-----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, BA/SUuMv1XY+70fREOD1O25oWHrIovW7z3fj7ISLae/tVco5P2d2cO5UMggQ8Czf ib1RV/8yvRr2D14Z6mDCbQ== 0000763907-97-000006.txt : 19971117 0000763907-97-000006.hdr.sgml : 19971117 ACCESSION NUMBER: 0000763907-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 000-14237 FILM NUMBER: 97718574 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 September 30, 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--6,287,542 shares outstanding as of September 30, 1997 Preferred stock, No par value--No shares outstanding as of September 30, 1997. - -01- INDEX FIRST UNITED CORPORATION PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - September 30, 1997 (Unaudited), December 31, 1996, and September 30, 1996(Unaudited). Consolidated Statements of Income (Unaudited) - Nine months ended September 30, 1997 and 1996 and three months ended September 30, 1997 and 1996. Consolidated Statement of Cash Flows (Unaudited) - Nine months ended September 30, 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) September 30, Dec. 31, September 30, Assets 1997 1996 1996 (Unaudited) (*) (Unaudited) ----------------------------- Cash and due from banks $15,269 $15,307 $22,004 Investment securities: Available-for-sale: U.S. Treasury Securities 16,507 20,576 20,471 Obl. of other U S Gov. Agen. 34,574 36,182 38,041 Obl. of St. and Loc. Govt 6,361 6,956 6,150 Other investments 21,767 19,997 21,420 ------------------------- Total available-for-sale 79,209 83,711 86,082 Held-to-maturity: Obl. of other U S Govt Agen - 1,518 1,521 Obl. of St. and Loc. Govt 9,313 8,362 6,022 Other investments 12,389 16,477 16,787 --------------------------- Total held-to-maturity 21,702 26,357 24,330 --------------------------- Total investment securities 100,911 110,068 110,412 Federal funds sold 3,300 900 2,197 Loans 429,973 382,780 374,043 Reserve for poss. credit losses (2,529) (2,186) (2,011) --------------------------- Net loans 427,444 380,594 372,032 Bank premises and equipment 9,182 9,331 9,057 Acc. int. Rec. and other assets 8,932 7,421 7,214 ---------------------------- Total Assets $565,038 $523,621 $522,916 ============================ * 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 September 30, Dec. 31, September 30, 1997 1996 1996 (Unaudited) (*) (Unaudited) Liabilities ------------------------------ Deposits Non-int. bearing deposits $ 52,248 $ 52,530 $ 52,329 Interest bearing deposits 445,634 400,009 399,807 --------------------------- Total deposits 497,882 452,539 452,136 Reserve for taxes, int., & Other liabilities 5,033 5,365 5,863 Fed funds purchased & other borrowed money 5,000 8,000 7,500 Dividends payable 885 902 845 ---------------------------- Total Liabilities 508,800 466,806 466,344 Shareholders' 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 6,288 shares at September 30, 1997, 6,442 outstanding at December 31, 1996, and 6,490 outstanding at September 30, 1996 63 64 65 Surplus 23,977 26,661 27,070 Retained earnings 31,898 29,877 29,630 Unrealized gain (loss) on available-for-sale securities net of taxes 300 213 (193) --------------------------- Total Shareholders' Equity 56,238 56,815 56,572 --------------------------- Total Liabilities and Shareholders' Equity $565,038 $523,621 $522,916 ============================ * 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 -04- FIRST UNITED CORPORATION Consolidated Statement Of Income (In Thousands, except per share data) Nine Months Ended September 30, 1997 1996 ------------------- (Unaudited) Interest income Interest and fees on loans $ 27,333 $ 24,392 Interest on investment securities: Taxable 4,060 4,188 Exempt from federal income tax 523 399 -------------------- 4,583 4,587 Interest on federal funds sold 93 148 -------------------- Total interest income 32,009 29,127 Interest expense Interest on deposits: Savings 870 1,370 Interest-bearing transaction acct. 2,118 2,051 Time, $100,000 or more 1,818 1,390 Other time 8,814 7,160 Interest on fed funds purchased & other borrowed money 212 60 -------------------- Total interest expense 13,832 12,031 -------------------- Net interest income 18,177 17,096 Provision for possible credit losses 623 356 -------------------- Net interest income after provision for possible credit losses 17,554 16,740 Other operating income Trust department income 1,035 900 Service charges on deposit accts. 