U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2003
[_] Transition Report Under Section 13
or 15(d) of the Exchange Act
For the transition period ended
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Commission File Number 0-26551
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UNITED COMMUNITY BANCORP
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(Exact name of small business issuer as specified in its charter)
NORTH CAROLINA 56-2137427
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1039 SECOND STREET NE, HICKORY, NC 28601
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(Address of principal executive office)
(888) 894-2483
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 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
---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes ___ No x
---
As of April 30, 2003, 4,127,375 shares of the issuer's common stock, $1.00 par
value, were outstanding.
This report contains 16 pages.
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Page No.
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Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Consolidated Balance Sheets
March 31, 2003 and December 31, 2002 ............................. 3
Consolidated Statements of Operations
Three Months Ended March 31, 2003 and 2002 ....................... 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2003 and 2002 ....................... 5
Notes to Consolidated Financial Statements ....................... 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................ 9
Item 3 - Quantitative and Qualitative Disclosures about Market Risk ........... 12
Item 4 - Controls and Procedures .............................................. 13
Part II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K ..................................... 14
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Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements
United Community Bancorp and Subsidiaries
Consolidated Balance Sheets
March 31,
2003 December 31,
ASSETS (Unaudited) 2002*
------------------ ------------------
Cash and due from banks $ 10,195,728 $ 9,000,383
Interest-bearing deposits with banks 6,514,856 7,518,090
Federal funds sold 1,331,933 937,494
Investment securities available for sale 75,617,687 75,752,035
Loans 432,003,352 415,740,668
Less allowance for loan losses (6,005,329) (5,721,452)
------------------ ------------------
Net Loans 425,998,023 410,019,216
Factored accounts receivable 3,540,074 3,694,568
Stock in the Federal Home Loan Bank, at cost 2,631,800 2,431,800
Foreclosed assets 822,881 585,697
Bank premises and equipment 15,035,392 14,217,567
Goodwill 17,017,473 17,017,473
Other intangible assets 2,716,106 2,795,901
Other assets 9,049,105 9,996,797
------------------ ------------------
Total Assets $ 570,471,058 $ 553,967,021
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing demand $ 69,477,124 $ 34,253,286
Money market and NOW accounts 98,979,536 121,827,208
Savings 12,343,554 11,692,178
Time, $100,00 and over 113,218,528 118,428,965
Other time 162,820,079 154,330,535
------------------ ------------------
Total Deposits 456,838,821 440,532,172
Federal Home Loan Bank Advance 36,630,363 36,130,363
Securities sold under agreement to repurchase 4,870,599 3,946,987
Accrued expenses and other liabilities 1,887,063 3,125,684
Trust preferred securities 10,000,000 10,000,000
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Total Liabilities 510,226,846 493,735,206
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Stockholder' equity:
Preferred stock, no par value, 1,000,000 shares
authorized; none issued - -
Common stock, $1 par value, 9,000,000 shares
authorized, 4,284,036 and 4,270,348 shares issued
in 2003 and 2002, respectively 4,284,036 4,270,348
Additional paid-in capital 51,140,443 51,016,222
Treasury stock (156,661 shares) (2,598,972) (1,192,728)
Retained earnings 6,100,354 4,906,988
Accumulated other comprehensive income 1,318,351 1,230,985
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Total stockholders' equity 60,244,212 60,231,815
------------------ ------------------
Total liabilities and stockholders' equity $ 570,471,058 $ 553,967,021
================== ==================
* Derived from audited financial statements
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United Community Bancorp and Subsidiaries
Consolidated Statements of Operations (Unaudited)
Three Months Ended
March,
------------------------------
2003 2002
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INTEREST INCOME
Loans $ 6,632,954 $ 4,016,098
Investment securities taxable 576,750 728,000
Investment securities nontaxable 119,516 114,407
Federal funds sold 33,853 6,359
Interest-bearing deposits with banks 3,042 22,462
Dividends 28,985 24,689
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Total Interest income 7,395,100 4,912,015
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INTEREST EXPENSE
Time deposits, $100,000 and over 853,787 676,313
Other deposits 1,664,466 1,333,507
Borrowings 502,068 263,070
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Total interest expense 3,020,321 2,272,890
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Net interest income 4,374,779 2,639,125
