SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
- ------ EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
-----------------
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 1-5735
UNION FINANCIAL BANCSHARES, INC.
--------------------------------
Delaware 57-1001177
- ------------------------------------------------------------------------------
(Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
203 West Main Street, Union, South Carolina 29379
- ------------------------------------------- -------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (864)427-7692
Check whether the issuer: (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. Yes X No
----- -----
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: The Corporation had issued
and outstanding 835,191 shares, $0.01 par value, common stock as of December
31, 1997.
UNION FINANCIAL BANCSHARES, INC.
INDEX
Part I. Financial Information Page
--------------------- ----
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets as of December 31, 1997
and September 30, 1997 3
Consolidated Statements of Income for the three months
ended December 31, 1997 and 1996 4
Consolidated Statements of Cash Flows for the three
months ended December 31, 1997 and 1996 5-6
Notes to Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-13
Part II. Other Information 14-16
-----------------
Signatures 17
Item 1. Financial Statements
UNION FINANCIAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1997 (unaudited) and September 30, 1997
December 31, September 30,
ASSETS 1997 1997
------------ -------------
(DOLLARS IN THOUSANDS)
Cash $ 1,245 $ 1,608
Short term interest-bearing deposits 2,405 6,213
------------ -------------
Total cash and cash equivalents 3,650 7,821
Investment and mortgage-backed securities: ------------ -------------
Held to maturity 5,185 7,811
Available for sale 12,476 15,855
------------ -------------
Total investment and mortgage-backed securities 17,661 23,666
Loans, net
Held for sale 28,457 15,044
Held for investment 112,701 114,913
------------ -------------
Total loans receivable, net 141,158 129,957
Office properties and equipment, net 3,126 3,009
Federal Home Loan Bank Stock, at cost 1,850 2,105
Accrued interest receivable 1,086 1,317
Other assets 3,577 3,369
------------ -------------
TOTAL ASSETS $ 172,108 $ 171,244
============ =============
LIABILITIES
Deposit accounts $ 115,899 $ 117,914
Securities sold under repurchase agreements 1,192 504
Advances from the Federal Home Loan Bank
and other borrowings 39,973 37,979
Accrued interest on deposits 273 314
Advances from borrowers for taxes and insurance 261 389
Other liabilities 567 617
------------ -------------
TOTAL LIABILITIES 158,165 157,717
------------ -------------
SHAREHOLDERS' EQUITY
Serial preferred stock, no par value,
authorized - 500,000 shares, issued
and outstanding - None 0 0
Common stock - $0.01 par value,
authorized - 2,500,000 shares,
issued and outstanding - 835,191 shares
at 12/31/97 and 827,700 at 9/30/97 8 8
Additional paid-in capital 4,145 3,993
Unrealized (loss) on investment and
mortgage-backed securities
available for sale (59) (63)
Retained earnings, substantially restricted 9,849 9,589
------------ -------------
TOTAL SHAREHOLDERS' EQUITY 13,943 13,527
------------ -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 172,108 $ 171,244
============ =============
See notes to consolidated financial statements.
3
UNION FINANCIAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended December 31, 1997 (unaudited) and 1996 (unaudited)
Three Months Ended
December 31, December 31,
1997 1996
------------ ------------
(DOLLARS IN THOUSANDS)
Interest Income:
Loans $ 2,892 $ 1,975
Deposits and federal funds sold 27 17
Mortgage-backed securities 122 218
Interest and dividends on
investment securities 227 380
------------ ------------
Total Interest Income 3,268 2,590
------------ ------------
Interest Expense:
Deposit accounts 1,304 1,071
Advances from the FHLB and other borrowings 507 336
------------ ------------
Total Interest Expense 1,811 1,407
------------ ------------
Net Interest Income 1,457 1,183
Provision for loan losses 45 38
Net Interest Income After ------------ ------------
Provision for Loan Losses 1,412 1,145
------------ ------------
Non-Interest Income:
Fees for financial services 189 114
Loan servicing fees (costs) 6 (1)
Net gains (losses) on sale of loans 75 0
Net gains on sale of investments 0 23
------------ ------------
Total Non-Interest Income 270 136
------------ ------------
Non-Interest Expense:
Compensation and employee benefits 554 358
Occupancy and equipment 224 163
Deposit insurance premiums 16 56
Professional services 89 63
Real estate operations 3 1
Other 223 103
------------ ------------
Total Non-Interest Expense 1,109 744
------------ ------------
Income Before Income Taxes 573 537
Income tax expense 213 198
------------ ------------
Net Income $ 360 $ 339
============ ============
Basic Net Income Per Common Share $ 0.43 $ 0.42
============ ============
Diluted Net Income Per Common Share $ 0.40 $ 0.39
============ ============
Weighted Average Number of
Common Shares Outstanding
Basic 832,706 813,275
Diluted 896,010 864,848
See notes to consolidated financial statements.
