the Company, all adjustments (consisting only of normal
recurring accruals), which are necessary for a fair presentation of the
operating results for the interim periods, have been included. The results of
operations for periods of less than a year are not necessarily indicative of
results for the full year.
Certain reclassifications have been made to the prior years' financial
statements to conform with the classifications used in 2002.
(2) Pending Acquisition
On November 20, 2001, the Company and Vista Bancorp ("Vista") signed a
definitive agreement under which the Company will acquire Vista in a merger
transaction for cash and stock. Pursuant to the terms of the definitive
agreement, the Company will pay to Vista shareholders approximately $37.6
million in cash and issue an approximate aggregate of 4,655,518 shares of its
common stock, subject to adjustments if any of the Vista stock options are
exercised prior to the completion of the merger. The value of the merger
consideration per Vista share that a Vista shareholder will receive will be the
sum of 0.8775 times the average of the closing prices for the Company's common
stock during the 10 consecutive full trading days ending on August 6, 2002 and
$7.09. The proposed acquisition, which will be accounted for as a purchase, and
is currently scheduled to be completed on August 21, 2002. Vista is a $712
million asset bank holding company headquartered in Phillipsburg, New Jersey and
operates 16 branches in western New Jersey and eastern Pennsylvania. During the
second quarter of 2002, the Company recorded $779,000 in integration expenses
related to its pending acquisition of Vista.
(3) Comprehensive Income
Total comprehensive income amounted to the following for the periods indicated
(amounts in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2002 2001 2002 2001
------- ------- ------- -------
Net Income $ 3,095 $ 5,916 $ 7,097 $11,781
Change In Market Value on Securities
Available for Sale, Net of Taxes 9,775 (2,787) 7,123 4,011
------- ------- ------- -------
Comprehensive Income $12,870 $ 3,129 $14,220 $15,792
======= ======= ======= =======
5
(4) Net Income Per Common Share
Basic net income per common share is computed by dividing net income by the
weighted average number of shares outstanding during each period.
Diluted net income per common share is computed by dividing net income by the
weighted average number of shares outstanding, as adjusted for the assumed
exercise of potential common stock options, using the treasury stock method.
Potential shares of common stock resulting from stock option agreements totaled
144,000 and 111,000 for the three months ended June 30, 2002 and June 30, 2001,
respectively. Potential shares of common stock resulting from stock option
agreements totaled 139,000 and 108,000 for the six months ended June 30, 2002
and June 30, 2001, respectively.
(5) Amortization of Intangible Assets
On July 20, 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and
Other Intangible Assets". SFAS No.142 requires that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead tested
for impairment at least annually in accordance with the provisions of SFAS No.
142. SFAS No. 142 also requires that intangible assets with definite useful
lives be amortized over their respective estimated useful lives to their
estimated residual values, and periodically reviewed for impairment.
The Company adopted SFAS No. 142 on January 1, 2002. The adoption of SFAS No.
142 had no significant impact on the Company's accounting for currently recorded
intangible assets, primarily core deposit intangibles. During the three months
and six months ended June 30, 2002, the Company recorded amortization of
intangible assets acquired before July 1, 2001 of approximately $370,000 and
$741,000, which primarily represented core deposit intangibles. The remaining
amortization period of the core deposit intangibles is approximately 3 years.
(6) Recent Accounting Pronouncements
In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities. The standard requires companies to recognize costs
associated with exit or disposal activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan. The Statement is to be
applied prospectively to exit or disposal activities initiated after December
31, 2002.
In April 2002, the FASB issued SFAS No. 145, which among other things, rescinds
SFAS No. 4, Reporting Gains and Losses from Extinguishments of Debt. Under SFAS
No. 4, gains and losses from the extinguishment of debt were required to be
classified as an extraordinary item, if material. Under SFAS No. 145, gains or
losses from the extinguishment of debt are to be classified as a component of
operating income, rather than an extraordinary item. SFAS No. 145 is effective
for fiscal years beginning after May 15, 2002, with early adoption of the
provisions related to the rescission of SFAS No. 4 encouraged. Upon adoption,
companies must reclassify prior-period amounts previously classified as an
extraordinary item. Management does not anticipate that the adoption of SFAS No.
145 will have a significant impact on the Company's consolidated financial
statements.
6
(7) Segment Reporting
The Company, for management purposes, is segmented into the following lines of
business: Retail Banking, Commercial Banking, Investments, and Trust and
Investment Services. Activities not included in these lines are reflected in All
Other. Summary financial information on a fully taxable equivalent basis for the
lines of business is presented below.
Trust and
Results of Operations for Retail Commercial Investment
The Three Months Ended June 30, 2002 Banking Banking Investments Services All Other Consolidated
- --------------------------------------------------------------------------------------------------------------------------
Interest Income $ 10,229 $ 10,346 $ 9,890 $ -- $ -- $ 30,465
Interest Expense 6,917 -- 5,024 -- -- 11,941
Funds Transfer Pricing Allocation 8,590 (7,120) (3,165) -- 1,695 --
- --------------------------------------------------------------------------------------------------------------------------
Net Interest Income 11,902 3,226 1,701 -- 1,695 18,524
Provision for Loan Losses (246) 4,571 -- -- -- 4,325
- --------------------------------------------------------------------------------------------------------------------------
Net Interest Income
After Provision for Loan Losses 12,148 (1,345) 1,701 -- 1,695 14,199
Non-Interest Income 2,646 474 950 1,712 (14) 5,768
Non-Interest Expense 10,899 1,764 1,221 1,321 862 16,067
- --------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) Before Taxes $ 3,895 $ (2,635) $ 1,430 $ 391 $ 819 $ 3,900
- --------------------------------------------------------------------------------------------------------------------------
Average Balances:
Gross Funds Provided $1,414,136 $ -- $ 429,453 $ -- $187,853 $2,031,442
Funds Used: Interest-Earning Assets 596,163 654,149 624,362 -- -- 1,874,674
Non-Interest-Earning Assets 12,178 2,860 59,233 -- 82,497 156,768
- --------------------------------------------------------------------------------------------------------------------------
Net Funds Provided (Used) $ 805,795 $(657,009) $(254,142) $ -- $105,356 $ --
- --------------------------------------------------------------------------------------------------------------------------
Trust and
Results of Operations for Retail Commercial Investment
The Three Months Ended June 30, 2001 Banking Banking Investments Services All Other Consolidated
- --------------------------------------------------------------------------------------------------------------------------
Interest Income $ 12,833 $ 11,782 $ 11,094 $ -- $ -- $ 35,709
Interest Expense 11,195 -- 6,165 -- -- 17,360
Funds Transfer Pricing Allocation 9,223 (7,128) (3,379) -- 1,284 --
- --------------------------------------------------------------------------------------------------------------------------
Net Interest Income 10,861 4,654 1,550 -- 1,284 18,349
Provision for Loan Losses (791) 1,607 -- -- -- 816
- --------------------------------------------------------------------------------------------------------------------------
Net Interest Income
After Provision for Loan Losses 11,652 3,047 1,550 -- 1,284 17,533
Non-Interest Income 2,840 225 952 2,123 44 6,184
Non-Interest Expense 11,216 1,397 1,077 1,107 79 14,876
- --------------------------------------------------------------------------------------------------------------------------
Net Income Before Taxes $ 3,276 $ 1,875 $ 1,425 $1,016 $ 1,249 $ 8,841
- --------------------------------------------------------------------------------------------------------------------------
Average Balances:
Gross Funds Provided $1,419,916 $ -- $ 435,104 $ -- $187,903 $2,042,923
Funds Used: Interest-Earning Assets 675,559 565,924 646,261 -- -- 1,887,744
Non-Interest-Earning Assets 11,464 3,065 54,932 -- 85,718 155,179
- --------------------------------------------------------------------------------------------------------------------------
Net Funds Provided (Used) $ 732,893 $(568,989) $(266,089) $ -- $102,185 $ --