Provision for loan losses 307,000 165,000
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Net interest income after provision for
loan losses 4,067,779 2,474,125
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Non-interest income
Service charges on deposit accounts 627,516 344,229
Factoring operations 113,368 102,992
Mortgage operations 612,968 548,502
Gain on sale on investment securities 11,181 -
Other 210,228 159,017
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Total non-interest income 1,575,261 1,154,740
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Non-interest expenses
Compensation and employee benefits 2,020,589 1,347,509
Occupancy and equipment 501,601 259,813
Professional fees 86,835 44,482
Stationery, printing and supplies 95,955 50,249
Advertising and business promotion 61,910 44,903
Data processing 296,147 178,260
Other 722,358 429,251
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Total non-interest expenses 3,785,395 2,354,467
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Income before taxes 1,857,645 1,274,398
Income taxes 664,277 437,536
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Net income $ 1,193,368 $ 836,862
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Net income per common share
Basic $ 0.29 $ 0.30
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Diluted $ 0.28 $ 0.29
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Dividends declared per common share $ .08 $ -
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United Community Bancorp and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Three Months ended
March 31,
---------------------------------
2003 2002
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Cash flows from operating activities
Net income $ 1,193,368 $ 836,862
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 198,464 221,498
Amortization of intangibles 79,795 -
Deferred income taxes 769,828 -
Provision for loan losses 307,000 165,000
Deferred compensation 9,249 7,028
Net gains on sales of investment securities (11,181) -
Net (gains) losses on sales of other assets (2,623) 1,818
Change in assets and liabilities:
(Increase) decrease in other assets 155,901 (275,489)
Increase (decrease) in other liabilities (1,247,870) 71,812
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Net cash provided by operating activities 1,451,931 1,028,529
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Cash flows from investing activities
Purchase of investment securities available for sale (8,625,801) (8,173,295)
Purchase of Federal Home Loan Bank stock (200,000) (150,000)
Proceeds from sales, maturities and calls of
investment securities 9,043,267 3,665,225
Net increase in loans (17,044,066) (7,034,834)
Net (increase) decrease in factored accounts receivable 154,494 (602,308)
Purchases of premises and equipment (1,023,422) (240,065)
Proceeds from sale of foreclosed real estate 368,223 522,509
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Net cash used in investing activities (17,327,305) (12,012,768)
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Cash flows from financing activities
Net increase in noninterest-bearing deposits 35,223,838 2,808,485
Net increase (decrease) in interest-bearing deposits (18,917,189) 9,975,331
Net increase (decrease) in securities sold under
agreements to repurchase 923,612 (369,361)
Net decrease in federal funds purchased - (2,985,000)
Net increase in Federal Home Loan Bank advances 500,000 4,00,000
Purchase of treasury stock (1,406,244) (135,319)
Proceeds from issuance of common stock 137,907 -
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Net cash provided by financing activities 16,461,924 7,294,136
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Net increase (decrease) in cash and cash equivalents 586,550 (3,690,103)
-------------- ---------------
Cash and cash equivalents, beginning of period 17,455,967 10,463,968
-------------- ---------------
Cash and cash equivalents, end of period $ 18,042,517 $ 6,773,865
============== ===============
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NOTE A - BASIS OF PRESENTATION
In management's opinion, the financial information, which is unaudited, reflects
all adjustments (consisting solely of normal recurring adjustments) necessary
for a fair presentation of the financial information as of and for the three
month period ended March 31, 2003 and 2002, in conformity with generally
accepted accounting principles. The accompanying consolidated financial
statements include the accounts of United Community Bancorp, and it's
wholly-owned subsidiaries: Catawba Valley Bank, First Gaston Bank, Valley
Financial Services, Inc., Community Mortgage Corporation, Catawba Valley Capital
Trust I and Catawba Valley Capital Trust II, collectively referred to as the
"Company". All significant intercompany transactions and balances have been
eliminated. Operating results for the three month period ended March 31, 2003
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 2003.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the notes to the consolidated
financial statements filed as part of the Company's 2002 annual report on Form
10-KSB. This quarterly report should be read in conjunction with such annual
report.
