<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
______________________________
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended:
June 30, 1994
Commission file number: 0-11916
FIRST UNITED BANCSHARES, INC.
(Exact name of Registrant as specified in its charter)
Arkansas 71-0538646
(State of Incorporation) (I.R.S. Employer
Identification No.)
Main and Washington Streets
El Dorado, Arkansas 71730
(Address of principal executive offices) (Zip Code)
(501) 863-3181
(Registrant's telephone number, including area code)
______________________________
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.
Yes X No
------- -------
The number of shares outstanding of registrant's common stock, par value $1.00
per share, at August 2, 1994 was 5,157,799.
================================================================================
<PAGE> 2
FIRST UNITED BANCSHARES, INC.
FORM 10-Q
JUNE 30, 1994
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Consolidated Statements of Condition,
June 30, 1994 and December 31, 1993. 3
Consolidated Statements of Income for the
Three and Six Month Periods Ended June 30,
1994 and 1993. 4
Consolidated Statements of Cash Flow for the
Six Months Ended June 30, 1994 and 1993. 5
Notes to Consolidated Financial Statements. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation. 7-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings N/A
Item 2. Change in Securities 14
Item 3. Defaults Upon Senior Securities N/A
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information N/A
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
2
<PAGE> 3
Part I. FIRST UNITED BANCSHARES, INC.
Item 1 CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993
------------- -----------------
(In thousands)
<S> <C> <C>
ASSETS
Cash and Due from Banks . . . . . . . . . . . . . . . . . . . . . . $ 38,770 $ 49,827
----------- -------------
Short-Term Investments:
Federal Funds Sold & Securities Purchased Under
Agreements to Resell . . . . . . . . . . . . . . . . . . . . . . 16,025 27,765
Other Short-Term Investments . . . . . . . . . . . . . . . . . . . 9,041 8,895
----------- -------------
Total Short-Term Investments . . . . . . . . . . . . . . . . . 25,066 36660
----------- -------------
Securities Available For Sale . . . . . . . . . . . . . . . . . . 371502 118385
----------- -------------
Investment Securities . . . . . . . . . . . . . . . . . . . . . . 154999 395014
----------- -------------
Total Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503,978 499,864
Unearned Discount . . . . . . . . . . . . . . . . . . . . . . . . (471) (559)
Allowance for Possible Loan Losses . . . . . . . . . . . . . . . (9,739) (9,972)
----------- -------------
Net Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 493768 489333
----------- -------------
Premises and Equipment . . . . . . . . . . . . . . . . . . . . . . 14,342 13,904
----------- -------------
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,996 4,308
----------- -------------
Other Real Estate Owned . . . . . . . . . . . . . . . . . . . . . . 817 1,027
----------- -------------
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,531 16,323
----------- -------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 1120791 $ 1124781
=========== =============
LIABILITIES
Deposits:
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 180,647 $ 175,970
Savings and Interest-Bearing Demand . . . . . . . . . . . . . . . 324,637 325,590
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459,528 468,661
----------- -------------
Total Deposits . . . . . . . . . . . . . . . . . . . . . . . . 964812 970221
Fed Funds Purchased & Securities Sold Under
Agreements to Repurchase . . . . . . . . . . . . . . . . . . . . 23,133 28,534
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 15,169 10,672
Long-Term Debt:
Unaffiliated Bank . . . . . . . . . . . . . . . . . . . . . . . . 2,214 2,214
Affiliated Company . . . . . . . . . . . . . . . . . . . . . . . 5,000 5,000
----------- -------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . 1010328 1016641
----------- -------------
CAPITAL ACCOUNTS
Preferred Stock(Par Value of $1.00; 500,000 shares authorized in
1994 and 1993; none outstanding) . . . . . . . . . . . . . . . . .
Common Stock(Par Value of $1.00; 24,000,000 shares authorized; 0 0
5,157,799 shares outstanding in 1994 and 1993) . . . . . . . . . .