1,635 1,285 Insurance premium income 226 238 Other income 1,638 1,168 -------------------- Total other operating income 4,534 3,591 Other operating expenses Salaries and employees benefits 6,997 6,698 Occupancy expense of premises 732 775 Equipment expense 1,248 1,078 Data processing expense 429 418 Deposit assess. and related fees 124 88 Other expense 5,527 3,772 -------------------- Total other operating expenses 15,057 12,829 -------------------- Income before income taxes 7,031 7,502 Applicable income taxes (2,309) (2,479) -------------------- Net income $4,722 $5,023 ==================== Earnings per share $ 0.74 $0.77 ==================== See Notes to Unaudited consolidated financial statements. -05- FIRST UNITED CORPORATION Consolidated Statement Of Income (In Thousands, except per share data) Three Months Ended September 30, 1997 1996 ------------------- (Unaudited) Interest income Interest and fees on loans $ 9,497 $ 8,243 Interest on investment securities: Taxable 1,327 1,432 Exempt from federal income tax 161 147 ------------------- 1,488 1,579 Interest on federal funds sold 40 68 ------------------- Total interest income 11,025 9,890 Interest expense Interest on deposits: Savings 284 453 Interest-bearing transaction acct. 773 696 Time, $100,000 or more 699 489 Other time 3,044 2,490 Interest on fed funds purchased & other borrowed money 87 3 ------------------- Total interest expense 4,887 4,131 ------------------- Net interest income 6,138 5,759 Provision for possible credit losses 376 158 ------------------- Net interest income after provision for possible credit losses 5,762 5,601 Other operating income Trust department income 345 300 Service charges on deposit accts. 731 447 Insurance premium income 80 95 Other income 421 470 ------------------ Total other operating income 1,577 1,312 Other operating expenses Salaries and employees benefits 2,226 2,242 Occupancy expense of premises 240 138 Equipment expense 418 390 Data processing expense 134 149 Deposit assess. and related fees 34 41 Other expense 1,800 1,308 --------------------- Total other operating expenses 4,861 4,268 --------------------- Income before income taxes 2,487 2,645 Applicable income taxes (838) (839) --------------------- Net income $1,649 $1,806 ===================== Earnings per share $ 0.26 $0.28 ===================== See Notes to Unaudited consolidated financial statements. -06- FIRST UNITED CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) Nine Months Ended September 30, 1997 1996 -------------------- (Unaudited) Operating activities Net Income $ 4,722 $ 5,023 Adjustments to reconcile net income to net cash provided by operating activities: Provision for possible credit losses 623 356 Provision for depreciation 1,067 970 Net accretion & amortization of investment security discounts & premiums (142) 296 Realized gain on sale of investment securities - 12 Increase in acc. interest & other receivables. (1,511) (276) (Decrease) increase in accrued interest & other payables (349) 2,337 -------------------- Net cash provided by operating activities 4,410 8,718 Investing activities Proceeds from maturities of available-for- sale securities 50,429 39,098 Purchases of available-for-sale securities (42,020) (49,887) Proceeds form maturities of held-to-maturity securities 4,808 3,097 Purchases of held-to-maturity securities (3,866) (7,266) Net increase in loans (47,473) (13,924) Purchases of premises & equipment (918) (422) ------------------- Net cash used in investing activities ($39,040) (29,304) Financing activities (Decrease) increase in Fed Fund Purchased and Other Borrowed Money ($3,000) $4,500 Net increase in demand deposits, NOW accounts and savings accounts 7,540 6,956 Net increase in certificates of deposits 37,802 20,886 Cash dividends paid or declared (2,666) (3,351) Proceeds from issuance of capital stock (18) (215) Acquisition and retirement of Common Stock (2,666) - Net cash provided by ------------------- financing activities 36,992 28,776 Cash and cash equivalents at beg. of year 16,207 16,011 Increase in cash & cash equiv. 2,362 8,190 -------------------- Cash & cash equivalents at end of period $ 18,569 $ 24,201 ==================== See Notes to unaudited consolidated financial statements. -07- FIRST UNITED CORPORATION Note to Unaudited Consolidated Financial Statements September 30, 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 nine month period ended September 30, 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 6,367 and 6,506 for the nine months ended September 30, 1997 and 1996. -08- Part I. Financial Information Item II. Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated net income for the quarter ended September 30, 1997 totaled $1.649 million, which is $.157 million less than was recorded for the third quarter of 1996. This translates into $.26 per share for the current period. For the same quarter of 1996, each share earned $.28. Consolidated net income for the nine month period ended September 30, 1997 totaled $4.722 million, which is $.301 million less than was recorded for the same period of 1996. This translates into $.74 per share for the year. For the same period of 1996, each share earned $.77. Return on Average Equity (ROAE) decreased from 11.48 percent, at December 31, 1996, to 11.07 percent as of September 30, 1997. The decreases in net income, Return on Average Equity and other key ratios, are the direct result 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 Shesunoff 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 severance package during the restructuring process and 63 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 $554,000 to be charged against earnings during the first six months 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,(net interest income plus other operating income plus the tax benefit of non-taxable securities and loans )excluding nonrecurring items and securities gains and losses. A lower ratio equals higher profitability and operating efficiencies. The Corporation's efficiency ratio was 65.04 percent for the period ended September 30, 1997. This represents a decline from year end 1996 when the ratio was 61.48%. The decline in our efficiency ratio was again primarily attributed to the process improvement project discussed above. Adjusting for the $.554 million severance package and the $.250 million paid to Alex Shesunoff in the first half of 1997, the efficiency ratio would have been 61.57%. Income from fiduciary services increased by $.135 million to $1.035 million for the nine months ended September 30, 1997 compared to the same time period in 1996. The increase in salaries and employee benefits expense from $ 6.698 million in September, 1996 to $ 6.997 million in September, 1997 was the result of the severance program offered to employees as part of the process improvement. These expense items should decline in 1998 because of management's actions in 1997. Other Operating Income and Other Operating Expense in 1997 were $4.534 million and $15.066 million compared to $3.591 million and $12.829 million in 1996. -09- The growth exhibited by the loan portfolio in the third quarter continued to be strong. In the third quarter, net loans grew $14.769 million to a total of $427.444 million. The growth for the same quarter of 1996 was $14.784 million, bringing the total to $372.032 million. Year to date, loans have grown $46.850 million. As a result of our solid loan growth, interest income at September 30, 1997 was $32.009 million compared to $29.127 September 30, 1996. This total represents an increase of $2.882 million or 9.89%. The Corporation's interest expense as of September 30, 1997 was $1.801 higher than was recorded for the same period in 1996. Interest expense increased $.756 million from the same quarter last year. During the first nine months of 1997, the Corporation was successful in increasing its deposit base through various deposit campaigns and competitive pricing strategies. Consequently, deposits have exhibited growth beyond management projections. Since December 31,1996, total deposits have increased $45.343 million to $497.882 million. During the first nine months of 1996, deposits grew from $425.277 million to $453.857 million or $28.580 million. The Corporation will strive to continue to increase its deposit base, which is a less expensive source of funding to support loan growth versus other sources. Net interest income for the first nine months of 1997 increased 6.32 percent from the same period in 1996, to $18.177 million. The result was a Corporate net interest margin of 4.87 percent in comparison to the net interest margin of 4.97 percent at the end of year 1996. The 4.87 percent net interest margin is comparable with the results achieved at year end 1996. Although the margin is within the expectations of the Corporation, varying market conditions and rising deposit costs constantly cause a reevaluation of acceptable margins on loans and deposits. Because interest expense has increased, coupled with the expenses associated