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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDING DECEMBER 31, 1994
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NO. 0-11916
FIRST UNITED BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
ARKANSAS 71-0538646
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
MAIN AND WASHINGTON STREETS, EL DORADO, ARKANSAS 71730
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (501) 863-3181
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
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NAME OF EACH EXCHANGE ON
TITLE OF CLASS WHICH REGISTERED
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Common Stock, $1.00 par value NASDAQ-NMS
</TABLE>
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes [x] No [ ]
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 period 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 [ ]
As of March 1, 1995, 5,158,772 shares of the Registrant's Common
Stock, $1.00 par value were issued and outstanding, and the approximate
aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $115,500,000.00.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference into
the listed Parts and Items of Form 10-K:
Annual Report to Stockholders for the year ending December 31, 1994 to
the extent indicated in the Form 10-K cross reference index - PARTS II, III,
and IV.
Definitive Proxy Statement to Stockholders to be filed with the
Securities and Exchange Commission not later than 120 days after the close of
the Registrant's fiscal year - PART III.
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FIRST UNITED BANCSHARES, INC.
ANNUAL REPORT ON FORM 10-K
December 31, 1994
CROSS REFERENCE SHEET AND INDEX
PART I.
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ITEM NO. LOCATION*
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Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 4 of Form 10-K
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5 of Form 10-K
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5 of Form 10-K
Item 4. Submission of Matters to a Vote
of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
PART II.
---------
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . Page 14 of the 1994
Annual Report
to Stockholders
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . Page 20 of the 1994
Annual Report to
Stockholders
Item 7. Managements's Discussion and Analysis
of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pages 4 - 19 of the
1994 Annual Report
to Stockholders
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . Pages 22 - 38 of the
1994 Annual Report
to Stockholders
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . Not Applicable
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FIRST UNITED BANCSHARES, INC.
ANNUAL REPORT ON FORM 10-K
December 31, 1994
CROSS REFERENCE SHEET AND INDEX (CONTINUED)
PART III.
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ITEM NO. LOCATION*
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Item 10. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pages 40 - 42 of the
1994 Annual Report
to Stockholders
The remaining information for Item 10 and the information required by Items 11 through 13 are
incorporated by reference to the Registrant's Definitive Proxy Statement for the 1995 Annual Meeting of
Stockholders filed with the Securities and Exchange Commission.
PART IV.
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Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5
</TABLE>
*Page number references are to the locations of the listed items contained in
this Annual Report on Form 10-K for the year ended December 31, 1994. The
Registrant's 1994 Annual Report to Stockholders and Definitive Proxy Statement
are referred to above where such information is incorporated by reference into
this Annual Report on Form 10-K from such 1994 Annual Report to Stockholders
and Definitive Proxy Statement.
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FIRST UNITED BANCSHARES, INC.
ANNUAL REPORT ON FORM 10-K
December 31, 1994
PART I
ITEM 1. BUSINESS.
DESCRIPTION OF BUSINESS
First United Bancshares, Inc. (First United) is a multi-bank holding
company incorporated in 1980 for the purpose of holding all of the outstanding
stock of The First National Bank of El Dorado (FNBE). Between 1981 and 1994,
First United acquired six other banks in different cities within Arkansas. The
banks acquired were the First National Bank of Magnolia (FNBM), Merchants and
Planters Bank, N.A., of Camden (MPBC), City National Bank of Fort Smith
(CNBFS), Commercial Bank at Alma (CBA), The Bank of North Arkansas (BNA), and
First Stuttgart Bank and Trust Company (FSBTC). Each of the banks are
wholly-owned by First United.
The banks offer customary services of banks of similar size and
similar markets, including interest-bearing and non-interest bearing deposit
accounts, commercial, real estate and personal loans, trust services,
correspondent banking services and safe deposit box activities. For further
discussion of First United operations, see pages 4 through 19 of the Annual
Report, which is incorporated by reference to Item 7 in the Form 10-K.
COMPETITION
The banking business is highly competitive. The banking subsidiaries
of First United compete actively with national and state banks, savings and
loan associations, securities dealers, mortgage bankers, finance companies and
insurance companies.
REGULATION
First United is a registered bank holding company pursuant to the Bank
Holding Company Act of 1956, as amended (the "Act"), and as such, is subject to
regulation and examination by the Federal Reserve Board and is required to file
with the Federal Reserve Board annual reports and other information regarding
the business operations of itself and its subsidiaries. The Act provides that
a bank holding company may be required to obtain Federal Reserve Board approval
for the acquisition of more than 5% of the voting securities or substantially
all of the assets of any bank or bank holding company, unless it already owns a
majority of the voting securities of such bank. The Act prohibits First United
from engaging in any business other than banking or bank-related activities
specifically allowed by the Federal Reserve Board. The Act also prohibits
First United and its subsidiaries from engaging in certain tie-in arrangements
in connection with the extension of credit, the lease or sale of property or
the provision of any services. Under Title VI of the Financial Institutions,
Reform, Recovery and Enforcement Act of 1989, the Act has been amended to
authorize bank holding companies to acquire savings and thrift institutions
without tandem operations restrictions.
First United's seven banking subsidiaries ("the Banks") are subject to
a variety of regulations concerning the maintenance of reserves against
deposits, limitations on the rates that can be charged on loans or paid on
deposits, branching, restrictions on the nature and amounts of loans and
investments that can be made and limits on daylight overdrafts. All of the
Banks are regulated by the Federal Deposit Insurance Corporation. In addition,
as national banking associations, FNBE, FNBM, MPBC, and CNBFS are subject to
the regulation and supervision of the Comptroller of the Currency, while CBA,
BNA and FSBTC are subject to the regulation of the Arkansas State Bank
Department. Each of the Banks is a member of the Federal Reserve System and is
subject to regulation by the Federal Reserve Board.
The Banks are limited in the amount of dividends they may declare.
Prior approval must be obtained from the appropriate regulatory authorities
before dividends can be paid by the Banks to First United if the amount of
adjusted capital, surplus and retained earnings is below defined regulatory
limits. See Note 14 of Notes to the Consolidated Financial Statements, which
is incorporated by reference into Item 8 of this Annual Report on Form 10-K.
The Banks are also restricted from extending credit or making loans to or
investments in First United and certain other affiliates as defined in the
Federal Reserve Act. Furthermore, loans and extensions of credit are subject
to certain other collateral requirements.
EMPLOYEES
At December 31, 1994, First United had approximately 478 full-time
equivalent employees and considers its relationship with its employees to be
good.
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ITEM 2. PROPERTIES.
PROPERTIES
The seven subsidiaries of First United hold in fee and primarily
occupy their main office buildings. In addition, the subsidiaries occupy and
operate branches located in fifteen (15) communities throughout Arkansas. The
majority of the branch locations are held in fee. The locations not held in
fee are leased for various terms. First United does not own or lease any real
property. Minimal office space is required for First United's officers and
employees and such space is provided without charge by FNBE. First United's
data processing operations are also located in facilities owned by FNBE.
ITEM 3. LEGAL PROCEEDINGS.
LEGAL PROCEEDINGS
First United and its subsidiaries have been named as defendants in
various legal actions arising from normal business activities in which damages
of various amounts are claimed. The amount, if any, of ultimate liability with
respect to such matters cannot be determined. However, after consulting with
legal counsel, management believes any such liability will not have a material
effect on First United's consolidated financial condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
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EXECUTIVE OFFICERS OF THE REGISTRANT
James V. Kelley, 45 . . . . . . . . . . . . Chairman, President and Chief Chairman,
President and Chief Executive Officer of First
United since 1987; Chairman and Chief Executive
Officer of FNBE since 1985.
Robert G. Dudley, 62 . . . . . . . . . . . . Secretary of First United since 1983; President
of FNBE since 1985.
John E. Burns, 36 . . . . . . . . . . . . . Vice President and Chief Financial
Officer of First United since 1993; Vice
President and Director of Audit from
1998 to 1993.
SIGNIFICANT OTHER EMPLOYEES
Robert L. Jones, 59 . . . . . . . . . . . . President and Chief Executive Officer of
FNBM since 1991; President and Chief
Executive Officer of MPBC from 1984 to
1991.
Jim N. Harwood, 55 . . . . . . . . . . . . . President and Chief Executive Officer of CNBFS
since 1993; Executive Vice President of CNBFS
from 1983 to 1993.
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS.
The information required in response to this Item is incorporated by
reference from the disclosure contained under the caption "Common Stock and
Dividends" on page 14 of the Annual Report to Stockholders, which is included
as Exhibit 13 hereto.
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ITEM 6. SELECTED FINANCIAL DATA.
The information required in response to this Item is incorporated by
reference from the disclosure contained under the caption "Selected Financial
Data" on page 20 of the Annual Report to Stockholders, which is included as
Exhibit 13 hereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information required in response to this Item is incorporated by
reference from the disclosure contained under the caption "Financial Analysis"
on pages 4-19 of the Annual Report to Stockholders, which is included as
Exhibit 13 hereto.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required in response to this Item is incorporated by
reference from the disclosure contained under the caption "Financial Statements
and Notes" on pages 22-38 of the Annual Report to Stockholders, which is
included as Exhibit 13 hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
Pursuant to general instruction G(3) of the instructions to Form 10-K,
information concerning First United's executive officers and other significant
employees is included under the separate captions "Executive Officers of the
Registrant" and "Significant Other Employees" at the end of Part I of this
report. The remaining information required in response to this Item is
incorporated by reference from the disclosure contained under the caption
"Executive Officers and Directors" on pages 40-42 of the Annual Report to
Stockholders, which is included as Exhibit 13 hereto, and is incorporated by
reference from the Definitive Proxy Statement which will be filed with the
Securities and Exchange Commission no later than 120 days after the end of the
1994 fiscal year covered by this Annual Report on 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
The information required in response to this Item is incorporated by
reference from the Definitive Proxy Statement which will be filed with the
Securities and Exchange Commission no later than 120 days after the end of the
1994 fiscal year covered by this Annual Report on 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required in response to this Item is incorporated by
reference from the Definitive Proxy Statement which will be filed with the
Securities and Exchange Commission no later than 120 days after the end of the
1994 fiscal year covered by this Annual Report on 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required in response to this Item is incorporated by
reference from the Definitive Proxy Statement which will be filed with the
Securities and Exchange Commission no later than 120 days after the end of the
1994 fiscal year covered by this Annual Report on 10-K.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORT ON FORM 8K.