On April 29, 2003 at the Company's Annual Meeting of Shareholders, the
shareholders approved a name change for the Company. The name United Community
Bancorp will be changed to Integrity Financial Corporation. The new symbol will
be IFCB. The change will go into effect on May 30, 2003.
NOTE B - NET INCOME PER SHARE
Basic and diluted net income per common share is computed based on the weighted
average number of shares outstanding during each period after retroactively
adjusting for stock dividends. Diluted net income per common share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the net income of the Company.
Basic and diluted net income per common share have been computed based upon net
income as presented in the accompanying consolidated statements of operations
divided by the weighted average number of common shares outstanding or assumed
to be outstanding as summarized below:
Three months ended
March 31,
---------------------------
2003 2002
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Weighted average number of common
shares used in computing basic net
income per share 4,148,061 2,768,019
Effect of dilutive stock options 98,725 98,911
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Weighted average number of common
shares and dilutive potential common
shares used in computing diluted net
income per share 4,246,786 2,866,930
=========== ============
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NOTE C - COMPREHENSIVE INCOME
For the three months ended March 31, 2003 and 2002, total comprehensive income,
consisting solely of net income and unrealized securities gains and losses, net
of taxes, was $1,280,734 and $610,471, respectively.
NOTE D - STOCK COMPENSATION PLANS
Statement of Financial Accounting Statements ("SFAS") No. 123, Accounting for
Stock-Based Compensation, encourages all entities to adopt a fair value based
method of accounting for employee stock compensation plans, whereby compensation
cost is measured at the grant date based on the value of the award and is
recognized over the service period, which is usually the vesting period.
However, it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting prescribed by
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees, whereby compensation cost is the excess, if any, of the quoted
market price of the stock at the grant date (or other measurement date) over the
amount an employee must pay to acquire the stock. Stock options issued under the
Company's stock option plans have no intrinsic value at the grant date and,
under APB Opinion No. 25, no compensation cost is recognized for them. The
Company has elected to continue with the accounting methodology in APB Opinion
No. 25 presented below are the pro forma disclosures of net income and earnings
per share and other disclosures as if the fair value based method of accounting
had been applied.
Three months ended
March 31,
----------------------------
2003 2002
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Net income as reported $ 1,193,368 $ 836,862
Deduct: Total stock-based employee
compensation expense determined
under fair value method for all awards,
net of related tax effects (7,749) (6,208)
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Net income pro forma $ 1,185,619 $ 830,654
=========== ===========
Basic net income per common share
As reported $ .29 $ .30
Pro forma .29 .29
Diluted net income per common share
As reported .28 .29
Pro forma .28 .29
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NOTE E - GUARANTEES
The Company has issued guarantees under standby letters of credit, which require
the Company to fund the guarantee in part or in entirety, in the event the
customer fails to perform under an obligating agreement. These standby letters
of credit typically have terms ranging from 10 to 156 months.
The maximum amount of the Company's guarantees under these standby letters of
credit are as follows (in thousands):
March 31, December 31,
2003 2002
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Undisbursed standby letters of credit $ 1,348 $ 1,448.