- --------------------------------------------------------------------------------------------------------------------------
7
Trust and
Results of Operations for Retail Commercial Investment
The Six Months Ended June 30, 2002 Banking Banking Investments Services All Other Consolidated
- ------------------------------------------------------------------------------------------------------------------------------
Interest Income $ 20,533 $ 21,106 $ 19,491 $ -- $ -- $ 61,130
Interest Expense 13,809 -- 9,843 -- -- 23,652
Funds Transfer Pricing Allocation 14,773 (13,865) (6,881) -- 5,973 --
- ------------------------------------------------------------------------------------------------------------------------------
Net Interest Income 21,497 7,241 2,767 -- 5,973 37,478
Provision for Loan Losses 247 8,703 -- -- -- 8,950
- ------------------------------------------------------------------------------------------------------------------------------
Net Interest Income
After Provision for Loan Losses 21,250 (1,462) 2,767 -- 5,973 28,528
Non-Interest Income 4,363 766 1,887 3,433 1,227 11,676
Non-Interest Expense 21,290 3,880 1,388 2,900 862 30,320
- ------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) Before Taxes $ 4,323 $ (4,576) $ 3,266 $ 533 $ 6,338 $ 9,884
- ------------------------------------------------------------------------------------------------------------------------------
Average Balances:
Gross Funds Provided $1,399,835 $ -- $ 416,582 $ -- $191,611 $2,008,028
Funds Used: Interest-Earning Assets 594,311 651,043 599,956 -- -- 1,845,310
Non-Interest-Earning Assets 12,163 2,729 58,235 -- 89,591 162,718
- ------------------------------------------------------------------------------------------------------------------------------
Net Funds Provided (Used) $ 793,361 $(653,772) $(241,609) $ -- $102,020 $ --
- ------------------------------------------------------------------------------------------------------------------------------
Trust and
Results of Operations for Retail Commercial Investment
The Six Months Ended June 30, 2001 Banking Banking Investments Services All Other Consolidated
- ------------------------------------------------------------------------------------------------------------------------------
Interest Income $ 27,107 $ 24,144 $ 22,741 $ -- $ -- $ 73,992
Interest Expense 24,788 -- 12,739 -- -- 37,527
Funds Transfer Pricing Allocation 20,799 (15,359) (7,041) -- 1,601 --
- ------------------------------------------------------------------------------------------------------------------------------
Net Interest Income 23,118 8,785 2,961 -- 1,601 36,465
Provision for Loan Losses 445 917 -- -- -- 1,362
- ------------------------------------------------------------------------------------------------------------------------------
Net Interest Income
After Provision for Loan Losses 22,673 7,868 2,961 -- 1,601 35,103
Non-Interest Income 5,400 313 2,103 4,155 73 12,044
Non-Interest Expense 22,813 3,222 1,155 2,332 79 29,601
- ------------------------------------------------------------------------------------------------------------------------------
Net Income Before Taxes $ 5,260 $ 4,959 $ 3,909 $1,823 $ 1,595 $ 17,546
- ------------------------------------------------------------------------------------------------------------------------------
Average Balances:
Gross Funds Provided $1,462,799 $ -- $ 422,041 $ -- $185,345 $2,070,185
Funds Used: Interest-Earning Assets 694,173 563,484 659,432 -- -- 1,917,089
Non-Interest-Earning Assets 11,985 2,351 54,528 -- 84,232 153,096
- ------------------------------------------------------------------------------------------------------------------------------
Net Funds Provided (Used) $ 756,641 $(565,835) $(291,919) $ -- $101,113 $ --
- ------------------------------------------------------------------------------------------------------------------------------
8
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the operating results and financial condition at
June 30, 2002 is intended to help readers analyze the accompanying financial
statements, notes and other supplemental information contained in this document.
Results of operations for the three-and six-month period ended June 30, 2002 are
not necessarily indicative of results to be attained for any other period.
Forward-Looking Statements
This report contains forward-looking statements within the meaning of The
Private Securities Litigation Reform Act of 1995. Such statements are not
historical facts and include expressions about our confidence and strategies and
our expectations about new and existing programs and products, relationships,
opportunities, technology and market conditions. These statements may be
identified by an "asterisk" ("*") or such forward-looking terminology as
"expect", "believe", "anticipate", or by expressions of confidence such as
"continuing" or "strong" or similar statements or variations of such terms. Such
forward-looking statements involve certain risks and uncertainties. These
include, but are not limited to, expected cost savings not being realized or not
being realized within the expected time frame; income or revenues being lower
than expected or operating costs higher; competitive pressures in the banking or
financial services industries increasing significantly; business disruption
related to program implementation or methodologies; weakening of general
economic conditions nationally or in New Jersey, especially as they have been
affected by the events of September 11th and the developments thereafter;
changes in legal or regulatory barriers and structures; and unanticipated
occurrences delaying planned programs or initiatives or increasing their costs
or decreasing their benefits. Actual results may differ materially from such
forward-looking statements. The Company assumes no obligation for updating any
such forward-looking statements at any time.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2002 and June 30, 2001:
OVERVIEW
The Company reported net income of $3.1 million for the second quarter ended
June 30, 2002, as compared to $5.9 million reported for the same period in 2001.
Net income per diluted share was $0.21 for the second quarter ended June 30,
2002 compared to $0.39 per diluted share for the prior-year period.
During current quarter of 2002, the Company made a higher loan loss provision
and recorded a $2.8 million charge-off on a $5.3 million loan participation to
Suprema Specialties, a company that declared bankruptcy during the first
quarter, and $2.4 million charge-off related to a loan to an insurance premium
financing company that was placed on non-accrual during the second quarter.
Additionally, the Company recorded $0.8 million ($0.5 million net of tax) in
integration expenses related its pending merger with Vista Bancorp, and $0.6
million ($0.3 million net of tax) in interest reversals related to the loan to
the insurance premium financing company.
EARNINGS ANALYSIS
Operating Revenue
The Company's earnings have two major revenue components: net interest income
and non-interest income, which includes net gains from securities transactions.
Operating revenues decreased $0.3 million to $23.5 million. Included in the
second quarter of 2002 and 2001 were gains of $0.9 million associated with the
sale of the unsecured credit card portfolio in 2002 and gains of $0.5 million
associated with the sale of the secured credit card portfolio in 2001 amounting
to $0.5 million. Excluding these items and net gains from securities
9
transactions, operating revenues decreased $0.7 million to $22.5 million. The
majority of this decline was the result of lower trust income and lower credit
card fees resulting from the 2001 credit card sale.
Net Interest Income
Net interest income, the amount by which interest earned on assets exceeds
interest paid to depositors and other creditors, is the Company's principal
source of revenue. For the purposes of this review, interest exempt from Federal
taxation has been restated to a taxable-equivalent basis, which places
tax-exempt income and yields on a comparable basis with taxable income to
facilitate analysis. In calculating loan yields, the applicable loan fees have
been included in interest income and the non-performing loans are included in
the average loan balances.
10
The following table reflects the components of net interest income, setting
forth, for the periods presented, (1) average assets, liabilities and
stockholders' equity, (2) interest earned on earning assets and interest paid on
interest-bearing liabilities, (3) average rates earned on earning assets and
average rates paid on interest-bearing liabilities, (4) net interest spread
(i.e., the difference between the average rate earned on earning assets and the
average rate paid on interest-bearing liabilities) and (5) the net interest
margin (i.e., annualized net interest income divided by average earning assets).
Dollar amounts are presented on a tax-equivalent basis assuming a tax rate of
35% in 2002 and 2001. Average balances have been derived from daily balances.
