-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q8deiySXfi89bDsLfDlygHN3zYuNL/9F3w+3JtcAE9dWvJyGJEH/J3TdMBnBStFv KHk5AAeid56EX1MU2Xv5HA== 0000763907-97-000004.txt : 19970520 0000763907-97-000004.hdr.sgml : 19970520 ACCESSION NUMBER: 0000763907-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970330 FILED AS OF DATE: 19970515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST UNITED CORP/MD/ CENTRAL INDEX KEY: 0000763907 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 521380770 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14237 FILM NUMBER: 97608043 BUSINESS ADDRESS: STREET 1: 19 S SECOND ST CITY: OAKLAND STATE: MD ZIP: 21550 BUSINESS PHONE: 3013349471 MAIL ADDRESS: STREET 1: 19 S SECOND ST CITY: OAKLAND STATE: MD ZIP: 21550 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarter ended March 31, 1997 Commission file number 0-14237 First United Corporation (Exact name of registrant as specified in its charter) Maryland 52-1380770 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification no.) 19 South Second Street, Oakland, Maryland 21550-0009 (address of principal executive offices) (zip code) (301) 334-4715 Registrant's telephone number, including area code Not applicable Former name, 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 periods 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common stock, $.01 Par value--6,391,880 shares outstanding as of March 31, 1997 Preferred stock, No par value-No shares outstanding as of March 31, 1997. -01- INDEX FIRST UNITED CORPORATION PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - March 31, 1997 (Unaudited), December 31, 1996, and March 31, 1996 (Unaudited). Consolidated Statements of Income (Unaudited) - Three months ended March 31, 1997 and 1996. Consolidated Statement of Cash Flows (Unaudited) - Three months ended March 31, 1997 and 1996. Notes to Unaudited Consolidated Financial Statements. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. PART II. OTHER INFORMATION Item 1. Legal Proceedings. Item 2. Changes in Securities. Item 3. Defaults upon Senior Securities. Item 4. Submission of Matters to a Vote of Security Holders. Item 5. Other Information. Item 6. Exhibits and Reports on Form 8-k. SIGNATURES -02- FIRST UNITED CORPORATION Consolidated Balance Sheet (In Thousands) Mar. 31, Dec. 31, Mar. 31, Assets 1997 1996 1996 (Unaudited) (*) (Unaudited) ----------------------------- Cash and due from banks $21,307 $15,307 $15,978 Investment securities: Available-for-sale: U.S. Treasury Securities 18,023 20,576 15,493 Obl. of other U S Gov. Agen. 33,599 36,182 37,343 Obl. of St. and Loc. Govt 6,820 6,956 5,508 Other investments 19,025 19,997 23,583 -------------------------- Total available-for-sale 77,467 83,711 81,927 Held-to-maturity: Obl. of other U S Govt Agen 1,515 1,518 1,528 Obl. of St. and Loc. Govt 8,620 8,362 4,748 Other investments 16,078 16,477 15,884 --------------------------- Total held-to-maturity 26,213 26,357 22,160 --------------------------- Total investment securities 103,680 110,068 104,087 Federal funds sold 0 900 0 Loans 395,025 382,780 356,417 Reserve for poss. credit losses (2,181) (2,186) (2,164) --------------------------- Net loans 392,844 380,594 354,253 Bank premises and equipment 9,399 9,331 9,392 Acc. int. Rec. and other assets 6,947 7,421 6,136 ---------------------------- Total Assets $534,177 $523,621 $489,846 ============================ * The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date. See notes to unaudited consolidated financial statements. () Indicates Deduction -03- FIRST UNITED CORPORATION Consolidated Balance Sheet Mar. 31, Dec. 31, Mar. 31, 1997 1996 1996 (Unaudited) (*) (Unaudited) Liabiliities ------------------------------ Deposits Non-int. bearing deposits $ 54,113 $ 52,530 $ 46,830 Interest bearing deposits 411,430 400,009 380,462 --------------------------- Total deposits 465,543 452,539 427,292 Reserve for taxes, int., & Other liabilities 4,470 8,000 5,159 Fed funds purchased & other borrowed money 6,500 5,365 1,300 Dividends payable 900 902 846 ---------------------------- Total Liabitities 477,413 466,806 434,597 Shareholder's Equity Preferred stock -no par value Authorized and unissued; 2,000 Shares - Capital Stock -par value $.01 per share: Authorized 12,000 shares; issued and outstanding 6,392 shares at March 31, 1997, 6,442 outstanding at December 31, 1996, and 6,506 outstanding at March 31, 1996 64 64 65 Surplus 25,994 26,661 27,314 Retained earnings 