SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission File Number: 000-16931
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
(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 November 3, 1998, there were 11,087,382 shares of common stock,
$1.25 par value, outstanding.
This Form 10-Q/A is being filed to correct a date in the second paragraph under
the caption "YEAR 2000 Issues" in Management's Discussion and Analysis. The
target date for the renovation phase has been corrected to read December 31,
1998, rather than October 31, 1998.
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
September 30, 1998 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 nine months ended September
30, 1998 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; changes in legal and 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 and Nine Months Ended September 30, 1998 and September 30, 1997.
OVERVIEW
The Company realized net income of $2,561,000 for the third quarter of 1998, as
compared to $4,074,000 reported for the same period in 1997. During the third
quarter of 1998, the Company recorded a merger-related charge (the "1998 Merger
Charge") of $1,694,000, net of taxes, or $0.15 per diluted share in connection
with the acquisition of the State Bank of South Orange ("SBSO"). Earnings per
diluted share were $0.23 for the third quarter of 1998 as compared to $0.36 for
the third quarter of 1997. Excluding the 1998 Merger Charge, earnings for the
third quarter of 1998 were $4,255,000 compared to the $4,074,000 for the third
quarter of 1997.
The increase in earnings for the three months ended September 30, 1998, compared
to 1997 (before the 1998 Merger Charge), was the result of an increase in net
interest income and non-interest income, combined with a reduction in the
provision for possible loan losses. These increases were offset in part by an
increase in non-interest expenses.
For the nine months ended September 30, 1998, net income was $10,445,000, as
compared to $9,853,000 for the same period last year. Earnings per diluted share
were $0.93 and $0.88, respectively. During the first quarter of 1997, the
Company recorded a merger-related charge (the "1997 Merger Charge") of
$1,072,000, net of taxes, in connection with the acquisition of Farrington Bank
("Farrington"). In the second quarter of 1997, the Company recorded a loss on
the then pending sale of its former operations center (the "Operations Center
Loss") of $326,000, net of taxes. Excluding the 1998 Merger Charge, the 1997
Merger Charge and the Operations Center Loss (together defined as "One-Time
Charges"), earnings for the nine months ended September 30, 1998 were
$12,139,000, compared to the $11,251,000 for the nine months ended September 30,
1997.
8
EARNINGS ANALYSIS
Interest Income
Interest income for the quarter ended September 30, 1998 represented a
$1,357,000 or 5.5% increase from the $24,590,000 reported for the same period in
1997. This was attributable to increases in interest and dividends on securities
of $883,000 and interest and fees on loans of $472,000. Interest on federal
funds sold and deposits with Federal Home Loan Bank ("FHLB") increased by
$2,000. The yield on average interest earning assets on a fully taxable
equivalent basis decreased 27 basis points from 8.08% for the third quarter of
1997 to 7.81% for the third quarter of 1998. The increase in interest income was
primarily attributable to a $124,458,000 increase in average interest earning
assets, offset in part by the 27 basis point decrease in the yield on earning
assets. During the second and third quarters of 1997, the Company developed and
implemented a strategy to increase earning assets, effectively leveraging its
capital and improving net interest income, by the purchase of $150 million of
additional investment securities funded through advances and repurchase
agreements (the "Growth Strategy"). During the first nine months of 1998, the
Company purchased an additional $50 million of investments pursuant to the
Growth Strategy.
For the nine months ended September 30, 1998, interest income increased
$8,430,000 or 12.3%, to $76,856,000 from the $68,426,000 reported for the same
period in 1997. This was attributable to increases in interest and dividends on
securities of $6,689,000 and interest and fees on loans of $1,787,000 offset in
part by a decline of $46,000 in interest on Federal funds sold and deposits with
Federal Home Loan Bank. The increase in interest income was primarily the result
of a $173,678,000 increase in average interest earning assets. This was offset
in part by a decrease in the yield on average earning assets from 8.18% for the
nine months ended September 30, 1997 to 7.99% for the comparable period in 1998.