4
UNION FINANCIAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended December 31, 1997 (unaudited) and 1996 (unaudited)
Three Months Ended
December 31, December 31,
1997 1996
------------ ------------
(IN THOUSANDS)
OPERATING ACTIVITIES:
Net income $360 $339
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 45 38
Amortization of intangibles 53 0
Depreciation expense 55 41
Recognition of deferred income, net of costs (8) (17)
Deferral of fee income, net of costs 98 57
(Gain) Loss on investment transactions 0 (23)
Loans originated for sale 23,094 0
Sale of loans (23,094) 0
(Gain) loss on sale of loans 75 0
Changes in operating assets and liabilities:
Decrease (increase) in accrued interest
receivable 231 66
Decrease (increase) in other assets (260) 431
(Decrease)Increase in other liabilities (177) 1,027
Increase (decrease) in accrued interest
payable (41) 165
-------- --------
Net cash provided by (used by) operating
activities 431 2,124
-------- --------
INVESTING ACTIVITIES:
Purchase of investment and mortgage-
backed securities:
Held to maturity 0 0
Available for sale (1,148) (450)
Proceeds from sale of investment and
mortgage-backed securities 0 4,295
Proceeds from maturity of investment and
mortgage-backed securities:
Held to maturity 0 1,022
Available for sale 6,724 2,454
Principal repayments on mortgage-backed
securities:
Held to maturity 40 0
Available for sale 389 652
Loan originations (19,707) (21,507)
Principal repayments of loans 8,300 2,104
Proceeds from sale of real estate acquired
in settlement of loans 0 66
Purchase of FHLB stock 0 (460)
Redemption of FHLB stock 255 0
Purchase of office properties and equipment (171) (24)
-------- --------
Net cash provided by (used by) investing
activities ($5,318) ($11,848)
-------- --------
5
FINANCING ACTIVITIES:
Proceeds from the exercise of stock options $0 $30
Proceeds from the dividend reinvestment plan 151 $0
Dividends paid in cash ($0.135 per share - 1997
and $0.125 per share - 1996) (102) (102)
Proceeds from FHLB advances and other borrowings 26,100 29,790
Repayment of FHLB advances and other borrowings (24,106) (21,200)
Increase (Decrease) in securities sold under
repurchase agreement 688
Increase (Decrease) in deposit accounts (2,015) (242)
Net cash (used by) provided by financing
activities 716 8,276
------- -------
NET DECREASE\INCREASE IN CASH
AND CASH EQUIVALENTS (4,171) (1,448)
------- -------
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 7,821 3,685
------- -------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $3,650 $2,237
====== ======
SUPPLEMENTAL DISCLOSURES:
Cash paid for:
Income taxes $50 $0
Interest 1,852 1,242
Non-cash transactions:
Loans foreclosed 0 49
See notes to consolidated financial statements.
6
UNION FINANCIAL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Presentation of Consolidated Financial Statements
The accompanying unaudited consolidated financial statements of Union
Financial Bancshares, Inc. (the "Corporation") were prepared in accordance
with instructions for Form 10-QSB and, therefore, do not include all
disclosures necessary for a complete presentation of consolidated financial
condition, results of operations, and cash flows in conformity with generally
accepted accounting principles. However, all adjustments which are, in the
opinion of management, necessary for the fair presentation of the interim
consolidated financial statements have been included. All such adjustments
are of a normal and recurring nature. The consolidated financial statements
include the Corporation's wholly owned subsidiary, Provident Community
Bank (the "Bank"). The results of operations for the three months ended
December 31, 1997 are not necessarily indicative of the results which may be
expected for the entire fiscal year. The consolidated balance sheet as of
September 30, 1997 has been derived from the Company's audited financial
statements presented in the annual report to shareholders. Certain amounts in
the prior year's financial statements have been reclassified to conform with
current year classifications.
In February, 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure", which was effective for financial statements for
periods ending after December 31, 1997. This statement applies to both public
and nonpublic entities. The new statement requires no change for entities
subject to existing requirements. The adoption of this standard did not have
a material effect on the Company.
In June, 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income",
which establishes standards for reporting and display of comprehensive income
and its components in a full set of general purposes financial statements.