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undivided Profits . . . . . . . . . . . . . . . . . . . . . . . . . 5,158 5,158
Unrealized Loss on Securities Available For Sale . . . . . . . . . 14,863 14,863
93,266 88,119
(2,824) 0
----------- -------------
Total Capital Accounts . . . . . . . . . . . . . . . . . . . . 110463 108140
----------- -------------
Total Liabilities and Capital Accounts . . . . . . . . . . . . $ 1120791 $ 1124781
=========== =============
</TABLE>
3
<PAGE> 4
FIRST UNITED BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
(In thousands) 1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans . . . . . . . . . . . . $ 9,965 $ 9,519 $ 19,531 $ 18,713
Interest on Securities: 13,305 15,096
Taxable Securities . . . . . . . . . . . . . . . 6,734 7,318 1,980 1,814
Nontaxable Securities . . . . . . . . . . . . . . 950 923
Interest on Federal Funds Sold and
Securities Purchased Under
Agreements to Resell . . . . . . . . . . . . . . 145 187 436 378
Interest on Deposits in Banks . . . . . . . . . . . 286 90 343 127
----------- ---------- ---------- ----------
TOTAL INTEREST INCOME . . . . . . . . . . . . . 18080 18037 35595 36128
----------- ---------- ---------- ----------
INTEREST EXPENSE
Interest on Deposits . . . . . . . . . . . . . . . 6,857 6,968 13,614 13,971
Interest on Federal Funds Purchased
and Securities Sold Under Agreements to Repurchase
Interest on Long-Term Debt . . . . . . . . . . . . 256 221 491 425
145 136 270 270
----------- ---------- ---------- ----------
TOTAL INTEREST EXPENSE . . . . . . . . . . . . 7258 7325 14375 14666
----------- ---------- ---------- ----------
NET INTEREST INCOME . . . . . . . . . . . . . . 10,822 10,712 21,220 21,462
Provision for Possible Loan Losses . . . . . . . . (199) (405) (244) (870)
----------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES . . . . . . . . . . . . . . . . . 10,623 10,307 20,976 20,592
----------- ---------- ---------- ----------
OTHER INCOME
Service Charges on Deposit Accounts . . . . . . . . 721 892 1,592 1,686
Trust Department Income . . . . . . . . . . . . . . 321 237 666 667
Security Gains(Losses) . . . . . . . . . . . . . . 0 163 0 169
Other Operating Income . . . . . . . . . . . . . . 540 278 1,035 709
----------- ---------- ---------- ----------
TOTAL OTHER INCOME . . . . . . . . . . . . . . 1582 1570 3293 3231
----------- ---------- ---------- ----------
OTHER EXPENSE
Salaries . . . . . . . . . . . . . . . . . . . . . 2,796 2,553 5,504 5,033
Pension and Other Employee Benefits . . . . . . . . 845 810 1,615 1,303
Net Occupancy Expense . . . . . . . . . . . . . . . 821 508 1,388 1,002
Equipment Expense . . . . . . . . . . . . . . . . . 50 311 388 643
Data Processing Expense . . . . . . . . . . . . . . 406 384 725 771
Other Operating Expenses . . . . . . . . . . . . . 2,100 2,454 4,494 4,802
----------- ---------- ---------- ----------
TOTAL OPERATING EXPENSE . . . . . . . . . . . . 7,018 7,020 14,114 13,554
----------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
A CHANGE IN
ACCOUNTING PRINCIPLE . . . . . . . . . . . . . . 5,187 4,857 10,155 10,269
INCOME TAX EXPENSE . . . . . . . . . . . . . . . . 1,575 1,384 3,052 3,030
----------- ---------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . . . 3,612 3,473 7,103 7,239
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE . . . . . . . . . . . . . . 0 0 0 2,522
----------- ---------- ---------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . $ 3,612 $ 3,473 $ 7,103 $ 9,761
=========== ========== ========== ==========
INCOME PER SHARE:
INCOME BEFORE CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . . . $ 0.70 $ 0.67 $ 1.38 $ 1.41
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE . . . . . . . . . . . . . . 0 0 0 .49
