UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
| (Mark One) |
_X_ QUARTERLY REPORT PERSUANT TO SECTION 13 OR 15(d) OF
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
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: 0-28080
UNITED FINANCIAL CORP.
(Exact Name of Registrant as Specified in its Charter)
| MINNESOTA | 81-0507591 |
| (State or Other Jurisdiction of | (I.R.S. Employer |
| Incorporation or Organization) | Identification No.) |
P.O. Box 2779, 120
First Avenue North, Great Falls, Montana 59403
(Address of Principal Executive Offices) (Zip Code)
(406) 727-6106
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 [ ]
Indicate by check mark
whether the Registrant is an accelerated filer
(as defined by Rule 12b-2 of the Securities Exchange Act of 1934).
Yes [ ] No [X]
Indicate the number of
shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date:
Common Stock, no par value; 2,436,475 shares outstanding as of November 8, 2004
Page i
UNITED FINANCIAL CORP.
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except per share data)
(Unaudited)
| September 30, | December 31, | ||||
|---|---|---|---|---|---|
| 2004 | 2003 | ||||
| ASSETS | |||||
| Cash and cash equivalents | $ 20,915 | $ 13,514 | |||
| Securities available-for-sale | 35,497 | 43,279 | |||
| Restricted stock, at cost | 4,211 | 4,109 | |||
| Loans held for sale | 4,582 | 3,883 | |||
| Loans receivable, net | 262,137 | 227,179 | |||
| Accrued interest receivable | 2,552 | 1,784 | |||
| Premises and equipment, net | 8,041 | 7,512 | |||
| Real estate and other personal property owned | 654 | 678 | |||
| Goodwill | 1,422 | 1,422 | |||
| Deferred income taxes, net | 372 | 272 | |||
| Other assets | 1,207 | 1,185 | |||
| $341,590 | $304,817 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||
| Deposits: | |||||
| Demand, NOW and money market demand accounts | $ 79,948 | $ 69,851 | |||
| Savings deposits | 56,834 | 54,897 | |||
| Time deposits | 112,467 | 102,766 | |||
| 249,249 | 227,514 | ||||
| Federal Home Loan Bank advances | 42,107 | 31,000 | |||
| Securities sold under agreements to repurchase | 13,667 | 7,889 | |||
| Accrued interest payable | 1,040 | 1,015 | |||
| Income taxes payable | 136 | — | |||
| Subordinated debt owed to trust | 3,093 | 3,093 | |||
| Other liabilities | 1,923 | 1,925 | |||
| 311,215 | 272,436 | ||||
| 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; 2,436,475 | |||||
| and 2,437,042 shares issued and outstanding | |||||
| at September 30, 2004 and December 31, 2003, | |||||
| respectively | 26,649 | 27,025 | |||
| Retained earnings, substantially restricted | 3,545 | 5,015 | |||
| Accumulated other comprehensive income, net | 181 | 341 | |||
| 30,375 | 32,381 | ||||
| $341,590 | $304,817 | ||||
| Equity/Assets | 8.89 | % | 10.62 | % | |
| Book Value/Share | $ 12.47 | $ 13.29 | |||
See Notes to Consolidated Condensed Financial Statements
Page 1
UNITED FINANCIAL CORP.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2004 | 2003 | 2004 | 2003 | ||||||
| Interest income | |||||||||
| Loans receivable | $4,289 | $3,982 | $12,117 | $11,909 | |||||
| Taxable investments | 395 | 325 | 1,190 | 1,215 | |||||
| Nontaxable investments | 13 | 24 | 42 | 76 | |||||
| Other interest earning assets | 38 | 66 | 121 | 231 | |||||
| Total interest income | 4,735 | 4,397 | 13,470 | 13,431 | |||||
| Interest expense | |||||||||
| Deposits | 854 | 1,012 | 2,524 | 3,364 | |||||
| Other borrowings | 485 | 405 | 1,271 | 1,281 | |||||
| Total interest expense | 1,339 | 1,417 | 3,795 | 4,645 | |||||
| Net interest income | 3,396 | 2,980 | 9,675 | 8,786 | |||||
| Provision for loan losses | — | 128 | 70 | 703 | |||||
| Net interest income after provision for loan losses | 3,396 | 2,852 | 9,605 | 8,083 | |||||
| Non-interest income | |||||||||
| Gain on sale of loans | 831 | 1,397 | 2,113 | 4,226 | |||||
| Service charges and fees | 296 | 313 | 840 | 760 | |||||
| Gain on sale of securities available-for-sale | — | — | 213 | 18 | |||||
| Other | 32 | 46 | 144 | 130 | |||||
| Total non-interest income | 1,159 | 1,756 | 3,310 | 5,134 | |||||
| Non-interest expense | |||||||||
| Compensation and benefits | 1,766 | 1,913 | 4,842 | 5,241 | |||||
