EX-99 3 ex99-1.txt EXHIBIT 99.1 EXHIBIT 99.1 UNITED NATIONAL BANCORP IDENTIFICATION AND RECONCILIATION OF NON-GAAP FINANCIAL MEASURES ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2002, AS AMENDED This Exhibit 99.1 includes excerpts from or references to portions of the Corporation's Annual Report on Form 10-K as amended, for the year ended December 31, 2002 ("2002 Form 10-K"). These excerpts and references include disclosures of non-GAAP financial measures as defined by the SEC's Release No. 33-8176, "Conditions for Use of Non-GAAP Financial Measures," that was effective subsequent to the Corporation's filing of the 2002 Form 10-K. In addition to such non-GAAP financial measures, this Exhibit 99.1 provides corresponding amounts or disclosures on a basis consistent with generally accepted accounting principles ("GAAP") as required by Release No. 33-8176 and in accordance with the SEC's "Frequently Asked Questions Regarding the Use of Non-GAAP Financial Measures" guidance issued June 13, 2003. The information in this Exhibit 99.1 is provided solely for the purpose of identifying and reconciling to GAAP the applicable items disclosed in the 2002 Form 10-K and does not represent the consolidated financial statements of the Corporation for any period nor does it purport to serve any other purpose under the SEC's financial reporting and disclosure rules and regulations. 1 1-a. Taxable-equivalent net interest income disclosed under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2002 10-K: In the "Results of Operations for the Years ended December 31, 2002 and 2001" and the "Results of Operations for the Years ended December 31, 2001 and 2000" sections of Item 7 of the 2002 Form 10-K, the Corporation discussed taxable-equivalent net interest income (net interest income on a taxable-equivalent basis). 1-b. Discussion of non-GAAP financial measure and reconciliation to GAAP: The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, the amount of pretax income realized on these earning assets is less than the amount of pretax income realized on comparable earning assets subject to Federal taxation. In presenting net interest income on a taxable-equivalent basis, the interest income earned on tax-exempt assets is increased to make them fully equivalent to other taxable interest income investments in order to provide accurate comparisons of yields and margins for all earning assets. A reconciliation of net interest income as reported in the Corporation's Consolidated Statements of Income in the 2002 Form 10-K to net interest income on a taxable-equivalent basis follows:

2 2-a. Excerpt from page 11, Item 6. Selected Financial Data in the 2002 10-K:

(3) Efficiency ratio is calculated by dividing adjusted non-interest expense by tax-equivalent net interest income and adjusted non-interest income. Adjusted non-interest expense is total non-interest expense less one-time charges, amortization of intangible assets and net costs to operate other real estate. Adjusted non-interest income is total non-interest income less net gains from securities transactions and non-recurring income. 2-b. Discussion of non-GAAP financial measure and reconciliation to GAAP: The Corporation's efficiency ratio, as reported, measures total non-interest expense as a percentage of net interest income on a taxable-equivalent basis plus total non-interest income, adjusted for certain income and expense items, as shown below.

The above adjustments to non-interest income and non-interest expense were made to reflect core revenue and expense levels, in an effort to present a better picture of the efficiency of the Corporation's continuing operations. In addition, net interest income was placed on a taxable-equivalent basis to make it comparable to other income and expense amounts. See Item 1-b. of this Exhibit 99.1 for a description of taxable-equivalent net interest income. 3 3-a.Excerpt from page 13, second paragraph of "Results of Operations for the Years ended December 31, 2002 and 2001--Earnings Summary" under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2002 10-K: The return on average tangible stockholders' equity was 12.52% in 2002 and 16.89% in 2001. Tangible stockholders' equity is defined as total stockholders' equity less total intangible assets, including goodwill. 3-b. Discussion of non-GAAP financial measure and reconciliation to GAAP: The first sentence of the excerpt in 3-a. above does not quantify average tangible stockholders' equity for the years ended December 31, 2002 and 2001. A reconciliation of these amounts is provided below.

4 4-a. Excerpt from page 22, "Lines of Business--All Other" under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2002 10-K: The following table shows the percentage contribution of the various lines of business to consolidated income before taxes on a fully taxable-equivalent basis:

4-b. Discussion of non-GAAP financial measure and reconciliation to GAAP: The percentage contributions of the various lines of business 4-a. above for all periods presented were calculated using net interest income on a taxable-equivalent basis and income before taxes on a taxable-equivalent basis. See Item 1-b. of this Exhibit 99.1 for a description of taxable-equivalent net interest income and reconciliation to net interest income on a GAAP basis. The percentage contribution of the various lines of business to consolidated income before taxes on a GAAP basis (using net interest income on a GAAP basis) is as follows:

5 5-a. Taxable-equivalent net interest income disclosed on pages 67 and 68 in "Note 18. Segment Reporting" under Item 8. Financial Statements and Supplementary Data in the 2002 10-K: In Note 18 to the Corporation's Consolidated Financial Statements, interest income, net interest income and income (loss) before taxes for the Commercial banking and Investments segments for the years ended December 31, 2002, 2001 and 2000 were presented on a taxable-equivalent basis. 5-b. Discussion of non-GAAP financial measure and reconciliation to GAAP: See Item 1-b. of this Exhibit 99.1 for a description of taxable-equivalent net interest income. A reconciliation of interest income, net interest income and income before taxes as reported in the Corporation's Consolidated Statement of Income in the 2002 Form 10-K to such amounts on a taxable-equivalent basis follows:

7 6-a. Average core deposits disclosed under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2002 10-K Report: On page 14 under the section, "Results of Operations for the Years ended December 31, 2002 and 2001--Analysis of Net Interest Margin", and on page 19 under the section, "Results of Operations for the Years ended December 31, 2001 and 2000", the percentage increase in average core deposits is presented. 6-b. Discussion of non-GAAP financial measure and reconciliation to GAAP: The core deposit disclosure mentioned in 6-a. above did not quantify average core deposits for the years ended December 31, 2002, 2001 and 2000. A reconciliation of these amounts is provided below.

UNITED NATIONAL BANCORP 8-K