----------- ---------- ---------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . $ 0.70 $ 0.67 $ 1.38 $ 1.90
=========== ========== ========== ==========
CASH DIVIDENDS PER SHARE . . . . . . . . . . . . . $ 0.19 $ 0.17 $ 0.36 $ 0.32
=========== ========== ========== ==========
Average Number of Shares Outstanding
During the Year . . . . . . . . . . . . . . . . . 5,157,799 5,157,799 5,157,799 5,157,799
</TABLE>
4
<PAGE> 5
FIRST UNITED BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------------------------
1994 1993
---- ----
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . $ 7103 $ 7239
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating
Activities:
Depreciation . . . . . . . . . . . . . . . . . . . . 771 522
Amortization of Goodwill . . . . . . . . . . . . . . 220 173
Provision for Possible Loan Losses . . . . . . . . . 244 870
Change in Accounting Principle . . . . . . . . . . . 0 2,522
Provision for Deferred Taxes . . . . . . . . . . . . 141 (211)
Gain on Sales of Securities . . . . . . . . . . . . 0 (7)
Accretion of Bond Discount, Net . . . . . . . . . . (1,271) (846)
(Increase) Decrease in Other Assets . . . . . . . . (1,208) (1,226)
Increase (Decrease) in Other
Liabilities . . . . . . . . . . . . . . . . . . . . 4,356 (4,197)
----------- -----------
Net Cash Provided by Operating
Activities . . . . . . . . . . . . . . . . . . . . . . 10356 4839
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds From Sales of Securities . . . . . . . . . 0 13,358
Proceeds From Maturities of
Securities . . . . . . . . . . . . . . . . . . . . 74,307 67,283
Purchase of Securities . . . . . . . . . . . . . . . (88,870) (98,576)
(Increase) Decrease in Interest-
bearing Deposits in Other Banks,
Net . . . . . . . . . . . . . . . . . . . . . . . . 0 (9,738)
Decrease in Federal Funds, Net . . . . . . . . . . . 6,339 8,622
(Increase) Decrease in Other Short-
term Investments . . . . . . . . . . . . . . . . . (146) 3,007
(Increase) Decrease in Loans . . . . . . . . . . . . (4,469) 38
Capital Additions, Net . . . . . . . . . . . . . . . (1,209) (370)
----------- -----------
Net Cash Used in Investing Activities . . . . . . . . . -14048 -16376
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Demand,
Savings and Interest-bearing Demand
Deposits . . . . . . . . . . . . . . . . . . . . . 3,724 1,763
Increase (Decrease) in Time Deposits . . . . . . . . (9,133) (6,837)
Payment on Long-term Debt . . . . . . . . . . . . . 0 0
Dividends Paid . . . . . . . . . . . . . . . . . . . (1,956) (1,453)
----------- -----------
Net Cash Provided by Financing
Activities . . . . . . . . . . . . . . . . . . . . . . -7365 -6527
-----------
Net Increase (Decrease) in Cash and
Cash Equivalents . . . . . . . . . . . . . . . . . . . -11057 -18064
Cash and Cash Equivalents, Beginning . . . . . . . . . 49827 57097
----------- -----------
Cash and Cash Equivalents, Ending . . . . . . . . . . . $ 38770 $ 39033
=========== ===========
</TABLE>
5
<PAGE> 6
FIRST UNITED BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements of First United Bancshares, Inc.
include the accounts of the parent company and its wholly-owned subsidiaries,
The First National Bank of El Dorado, First National Bank of Magnolia,
Merchants and Planters Bank, N.A. of Camden, City National Bank of Fort Smith,
Commercial Bank at Alma, The Bank of North Arkansas and First Stuttgart Bank
and Trust. All material intercompany transactions have been eliminated.
The consolidated statements of condition as of June 30, 1994 and the
related consolidated statements of income for the three and six month periods
ended June 30, 1994 and 1993 and the consolidated statements of cash flows for
the six month period ended June 30, 1994 and 1993 are unaudited; in the opinion
of management, all adjustments necessary for a fair presentation of the
financial statements are included.