30,753 29,877 27,908 Unrealized (loss)gain on available-for-sale securities net of taxes (47) 213 (38) --------------------------- Total Shareholder's Equity 56,764 56,815 55,249 --------------------------- Total Liabilities and Shareholder's Equity $534,177 $523,621 $489,846 ============================ -04- * The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date. See Notes to unaudited consolidated financial statements. () Indicates Deduction -05- FIRST UNITED CORPORATION Consolidated Statement Of Income (In Thousands, except per share data) Three Months Ended March 31, 1997 1996 ------------------- (Unaudited) Interest income Interest and fees on loans $ 8,761 $ 8,093 Interest on investment securities: Taxable 1,413 1,310 Exempt from federal income tax 180 119 -------------------- 1,593 1,429 Interest on federal funds sold 27 63 -------------------- Total interest income 10,381 9,585 Interest expense Interest on deposits: Savings 289 462 Interest-bearing transaction acct. 646 694 Time, $100,000 or more 535 469 Other time 2,834 2,322 Interest on fed funds purchased & other borrowed money 93 25 -------------------- Total interest expense 4,397 3,972 -------------------- Net interest income 5,984 5,613 Provision for possible credit losses 124 99 -------------------- Net interest income after provision for possible credit losses 5,860 5,514 Other operating income Trust department income $345 $300 Service charges on deposit accts. 434 395 Insurance premium income 73 76 Other income 348 309 -------------------- Total other operating income 1,200 1,080 -06- Three Months Ended March 31, 1997 1996 ------------------- (Unaudited) Other operating expenses Salaries and employees benefits 2,404 2,218 Occupancy expense of premises 239 277 Equipment expense 441 336 Data processing expense 145 139 Deposit assess. and related fees 47 19 Restructing charge 350 0 Other expense 1,377 1,187 --------------------- Total other operating expenses 5,003 4,176 --------------------- Income before income taxes 2,057 2,418 Applicable income taxes (681) (819) --------------------- Net income $1,376 $1,599 ===================== Earnings per share $0.21 $0.25 ===================== See Notes to Unaudited consolidated financial statements. -07- FIRST UNITED CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) Three Months Ended March 31, 1997 1996 -------------------- (Unaudited) Operating activities Net Income $ 1,376 $ 1,599 Adjustments to reconcile net income to net cash provided by operating activities: Provision for possible credit losses 124 99 Provision for depreciation 343 318 Net accretion & amortization of investment security discounts & premiums 60 118 Decrease in accrued interest & other receivables. 474 802 (Decrease)increase in accrued interest & other payables (897) 2,934 -------------------- Net cash provided by operating activities 1,480 5,870 -------------------- Investing activities Proceeds from maturities of available-for- sale securities 23,284 17,255 Purchases of available-for-sale securities (18,328) (23,379) Proceeds form maturities of held-to-maturity securities 2,641 462 Purchases of held-to-maturity securities (1,529) (2,620) Net (increase) decrease in loans (12,374) 4,112 Purchases of premises & equipment (411) (105) ------------------- Net cash used in investing activities (6,717) (4,275) ------------------- Financing activities (Decrease)in Fed Fund Purchased and Other Borrowed Money $ (1,500) (3,000) Net increase (decrease) in demand deposits, NOW accounts and savings accounts 1,370 (2,693) Net increase in certificates of deposits 11,634 5,691 Cash dividends paid or declared (500) (5,756) Proceeds from issuance of capital stock 172 4,130 Repurchases and retirement of Common Stock (839) 0 ------------------- -08- Three Months Ended March 31, 1997 1996 --------------------- Net cash provided (used) by --------------------- financing activities 10,337 (1,628) -------------------- Cash and cash equivalents at beg. of qtr. 16,207 16,011 Increase (decrease) in cash & cash equiv. 