10-Q 1 a35993.txt UNITED NATIONAL BANCORP ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2003 or [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to __________________ Commission File Number: 000-16931 UNITED NATIONAL BANCORP (Exact name of registrant as specified in its charter) New Jersey 22-2894827 -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer identification No.) incorporation or organization) 1130 Route 22 East, Bridgewater, New Jersey 08807-0010 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (908) 429-2200 --------------------------------------------------- (Registrant's telephone number, including area code) N/A -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). [X] Yes [ ] No As of August 1, 2003, there were 18,811,333 shares of common stock, $1.25 par value, outstanding. ================================================================================ UNITED NATIONAL BANCORP FORM 10 - Q INDEX

Part I - Financial Information Item 1 - Financial Statements UNITED NATIONAL BANCORP AND SUBSIDIARIES Consolidated Balance Sheet (In thousands, except per share data) (unaudited)

See accompanying Notes to Consolidated Financial Statements. 1 UNITED NATIONAL BANCORP AND SUBSIDIARIES Consolidated Statements of Income (In thousands, except per share data) (unaudited)

See accompanying Notes to Consolidated Financial Statements. 2 UNITED NATIONAL BANCORP AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity (In thousands, except per share data) (unaudited)

See accompanying Notes to Consolidated Financial Statements. 3 UNITED NATIONAL BANCORP AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) (unaudited)

See accompanying Notes to Consolidated Financial Statements. 4 UNITED NATIONAL BANCORP Notes to Consolidated Financial Statements (Unaudited) Note 1. Basis of Presentation The accompanying unaudited Consolidated Financial Statements included herein have been prepared by United National Bancorp (the "Company"), in accordance with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations. These Consolidated Financial Statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. In the opinion of the Company, all adjustments (consisting only of normal recurring accruals), which are necessary for a fair presentation of the operating results for the interim periods, have been included. The results of operations for periods of less than a year are not necessarily indicative of results for the full year. Certain reclassifications have been made to the prior years' financial statements to conform with the classifications used in 2003. Note 2. Acquisition On August 21, 2002, Vista Bancorp, Inc. ("Vista") was merged with and into the Company with the Company being the surviving corporation (the "Vista Merger") in a transaction accounted for under the purchase method of accounting. Under the terms of the Vista Merger, the Company acquired all 5,350,637 outstanding shares of Vista in exchange for 4,695,184 shares of the Company's Common Stock and $37,943,095 in cash. Note 3. Comprehensive Income Total comprehensive income amounted to the following for the periods indicated (in thousands):

Note 4. Net Income per Share Basic income per common share is computed by dividing net income available to common stockholders by the weighted average number of shares outstanding during each year. Diluted net income per common share is computed by dividing net income available to common stockholders by the weighted average number of shares outstanding, as adjusted for the assumed exercise of common stock options, using the treasury stock method. 5

Note 5. Goodwill and Other Intangibles On July 20, 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and periodically reviewed for impairment. The Company adopted SFAS No. 142 on January 1, 2002. The Company recorded a core deposit intangible of $14.8 million in connection with the Vista Merger during the third quarter of 2002. The core deposit intangible has an estimated life of 10 years and during the three- and six-months ended June 30, 2003 the Company amortized $372,000 and $742,000, respectively. The core deposit intangible will be periodically reviewed for impairment. In addition, the Company recorded goodwill of $79.5 million in connection with the Vista Merger. The goodwill will be tested for impairment at least annually in accordance with the provisions of SFAS No. 142. During the three- and six-months ended June 30, 2003, the Company recorded amortization of intangible assets acquired before July 1, 2001 of approximately $418,000 and $839,000, respectively which primarily represented core deposit intangibles. The remaining amortization period of these core deposit intangibles is approximately 2.0 years. Note 6. Recent Accounting Pronouncements Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity," was issued in May 2003. Statement 150 requires instruments within its scope to be classified as a liability (or, in some cases, as an asset). Statement 150 is generally effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003 (i.e. July 1, 2003 for calendar year entities). For financial instruments created before June 1, 2003 and still existing at the beginning of the interim period of adoption, transition generally should be applied by reporting the cumulative effect of a change in an accounting principle by initially measuring the financial instruments at fair value or other measurement attributes of the Statement. The adoption of Statement 150 did not have a significant effect on the Company's consolidated financial statements. Statement of Financial Accounting Standards No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities," was issued on April 30, 2003. The Statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement 133. This Statement is effective for contracts entered into or modified after June 30, 2003. The adoption of this Statement is not expected to have a significant effect on the Company's consolidated financial statements. In December, 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment to FASB Statement No. 123". SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee 6 compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both interim and annual financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The interim reporting requirements of SFAS No. 148 are effective for interim periods beginning after December 31, 2002. In April 2003, the FASB announced that they will propose an accounting standard requiring all companies to expense the value of employee stock options based upon the fair value of options. Effective December 31, 2002, the Company elected to adopt the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation", for stock-based employee compensation. All prior periods presented have been restated to reflect the compensation cost that would have been recognized had the recognition provisions of Statement 123 been applied to all awards granted to employees after January 1, 1995. Note 7. Lines of Business - Segment Reporting The Company, for management purposes, is divided into the following lines of business: Retail Banking, Commercial Banking, Investments, and Trust and Investment Services. Activities not included in these lines are reflected in All Other. Line of business information is based on accounting practices that conform to and support the current management structure, and is not necessarily comparable with similar information for any other financial institution. Net income before taxes on a fully tax-equivalent basis includes revenues and expenses directly associated with each line, plus allocations of certain indirect revenues and expenses. Centrally provided corporate services and general overhead are allocated in proportion to the contribution of each business line to consolidated pretax income prior to the inclusion of these costs. A matched maturity funds transfer method is employed to assign a cost of funds to the earning assets of each business line, as well as to a value of funds to the liabilities of each business line. The provision for loan losses is allocated based on the historical net charge-off ratio for each line of business. The following tables present the results of operations on a tax-equivalent basis, using a 35% Federal tax rate, and average balances by reportable segment for the periods presented below (in thousands). 7