2. CHANGES IN ACCOUNTING POLICIES
On January 1, 1994, First United adopted SFAS No. 115 "Accounting for
Certain Investments in Debt and Equity Securities". This statement addressed
the accounting and reporting for investments in debt and certain equity
securities. In connection with this adoption on january 1, 1994, debt
securities not classified as trading account securities or investment
securities expected to be held until maturity and all equity securities were
classified as securities available for sale and have been reported at fair
value, with net unrealized gains and losses reported, net of tax, as a separate
component of stockholders equity. At June 30, 1994 the amortized costs and fair
values of securities classified as available for sale were $376.04 million and
$371.70 million, respectively, which resulted in an unrecognized loss, net of
tax, of approximately $2.82 million as a separate component of the capital
accounts. There have been no other significant changes in the accounting
policies of First United since the close of business on December 31, 1993, the
date of the most recent annual report to shareholders.
3. RESULTS OF OPERATIONS
The results for the six month period ended June 30, 1994 are not
necessarily indicative of the results for the entire year of 1993. This report
should be read in conjunction with First United's 1993 Annual Report to
Shareholders for a complete understanding of First United's accounting policies
and their effect on the financial statements as a whole.
4. PRIOR YEAR BALANCES
Certain reclassifications have been made to previously reported
balances for 1993 to conform to the 1994 presentation. Such reclassifications
are of a normal recurring nature in accordance with Rule 10-02(b)(8) of
Regulation S-X.
5. ACQUISITIONS
On June 14, 1994, First United completed the acquisition of InvestArk,
Bankshares, Inc. (InvestArk). First United acquired all of the issued and
outstanding stock of InvestArk through the issuance of 885,723 First United
shares of common stock. This transaction was accounted for as a pooling of
interests. For the six months ended June 30, 1994, InvestArk had net interest
income and net income of approximately $3.63 million and $1.17 million,
respectively.
On July 28, 1994, First United entered into a definitive agreement to
acquire FirstBank located in Texarkana, Texas. Under the terms of the
agreement, First United will acquire all of the outstanding shares of FirstBank
for approximately $25 million in cash. As of June 30, 1994, FirstBank had total
assets of approximately $158 million. For the six months ended June 30, 1994,
FirstBank had net interest income and net income of approximately $3.25 million
and $.67 million, respectively. The transaction will be accounted for as a
purchase.
6
<PAGE> 7
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and review of First United Bancshares, Inc.
("First United") and its subsidiaries, The First National Bank of El Dorado,
the City National Bank of Fort Smith, First National Bank of Magnolia,
Merchants and Planters Bank, N.A. of Camden, Commercial Bank at Alma, The Bank
of North Arkansas and First Stuttgart Bank and Trust focuses on the results
from operations which are not otherwise apparent from the consolidated
financial statements. Reference should be made to these financial statements
and the notes to the financial statements for an understanding of this review
and discussion.
RESULTS OF OPERATIONS
Net income for the three months ended June 30, 1994 was $3.61 million,
or $.70 per share compared with $3.47 million or $.67 per share during the same
period in 1993. Net income for the six month period ended June 30, 1994 was
$7.10 million or $1.38 per share compared with $7.24 million or $1.41 per share
as of June 30, 1993. The annualized return on average assets from continuing
operations for the six months ended June 30, 1994 and 1993 was 1.30% and 1.35%
respectively, while the annualized return on average equity was 13.03% and
14.47% respectively for the same periods. The decrease in net income was due
primarily to a decrease in First United's net interest margin which was
partially offset by lower provisions for possible loan losses.
During the first quarter of 1993, First United adopted the provisions
of FAS 109, "Accounting For Income Taxes." As a direct result of this
standard, First United realized a non-recurring increase in income of
approximately $2.52 million.
NET INTEREST INCOME
Net interest income, the principal source of earnings, is the
difference between the income generated by earning assets and the total
interest cost of the funds obtained to carry them. Net interest income, as
referred to in this discussion, is on a fully tax-equivalent basis, which
adjusts for the tax exempt status of income earned on certain loans and
investments. The reported interest income for the tax-free assets is increased
by the amount of tax savings less the nondeductible portion of interest expense
incurred to acquire the tax-free assets. Net interest income is affected by
variations in both interest rates and the volume of interest-earning assets and
interest-bearing liabilities.
