11-K 1 form_11-k063003.htm Form 11-K for period ending 12/31/02

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549


FORM 11-K

ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One):


/ X / ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE OF ACT 1934 [NO FEE REQUIRED].

For the fiscal year ended December 31, 2002.

/    / TRANSACTION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED].

For the transaction period from ________________ to _______________.

Commission file number:   1-08660

A. Full title of the plan and the address of the plan, if different from that of the issuer named below:

HUDSON UNITED BANCORP SAVINGS AND INVESTMENT PLAN
(for Non-Bargaining Unit Employees)

B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

Hudson United Bancorp
1000 MacArthur Boulevard
Mahwah, New Jersey 07430


FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES

Hudson United Bancorp and Subsidiaries Savings and Investment Plan

Years ended December 31, 2002 and 2001
with Report of Independent Auditors



Hudson United Bancorp and Subsidiaries Savings and Investment Plan

Financial Statements and Supplemental Schedules

Years ended December 31, 2002 and 2001



Contents


Report of Independent Auditors

  1

 
Report of Independent Public Accountants

  2

 
Financial Statements

 
Statements of Net Assets Available for Benefits  3  
Statement of Changes in Net Assets Available for Benefits  4  
Notes to Financial Statements

  5

 
Supplemental Schedules

 
Schedule of Assets (Held at End of Year)  12  
Schedule of Reportable Transactions  13  
Signature Page

  14

 
Exhibit Index

  15

 


Report of Independent Auditors

To the Trust Committee of
   Hudson United Bancorp

We have audited the accompanying statement of net assets available for benefits of the Hudson United Bancorp and Subsidiaries Savings and Investment Plan (the “Plan”) as of December 31, 2002, and the related statement of changes in net assets available for benefits for the year then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of the Plan as of December 31, 2001, were audited by other auditors who have ceased operations and whose report dated May 2, 2002, expressed an unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2002, and the changes in net assets available for benefits for the year then ended, in conformity with accounting principles generally accepted in the United States.

Our audit was performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets held at end of year as of December 31, 2002 and reportable transactions for the year then ended, is presented for purposes of additional analysis and are not a required part of the financial statements but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan’s management. The supplemental schedules have been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole.


/s/ Ernst &Young LLP

June 23, 2003


This is a copy of the audit report previously issued by Arthur Andersen LLP in connection with the Plan’s filing on this Form 11-K for the year ended December 31, 2001. This audit report has not been reissued by Arthur Andersen LLP in connection with this filing on Form 11-K. See Exhibit 23.2 for further discussion.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Trust Committee of Hudson United Bancorp:

We have audited the accompanying statements of net assets applicable to participants’ equity of the Hudson United Bancorp Savings and Investment Plan for Non-Bargaining Unit Employees (the “Plan”) as of December 31, 2001 and 2000, and the related statement of changes in net assets applicable to participants’ equity with fund information for the year ended December 31, 2001. These financial statements and schedules referred to below are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets applicable to participants’ equity of the Plan as of December 31, 2001 and 2000, and the changes in net assets applicable to participants’ equity for the year ended December 31, 2000, in conformity with accounting principles generally accepted in the United States.

Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of Assets Held for Investment Purposes and Reportable Transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The fund information in the statement of changes in net assets applicable to participants’ equity with fund information is presented for purposes of additional analysis rather than to present the changes in net assets applicable to participants’ equity with fund information for each fund. The supplemental schedules and fund information have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole.


/s/ Arthur Andersen LLP
Roseland, New Jersey
May 2, 2002


Hudson United Bancorp and Subsidiaries Savings and Investment Plan

Statements of Net Assets Available for Benefits

December 31
2002
2001
Cash   $       --   $            129  

Investments, at fair value:  
   Mutual funds  15,010,722   14,620,792  
   Common stock of Hudson United Bancorp  17,190,081   14,711,563  
 
Participant loans receivable

  1,115,916

  745,472

 
Net assets available for benefits  $33,316,719
  $30,077,956
 

See accompanying notes.