Interest Expense
The Company's interest expense for the third quarter of 1998 increased
$1,309,000, or 12.5%, to $11,816,000 from $10,507,000 for the same period last
year, as a result of the Growth Strategy, increased average deposits and the
movement of deposits from lower rate savings accounts to higher rate time
deposits. Specifically, interest on other borrowings increased $652,000,
interest on short-term borrowings increased $497,000, and interest on savings
and time deposits rose $160,000. The Company's average cost of funds increased
from 4.12% for the third quarter of 1997 to 4.22% for the third quarter of 1998.
Average interest bearing liabilities increased by $119,070,000 from the third
quarter of 1997 to the same period in 1998.
For the nine months ended September 30, 1998, interest expense increased by
$6,380,000, or 23.1% over the same period in 1997. Interest expense on other
borrowings increased $3,741,000, interest expense on short-term borrowings
increased by $1,522,000, and interest on savings and time deposits increased by
$1,117,000.
Net Interest Income
The net effect of the changes in interest income and interest expense for the
third quarter of 1998 was an increase of $48,000 or 0.3% in net interest income
as compared to the third quarter of 1997. The net interest margin and net
interest spread, on a fully taxable equivalent basis, decreased 28 basis points
and 37 basis points, respectively, from the same period last year.
Net interest income for the nine months ended September 30, 1998, increased
$2,050,000 or 5.0% over the same period last year. The net interest margin and
the net interest spread both decreased 41 basis points from the same period last
year.
9
Provision for Possible Loan Losses
For the three months ended September 30, 1998, the provision for possible loan
losses was $373,000, compared to $948,000 for the same period last year. The
provision for possible loan losses was $2,169,000 for the nine months ended
September 30, 1998, as compared to $2,844,000 for the same period last year. The
amount of the loan loss provision and the level of the allowance for possible
loan losses are based upon a number of factors including Management's evaluation
of potential losses in the portfolio, after consideration of appraised
collateral values, financial condition and past credit history of the borrowers
as well as prevailing and anticipated economic conditions.
In the opinion of Management, the allowance for possible loan losses at
September 30, 1998 was adequate to absorb possible future losses on existing
loans and commitments that are currently inherent in the loan portfolio.* At
September 30, 1998, the ratio of the allowance for possible loan losses to
non-performing loans was 109.44% as compared to 84.01% at September 30, 1997.
Non-Interest Income
For the third quarter of 1998, compared to the third quarter of 1997, total
non-interest income increased $323,000 or 6.4%, due primarily to increases of
$237,000 in trust income and $87,000 of increases in other service charges,
commissions and fees. These increases were partly offset by $76,000 in decreases
in other income and $51,000 of decreases in service charges on deposit accounts.
The increase in other service charges, commissions and fees was the result of
fees on additional services implemented during the past year and a higher volume
of credit card annual fees, offset in part by lower volume of credit card
application fees. The decrease in other income is the result of lower gains on
sales of loans guaranteed by the Small Business Administration ("SBA"), partly
offset by income from the Company's investment in corporate owned life
insurance. In addition, there were increases of $126,000 in net gains from
securities transactions.
For the nine months ended September 30, 1998, non-interest income increased
$1,477,000 from the same period in 1997, due primarily to increases of $712,000
in trust income, $343,000 in other income and $259,000 in other service charges,
commissions and fees. In addition, there were increases of $174,000 in net gains
from securities transactions. Conversely, service charges on deposit accounts
declined by $11,000. The increases for the nine-month period were due to the
same factors that caused the quarterly increases.
Non-Interest Expense
For the quarter ended September 30, 1998, non-interest expense increased
$3,271,000 or 27.1% from the same period last year. Included in the third
quarter of 1998 was the 1998 Merger Charge of $2,179,000, pre-tax. Excluding
this charge, non-interest expense increased $1,092,000 or 9.1% from 1997 to
1998. Salaries and employee benefits increased $202,000; salaries increased by
$168,000 and employee benefits decreased $34,000. The increase in salary and
benefit expense was due to additional employees hired for new branches opened
during 1998 and the latter part of 1997, offset in part by lower retirement
benefits cost and lower hospitalization benefit costs. Occupancy expense
increased $174,000, or 21.5%, as the increased cost of the new branches more
than offset the elimination of costs associated with the former operations
center sold in the third quarter of 1997. Furniture and equipment expense
increased $104,000, or 12.8% as a result of the upgrading of the corporate-wide
personal computer network in mid-1997. Data processing expense increased
$591,000, or 44.8% as a result of increased volume of items processed through
United Financial Services, Inc. ("United Financial") as well as increased credit
card processing. United Financial, a data processing joint venture, is 50% owned
by the Company. Distributions on the trust capital securities, issued in March
1997, at an annual rate of 10.01%,
10
amounted to $501,000, the same as the prior year. Other expenses, net costs to
operate other real estate and amortization of intangible assets increased
$21,000.