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Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Quarterly Report on Form 10-Q may contain certain forward-looking
statements consisting of estimates with respect to the financial condition,
results of operations and business of the Company that are subject to various
factors which could cause actual results to differ materially from these
estimates. These factors include, but are not limited to, general economic
conditions, changes in interest rates, deposit flows, loan demand, real estate
values, and competition; changes in accounting principles, policies, or
guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory, and technological factors affecting the
Company's operations, pricing, products and services.
Overview
On December 31, 2002, the Company acquired Community Bancshares, Inc.
headquartered in Wilkesboro, North Carolina, the holding company for
Northwestern National Bank ("Northwestern") and Community Mortgage Corporation.
The branches of Northwestern were merged into the Company's wholly owned
subsidiary, Catawba Valley Bank, and are now doing business as "Northwestern
Bank, a division of Catawba Valley Bank." Community Mortgage became a wholly
owned subsidiary of the Company. This business combination was appropriately
accounted for under the purchase method, therefore the results of operations for
the three months ended March 31, 2002 do not include the consolidated results of
operations for Community Bancshares, Inc.
Comparison of Financial Condition at March 31, 2003 and December 31, 2002
During the three months ended March 31, 2003, total consolidated assets
increased $16.5 million or 3.0% from $553.9 million to $570.5 million. This
increase in the Company's assets resulted primarily from an increase in our net
loans outstanding of $15.9 million or 3.9% during the period. This increase in
loans was attribute to a growth in our commercial portfolio. The $818,000 or
5.8% increase in premises and equipment resulted from the ongoing construction
of three new branches Catawba Valley Bank is building. Also during the three
month period, our investment in the stock of the Federal Home Loan Bank
increased $200,000 to $2.6 million due to the increased level of our Federal
Home Loan bank advances, and the level of our foreclosed assets increased by
51.7% from $586,000 to $891,000 at March 31, 2003.
The aforementioned growth in our assets was funded principally by an increase of
$16.3 million or 31.7% in deposits from our customers during the period from
$440.5 million at December 31, 2002 to $456.8 million at March 31, 2003, and
from a net increase in our borrowings of $185,000 million during the same
period. Our borrowings consist of Federal Home Loan Bank advances, securities
sold under agreements to repurchase, and federal funds purchased. The most
significant component of the increase in deposits from our customers during the
period was the increase in noninterest bearing deposits, which increased $35.2
million from $34.2 million at December 31, 2002 to $69.4 million at March 31,
2003.
Earning assets represented 93.2% of total assets on March 31, 2003. The
allowance for loan losses was $6.0 million at March 31, 2003, representing 1.39%
of total loans. Management believes that the allowance is adequate at this time.
Deposits on March 31, 2003 were $456.8 million, an increase of $16.3 million or
3.7% from December 31, 2002. Noninterest bearing deposits increased $35.2
million during the period, while interest bearing deposits decreased $18.9
million. Management is continuing to make a
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conscious effort to attract lower cost core deposits and reduce the dependency
on certificates of deposit. Other borrowings increased by $185,000 at March 31,
2003.
Other liabilities decreased from $3.1 million at December 31, 2002 to $1.9
million at March 31, 2003, a decrease of $1.2 million or 38.7%. The decrease was
due in part to the payment of accrued merger expenses of $500,000 during first
quarter. The remainder was the payment of accrued income taxes during the
period.
The Banks now operate fifteen full service branches and continue to actively
solicit loans and deposits.
Total stockholders' equity increased $12,000 for the three month period ended
March 31, 2003. The increase resulted principally from net income of $1.2
million for the three months. Accumulated other comprehensive income increased
by $87,000 for the period. During the three months ended March 31, 2003, the
Company repurchased 81,417 of its common shares totaling $1.4 million under its
stock repurchase plan. At March 31, 2003, the Company and the Banks continued to
exceed all applicable regulatory capital requirements.