9 Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion is an analysis of the financial condition and results of operations of the Company for the three- and six-months ended June 30, 2003 and 2002, and should be read in conjunction with the related financial statements and accompanying notes presented elsewhere herein. Results of operations for the three- and six-month periods ended June 30, 2003 are not necessarily indicative of results to be attained for any other period. FORWARD-LOOKING STATEMENTS The foregoing contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about our confidence and strategies and our expectations about earnings, opportunities, and market conditions. These statements may be identified by such forward-looking terminology as "expect", "believe", "anticipate", "optimistic", or by expressions of confidence such as "for the coming months", "consistent", "continue", "strong", "superior" or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties. These include, but are not limited to, expected benefits, cost savings and other benefits from the Vista acquisition or other planned programs not being realized or not being realized within the expected time frame; income or revenues from the Vista acquisition or other planned programs being lower than expected or operating costs higher; efficiencies of our operations not improving as a result of certain cost cutting measures, competitive pressures in the banking or financial services industries increasing significantly; business disruption related to program implementation or methodologies; weakening of economic conditions in New Jersey or Pennsylvania; changes in legal, regulatory and tax structures; and unanticipated occurrences delaying planned programs or initiatives or increasing their costs or decreasing their benefits. Actual results may differ materially from such forward-looking statements. The Company does not assume any obligation for updating any such forward-looking statements at any time. VISTA MERGER On August 21, 2002, the Company acquired Vista Bancorp, Inc. ("Vista") in a transaction accounted for under the purchase method of accounting (the "Vista Merger"). Under the terms of the Vista Merger, the Company acquired all 5,350,637 outstanding shares of Vista in exchange for 4,695,184 shares of the Company's Common Stock and $37,943,095 in cash. Based on its unaudited financial statement at June 30, 2002, Vista had total assets of $713 million, deposits of $600 million and stockholders' equity of $66 million. Vista was headquartered in Phillipsburg, New Jersey and operated 16 banking offices in western New Jersey and eastern Pennsylvania. CRITICAL ACCOUNTING POLICIES AND ESTIMATES "Management's Discussion and Analysis of Financial Condition and Results of Operations" is based upon the Company's Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. Certain information and note disclosures usually included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission for the preparation of the Form 10-Q. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Some accounting policies have a significant impact on amounts reported in these financial statements. A summary of significant accounting policies and a description of accounting policies that are considered critical may be found in the Company's Annual Report on Form 10-K, filed on March 20, 2003, in the Notes to the Consolidated Financial Statements and the Critical Accounting Policies and Estimates section. 10 RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2003 AND 2002 Earnings Summary The Company reported net income for the second quarter of 2003 of $7.6 million, up 152% from the $3.0 million earned in the three months ended June 30, 2002. Diluted per share earnings were $0.40 in the second quarter of 2003, up 90% over the $0.21 recorded for the second quarter of 2002. The increase in earnings per share over the prior year period resulted primarily from a decreased loan loss provision compared to the second quarter of 2002 as well as an increase in gains on securities transactions. The substantial decrease in the loan loss provision for the current quarter was related primarily to one large credit that was placed on non-accrual in the second quarter of 2002 and the continued improvement in asset quality. In the second quarter of 2002, the Company recorded a $2.8 million charge-off on a $5.3 million loan participation to Suprema Specialties, a company that declared bankruptcy during the first quarter of 2002, and recorded a $2.4 million charge-off related to a loan to an insurance premium financing company that was placed on non-accrual during the second quarter of 2002. The gains on securities transactions largely resulted from the sale of mortgage-backed securities to take advantage of current market conditions and the opportunity to reinvest the proceeds, expecting that otherwise these securities would have been prepaid in the near term at par value. The return on average assets was 1.02% and 0.60% for the second quarter of 2003 and 2002, respectively while the return on average stockholders' equity was 11.40% and 7.81% for the second quarter of 2003 and 2002, respectively. The higher loan loss provision recorded in the second quarter of 2002 adversely affected the return on average assets and the return on average stockholders' equity for that period. Net Interest Income The Company's most significant revenue source is net interest income, which represents the difference between interest earned on assets and interest paid to depositors and other creditors. A portion of the Company's total interest income is derived from investments that are exempt from Federal taxation. Due to the "tax-free" nature of these investments, the amount of pretax income realized from them is less than the amount of pretax income realizable from comparable investments subject to Federal taxation. For purposes of the following discussion, interest exempt from Federal taxation has been adjusted to a fully tax-equivalent basis assuming a statutory tax rate of 35% for both the second quarter of 2003 and 2002. This was accomplished by adjusting this income upward to make it equivalent to the level of taxable income required to earn the same amount after taxes. A summary of net interest income on a tax-equivalent basis for the second quarter of 2003 and 2002 is presented in the following table (in thousands):