ITEM 14(A)(1) FINANCIAL STATEMENTS.
The following consolidated financial statements and the report of
independent auditors of First United Bancshares, Inc. and subsidiaries for the
year ended December 31, 1994 as required by Item 8, are:
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Page(s) in 1994 Annual
Report to Stockholders
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Reports of Management and Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . Page 39
Consolidated Statements of Condition as of
December 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 23
Consolidated Statement of Income
for the three years ended December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . Page 24
Consolidated Statements of Changes in Capital Accounts
for the three years ended December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . Page 25
Consolidated Statements of Cash Flows
for the three years ended December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . Page 26
Notes to Consolidated Financial Statements-December 31, 1994 . . . . . . . . . . . . . . . . . Pages 27-38
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ITEM 14(A)(2) FINANCIAL STATEMENT SCHEDULES.
Not applicable.
ITEM 14(A)(3) FINANCIAL STATEMENT SCHEDULES.
The Exhibits required by Item 601 of Regulation S-K which are required
to be filed in response to this Item 14(a)(3) are submitted as a separate
section of this Annual Report on Form 10-K under the caption "Exhibit Index".
ITEM 14(B) REPORTS ON FORM 8-K.
First United Bancshares, Inc. filed a Current Report on Form 8-K dated
on June 16, 1994, describing under Item 2 that First United Bancshares, Inc.
had consummated an Agreement and Plan of Reorganization with InvestArk
Bankshares, Inc., whereby First United Bancshares, Inc. acquired ownership of
one hundred percent (100%) of the issued and outstanding stock of InvestArk
Bankshares, Inc.
First United Bancshares, Inc. filed an amendment to its Current Report
on Form 8-K dated June 16, 1994 on Form 8-K/A on August 12, 1994, which
provided pro forma financial statements of First United and InvestArk
Bankshares, Inc. and historical financial statements of InvestArk Bankshares,
Inc.
First United Bancshares, Inc. filed a Current Report on Form 8-K dated
October 18, 1994, under Item 5 thereof, disclosing the restated financial
statements of First United as a result of accounting for the merger by and
between First United and InvestArk Bankshares, Inc. under the pooling of
interests method.
ITEM 14(C) EXHIBITS.
The exhibits required by Item 601 of Regulation S-K which are required
to be filed in response to this Item 14(c) are submitted as a separate section
of this Annual Report on Form 10-K under the caption "Exhibit Index".
ITEM 14(D) FINANCIAL STATEMENT SCHEDULES.
Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 20th day of
March, 1995.
FIRST UNITED BANCSHARES, INC.
By:/s/ JOHN E. BURNS
John E. Burns, Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes James V.
Kelley and/or John E. Burns, to file one or more amendments to this Annual
Report on Form 10-K, which amendments may make such changes to the Annual
Report on Form 10-K as he deems appropriate, and each such person hereby
appoints James V. Kelley and/or John E. Burns as his lawful attorney-in-fact to
execute in the name and on behalf of each such person individually, and in each
capacity stated below, any such amendments to the Annual Report on Form 10-K.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
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SIGNATURE TITLE DATE
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/s/ JAMES V. KELLEY
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James V. Kelley Chairman of the Board, President, March 20, 1995
Chief Executive Officer
/s/ JOHN E. BURNS
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John E. Burns Vice President, Chief Financial March 20, 1995
Officer, Principle Accounting Officer
/s/ E. LARRY BURROW
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E. Larry Burrow Director March 20, 1995
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Claiborne P. Deming Director March 20, 1995
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Grady E. DuPriest Director March 20, 1995
/s/ WILLIAM A. ECKERT, JR
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William A. Eckert, Jr. Director March 20, 1995
/s/ ROY E. LEDBETTER
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Roy E. Ledbetter Director March 20, 1995
/s/ MICHAEL F. MAHONY
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Michael F. Mahony Director March 20, 1995
/s/ RICHARD H. MASON
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Richard H. Mason Director March 20, 1995
/s/ JACK W. MCNUTT
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Jack W. McNutt Director March 20, 1995
/s/ WILLIAM E. MORGAN
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William E. Morgan Director March 20, 1995
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R. Madison Murphy Director March 20, 1995
/s/ ROBERT C. NOLAN
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Robert C. Nolan Director March 20, 1995
/s/ PAULA M. O'CONNOR
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Paula M. O'Connor Director March 20, 1995
/s/ KATHERINE P. OZMENT
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Katherine P. Ozment Director March 20, 1995
/s/ CAL PARTEE, JR.
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Cal Partee, Jr. Director March 20, 1995
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/s/ W. C. PARTEE
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W. C. Partee Director March 20, 1995
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Chesley Pruet Director March 20, 1995
/S/ JOHN D. TRIMBLE, JR.
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John D. Trimble, Jr. Director March 20, 1995
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Ralph C. Weiser Director March 20, 1995
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David M. Yocum, Jr. Director March 20, 1995
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FIRST UNITED BANCSHARES, INC.
ANNUAL REPORT ON FORM 10-K
December 31, 1994
EXHIBIT INDEX
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EXHIBIT NUMBER DESCRIPTION
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2 Agreement and Plan of Reorganization dated July 28, 1994 between First United
Bancshares, Inc. and FirstBank, Texarkana, Texas.
3(a) Restated Articles of Incorporation of First United Bancshares, Inc.
3(b) Restated Bylaws of First United Bancshares, Inc.
9 Trust Agreement dated June 14, 1994, by and among Jackson T. Stephens, the W.
R. Stephens Trust, the W. R. Stephens, Jr. Trust, W. R. Stephens, Jr., Warren
A. Stephens, the Elizabeth Ann Stephens Campbell Trust, Stephens Group, Inc.
and the Bank of New York, a Trustee (filed as Exhibit 9 to the Registration
Statement of Form S-4 of the Company filed with the Securities and Exchange
Commission on May 4, 1994) incorporated by reference herein.
10(a) Severance Agreement between First United Bancshares, Inc. and James V. Kelley
(filed as Exhibit 10.1 to the Annual Report on Form 10-K for the year ended
December 31, 1992) incorporated by reference herein.
10(b) Shareholders Agreement dated December 17, 1993 by and among First United, W.
R. Stephens, Jr., the W. R. Stephens Trust, W. R. Stephens, Jr. Trust, Jackson
T. Stephens, Warren A. Stephens, Elizabeth Ann Stephens Trust and Stephens
Group, Inc. (filed as Exhibit 10 to the Registration Statement on Form S-4
filed with the Securities and Exchange Commission on May 4, 1994) incorporated
by reference herein.
11 Statement of Computation of Per Share Earnings (see page 24 of the
Consolidated Financial Statements of First United Bancshares, Inc. contained
in the 1994 Annual Report to Stockholders which is included herein as Exhibit
13).
13 First United Bancshares, Inc. 1994 Annual Report to Stockholders.
21 Subsidiaries of First United Bancshares, Inc.
23(a) Consent of Arthur Andersen LLP.
23(b) Consent of Martin & Company.
24 Power of Attorney (see signature page).
27 Financial Data Schedule.
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EXHIBIT 2
AGREEMENT AND PLAN OF REORGANIZATION, DATED JULY 28, 1994
BETWEEN
FIRST UNITED BANCSHARES, INC.
AND
FIRSTBANK, TEXARKANA, TEXAS
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EXHIBIT 2
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
FIRST UNITED BANCSHARES, INC.,
FIRSTBANK, TEXARKANA, TEXAS
AND
SELLERS
(as defined in Exhibit 1 of this Agreement)
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TABLE OF CONTENTS
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SECTION PAGE
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ARTICLE I
THE MERGER
SECTION 1.01. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.03. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.04. Establishment of First United of Texas, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.05. Establishment of Interim Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.06. Deferred Compensation Agreement and Incentive
Deferred Compensation Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.07. Bank Earnings Prior to Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.08. Merger of Retirement Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.09. Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
EFFECT OF THE MERGER ON BANK COMMON STOCK
SECTION 2.01. Effect on Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BANK AND SELLERS
SECTION 3.01. Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3.02. Subsidiaries; Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.03. Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.04. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3.05. Bank Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.06. Bank Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.07. Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.08. Authorizations; Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.09. Litigation and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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SECTION PAGE
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SECTION 3.11. Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.12. Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.13. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.14. Conduct of Bank to Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.15. Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.16. Properties, Leases and Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.17. No Untrue Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.18. Existence and Enforceability of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.19. Not in Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.20. Trust Validity; Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.21. Correction of Examination Deficiencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.22. Sellers Informed Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.23. Limitation on Representations and Warranties of Sellers . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF UNITED
SECTION 4.01. Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.02. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE V
COVENANTS OF BANK AND SELLERS
SECTION 5.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 5.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 5.03. Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5.04. Update Disclosure; Breaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.05. Vote of Bank Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Shareholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
<PAGE> 5
<TABLE>
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<S> <C> <C>
SECTION 6.02. Legal Conditions to Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 6.03. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 6.04. Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.05. Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.06. Governmental and Other Third Party Approvals . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. Conditions to Each Party's Obligation to Effect the Merger . . . . . . . . . . . . . . . . 26
SECTION 7.02. Conditions to Obligations of United . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7.03. Conditions to Obligations of Bank and Sellers . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VIII
TERMINATION AND AMENDMENT
SECTION 8.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 8.02. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 8.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 8.04. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 9.02. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 9.03. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 9.04. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 9.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 9.06. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 9.07. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 9.08. Knowledge of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
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<TABLE>
<CAPTION>
SECTION PAGE
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<S> <C> <C>
SECTION 9.09. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 9.10. Effect of Closing on Representations and Warranties . . . . . . . . . . . . . . . . . . . 33
SECTION 9.11. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
EXHIBIT A Plan of Merger
EXHIBIT 1 Sellers
EXHIBIT 2.01(a) Escrow Agreement
<PAGE> 7
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
SECTION
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<S> <C>
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Agreement Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.09
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Bank Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.12(a)
Bank Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Bank Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.02(b)(ii)
Bank Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.05(a)
Bank Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.08
Bank Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.08
Bank Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.06
BHC Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.01
BSC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.02(b)(i)
BSC Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.02(b)(i)
BSC Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.02(b)(i)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.03
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.03
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.12(a)
Competing Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.09
Competing Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.02(f)
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.02
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.08
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.12(a)
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.04
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.06
Federal Reserve Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.03
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
SECTION
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<S> <C>
First Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.04
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.04
IBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.02(b)(ii)
IBS Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.02(b)(ii)
IBS Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.02(b)(ii)
Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(d)
Interim Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.05
Interim Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.07
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.10
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.08
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Merger Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Plan of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01(a)
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.02
Surviving Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.10
TBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.01
Toxic Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.08
United . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.04
Voting Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.03
</TABLE>
<PAGE> 9
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization ("Agreement") is made as of
July 28, 1994, by and between First United Bancshares, Inc. ("United"),
FirstBank, Texarkana, Texas ("Bank" or "Surviving Bank"), and the Shareholders
of Bank listed in Exhibit 1 attached hereto, said Shareholders being referred
to collectively as Sellers and individually as Seller.