Comparison of Results of Operations for the Three Months Ended March 31, 2003
and 2002
Net Income. Net income for the quarter ended March 31, 2003 was $1.2 million or
$.29 per basic share, as compared with net income of $837,000 or $.30 per basic
share for the three months ended March 31, 2002, an increase of $357,000 in net
income and a decrease of $.01 per share. The decrease in earnings per share was
attributable to the increase in shares outstanding resulting from the business
combination. An increase in net interest income of $1.7 million and non interest
income of $421, 000 was offset by an increase in non interest expense of $1.4
million and provision for loan losses of $142,000.
Net Interest Income. Like most financial institutions, the primary component of
earnings for our banks, Catawba Valley and First Gaston, is net interest income.
Net interest income is the difference between interest income, principally from
loan and investment securities portfolios, and interest expense, principally on
customer deposits and borrowings. Changes in net interest income result from
changes in volume, spread and margin. For this purpose, volume refers to the
average dollar level of interest-earning assets and interest-bearing
liabilities, spread refers to the difference between the average yield on
interest-earnings assets and the average cost of interest-bearing liabilities
and margin refers to net interest income divided by average interest-earnings
assets. Margin is influenced by the level and relative mix of interest-earning
assets and interest-bearing liabilities, as well as by levels of
noninterest-bearing liabilities and capital.
Net interest income for the quarter ended March 31, 2003 was $4.4 million as
compared with $2.6 million during the quarter ended March 31, 2002 an increase
of $1.7 million. This increase was impacted by the increased levels of interest
earning assets and interest bearing liabilities resulting from the business
combination mentioned previously. After the rapid rate decline in 2002, rates
have began to stabilize, however, there is increasing pressure from local
competition to lower rates. The Company's net interest margin decreased from
3.52% for the three-month period ending March 31, 2002 to 3.43% for the same
period in 2003.
Provision for Loan Losses. Our allowance for loan losses is established through
charges to earnings in the form of a provision for loan losses. We increase our
allowance for loan losses by provisions charged to operations and by recoveries
of amounts previously charged off, and we reduce our allowance by loans charged
off. We evaluate the adequacy of the allowance at least quarterly. In evaluating
the adequacy of the allowance, we consider the growth, composition and industry
diversification of the portfolio, historical loan loss experience, current
delinquency levels, adverse situations that may affect a borrower's ability to
repay estimated
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value of any underlying collateral prevailing economic conditions and other
relevant factors deriving from our history of operations.
We follow a loan review program designed to evaluate the credit risk in our loan
portfolio. Through this loan review process, we maintain an internally
classified watch list that helps management assess the overall quality of the
loan portfolio and the adequacy of the allowance for loan losses. In
establishing the appropriate classification for specific assets, management
considers, among other factors, the estimated value of the underlying
collateral, the borrower's ability to repay, the borrower's payment history and
the current delinquent status. As a result of this process, certain loans are
categorized as substandard, doubtful or loss and reserves are allocated based on
management's judgment and historical experience. Testing by our internal
auditors and by other independent third parties contracted with to perform
reviews of our loans helps to validate this process. In addition regulatory
agencies, as an integral part of their examinations process, periodically review
our allowance for loan losses and may require us to make adjustments based upon
information available to them at the time of their examination.
The provision for loan losses was $307,000 and $165,000 for the quarters ended
March 31, 2003 and 2002, respectively. The increase in the provision for loan
losses along with the resulting increase in the allowance for loan losses
expressed as a percentage of gross loans, from 1.37% at December 31, 2002 to
1.39% at March 31, 2003, resulted primarily from the increase in the level of
our nonaccrual loans and the overall growth of our loan portfolio. There were
net loan charge offs of $24,569 during the quarter ended March 31, 2003 as
compared with net charge offs of $157,109 during the quarter ended March 31,
2002. The increase in nonaccrual loans as illustrated below occurred during 2003
due to local and state economic conditions.
