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8-K - UNION NATIONAL FINANCIAL CORP / PA | v201172_8k.htm |
Exhibit
99.1
PRESS
RELEASE
Union National Financial
Corporation Reports Third Quarter 2010 Operating Results
Lancaster, Pennsylvania, November 5,
2010. Union National Financial Corporation (OTCBB: UNNF), the
parent company of Union National Community Bank, reported net income available
to common stockholders of $77,000 for the third quarter of 2010 as compared to
net income available to common stockholders of $147,000 for the third quarter of
2009. Basic and diluted earnings per common share were $0.03 for the third
quarter of 2010 as compared to $0.05 for the third quarter of
2009. For the first nine months of 2010, Union National reported a
net loss available to common stockholders of ($959,000), as compared to a net
loss available to common stockholders of ($257,000) for the same period in
2009. Basic and diluted losses per common share were ($0.34) for the
first nine months of 2010, as compared to ($0.09) for the same period in
2009.
Net
interest income increased $905,000, or 10%, to $10,189,000 for the first nine
months of 2010, as compared to $9,284,000 for the same period in
2009. The taxable-equivalent net interest margin percentage improved
to 3.12% for the first nine months of 2010, as compared to 2.71% for same period
in 2009, as the cost of interest-bearing deposits decreased to 1.76% for the
first nine months of 2010, as compared to 2.40% for same period in
2009. For the third quarter of 2010, the taxable-equivalent net
interest margin was 3.39% as compared to 2.89% for the third quarter of
2009.
The
operating results for the first nine months of 2010 reflect impairment charges on investments and expenses associated with the previously
announced proposed merger with Donegal Financial Services Corporation (“DFSC”)
and certain affiliated entities of DFSC.
During
2010, Union National recorded $1,664,000 of additional impairment charges on the
remaining three private-issue debt securities in Union National’s investment
portfolio. These private-issue securities, which all have had
previous impairment charges recorded against them, have experienced declining
and below-investment grade ratings, with two of the securities being further
downgraded in July 2010. Union National sold two of the three
securities during the third quarter of 2010, and at September 30, 2010, Union
National’s investment portfolio included one remaining previously-impaired
security at a recorded fair value of $70,000. Realized net gains on
the sale of investment securities were $943,000 for the first nine months of
2010, partially offsetting the impact of the impairment charges.
Union
National incurred expenses of $773,000 for the first nine months of 2010 related
to its previously announced proposed merger with DFSC, pursuant to which Union
National will merge with and into DFSC. DFSC, the parent company of
Province Bank FSB, is wholly owned by Donegal Mutual Insurance Company and
Donegal Group Inc. In addition, Union National Community Bank will
merge with and into Province Bank FSB, and the merged bank will operate as a
federally chartered savings association under a mutually-agreed-upon new bank
name. On September 16, 2010, at a special meeting of Union National
shareholders, the proposed merger was approved by the shareholders with more
than 85% of the outstanding shares voting in favor of the
merger. Regulatory approval of the merger is pending and, subject to
the receipt of regulatory approval, the transaction is expected to close by
year-end.
The
provision for credit losses was $1,546,000 for the first nine months of 2010, as
compared to $1,446,000 for the same period in 2009. The allowance for credit
losses as a percentage of gross loans increased to 1.93% at September 30, 2010,
as compared to 1.73% at December 31, 2009, and 1.40% at September 30,
2009. Net charge-offs for the first nine months of 2010 were
$1,063,000 as compared to net charge-offs of $1,006,000 for the same period in
2009. The level of the allowance for credit losses reflects
continuing credit risk related to certain commercial credits that remain
stressed in the current economic environment. Management continues to
closely monitor the loan portfolio and the adequacy of the loan loss reserve by
regularly evaluating borrower financial performance, underlying collateral
values and other relevant factors.
During
the third quarter of 2010, Union National continued to deleverage its balance
sheet and reduce its high cost borrowings by prepaying $20,000,000 of FHLB debt,
incurring debt prepayment penalties of $384,000 which were included in
non-interest expense. The penalties will be more than offset by
future cumulative savings on interest expense that would have been incurred if
such FHLB debt was not paid until its scheduled maturity.