For the nine months ended September 30, 1998, non-interest expense increased
$3,991,000, or 10.7% from the same period last year. Included in 1998 was the
pre-tax 1998 Merger Charge of $2,179,000. In addition, included in 1997 were the
pre-tax 1997 Merger Charge of $1,665,000 in the first quarter and the Operations
Center Loss of $543,000 in the second quarter. Excluding these One-Time Charges,
non-interest expense increased $4,020,000, or 11.4% from 1997 to 1998. Salaries
and employee benefits increased $316,000, or 2.0% as salaries and wages
increased $764,000 and employee benefits decreased by $448,000. Occupancy
expense increased $199,000. Furniture and equipment expense increased $481,000
or 21.4%. These increases for the nine-month period were due to the same factors
that caused the quarterly increases. Data processing expense increased
$1,966,000, or 53.2% over the same period in 1997 as a result of higher
processing volumes. The increase in cash distributions on the trust capital
securities of $445,000 resulted from their placement in March 1997. Other
expenses, including amortization of intangible assets, increased $613,000
primarily as a result of additional marketing, postage and telephone expenses
incurred for credit card marketing, along with increases in local marketing
expenses, legal and professional fees, offset in part by decreased costs to
operate other real estate.
Income Taxes
Income tax expense decreased $812,000 to $1,234,000 for the third quarter of
1998 as compared to $2,046,000 for the same period in 1997. For the nine months
ended September 30, 1998, income tax expense decreased $381,000 when compared to
the prior year. The decrease in income taxes was the result of lower taxable
income than the prior year.
YEAR 2000 Issues
The Year 2000 issue involves preparing computer systems and programs to identify
the arrival of January 1, 2000. In the past, many computer programs allocated
only two digits to a year, (ie. 1998 was represented as 98). Given this
programming, the year 2000 could be confused with that of 1900. The Year 2000
issue not only impacts computer hardware and software, but all equipment which
utilizes processors or computer microchips.
Management has initiated a program to assess the Company's computer systems,
applications and third-party vendors for year 2000 compliance. Management has
formed a Year 2000 Committee with members from all significant areas of the
Company, which has conducted a review of its operations to identify systems,
vendors and customers that could be affected by the year 2000 issue. The
committee has developed an implementation plan (the "Plan") to rectify any
issues related to processing of transactions in the year 2000 and beyond. As
recommended by the Federal Financial Institutions Examination Council, the Plan
encompasses the following phases: awareness, assessment, renovation, validation
and implementation. These phases are designed to enable the Company to identify
risks, develop an action plan, perform adequate testing and complete
certification that its processing systems will be Year 2000 ready. Execution of
the Plan is currently believed to be on target. The Company is currently in the
renovation phase, which includes code enhancements, program changes, hardware
and software upgrades and system replacements, as necessary. Concurrently the
Company is also addressing certain issues related to the validation and
implementation Phases. The primary operating software for the Company is
obtained from, and maintained by, an external provider of software (the
"External Provider"). The Company has maintained ongoing contact with this
vendor who has provided written assurance that the software is Year 2000
compliant. The Company is also in process of obtaining certifications of Year
2000 compliance from its vendors. In the event the Company is unable to obtain
such certifications, the Company will obtain Year 2000 compliant software,
hardware and support services as appropriate. Each
11
of the vendors whose products or services are believed by management to be
material to the Company has either provided written assurance that it is Year
2000 compliant or has provided written assurance that it expects to be Year 2000
compliant prior to the Year 2000. The Company is also working with its
significant borrowers and depositors to ensure they are taking appropriate steps
to become Year 2000 compliant. In addition, the Company is in process of
contacting all non-information technology suppliers (i.e., utility systems,
telephone systems and security systems) regarding their Year 2000 state of
readiness. The renovation phase is targeted for completion by December 31,
1998*. The validation phase involves testing of changes to hardware and
software, accompanied by monitoring and testing with vendors. The validation
phase is targeted for completion by March 31, 1999*. The implementation phase's
purpose is to certify that systems are compliant on a going-forward basis. This
phase is targeted for completion by June 30, 1999*.