Under this statement, enterprises are required to classify items of "other
comprehensive income" by their nature in the financial statement and display
the balance of other comprehensive income separately in the equity section of
a statement of financial position. Statement 130 is effective for both
interim and annual periods beginning after December 15, 1997. Comparative
financial statements provided for earlier periods are required to be
reclassified to reflect the provisions of the statement. The Corporation will
adopt Statement 130 effective March 31, 1998 and will provide the required
disclosures in the Company's Form 10-Q.
Also in June, 1997, the FASB issued SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information". This statement establishes
standards for the way public enterprises are to report information about
operating segments in annual financial statements
7
and requires those enterprises to report selected information about operating
segments in interim financial reports issued to shareholders. Statement 131
is effective for financial statements for periods beginning after December 15,
1997. In the initial year of application, comparative information for earlier
years is to be restated unless it is impractical to do so. It is not
anticipated that the adoption of this statement will materially effect the
Corporation's current method of financial reporting.
2. Income Per Share
Income per share amounts for the three months ended December 31, 1997 and 1996
were computed based on the weighted average number of common shares
outstanding adjusted for the dilutive effect of outstanding common stock
options during the periods.
During the quarter, the Corporation adopted SFAS No. 128, "Earnings per Share"
which requires dual presentation of basic and diluted EPS by entities with
complex capital structures (as defined by the statement). The adoption of the
standard did not have a material effect on EPS.
3. Assets Pledged
Approximately $9,341,000 and $9,013,000 of debt securities at December 31,
1997 and September 30, 1997, respectively, were pledged by the Bank as
collateral to secure deposits of the State of South Carolina, the City of
Union and certain other liabilities. The Bank pledges as collateral to
Federal Home Loan Bank advances the Bank's Federal Home Loan Bank stock and
has entered into a blanket collateral agreement with the Federal Home Loan
Bank whereby the Bank maintains, free of other encumbrances, qualifying
mortgages (as defined) with unpaid principal balances equal to, when
discounted at 75% of the unpaid principal balances, 100% of total advances.
4. Contingencies and Loan Commitments
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These instruments expose the Bank to credit risk in excess of the amount
recognized in the balance sheet.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit is
represented by the contractual amount of those instruments. The Bank uses the
same credit policies in making commitments and conditional obligations as it
does for on-balance-sheet instruments. Total credit exposure at December 31,
1997 related to these items is summarized below:
Loan Commitments: Contract Amount
- ---------------- ---------------
Approved loan commitments $ 1,902,000
8
Unadvanced portions of loans 4,117,000
Total loan commitments $ 6,019,000
Loan commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract. Loan
commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained
upon extension of credit is based on management's credit evaluation of the
counter party. Collateral held is primarily residential property. Interest
rates on loan commitments are a combination of fixed and variable.
Commitments outstanding at December 31, 1997 consist of fixed and adjustable
rate loans of approximately $6,019,000 at rates ranging from 7% to 9%.
Commitments to originate loans generally expire within 30 to 60 days.
Commitments to fund credit lines (principally variable rate, consumer lines
secured by real estate and overdraft protection) totaled approximately
$11,114,000. Of these lines, the outstanding loan balances totaled
approximately $6,651,000. The Bank also has commitments to fund warehouse
lines of credit for various mortgage banking companies totaling $1,500,000,
which had an outstanding balance at December 31, 1997 of approximately
$226,000. At December 31, 1997, the Bank had loan commitments to sell
$24,000,000 in fixed rate residential loans which had not been closed to
Freddie Mac for the months of January-March, 1998.
9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
- -------
On November 9, 1994, Provident Community Bank (the "Bank"), formerly Union
Federal Savings Bank, reorganized into the holding company form of ownership,
resulting in Union Financial Bancshares, Inc. (the "Corporation") becoming the
sole stockholder of the Bank (after resolution of dissenters' rights).
Financial Condition
- -------------------
At December 31, 1997 total assets of the Corporation increased .50% to
$172,108,000 from $171,244,000 at September 30, 1997. The increase was due
primarily to an increase in loans receivable, net, of approximately
$11,201,000 or 8.61% during the three months ended December 31, 1997. The
increase was due primarily to increased origination of fixed-rate loans held
for sale through the wholesale mortgage operation in the three months ended
December 31, 1997. This increase in loans receivable was funded by a
reduction in investments and mortgage-backed securities that resulted from
maturities and calls and through the use of cash and cash equivalents, which
decreased 53.33% since September 30, 1997. Total investment and mortgage-
backed securities decreased $6,005,000, or 25.37%, to $17,661,000 during the
three months ended December 31, 1997. The current year trend for loan
production is expected to be slower growth with fixed rate production
generated being securitized and sold in the secondary market. Deposits
decreased $2,015,000 or 1.71% to $115,899,000 for the three months ended
December 31, 1997. The decrease was a result of reductions in regular savings
balances due to the payment of Christmas club accounts and reductions in
demand account balances. Borrowings increased $1,994,000 or 5.25% from
$37,979,000 at September 30, 1997 to $39,973,000 at December 31, 1997, as a
result of increased loan originations.