WHEREAS, Sellers and related parties own fifty and 76/100 percent
(50.76%) of the issued and outstanding shares of the common stock of Bank
consisting of 54,703 shares of the total of 107,747 shares issued and
outstanding (the "Bank Common Stock"); and
WHEREAS, United desires to acquire the Bank Common Stock and Sellers
wish to sell the Bank Common Stock upon the terms and conditions hereinafter
set forth; and
WHEREAS, the respective Boards of Directors of United and Bank have
approved the merger of an interim bank chartered under the laws of the State of
Texas (which, conditioned upon obtaining all necessary regulatory approvals,
will be wholly owned by United through a subsidiary holding company, as
described below) with and into Bank (the "Merger") pursuant to a Plan of Merger
in substantially the form attached hereto as Exhibit A (the "Plan of Merger");
and
WHEREAS, the respective Boards of Directors of United and Bank believe
that such proposed Merger and the payment of cash for the Bank Common Stock,
pursuant and subject to the terms of this Agreement and the Plan of Merger (the
"Merger Agreements"), is desirable and in the best short-term and long-term
interests of their respective organizations and shareholders; and
WHEREAS, United, Bank and Sellers desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the promises and the
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.01. The Merger. Subject to the terms and conditions of this
Agreement, United, Bank and Sellers agree to effect the Merger of an interim
bank established by United in accordance with the Texas Banking Code, as
amended (the "TBC") with and into Bank. All of the expenses of the Merger will
be borne by United.
1.02. Effective Time of the Merger. The Merger shall become effective
at 5:00 p.m. Central Standard Time on the date of the Closing (the "Effective
Time").
1.03. Closing. The closing of the Merger (the "Closing") will take
place at the offices of United at a time and on a date (the "Closing Date") to
be specified by the parties as soon as reasonably practicable after the later
to occur of (i) approval of the Merger
<PAGE> 10
by the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") and the expiration of any waiting period, and (ii) approval by other
regulatory agencies and third parties, including the Texas Banking Department,
and the expiration of all waiting periods.
1.04. Establishment of Subsidiary Holding Company. United agrees to
make application to the Federal Reserve Board to establish a subsidiary bank
holding company ("First Texas"). First Texas shall be wholly owned by United
and after the Effective Time will directly own one hundred percent (100%) of
the issued and outstanding shares of common stock of Bank.
1.05. Establishment of Interim Bank. United agrees to make application
to the Texas Banking Department to charter an interim bank ("Interim Bank")
which will be merged with and into Bank at the Effective Time. Bank will be
the surviving bank, under the name and title of FirstBank.
1.06. Deferred Compensation Agreement and Incentive Deferred
Compensation Agreement. Bank and Gene D. Wyatt, a Seller, have entered into a
certain deferred compensation agreement, dated June 1, 1990 as supplemented
September 15, 1993 and amended May 18, 1994, and a certain Incentive Deferred
Compensation Agreement, dated July 21, 1993, as supplemented January 13, 1994.
The obligations under the deferred compensation agreements shall remain in full
force and effect as obligations of Bank after consummation of the Merger. For
and in consideration of the receipt of continued benefits under the deferred
compensation agreement and the incentive deferred compensation agreement Mr.
Wyatt agrees to forego any future participation in any and all employee benefit
or retirement plans, including but not limited to the United defined benefit
pension plan, employee stock ownership plan or equity participation plan. Mr.
Wyatt agrees to execute all documentation required by law to opt out of said
plans. However, Mr. Wyatt shall be entitled to participate in the United
401(k) plan and shall be provided health and/or dental insurance benefits until
his retirement.
1.07. Bank Earnings Prior to Closing Date. Subject to any regulatory
limitation, all earnings of Bank from July 1, 1994 until the Closing Date (the
"Interim Period") shall be paid to the shareholders of Bank by way of cash
dividends. Bank agrees to operate during the Interim Period in a manner that
is consistent with safe and sound banking principles, that is consistent with
the historical operation of the Bank, and that is consistent with Generally
Accepted Accounting Principles and Regulatory Accounting Principles. As used
in this paragraph the term earnings shall mean net income of Bank from
continuing operations exclusive of (i) gains on the sale of securities, real
property or any other assets of Bank, (ii) income resulting from a change in
accounting principle or accounting estimate and (iii) other extraordinary items
of income as defined by generally accepted accounting principles.
1.08. Merger of Retirement Plan. Bank has established the FirstBank
Retirement Plan for the benefit of its employees. The plan is a combination of
an employee stock purchase plan and a deferred income 401(k) plan. At the
Effective Time the FirstBank Retirement Plan shall be merged with and into the
United 401(k) Savings Plan and Trust Agreement.
2
<PAGE> 11
1.09. Non-Competition. During a period beginning on the Effective Date
and ending five (5) years thereafter ("Agreement Period") Sellers will not,
either directly or indirectly, as an officer, director, shareholder, owner,
partner, joint venturer, employee, promoter, consultant, manager, independent
contractor, agent, or in another similar capacity, participate in any business,
other than the business of Bank, which engages in the provision of banking
services or any services or products closely related to banking that are being
provided by United, Bank or any of their subsidiaries or affiliates now or at
any time during the Agreement Period ("Competing Business") within Bowie
County, Texas and Miller County, Arkansas and any counties contiguous thereto.
Notwithstanding the preceding sentence to the contrary, Sellers may own five
percent (5%) or less of a publicly held corporation engaged in a Competing
Business; Seller Cook shall not be prohibited from owning stock in Bodcaw Bank,
Stamps, Arkansas, and Texarkana National Bancshares, Texarkana, Texas; and
Seller Martin shall not be prohibited from owning stock in Texarkana National
Bancshares, Texarkana, Texas.
ARTICLE II
EFFECT OF THE MERGER ON BANK COMMON STOCK
2.01. Effect on Common Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any of Bank's
Common Stock:
(a) Conversion of Bank Common Stock. One hundred percent
of the issued and outstanding shares of Bank Common Stock shall be converted
into the right to receive an aggregate cash payment of Twenty Five Million
Dollars ($25,000,000.00). However, Two Hundred Thousand Dollars ($200,000.00)
shall be escrowed, pursuant to the Escrow Agreement attached hereto as Exhibit
2.01(a), with First National Bank of El Dorado, El Dorado, Arkansas, for
payment of Bank's potential liability in the cases of Dennis Shirk,
administrator of estates of Daniel Clay Sparks and Edna Lovett Sparks, deceased
v. FirstBank, et al, Graco Robotics, Inc. v. Oaklawn Bank, and Otis Weaver v.
various parties, including FirstBank. The escrowed funds, if any remain, will
be distributed to the shareholders of Bank upon resolution of the cases. Said
Escrow Agreement has been signed by all parties and shall be dated and become
effective as of the Closing Date.
Each shareholder of Bank shall be entitled to receive a cash
payment specified above based upon each shareholder's pro rata ownership of
Bank Common Stock immediately prior to the Effective Time.
(b) Cancellation of Shares. All shares of Bank Common
stock issued and outstanding immediately prior to the Effective Time shall no
longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto, except the right to
receive his pro rata cash payment in consideration therefor upon the surrender
of such certificate in accordance with the Plan of Merger, without interest.
3
<PAGE> 12
(c) Conversion of Stock of Interim Bank. At the Effective
Time, the shares of the Interim Bank common stock validly issued and
outstanding immediately prior to the Effective Time will, by virtue of the
Merger and without any action by the holder thereof, be converted into the
capital stock, of the Surviving Bank, so that all shares of capital stock of
the Surviving Bank will be owned by First Texas. The outstanding certificates
representing shares of the Interim Bank common stock will, after the Effective
Time, be deemed to represent the number of shares of the Surviving Bank into
which they have been converted and may be exchanged for new certificates of the
Surviving Bank upon request of the holder thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BANK AND SELLERS
Bank and Sellers hereby represent and warrant to United and, effective
as of the time of their creation, to First Texas and to Interim Bank, as
follows:
3.01. Organization, Standing and Power. Bank is a State bank duly
organized, validly existing and in good standing under the laws of the State of
Texas and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to have such power or authority would not have a
material adverse effect on the business, operations or financial condition of
Bank. Bank is not qualified to do business in any other state or foreign
jurisdiction, and its ownership or leasing of property or the conduct of its
business does not require it to be so qualified. Bank is chartered as a State
bank with the Texas Banking Department under the TBC. Bank has delivered to
United true, accurate and complete copies of the currently effective Articles
of Association and By-laws of Bank, including all amendments thereto.