The
regulatory capital ratios of Union National Community Bank remain above
regulatory well-capitalized quantitative standards and exceed the
institution-specific minimum capital requirements established by Union National
Community Bank’s primary banking regulator, the Office of the Comptroller of the
Currency.
Mark
Gainer, Chairman, Chief Executive Officer and President, stated “With our
disciplined pricing of deposits and our deleveraging activities that have
continued through 2010, we have been able to substantially reduce our cost of
funds and increase our net interest margin at a time when yields on loans and
investments continue to be stressed. As we look forward to our
proposed merger with Donegal Financial Services Corporation, we have lessened
our debt burden while maintaining required capital levels and liquidity, and we
continue to pursue quality lending opportunities to creditworthy businesses and
families in the Lancaster County communities which we serve.”
Union
National Community Bank, a wholly-owned subsidiary of Union National Financial
Corporation, has been serving its communities since 1853. The bank
provides a full range of financial services for both retail and business
customers, and offers insurance, retirement plan services and wealth management
services through Union National Advisors. Union National Community
Bank has ten full-service offices in Lancaster County,
Pennsylvania.
Management
considers subsequent events occurring after the balance sheet date for matters
which may require adjustment to or disclosure in, the consolidated financial
statements. The review period for subsequent events extends up to and
including the date prior to the filing date of a public company’s consolidated
financial statements when filed with the Securities and Exchange Commission
(“SEC”). Accordingly, the financial information in this press release
is subject to change.
This
press release contains forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995. Actual results and trends of Union
National Financial Corporation (“Union National”) and Union National Community
Bank (the “Bank”) could differ materially from those set forth in such
statements due to various risks, uncertainties and other factors. Such risks,
uncertainties and other factors that could cause actual results and experience
to differ include, but are not limited to, the following: strategic initiatives
and business plans, including prospective business combinations, may not be
satisfactorily completed or executed, if at all; increased demand or prices for
the Bank’s financial services and products may not occur; changing economic and
competitive conditions; technological developments; the effectiveness of Union
National’s business strategy due to changes in current or future market
conditions; actions of the U.S. government, the Federal Reserve, the Office of
the Comptroller of the Currency (“OCC”) and other governmental and regulatory
bodies for the purpose of stabilizing the financial markets; enforcement actions
with bank regulatory agencies restricting certain transactions of Union National
and the Bank; effects of deterioration of economic conditions on customers,
specifically the effect on loan customers to repay loans; inability of Union
National to raise or achieve desired or required levels of regulatory capital;
paying significantly higher Federal Deposit Insurance Corporation (“FDIC”)
premiums in the future; the effects of competition, and of changes in laws and
regulations, including industry consolidation and development of competing
financial products and services; interest rate movements; relationships with
customers and employees; challenges in establishing and maintaining operations;
volatilities in the securities markets and related potential impairments of
investment securities; deteriorating economic conditions and declines in housing
prices and real estate values; and other risks and uncertainties, including
those detailed in Union National’s filings with the Securities and Exchange
Commission. When we use words such as “believes”, “expects”,
“anticipates”, or similar expressions, we are making forward-looking
statements. Union National undertakes no obligation to publicly
revise or update these forward-looking statements to reflect events or
circumstances that arise after the date of this report. This press
release should be read in conjunction with the audited financial statements
and notes thereto included in Union National’s Annual Report on Form 10-K for
the year ended December 31, 2009, and with Union National’s Forms 8-K, and other
reports, that were filed during 2010 with the SEC.