For the second quarter of 2003, tax-equivalent net interest income increased 42% to $26.2 million from $18.5 million in the second quarter of 2002. This growth resulted from an increase of $804.6 million in average interest-earning assets primarily related to the acquisition of Vista during the third quarter of 2002, which was accounted for using the purchase method of accounting. The remainder of the increase in average earnings assets was due to growth in residential mortgage loans and investment securities. A 4 basis-point narrowing in the net interest margin in the second quarter of 2003 from the same quarter of 2002 served to limit the growth in net interest income. The net interest margin for the second quarter of 2003 declined to 3.92% from 3.96% in the second quarter of 2002, despite a 19 basis-point widening in the net interest spread. This 4 basis point narrowing was partially attributable to a reduced contribution of net non-interest-bearing funds resulting from the lower 2003 interest rate 11 environment and to a decline in the proportion of net non-interest-bearing funds to total sources of funds principally due to the Vista Merger. Average interest-earning assets grew $804.6 million or 43% in the second quarter of 2003 from the same quarter in 2002 as average loans, securities and short-term investments all increased. Average loans increased $557.6 million or 44% during the second quarter of 2003 compared to the same quarter in 2002, primarily from loans added in the Vista Merger. Average securities rose $247.9 million or 40% in the second quarter of 2003 from the prior year, also due to the Vista Merger. Average short-term investments decreased $0.9 million to $0.6 million in the second quarter of 2003 from the prior year quarter. Excluding the impact of the Vista Merger, average loans increased $143.8 million or 11% and average securities increased $65.4 million or 11%. Average deposits grew $762.4 million or 53% in the second quarter of 2003 from the same quarter last year. Average deposits for 2003 contained approximately $616.2 million in deposits resulting from the Vista Merger. Excluding the effect of the Vista Merger, average total deposits for the second quarter of 2003 increased $146.2 million or 10% from the second quarter of 2002. The increase in average deposits in the second quarter of 2003 over the same quarter of 2002 excluding the impact of the Vista Merger was largely attributable to a $24.4 million or 9% growth in average demand deposits and a $119.6 million or 20% growth in average savings deposits, which includes NOW and money market accounts. Time deposits, excluding the impact of the Vista Merger, increased a modest $2.2 million. The Company increased its short-term borrowings by $46.4 million or 47% due to the aforementioned growth in average loans. Average other borrowings, which consist of debt having an original maturity of one year or more, increased $35.4 million or 11% during the second quarter of 2003 from the prior year quarter. The increase in average other borrowings was principally due to the impact of Vista Merger and liability extensions made to reduce the liability sensitivity of the Bank and higher amortizing advances from the Federal Home Loan Bank of New York that were used to match fund certain fixed-rate loans. 12 Average Consolidated Balance Sheet, Net Interest Income and Net Interest Margin (Tax-Equivalent Basis)

---------- (1) Securities available for sale are stated at amortized cost. (2) Interest income is presented on a tax-equivalent basis using a 35% Federal tax rate. (3) Average loan balances and yields include non-accruing loans. Loan fees are included in the interest amounts and are not material. (4) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets. 13 Provision for Loan Losses The provision for loan losses represents Management's estimate of the amount necessary to be charged to operations to bring the allowance for loan losses to a level that is considered adequate in relation to the risk of losses inherent in the loan portfolio. Actual loan losses, net of recoveries, serve to reduce the allowance. The loan loss provision amounted to $1.6 million in the second quarter of 2003, representing a $2.7 million decrease from the same quarter of 2002 provision of $4.3 million. The substantial decrease in the loan loss provision for the current quarter was related primarily to one large credit that was placed on non-accrual in the second quarter of 2002 and the continued improvement in asset quality. Non-Interest Income Non-interest income has become an increasingly important source of revenue for the Company. The major components of non-interest income are presented below (in thousands).

NM - Not meaningful. Non-interest income amounted to $7.5 million in the second quarter of 2003, an increase of 31% from the $5.8 million earned in the prior year quarter. Excluding the $0.9 million gain on the disposition of a credit card portfolio in the second quarter of 2002, the growth in non-interest income from the second quarter of 2002 was primarily attributable to the realization of $1.3 million in gains on securities transactions in the second quarter of 2003, the effect of the Vista Merger, and increased deposit services fee income. The Company sold $105 million in available for sale mortgage-backed securities during the second quarter of 2003 in an effort to realize gains and reinvest the proceeds, expecting that otherwise these securities would be prepaid in the near term at par value. Typically, such prepayments have an adverse effect on the yields on average loans and securities and, accordingly, on net interest income. As a result of these transactions, the Company has largely disposed of the Vista mortgage-backed securities portfolio, therefore eliminated the potential adverse impact of the amortization of the purchase accounting premium recorded on these securities at the date of acquisition. 14 Non-Interest Expense The Company closely monitors non-interest expense growth. The following table presents an analysis of the major categories of non-interest expenses (in thousands):