3.02 Subsidiaries; Affiliates. Bank has the following subsidiaries and
affiliates:
(a) Subsidiaries. Bank has no subsidiaries other than
Texarkana OFC, Inc., a Texas corporation having only minimum capital
("Subsidiary"). Bank owns 100% of the authorized and issued and outstanding
shares of stock of such subsidiary. Subsidiary will not engage in any business
or other activities from and after the date of this Agreement and will be
dissolved not later than the date of Closing by filing a Certificate of
Dissolution with the Secretary of State of the State of Texas, which will be
delivered to United at the Closing. Bank has delivered to United true,
accurate and complete copies of the currently effective Articles of
Incorporation and Bylaws of Subsidiary, including, all amendments thereto.
(b) Affiliates. Bank is a member of the following limited
liability companies organized under the provisions of the Texas Limited
Liability Company Act:
(i) BSC Alliance Limited Company ("BSC"). The
Articles of Organization of BSC (the "BSC Articles") contain a broad "purpose"
clause. Its actual purpose is to provide securities brokerage services for the
convenience of customers of its members. The Bank was one (1) of four (4)
initial members of BSC. It made an initial cash contribution of $68,479.83 to
the capital of BSC for which it acquired a 20% ownership interest. Two (2)
additional members were subsequently
4
<PAGE> 13
admitted to BSC and the Bank now holds a one-sixth (1/6) ownership interest.
Each of the members of BSC is a commercial bank. A member may be required to
make additional pro-rata cash contributions to BSC to enable it to be properly
operated and maintained and to discharge the costs, obligations and liabilities
associated with operations. An assessment of additional contributions requires
a vote of the members of BSC under procedures outlined in the Regulations of
BSC (the "BSC Regulations"). The BSC Regulations provide that a member shall
not be otherwise liable for the debts, obligations or liabilities of BSC unless
it has agreed in writing to so be liable. The BSC Regulations impose certain
restrictions on disposition of a membership interest. Under procedures
outlined in the BSC Regulations, a member may voluntarily withdraw from BSC by
giving notice of voluntary withdrawal at least four (4) months prior to its
withdrawal. True, accurate and complete copies of the currently effective BSC
Articles and the BSC Regulations, including all amendments thereto, have been
delivered to United by Bank.
(ii) Independent Bank Services, L.C. ("IBS"). The Articles
or Organization of IBS (the "IBS Articles") contain a broad "purpose" clause.
It is actually operated for the purpose of performing internal auditing, loan
review and compliance review services for its members. The Bank is one (1) of
six (6) members of IBS, each of which is a commercial bank. The Bank made an
initial cash contribution of $10,000.00 to the capital of IBS for which it
acquired a one-sixth (1/6) ownership interest. A member may be required to
make additional pro-rata cash contributions to the capital of IBS to enable it
to be properly operated and maintained. An assessment of additional
contributions requires a vote of all of the members of BSC under procedures
outlined in the Regulations of IBS (the "IBS Regulations"). The IBS
Regulations provide that a member shall not be otherwise liable for the debts,
obligations or liabilities of IBS unless it has consented in writing to so be
liable. The IBS Regulations impose certain restrictions on disposition of a
membership interest. Under procedures outlined in the IBS Regulations, a
member may voluntarily withdraw form IBS by giving notice of voluntary
withdrawal at least four (4) months prior to its withdrawal. True, accurate
and complete copies of the currently effective IBS Articles and the IBS
Regulations, including all amendments thereto, have been delivered to United by
Bank.
Except as set forth in this Section and in the Bank Disclosure Letter
(which is a letter of even date herewith delivered by Bank to United), the
receipt thereof having been acknowledged by United executing a copy thereof,
and except for securities held in its capacity as fiduciary, Bank does not own
beneficially, directly or indirectly, any class of equity securities,
partnership interests, membership interests, or similar interests of any
corporation, bank, partnership, limited partnership, limited liability company,
business trust, association or similar organization.
3.03. Capital Structure. As of the date hereof, the authorized capital
stock of Bank consists of 107,747 shares of common stock, $27.843 par value.
As of the date hereof, (i) 107,747 shares of Bank common stock are outstanding,
(ii) no shares of Bank Common Stock are held by Bank in its treasury, and (iii)
neither Bank nor Subsidiary has issued and has outstanding bonds, debentures,
notes or other indebtedness having the right to vote (or convertible into
securities having the right to vote) on any matters
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on which shareholders may vote ("Voting Debt"). All outstanding shares of Bank
Common Stock are validly issued, fully paid and nonassessable, and, as to those
shares owned by Sellers and related parties, at the Effective Time will be free
and clear of any claim, lien, encumbrance or agreement with respect thereto.
There are no options, warrants, calls, rights, or agreements of any character
whatsoever to which Bank or Subsidiary is a party or by which it is bound
obligating Bank or Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or any Voting Debt
securities or obligating Bank or Subsidiary to grant, extend or enter into any
such option, warrant, call, right or agreement. Immediately before and after
the Effective Time, there will be no option, warrant, call, right or agreement
obligating Bank or Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of capital stock or obligating Bank or Subsidiary
to grant, extend or enter into any such option, warrant, call, right or
agreement.
3.04. Authority. Bank has all requisite corporate power and authority
to enter into this Agreement and the Plan of Merger and, subject only to
approval of this Agreement and the Plan of Merger by the shareholders of Bank,
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Plan of Merger and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Bank, subject to such approval of
this Agreement and the Plan of Merger by the shareholders of Bank. This
Agreement and the Plan of Merger Agreement have been duly executed and
delivered by Bank, and each constitutes a valid and binding obligation of Bank
enforceable in accordance with its terms, except as the enforceability of the
Agreement may be subject to or limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws relating to or
affecting the rights of creditors. The execution and delivery of this
Agreement and the Plan of Merger do not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with, or result
in any violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or the loss of a material benefit, or the
creation of a lien, pledge, security interest or other encumbrance on assets
(any such conflict, violation, default, right of termination, cancellation or
acceleration loss or creation, a "Violation"), pursuant to any provision of (a)
the Articles of Association or By-laws of Bank or Subsidiary or (b) except (i)
as set forth in the Bank Disclosure Letter or (ii) as contemplated by the next
sentence hereof, any loan or credit agreement, note, mortgage, indenture,
lease, or other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Bank or Subsidiary or their respective properties or
assets which Violation would have a material adverse effect on Bank or
Subsidiary. Other than in connection or in compliance with the provisions of
the TBC, the Securities Act of 1933, as amended, and the rules and regulations
thereunder, the Securities and Exchange Act of 1934, as amended, and the rules
and regulations thereunder (the "Exchange Act"), the securities or blue sky
laws of the various states, and consents, authorizations, approvals, notices or
exemptions required under the TBC, and from other regulatory agencies, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any court,
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administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is required by
or with respect to Bank or Subsidiary in connection with the execution and
delivery of this Agreement and the Plan of Merger by Bank or the consummation
by Bank of the transactions contemplated hereby and thereby.
3.05. Bank Financial Statements. (a) The consolidated balance sheets
of Bank as of December 31, 1993 and 1992 (and, if available on the Closing
Date, December 31, 1994) and the related consolidated statements of income,
consolidated statements of cash flows and consolidated statements of
shareholders equity for the periods ended December 31, 1993 and 1992 (and, if
available on the Closing Date, December 31, 1994) certified by Thomas & Thomas,
C.P.A., and the internally prepared financial statements dated June 30, 1994,
copies of which have been furnished by Bank to United (the "Bank Financial
Statements"), have been or will be prepared in accordance with generally
accepted accounting principles and practices on a consistent basis, and present
fairly the consolidated financial condition of Bank at the dates, and the
consolidated results of operations and cash flows for the periods, stated
therein. Neither Bank nor Subsidiary has any liability of any nature, whether
direct, indirect, accrued, absolute, contingent or otherwise, which is material
to Bank or Subsidiary, except as provided for or disclosed in the Bank
Financial Statements or in the Bank Disclosure Letter and except for such of
the following liabilities as are incurred in the ordinary course of business:
(i) deposit liabilities and interest payable
thereon,
(ii) federal funds purchased and securities sold
under repurchase agreements and interest
payable thereon,
(iii) other short term borrowings,
(iv) contingent liability upon negotiable
instruments endorsed for the purpose of
collection,
(v) taxes,
(vi) accounts payable of the operating business,
(vii) salaries and benefits payable,
(viii) unearned income and premiums,
(ix) abandoned and garnished accounts, and
(x) letters of credit and similar commitments.
(b) Without limitation to the foregoing, Bank's allowance
for loan losses included in the Bank Financial Statements was adequate as of
the date thereof to absorb potential losses in the loan portfolios of Bank and
Subsidiary. There are no known facts which should cause Bank to increase the
level of such allowance for loan losses.
3.06. Bank Reports. Bank and Subsidiary have filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that were and are required to be filed with (i) the
Federal Reserve Board, (ii) the FDIC, (iii) the Texas Banking Department and
(iv) any other applicable securities, banking or regulatory authorities (all
such reports and
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<PAGE> 16
statements are collectively referred to herein as the "Bank Reports"). As of
their respective dates, the Bank Reports complied in all material respects with
all of the statutes, rules and regulations enforced or promulgated by the
regulatory authorities with which they were filed and did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
3.07. Information Supplied. None of the information supplied or to be
supplied by Bank for inclusion or incorporation by reference in any document to
be filed with the SEC, the Federal Reserve Board, or any regulatory agency in
connection with the transactions contemplated hereby, contain or will contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Bank has, to
the best of its knowledge, disclosed to United all financial and other
information reasonably necessary to enable United to make informed judgments
concerning the state of the financial and other conditions and affairs of Bank
and Subsidiary.