5,100 (33) -------------------- Cash & cash equivalents at end of period $ 21,307 $ 15,978 ==================== See Notes to unaudited consolidated financial statements. -09- FIRST UNITED CORPORATION Note to Unaudited Consolidated Financial Statements March 31, 1997 Note A -- Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring items have been included. Operating results for the three month period ended March 31, 1997, are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. The enclosed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1996. Earnings per share are based on the weighted average number of shares outstanding of 6,411 and 6,505 for the three months ended March 31, 1997 and 1996. -10- Part I. Financial Information Item II. Management's Discussion and Analysis Consolidated net earnings for the quarter totaled $1.376 million, which is $.223 million less than was recorded for the first quarter of 1996. This translates into $.21 per share for the current period. For the same quarter of 1996, each share earned $.25. Return on average equity (ROAE) fell from 11.48 percent, at December 31, 1996, to 9.68 percent as of March 31, 1997. These decreases are a result of the continuation of the Corporation's process improvement program. The Company engaged the services of Alex Sheshunoff Management Services, Inc., a highly respected financial consulting group, to facilitate this process. Based on the recommendations of the Alex Sheshunoff Management Group, Inc. and the vision of executive management, several positions in the organization were changed, new positions were created, and a few positions were eliminated. All employees were offered a generous severance package during the restructuring process, and 56 employees chose to accept this package. Throughout this process First United National Bank & Trust maintained its tradition of no lay-offs affecting its employees. For those employees accepting the voluntary severance package, the Board of Directors authorized a total of $350,000 to be charged against earnings during the first quarter of 1997. The efficiency ratio is a key measuring tool for profitability and operating efficiency. The calculation for the efficiency ratio is noninterest expense divided by net operating revenue, excluding nonrecurring items and securities gains and losses. The Corporation's efficiency ratio was -68.25 percent for the period ended March 31, 1997. This represents an increase from year end 1996 when the ratio was -61.48. This increase was due to a rise in non-interest expense and a slowly declining net interest margin. Salaries and employee benefits expense increased from $2.218 million in March, 1996 to $2.404 million in March, 1997. Noninterest expense also was impacted this quarter by a $.450 million charge. This $.450 million was comprised of $.100 million for consulting fees related to the process improvement project as previously mentioned and $.350 million for employee voluntary severance. Income from fiduciary services increased by $45,000 to $345,000 in the first quarter of 1997 compared to the first quarter of 1996. Noninterest income and noninterest expense in 1997 were $1.200 million and $5.003 million compared to $1.080 million and $4.176 million in 1996. Interest expense increased $.425 million from the same quarter last year. As interest rates continue to rise, it is of utmost importance that the Company takes advantage of increasing the deposit base which is a less expensive source of funding to support loan growth versus other sources. -11- In the first quarter of 1996, the Corporation was successful in increasing its deposit base through various deposit campaigns and competitive pricing strategies. Likewise, deposits have exhibited growth beyond first quarter 1997 predictions. Since year end 1996, total deposits have increased $13.00 million to $465.54 million. Net interest income for the first three months of 1997 increased 6.61 percent from the same period in 1996, to $5.984 million. Because interest expense has increased, coupled with the $.450 million charge to non-interest expense as previously noted, ROAA declined to 1.05 percent at March 31, 1997 compared to 1.32 percent March 31, 1996. The result was a Corporate net interest margin of 4.95 percent in comparison to the interest margin of 5.05 percent at the end of year 1996. The 4.95 percent net interest margin is within the expectations of the Corporation, as deposit costs increase and market conditions continue to cause us to reevaluate our margin on loans. The provision for possible credit losses was $0.124 million for the first three months of 1997 compared to $0.099 million for the same period in 1996. Net charge-offs for the first quarter were $0.129 million, which equates to 0.03 percent of our net loan total of $392.844 million. First United Corporation continues to place strong emphasis on maintaining a top quality loan portfolio, achieved