The following is a summary of the principal balances of loans on nonaccrual
status and loans past due ninety days or more:
3/31/2003 12/31/2002
---------- ----------
Loans contractually past due 90 days or more and/or on nonaccrual
status:
Nonaccrual loans $3,142,333 $2,441,995
Past due loans 90 days or more
and still accruing 996,881 582,387
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$4,139,214 $3,024,382
========== ==========
Non-Interest Income. Non-interest income was $1.6 million for the quarter ended
March 31, 2003 compared to $1.2 million for the quarter ended March 31, 2002, an
increase of $420,000. Service charges on deposit accounts accounted for most of
the increase, increasing from $344,000 at March 31, 2002 to $627,000 at March
31, 2003, an increase of $283,000. Fees charged for non-sufficient funds, a
major component of service charges on deposit accounts, increased from $244,000
to $493,000 for the same period an increase of $249,000. The business
combination discussed earlier in this section had a direct impact on service
charges. Mortgage operations have continued to see a strong demand and revenue
generated increased $64,000 for the three month period. During the fourth
quarter of 2002, the Company invested in bank owned life insurance. The income
generated during the first quarter of 2003 was $54,000, and is included in other
non interest income.
Non-Interest Expense. Non-interest expense increased $1.4 million, from $2.4
million at March 31, 2002 to $3.8 million at March 31, 2003. This increase is
due to the business combination discussed previously. Catawba Valley Bank added
six full service branches with the acquisition on December 31, 2002. The
increases in the categories under non-interest expense were all affected by
this. Also, First Gaston Bank opened their fourth full service office in July
2002 and purchased a fifth full service office from RBC Centura in Dallas, North
Carolina in October 2002.
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Liquidity and Capital Resources
Maintaining adequate liquidity while managing interest rate risk is the primary
goal of the Company's asset and liability management strategy. Liquidity is the
ability to fund the needs of the Company's borrowers and depositors, pay
operating expenses, and meet regulatory liquidity requirements. Maturing
investments, loan and mortgage-backed security principal repayments, deposit
growth and borrowings are presently the main sources of the Company's liquidity.
The Company's primary uses of liquidity are to fund loans and to make
investments.
As of March 31, 2003, liquid assets, consisting of cash and cash equivalents and
investment securities were approximately $93.7 million, which represents 16.4%
of total assets and 18.8% of total deposits and borrowings. Supplementing this
liquidity, the Company, through its bank subsidiaries, had $54.6 million of
credit available from the Federal Home Loan Bank and available lines of credit
from correspondent banks totaling $22 million. At March 31, 2003, outstanding
commitments to extend credit were $1.1 million and undisbursed line of credit
balances totaled $85.6 million. The Company also has commitments to complete
three new branches in 2003 of $1.0 million. Management believes that the
combined aggregate liquidity position of the Company is sufficient to meet the
funding requirements of loan demand and deposit maturities and withdrawals in
the near term.
Certificates of deposit represented 60.4% of the Company's total deposits at
March 31, 2003. The Company's growth strategy will include efforts focused at
increasing the relative volume of transaction deposit accounts. Certificates of
deposit of $100,000 or more represented 24.8% of the Company's total deposits at
March 31, 2003. These deposits are generally considered rate sensitive, but
management believes many of them are relationship-oriented. While the Company
will need to pay competitive rates to retain these deposits at maturity, there
are other subjective factors that will determine the Company's continued
retention of those deposits.
Banks and bank holding companies, as regulated institutions, must meet required
levels of capital. The FDIC, the primary regulator of Catawba Valley Bank and
First Gaston Bank, and the Federal Reserve, the primary regulator of United
Community Bancorp, have adopted minimum capital regulations or guidelines that
categorize components and the level of risk associated with various types of
assets. Financial institutions are expected to maintain a level of capital
commensurate with the risk profile assigned to its assets in accordance with
these guidelines.