---------- NM - Not meaningful. Non-interest expense increased 27% to $21.0 million in the second quarter of 2003 over the $16.5 million incurred in the same quarter of 2002. The increase over the second quarter of 2002 was primarily due to the impact of the Vista Merger of approximately $3.4 million, higher pension and healthcare costs, the recognition of $0.9 million in employment termination costs, increased intangible asset amortization related to the Vista Merger, and higher proxy solicitation expenses. The Company incurred approximately $0.4 million in proxy solicitation costs in connection with the election of its nominees for director at the 2003 Annual Meeting of Shareholders. Partly offsetting these expense increases were declines in data processing expense related to the in-house processing of checks and lower credit card expense resulting from the sale of this portfolio. In addition, the Company incurred $0.8 million in integration costs in the second quarter of 2002 related to the Vista Merger. The Company adopted the fair value based method to recognize compensation expense on all of its outstanding stock option awards in the fourth quarter of 2002, in accordance with the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS No. 148, which permits retroactive restatement. Accordingly, the Company increased its employee benefit expense in its prior period. Income Taxes The provision for income taxes amounted to $2.5 million in the second quarter of 2003 compared to a $0.4 million benefit recognized in the second quarter of 2002. The increase in the income tax provision was due to a 286% increase in income before provision for income taxes. LINES OF BUSINESS - SEGMENT REPORTING The Company, for management purposes, is segmented into the following lines of business: Retail Banking, Commercial Banking, Investments, and Trust and Investment Services. Activities not included in these lines are reflected in All Other. Summary financial information on a fully tax-equivalent basis for the lines of business is presented in "Note 7. Lines of Business - Segment Reporting" of this report. Line of business information is based on accounting practices that conform to and support the current management structure, and is not necessarily comparable with similar information for any other financial institution. 15 Net income (loss) before taxes on a fully tax-equivalent basis includes revenues and expenses directly associated with each line, plus allocations of certain indirect revenues and expenses. Centrally provided corporate services and general overhead are allocated in proportion to the contribution of each business line to consolidated pretax income prior to the inclusion of these costs. A matched maturity funds transfer method is employed to assign a cost of funds to the earning assets of each business line, as well as to a value of funds to the liabilities of each business line. The provision for loan losses is allocated based on the historical net charge-off ratio for each line of business. Retail Banking Retail Banking meets the needs of individuals and small businesses. This segment includes loans secured by one-to-four family residential properties, construction financing, loans to individuals for household, family and other personal expenditures, and lease financing. In addition, this segment includes the branch network. Income before taxes for this segment, in the second quarter of 2003, increased $4.0 million from the second quarter of 2002 due to an increase of $7.9 million in net interest income. This was offset by increases in non-interest expense of $3.2 million and the allocation of the provision for loan losses of $0.6 million, and a decrease of $0.1 million in non-interest income. The higher net interest income was primarily related to increased average residential mortgage and consumer loans and wider-spread average core deposits when compared to the second quarter of 2002. The increase in non-interest expense was mainly due to the Vista Merger, and the increase in the loan loss provision was due primarily to the Vista Merger and increased loan volume. Commercial Banking Commercial Banking provides term loans, demand secured loans, Small Business Administration ("SBA") financing, floor plan loans and financing for commercial and construction lending and commercial credit to middle-market businesses. It also includes the operations of United Commercial Capital Group, which provides non-traditional real estate and commercial financings. Pretax results in the second quarter of 2003 increased $3.8 million from the second quarter of 2002 primarily due to a $3.4 million decrease in the loan loss provision allocation. The substantial decrease in the loan loss provision for the current quarter was related primarily to one large credit that was placed on non-accrual in the second quarter of 2002 and the continued improvement in asset quality. Net interest income increased $1.1 million in the second quarter of 2003 due to increased average commercial and real estate construction loans. In addition, non-interest expense increased $0.7 million due to the Vista Merger. Investments The Investments segment is comprised of the Company's securities portfolio, which includes U.S. Treasury and Federal Agency securities, tax-exempt securities, mortgage-backed securities, corporate debt securities, equity securities and short-term investments. Pretax income for the second quarter of 2003 increased $2.7 million over the second quarter of 2002 due to a $2.5 million increase in net interest income and a $1.4 million increase in non-interest income, offset by a $1.2 million increase in non-interest expense. The increase in net interest income was largely due to a 40% growth in average investment securities and wider spreads on mortgage-backed securities purchased during the past six months, while the increase in non-interest income was due to the realization of $1.3 million of investment securities gains. The increase in non-interest expense was due to a larger allocation of corporate overhead due to the increased pretax income. Trust and Investment Services The Trust and Investment Services segment derives revenue in the form of fees generated for the services provided. The major sources of fee income are generated from a full range of fiduciary services, ranging from mutual funds to personal trust, investment advisory and employee benefits. Also included are fees generated from the financial services area, which provides uninsured financial products, including the sale of annuities, insurance and mutual funds. In the second quarter of 2003, income before taxes for this segment increased $0.1 million from the second quarter of 2002. Fees for trust services increased $0.2 million, which was offset by an increase in non-interest expense of $0.1 million. All Other The All Other segment primarily includes the impact of stockholders' equity and the allowance for loan losses, as well as funds transfer-pricing offsets. Additionally, certain revenues and expenses that are not considered allocable to a line of business are reflected in this segment. Net loss before taxes in the second quarter of 2003 for this segment was $2.1 million as compared to net income before taxes of $0.8 million in the second quarter of 2002. 16 This was due primarily to a $2.9 million decline in net interest income related to a higher funds credit assigned to non-maturity core deposits in Retail Banking in the second quarter of 2003 due to longer expected life of these deposits and lower relative funding costs charged on mortgage-related assets in the Retail Banking and Investments segments. In addition, non-interest expense was $0.8 million lower in the second quarter of 2003 compared to the second quarter of 2002 due to $0.8 million of merger related expenses recorded in 2002. The following table shows the percentage contribution of the various lines of business to consolidated income before taxes on a fully tax-equivalent basis:

17 RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002 Earnings Summary The Company reported net income for the six months ended June 30, 2003 of $15.2 million, up 118% from the $7.0 million earned in the same period of the prior year. Diluted per share earnings were $0.80 in the six months ended June 30, 2003, up 70% over the $0.47 recorded for the six months ended June 30, 2002. The increase in earnings per share over the prior year period resulted primarily from a decreased loan loss provision compared to the prior year period as well as an increase in gains on securities transactions. The substantial decrease in the loan loss provision for the current year period was related primarily to large charge-offs in the prior year period, as discussed previously in the comparison of the second quarter results. The gains on securities transactions largely resulted from the sale of mortgage-backed securities to take advantage of current market conditions and the opportunity to reinvest the proceeds, expecting that otherwise these securities would have been prepaid in the near term at par value. The return on average assets was 1.04% and 0.70% for the six months ended June 30, 2003 and 2002, respectively while the return on average stockholders' equity was 11.43% and 8.97% for the six months ended June 30, 2003 and 2002, respectively. The higher loan loss provision recorded in the first and second quarters of 2002 adversely affected the return on average assets and the return on average stockholders' equity for the first half of 2002. Net Interest Income A summary of net interest income on a tax-equivalent basis for the six months ended June 30, 2003 and 2002 is presented in the following table (in thousands):

