UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 31, 2003
UNITED FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
MINNESOTA
(State or other jurisdiction of incorporation)
0-28080 81-0507591
(Commission File Number) (IRS Employer Identification No.)
P. O. BOX 2779, 120 FIRST AVENUE NORTH,
GREAT FALLS, MONTANA 59403
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (406) 727-6106
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 31, 2003, United Financial Corp. ("the Company") completed the
sale of its majority-owned subsidiary Valley Bancorp, Inc. ("Valley"), pursuant
to a Merger Agreement dated May 22, 2003 (the "Merger Agreement"), as a result
of which Valley became a wholly-owned subsidiary of Marquette Financial
Companies ("Marquette"). At the time of the sale, and taking into account stock
options which were exercised immediately prior to the closing, the Company owned
approximately 62% of Valley's issued and outstanding capital stock. As provided
in the Merger Agreement, the net purchase price paid by Marquette for all Valley
capital stock outstanding was approximately $14.6 million.
For accounting purposes, in our historical financial statements for
2002 as reported in our 2002 Annual Report on Form 10-K, we have presented
consolidated financial statements with Valley as a 65% majority-owned
subsidiary. Likewise, historical consolidated financial statements including
Valley were presented in our Form 10-Q for June 30, 2003.
For purposes of presenting our pro forma financial statements in this
Form 8-K, we have presented the historical statement of financial condition as
of June 30, 2003 as presented in the Form 10-Q. We then presented a separate
column for Valley balances which were consolidated. We then adjusted the
resulting balances to include the approximately $9.0 million in net proceeds
received from the Valley sale. We recorded a gain, reflected as a credit to
retained earnings, of approximately $700,000. This gain represents approximately
$9.0 million in net proceeds realized from the sale less our investment in
Valley stock, and less applicable income tax provision and legal fees.
For further information on this sale, see Exhibit 2.1 herein, which is
the Merger Agreement incorporated by reference from our Form 8-K dated May 23,
2003 and Exhibit 99.1 herein, which is a press release incorporated by reference
from our Form 8-K dated August 1, 2003.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Unaudited pro forma financial information:
1. Pro forma statements of financial condition as of
June 30, 2003
2. Pro forma statements of income for the six months
ended June 30, 2003
3. Pro forma statements of income for the twelve months
ended December 30, 2002
4. Notes to unaudited pro forma financial information
We included the Merger Agreement as an exhibit on our current report on
Form 8-K filed with the Securities and Exchange Commission ("SEC") on May 23,
2003, announcing the signing of the Merger Agreement. We disclosed our
completion of the sale of Valley on our current report on Form 8-K filed with
the SEC on August 1, 2003.
The following unaudited pro forma financial information illustrates the
effects of the Valley sale on our financial position, as if the sale had
occurred as of June 30, 2003. The pro forma statements of income illustrate
1
the effect of the Valley sale on our results of operations as if the sale had
occurred on the first day of the period presented.
NONE OF THE PRO FORMA FINANCIAL INFORMATION INCLUDES ANY INCOME WE
MIGHT HAVE EARNED ON THE NET PROCEEDS.
The unaudited pro forma financial information is presented for
illustrative purposes only and does not purport to (i) represent what our
financial position or results of operations would have been had the disposition
in fact occurred on the date indicated, or (ii) project our financial position
or results of operations for any future period or date. The pro forma
adjustments are based on available information that we believe is reasonable
under the circumstances.
The following unaudited pro forma financial information should be read
in conjunction with our audited consolidated financial statements for the year
ended December 31, 2002, including footnotes, as contained in our Annual Report
on Form 10-K filed with the SEC on March 28, 2003.
2
UNITED FINANCIAL CORP.
PRO FORMA STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
PRO FORMA
UNITED
VALLEY PRO FORMA FINANCIAL
CONSOLIDATED BANCORP, INC ADJUSTMENTS CORP.