3.08. Authorizations; Compliance with Applicable Laws. Bank and
Subsidiary hold all authorizations, permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities which are material to the
operations of the businesses of Bank or Subsidiary (the "Bank Permits"),
including appropriate authorizations from the Texas Banking Department. Bank
and Subsidiary are in compliance with the terms of the Bank Permits, except
where the failure so to comply would not have a material adverse effect on Bank
or Subsidiary. Except as disclosed in the Bank Disclosure Letter, the
businesses of Bank and Subsidiary are not being conducted in violation of any
domestic (federal, state or local) or foreign law, statute, ordinance or
regulation of any Governmental Entity (collectively "Laws"), including, without
limitation, Regulation O of the Federal Reserve Board, except for possible
violations which individually or in the aggregate do not and, insofar as
reasonably can be foreseen, in the future will not, have a material adverse
effect on Bank or Subsidiary. No investigation or review by any Governmental
Entity with respect to Bank or Subsidiary is pending or threatened, nor has any
Governmental Entity indicated an intention to conduct the same. Without
limiting the foregoing, there have been no acts or omissions occurring on or
with respect to real estate currently or previously owned, leased or otherwise
used by Bank or Subsidiary, or in which Bank or Subsidiary has or had an
investment or security interest (by mortgage, deed of trust, or otherwise),
including, without limitation, properties under foreclosure, properties held by
Bank or Subsidiary in its capacity as a trustee, or properties in which any
venture capital or similar unit of Bank or Subsidiary has or had an interest
(the "Bank Property"), which constitute or result, or may have constituted or
resulted, in the creation of any federal, state or common law nuisance (whether
or not the nuisance condition is, or was, foreseen or unforeseen) or which do
not, or have not, complied with Environmental Laws (defined as federal, state
or local environmental laws including, without limitation, the Clean Water Act,
the Resource Conservation and Recovery Act, the Toxic Substances Control Act
and the Comprehensive Environmental, Response, Compensation and Liability Act,
as amended, and their state and local law counterparts, all rules and
regulations promulgated
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<PAGE> 17
thereunder and all other legal requirements associated with the ownership and
use of the Bank Property) and are reasonably likely to result in a material
liability to Bank. Neither Bank nor Subsidiary is subject to or reasonably
likely to incur a material liability as a result of its ownership, lease,
operation, or use of any Bank Property or as a result of its investment or
security interest (as described above) in any Bank Property (a) that is
contaminated by or contains any Toxic Substances (defined as a substance that
is contaminated by or contains any hazardous waste, toxic substances or related
materials, including without limitation asbestos, PCBs, pesticides, herbicides,
petroleum products, substances defined as "hazardous substances" or "toxic
substances" in the Environmental Laws, and any other substances or waste that
is hazardous to human health or the environment), or (b) on which any Toxic
Substance has been stored, disposed of, placed, or used in the construction
thereof. No claim, action, suit or proceeding is pending against Bank or
Subsidiary relating to the Bank Property before any court or other governmental
authority or tribunal relating to Toxic Substances, pollution or the
environment, and there is no outstanding judgment, order, writ, injunction,
decree, or award against or affecting Bank or Subsidiary with respect thereto.
3.09. Litigation and Claims. Except as disclosed in this Agreement or
in the Bank Disclosure Letter (a) neither Bank nor Subsidiary is subject to
any continuing order of, or written agreement or memorandum of understanding
with, or continuing material investigation by, any federal or state banking or
insurance authority or other Governmental Entity, or any judgment, order, writ,
injunction, decree or award of any Governmental Entity or arbitrator,
including, without limitation, cease-and-desist or other orders of any bank
regulatory authority, (b) there is no claim of any kind, action, suit,
litigation, proceeding, arbitration, investigation, or controversy affecting
Bank or Subsidiary pending or threatened, which in the aggregate will have or
can reasonably be expected to have a material adverse effect on Bank or
Subsidiary and (c) there are no uncured material violations, or violations with
respect to which material refunds or restitutions may be required, cited in any
compliance report to Bank or Subsidiary as a result of the examination by any
bank regulatory authority.
3.10. Taxes. Bank and Subsidiary have filed all tax returns required
to be filed by them and have paid, or have set up an adequate reserve for the
payment of, all taxes required to be paid as shown on such returns, and the
most recent Bank Financial Statements reflect an adequate reserve for all taxes
payable by Bank and Subsidiary accrued through the date of such financial
statements. The Bank Disclosure Letter will set forth, as of the date hereof,
the following information with respect to Bank: (a) the most recent tax year
through which the United States Internal Revenue Service ("IRS") has completed
its examination of such corporation, (b) whether there is an examination
pending by the IRS with respect to such corporation and, if so, the tax years
involved, (c) whether such corporation has executed or filed with the IRS any
agreement which is still in effect extending the period for assessment and
collection of any federal tax and, if so, the tax years covered by such
agreement and the expiration date of such extension, and (d) whether there are
any existing material disputes as to foreign, state, or local taxes. There are
no material liens for taxes upon the assets of Bank or Subsidiary, except for
statutory liens for taxes not yet delinquent, adequate reserves for which have
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<PAGE> 18
been established on Bank's books. Except as disclosed in the Bank Disclosure
Letter and except for any action, proceeding or claim as to which the taxes
sought do not exceed $25,000, neither Bank nor Subsidiary is a party to any
action or proceeding by any governmental authority for assessment and
collection of taxes, and no claim for assessment and collection of taxes has
been asserted against any of them. For the purpose of this Agreement, the term
"tax" (including, with correlative meaning, the terms "taxes" and "taxable")
shall include all federal, state, local and foreign income, profits, franchise,
gross receipts, payroll, sales, employment, use, personal and real property,
withholding, excise and other taxes, duties or assessments of any nature
whatsoever, together with all interest, penalties and additions imposed with
respect to such amounts. Bank and Subsidiary have withheld from their
employees and timely paid to the appropriate governmental agency proper and
accurate amounts for all periods in material compliance with all tax
withholding provisions of applicable federal, state, foreign and local laws
(including without limitation income, social security and employment tax
withholding for all types of compensation).
3.11. Certain Agreements. Except as disclosed in the Bank Disclosure
Letter, and except for this Agreement, neither Bank nor Subsidiary is a party
to any (i) consulting agreement not terminable on 60 days' or less notice or
employment agreement or other agreement providing any term of employment,
compensation guarantee, or severance or supplemental retirement benefit, (ii)
union, guild or collective bargaining agreement, (iii) agreement or plan, any
of the benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of the transactions contemplated by this
Agreement, (iv) any stock option plan, stock appreciation rights plan,
restricted stock plan, stock purchase plan or similar plan granting rights to
acquire stock in Bank or Subsidiary, or (v) contract containing covenants which
limit the ability of Bank or Subsidiary to compete in any line of business or
with any person or which involve any restriction of the geographical area in
which, or method by which, Bank or Subsidiary may carry on its business (other
than as may be required by law or applicable regulatory authorities).
3.12. Benefit Plans. (a) The Bank Disclosure Letter lists (i) each
employee bonus, incentive, deferred compensation, stock purchase, stock
appreciation right, stock option and severance pay plan, (ii) each pension,
profit sharing, stock bonus, thrift, savings and employee stock ownership plan,
and (iii) every other employee benefit plan (within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
(collectively "Bank Benefit Plans"), which Bank or Subsidiary maintains or to
which Bank or Subsidiary contributes on behalf of current or former employees.
Except as disclosed in the Bank Disclosure Letter, all of the Bank Benefit
Plans comply in all material respects with all applicable requirements of ERISA
and all other applicable federal and state laws, including without limitation
the reporting and disclosure requirements of Part 1 of Title I of ERISA. With
respect to the Bank Benefit Plans, individually and in the aggregate, no event
has occurred and there exists no condition or set of circumstances in
connection with which Bank or Subsidiary could be subject to any liability that
is reasonably likely to have a material adverse effect upon Bank or Subsidiary
(except liability for benefits claims and funding obligations payable in the
ordinary
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<PAGE> 19
course) under ERISA, the Code or any other applicable law. Each of the Bank
Benefit Plans that is intended to be a pension, profit sharing, stock bonus,
thrift, savings or employee stock ownership plan that is qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
has been determined by the IRS to qualify under Section 401(a) of the Code, or
an application for the determination of such qualification will be made to the
IRS under Section 401(b) of the Code and the regulations thereunder, and there
exist no circumstances that would materially adversely affect the qualified
status of any such Bank Benefit Plan under that section. Except as set forth
in the Bank Disclosure Letter, each Bank Benefit Plan that is a defined benefit
pension plan has assets with an aggregate value that exceeds the actuarially
present value of its liability for accrued benefits as determined on the basis
of the actuarial assumptions used for the most recent actuarial valuation of
such Plan, no such Plan has incurred an accumulated funding deficiency within
the meaning of Section 412(a) of the Code, and no such Plan is a "multiemployer
plan" within the meaning of Section 3(37) of ERISA. Except as set forth in the
Bank Disclosure Letter, there is no pending or threatened litigation,
governmental proceeding or investigation against or relating to any Bank
Benefit Plan, and there is no reasonable basis for any material proceedings,
claims, actions or proceedings against any Plan. Except as set forth in the
Bank Disclosure Letter, no "reportable event" (as defined in Section 4043(b) of
ERISA) (other than a "reportable event" for which the 30-day notice requirement
has been waived by the Pension Benefit Guaranty Corporation) has occurred with
respect to any Bank Benefit Plan, and no Bank Benefit Plan has engaged in a
"prohibited transaction" (as defined in Section 406 of ERISA and Section
4975(c) of the Code) since the date on which said sections became applicable to
such Plan which could reasonably result in a material liability.
(b) Bank has delivered to United copies of (i) each Bank
Benefit Plan, (ii) the most recent summary plan descriptions of each Bank
Benefit Plan, (iii) each trust agreement, insurance policy or other instrument
relating to the funding of any Bank Benefit Plan, (iv) the most recent Annual
Reports (Form 5500 series) and accompanying schedules filed with the IRS or
United States Department of Labor with respect to each Bank Benefit Plan, (v)
the most recent determination letter issued by the IRS with respect to each
Bank Benefit Plan that is intended to qualify under Section 401 of the Code,
(vi) the most recent available financial statements for each Bank Benefit Plan
that has assets, (vii) the most recent actuarial report for any Bank Benefit
Plan that is a defined benefit pension plan, and if any such Plan was amended
subsequent to the date of such report, information about the financial effects
of such amendment and (viii) the most recent audited financial statements for
each Bank Benefit Plan for which audited financial statements are required by
ERISA.