Hudson United Bancorp and Subsidiaries Savings and Investment Plan

Statement of Changes in Net Assets Available for Benefits

Year ended December 31, 2002



Employer
Stock Fund

Intermediate
Government
Trust

    Stock
    Trust

Growth
Strategies
Fund

Stock and
Bond Trust

Short-Term
Government
Trust

 Large Cap
  Growth
  Fund

Max Cap
Fund

International
Small
Company
Fund

Participant
Loans

Total
Net assets available for benefits,                      
   beginning of year $ 14,711,692  $ 1,233,307  $ 2,511,411  $ 2,111,306  $ 1,400,107  $ 6,575,084  $ 257,783  $ 327,027  $ 204,767  $    745,472  $ 30,077,956 
Additions (deductions):                      
   Contributions:                      
     Employees 317,732  155,172  310,002  326,416  170,634  1,682,476  84,917  115,407  64,070  --  3,226,826 
     Employer 1,820,985  (114) (908) (7,438) --  (287,502) --  --  --  --  1,525,023 
   Rollovers 7,780  239  13,833  8,408  5,100  260,885  --  --  --  --  296,245 
Transfers into Plan and to
   (from) funds
368,183  367,826  29,936  (73,187) 189,175  248,232  13,866  153,874  7,182  --  1,305,087 
   
   
   Net realized/unrealized appreciation
   (depreciation) of investments
1,907,363  129,912  (537,393) (557,908) (171,561) 121,666  (83,364) (110,237) (36,046) --  662,432 


   Distributions (1,570,166) (268,198) (294,800) (230,129) (181,685) (883,933) (31,197) (70,539) (23,821) (115,358) (3,669,826)
   Trust administrative fees (54,358) (4,382) (8,707) (6,832) (5,307) (24,252) (900) (1,525) (761) --  (107,024)
   Net activity relating to participant's loans (319,130) (27,178) (12,456) (11,647) (16,207) (88,678) (3,217) (4,652) (2,637) 485,802  -- 











Net assets available for benefits, end of year $ 17,190,081 
$ 1,586,584 
$ 2,010,918 
$ 1,558,989 
$ 1,390,256 
$ 7,603,978 
$ 237,888 
$ 409,355 
$ 212,754 
$ 1,115,916 
$ 33,316,719 

See accompanying notes.


Hudson United Bankcorp and Subsidiaries Savings and Investment Plan

Notes to Financial Statements

1. Description of the Plan

The following description of the Hudson United Bancorp and Subsidiaries Savings and Investment Plan (the “Plan”) provides only general information. Participants should refer to the Summary Plan Description for a more complete narrative of the Plan’s provisions. During the year, the Plan’s name was changed from “Hudson United Bancorp Savings and Investment Plan for Non-Bargaining Unit Employees” to “Hudson United Bancorp and Subsidiaries Savings and Investment Plan”.

General

The Plan is a defined contribution plan covering all employees of Hudson United Bancorp (the “Company”). Full-time employees are eligible to be admitted to the Plan upon completion of 1,000 hours of service in a six-month period (twelve months for part-time employees) and the attainment of age 21. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

Participant Accounts

Each participant’s account is credited with the participant’s contributions and allocations of (a) the Company’s contributions and (b) plan earnings, and is charged with an allocation of administrative expenses. Allocations are based on participant account balances, as defined. Forfeited balances of terminated participants’ nonvested accounts are used to reduce company contributions for the year in which the forfeiture occurred. The benefit to which a participant is entitled is the vested account balance.

Contributions

Each year, Plan participants may make a contribution of 2% to 12% of their annual compensation, as defined. The Company contributes 75% of each employee’s contribution to a maximum of 6% of eligible annual compensation.

Upon enrollment, a participant may direct contributions in 10% increments to any of the Plan’s fund options. Participants may change their investment elections a maximum of 3 times per quarter. All employer contributions are allocated to the Employer Stock Fund.



Hudson United Bankcorp and Subsidiaries Savings and Investment Plan

Notes to Financial Statements (continued)

1. Description of the Plan (continued)

Contributions (continued)

Under the provisions of the Plan, participating employees may elect to invest their contributions in the following nine investment funds:


Employer Stock Fund Established to invest in the common stock
         of Hudson United Bancorp.

Federated Intermediate Government Invests in United States Government Agency
Trust Securities that generally mature within
         five years from the date of purchase.

Federated Stock Trust Invests in a portfolio of common stocks
          with an emphasis on large capitalized
          companies.

Federated Growth Strategies Invests in common stock of companies with
Fund prospects for above average growth.

Federated Stock and Bond Trust Invests in a balanced portfolio of high
          quality common stocks, United States
          Government Agency Securities and corporate
          bonds rates "A" or better.

Federated Short-Term Government Established to invest in short-term U.S.
Trust Treasury and other securities issued or
          guaranteed by the U.S. government or its
          agencies.

Federated Large Cap Growth Fund The Fund seeks capital appreciation by
           investing primarily in large,
           well-established companies.

Federated Max Cap Fund The Fund seeks to achieve a total return
           similar to the S&P 500 stock index.