------------ -------------- ----------- -----------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2003 2003 2003 2003
------------ -------------- ----------- -----------
ASSETS
Cash and cash equivalents $ 30,354 $(11,719) $ 9,012 $ 27,647
Securities available-for-sale 57,498 (16,129) -- 41,369
Restricted stock, at cost 4,441 (423) -- 4,018
Loans held for sale 20,822 (2,428) -- 18,394
Loans receivable, net 255,285 (36,655) -- 218,630
Accrued interest receivable 2,483 (349) -- 2,134
Premises and equipment, net 7,652 (916) -- 6,736
Real estate and other personal property owned 562 -- -- 562
Goodwill, net of accumulated amortization 3,429 -- (2,007) 1,422
Other assets 1,147 (94) (7) 1,046
--------- -------- ------- --------
$ 383,673 $(68,713) $ 6,998 $321,958
========= ======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand, NOW and money market demand accounts $ 121,552 $(41,367) $ -- $ 80,185
Savings deposits 53,766 (639) -- 53,127
Time deposits 124,278 (14,809) -- 109,469
--------- -------- ------- --------
299,596 (56,815) -- 242,781
Federal Home Loan Bank advances 34,000 (3,000) -- 31,000
Securities sold under agreements to repurchase 9,409 -- -- 9,409
Accrued interest payable 1,460 (62) -- 1,398
Advances from borrowers for taxes and insurance 103 -- -- 103
Income taxes payable 197 (114) 575 658
Deferred income taxes, net 54 136 125 315
Trust preferred securities 3,000 -- -- 3,000
Other liabilities 1,166 (158) 6 1,014
--------- -------- ------- --------
348,985 (60,013) 706 288,678
MINORITY INTEREST 3,017 -- (3,017) --
Stockholders' equity:
Preferred stock, no par value; authorized
2,000,000 shares; no shares issued and outstanding -- -- -- --
Common stock, no par value; authorized
8,000,000 shares; 2,441,669 and 2,439,225
shares issued and outstanding at June 30,2003 and
December 31, 2002, respectively 27,203 (172) 172 27,203
Retained earnings, substantially restricted 3,741 (644) 1,367 4,464
Paid in capital -- (7,710) 7,710 --
Unrealized gain on securities available-for-
sale 727 (174) 60 613
--------- -------- ------- --------
31,671 (8,700) 9,309 32,280
--------- -------- ------- --------
$ 383,673 $(68,713) $ 6,998 $321,958
========= ======== ======= ========
Equity/Assets 8.25% 12.66% 10.24%
Book Value/Share $12.97 $5.05 $13.51
Shares Outstanding 2,442 1,723 2,442
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
3
UNITED FINANCIAL CORP.
PRO FORMA STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
SIX MONTHS ENDED JUNE 30, 2003
PRO FORMA
VALLEY UNITED
BANCORP, PRO FORMA FINANCIAL
CONSOLIDATED INC. ADJUSTMENTS CORP.
------------ -------- ----------- ---------
INTEREST INCOME:
Loans receivable $ 9,125 $ (1,383) $ -- $ 7,742
Mortgage-backed securities 987 (290) -- 697
Other investment securities 342 (96) -- 246
Other interest earning assets 197 (34) -- 163
-------- -------- -------- --------
Total interest income 10,651 (1,803) -- 8,848
INTEREST EXPENSE:
Deposits 2,769 (418) -- 2,351
Other borrowings 936 (59) -- 877
-------- -------- -------- --------
Total interest expense 3,705 (477) -- 3,228
-------- -------- -------- --------
Net interest income 6,946 (1,326) -- 5,620
Provision for loan losses 625 (50) -- 575
-------- -------- -------- --------
Net interest income after provision for
loan losses 6,321 (1,276) -- 5,045
NON-INTEREST INCOME:
Gain on sale of loans 3,117 (176) -- 2,941
Service charges and fees 604 (84) -- 520
Gain on sale of securities 18 -- -- 18
Other 96 (11) -- 85
-------- -------- -------- --------
Total non-interest income 3,835 (271) -- 3,564
NON-INTEREST EXPENSE:
Compensation and benefits 3,975 (647) -- 3,328
Occupancy and equipment 826 (226) -- 600
Data processing fees 438 (91) -- 347
Other 1,366 (173) -- 1,193
-------- -------- -------- --------
Total non-interest expense 6,605 (1,137) -- 5,468
-------- -------- -------- --------
Income before income taxes and minority
interest 3,551 (410) -- 3,141
Provision for income taxes 1,336 (153) -- 1,183
-------- -------- -------- --------
Income before minority interest 2,215 (257) -- 1,958
Minority interest (89) -- 89 --
-------- -------- -------- --------
Net income $ 2,126 $ (257) $ 89 $ 1,958
======== ======== ======== ========
Basic earnings per share $ .87 $ .15 $ .80
======== ======== ========
Diluted earnings per share $ .85 $ .15 $ .79
======== ======== ========
Weighted average shares outstanding - basic 2,439 1,723 2,439
======== ======== ========
Weighted average shares outstanding - diluted 2,489 1,723 2,489
======== ======== ========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
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UNITED FINANCIAL CORP.
PRO FORMA STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
TWELVE MONTHS ENDED DECEMBER 31, 2002
PRO FORMA
VALLEY UNITED
BANCORP, PRO FORMA FINANCIAL
CONSOLIDATED INC. ADJUSTMENTS CORP.