On a tax equivalent basis, net interest income for the first six
months of 1994 was $22.29 million compared with $22.44 million in the first six
months of 1993. Net interest income also decreased when compared with 1992.
The small decrease in net interest income was the result of First United's
liability sensitive balance sheet position during a time of rising interest
rates. However, during the first six months of 1994, First United experienced
a decline in its' net interest margin. The net interest margin through June 30,
1994, was 4.16% compared with 4.37% for 1993 and 4.40% for 1992. First United
anticipates that margins for the remainder of 1994 will be lower than that of
1993. During 1993, First United shortened the overall maturities of its
investment portfolio in order to minimize the effect of any potential rise in
interest rates.
First United has debt of approximately $7.21 million at June 30, 1994
and interest expense associated with this debt totaled $270 thousand during the
first six months of 1994. First United will make a principal payment of $1.11
million on its instalment note payable to an unaffiliated bank in August of
this year, with the final instalment payment of $1.11 million due in August
1995. These borrowing contain financial covenants relating to the issuance of
additional debt and maintenance of minimum tangible net worth . First United's
$5.00 million note payable to an affiliated company matures in August of 1994.
First United intends to renew this note at the present time.
Pursuant to the Interest Rate Control Amendment to the Constitution of
the State of Arkansas, "consumer loans and credit sales" have a maximum
limitation of 17% per annum and all "general loans" have a maximum limitation
of 5% over the Federal Reserve Discount Rate in effect at the time the loan was
made. The Arkansas Supreme Court has determined that "consumer loans and
credit sales" are "general loans" and are subject to the limitation of 5% over
the Federal Reserve Discount Rate as well as a Maximum limitation of 17% per
annum. As a general rule, the Company and its subsidiary banks are required to
comply with the Arkansas usury laws on loans made within the State of Arkansas.
7
<PAGE> 8
The following table is a comparison of the net interest margin:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993 1992
--------- ---------------------
<S> <C> <C> <C>
Yield on Earning asset 6.91% 7.27% 7.99%
Break - even yield 2.75% 2.90% 3.59%
Net interest margin 4.16% 4.37% 4.40%
Net interest spread 3.59% 3.83% 3.75%
----- ----- -----
</TABLE>
LOANS AND LEASES
First United's gross loans and leases totaled $503.98 million at June
30, 1994 compared with $499.86 million at December 31, 1993. Although the
Company experienced a modest increase in loans, overall loan demand continues
to be weak. In light of the local economic outlook for the remainder of 1994,
the Company does not anticipate a significant increase in loan demand. The
Company has no foreign loans or leases and it is the policy of the Company to
avoid out of territory loans.
A sound credit policy combined with periodic and independent credit
reviews are the key factors of the credit risk management program. All
affiliate banks operate under written loan policies that help maintain a
consistent lending function and provide sound credit decisions. Credit
decisions continue to be based on the borrower's cash flow position and the
value of the underlying collateral, as well as other relevant factors. Each
bank is responsible for evaluating its loans to identify those credits
beginning to show signs of deterioration so that prompt corrective action may
be taken. In addition, an internal audit and loan review staff operate
independently of the affiliate banks. This review team performs periodic
examinations of each bank's loans and related documentation. Results of these
examinations are reviewed with the Chairman and Chief Executive Officer, the
management and board of the respective affiliate banks and the Audit
Committees.