Consolidated
Financial Highlights
(Unaudited;
dollars in thousands, except per share data)
Income
Statement Data
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
||||||||||||||||||||||
2010
|
2009
|
%
Change
|
2010
|
2009
|
%
Change
|
|||||||||||||||||||
Interest
and Fees on Loans and Leases
|
$ | 5,013 | $ | 5,597 | (10 | )% | $ | 15,020 | $ | 16,478 | (9 | )% | ||||||||||||
Net
Interest Income
|
3,527 | 3,361 | 5 | 10,189 | 9,284 | 10 | ||||||||||||||||||
Provision
for Credit Losses
|
422 | 522 | (19 | ) | 1,546 | 1,446 | 7 | |||||||||||||||||
Non-Interest
Income (excluding investment activities)
|
1,135 | 1,200 | (5 | ) | 3,404 | 3,764 | (10 | ) | ||||||||||||||||
Non-Interest
Expense
|
4,731 | 4,167 | 14 | 13,037 | 12,661 | 3 | ||||||||||||||||||
Net
Income (Loss)
|
77 | 147 | (48 | ) | (924 | ) | (257 | ) | (260 | ) | ||||||||||||||
Preferred
Stock Dividends
|
─
|
─
|
─
|
35 |
─
|
100 | ||||||||||||||||||
Net
Income (Loss) Available to Common
Stockholders
|
77 | 147 | (48 | ) | (959 | ) | (257 | ) | (273 | ) | ||||||||||||||
Investment Securities
Activities:
|
||||||||||||||||||||||||
Investment
Securities – Net Realized Gains
|
577 | 397 | 45 | 943 | 1,791 | (47 | ) | |||||||||||||||||
Less: Impairment
Charges on Investment Securities
|
(104 | ) | (170 | ) | (39 | ) | (1,664 | ) | (1,471 | ) | 13 | |||||||||||||
Net
Investment Securities (Losses) Gains
|
473 | 227 | 108 | (721 | ) | 320 | (325 | ) | ||||||||||||||||
Per Common Share
Information:
|
||||||||||||||||||||||||
Earnings
(Loss) Per Common Share – Basic &
Diluted
|
$ | 0.03 | $ | 0.05 | (40 | ) % | $ | (0.34 | ) | $ | (0.09 | ) | (278 | )% | ||||||||||
Performance Ratios:
|
||||||||||||||||||||||||
Net
Interest Margin % (Taxable-Equivalent)
|
3.39 | % | 2.89 | % | 16 | % | 3.14 | % | 2.71 | % | 16 | % | ||||||||||||
Return
on Average Stockholders’ Equity
|
0.99 | 1.88 | (47 | ) | (3.85 | ) | (1.09 | ) | (253 | ) |
Balance
Sheet Data
|
Unaudited
as of
|
Audited
(1) as of
|
Unaudited
as of
|
|||||||||
Sept.
30, 2010
|
Dec.
31, 2009
|
Sept.
30, 2009
|
||||||||||
Cash
and Cash Equivalents
|
$ | 49,696 | $ | 43,340 | $ | 54,039 | ||||||
Total
Loans and Leases
|
329,239 | 339,274 | 342,506 | |||||||||
Allowance
for Credit Losses
|
(6,341 | ) | (5,858 | ) | (4,798 | ) | ||||||
Total
Assets
|
468,072 | 489,644 | 500,701 | |||||||||
Total
Deposits
|
397,545 | 404,765 | 414,962 | |||||||||
Total
Stockholders’ Equity
|
30,745 | 31,336 | 31,558 | |||||||||
Per Share Information:
|
||||||||||||
Book
Value Per Common Share
|
$ | 10.06 | $ | 10.97 | $ | 11.27 | ||||||
Dilutive
Book Value Per Common Share
|
$ | 10.05 | $ | 10.24 | $ | 10.83 | ||||||
Balance Sheet Ratios:
|
||||||||||||
Nonperforming
Loans and Leases as a
% of Total Loans and Leases
|
1.91 | % | 2.52 | % | 1.98 | % | ||||||
Total
Stockholders’ Equity as a %
of Total Assets
|
6.57 | % | 6.40 | % | 6.30 | % |
(1) Derived
from audited financial statements; does not include footnote
disclosures.
Regulatory
Capital Measures for Union National Community Bank
|
Sept.
30, 2010
|
December
31,
2009
|
Sept.
30,
2009
|
Regulatory
Standard for Well Capitalized
|
OCC
Individual Minimum Capital Requirement
|
|||||||||||||||
Tier
1 (Leverage) Capital
|
8.44 | % | 8.31 | % | 8.19 | % | 5.00 | % | 8.00 | % | ||||||||||
Tier
1 Risk-Based Capital
|
10.51 | 9.69 | 9.80 | 6.00 | 9.50 | |||||||||||||||
Total
Risk-Based Capital
|
13.33 | 12.37 | 12.35 | 10.00 | 12.00 |
For
further information, please contact:
|
Mark
D. Gainer, Chairman, CEO and President
|
Union
National Financial Corporation
|
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570
Lausch Lane, Suite 300
|
|
Lancaster,
PA 17601
|
|
(717)
519-8630
|