Three Months Ended
--------------------------------------------------------------------
June 30, 2002 June 30, 2001
--------------------------------- ---------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
(Dollars in Thousands) Balance Expense Rate Balance Expense Rate
- ----------------------------------------------------------------------------------------------------------------------
Assets:
Interest-Earning Assets:
Securities Available for Sale:
Taxable $ 473,229 $ 7,557 6.39% $ 516,654 $ 8,854 6.85%
Non-Taxable 102,863 1,731 6.72 90,180 1,615 7.17
Securities Held to Maturity:
Taxable 5,894 55 3.77 12,167 190 6.22
Non-Taxable 38,075 540 5.67 23,895 429 7.18
--------------------------------------------------------------------
Total Securities 620,061 9,883 6.38 642,896 11,088 6.90
--------------------------------------------------------------------
Short-Term Investments 1,505 7 1.84 681 7 4.07
Loans (Net of Unearned Income):
Commercial 321,360 4,085 5.10 287,546 5,879 8.20
Real Estate - Commercial 360,460 6,707 7.36 291,133 6,156 8.37
Real Estate - Residential 263,779 4,352 6.60 392,372 6,664 6.79
Consumer 292,994 5,027 6.88 248,211 5,005 8.09
Credit Card 14,515 404 11.16 24,905 910 14.67
--------------------------------------------------------------------
Total Loans 1,253,108 20,575 6.55 1,244,167 24,614 7.90
--------------------------------------------------------------------
Total Interest-Earning Assets 1,874,674 30,465 6.49 1,887,744 35,709 7.56
--------------------------------------------------------------------
Non-Interest-Earning Assets 156,768 155,179
------------- -------------
Total Assets $2,031,442 $2,042,923
============= =============
Liabilities and Stockholders' Equity:
Interest-Bearing Liabilities:
Savings Deposits $ 584,197 1,644 1.13 $ 546,828 2,854 2.09
Time Deposits 569,885 5,339 3.76 650,240 8,633 5.33
--------------------------------------------------------------------
Total Savings and Time Deposits 1,154,082 6,983 2.43 1,197,068 11,487 3.85
Short-Term Borrowings 97,608 462 1.90 220,732 2,806 5.10
Other Borrowed Funds 323,505 4,496 5.57 195,483 3,067 6.29
--------------------------------------------------------------------
Total Interest-Bearing Liabilities 1,575,195 11,941 3.04 1,613,283 17,360 4.32
--------------------------------------------------------------------
Non-Interest-Bearing Liabilities:
Demand Deposits and Non-Interest Bearing 279,175 251,697
Savings
Other Liabilities 22,541 30,770
------------- -------------
Total Non-Interest Bearing Liabilities 301,716 282,467
------------- -------------
Stockholders' Equity 154,531 147,173
------------- -------------
Total Liabilities and Stockholders' Equity $2,031,442 $2,042,923
============= =============
Net Interest Income (Tax-Equivalent Basis) $18,524 $18,349
=========== ============
Interest Rate Spread 3.45 3.24
======= ======
Net Interest Margin 3.96% 3.89%
======= ======
Net interest income for the second quarter ended June 30, 2002 increased $0.2
million to $18.5 million compared to the same period last year. This was due
primarily to an increase in the Company's interest rate spread, which was
partially offset by the reversal of $580,000 in interest income. This reversal
was related to the placement of a $21 million loan to an insurance premium
finance company on non-accrual during the second quarter of 2002.
11
As rates declined throughout 2001, the Company's interest-bearing liabilities
repriced at a faster rate than its interest-earning assets. Average
interest-bearing liabilities decreased $38.1 million to $1,575.2 million for the
second quarter ended June 30, 2002 compared to the same period in 2001. The
average yield on those liabilities dropped 128 basis points to 3.04%. Average
interest-earning assets decreased $13.1 million to $1,874.7 for the second
quarter ended June 30, 2002 compared to the prior year period, while the average
yield on those assets dropped 107 basis points to 6.49%.
Average securities, excluding any unrealized gains or losses, declined $22.8
million to $620.1 million, while the yield earned on the portfolio declined 52
basis points to 6.38%. Average loans increased $8.9 million to $1,253.1 million,
while the yield earned on the portfolio declined to 6.55% from 7.90% in the same
period last year. The decline in the average loan portfolio yield was primarily
the result of the lower interest rate environment and a rise in non-accrual
loans. During 2001, the Company sold $103 million in loans, of which $81.0
million were related to the sale of residential mortgage loans, as part of its
Asset/Liability Management strategy to reposition its balance sheet. Excluding
residential mortgage loans, average loans for the second quarter of 2002 rose
16.1% from the second quarter of 2001. Average short-term investments increased
$0.8 million to $1.5 million. These changes resulted in a decrease in interest
income of $5.2 million to $30.5 million for the quarter ended June 30, 2002. The
average yield on interest-earning assets declined 107 basis points to 6.49%,
reflecting the current lower interest rate environment.
Average interest-bearing deposits decreased $43.0 million to $1,154.1 million in
the second quarter ended June 30, 2002, while the yield paid declined to 2.43%
from 3.85%. Within interest bearing deposits, average savings deposits increased
$37.4 million from the prior year to $584.2 million, while average time deposits
decreased $80.4 million to $569.9 million during the current quarter. The
decrease in average time deposits resulted primarily from a decrease in
large-denomination municipal certificates of deposit, which declined $79.6
million on average from the second quarter of 2001. The average yield paid on
savings deposits declined 96 basis points to 1.13% while the average yield paid
on time deposits declined 157 basis points to 3.76%. Throughout 2001, as market
rates steadily declined, the Company accordingly adjusted rates paid on its
deposits and introduced competitive rates on selected deposits products in an
effort to retain deposits. The Company also utilizes short-term and other
borrowings as additional funding sources. Average short-term borrowings declined
$123.1 million during the quarter ended June 30, 2002 to $97.6 million, while
the yield paid declined 320 basis points to 1.90%. Average other borrowings
increased $128.0 million during the quarter ended June 30, 2002 to $323.5
million, while the yield declined 72 basis points to 5.57%. During 2001 and into
2002, the Company extended a portion of its short-term borrowings. The Company's
strategy in extending its borrowings during a time of low interest rates is to
stabilize the Company's interest costs if and when market rates begin to rise.
These changes resulted in a decrease in interest expense of $5.4 million to
$11.9 million for the quarter ended June 30, 2002. The average yield on
interest-bearing liabilities declined 128 basis points to 3.04%, reflecting the
current lower interest rate environment.
The net interest margin, which represents net interest income as a percentage of
average interest-earning assets, is a key indicator of net interest income
performance. The net interest margin increased during the second quarter of 2002
to 3.96% compared with 3.89% in the prior year quarter, despite the previously
mentioned interest reversal of $580,000 related to the placement of a $21
million loan on non-accrual. The Company's stock repurchase program and its
investment in cash surrender value of life insurance policies also had the
effect of reducing the net interest margin, as these investments reduced
investable interest-earning funds. The increase in cash surrender value of life
insurance policies had a positively impact on non-interest income, generating
$0.8 million of income in both the second quarter of 2002 and the second quarter
of 2001.
Provision for Loan Losses
For the quarter ended June 30, 2002, the provision for loan losses was $4.3
million compared to $0.8 million for the same period last year. This higher
provision was attributable in part to a $2.4 million charge-off of an insurance
premium financing company loan that was placed on non-accrual during the second
quarter of 2002.
12
For additional information, see "Allowance for Loan Losses" under Financial
Condition.
Non-Interest Income
Non-interest income for the quarter ended June 30, 2002 decreased $0.4 million
to $5.8 million from the same period of the prior year. During the second
quarter of 2002, the Company recorded a gain of $0.9 million resulting from the
sale of its $14 million unsecured credit card portfolio. During the second
quarter of 2001, a $0.5 million gain on the sale of the Company's $22 million
secured credit card portfolio was recognized. Trust income declined $0.4 million
from the prior-year period, due to lower managed assets values. Other service
charges, commissions and fees were down $0.5 million due to lower credit card
fees resulting from the 2001 credit card sale. Offsetting these declines were
modest increases in service charges on deposit accounts and income on
corporate-owned life insurance.