8
<PAGE> 9
The following table list those loans and leases by type which are on
non-accrual status; loans by type 90 days or more past due and still accruing;
renegotiated loans by type and loans transferred to other real estate:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993 1992
---------- -------------------
(In thousands)
<S> <C> <C> <C>
Non-performing loans:
Non-accrual loans:
Commercial & Financial $ 1,601 $ 2,045 $ 1,740
Real Estate 510 520 708
Consumer 96 68 59
-------- ------- -------
$ 2,207 $ 2,633 $ 2,507
-------- ------- -------
Past due 90 days or more:
Commercial $ 268 $ 95 $ 113
Real Estate 130 28 535
Consumer 197 219 156
-------- ------- -------
$ 595 $ 342 $ 804
-------- ------- -------
Renegotiated Commercial
Loans: $ 515 $ 223 $ 1,414
-------- ------- -------
Total non-performing
Loans: $ 3,317 $ 3,198 $ 4,725
Other Real Estate, Net 830 1,039 3,854
-------- ------- -------
Total non-performing
Assets: $ 4,147 $ 4,237 $ 8,579
======== ======= =======
</TABLE>
All loans listed above as non-accrual, 90 days or more past due and
renegotiated were classified as either substandard, doubtful or loss as of June
30, 1994.
Management remains committed to reducing the level of non-performing
assets and to minimize future risks by continuous review of the loan portfolio.
During the past year, First United has issued revised credit policies for real
estate lending in order to control loan risks.
ALLOWANCE FOR POSSIBLE LOAN AND LEASE LOSSES
The provision for possible loan losses represents management's
evaluation of the overall loan portfolio quality and loss experience. During
management's periodic review of the provision throughout each quarter, the
amount to be provided is determined by the level of net charge-offs, the size
of the loan portfolio, the non-performing assets, anticipated and current
economic conditions and specific reviews of performing and non-performing
loans.
9
<PAGE> 10
During the first six months of 1994 First United made provisions for
possible loan losses of $244 thousand compared with $870 thousand for the same
period in 1993. Total non-performing loans increased $119 thousand from $3.20
million at December 31, 1993 to $3.32 million at June 30, 1994. Net
charge-offs through June 30, 1994 totaled $477 thousand.
<TABLE>
<CAPTION>
Year Ended December 31,
June 30, 1994 1993 1992
------------- --------------------------------
<S> <C> <C> <C>
Allowance as a
percentage of total
loans and leases 1.93% 2.00% 1.77%
</TABLE>
The reserve for possible loan losses as a percentage of non-performing
loans was approximately 294% at June 30, 1994 compared with 308% at December
31, 1993.
The allocation of the allowance for possible loan losses by major
categories of loans is as follows:
<TABLE>
<CAPTION>
December 31,
June 30, ------------
(In thousands) 1994 1993 1992
---------- ----------------------------------
<S> <C> <C> <C>
Commercial & Financial $5,889 $5,313 $2,922
Real Estate 736 1,044 2,063
Consumer 1,858 1,113 576
Unallocated 1,256 2,502 2,411
------ ------ ------
Total $9,739 $9,972 $7,972
====== ====== ======
</TABLE>
NON-INTEREST INCOME
Management continues to emphasize that growth of non-interest income
in providing new revenue to the income stream. Future profitability depends
upon income derived from providing loan and deposit services, discount
brokerage fees, trust service income, mortgage service fees and service charges
on deposit accounts.
The table represented below is a comparison of the dollar and
percentage change for each component of non-interest income:
<TABLE>
<CAPTION>
Six Months Ended
June 30, Change
---------------------- ----------------------
(Dollars in Thousands) 1994 1993 $ %
------ ------ ----- -----
<S> <C> <C> <C> <C>
Service Charges on
Deposit Accounts $1,592 $1,686 $ (94) (6%)
Trust Income 666 667 (1) ---
Security Gains 0 169 (169) ---
Other Income 1,035 709 326 46%
------ ------ ------ -----
Total Other Income $3,293 $3,231 $ 62 (2%)
====== ====== ====== =====
</TABLE>
Excluding security gains, non-interest income increased approximately $231
thousand when comparing 1994 with 1993 results. This increase was primarily
related to other fee income.
10
<PAGE> 11
INVESTMENT SECURITIES
During the first six months of 1994, First United had no security
gains.