| Occupancy and equipment expense | 381 | 345 | 1,063 | 945 | |||||
| Data processing fees | 193 | 181 | 563 | 528 | |||||
| Other expenses | 587 | 720 | 1,740 | 1,913 | |||||
| Total non-interest expense | 2,927 | 3,159 | 8,208 | 8,627 | |||||
| Income from continuing operations before | |||||||||
| income taxes | 1,628 | 1,449 | 4,707 | 4,590 | |||||
| Income taxes | 614 | 438 | 1,773 | 1,621 | |||||
| Income from continuing operations | 1,014 | 1,011 | 2,934 | 2,969 | |||||
| Discontinued Operations | |||||||||
| Income from discontinued operations (net of tax) | — | 723 | — | 891 | |||||
| Net income | $1,014 | $1,734 | $ 2,934 | $ 3,860 | |||||
| Basic earnings per share | |||||||||
| Continuing operations | $ .42 | $ .41 | $ 1.21 | $ 1.22 | |||||
| Discontinued operations | — | .30 | — | .36 | |||||
| Per Share Net Income | $ .42 | $ .71 | $ 1.21 | $ 1.58 | |||||
| Diluted earnings per share | |||||||||
| Continuing operations | $ .40 | $ .40 | $ 1.17 | $ 1.18 | |||||
| Discontinued operations | — | .29 | — | .36 | |||||
| Per Share Net Income | $ .40 | $ .69 | $ 1.17 | $ 1.54 | |||||
| Dividends declared per share | $ .27 | $ .27 | $ 1.81 | $ .63 | |||||
| Weighted average shares outstanding-basic | 2,436 | 2,442 | 2,434 | 2,440 | |||||
| Weighted average shares outstanding-diluted | 2,509 | 2,525 | 2,515 | 2,503 | |||||
See Notes to Consolidated Condensed Financial Statements
Page 2
UNITED FINANCIAL CORP.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Nine Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| September 30, 2004 | September 30, 2003 | |||||||
| Cash flows from operating activities | ||||||||
Net cash from operating activities | $ | 1,720 | $ | 5,928 | ||||
Cash flows from investing activities | ||||||||
Net increase in loans receivable | (35,161 | ) | (11,750 | ) | ||||
| Purchases of securities available-for-sale | (8,995 | ) | (21,207 | ) | ||||
| Proceeds from maturities, pay downs and sales of securities | ||||||||
| available-for-sale | 16,645 | 24,557 | ||||||
| Proceeds from sale of Valley Bancorp, Inc. stock | — | 9,012 | ||||||
| Purchases of premises and equipment | (962 | ) | (640 | ) | ||||
| Proceeds from sale of premises and equipment | — | 13 | ||||||
| Proceeds from sale of real estate and other personal property | ||||||||
| owned | 148 | 84 | ||||||
Net cash from investing activities | (28,325 | ) | 69 | |||||
Cash flows from financing activities | ||||||||
Net increase in deposits | 21,735 | 3,296 | ||||||
| Proceeds from Federal Home Loan Bank advances | 57,750 | 30,500 | ||||||
| Payments on Federal Home Loan Bank advances | (46,643 | ) | (33,500 | ) | ||||
| Payments on line of credit | — | (700 | ) | |||||
| Net increase (decrease) in securities sold under agreements to | ||||||||
| repurchase | 5,778 | (3,963 | ) | |||||
| Increase in advances from borrowers for taxes and | ||||||||
| insurance | 167 | 179 | ||||||
| Dividends paid to stockholders | (4,404 | ) | (1,523 | ) | ||||
| Proceeds from issuance of common stock | 247 | 38 | ||||||
| Purchase of treasury stock | (624 | ) | — | |||||
Net cash from financing activities | 34,006 | (5,673 | ) | |||||
| Increase in cash and cash equivalents | 7,401 | 324 | ||||||
| Cash and cash equivalents at beginning of year | 13,514 | 17,992 | ||||||
| Cash and cash equivalents at end of period | $ | 20,915 | $ | 18,316 | ||||
Supplemental Cash Flow Disclosure | ||||||||
| Cash payments for interest | $ | 3,770 | $ | 4,964 | ||||
| Cash payments for income taxes | $ | 1,616 | $ | 2,370 | ||||
Non Cash Investing and Financing Activities | ||||||||
| Vehicle financed | $ | — | $ | 28 | ||||
| Acquisition of other personal property in settlement of loans | $ | 173 | $ | 231 | ||||
See Notes to Consolidated Condensed Financial Statements
Page 3
UNITED FINANCIAL CORP.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
| 1. | GENERAL |
United Financial Corp. (“United”) is a bank holding company headquartered in Great Falls, Montana. United was organized as a Minnesota corporation in 1996. United’s banking business in Montana is conducted through its wholly owned subsidiary, Heritage Bank, a Montana corporation established in 1923, with operations in 15 locations in 13 Montana communities.