The Company, however, continues to bear some risk related to the Year 2000 issue
and could be adversely affected if other entities (e.g., vendors) do not
appropriately address their own compliance issues. If during the validation
phase the External Provider's software is determined to have potential problems
which it is not able to resolve in time, the Company would likely experience
significant processing delays, mistakes or failures. These delays, mistakes or
failures could have a significant adverse impact on the financial statements of
the Company. In addition if any of the Bank's borrowers experiences significant
problems due to Year 2000 issues, the credit risk inherent in loans to such
borrowers would increase.
The Company continues to evaluate the estimated costs associated with attaining
Year 2000 readiness. Additional costs, such as testing, software purchases and
marketing, are not anticipated to be material to the Company in any one year*.
In total, the Company estimates that its cost for compliance will amount to
approximately $850,000 over the two year period from 1998-1999, of which
approximately $350,000 has been incurred to date. The Company expects to fund
these costs out of normal operating cash. While additional costs will be
incurred, the Company believes, based upon available information, that it will
be able to manage its Year 2000 transition without any significant adverse
effect on business operations or financial condition.*
The Company has completed a remediation contingency plan for Year 2000
compliance for its mission critical applications. The remediation contingency
plan outlines the actions to be taken if the current approach to remediating
mission critical applications does not appear to be able to deliver a Year 2000
compliant system when required. Predetermined target dates have been established
for all mission critical applications. If testing of the mission critical
application is not completed by the target date then alternative actions would
be taken as outlined in the remediation contingency plan. In addition, the
Company also has a comprehensive business resumption plan to facilitate timely
restoration of services in the event of business disruption. The Company's
remediation contingency plan and business resumption plan will be reviewed and
updated as needed throughout 1998 and 1999. The Company is in process of
preparing a contingency plan for all other hardware, software, vendors and
customers, which is targeted for completion by December 31, 1998*.
12
FINANCIAL CONDITION
September 30, 1998 as compared to December 31, 1997.
Total assets increased $133,334,000 or 9.6% from December 31, 1997. Loans, net
of allowance for possible loan losses, increased $46,576,000. Securities
increased by $38,032,000 as the Company utilized $50 million of advances and
repurchase agreements to fund the growth in the investment portfolio, which in
turn increased net interest income. The $50 million of investments purchased
through the Growth Strategy were partly offset by investments called or matured
in the first quarter. In addition, there were increases in Federal funds sold of
$48,400,000, premises and equipment of $669,000, cash and due from banks of
$890,000 and other assets of $965,000. Conversely, there were decreases of
$996,000 in other real estate and $1,202,000 in intangible assets.
Total loans at September 30, 1998 increased $45,501,000 to $709,067,000 from
year-end 1997. Commercial loans increased $43,422,000 or 26.2% to $209,261,000
at September 30, 1998. The residential and commercial real estate loan
portfolios increased by $23,940,000 or 7.7% from $309,939,000 at December 31,
1997 to $333,879,000 at September 30, 1998. In addition, the credit card
portfolio increased $2,417,000 or 7.3% from December 31, 1997 to $35,557,000 at
September 30, 1998. Partly offsetting these increases, personal loans decreased
$24,278,000 or 15.7% from December 31, 1997 to $130,370,000 at September 30,
1998, as a result of loan payments on the indirect automobile loan portfolio
exceeding new loan growth.The following schedule presents the components of
loans, by type, net of unearned income, for each period presented.