Non-Interest Expense
For the quarter ended June 30, 2002, non-interest expense increased $1.2 million
to $16.1 million compared to $14.9 million for the same period last year.
Salaries, wages and benefits increased $1.0 million to $7.1 million in 2002 from
the same period last year. The increase in salary, wages and employee benefits
were attributable to normal salary adjustments, higher healthcare expenses and
increased pension and other post-retirement costs. During the second quarter of
2002, the Company recorded $0.8 million in integration expenses relating to its
pending merger with Vista Bancorp. During the second quarter of 2001, the
Company recorded $0.8 million in expenses associated with the conversion of
United National Bank to a state-chartered bank and its name change to
UnitedTrust. Other expenses increased $0.3 million due primarily to higher
consulting and postage expenses, while furniture and equipment expense rose $0.1
million to $1.1 million from the same period last year. Partially offsetting
these increases was a decline in data processing expense, which decreased $0.2
million from the same quarter last year due primarily to lower transaction
volumes resulting from the sale of the secured credit card portfolio.
Income Taxes
The Company recorded a benefit for income taxes of $13,000 for the second
quarter of 2002 as compared to a provision for income tax of $2.2 million in the
second quarter of last year. This was due primarily to a decrease in the level
of pre-tax income and lower state income taxes.
On July 2, 2002, the State of New Jersey passed the New Jersey Business Tax
Reform Act. The legislation is not expected to have a material effect on the
Company.
Segment Reporting
The Company, for management purposes, is segmented into the following lines of
business: Retail Banking, Commercial Banking, Investments, and Trust and
Investment Services. Activities not included in these lines are reflected in All
Other.
Summary financial information on a fully taxable equivalent basis for each line
of business is presented in Note 7.
13
The following table shows the percentage contribution of the reportable segments
to consolidated net income before taxes on a fully taxable equivalent basis:
Trust and
Retail Commercial Investment All
Banking Banking Investments Services Other Consolidated
-----------------------------------------------------------------------
Three Months Ended June 30, 2002 99.9% (67.6%) 36.7% 10.0% 21.0% 100.0%
Three Months Ended June 30, 2001 37.1% 21.2% 16.1% 11.5% 14.1% 100.0%
Income before taxes for the Retail Banking segment was $0.6 million higher than
the second quarter of 2001 due to a $1.0 million increase in net interest income
offset in part by an increase of $0.5 million in the loan loss provision. The
higher net interest income was primarily related to increases in average
consumer loans and in wider-spread average core deposits when compared to 2001.
The increase in the loan loss provision was due to a higher allocation related
to the consumer portfolio partially offset by a reduction related to the sale of
the unsecured credit card portfolio. Commercial Banking pretax income decreased
$4.5 million primarily due to a $3.0 million increase in the loan loss provision
allocation and a decrease of $1.4 million in net interest income. Of the total
amount of the loan loss provision, $2.4 million was related to a charge-off of a
loan to an insurance premium financing company that was placed on non-accrual
during the second quarter of 2002. The decrease in net interest income was due
primarily to an increase in non-accrual loans and narrower spreads on new loans.
Pretax income for the Investments segment was approximately the same for both
periods. Income before taxes for the Trust and Investment Services segment
decreased $0.6 million primarily due to a 19.4% decline in revenue caused by
lower market values of trust assets. Income before taxes for the All Other
segment decreased $0.4 million from the first quarter of 2001 due to $0.8
million in integration expenses relating to the pending merger with Vista
Bancorp offset by a decrease in the credit assigned to non-maturity deposits in
the Retail Banking segment.
14
Six Months Ended June 30, 2002 and June 30, 2001:
OVERVIEW
The Company reported net income of $7.1 million for the six months ended June
30, 2002, as compared to $11.8 million reported for the same period in 2001. Net
income per diluted share was $0.48 for the six months ended June 30, 2002
compared to $0.78 per diluted share for the prior-year period.
During first half of 2002, the Company increased its loan loss provision and
recorded a $2.8 million charge-off on a $5.3 million loan participation to
Suprema Specialties, a company that declared bankruptcy during the first
quarter, and recoded a $2.4 million charge-off related to a loan to an insurance
premium financing company that was placed on non-accrual during the second
quarter. Additionally, the Company recorded $0.8 million ($0.5 million net of
tax) in integration expenses related its pending merger with Vista Bancorp, and
$0.6 million ($0.3 million net of tax) in interest reversals related to the loan
to the insurance premium financing company. These charges were partially offset
by a $0.9 million ($0.5 million net of tax) gain on the sale of the Company's
$14 million unsecured credit card portfolio and a gain of $1.2 million ($0.7
million net of tax) from the dissolution of its joint venture in United
Financial Services, Inc. ("UFS").
During the first half of 2001, the Company recorded a non-recurring charge of
$0.8 million ($0.5 million net of tax) representing expenses associated with the
conversion of United National Bank to a state-chartered bank and its name change
to UnitedTrust Bank. This charge was partially offset by a $0.5 million ($0.3
million net of tax) gain on the sale of the Company's secured credit card
portfolio.
EARNINGS ANALYSIS
Operating Revenue
The Company's earnings have two major revenue components: net interest income
and non-interest income, which includes net gains from security transactions.
Operating revenues increased $0.5 million to $47.5 million, despite the reversal
of $0.6 million in interest income related to the placing of a $21 million loan
to an insurance premium financing company on non-accrual. Included in the six
months ended June 30, 2002 were gains associated with the sale of the unsecured
credit card portfolio of $0.9 million and the dissolution of joint venture in
UFS of $1.2 million. Included in the corresponding period in 2001 was the gain
associated with the sale of the secured credit card business of $0.5 million.
Excluding these items and the gains from security transactions, operating
revenues declined $1.1 million to $45.4 million. The majority of this decline
was a result of lower trust income and lower credit card fees resulting from the
2001 credit card sale.
Net Interest Income
Net interest income, the amount by which interest earned on assets exceeds
interest paid to depositors and other creditors, is the Company's principal
source of revenue. For the purposes of this review, interest exempt from Federal
taxation has been restated to a taxable-equivalent basis, which places
tax-exempt income and yields on a comparable basis with taxable income to
facilitate analysis. In calculating loan yields, the applicable loan fees have
been included in interest income and the non-performing loans are included in
the average loan balances.
15
The following table reflects the components of net interest income, setting
forth, for the periods presented, (1) average assets, liabilities and
stockholders' equity, (2) interest earned on earning assets and interest paid on
interest-bearing liabilities, (3) average rates earned on earning assets and
average rates paid on interest-bearing liabilities, (4) net interest spread
(i.e., the difference between the average rate earned on earning assets and the
average rate paid on interest-bearing liabilities) and (5) the net interest
margin (i.e., annualized net interest income divided by average earning assets).
Dollar amounts are presented on a tax-equivalent basis assuming a tax rate of
35% in 2002 and 2001. Average balances have been derived from daily balances.