For the 2003 period, tax-equivalent net interest income increased 36% to $51.0 million from $37.5 million in the prior year period. This growth was primarily due to the impact of the Vista Merger and growth in residential mortgage loans and investment securities. A 17 basis-point narrowing in the net interest margin during the first six months of this year from the same period of last year partially offset the favorable effect of the increase in average interest-earning assets. The net interest margin narrowed by 17 basis points for the six months ended June 30, 2003 to 3.90% from 4.07% in the prior year period, despite a three basis-point widening in the net interest spread during these periods. The favorable effect of the improvement in spread was offset by a reduced contribution of net non-interest-bearing funds resulting from the lower 2003 interest rate environment and a decline in the proportion of net non-interest-bearing funds to total sources of funds resulting from the Vista Merger. The average rate earned on interest-earning assets declined 74 basis-points to 5.90% while the average rate paid on interest-bearing liabilities declined 77 basis points to 2.30%. Average interest-earning assets grew $776.1 million or 42% in the six months ended June 30, 2003 compared to the same period of the prior year, as average loans, securities and short-term investments all increased. The decline in the average rate on interest-earning assets of 74 basis points was largely due to a sharp rise in prepayments on mortgage-related assets, a 75 basis-point decline in the prime rate and in other short-term interest rates, and a higher level of average short-term investments. Average loans increased $507.3 million or 41% during the six months ended June 30, 2003 compared to the same period in 2002 primarily due to the Vista Merger coupled with strong loan growth experienced during the second quarter of 2003. Average securities rose $244.6 million or 41% in the first six months of 2003 from the same period of the prior year, also due to the Vista Merger. Average short-term investments increased $24.2 million to $25.3 million in the six months ended June 30, 2003 from $1.1 million in the same period of 2002, due to a sharp rise in prepayments on mortgage-related assets. Excluding 18 the impact of the Vista Merger, average loans increased $93.5 million or 7% and average securities increased $62.0 million or 10%. Average deposits grew $763.4 million or 54% in the six months ended June 30, 2003 from the same period last year. Average deposits for 2003 contained approximately $616.2 million in deposits resulting from the Vista Merger. Excluding the effect of the Vista Merger, average total deposits for the current period of 2003 increased $147.2 million or 10% from the same period of 2002. The increase in average deposits in the six month period of 2003 over the prior year period excluding the impact of the Vista Merger was largely attributable to a $21.2 million or 8% growth in average demand deposits and a $124.4 million or 22% growth in average savings deposits, which includes NOW and money market accounts. Time deposits, excluding the impact of the Vista Merger, increased a modest $1.6 million. The Company reduced its short-term borrowings by $6.9 million or 7% due to the effect of the Vista Merger as well as to the aforementioned growth in average deposits. Average other borrowings, which consist of debt having an original maturity of one year or more, increased $60.7 million or 20% during the first half of 2003 from the same period last year. The increase in average other borrowings was principally due to the impact of the Vista Merger and liability extensions made to reduce the liability sensitivity of the Bank and higher amortizing advances from the Federal Home Loan Bank of New York that were used to match fund certain fixed-rate loans. 19 Average Consolidated Balance Sheet, Net Interest Income and Net Interest Margin (Tax-Equivalent Basis)

---------- (1) Securities available for sale are stated at amortized cost. (2) Interest income is presented on a tax-equivalent basis using a 35% Federal tax rate. (3) Average loan balances and yields include non-accruing loans. Loan fees are included in the interest amounts and are not material. (4) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets. 20 Provision for Loan Losses The provision for loan losses represents Management's estimate of the amount necessary to be charged to operations to bring the allowance for loan losses to a level that is considered adequate in relation to the risk of losses inherent in the loan portfolio. Actual loan losses, net of recoveries, serve to reduce the allowance. The loan loss provision amounted to $3.1 million in the six months ended June 30, 2003, representing a $5.9 million decrease from the same period of 2002. The substantial decrease in the loan loss provision for the six months was related primarily to two credits that were placed on non-accrual in the first and second quarters of 2002 and the continued improvement in asset quality. Non-Interest Income Non-interest income has become an increasingly important source of revenue for the Company. The major components of non-interest income are presented below (in thousands).

---------- NM - Not meaningful. Non-interest income increased 38% to $16.1 million for the six months ended June 30, 2003 from the $11.7 million earned in the same period of 2002. The increase from the prior year period was attributable to the realization of $4.1 million in gains on securities transactions during the six months ended June 30, 2003 and the impact of the Vista Merger, partly offset by a $1.2 million recovery on the dissolution of a joint venture in the first quarter of 2002 and the aforementioned gain recognized from the sale of the credit card portfolio in the second quarter of 2002. The Company sold $152 million in available for sale mortgage-backed securities during the six months ended June 30, 2003 in an effort to realize gains and reinvest the proceeds, expecting that otherwise these securities would be prepaid in the near term at par value. Typically, such prepayments have an adverse effect on the yields on average loans and securities and, accordingly, on net interest income. 21 Non-Interest Expense The Company closely monitors non-interest expense growth. The following table presents an analysis of the major categories of non-interest expenses (in thousands):