------------ -------- ----------- ---------
INTEREST INCOME:
Loans receivable $ 19,497 $ (3,292) $ -- $ 16,205
Mortgage-backed securities 2,797 (1,037) -- 1,760
Other investment securities 808 -- -- 808
Other interest earning assets 536 (93) -- 443
-------- -------- -------- --------
Total interest income 23,638 (4,422) -- 19,216
INTEREST EXPENSE:
Deposits 7,529 (1,424) -- 6,105
Other borrowings 3,207 (131) -- 3,076
-------- -------- -------- --------
Total interest expense 10,736 (1,555) -- 9,181
-------- -------- -------- --------
Net interest income 12,902 (2,867) -- 10,035
Provision for loan losses 1,170 (55) -- 1,115
-------- -------- -------- --------
Net interest income after provision for
loan losses 11,732 (2,812) -- 8,920
NON-INTEREST INCOME:
Gain on sale of loans 3,955 (163) -- 3,792
Service charges and fees 1,122 (148) -- 974
Gain on sale of securities 87 (86) -- 1
Other 236 (59) -- 177
-------- -------- -------- --------
Total non-interest income 5,400 (456) -- 4,944
NON-INTEREST EXPENSE:
Compensation and benefits 6,534 (1,161) -- 5,373
Occupancy and equipment 1,601 (438) -- 1,163
Data processing fees 796 (204) -- 592
Other 3,111 (492) -- 2,619
-------- -------- -------- --------
Total non-interest expense 12,042 (2,295) -- 9,747
-------- -------- -------- --------
Income before income taxes and minority
interest 5,090 (973) -- 4,117
Provision for income taxes 1,923 (360) -- 1,563
-------- -------- -------- --------
Income before minority interest 3,167 (613) -- 2,554
Minority interest (212) -- 212 --
-------- -------- -------- --------
Net income $ 2,955 $ (613) $ 212 $ 2,554
======== ======== ======== ========
Basic earnings per share $ 1.21 $ 0.36 $ 1.05
======== ======== ========
Diluted earnings per share $ 1.19 $ 0.36 $ 1.03
======== ======== ========
Weighted average shares outstanding - basic 2,439 1,723 2,439
======== ======== ========
Weighted average shares outstanding - diluted 2,489 1,723 2,489
======== ======== ========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
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NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
NOTE 1 - PRO FORMA STATEMENTS OF FINANCIAL CONDITION
Cash adjustments - We adjusted cash by the net proceeds of $9,012,000.
Goodwill adjustment - In addition to the Valley investment account, the
Company had $2,007,000 in goodwill recorded for Valley. The investment account
was previously eliminated in the Valley consolidation. This adjustment removes
the remaining cost of the Valley investment from the Company's books to reflect
the sale.
Other adjustments - The decrease of $7,000 in other assets is prepaid
legal fees, which were expensed at the time of the sale. The increase of $6,000
in other liabilities is accrued legal fees, which were expensed at the time of
the sale. The increase of $575,000 and $125,000 in current and deferred income
taxes, respectively, reflects the estimated income tax provisions on the Valley
gain of approximately $1.4 million.
Retained earnings - The difference between the net pro forma cash
proceeds of approximately $9,012,000 and the investment in Valley including
goodwill of approximately $7,576,000, less applicable income taxes of $700,000
and legal fees of $13,000, was credited to retained earnings. This amount plus
the elimination of Valley's retained earnings comprise the total pro forma
adjustment to retained earnings of $1,367,000.
The following is a summary of the net gain on the sale of Valley
credited to retained earnings for pro forma purposes only, rounded to the
nearest thousands.
Cash proceeds from sale $ 9,012,000
Cost basis of investment (5,683,000)(1)
Goodwill recorded (2,007,000)
Unrealized gain on available-for-sale securities 114,000
Legal fees related to sale (13,000)
----------
1,423,000
Provision for income taxes (700,000)
----------
Net gain on sale credited to retained earnings 723,000
Elimination of Valley's retained earnings 644,000
----------
Total adjustment to retained earnings $ 1,367,000
==========
(1) Eliminated previously in the June 30, 2003 historical balances.
NOTE 2 - PRO FORMA STATEMENTS OF INCOME
Minority interest - The only pro forma adjustment on the statements of
income involves an addback for the minority interest portion of Valley's net
income for the periods presented. The adjustment is needed because the
historical statements include 65% of Valley's net income recorded as "minority
interest" on the consolidated financial statements. The Valley column reflects
the reversal of 100% of Valley's interest income and expense and non-interest
income and expense. Therefore, the pro forma adjustment reflects only 65% of
Valley's net income reported in the consolidated financial statements for the
periods presented.
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(c) Exhibits:
Exhibit 2.1 Merger Agreement dated May 22, 2003 among
Marquette, Valley and the Company
(incorporated by reference into the
Company's current report on Form 8-K dated
May 23, 2003)
Exhibit 99.1 Press Release of United Financial Corp.
dated August 1, 2003, reporting the
completion of the previously announced sale
of Valley Bancorp, Inc. (incorporated by
reference into the Company's current report
on Form 8-K dated August 1, 2003)
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, United Financial Corp. has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
UNITED FINANCIAL CORP.
DATE: August 14, 2003 By: /s/ Paula J. Delaney
----------------------------------
Paula J. Delaney
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
Exhibit 2.1 Merger Agreement dated May 22, 2003 among Marquette, Valley
and the Company (incorporated by reference into the Company's
Current Report on Form 8-K dated May 23, 2003)
Exhibit 99.1 Press Release of United Financial Corp. dated August 1, 2003,
reporting the completion of the previously announced sale of
Valley Bancorp, Inc. (incorporated by reference into the
Company's Current Report on Form 8-K dated August 1, 2003)
8