3.13. Insurance. Bank has delivered to United correct and complete
summaries of all material policies of insurance of Bank and Subsidiary
currently in effect. Neither Bank nor Subsidiary has any liability for unpaid
premiums or premium adjustments not properly reflected on the Bank Financial
Statements.
3.14. Conduct of Bank to Date. Except as disclosed in the Bank
Disclosure Letter and except as contemplated by this Agreement and the Plan of
Merger, from and after December 31, 1993: (a) Bank and Subsidiary have carried
on their respective
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businesses in the ordinary and usual course consistent with past practices, (b)
Bank has not issued or sold any of its capital stock or issued or sold any
corporate debt securities which would be classified as long term debt on the
balance sheet of Bank, (c) Bank has not granted any option for the purchase of
its capital stock, effected any stock split, or otherwise changed its
capitalization, (d) Bank has not declared, set aside, or paid any cash or stock
dividend or other distribution in respect of its capital stock, (e) neither
Bank nor Subsidiary has incurred any material obligation or liability (absolute
or contingent), except normal trade or business obligations or liabilities
incurred in the ordinary course of business, or mortgaged, pledged, or
subjected to lien, claim, security interest, charge, encumbrance or restriction
any of its assets or properties, (f) neither Bank nor Subsidiary has discharged
or satisfied any material lien, mortgage, pledge, claim, security interest,
charges, encumbrance, or restriction or paid any material obligation or
liability (absolute or contingent), other than in the ordinary course of
business, (g) neither Bank nor Subsidiary has sold, assigned, transferred,
leased, exchanged, or otherwise disposed of any of its properties or assets
other than for a fair consideration in the ordinary course of business, (h)
neither Bank nor Subsidiary has increased the rate of compensation of, or paid
any bonus to, any of its directors, officers, or other employees, except merit
or promotion increases in accordance with existing policy; entered into any
new, or amended or supplemented any existing, employment, management,
consulting, deferred compensation, severance, or other similar contract;
adopted, entered into, terminated, amended or modified any Bank Benefit Plan in
respect of any of present or former directors, officers or other employees; or
agreed to do any of the foregoing, (i) neither Bank nor Subsidiary has suffered
any material damage, destruction, or loss, whether as the result of flood,
fire, explosion, earthquake, accident, casualty, labor trouble, requisition or
taking of property by any government or any agency of any government,
windstorm, embargo, riot, act of God or the enemy, or other similar or
dissimilar casualty or event or otherwise, and whether or not covered by
insurance, (j) neither Bank nor Subsidiary has cancelled or compromised any
debt to an extent exceeding $100,000 owed to Bank or Subsidiary or claim to an
extent exceeding $100,000 asserted by Bank or Subsidiary, (k) neither Bank nor
Subsidiary has entered into any transaction, contract, or commitment outside
the ordinary course of its business, (1) neither Bank nor Subsidiary has
entered, or agreed to enter, into any agreement or arrangement granting any
preferential right to purchase any of its material assets, properties or rights
or requiring the consent of any party to the transfer and assignment of any
such material assets, properties or rights, (m) there has not been any other
transaction, commitment, dispute or other event or condition (financial or
otherwise) of any character (whether or not in the ordinary course of business)
individually or in the aggregate having or which, insofar as reasonably can be
foreseen, in the future is reasonably likely to have, a material adverse effect
on Bank or Subsidiary, (n) there has not been any change in the method of
accounting or accounting practices of Bank and Subsidiary, and (o) Bank and
Subsidiary have kept all records in accordance with all regulatory and
statutory requirements and in accordance with industry standards specified by
the American Bankers Association, and have retained such records for the
periods required by statute, regulation or American Bankers Association
industry standards.
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3.15. Material Adverse Change. Since December 31, 1993, there has been
no material adverse change in the financial condition, results of operations or
business of Bank and Subsidiary.
3.16. Properties, Leases and Other Agreements. Except (i) as may be
reflected in the Bank Financial Statements, (ii) for any lien for current taxes
not yet delinquent, (iii) for pledges to secure deposits and (iv) for such
other liens, security interests, claims, charges, options or other encumbrances
and imperfections of title which do not materially affect the value or
interfere with or impair the present and continued use of personal or real
property reflected in the Bank Financial Statements or acquired since the date
of such Statements, Bank and Subsidiary have good title, free and clear of any
liens, security interests, claims, charges, options or other encumbrances to
all of the personal and real property reflected in the Bank Financial
Statements, and all personal and real property acquired since the date of such
Statements, except such personal and real property as has been disposed of in
the ordinary course of business. Substantially all Bank's and Subsidiary's
buildings and equipment in regular use have been reasonably maintained and are
in good and serviceable condition, reasonable wear and tear excepted. All
leases material to Bank and Subsidiary pursuant to which Bank or Subsidiary, as
lessee, leases real or personal property are valid and effective in accordance
with their respective terms and there is not, under any of such leases, any
material existing default by Bank, Subsidiary or, to the best knowledge of
Bank, any other party thereto, or any event which with notice or lapse of time
or both would constitute such a material default. No options to renew said
leases have lapsed and the terms of the leases govern the rights of the
respective landlords of Bank and Subsidiary.
3.17. No Untrue Statements. No representation or warranty hereunder or
information contained in any financial statement or any other document
delivered to United pursuant to this Agreement contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
3.18. Existence and Enforceability of Loans. With respect to all loans
to borrowers which are payable to Bank or Subsidiary either directly or as a
participant and except for such imperfections as do not have a material net
adverse effect on the business, operations or financial condition of Bank or
Subsidiary:
(a) All loans were made for good, valuable and adequate
consideration in the normal and ordinary course of business, and the
notes and other evidences of indebtedness and any loan agreements or
security documents executed in connection therewith are true and genuine
and constitute the valid and legally binding obligations of the
borrowers to whom the loans were made and are legally enforceable
against such borrowers in accordance with their terms subject to
applicable bankruptcy, insolvency, reorganization, moratorium, and
similar debtor relief laws from time to time in effect, as well as
general principles of equity applied by a court of proper jurisdiction;
(b) The amounts represented to United as the balances owing on
the loans are the correct amounts actually and unconditionally owing,
are undisputed, and are not subject to any offsets, credits, deductions
or counterclaims;
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(c) The collateral securing each loan as referenced in a loan
officer worksheet, loan summary report or similar internal loan
documentation is in fact the collateral held by Bank or Subsidiary to
secure each loan;
(d) Bank or Subsidiary have possession of all loan document
files and credit files for all loans held by them containing promissory
notes and other relevant evidences of indebtedness with original
signatures of their borrowers and guarantors;
(e) Bank and Subsidiary hold validly perfected liens or
security interests in the collateral granted to Bank or Subsidiary to
secure all loans as referenced in the loan officer worksheets, loan
summary reports or similar internal loan documentation and the loan or
credit files contain the original security agreements, mortgages, or
other lien creation and perfection documents unless originals of such
documents are filed of public record;
(f) The liens or security interests of Bank and Subsidiary in
the collateral held for loans are properly perfected in the priority
intended to be held by Bank and Subsidiary and described in the loan
officer worksheets, loan summary reports or similar internal loan
documentation contained in the loan document or credit files;
(g) Bank and Subsidiary are in possession of all collateral
that the loan document files or credit files indicate they have in their
possession;
(h) All guaranties granted to Bank and Subsidiary to insure
payment of loans constitute the valid and legally binding obligations of
the guarantors and are enforceable in accordance with their terms;
(i) With respect to any loans in which Bank and Subsidiary have
sold participation interests to another bank or other financial
institution, none of the buyers of such participation interests are in
default under any participation agreements.
3.19. Not in Default. Bank and Subsidiary are not in default under any
material agreement, ordinance, resolution, decree, bond, note, indenture, order
or judgment to which either is a party, by which either is bound, or to which
their properties or assets are subject.
3.20. Trust Validity; Authority. The Mildred Creighton Trust; the
Martha Prieskorn Trust; the Cindy Sandefur Trust and the MCM Partnership Trust,
respectively, have been duly created under the laws of the State of Texas and
are validly existing. The undersigned trustees executing this Agreement on
behalf of said Trusts have been duly appointed, constitute all of the presently
acting Trustees of the Trusts and have all requisite power and authority to
execute and deliver this Agreement and to perform this Agreement in accordance
with its terms. The undersigned representative executing the Agreement on
behalf of the Lucille Cook Agency has been duly appointed and has all requisite
power and authority to execute and deliver this Agreement and to perform this
Agreement in accordance with its terms. MCM Limited Partnership is a Texas
limited partnership and its undersigned general partner has all requisite power
and authority to enter into this Agreement and to perform this Agreement in
accordance with its terms for and on behalf of said limited partnership. The
Individual Retirement Arrangement of Gene Wyatt is a self-directed individual
retirement
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arrangement and, with respect to the shares of stock of Bank therein, he has
all requisite power and authority to execute and deliver this Agreement and to
perform this Agreement in accordance with its terms. Gene Wyatt is the
beneficial owner of the shares of stock of Bank credited to his account in the
employee stock purchase plan feature of the Bank Benefit Plans and, under the
provisions of the Bank Benefit Plans, he has full power and authority to direct
the manner of the voting of such shares of stock at meetings of shareholders of
the Bank.
3.21. Correction of Examination Deficiencies. Bank shall use its best
efforts to correct, prior to the Closing, all deficiencies noted in the
compliance examination dated June 4, 1993, of the Federal Deposit Insurance
Corporation, and the Safety and Soundness examination dated March 31, 1994, of
the Federal Deposit Insurance Corporation, and United shall have received a
certificate signed on behalf of Bank by the Chairman of the Board and each
member of the Board of Bank to such effect.