---------- NM - Not meaningful. Non-interest expense increased 35% to $42.1 million in the six months ended June 30, 2003 over the $31.2 million incurred in the same period of 2002. The same factors noted in the comparison of the second quarter 2003 expenses to those of the same period in 2002 also contributed to the first half expense variance, as well as increased snow removal/parking lot maintenance costs of $0.7 million and costs relating to the settlement of a lawsuit, which amounted to $0.5 million. The Company adopted the fair value based method to recognize compensation expense on all of its outstanding stock option awards in the fourth quarter of 2002, in accordance with the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS No. 148, which permits retroactive restatement. Accordingly, the Company increased its employee benefit expense in its prior period. Income Taxes The provision for income taxes amounted to $4.5 million in the six months ended June 30, 2003 from the $0.4 million incurred in the same period of the prior year. The increase in the income tax provision was due to a 167% increase in income before provision for income taxes. LINES OF BUSINESS - SEGMENT REPORTING The Company, for management purposes, is segmented into the following lines of business: Retail Banking, Commercial Banking, Investments, and Trust and Investment Services. Activities not included in these lines are reflected in All Other. Summary financial information on a fully tax-equivalent basis for the lines of business is presented in "Note 7. Lines of Business - Segment Reporting" of this report. Retail Banking Net income before taxes for this segment in the six months ended June 30, 2003, increased $9.5 million from the same period in 2002 due to increases of $17.6 million in net interest income and $0.5 million in non-interest income. This was offset by increases in non-interest expense of $7.6 million and an increase in the allocation of the provision for loan losses of $1.0 million. The higher net interest income was primarily related to increased average residential mortgage and consumer loans and wider-spread average core deposits when compared to the first half of 2002. The increases in non-interest income and non-interest expense were mainly due to the Vista 22 Merger, and the increase in the loan loss provision was due primarily to the Vista Merger and increased loan volume. Commercial Banking Pretax results in the six months ended June 30, 2003 increased $7.0 million from the same period in 2002 primarily due to a $6.9 million decrease in the loan loss provision allocation. The substantial decrease in the loan loss provision for the current quarter was related primarily to two credits that were placed on non-accrual in the first and second quarters of 2002 and the continued improvement in asset quality. Net interest income increased $1.2 million in the six months ended June 30, 2003 due to increased average commercial and real estate construction loans. In addition, non-interest expense increased $1.2 million due to the Vista Merger. Investments Pretax income for the six months ended June 30, 2003 increased $7.1 million over the same period in 2002 due to a $5.3 million increase in net interest income and a $4.5 million increase in non-interest income, offset by a $2.7 million increase in non-interest expense. The increase in net interest income was largely due to a 44% growth in average investment securities and wider spreads on mortgage-backed securities purchased during the past six months, while the increase in non-interest income was due to the realization of $4.1 million of investment securities gains. The increase in non-interest expense was due to a larger allocation of corporate overhead due to the increased pretax income. Trust and Investment Services In the six months ended June 30, 2003, income before taxes for this segment increased $0.2 million from the same period in 2002. Fees for trust services increased $0.4 million, which was offset by a $0.2 million increase in non-interest expense. All Other Net loss before taxes in the six months ended June 30, 2003 for this segment was $4.6 million as compared to net income before taxes of $6.2 million for the same period in 2002. This was due primarily to a $10.6 million decline in net interest income related to a higher funds credit assigned to non-maturity core deposits in Retail Banking in the first half of 2003 due to longer expected life of these deposits and lower relative funding costs charged on mortgage-related assets in the Retail Banking and Investments segments. Non-interest income decreased $1.1 million from the first quarter of 2002 due to a $1.2 million recovery from the dissolution of the UFS joint venture recorded in 2002. In addition, non-interest expense was $0.8 million lower in the six months ended June 30, 2003 compared to the same period of 2002 due to $0.8 million of merger related expenses recorded in 2002. The following table shows the percentage contribution of the various lines of business to consolidated income before taxes on a fully tax-equivalent basis:

23 FINANCIAL CONDITION Loan Portfolio An analysis of loans outstanding, net of unearned income, is presented in the following table (in thousands):

At June 30, 2003, total loans increased $236.8 million or 14% from year-end 2002, which represents an annual growth rate of 28%. The Company achieved strong growth in residential, commercial and consumer loans, which increased $117.4 million, $85.2 million and $44.7 million, respectively. On an annualized basis, this represents growth of 52%, 50% and 23%, respectively. Activity in the commercial mortgage portfolio, which declined $9.2 million from year-end 2002, had been affected by the adverse weather conditions this past winter. Asset Quality Lending policies are formulated by the Company's Senior Lending Officer and reviewed and approved by the Board of Directors of the Company and the Bank. Loan approval requirements are dictated by the policies for the respective loan areas of the Bank, which are based on, but not limited to, reputation of the customer, collateral securing the loan, capital, ability to repay, and current economic conditions. Individual approval limits for each of the Bank's loan officers have been reviewed and reset, as appropriate. However, authority for approval of credits between $1 million and $15 million, is still retained by the Bank's Management Loan Committee, consisting of the Bank's Chief Executive Officer, President, Chief Operating Officer and Senior Lending Officer, Executive Vice President Commercial and Consumer Lending, Executive Vice President Real Estate Lending, Senior Vice President and Commercial Real Estate Department Head, Vice President and Commercial Loan Department Head and the Senior Credit Officer, as appropriate. Additionally, the Executive Committee of the Board of Directors of the Company and the Bank approve credit extensions exceeding $15 million. Loan officers are required to identify potentially deteriorating loan situations through a self-reporting system. The Bank maintains a risk rating system for all commercial, construction and commercial real estate loans. Each of these loans is evaluated and given a rating upon origination. Subsequently, these loans are monitored on a regular basis and rating revisions are made, as appropriate. Each month, the Bank's lending staff reviews delinquent loans for all loan portfolios with the Credit Quality Committee of the Bank, consisting of the same management group as the Bank's Management Loan Committee as well as other lending department heads, and the Executive Committee of the Board of Directors of the Company and the Bank. These processes allow for implementation of a strategy to react in the early stage of a potential credit concern. The Company's independent loan review function is an integral part of its overall loan administration. The Bank has engaged an independent consultant to perform the loan review function. The independent consultant is responsible for the evaluation of credit extensions with respect to quality, documentation and risk criteria. The consultant's direct reporting line to the Audit Committee of the Board of Directors of the Bank is intended to maintain its independence and to provide assurance that troubled loan situations will be identified and proper procedures followed to establish corrective measures. The loan review and the self-reporting and risk rating systems are designed to provide the Company with an early warning mechanism to detect loans to customers with deteriorating financial conditions or loans that may represent potentially troubled situations. In addition, the Company's internal audit department reviews loan documentation and collateral as part of its regular audit procedures. 24 Non-Performing Assets The Company defines non-performing assets as non-accrual loans, impaired loans, loans past due 90 days or more and still accruing, other real estate owned and other assets owned. At June 30, 2003, non-performing assets totaled $17.0 million or 0.56% of total assets compared to $16.3 million or 0.57% of total assets at December 31, 2002. Non-performing loans at June 30, 2003 were $15.4 million or 0.81% of total loans, compared to $15.7 million or 0.95% of total loans at December 31, 2002. At June 30, 2003, the Company's holdings in other real estate owned amounted to $1.5 million compared to $570,000 at December 31, 2002. Foreclosures will continue to result in assets migrating from non-performing loans to other real estate owned. It is the Company's intent to actively negotiate and dispose of these properties at fair market values, which are considered reasonable under the circumstances. In the six months ended June 30, 2003, the Company recognized $72,000 in net recoveries relating to these properties compared to $75,000 in net costs during the same period of 2002. Other assets owned amounted to $84,000 at June 30, 2003 compared to $30,000 at December 31, 2002. The following table provides an analysis of non-performing assets as of the periods indicated (in thousands):