Six Months Ended
--------------------------------------------------------------------
June 30, 2002 June 30, 2001
--------------------------------- ---------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
(Dollars in Thousands) Balance Expense Rate Balance Expense Rate
- ----------------------------------------------------------------------------------------------------------------------
Assets:
Interest-Earning Assets:
Securities:
Taxable $ 453,580 $ 14,890 6.56 % $ 529,008 $ 18,176 6.87%
Non-Taxable 100,166 3,408 6.80 87,507 3,157 7.22
Securities Held to Maturity:
Taxable 6,256 128 4.12 16,171 519 6.42
Non-Taxable 36,109 1,055 5.84 22,715 837 7.37
--------------------------------------------------------------------
Total Securities 596,111 19,481 6.53 655,401 22,689 6.92
--------------------------------------------------------------------
Short-Term Investments 1,055 10 1.89 1,990 52 5.20
Loans (Net of Unearned Income):
Commercial 319,158 8,745 5.53 282,144 12,095 8.64
Real Estate - Commercial 359,025 13,227 7.33 293,451 12,522 8.53
Real Estate - Residential 267,644 8,826 6.60 401,291 13,671 6.81
Consumer 287,374 10,013 7.03 249,315 10,134 8.20
Credit Card 14,943 828 11.17 33,497 2,829 17.03
--------------------------------------------------------------------
Total Loans 1,248,144 41,639 6.69 1,259,698 51,251 8.17
--------------------------------------------------------------------
Total Interest-Earning Assets 1,845,310 61,130 6.64 1,917,089 73,992 7.74
--------------------------------------------------------------------
Non-Interest-Earning Assets 162,718 153,096
------------- -------------
Total Assets $ 2,008,028 $ 2,070,185
============= =============
Liabilities and Stockholders' Equity:
Interest-Bearing Liabilities:
Savings Deposits $ 571,243 3,072 1.08 $ 555,027 6,460 2.35
Time Deposits 573,643 10,888 3.83 687,868 19,088 5.60
--------------------------------------------------------------------
Total Savings and Time Deposits 1,144,886 13,960 2.46 1,242,895 25,548 4.15
Short-Term Borrowings 100,274 998 2.01 224,262 6,300 5.66
Other Borrowed Funds 306,291 8,694 5.71 175,529 5,679 6.51
--------------------------------------------------------------------
Total Interest-Bearing Liabilities 1,551,451 23,652 3.07 1,642,686 37,527 4.61
--------------------------------------------------------------------
Non-Interest-Bearing Liabilities:
Demand Deposits and Non-Interest Bearing 274,929 251,959
Savings
Other Liabilities 25,703 30,614
------------- -------------
Total Non-Interest Bearing Liabilities 300,632 282,573
------------- -------------
Stockholders' Equity 155,945 144,926
------------- -------------
Total Liabilities and Stockholders' Equity $ 2,008,028 $ 2,070,185
============= =============
Net Interest Income (Tax-Equivalent Basis) $ 37,478 $ 36,465
=========== ============
Interest Rate Spread 3.57 3.13
======= ======
Net Interest Margin 4.07 % 3.80%
======= ======
Despite the reversal of $0.6 million in interest income related to the placing
of a $21 million loan to an insurance premium financing company on non-accrual,
net interest income for the six months ended June 30, 2002 increased $1.0
million to $37.5 million compared to the same period last year. As rates
declined throughout 2001, the Company's interest-bearing liabilities repriced at
a faster rate than its interest-earning assets. Average interest-bearing
liabilities decreased $91.2 million or 5.6% to $1,551.5 million for the six
months ended June 30, 2002 compared to the same period in 2001. The average
yield on those liabilities dropped 154 basis points to 3.07%. Average
interest-earning assets decreased $71.8 million or 3.7% to
16
$1,845.3 million for the six months ended June 30, 2002 compared to the prior
year period, while the average yield on those assets dropped 110 basis points to
6.64%.
Average securities, excluding any unrealized gains or losses, declined $59.3
million to $596.1 million, while the yield earned on the portfolio declined 39
basis points to 6.53%. Average loans declined $11.6 million to $1,248.1 million,
while the yield earned on the portfolio decreased to 6.69% from 8.17% in the
same period last year. The decline in the average loan portfolio yield was due
to the lower interest rate environment, a rise in non-accrual loans and the sale
of the secured credit card portfolio. During 2001, the Company sold $103 million
in loans, predominantly residential mortgage loans, as part of its
Asset/Liability Management strategy to reposition its balance sheet. Excluding
residential mortgage loans, average loans grew 14.2% during the first six months
of 2002 compared to the same period last year. Average short-term investments
declined $0.9 million to $1.1 million. These changes resulted in a decrease in
interest income of $12.9 million to $61.1 million for the six months ended June
30, 2002. The average yield on interest-earning assets declined 110 basis points
to 6.64%, reflecting the current lower interest rate environment.
Average interest-bearing deposits decreased $98.0 million to $1,144.9 million in
the six months ended June 30, 2002, while the yield paid declined to 2.46% from
4.15%. Within interest bearing deposits, average savings deposits increased
$16.2 million from the prior year to $571.2 million, while average time deposits
decreased $114.2 million to $573.6 million during the first half of 2002.
Average time deposits decreased primarily from a reduction in large-denomination
municipal certificates of deposit, which had declined $100.9 million in the
first six months of 2002 from the first six months of 2001. The average yield
paid on savings deposits declined 127 basis points to 1.08%, while the average
yield paid on time deposits declined 177 basis points to 3.83%. Throughout 2001,
as market rates steadily declined, the Company accordingly adjusted rates paid
on its deposits and introduced competitive rates on selected deposits products
in an effort to retain deposits. The Company also utilizes short-term and other
borrowings as additional funding sources. Average short-term borrowings declined
$124.0 million during the six months ended June 30, 2002 to $100.3 million,
while the yield paid declined 365 basis points to 2.01%. Average other
borrowings were $306.3 million during the six months ended June 30, 2002
compared to $175.5 million, while the yield declined 80 basis points to 5.71%.
These changes resulted in a decrease in interest expense of $13.9 million to
$23.7 million for the six months ended June 30, 2002. The average yield on
interest-bearing liabilities declined 154 basis points to 3.07%, reflecting the
lower interest rate environment.
The net interest margin, which represents net interest income as a percentage of
average interest-earning assets, is a key indicator of net interest income
performance. The net interest margin increased during the first six months of
2002 to 4.07% compared with 3.80% in the first half of 2001. The Company's stock
repurchase program and its investment in cash surrender value of life insurance
policies have the effect of reducing the net interest margin, as these
investments reduce investable interest-earning funds. The increase in cash
surrender value of life insurance policies has positively impacted non-interest
income, generating $1.6 million of income in both the six months ended June 30,
2002 and 2001.
Provision for Loan Losses
For the six months ended June 30, 2002, the provision for loan losses was $9.0
million compared to $1.4 million for the same period last year. The increase
reflects a special provision of $3.7 million charged to operations during the
first quarter of 2002 related to the Suprema Specialties credit facility, a
company that declared bankruptcy during the first quarter. Additionally, a
higher loan loss provision was provided during the second quarter due in part to
the $2.4 million charge-off relating to a loan to an insurance premium financing
company that was placed on non-accrual during the second quarter.
For additional information, see "Allowance for Loan Losses" under Financial
Condition.
17
Non-Interest Income
Non-interest income for the six months ended June 30, 2002 was $11.7 million,
down $0.4 million from the same period of the prior year. Non-interest income
for 2002 included a $0.9 million gain on the sale of the Company's $14 million
unsecured credit card portfolio in the second quarter and a gain of $1.2 million
from the dissolution of its joint venture in United Financial Services, Inc.
("UFS") during the first quarter. During the second quarter of 2001, a $0.5
million gain on the sale of the Company's $22 million secured credit card
portfolio was recognized. Excluding these non-recurring items, non-interest
income for the six months ended June 30, 2002 declined $1.9 million to $9.6
million. Trust income declined $0.8 million from the prior year period
reflecting lower managed assets values. Other service charges, commissions and
fees were down $1.2 million due to lower credit card fees resulting from the
2001 credit card sale. Offsetting these declines were modest increases in
service charges on deposit accounts, income on corporate-owned life insurance
and other income.