<TABLE>
<CAPTION>
June 30, December 31,
(In thousands) 1994 1993 1992
----------- ------------------------------------
<S> <C> <C> <C>
Market Value $ 152,161 $ 404,512 $ 422,356
Book Value 154,463 395,014 413,300
----------- --------- ---------
Difference $ (2,302) $ 9,498 $ 9,056
=========== ========= =========
</TABLE>
At June 30, 1994, approximately 72% of First United's securities
portfolio was classified as available for sale and carried at fair value.
SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
June 30, December 31,
(In thousands) 1994 1993
---------- ------------
<S> <C> <C>
Market Value $ 371,700 $84,450
Book Value 376,041 83,468
---------- -------
Difference $ (4,341) $ 982
========== =======
</TABLE>
Those securities listed as of December 31, 1993 were classified as
Held For Sale and are included in this presentation for comparative purposes
only.
NON-INTEREST EXPENSE
Control of non-interest expenses continues to be one of First United's
major objectives. Non-interest expenses include salaries, employee benefits,
occupancy costs, equipment and other operating expenses:
<TABLE>
<CAPTION>
Six Months Ended
June 30, Change
-------------------- -----------------
(Dollars in Thousands) 1994 1993 $ %
---- ---- ----- -----
<S> <C> <C> <C> <C>
Salaries $ 5,504 $ 5,033 $ 471 9%
Pension and Employee Benefits 1,615 1,303 312 24%
Net Occupancy Expense 1,388 1,002 386 39%
Equipment Expense 388 643 (255) (40%)
Data Processing Expense 725 771 (46) (6%)
Other Operating Expense 4,494 4,802 (308) (6%)
------- ------- ----- ---
Total Non-Interest Expense $14,114 $13,554 $ 560 4%
======= ======= ===== ===
</TABLE>
Pension and employee benefits increased approximately 24% during the
first six months of 1994 when compared with the same period in 1993 primarily
as a result of the cumulative effect of a $500 thousand adjustment in the net
periodic pension costs related to First United's defined pension benefit plan.
Excluding the benefit of the non-recurring adjustment, employee benefit costs
decreased by approximately $178 thousand. The 14.11 million in total
non-interest expense included approximately $706 thousand of non-interest
expense at Alma which was accounted for as a purchase.
11
<PAGE> 12
INCOME TAXES
The effective tax rate of First United for the six month period ended
June 30, 1994 was 30.1% compared to 29.5% for the same period in 1992. The
increase in the 1994 effective tax rate over 1993 was due to a increase in the
proportion of nontaxable income to total income.
CAPITAL AND LIQUIDITY
The assessment of capital adequacy depends primarily on a number of
factors which include asset quality, liquidity, stability of earnings, changing
competitive forces, economic conditions in the various markets served and
strength of management. Management of capital focuses on achieving the rate of
return for shareholders while following guidelines set forth by bank
regulators.
First United's equity capital totaled $110.46 million at June 30,
1994, compared to the December 31, 1993 level of $108.14 million. The growth
and retention of earnings continues to be First United's primary source of
additional capital. Currently, First United does not have any plans for
issuing subordinated notes and First United has not issued any new common or
preferred stock except for the acquisition of InvestArk as discussed in Note 5
on page 6 of this report.
The table presented below is a comparison of capital ratios:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993 1992
----------- ------------------------
<S> <C> <C> <C>
Equity Capital to Total Assets 10.11% 9.62% 9.37%
Primary Capital to Total Assets 10.88% 10.42% 10.14%
</TABLE>
The table presented below is a comparison of First United's capital
position with regulatory capital requirements:
<TABLE>
<CAPTION>
June 30, Regulatory
1994 Requirements
----------- ------------
<S> <C> <C>
Total Capital/Total Assets 10.88% 6.00%
Primary Capital/Total Assets 10.88% 5.50%
Total Risk Based Capital 19.36% 8.00%
Tier 1 Capital 18.11% 4.00%
Leverage Ratio 9.79% 3.00%
</TABLE>
Liquidity management is concerned with meeting the cash requirements
of customers, including the withdrawal of funds by depositors or drawing down
of approved lines of credit and commitments by borrowers. First United is
aided significantly in meeting its short term liquidity needs by its strong
capital position, its high rate of internal capital generation and its level of
loan loss reserves.