3.22. Sellers Informed Decision. Each Seller is fully knowledgeable
and familiar with the business and financial condition of Bank and Subsidiary
and had access to all material information that each Seller considered
necessary or advisable to enable each Seller to make an informed investment
decision and Sellers are not relying upon any representations made by United or
any officer, director, shareholder or agent thereof except as expressly stated
in this Agreement.
3.23. Limitation on Representations and Warranties of Sellers. It is
expressly agreed and understood by the parties that, any and all
representations and warranties by a Seller set forth in this Article III are
based solely on the personal knowledge, information and belief of the
respective Seller and in no event shall a Seller be deemed to be in breach with
respect to any representation and/or warranty unless he shall have had personal
knowledge or information (or reason to believe) that such representation and/or
warranty was unfounded.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF UNITED
United hereby represents and warrants to Bank as follows:
4.01. Organization, Standing and Power. United is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arkansas and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to have such power or authority would not have a
material adverse effect on the business, operations or financial condition of
United and its Subsidiaries. United is not qualified to do business in any
other state or foreign jurisdiction, and its ownership or leasing of property
or the conduct of its business does not require it to be so qualified or the
failure to be so qualified would not have a material adverse effect on the
business, operations or financial condition of United and its Subsidiaries.
United is registered as a bank holding company with the Federal Reserve Board
under the Bank Holding Company Act of 1956, as amended (the "BHC Act").
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4.02. Authority. Subject only to approval of this Agreement and the
Plan of Merger by the board of directors of United, United has all requisite
corporate power and authority to enter into this Agreement and the Plan of
Merger and to consummate the transactions contemplated hereby and thereby.
Upon approval by the United board of directors, the execution and delivery of
this Agreement and the Plan of Merger and the consummation of the transactions
contemplated hereby and thereby will have been duly authorized by all necessary
corporate action on the part of United. Subject to the foregoing, this
Agreement and the Plan of Merger have been duly executed and delivered by
United, and each will constitute a valid and binding obligation of United
enforceable in accordance with its terms, except as the enforceability of the
Agreement may be subject to or limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws relating to or
affecting the rights of creditors. The execution and delivery of this
Agreement and the Plan of Merger do not, and the consummation of the
transactions contemplated hereby and thereby will not, result in any Violation
pursuant to any provision of the Articles of Incorporation or Bylaws of United
or any of its Subsidiaries or, except as contemplated below, result in any
Violation of any loan or credit agreement, note, mortgage, indenture, lease, or
other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to United or any of its Subsidiaries or their respective properties
or assets which Violation would have a material adverse effect on United or any
United Subsidiary; provided, however, that the consent of First Tennessee Bank,
N.A. is required before United may lawfully consummate the transactions
contemplated herein. Other than in connection or in compliance with the
provisions of the Arkansas Business Corporation Act, the Securities Act of
1933, as amended, the Exchange Act of 1934, as amended, the securities or blue
sky laws of the various states, and consents, authorizations, approvals,
notices or exemptions required under the BHC Act, the National Bank Act and
from other regulatory authorities, no consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity is
required by or with respect to United or any of its Subsidiaries in connection
with the execution and delivery of this Agreement and the Plan of Merger by
United or the consummation by United of the transactions contemplated hereby
and thereby, the failure to obtain which would have a material adverse effect
on United or any United Subsidiary.
ARTICLE V
COVENANTS OF BANK AND SELLERS
5.01. Affirmative Covenants. Bank hereby covenant and agree with
United that prior to the Effective Time, unless the prior written consent of
United shall have been obtained, which consent shall not be unreasonably
withheld, and except as otherwise contemplated herein, Bank and Subsidiary
will:
(a) operate its business only in the usual, regular and
ordinary course consistent with past practices;
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(b) use reasonable efforts to preserve intact its business
organization and assets, maintain its rights and franchises, retain the
services of its officers and key employees (except that it shall have the right
to lawfully terminate the employment of any officer or key employee if such
termination is in accordance with Bank's existing employment procedures) and
maintain its relationships with customers;
(c) use reasonable efforts to maintain and keep its
properties in as good repair and condition as at present, except for
depreciation due to ordinary wear and tear;
(d) use reasonable efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that now
maintained by it; provided, however, that Bank shall not be required to
purchase insurance policies for directors' and officers' liabilities;
(e) perform in all material respects all obligations
required to be performed by it under all material contracts, leases, and
documents relating to or affecting its assets, properties, and business; and
(f) comply with and perform in all material respects all
obligations and duties imposed upon it by all Laws.
5.02. Negative Covenants. Except as specifically contemplated by this
Agreement, from the date hereof until the Effective Time, Bank shall not do, or
permit Subsidiary to do, without the prior written consent of United (which
shall not be unreasonably withheld) any of the following:
(a) incur any material liabilities or material obligations,
whether directly or by way of guaranty, including any obligation for borrowed
money whether or not evidenced by a note, bond, debenture or similar
instrument, except in the ordinary course of business consistent with past
practice;
(b) (i) grant any general increase in compensation to its
employees as a class, or to its officers or directors, except in accordance
with past practice or as required by law, or increases which are not material,
or the payment of year-end bonuses in accordance with past practice, (ii)
effect any change in retirement benefits to any class of employees or officers
(unless any such change shall be required by applicable law) which would
increase its retirement benefit liabilities, (iii) adopt, enter into, amend or
modify any Bank Benefit Plan, or (iv) enter into or amend any employment,
severance or similar agreements or arrangements with any directors or officers,
other than as is consistent with the normal severance policy of Bank in effect
on the date hereof as listed in the Bank Disclosure Letter;
(c) except as provided in Section 1.07 above, declare or
pay any dividend on, or make any other distribution in respect of, its
outstanding shares of capital stock, except dividends by Subsidiary;
(d) (i) redeem, purchase or otherwise acquire any shares of
its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or any options, warrants,
conversion or other
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rights to acquire any shares of its capital stock or any such securities or
obligations; (ii) merge with or into any other corporation or bank, permit any
other corporation or bank to merge into it or consolidate with any other
corporation or bank, or effect any reorganization or recapitalization; (iii)
purchase or otherwise acquire any substantial portion of the assets, or more
than 5% of any class of stock, of any corporation, bank or other business; (iv)
liquidate, sell, dispose of, or encumber any assets or acquire any assets,
other than in the ordinary course of its business consistent with past
practice; or (v) split, combine or reclassify any of its capital or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock;
(e) issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale of, any shares of its
capital stock of any class (including shares held in treasury), any Voting Debt
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, Voting Debt or convertible securities;
(f) except as may be required by applicable law, initiate,
solicit or encourage (including by way of furnishing information or
assistance), or take any other action to facilitate, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any Competing Transaction (as such term is defined below), or negotiate
with any person in furtherance of such inquiries or to obtain a Competing
Transaction, or agree to or endorse any Competing Transaction, or authorize or
permit any of its officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other representative retained by it
or Subsidiary to take any such action, and Bank shall promptly notify United
orally and in writing of all of the relevant details relating to all inquiries
and proposals which it may receive relating to any of such matters; for
purposes of this Agreement, "Competing Transaction" shall mean any of the
following involving Bank or Subsidiary: any merger, consolidation, share
exchange or other business combination; a sale, lease, exchange, mortgage,
pledge, transfer or other disposition of a substantial portion of assets; a
sale of shares of capital stock (or securities convertible or exchangeable into
or otherwise evidencing, or any agreement or instrument evidencing, the right
to acquire capital stock);
(g) propose or adopt any amendments to its corporate
charter or by-laws in any way adverse to United;
(h) authorize, recommend, propose or announce an intention
to authorize, recommend or propose, or enter into an agreement in principle
with respect to any acquisition of a material amount of assets or securities or
any release or relinquishment of any material contract rights not in the
ordinary course of business;
(i) except in their fiduciary capacities, purchase any
shares of United common stock;
(j) change any of its methods of accounting in effect at
December 31, 1993, or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year ending
December 31, 1993, except as may be required by law or generally accepted
accounting principles;
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(k) take action which would or is reasonably likely to (i)
adversely affect the ability of either of United or Bank to obtain any
necessary approvals of governmental authorities required for the transactions
contemplated hereby; (ii) adversely affect Bank's ability to perform its
covenants and agreements under this Agreement; or (iii) result in any of the
conditions to the Merger set forth in Article VIII not being satisfied;
(l) change the lending, investment, asset/liability
management and other material policies concerning the banking business of Bank
and Subsidiary, unless required by Law or order or unless such change does not
cause a materially adverse effect on Bank or Subsidiary;
(m) agree in writing or otherwise to do any of the
foregoing;
(n) make any new single loan or series of loans to one
borrower or related series of borrowers in an aggregate amount greater than
$500,000.00; or
(o) sell or otherwise dispose of securities owned as
investments except at maturity dates or as needed for liquidity purposes in
accordance with past practices, provided, however, that this restriction shall
not apply to securities held for sale.
5.03. Access and Information. Upon reasonable notice, Bank shall (and
shall cause Subsidiary to) afford to United's officers, employees, accountants,
counsel and other representatives, access, during normal business hours during
the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records. During such period, Bank shall (and shall
cause Subsidiary to) furnish promptly to United (i) a copy of each Bank Report
filed or received by it during such period pursuant to the requirements of the
TBC and any other federal or state banking laws promptly after such documents
are available, (ii) the monthly financial statements of Bank and Subsidiary (as
prepared by Bank in accordance with its normal accounting procedures) promptly
after such financial statements are available, (iii) a summary of any action
taken by the Board of Directors, or any committee thereof, of Bank, and (iv)
all other information concerning its business, properties and personnel as
United may reasonably request. Unless otherwise required by law, the parties
will hold any such information which is nonpublic in confidence until such time
as such information otherwise becomes publicly available through no wrongful
act of either party, and in the event of termination of this Agreement for any
reason each party shall promptly return all nonpublic documents obtained from
any other party, and any copies made of such documents, to such other party or
destroy such documents and copies.