Non-Interest Expense
For the six months ended June 30, 2002, non-interest expense increased $0.7
million to $30.3 million compared to $29.6 million for the same period last
year. Salaries, wages and benefits increased $1.7 million to $14.3 million in
2002 from the same period last year. The increase in salary, wages and employee
benefits were attributable to normal salary adjustments, higher healthcare
expenses and increased pension and other post-retirement costs. During the
second quarter, the Company recorded $0.8 million in integration expenses
relating to its pending merger with Vista Bancorp, while in the second quarter
of 2001 the Company recorded $0.8 million in expenses associated with the
conversion of United National Bank to a state-chartered bank and its name change
to UnitedTrust. Partially offsetting the increase in salaries, wages and
benefits was a decline in data processing expense, which fell $1.0 million from
the same quarter last year due primarily to lower transaction volumes resulting
from the sale of the secured credit card portfolio.
Income Taxes
The provision for income taxes decreased by $3.1 million to $1.2 million for the
six months ended June 30, 2002 from $4.3 million for the same period in 2001 due
primarily to the decrease in pre-tax income, an increase in tax-exempt interest
income and lower state income taxes in the first half of 2002 as compared to
same period in 2001.
Segment Reporting
The Company, for management purposes, is segmented into the following lines of
business: Retail Banking, Commercial Banking, Investments, and Trust and
Investment Services. Activities not included in these lines are reflected in All
Other.
Summary financial information on a fully taxable equivalent basis for each line
of business is presented in Note 7.
The following table shows the percentage contribution of the reportable segments
to consolidated net income before taxes on a fully taxable equivalent basis:
Trust and
Retail Commercial Investment All
Banking Banking Investments Services Other Consolidated
-----------------------------------------------------------------------
Six Months Ended June 30, 2002 43.8% (46.3%) 33.0% 5.4% 64.1% 100.0%
Six Months Ended June 30, 2001 30.0% 28.2% 22.3% 10.4% 9.1% 100.0%
Income before taxes for the Retail Banking segment decreased $0.9 million from
the six months of 2001 due to a $1.6 million decline in net interest income and
a decrease in non-interest income of $1.0 million. This
18
was offset by a $0.2 million decrease in the loan loss provision allocation and
a $1.5 million reduction in non-interest expense. The reduction in net interest
income was primarily related to the impact of the sale of the secured credit
card portfolio in 2001, a 4.3% decline in average deposits and lower funds
transfer credits assigned to certain non-maturity deposits. The decrease in the
loan loss provision was due to the sale of the secured and unsecured credit card
portfolios. The decrease in non-interest income and non-interest expense was due
to lower credit card fees and a decline in data processing expense due to lower
transaction volumes, respectively, resulting from the sale of the secured credit
card portfolio in 2001. Commercial Banking pretax income decreased $9.5 million
primarily due to a $7.8 million increase in the loan loss provision allocation.
Of this amount, $3.7 million was related to the Suprema Specialties credit
facility, and $2.4 million was due to a charge-off relating to a loan to an
insurance premium financing company that was placed on non-accrual during the
second quarter. The remaining allocation was due to increased loan volume.
Pretax income for the Investments segment decreased $0.6 million due to a
decline in net interest income of $0.2 million, a decrease in non-interest
income of $0.2 million related to lower investment securities gains and by an
increase of $0.2 million in non-interest expense. Income before taxes for the
Trust and Investment Services segment decreased $1.3 million due to a 19.1%
decline in revenue resulting from lower market value of trust assets and a 24.4%
increase in expenses, which was primarily due to a higher occupancy expense
allocation and increased commissions on alternative investment products. Income
before taxes for the All Other segment increased $4.7 million from the first
quarter of 2001 due to a significant decline in the credit assigned to
non-maturity deposits in the Retail Banking segment and a $1.2 million recovery
related to the settlement of the Company's joint venture data-servicing
provider, United Financial Services, Inc. This was offset by $0.8 million in
integration expenses relating to the pending merger with Vista Bancorp.
FINANCIAL CONDITION
June 30, 2002 as compared to December 31, 2001:
Total assets increased $97.8 million, or 5.0% from December 31, 2001. The asset
increases were $74.2 million in securities available for sale, $4.1 million in
securities held to maturity, $16.4 million in short-term investments, $10.9
million in loans, net of allowance, and $3.4 million in the cash surrender value
of life insurance policies. Offsetting these increases were decreases of $11.0
million in cash and due from banks and $0.2 million in other assets, including
premises and equipment, intangible assets and other real estate.
Securities
Within the securities portfolio, most of the increase was due to purchases of
mortgage-backed securities. The amortized cost and approximate market value of
securities are summarized as follows:
(in thousands) June 30, 2002 December 31, 2001
--------------------------------- ---------------------------------
Amortized Market Amortized Market
Securities Available for Sale Costs Value Costs Value
----------------------------- --------------- -------------- -------------- ---------------
U.S. Treasury Securities $ 1,994 $ 2,073 $ 1,993 $ 2,065
------------------------------------------
Obligations of U.S. Government
Agencies and Corporations 15,688 15,800 15,685 15,646
------------------------------------------
Obligations of States and
Political Subdivisions 103,017 106,440 95,979 96,502
------------------------------------------
Mortgage-Backed Securities 399,131 409,189 328,475 331,279
------------------------------------------
Corporate Debt Securities 31,387 28,880 45,039 42,424
------------------------------------------
Equity Securities 31,307 31,906 32,015 32,077
--------------------------------------------------------------------------------------------------------------------
Total Securities Available for Sale 582,524 594,288 519,186 519,993
--------------------------------------------------------------------------------------------------------------------
19
Securities Held to Maturity
---------------------------
U.S. Treasury Securities 997 1,037 996 1,033
------------------------------------------
Obligations of States and
Political Subdivisions 36,029 36,436 30,579 30,756
------------------------------------------
Mortgage-Backed Securities 4,454 4,502 5,856 5,861
------------------------------------------
Other Securities 250 250 225 225
----------------------------------------------------------------------------------------------------------------
Total Securities Held to Maturity 41,730 42,225 37,656 37,875
----------------------------------------------------------------------------------------------------------------
Total Securities $624,254 $636,513 $556,842 $557,868
----------------------------------------------------------------------------------------------------------------
Loans
Total loans at June 30, 2002, net of unearned income, increased $13.5 million,
or 1.1% to $1,249.4 million from year-end 2001. All loan categories increased
from December 31, 2001 except for residential mortgage, lease financing and
credit card loans.
20
The following schedule presents the components of loans outstanding by type, for
each period presented.
(In Thousands) June 30, 2002 December 31, 2001
------------------------ -----------------------
Real Estate:
Commercial $ 287,590 $ 281,607
- ----------------------------------------------------------
Residential Mortgage 264,591 280,416
- ----------------------------------------------------------
Construction 75,503 68,838
- ----------------------------------------------------------
Commercial Loans 322,879 312,491
- ----------------------------------------------------------
Lease Financing 17,305 21,186
- ----------------------------------------------------------
Installment Loans 281,298 255,345
- ----------------------------------------------------------
Retail Credit Card 219 16,042
- -----------------------------------------------------------------------------------------------------------
Total Loans Outstanding, Net of Unearned Income 1,249,385 1,235,925
- ----------------------------------------------------------
Less: Allowance for Loan Losses 15,051 12,478
- -----------------------------------------------------------------------------------------------------------
Loans, Net $1,234,334 $1,223,447
- -----------------------------------------------------------------------------------------------------------
Asset Quality
The following table provides an analysis of non-performing assets as of the
periods indicated:
June 30, December 31, December 31, December 31, December 31,
(Dollars in thousands) 2002 2001 2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------------
Total Assets $2,060,290 $1,962,450 $2,112,181 $2,090,383 $1,916,809
- -------------------------------------
Total Loans (Net of Unearned Income) $1,249,385 $1,235,925 $1,287,417 $1,261,343 $1,057,081
- -------------------------------------
Allowance for Loan Losses $ 15,051 $ 12,478 $ 12,419 $ 10,386 $ 11,174
- -------------------------------------
Percent of Total Loans 1.20% 1.01% 0.96% 0.82% 1.06%
- -------------------------------------
Total Non-Performing Loans (1) $ 32,658 $ 6,437 $ 6,751 $ 8,142 $ 8,615
- -------------------------------------
Percent of Total Assets 1.59% 0.33% 0.32% 0.39% 0.45%
- -------------------------------------
Percent of Total Loans 2.61% 0.52% 0.52% 0.65% 0.81%
- -------------------------------------
Allowance for Loan Losses to
Non-Performing Assets 46.09% 193.85% 183.96% 127.56% 129.70%
- -------------------------------------
Total Non-Performing Assets $ 32,900 $ 6,628 $ 6,944 $ 8,251 $ 9,170
- -------------------------------------
Percent of Total Assets 1.60% 0.34% 0.33% 0.39% 0.48%
- -------------------------------------
(1) Non-performing loans consist of impaired loans, non-accrual loans and
loans which are contractually past due 90 days or more as to principal
or interest, but are still accruing interest at previously negotiated
rates to the extent that such loans are both well secured and in the
process of collection.