12
<PAGE> 13
DIVIDEND POLICY
First United strives to maintain a balance between the retention of
earnings for the support of growth and expansion and a dividend payout that
meets the required return for investors. First United anticipates continuing
its policy of regular cash dividends, although there is no assurance as to
future increases in dividends because they are dependent upon future earnings,
capital requirements and economic conditions.
On May 24, 1994 the Board of Directors of First United increased the
annual cash dividend approximately 11.8%. The current annual dividend rate is
$.76 per share compared with $.68 per share prior to the increase.
The following table sets forth the dividend payout ratio for the last
two years and for the six months ended June 30, 1994:
<TABLE>
<CAPTION>
Year Ended
June 30, ----------------------
1994 1993 1992
------- ---- ----
<S> <C> <C> <C>
Dividend payout ratio 26.14% 23.62% 24.54%
</TABLE>
13
<PAGE> 14
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not Applicable
Item 2. CHANGES IN SECURITIES
On June 14, 1994, First United Bancshares, Inc. (the "Company")
acquired all of the issued and outstanding shares of common stock of InvestArk
Bankshares, Inc., Stuttgart, Arkansas, in exchange for the issuance of 885,523
shares of common stock, $1.00 par value, of the Company. As of the date of
this filing, the Company has issued and outstanding 5,157,799 shares of common
stock, $1.00 par value. Said shares have been publicly registered with the
Securities and Exchange Commission and are traded on the National Association
of Securities Dealers Automated Quotation System under the symbol "UNTD". The
above referenced issuance of common stock did not materially modify, limit or
quality the rights of the holders of the Company's common stock.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 13, 1994, the Company held a special shareholders meeting
where the Board of Directors of the Company submitted to the shareholders a
proposal to vote upon the Agreement and Plan of Reorganization, dated December
17, 1993 (the "Agreement"), by and between the Company and InvestArk
Bankshares, Inc., where the Company would acquire all of the issued and
outstanding shares of common stock of InvestArk Bankshares, Inc. in exchange
for the issuance of the Company's common stock based upon an exchange formula
as described in the Agreement. The exchange formula is more fully described in
the Company's Form S-4 Registration Statement under the Securities Act of
1933,, as amended, Registration No. 33-52341 as filed with the Securities and
Exchange Commission on May 4, 1994, and which became effective on May 6, 1994
and in the Company's current report on Form 8-K filed with the Securities and
Exchange Commission on June 16, 1994. Of the total shares voted at the special
meeting 3,206,820 were voted in favor of the Agreement, 3,074 voted against the
Agreement and 8,800 abstained from voting.
Item 5. OTHER MATTERS
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
--------
2 Agreement and Plan of Reorganization, dated December
17, 1993, by and between First United Bancshares,
Inc. and InvestArk Bankshares, Inc. and Plan of
Merger attached as Exhibit A thereto is incorporated
herein by reference as previously filed by the
Company in its Form S-4 Registration Statement under
the Securities Act of 1933, Registration No. 33-52341
as filed with the Securities and Exchange Commission
on May 4, 1994 which became effective May 6, 1994.
Reports on Form 8-K
On June 16, 1994, the Company filed a current report on Form 8-K under
Item 2 regarding the Company's acquisition of all of the issued and outstanding
shares of common stock of InvestArk Bankshares, Inc., Stuttgart, Arkansas, in
exchange for the issuance of 885,523 shares of the Company's common stock, par
value $1.00. On August 12, 1994, the Company filed its Form 8-K/A which
amended the prior filing to add the financial statements of InvestArk
Bankshares, Inc. and the pro forma financial information required pursuant to
Article 11 of Regulation S-X. This amendment was filed in accordance with Item
7(a)(4) and (b)(2) of Form 8-K.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements 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 BANCSHARES, INC.
BY /s/ JAMES V. KELLEY
James V. Kelley
Chairman, President and Chief
Executive Officer
BY /s/ JOHN E. BURNS
John E. Burns
Chief Financial Officer and Principal
Accounting Officer
Date: August 12, 1994
15