As of December 31, 1997, real estate acquired through foreclosure ("REO")
consisted of one property with a net book value of $1,500. Repossessed assets
consisted of $8,550 of automobiles as of December 31, 1997. REO and
repossessed assets are carried at their estimated fair values less estimated
selling costs.
Liquidity
- ---------
Liquidity is the ability to meet demand for loan disbursements, deposit
withdrawals, repayment of debt, payment of interest on deposits and other
operating expenses. The primary sources of liquidity are savings deposits,
loan repayments, borrowings and interest payments.
The OTS imposes a minimum level of liquidity on the Bank which is currently 4%
of
10
withdrawable deposits plus short-term borrowings. The liquidity level of the
Bank as measured for regulatory purposes was 5.08% as of December 31, 1997.
As in the past, management expects that the Bank can meet its obligations to
fund outstanding mortgage loan commitments, which were approximately
$1,902,000, as described in Note 4 to the Consolidated Financial Statements,
and other loan commitments as of December 31, 1997, while maintaining
liquidity in excess of regulatory requirements.
Capital Resources
- -----------------
The capital requirement of the Bank consists of three components: (1) tangible
capital, (2) core capital and (3) risk based capital. Tangible capital must
equal or exceed 1.5% of adjusted total assets. Core capital must be a minimum
of 3% of adjusted total assets and risk based capital must be a minimum of 8%
of risk weighted assets.
As of December 31, 1997, the Bank's capital position, as calculated under
regulatory guidelines, exceeds these minimum requirements as follows (dollars
in thousands):
Requirement Actual Excess
- ----------------------------------------------------------------------------
Tangible capital $2,571 $11,455 $8,884
Tangible capital to adjusted total assets 1.50% 6.68% 5.18%
Core capital $5,141 $11,455 $6,314
Core capital to adjusted total assets 3.00% 6.68% 3.68%
Risk based capital $7,520 $12,400 $4,880
Risk based capital to risk weighted assets 8.00% 13.19% 5.19%
The reported capital requirements are based on information reported in the OTS
December 31, 1997 quarterly thrift financial report.
Results of Operations for the Three Months Ended December 31, 1997 and 1996
- ---------------------------------------------------------------------------
General
- -------
Net income increased $21,000 or 6.19% to $360,000 for the three months ended
December 31, 1997 as compared to the same period in 1996. The increase in net
income was due primarily to a 23.16% increase in net interest income for the
three months ended December 31, 1997 as compared to the same period in 1996.
Interest Income
- ---------------
Interest income increased $678,000 or 26.18% for the three months ended
December 31, 1997 as compared to the same period in 1996. Interest income on
loans increased 46.43%
11
or $917,000 to $2,892,000 for the three months ended December 31, 1997 from
$1,975,000 for the three months ended December 31, 1996 due to higher loan
volumes. The average balance of loans increased as a result of the investment
of the funds received in connection with the acquisition of the Laurens
branch in March, 1997. Interest income on overnight deposits and federal
funds sold and on mortgage-backed securities had a net decrease of $86,000 for
the three months ended December 31, 1997 as compared to the same period in the
prior year due primarily to lower balances. Interest and dividends on
investment securities decreased $153,000 or 40.26% for the three months ended
December 31, 1997 to $227,000 from $380,000 during the same period in 1996.
The decrease was due primarily to a reduction in the level of investment
securities due to the high volume of agency calls experienced during the
quarter.
Interest Expense
- ----------------
The Corporation experienced an overall increase of $404,000 or 28.27% in
interest expense for the three months ended December 31, 1997 as compared to
the three months ended December 31, 1996 due primarily to the acquisition of
the Laurens branch deposit base. Interest expense on deposit accounts
increased $233,000 or 21.76% to $1,304,000 for the three months ended December
31, 1997 from $1,071,000 during the same period in 1996. Interest expense on
borrowings increased $171,000 for the three months ended December 31, 1997 as
compared to the three months ended December 31, 1996. The increase was due to
higher volumes in FHLB advances during the period which were required to fund
higher loan originations.