---------- (1) Generally represents those loans on which Management has determined that borrowers may be unable to meet contractual principal and/or interest obligations or where interest or principal is past due for a period of 90 days or more (except when such loans are both well-secured and in the process of collection). When loans are placed on non-accrual status, all accrued but unpaid interest is reversed. (2) Represents loans on which payments of interest and/or principal are contractually past due 90 days or more, but are currently accruing interest at the previously negotiated rates, based on a determination that such loans are both well-secured and in the process of collection. (3) Consists of real estate acquired through foreclosure. (4) Consists of assets, other than real estate, acquired through repossession, forfeiture or abandonment. 25 Loan Loss Experience The following table presents an analysis of the allowance for loan losses, including charge-offs and recoveries for the periods indicated.

---------- (1) Annualized basis. Asset/Liability Management The Company's asset/liability management activities are intended to ensure adequate liquidity and to protect net interest revenue from the effect of adverse movements in the level of interest rates and the shape of the interest rate yield curve. The Asset/Liability Management Committee (the "ALCO") is responsible for monitoring the Company's liquidity and interest rate risk positions. The ALCO meets regularly to assess the Company's current and prospective risk exposure and to establish strategies to achieve net interest margin objectives. Both on-balance sheet and off-balance sheet (e.g., interest rate swap agreements) techniques are used to implement ALCO strategies. ALCO monitors and manages interest rate sensitivity through simulation and market value of equity analyses in order to avoid unacceptable earnings fluctuations due to interest rate changes. The Company's simulation model includes certain management assumptions based upon past experience and the expected behavior of customers during various interest rate scenarios. The assumptions include principal prepayments for various loan and security products and classifying the non-maturity deposit balances by degree of interest rate sensitivity. Management believes that the simulation of net interest income in different interest rate environments provides a meaningful and dynamic measure of interest rate risk. Income simulation analysis captures not only the potential of all assets and liabilities to mature or reprice, but the probability that such would occur. Income simulation also permits management to assess the probable effects on the balance sheet not only of changes in interest rates, but also of proposed strategies for responding to them. The Company's income simulation model analyzes interest rate sensitivity by projecting net interest income over the next 24 months in a flat rate scenario versus net interest income in alternative interest rate scenarios. Management reviews and refines its interest rate risk management process in response to the changing economic climate. The model incorporates management assumptions regarding the level of interest rate or balance changes on non-maturity deposit products, such as NOW, savings, money market and demand deposit accounts, for a given level of market rate changes. These assumptions incorporate historical analysis and future expected customer behavior patterns. Interest rate caps and floors are included, if applicable. Changes in prepayment behaviors of mortgage-based products for both loans and securities in each rate environment are also captured. Additionally, the impact of planned growth and anticipated new business activities are factored into the model. 26 Currently, the Company's earnings simulation model employs a 400 basis point differential in rates (i.e., the difference between a rising rate projection and a declining rate projection) during the first year, in even monthly increments, with rates held constant in the second year. The Company's ALCO policy has established that interest income sensitivity will be considered acceptable if the change in net interest income in the above interest rate scenario is within 10% of net interest income from the flat rate scenario in the first year and over a two-year timeframe. At June 30, 2003, the Company's income simulation model indicates an acceptable level of interest rate risk and is materially consistent with the year-end disclosure. In light of significant changes occurring in market interest rates, the Company will continue to evaluate its sensitivity to interest rates. Liquidity and Funding Liquidity management involves the Company's ability to maintain prudent amounts of liquid assets in its portfolio in order to meet the borrowing needs and deposit withdrawal requirements of customers and to support asset growth. Current and future liquidity needs are reviewed by ALCO to determine the appropriate asset/liability mix. The ALCO analysis includes an examination of the maturity and potential volatility characteristics of the Company's liabilities. Funding sources available to the Company include retail and commercial deposits, purchased liabilities and stockholders' equity. During 2002 and into 2003, the Company was able to reduce its reliance on short-term borrowings or other "purchased" funds to satisfy liquidity requirements through the growth in core deposits and the impact of the Vista Merger. Consequently, the sum of average large-denomination municipal certificates of deposit and average short-term borrowings for the six months ended June 30, 2003 was $127.6 million or only 4.3% of average total assets. Additionally, asset liquidity is provided by short-term investments and the marketability of securities available for sale. Short-term investments averaged $25.3 million in the six months ended June 30, 2003 while securities available for sale at market value averaged $840.7 million in the same period of 2003. The Company did not maintain any short-term investments at June 30, 2003, while securities available for sale at market value amounted to $773.9 million at June 30, 2003. The Company intends to hold its investment securities for the foreseeable future. However, the level and composition of the portfolio may change as a result of maturities and purchases undertaken as part of the asset/liability management process. Unexpected changes in the financial environment are likely to affect the Company's interest rate risk, liquidity position and the potential return on the portfolio. Additionally, the Company may also purchase and sell those securities that are available for sale in order to address these changes. Overall balance sheet size and capital adequacy are considered in determining the appropriate level for the portfolio. When economic factors cause changes in the balance sheet or when the Company reassesses its interest rate risk, liquidity or capital position, strategic changes may be made in both the securities held to maturity and securities available for sale portfolios based on opportunities to enhance the ongoing total return of the balance sheet. The following table sets forth the market value of securities available for sale at June 30, 2003 and at December 31, 2002 (in thousands)

27 ~~-------- -------- Total securities available for sale $773,945 $827,976 ======== ========~~

The following table sets forth the amortized costs of securities held to maturity at June 30, 2003 and at December 31, 2002.