through stringent underwriting standards and a consistent loan review process. Summary of Loan Loss Experience ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES March 31, 1997 --------------- Balance at the Beginning of the period $2,186 Charge-offs: Domestic: Commercial, financial and agricultural 16 Real estate-mortgage 61 Installment loans to individuals 74 ----------- 151 ----------- -12- March 31, 1997 --------------- Recoveries: Domestic: Commercial, financial and agricultural 6 Installment loans to individuals 16 ------------ 22 ------------ Net charge-offs 129 ------------ Additions charged to operations 124 ----------- Balance at end of period $2,181 =========== Ratio of net charge-offs during the period to average loans outstanding during the period .03% =========== Risk Elements of Loan Portfolio The following table provides a comparison of the Risk Elements of the Loan Portfolio in the format prescribed by Item III-C of Industry Guide 3. FUNB&T has no foreign loans or loans defined as troubled debt restructurings. Further, the bank has no potential problem loans other than those in the table below. FUNB&T's non-accrual loans decreased $.252M in the first quarter of 1997 from the year-end total of $.976M. This decrease was primarily due to a single residential mortgage loan that was moved from non-accrual status to accrual status as a result of the debtor paying all arrearages and demonstrating the capacity to make scheduled payments. Mar 31 Dec. 31 1997 1996 --------------- on-accrual loans $724 $976 Accruing loans past due 90 days or more 481 659 Restructed Loans 0 0 Information with respect to non-accrual loans at March 31, 1997 is as follows: Non-accrual Loans $724 $976 Interest income that would have been recorded original terms 16 70 Interest income recorded during the period 7 33 -13- First United opened its newest supermarket community office on January 29, 1997. This office is located in the new Martin's Food Store on Foxcroft Avenue in Martinsburg, WV. This is the fourth supermarket office opened by the First United family of community banks. A strength of First United is its capital position. Shareholders' equity increased to $56.764 million, a 2.74 percent increase from the first quarter of 1996, which was $55.249 million. Risk based capital, another measurement of stability and security was 17.00 percent, which far surpasses the regulatory minimum of 8.00 percent. The Board of Directors authorized the Corporation's officers to repurchase up to 5% of its outstanding common stock in August of 1996. Purchases of the Corporation's stock under the program were completed in brokered transactions or directly from the Corporation's market makers. As of March 31, 1997, 114,401 shares have been repurchased and retired under the plan authorized by the Board of Directors. The Corporation paid a cash dividend of .14 on February 1, 1997, and on March 26, 1997, declared another dividend of equal amount, to be paid May 1, 1997, to shareholders on record at April 17, 1997. -14- Part II. OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities. None. Item 3. Defaults upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. First United Corporation's annual meeting of shareholders was held on April 29, 1997. Items ratified by the 1997 proxy vote included the election of directors and the appointment of Ernst & Young LLP as the independent auditors of First United Corporation. Results of 1997 proxy vote were: # of Shares Eligible to Vote For Against Abstain -------------------------------------------------- Directors 5,761,637 3,294,383 22,027 Ernst & Young 6,443,923 3,946,811 9,453 42,150 Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. The Company did not file any reports on Form 8-K for the period ending March 31, 1997. -15- SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST UNITED CORPORATION Date 05/14/97 /s/ WILLIAM B. GRANT ---------- ---------------------------------------- William B. Grant, Chairman of the Board & Chief Executive Officer Date 05/14/97 /s/ ROBERT W. KURTZ ---------- ---------------------------------------- Robert W. Kurtz, President, Secretary, & Chief Financial Officer -16- EX-27 2
9 YEAR DEC-31-1997 MAR-31-1997 21307 411430 0 0 77467 26213 26416 395025 2181 534177 465543 6500 5370 0 64 0 0 56700 534177 8761 1593 27 10381 4304 4397 5860 124 0 5003 2057 2057 0 0 1376 .21 0 4.95 723 481 0 0 0 151 22 2181 2181 0 0
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