Provision for Loan Loss
- -----------------------
During the three months ended December 31, 1997, provisions for loan losses
were $45,000 as compared to $38,000 for the same period in the previous year.
The increase in loan loss provisions are consistent with the growth in loans.
Management believes the Bank's loan loss allowances are adequate to absorb
estimated future loan losses. The Bank's loan loss allowances at December 31,
1997 were approximately .82% of the Bank's outstanding loan portfolio, net
compared to .82% for the same period in the previous year.
The following table sets forth information with respect to the Bank's
non-performing assets at the dates indicated (dollars in thousands):
December 31, 1997 September 30, 1997
----------------- ------------------
Non-accruing loans which are
contractually past due 90 days
or more:
12
Real Estate:
Residential $ 632 $ 751
Commercial 0 26
Construction -- --
Non-mortgage 20 --
------ ------
Total $ 652 $ 777
====== ======
Percentage of loans receivable, net 0.46% 0.60%
==== ====
Allowance for loan losses $944 $928
==== ====
Real estate acquired through
foreclosure and repossessed
assets, net of allowances $ 2 $ 2
Non Interest Income and Expense
- -------------------------------
Total non-interest income increased $134,000 or 98.53% to $270,000 for the
three months ended December 31, 1997 from $136,000 for the same period in the
previous year. This increase reflects the operation of the branch acquired
from First Union on March 24, 1997. Gains on sale of loans was $75,000 for
the three months ended December 31, 1997 as compared to $0 for the three
months ended December 31, 1996. The gains reflect the operations of the
Mortgage Division that was established in the third quarter of the previous
year.
For the three months ended December 31, 1997, total non-interest expense
increased $365,000 or 49.06% to $1,109,000 from $744,000 for the same period
in 1996. The current year period ending December 31, 1997 includes additional
expenses for a new branch acquisition along with expenses for the new Mortgage
Division. Compensation and employee benefits increased $196,000 or 54.75% to
$554,000 for the three months period ended December 31, 1997 from $358,000 for
the same period in 1996. Occupancy and equipment expense increased $61,000 or
37.42% to $224,000 for the three months ended December 31, 1997 from $163,000
for the same period in 1996. Professional services expenses increased $26,000
or 41.27% to $89,000 for the three month period ended December 31, 1997 from
$63,000 for the same period in 1996. The increase in compensation and
employee benefits was due to cost of living increases along with additional
staffing for the new branch acquisition and Mortgage Division. Occupancy and
equipment expense increased due to increases in maintenance and data
processing expenses. Professional services expenses increased due to
additional advertising and legal expenses incurred for the name change of the
subsidiary bank. These increases were partially offset by a decrease in
deposit insurance premiums for the three months ended December 31, 1997 due to
reduction in the deposit assessment rate from 23 basis points to 6.45 basis
points.
13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The Corporation is involved in various claims and legal actions
arising in the normal course of business. Management believes
that these proceedings will not result in a material loss to the
Corporation.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
Year 2000 Issues
----------------
The Corporation recognizes that there is a business risk in
computerized systems as the calendar rolls over into the next
century. The Federal Financial Institutions Examination Council
("FFIEC") issued an interagency statement on May 5, 1997,
outlining five phases for institutions to effectively manage the
Year 2000 challenge. The phases were: Awareness; Assessment;
Renovation; Validation; and, Implementation. The FFIEC encouraged
institutions to have all critical applications identified and
priorities set by September 30, 1997 and to have renovation work
largely completed and testing well underway by December 31, 1998.
The Corporation has an internal task force assigned to this
project and the Board of Directors and management of the Company
have established year 2000 compliance as a strategic initiative.
The Corporation is well into the assessment phase of the project.
While the Corporation believes that it has available resources to
assure year 2000 compliance, it is to some extent dependent on
vendor cooperation. At the present time, the Corporation expects
its most critical application software vendor to have all of its
systems compliant by January, 1999. The Corporation expects to
install the necessary software releases in fiscal 1999 and have
testing of such systems substantially completed by March 31, 1999.
At this time, the Corporation has not determined the cost of
making modification to correct any year
14
2000 problems; however, equipment and software expenses are not
expected to materially differ from past results.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibits
--------
27 Financial Data Schedule
15
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.
UNION FINANCIAL BANCSHARES, INC.
--------------------------------
(Registrant)
Date: 2/10/98 By: /s/ Dwight V. Neese
-------------------------------
Dwight V. Neese, CEO
Date: 2/10/98 By: /s/ Richard H. Flake
-------------------------------
Richard H. Flake, CFO
17