with the process improvement program, Return on Average Assets ( ROAA ) dropped to 1.17 percent at September 30, 1997 compared to 1.32 percent at September 30, 1996. The provision for possible credit losses was $0.623 million for the first nine months of 1997 compared to $.356 million for the same period in 1996. A total provision of $.376 million was made during the third quarter primarily for the loan growth exhibited during the first three quarters of 1997. Net charge-offs for the nine months were $0.281 million, which equates to 0.07 percent of our net loan total of $427.444 million. During the first nine months of 1996, net charge-offs were $.465 million or 1.25% of our net loan total at September 30, 1996 of $372.032 million. First United Corporation continues to place strong emphasis on maintaining a quality loan portfolio, achieved through stringent underwriting standards and a consistent loan review process. -10- Summary of Loan Loss Experience ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES September 30, 1997 --------------- Balance at the Beginning of the period $2,186 Charge-offs: Commercial, financial and agricultural 65 Real estate - mortgage 168 Installment loans to individuals 180 ---------------- 413 ---------------- Recoveries: Commercial, financial and agricultural 33 Real estate - mortgage 39 Installment loans to individuals 60 --------------- 132 --------------- Net Charge-offs 281 --------------- Additions charged to operations 623 --------------- Balance at end of period $2,528 =============== Ratio of net charge-offs during the period to average Loans outstanding during the period .07% =============== 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. The Bank 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 $.564 million in the first three quarters of 1997 from the year end total of $.976 million. This decrease was primarily due to a single residential mortgage loan that was moved from non-accural status to accrual status as a result of the debtor paying all arrearages and demonstrating the capaicty to make scheduled payments when due. September 30 Dec. 31 1997 1996 ----------------------- Non-accrual loans $412 $976 Accruing loans past due 90 days or more 1,091 659 Restructured Loans 0 0 Information with respect to non-accrual loans at September 30, 1997 is as follows: Non-accrual Loans $412 $976 Interest income that would have been recorded under original terms 30 70 Interest income recorded during the period 0 33 -11- First United opened its newest supermarket community office on January 29, 1997. This office is located in the 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. One strength of First United is its capital position. Shareholders' equity as of September 30, 1997 was equal to $56.238 million, comparable to the third quarter total of 1996, which was $56.572 million. Risk based capital, which is an expression of the Corporation's stability and security was 15.27 percent, which is in excess of the regulatory minimum of 8.00 percent. On July 31, 1996, the Board of Directors ratified a stock buy back program. The Corporation's management has authority to repurchase up to 5% of the outstanding shares of First United Corporation at a price management deems appropriate. On a cumulative basis, the Corporation has repurchased 219,989 shares at a price of $3.665 million as of September 30, 1997. This represents 3.387% of the approved 5%. The Corporation paid cash dividends of $.14 on February 1, 1997, May 1, 1997 and August 1, 1997. On September 24,1997, the Corporation declared another dividend of equal amount, to be paid November 1, 1997, to shareholders on record at October 20, 1997. -12- 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. None. 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 September 30, 1997. -13- 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 10/29/97 /s/ WILLIAM B. GRANT ---------- ---------------------------------------- William B. Grant, Chairman of the Board and Chief Executive Officer Date 10/29/97 /s/ Robert W. Kurtz ---------- ---------------------------------------- Robert W Kurtz, President and Chief Financial Officer -14- EX-27 2
9 YEAR DEC-31-1997 SEP-3O-1997 15269 445634 3300 0 79209 21702 21895 429973 2529 565038 497882 5000 5033 0 63 0 0 56175 565038 27333 4583 93 32009 13620 13832 18177 0 0 15057 7031 4722 0 0 4722 .74 0 4.87 412 1091 0 0 0 413 132 2529 2529 0 0
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