Heritage Bank is a state-chartered commercial bank with locations in Billings, Bozeman, Chester, Fort Benton, Geraldine, Glendive, Great Falls (three locations), Hamilton, Havre, Kalispell, Missoula, Libby and Shelby, Montana. Heritage Bank is engaged in the community banking business of attracting deposits from the general public through its branches and using those deposits, together with other available funds, to originate commercial (including lease financing), commercial real estate, residential, agricultural and consumer loans primarily in its market areas in Montana. Heritage Bank’s banking business is concentrated in the Great Falls area through its two full service branches and one separate drive up location. Based on total assets, 58% of United’s assets are located at Heritage Bank’s Great Falls locations. Heritage Bank also invests in mortgage-backed securities, U.S. Treasury obligations, other U.S. Government agency obligations and other interest-earning assets.
Heritage Bank’s financial condition and results of operations, and therefore the financial condition and results of operations of United, are dependent primarily on net interest income and fee income. Heritage Bank’s financial condition and results of operations are also significantly influenced by local and national economic conditions, changes in market interest rates, governmental policies, tax laws and the actions of various regulatory agencies.
Heritage Bank also holds a 14% ownership interest in Bankers’ Resource Center, a computer data center, located in Helena, Montana.
In December 2003, Heritage Bank incorporated a new wholly-owned subsidiary, Heritage Northwest, Inc., a mortgage banking company in Bellingham, Washingon, which began operations in the spring of 2004.
United makes available all periodic and current reports, free of charge, on its website as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). United’s website address is www.ufcmontana.com.
United’s principal offices are located at 120 First Avenue North, Great Falls, Montana 59401, and its telephone number is (406) 727-6106.
| 2. | BASIS OF PRESENTATION |
United’s consolidated financial statements, included herein, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the consolidated financial condition, results of operations, and cash flows for the periods disclosed. Operating results for the three and nine months ended September 30, 2004 are not necessarily indicative of the results anticipated for the year ending December 31, 2004. For additional information, refer to the consolidated audited financial statements and footnotes thereto included in United’s Annual Report to Shareholders and Annual Report on Form 10-K for the year ended December 31, 2003.
Page 4
| 3. | COMPREHENSIVE INCOME |
United’s only significant element of comprehensive income is unrealized gains and losses on securities available-for-sale.
(In thousands)
(Unaudited)
| Three Months Ended September 30, 2004 | Three Months Ended September 30, 2003 | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Before Tax | Tax Expense | After Tax | Before Tax | Tax Expense | After Tax | |||||||||||||||
| Net income | $ | 1,628 | $ | 614 | $ | 1,014 | $ | 2,867 | $ | 1,133 | $ | 1,734 | ||||||||
Unrealized and realized | ||||||||||||||||||||
| holding gains arising during | ||||||||||||||||||||
| period | 633 | 244 | 389 | 432 | 163 | 269 | ||||||||||||||
Less: reclassification adjustment | ||||||||||||||||||||
| for gains included in net income | — | — | — | (1 | ) | — | ||||||||||||||