Asset liquidity is represented by the ease with which assets can be converted into cash. This liquidity is provided by marketable equity securities and debt securities with maturity dates, assuming prepayments, of one year or less, which totaled $339.4 million at June 30, 2003. Included within this figure are marketable equity securities amounting to $1.5 million. Debt securities consist primarily of U.S. Treasury securities, Federal agency obligations, mortgage-backed securities and state and municipal securities. All securities held by the Company are believed to be readily marketable. As of June 30, 2003, debt securities scheduled to mature within one year based upon estimated cash flows, amounted to $337.9 million and represented 40% of the total debt securities portfolio. Approximately 86% of the entire debt portfolio is projected to mature or reprice within five years, based upon estimated cash flows. There was no security issue held which represented more than 10% of the Company's stockholders' equity. Additional liquidity is derived from scheduled loan and investment payments of principal and interest, as well as prepayments received. Capital Adequacy The Company strives to maintain a strong capital position. Capital adequacy is monitored in relation to the size, composition and quality of its asset base and with consideration given to regulatory guidelines and requirements, as well as industry standards. Management seeks to maintain a capital structure that will support anticipated asset growth and provide for favorable access to the capital markets. At June 30, 2003, total stockholders' equity was $267.1 million, an increase of $2.5 million from year-end 2002. During the six months ended June 30, 2003, the Company generated net retained earnings of $7.7 million. These increases were partially offset by a reduction of $6.2 million resulting from the Company's purchases under its stock repurchase program of 242,000 shares to be held in Treasury at an average price of $25.73 per share and a decline of $188,000 in the market value of the Company's available for sale securities portfolio from December 31, 2002 to June 30, 2003. 28 The following reflects the Company's capital ratios as of June 30, 2003 and December 31, 2002 in accordance with current regulatory guidelines (dollars in thousands):

The Company's risk based capital ratios (Tier I Capital and Combined Tier I and Tier II Capital) and Tier I leverage ratio continue to exceed the minimum requirements set forth by the Company's regulators to be considered well capitalized. Common Stock and Dividends The Company's Common Stock is traded in the over-the-counter market on the NASDAQ Stock Market. The market price of its common shares increased during the six months ended June 30, 2003 reaching a high of $28.47 near the end of the second quarter. The Company's Common Stock price was $27.58 at June 30, 2003 compared to $23.05 at December 31, 2002. Book value per common share increased 1.9% during the six months ended June 30, 2003 and amounted to $14.20 per share at June 30, 2003. This resulted in the Company's per share market price to book value rising to 194% from 165% at the end of 2002. The Company has paid cash dividends for 60 consecutive quarters since it commenced operations in 1988. While the Company presently expects to continue to pay dividends, no assurance can be given that dividends will be paid in the future since the declaration and payment of such dividends will be based on a number of factors considered by the Board of Directors, including current and prospective earnings, anticipated asset growth, the Company's capital position and the economic outlook. Future dividends will also depend on, among other things, the earnings and financial condition of the Bank, its need for funds and applicable governmental policies and regulations. Any deferral of payments due to the trust preferred securities would prevent the Company from paying dividends until the deferred amounts are paid. 29 Item 3 - Quantitative and Qualitative Disclosure About Market Risk Information pertaining to this item can be found in the section "Asset/Liability Management" in Item 2 of this report. Item 4 - Controls and Procedures The Company's Chief Executive Officer and Chief Financial Officer, with the assistance of other members of the Company's management, have evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective. The Company's Chief Executive Officer and Chief Financial Officer have also concluded that there have not been any changes in the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 30 Part II - Other Information Item 4 - Submission of Matters to a Vote of Security Holders On or about April 25, 2003, the Company mailed to its shareholders a proxy statement ("Proxy Statement") for the purpose of soliciting proxies for use at its Annual Meeting of Shareholders. The proxies were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934. At the Annual Meeting, held on May 20, 2003, the shareholders approved the following proposals set forth in the Proxy Statement, by the votes indicated: 1. Election of the six (6) directors nominated by the Company's Board of Directors to serve until the expiration of their terms and thereafter until their successors shall have been duly elected and have been qualified.

The following directors' terms of office continued after the meeting: George W. Blank C. Douglas Cherry Thomas C. Gregor John R. Kopicki John W. McGowen III Patricia A. McKiernan Paul K. Ross David Walker George Wickard The following nominee to the Board of Directors was not elected and received votes as indicated:

2. Ratification of the selection of KPMG, LLP as the Company's independent auditors for the year ending December 31, 2003.

31 Item 6 - Exhibits and Reports on Form 8-K Exhibit List (3) By-laws of the Company, as amended through June 17, 2003. (31.1) Certification of Chairman of the Board, President and Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (31.2) Certification of Vice President and Treasurer (Principal Financial Officer) Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (32) Certification of the Chairman of the Board, President and CEO and certification of the Vice President and Treasurer pursuant to Section 302 of Sarbanes-Oxley Act of 2002. Reports on Form 8-K A Form 8-K was filed on April 16, 2003, under Item 7 "Financial Statements and Exhibits" and Item 9 "Regulation FD Disclosure". The Company's press release dated April 16, 2003, United National Bancorp Reports Increased First Quarter Earnings. A Form 8-K was filed on April 21, 2003, under Item 5 "Other Events" and Item 7 "Financial Statements, Pro Forma Financial Information and Exhibits." The Company filed its Bylaws as amended through April 15, 2003. A Form 8-K was filed on May 30, 2003, under Item 5 "Other Information." The Company's press release dated May 30, 2003, United National Bancorp Announces Results Of Annual Meeting of Shareholders. A Form 8-K was filed on June 18, 2003, under Item 5 "Other Information." The Company's press release dated June 18, 2003, United National Bancorp Declares Cash Dividend. 32 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. UNITED NATIONAL BANCORP ----------------------- (Registrant) Dated: August 14, 2003 By: /s/ Thomas C. Gregor -------------------------- Thomas C. Gregor Chairman, President and CEO Dated: August 13, 2003 By: /s/ Alfred J. Soles -------------------------- Alfred J. Soles Senior Vice President & Chief Financial Officer (Principal Financial Officer) 33

UNITED NATIONAL BANCORP 10-Q