September 30, December 31,
(In Thousands) 1998 1997
------------- ------------
Commercial $209,261 $165,839
Real Estate 333,879 309,939
Personal Loans 130,370 154,648
Credit Card Loans 35,557 33,140
------------- ------------
Loans, Net of Unearned Income $709,067 $663,566
============= ============
Total securities at September 30, 1998 increased $38,032,000 or 6.3% to
$637,561,000 from year-end 1997. Within the securities portfolio, the majority
of the increase occurred in the mortgage-backed securities, which increased
$73,318,000. In addition, obligations of states and political subdivisions
increased by $15,580,000. Trading account securities declined by $178,000, while
Corporate debt securities (trust preferred issues of other banks) increased
$6,201,000. U.S. government agencies and corporations declined by $39,005,000.
Other securities, consisting of money market mutual funds and stock in Federal
Reserve Bank and Federal Home Loan Bank decreased by $12,915,000. U.S. Treasury
securities decreased by $4,969,000.
13
The amortized cost and approximate market value of securities are summarized as
follows (in thousands):
September 30, 1998 December 31, 1997
------------------------- -------------------------
Amortized Market Amortized Market
Securities Available for Sale Cost Value Cost Value
- -------------------------------- ----------- ------------ ------------ ----------
U.S. Treasury Securities $ 4,997 $ 5,005 $ 11,977 $ 11,982
Obligations of U.S. Government
Agencies and Corporations 61,706 62,875 92,384 92,914
Obligations of States and
Political Subdivisions 62,565 64,577 55,632 56,887
Mortgage-Backed Securities 382,027 387,316 310,998 313,081
Corporate Debt Securities 19,344 20,121 13,496 13,920
Other Securities 46,045 51,276 59,974 64,216
----------- ----------- ---------- -----------
Total Securities Available For Sale 576,684 591,170 544,461 553,000
----------- ----------- ---------- -----------
Securities Held to Maturity
- -------------------------------
U.S. Treasury Securities 2,998 3,020 990 995
Obligations of U.S. Government
Agencies and Corporations 18,987 19,046 27,953 27,936
Obligations of States and
Political Subdivisions 19,602 19,820 11,712 11,798
Mortgage-Backed Securities 3,611 3,621 4,528 4,506
Other Securities 150 156 125 129
----------- ----------- --------- -----------
Total Securities Held to Maturity 45,348 45,663 45,308 45,364
----------- ----------- --------- -----------
Trading Securities 675 1,043 581 1,221
- ------------------------------- ----------- ----------- --------- -----------
Total Securities $622,707 $637,876 $590,350 $599,585
=========== =========== ========= ===========
Total deposits increased $68,911,000 or 6.5%. Time deposits increased by
$45,925,000, and demand deposits increased $24,068,000, while savings deposits
decreased by $1,082,000. Short-term borrowings increased by $24,783,000 and
other borrowings increased by $26,976,000, as the Bank continued to utilize
Growth Strategies to increase the investment portfolio. Management continues to
monitor the shift of deposits and level of borrowings through its
Asset/Liability Management Committee.
14
Asset Quality
At September 30, 1998, non-performing loans decreased $934,000 as compared to
June 30, 1998 and $2,198,000 as compared to December 31, 1997. Of the decrease
in non-performing loans from June 30, 1998, $863,000 was in the real estate loan
portfolio and $561,000 was in the commercial loan portfolio. This was partly
offset by an increase of $490,000 in the personal loan portfolio. The Loan
Review Department reviews the large credits in the performing loan portfolio, as
well as the non-performing loans on a regular basis.
September 30, June 30, March 31, December 31, September 30,
Dollars in Thousands) 1998 1998 1998 1997 1997
-------------- ------------ ----------- ------------- -------------
Total Assets $1,516,710 $1,450,952 $1,420,286 $1,383,376 $1,346,179
Total Loans (Net of $ 709,067 $ 704,382 $ 659,987 $ 663,566 $ 663,525
Unearned Income)
Allowance for Possible $ 7,359 $ 7,916 $ 7,891 $ 8,434 $ 8,515
Loan Losses
% of Total Loans 1.04 % 1.12 % 1.20 % 1.27 % 1.28 %
Total Non-Performing $ 6,724 $ 7,658 $ 8,598 $ 8,922 $ 10,136
Loans (1)
% of Total Assets 0.44 % 0.53 % 0.61 % 0.64 % 0.75 %
% of Total Loans 0.95 % 1.09 % 1.30 % 1.34 % 1.53 %
Allowance for Possible
Loan Losses
to Non-Performing Loans 109.44 % 103.37 % 91.78 % 94.53 % 84.01 %
Total of Non-Performing $ 7,221 $ 9,130 $ 10,262 $ 10,559 $ 11,855
Assets
% of Total Assets 0.48 % 0.63 % 0.72 % 0.76 % 0.88 %
% of Loans, Other Real
Estate Owned and
Other Assets Owned 1.02 % 1.29 % 1.55 % 1.59 % 1.78 %
(1) Non-performing loans consist of:
(a) impaired loans, which includes non-accrual and renegotiated loans, and
(b)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.