Allowance for Loan Losses
The determination of the adequacy of the allowance for loan losses is a critical
accounting policy of the Company and is maintained at a level considered
adequate to provide for inherent and reasonably estimable loan losses. The level
of the allowance is based on Management's evaluation of inherent and estimable
losses in the portfolio, after consideration of appraised collateral values,
financial condition of the borrower, delinquency and charge-off trends,
portfolio growth trends, as well as prevailing economic conditions. Management
evaluates the adequacy of the allowance for loan losses on a regular basis
throughout the year. Management believes that the allowance for loan losses is
adequate. While Management uses available information to recognize losses on
loans, future additions to the allowance may be necessary based upon adverse
changes in economic conditions and specific elements underlying the Company's
ability to collect upon a loan including significant changes in collateral value
and the deterioration in the financial condition of borrowers. In addition,
various regulatory agencies periodically review the Company's allowance for loan
21
losses. Such agencies may require the Company to recognize additions to the
allowance based upon their judgments of information available to them at the
time of their examination.
The Company's June 30, 2002 allowance for loan losses (the "Allowance") totaled
$15.1 million and represented 1.20% of total loans. The Allowance was $12.5
million at year-end 2001, or 1.01% of total loans, and $11.9 million at June 30,
2001 or 0.97% of total loans. During the second quarter of 2002, the Company
made a $4.3 million provision for loan losses and recorded a $2.8 million
charge-off on the Suprema Specialties loan and a $2.4 million charge-off on the
loan to the insurance premium financing company to reduce these exposures to
their expected realizable values. Based upon current facts and circumstances,
the Company expects that the remaining balance on the insurance premium
financing company loan will be satisfied during the third quarter of 2002. The
increase in the Allowance was also due to a $3.7 million loan loss provision
primarily related to the aforementioned Suprema Specialties loan participation
during the first quarter of 2002. For the six months ended June 30, 2002, loan
loss provisions amounted to $9.0 million, up from the $1.4 million in the six
months ended June 30, 2001. At June 30, 2002, the ratio of the allowance for
loan losses to non-performing loans was 46.09% compared to 193.85% at December
31, 2001 and 274.71% at June 30, 2001.
The determination of an appropriate level of the Allowance is based upon an
analysis of the risks inherent in the Bank's loan portfolio. One tool used in
identifying these risks is a risk rating system for commercial and commercial
real estate loans, consisting of ten loan-grading categories. In assigning a
rating to a given loan, various factors are weighted, including (a) the
financial condition and past credit history of the borrower; (b) strength of
management; (c) loan structure; (d) available collateral, and its valuation; (e)
loan documentation; and (f) concentrations within industries and economic
environments. Account officers and various loan committees perform the analysis
on a continuous basis. In addition, the Bank has an external loan review service
provider. The loan review service provider also performs a quarterly review of
the adequacy of the Allowance calculation.
In conjunction with the review of the loan portfolio, the adequacy of the
Allowance is monitored on an ongoing basis and a quarterly analysis is
performed. The purpose of the analysis is to estimate the inherent risk of loss
on all loans, as of the evaluation date, in order to ensure that an adequate
Allowance level is maintained. The methodology for determining the adequacy for
the Allowance utilizes guidelines established by various regulatory agencies.
This analysis is based on the historical loss experience associated with the
various loan portfolios. Loss factors are developed for the respective loan
portfolios and are adjusted to reflect the impact of a variety of conditions
which include: delinquency trends; changes in lending policies; experience,
ability and depth of management; national and local economic trends.
Management then determines the adequacy of the Allowance based on the review of
the loan portfolio. Appropriate recommendations are then made to the Board of
Directors regarding the amount of the quarterly charge against earnings (i.e.,
the provision for loan losses), needed to maintain the Allowance at a level
deemed adequate by Management. The Allowance is increased by the amount of such
provisions and by the amount of loan recoveries, and is decreased by the amount
of loan charge-offs.
During 2002, Management continued its assessment of risk factors utilized in the
calculation of the Allowance, and in consideration of, among other factors,
slowing economic trends, the shift of the portfolio into commercial, commercial
real estate and installment loans, and charge-off history, Management adjusted
the general factors utilized in the calculation. While management uses available
information to estimate probable loan losses, future additions to the Allowance
may be necessary due to adverse economic conditions or other currently
unforeseen events.
Net charge-offs in the six months ended June 30, 2002 were $6.4 million or 1.02%
of average loans outstanding on an annualized basis as compared to net
charge-offs in the six months ended June 30, 2001, which were $1.9 million or
0.30% of average loans on an annualized basis.
22
Net charge-offs in the credit card portfolio and related products decreased to
$526,000 in the six months ended June 30, 2002, compared to $1,417,000 in same
period of the prior year, primarily due to the sale of the secured credit card
portfolio in 2001. Net charge-offs in installment lending and lease financing
receivables decreased to $224,000 in the six months ended June 30, 2002,
compared with $258,000 in same period of the prior year. Net charge-offs of real
estate secured loans, consisting predominantly of commercial real estate, were
$225,000 in six months ended June 30, 2002 compared to $45,000 in the prior
year, while net charge-offs of commercial and industrial loans were $5,402,000
during the six months ended June 30, 2002 compared to $188,000 in prior year
period. The increase in the commercial loan charge-offs relates primarily to the
previously mentioned charge-offs relating to Suprema Specialties and the
insurance premium financing company. The charged-off loans are in various stages
of collection and litigation.
Deposits and Borrowings
Total deposits increased $42.5 million or 3.0% to $1,443.2 million at June 30,
2002 from $1,400.7 million at December 31, 2001. Core deposits, which exclude
large-denomination municipal certificates of deposit, amounted to $1,401.7
million at June 30, 2002 as compared to $1,358.4 million at year-end 2001, an
increase of 3.2%. Savings deposits increased $45.4 million or 7.9%, while demand
deposits increased $9.9 million or 3.7%. Time deposits declined $12.8 million or
2.3%. Excluding large-denomination municipal certificates of deposit, time
deposits decreased 2.4%. Short-term borrowings decreased by $4.2 million, or
3.5%, while other borrowings increased by $56.7 million, or 22.2%. In an effort
to help minimize interest rate risk, the Company continues to look for
opportunities to extend the maturities of both its deposits and borrowings.
Management continues to monitor the shift of deposits and level of borrowings
through its Asset/Liability Management Committee.