At December 31, 2002, both United Community and each of its bank subsidiaries
maintained capital levels exceeding the minimum levels for "well capitalized"
bank holding companies and banks.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The Company's primary market risk is interest rate risk. Interest rate risk is
the result of differing maturities or repricing intervals of interest earning
assets and interest bearing liabilities and the fact that rates on these
financial instruments do not change uniformly. These conditions may impact the
earnings generated by the Company's interest earning assets or the cost of its
interest bearing liabilities, thus directly impacting the Company's overall
earnings. The Company's management actively monitors and manages interest rate
risk. One way this is accomplished is through the development of and adherence
to the Company's asset/liability policy. This policy sets forth management's
strategy for matching the risk characteristics of the Company's interest earning
assets and liabilities so as to mitigate the effect of changes in the rate
environment. The Company's market risk profile has not changed significantly
since December 31, 2002.
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Item 4. Controls and Procedures
Within the 90 days prior to the date of this report, the Company carried out an
evaluation under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Securities Exchange Act Rule
13a-14. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company required to be included in the Company's periodic SEC
Filings. There were no significant changes in the Company's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation.
-13-
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10(i) Amended and Restated Trust Agreement among United
Community Bancorp, as Depositor, The Bank of New
York, as Property Trustee, The Bank of New York
(Delaware), as Delaware Trustee, and the
Administrative Trustees (Catawba Valley Capital Trust I)
10(ii) Junior Subordinated Indenture between United
Community Bancorp and The Bank of New York, as
Trustee (Catawba Valley Capital Trust I)
10(iii) Floating Rate Junior Subordinated Note Due 2032
(Issued by United Community Bancorp to Catawba Valley
Trust I)
10(iv) Guarantee Agreement between United Community Bancorp, As
guarantor and The Bank of New York, as Guarantee Trustee
(Catawba Valley Capital Trust I)
10(v) Amended and Restated Trust Agreement among United
Community Bancorp, as Depositor, The Bank of New York, as
Property Trustee, The Bank of New York (Delaware), as
Delaware Trustee, and the Administrative Trustees (Catawba
Valley Capital Trust II)
10(vi) Junior Subordinated Indenture between United Community
Bancorp and The Bank of New York, as Trustee (Catawba
Valley Capital Trust II)
10(vii) Junior Subordinated Note Due 2032 (Issued by United
Community Bancorp to Catawba Valley Capital Trust II)
10(viii) Guarantee Agreement between United Community Bancorp, as
Guarantor and The Bank of New York, as Guarantee Trustee
(Catawba Valley Capital Trust II)
99.1 Certification Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
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(b) Reports on Form 8-K.
A Form 8-K was filed on January 16, 2003 releasing 4th Quarter Earnings.
A Form 8-K was filed on March 18, 2003 declared a semi -annual cash
dividend of $.08 per share.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNITED COMMUNITY BANCORP
Date: May 14, 2003 By: /s/ R. Steve Aaron
---------------------------------------
R. Steve Aaron
President and Chief Executive Officer
Date: May 14, 2003 By: /s/ Susan B. Mikels
---------------------------------------
Susan B. Mikels
Chief Financial Officer
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CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, R. Steve Aaron, certify that:
(1) I have reviewed this quarterly report on Form 10-Q of United Community
Bancorp, a North Carolina corporation (the "registrant");
(2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
(4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, is made known to us
by others within those entities, particularly during the period in
which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
(5) The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
(6) The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 14, 2003 By: /s/ R. Steve Aaron
------------------------------------
R. Steve Aaron
President and Chief Executive Officer
-17-
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Susan B. Mikels, certify that:
(1) I have reviewed this quarterly report on Form 10-Q of United Community
Bancorp, a North Carolina corporation (the "registrant");
(2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
(4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, is made known to us
by others within those entities, particularly during the period in
which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
(5) The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
(6) The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 14, 2003 By: /s/ Susan B. Mikels
-------------------------------------
Susan B. Mikels
Chief Financial Officer
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