Federated International Small The Fund seeks long-term capital
Company Fund appreciation by investing in equity
          securities of small cap companies.


Hudson United Bankcorp and Subsidiaries Savings and Investment Plan

Notes to Financial Statements (continued)

1. Description of the Plan (continued)

Vesting

All participants are immediately and fully vested in all participant contributions and the assets derived from their investment. Employees become fully vested in Company contributions and the assets derived from their investment in the event of any one of the following: attainment of age 65, upon retirement due to disability, death, plan termination, or the completion of five years of service with the Company. Employer contributions vest as follows:


Up to 2 years of service = 0% vesting
After 2 years of service = 25% vesting
After 3 years of service = 50% vesting
After 4 years of service = 75% vesting
After 5 years of service = 100% vesting



Forfeitures of nonvested Company contributions for participants are used to reduce Company matching contributions to the Plan.

Participant Loans

Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 (reduced by the excess of the highest outstanding loan balance during the one year period prior to the current loan over the outstanding balance of loans as of the current loan date) or the greater of 50% of their vested account balance or $10,000. Loan terms range from 1-5 years or up to 10 years for the purchase of a primary residence. The loans are secured by the balance in the participant’s account and bear interest at a rate established as the prevailing prime interest rate at the time of the loan issuance. Principal and interest is paid ratably through bi-weekly payroll deductions.

Payment of benefits

Pursuant to a Plan provision, upon termination of employment, employees may receive a lump sum payment equal to the value of their account unless another method of payment has been selected as provided for by the Plan. Benefit payments are distributed to participants in the Employer Stock Fund in the form of the Company’s stock or cash, at the Participant’s election.



Hudson United Bankcorp and Subsidiaries Savings and Investment Plan

Notes to Financial Statements (continued)

1. Description of the Plan (continued)

Merger

Effective December 31, 2001, the JeffBanks Employee Stock Ownership/401(k) Plan was merged with the Plan. The fair value of the assets transferred into the Plan on the effective date was approximately $1.3 million.

2. Summary of Significant Accounting Policies

Basis of accounting

The accounting records of the Plan are maintained on the accrual basis.

Investment Valuation and Income Recognition

Investments are stated at their aggregate fair value. Securities which are traded on a national securities exchange are valued at the last reported sales price on the last business day of the Plan year. The market value of the participation units in the Federated funds is based on quoted market value on the last business day of the Plan year.

The change in the difference between the fair value and the cost of investments is reflected in the statement of changes in net assets available for benefits as net appreciation (depreciation) of investments, along with gains or losses realized on the sale of investments, which are determined using a specific identification basis.

Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

Participant loans

The participant loans are valued at their outstanding balances, which approximate fair value.

Payment of benefits

Benefits are recorded when paid.



Hudson United Bankcorp and Subsidiaries Savings and Investment Plan

Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Operating expenses

Trust Administrative Fees of the Plan are paid out of the Plan’s assets. All other plan expenses are paid for by the Company.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

3. Investments

The Plan’s investments are held by Hudson United Bank (a subsidiary of the Company) and Federated Securities Corp.

The fair value of individual investments that represent 5% or more of the Plan’s net assets at end of year are as follows:


       2002       

       2001       

               Hudson United Bancorp common stock $17,190,081  $14,711,563 
               Federated Short-Term Government Trust 7,603,978  6,575,084 
               Federated Stock Trust 2,010,918  2,511,411 
               Federated Growth Strategies Fund --  2,111,306 



4. Transactions with Parties-in-Interest

At December 31, 2002 and 2001, the Plan held 552,736 and 512,598 shares of common stock, respectively, of the Company with a fair value of $17,190,081 and $14,711,563, respectively. The shares were originally acquired at a cost of $9,111,194 and $7,554,629, respectively. Dividend income from this investment was $593,766 and $514,960 for the years ended December 31, 2002 and 2001, respectively. A Party-in-Interest provides Trust Administration services to the Plan. For the year ended December 31, 2002, the related fees paid to the Company amounted to $107,024.




Hudson United Bankcorp and Subsidiaries Savings and Investment Plan

Notes to Financial Statements (continued)

5. Income Tax Status

The Plan has received a determination letter from the Internal Revenue Service dated October 3, 2002, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the “Code”) and, therefore, the related trust is exempt from taxation. The Plan has been amended since receiving the determination letter. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt.

Employees participating in the Plan are not subject to Federal income tax on amounts contributed until such time that their participating interest in the Plan is distributed to them.