Capital
Total stockholders' equity increased $1.7 million to $157.4 million at June 30,
2002 from $155.7 million at December 31, 2001. The increase during the six-month
period was due to net income of $7.1 million, an increase of $7.1 million (net
of tax) in the market value of Company's available for sale securities portfolio
from December 31, 2001 to June 30, 2002, and the exercise of stock options of
$0.4 million. Partially offsetting these increases were the repurchase of
315,500 shares of the Company's common stock, which amounted to $7.1 million,
and the two quarterly cash dividends totaling $5.8 million.
The following table reflects the Company's capital ratios, as of June 30, 2002
and December 31, 2001 in accordance with current regulatory guidelines.
(Dollars in Thousands) June 30, 2002 December 31, 2001
------------------------- --------------------------
Amount Ratio Amount Ratio
------------- --------- -------------- ---------
Risk-Based Capital
Tier I Capital
Actual $193,148 12.18% $197,944 12.90%
- ------------------------------------------------
Regulatory Minimum Requirements 63,437 4.00 61,363 4.00
- ------------------------------------------------
For Classification as Well Capitalized 95,156 6.00 92,044 6.00
- ------------------------------------------------
Combined Tier I and Tier II Capital
Actual 208,199 13.13% 210,422 13.72%
- ------------------------------------------------
Regulatory Minimum Requirements 126,874 8.00 122,725 8.00
- ------------------------------------------------
For Classification as Well Capitalized 158,593 10.00 153,406 10.00
- ------------------------------------------------
Leverage
Actual 193,148 9.54% 197,944 10.29%
- ------------------------------------------------
Regulatory Minimum Requirements 80,943 4.00 76,957 4.00
- ------------------------------------------------
For Classification as Well Capitalized 101,179 5.00 96,196 5.00
- ------------------------------------------------
23
The Company's risk-based capital ratios (Tier I and Combined Tier I and Tier II
Capital) and Tier I leverage ratio continue to exceed the minimum requirements
set forth by the Company's regulators.
Liquidity Management
Liquidity management involves the Company's ability to maintain prudent amounts
of liquid assets in its portfolio in order to meet the borrowing needs and
deposit withdrawal requirements of customers and to support asset growth.
Current and future liquidity needs are reviewed by ALCO to determine the
appropriate asset/liability mix.
At June 30, 2002, the amount of liquid assets remained at a level Management
believed adequate to ensure that contractual liabilities, depositors' withdrawal
requirements, and other operational and customer credit needs could be
satisfied.* This liquidity was maintained at the same time the Company was
managing the interest rate sensitivity of interest earning assets and interest
bearing liabilities so as to improve profitability.
Asset liquidity is represented by the ease with which assets can be converted
into cash. This liquidity is provided by marketable equity securities and debt
securities with maturity dates of one year or less, which totaled $44.6 million
at June 30, 2002. Included within this figure are marketable equity securities
amounting to $14.0 million. Debt securities consist primarily of U.S. Treasury
notes and bonds, obligations of U.S. Government agencies, mortgage-backed
securities and obligations of states and political subdivisions. In addition,
all or part of the investment securities available for sale could be sold to
provide liquidity. These sources can be used to meet the funding needs during
periods of loan growth. Additional liquidity is derived from scheduled payments
of interest on loans and securities, scheduled loan payments of principal, as
well as prepayments of loans and securities.
Liquidity is also available through additional lines of credit and the ability
to incur additional debt. At June 30, 2002, the Company had $309.7 million of
lines of credit with the Federal Home Loan Bank and correspondent banks under
which $14.5 million was readily available. Additionally, at June 30, 2002, the
Company had $650.0 million of repurchase lines with investment brokers and FHLB,
of which $598.0 million was available contingent upon available collateral.
24
Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
MARKET RISK - ASSET/LIABILITY MANAGEMENT.
The primary market risk faced by the Company is interest rate risk. The
Company's Asset/Liability Committee ("ALCO") monitors the changes in the
movement of funds and rate and volume trends to enable appropriate management
response to changing market and rate conditions.
The Company's income simulation model analyzes interest rate sensitivity by
projecting net interest income over the next 24 months in a flat rate scenario
versus net interest income in alternative interest rate scenarios. Management
reviews and refines its interest rate risk management process in response to the
changing economic climate. The model incorporates management assumptions
regarding the level of interest rate or balance changes on non-maturity deposit
products, such as NOW, savings, money market and demand deposit accounts, for a
given level of market rate changes. These assumptions incorporate historical
analysis and future expected customer behavior patterns. Interest rate caps and
floors are included, if applicable. Changes in prepayment behaviors of
mortgage-based products for both loans and securities in each rate environment
are also captured. Additionally, the impact of planned growth and anticipated
new business activities are factored into the model.
As of June 30, 2002, the Company's earnings simulation model projects a 300
basis point upward change in rates during the first year and a 100 basis point
downward change in rates during the first year, both in even monthly increments,
with rates held constant in the second year. The Company's ALCO policy has
established that interest income sensitivity will be considered acceptable if
the change in net interest income in the above interest rate scenario is within
10% of net interest income from the flat rate scenario in the first year. At
June 30, 2002, the Company's income simulation model indicates an acceptable
level of interest rate risk and is materially consistent with the year-end
disclosure.*
Computation of prospective effects of hypothetical interest rate changes are
based on numerous assumptions, including relative levels of market interest
rates, loan prepayments and duration of deposits, and should not be relied upon
as indicative of actual results.
25
Part II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders
On or about March 28, 2002, the Company mailed to its shareholders a proxy
statement ("Proxy Statement") for the purpose of soliciting proxies for use at
its Annual Meeting of Shareholders. The proxies were solicited pursuant to
Regulation 14A under the Securities Exchange Act of 1934 and there were no
solicitations in opposition thereto.
At the Annual Meeting, held on May 7, 2002, the shareholders approved the
following proposals set forth in the Proxy Statement, by the votes indicated:
1. The merger of Vista Bancorp with and into United National Bancorp,
with United National Bancorp being the surviving corporation
pursuant to the Agreement and Plan of Merger dated as of November
19, 2001 as amended and it is approved.
Affirmative Votes: Authority to Vote Withheld:
----------------- --------------------------
9,749,747 82,381
2. Election of the five (5) directors nominated by the Company's Board
of Directors to serve until the expiration of their terms and
thereafter until their successors shall have been duly elected and
have been qualified.
------------------------------- --------------------- ---------------------------- ---------------------
Director Term Expiration Affirmative Votes Authority to Vote
Withheld
------------------------------- --------------------- ---------------------------- ---------------------
C. Douglas Cherry 2005 12,066,038 131,844
------------------------------- --------------------- ---------------------------- ---------------------
Thomas C. Gregor 2005 11,673,474 524,408
------------------------------- --------------------- ---------------------------- ---------------------
Patricia A. McKiernan 2005 12,150,194 47,688
------------------------------- --------------------- ---------------------------- ---------------------
David Walker 2005 12,151,626 46,256
------------------------------- --------------------- ---------------------------- ---------------------
George Wickard 2005 12,146,440 51,442
------------------------------- --------------------- ---------------------------- ---------------------
The following directors' terms of office continued after the meeting:
George W. Blank
William T. Kelleher, Jr.
John R. Kopicki
Antonia S. Marotta
John W. McGowen III
Charles N. Pond, Jr.
Paul K. Ross
Arlyn D. Rus
Ronald E. West
26
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
A Form 8-K was filed on June 7, 2002, under Item 5 "Other Events".
United's press release dated June 6, 2002, United National Bancorp statement
that UnitedTrust has placed a $21 million commercial credit facility to an
insurance premium financier on non-accrual, was included as an exhibit.
27
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.
UNITED NATIONAL BANCORP
-----------------------
(Registrant)
Dated: August 14, 2002 By: THOMAS C. GREGOR
----------------
Thomas C. Gregor
Chairman, President and CEO
Dated: August 14, 2002 By: ALFRED J. SOLES
---------------
Alfred J. Soles
Vice President & Treasurer
(Principal Financial Officer)
28