15
Allowance for Possible Loan Losses
The allowance for possible loan losses is maintained at a level considered
adequate to provide for potential loan losses.* The level of the allowance is
based on Management's evaluation of potential losses in the portfolio, after
consideration of risk characteristics of the loans and prevailing and
anticipated economic conditions. The allowance is increased by provisions
charged to expense and reduced by charge-offs, net of recoveries.
At September 30, 1998, the allowance for possible loan losses was $7,359,000,
down 12.7% from the $8,434,000 at year-end 1997. Net charge-offs for the three
months and nine months ended September 30, 1998 were $930,000 and $3,244,000,
respectively.
Liquidity Management
At September 30, 1998, the amount of liquid assets remained at a level
Management deemed 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.
At September 30, 1998, liquid investments, comprised of Federal funds sold and
money market mutual fund instruments, totaled $87,401,000. Additional liquidity
is generated from maturities and principal payments in the investment portfolio.
Scheduled maturities and anticipated principal payments of the investment
portfolio will approximate $119,953,000 throughout the next twelve months.* 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. Liquidity is also available through additional
lines of credit and the ability to incur additional debt. At September 30, 1998,
there were $260 million of short-term lines of credit, of which $178 million was
available. In addition, the Bank has $73.2 million available on established
lines of credit, which are currently unused, with the Federal Reserve Bank and
the FHLB of New York at September 30, 1998, which further support and enhance
liquidity.
Capital
Total stockholders' equity increased $9,771,000 to $126,398,000 at September 30,
1998 from the $116,627,000 recorded at the end of 1997. The increase was due to
net income of $10,445,000, an increase in net unrealized gains on securities
available for sale of $3,928,000, exercises of stock options of $144,000 and
restricted stock activity of $74,000. These increases were offset in part by
cash dividends declared of $4,820,000.
16
The following table reflects the Company's capital ratios, as of September 30,
1998 and December 31, 1997, and have been presented in accordance with current
regulatory guidelines.
(Dollars in Thousands) September 30, 1998 December 31, 1997
---------------------- ---------------------
Amount Ratio Amount Ratio
---------- ---------- ---------- ---------
Risk-Based Capital
Tier I Capital
Actual $126,954 14.11 % $120,357 14.62 %
Regulatory Minimum
Requirements 35,992 4.00 32,937 4.00
For Classification as
Well Capitalized 53,988 6.00 49,905 6.00
Combined Tier I and
Tier II Capital
Actual 134,313 14.93 128,691 15.63
Regulatory Minimum
Requirements 71,984 8.00 65,873 8.00
For Classification as
Well Capitalized 89,981 10.00 82,341 10.00
Leverage
Actual 126,954 8.75 120,357 8.93
Regulatory Minimum
Requirements 58,045 4.00 53,931 4.00
For Classification as
Well Capitalized 72,557 5.00 67,413 5.00
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. The Tier I ratio and the combined Tier I
and Tier II ratios both decreased from 14.62% to 14.11% and from 15.63% to
14.93%, respectively. The Tier I leverage ratio decreased from 8.93% at December
31, 1997 to 8.75% at September 30, 1998. The Company's asset growth during the
nine months ended September 30, 1998 resulted in the decrease in the risk-based
and leverage capital ratios.
17
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: December 17, 1998 By: /s/Thomas C. Gregor
---------------------------
Thomas C. Gregor, Chairman
President and CEO
Dated: December 17, 1998 By: /s/Donald W. Malwitz
----------------------------
Donald W. Malwitz
Vice President & Treasurer
(Principal Financial Officer)
21