6. Plan Termination

Although the Company has not expressed any intent to do so, the Company has the right under the Plan to terminate the Plan subject to the provisions of ERISA.

7. Subsequent Event

Effective January 1, 2003 (the “effective date”), the Plan Administrator introduced certain changes to the Plan.

As of the effective date, the employer matching contribution will follow the same investment direction as the employee contribution. Prior to January 1, 2003, the employer match was nonparticipant directed and, accordingly, was entirely invested in shares of Hudson United Bancorp. The participants could elect to transfer out of the employer stock only after becoming eligible for diversification. Effective January 1, 2003, employees can elect to transfer the employer match invested in shares of Hudson United Bancorp to other investments at will, subject to other provisions of the Plan.

Prior to the effective date, employer contribution calculations were based on employee’s total compensation for the year. Effective January 1, 2003, the basis of employer contribution was changed from employee’s total annual compensation to employee’s annual base pay. In addition, the employer matching contribution, was reduced from 75% to 50% of the employee’s contribution, with the maximum employer match remaining unchanged at 6%.











Supplemental Schedules



EIN: #22-2405746
Plan: #003

Hudson United Bancorp and Subsidiaries Savings and Investment Plan

Schedule H, 4i--Schedule of Assets (Held at End of Year)

December 31, 2002


Identity of Issuer
Description of Investment
Including Maturity Date, Rate of
    Interest, Par or Maturity Value    
    Cost    
Current
Value

Mutual Funds
   

Federated Securities Corp.

7,603,978 units of Federated
Short-Term Government Trust
  $  7,603,978  $  7,603,978 

Federated Securities Corp.
83,279 units of Federated Growth
Strategies Fund
  2,483,244  1,558,989 

Federated Securities Corp.

73,985 units of Federated Stock Trust

2,568,632 

2,010,918 

Federated Securities Corp.

88,721 units of Federated Stock
and Bond Trust
  1,593,359  1,390,256 
Federated Securities Corp. 135,954 units of Federated
Intermediate Government Trust
  1,486,244  1,586,584 
Federated Securities Corp. 38,001 units of Federated Large
Cap Growth Fund
  413,491  237,888 
Federated Securities Corp. 23,010 units of Federated
MaxCap Fund
  560,792  409,355 
Federated Securities Corp. 14,346 units of Federated
International Small Company Fund
    355,439     212,754  
                17,065,179   15,010,722 

Common Stock
   
Hudson United Bancorp * 552,736 shares common stock  9,111,194   17,190,081 

Participant Loans


Interest rates range from 4.25% to 10.00%
and loans mature through 11/07/12
   1,115,916   1,115,916 
    $27,292,289  $33,316,719 


*Denotes party-in-interest.



EIN: #22-2405746
Plan: #003

Hudson United Bancorp and Subsidiaries Savings and Investment Plan

Schedule H, 4j-Schedule of Reportable Transactions

Year ended December 31, 2002




Identity of Party Involved Description of Asset Number of
Transactions
Purchase
Price
Selling
Price
Cost
of Asset
Current
Value of
Asset on
Transaction
Date
Net
Gain








Category (iii) - Series of
transactions in excess of 5%

Hudson United Bancorp Hudson United Bancorp
Common Stock
        72 $2,870,259        --      $2,876,467       $2,863,548         --

Hudson United Bancorp

Hudson United Bancorp
Common Stock

        92

        --

$2,285,526

     $1,186,885

      $2,291,479

   $1,098,641


(a)   Reportable transactions are those purchases and sales of non-participant directed securities that,
           individually or in the aggregate, exceed 5% of Plan assets as of the beginning of the Plan year.



SIGNATURES

     Pursuant to the requirements of the Securities Act of 1934, the Plan administrators have duly caused this Form 11-K to be signed on their behalf by the undersigned, thereunto duly authorized.


Date: June 30, 2003
HUDSON UNITED BANCORP SAVINGS
AND INVESTMENT PLAN
(for Non-Bargaining Unit Employees)


By:  D. LYNN VAN BORKULO-NUZZO
——————————————————
D. Lynn Van Borkulo-Nuzzo,
on behalf of Plan Administrators


Exhibit Index

23.1 Consent of Ernst &Young LLP

23.2 Notice Regarding Arthur Anderson LLP Consent

99.1 Certification of Kenneth T. Neilson, Chairman, President and Chief Executive Officer of Hudson United Bancorp, pursuant to 18 U.S.C. Section 1350

99.2 Certification of William A. Houlihan, Executive Vice President and Chief Financial Officer of Hudson United Bancorp, pursuant to 18 U.S.C. Section 1350