5.04. Update Disclosure; Breaches.
(a) From and after the date hereof until the Effective
Time, Bank shall update the Bank Disclosure Letter by notice to United as
necessary to reflect any matters which have occurred from and after the date
hereof which, if existing on the date hereof, would have been required to be
described therein, provided, however, that no such update shall affect the
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conditions to the obligation of United to consummate the transactions
contemplated hereby, and any and all changes contained in any such update shall
be considered in determining whether such conditions have been satisfied;
provided further that, without limiting United's rights under Section 5.03, to
the extent that any information that would be required to be included in an
update under this Section 5.04(a) has in the past been contained in internal
reports prepared by Bank or Subsidiary in the ordinary course, such update may
occur at the time such information becomes available to United in such internal
reports prepared in accordance with past practice.
(b) Bank shall, in the event it becomes aware of the
impending or threatened occurrence of any event or condition which would cause
or constitute a material breach (or would have caused or constituted a breach
had such event occurred or been known prior to the date hereof) of any of its
representations or agreements contained or referred to herein, give prompt
written notice thereof to United and use its best efforts to prevent or
promptly remedy the same.
5.05. Vote of Bank Shareholders. Except as may be required by
applicable law, each Seller hereby agrees to vote all shares of Bank Common
Stock owned, voted or controlled by each Seller in favor of the Merger at the
Bank Shareholders Meeting called to vote on the Merger, and further agrees to
take such other action or cast such other votes as shareholders of Bank as are
reasonably deemed necessary or desirable by United to facilitate consummation
of the transactions contemplated herein.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01. Shareholder Meetings. Bank shall call a meeting of its
shareholders to be held as promptly as practicable for the purpose of voting
upon the Merger Agreements.
6.02. Legal Conditions to Merger. Each of Bank and United will take
all reasonable actions necessary to comply promptly with all legal requirements
it may have with respect to the Merger (including furnishing all information
required by the Federal Reserve Board or in connection with approvals of or
filings with any other Governmental Entity) and will promptly cooperate with
and furnish information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection with the
Merger. Each of Bank and United will, and will cause its Subsidiaries to, take
in a prompt manner all reasonable actions necessary to obtain (and will
cooperate with each other in obtaining) any agreement, consent, authorization,
order or approval of, or any exemption by, any Governmental Entity or other
public or private third party, required to be obtained or made by United, Bank
or any of their Subsidiaries in connection with the Merger or the taking of any
action contemplated thereby or by this Agreement and the Plan of Merger.
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6.03. Reports.
(a) Prior to the Effective Time, (i) Bank shall prepare and
file as and when required all Bank Reports.
(b) Bank shall prepare such Bank Reports so that (i) they
comply in all material respects with all of the statutes, rules and regulations
enforced or promulgated by the regulatory authority with which they are filed
and do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (ii) with respect to any Bank Reports containing financial
information of the type included in the Bank Financial Statements the financial
information (A) is prepared in accordance with generally accepted accounting
principles and practices as utilized in the Bank Financial Statements applied
on a consistent basis (except as stated therein or in the notes thereto), (B)
presents fairly the consolidated financial condition of Bank at the dates, and
the consolidated results of operations and cash flows for the periods, stated
therein and (C) in the case of interim fiscal periods, reflects all
adjustments, consisting only of normal recurring items necessary for a fair
presentation, subject to year-end audit adjustments.
6.04. Brokers or Finders. Each of United and Bank represents, as to
itself, its Subsidiaries and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement.
6.05. Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including cooperating fully with the other party. In case at any time after
the Effective Time any further action is reasonably necessary or desirable to
carry out the purposes of this Agreement or to vest United, through its
Subsidiary, with full title to all properties, assets, rights, approvals,
immunities and franchises of either of Bank or its Subsidiary, the proper
officers and directors of each party to this Agreement shall take all such
necessary action.
6.06. Governmental and Other Third Party Approvals. Bank and United
shall each use their reasonable best efforts to obtain all governmental and
other third party approvals, authorizations and consents that may be necessary
or reasonably required of them in order to effect the transactions contemplated
by this Agreement. Bank and United agree to make all filings and applications
for such approvals and reviews as soon as practicable, to prosecute the same
with reasonable diligence and to notify each other when such approvals,
authorizations and consents have been received. Bank and United will provide
each other with copies of all regulatory notices and filings made in connection
with the transactions contemplated by this Agreement prior to filing. Each
party will also promptly provide to the other copies of any correspondence
received from any regulatory
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agency relating to such filings, and shall use its best efforts to keep the
other party advised of the progress of obtaining all regulatory and third party
approvals required for the consummation of all transactions contemplated by
this Agreement.
ARTICLE VII
CONDITIONS PRECEDENT
7.01. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger are subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Shareholder Approval. The Merger Agreements shall have
been approved and adopted by the legally required vote of the holders of the
outstanding shares of Bank.
(b) Federal Reserve Board. The Merger Agreements and the
transactions contemplated hereby, as well as the formation of First Texas as
United's subsidiary bank holding company, shall have been approved by the
Federal Reserve Board without any condition not satisfactory to United, all
conditions required to be satisfied prior to the Effective Time imposed by the
terms of such approvals shall have been satisfied and all waiting periods
relating to such approvals shall have expired.
(c) Texas Banking Department. The creation of Interim Bank
and the Bank Merger shall have been approved by the Texas Banking Department
without any condition (other than advance notification) not satisfactory to
United, all conditions required to be satisfied prior to the Merger and the
occurrence of the Effective Time imposed by the terms of such approval shall
have been satisfied and all waiting periods relating to such approval shall
have expired and there shall exist no condition that prevents consummation of
the Merger at the Effective Time.
(d) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect.
(e) No Proceeding or Litigation. No material action, suit
or proceeding before any court or any governmental or regulatory authority
shall have been commenced against United, Bank or any affiliate, associate,
officer or director of either of them, seeking to restrain, enjoin, prevent,
change or rescind the transactions contemplated hereby or questioning the
validity or legality of any such transactions.
(f) Consents Under Agreements. United, Bank and their
Subsidiaries shall have obtained the consent or approval of each person whose
consent or approval shall be required in connection with the transactions
contemplated hereby under any loan or credit agreement, note, mortgage,
indenture, lease or other agreement or instrument.
(g) Other Regulatory Approvals. All other regulatory
approvals necessary to allow consummation of the transactions contemplated by
this Agreement shall have been obtained.
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7.02. Conditions to Obligations of United. The obligations of United
to effect the Merger are subject to the satisfaction of the following
conditions unless waived in writing by United:
(a) Representations and Warranties. Each of the
representations and warranties of Bank and Sellers set forth in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, except for changes expressly contemplated by this Agreement, and United
shall have received a certificate signed on behalf of Bank by the Chief
Executive Officer and by the Chief Financial Officer of Bank to such effect.
(b) Performance of Obligations of Bank. Bank shall have
performed in all material respects each of the obligations required to be
performed by it under this Agreement and the Plan of Merger at or prior to the
Closing Date, and United shall have received a certificate signed on behalf of
Bank by the Chief Executive Officer and by each member of the Board of Bank to
such effect.
(c) Opinion of Counsel. Bank shall have delivered to
United an opinion of its counsel, Atchley, Russell, Waldrop & Hlavinka, L.L.P.,
dated as of the Closing Date and in form and substance satisfactory to counsel
for United, to the aggregate effect that: (i) Bank is a State chartered bank
validly existing under the laws of Texas with full corporate power and
authority to enter into this Agreement and the Plan of Merger and to consummate
the transactions contemplated thereby; (ii) all corporate proceedings and other
actions on the part of Bank necessary to be taken in connection with the Merger
and (except for the filing of the Certificate of Merger) necessary to make same
effective have been duly and validly taken; (iii) this Agreement and the Plan
of Merger have been duly and validly authorized, executed and delivered on
behalf of Bank and constitute (subject to standard exceptions to enforceability
arising from the bankruptcy laws and rules of equity) valid and binding
agreements of Bank; (iv) this Agreement and the transactions contemplated
hereby do not constitute a "disposition" within the meaning of the BSC
Regulations or IBS Regulations; and (v) Bank is not and may not be, unless Bank
so consents, liable for the debts, obligations or liabilities of either BSC or
IBS notwithstanding the fact that Bank may be required to make additional pro
rata cash contributions as expressed in Section 3.02(b)(i) and (b)(ii) hereof..
(d) No Material Adverse Change. There shall have been no
material adverse change since December 31, 1993 in the financial condition,
results of operations or business of Bank and Subsidiary. Bank agrees that
upon execution of this Agreement, United shall have complete access to all
documents, financial statements or any other document used in the conduct of
Bank's business and the ability to analyze Bank's loan portfolio. Material
adverse change shall include, but is not limited to, a material change in the
credit classification of any loan or any other extension of credit, or the
commencement or making of any investigation, lawsuit or claim which, if decided
adversely to Bank or a Bank Subsidiary, would have a material adverse effect on
Bank or any Bank Subsidiary.
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(e) If the Closing Date is after February 28, 1995, United
shall have received audited financial statements of Bank for the period ended
December 31, 1994, certified by Thomas & Thomas and such audited financial
statements shall reflect no material adverse change since December 31, 1993 in
the financial condition, result of operations or business of Bank and the Bank
Subsidiaries.
(f) Each Seller shall have executed and become legally
bound to the terms of this Agreement.
(g) Environmental Audits. Phase I environmental audits of
properties on which Bank operates its facilities and such other real estate
owned by Bank as is identified in the Bank's Disclosure Letter as potentially
involving problems with Environmental Laws shall have been conducted at
United's option and at Bank's expense, and shall, to United's satisfaction,
reflect no material problems under Environmental Laws. Phase I environmental
audits of any other real estate owned by Bank as United may select shall have
been conducted at United's option and expense and shall, to United's
satisfaction, reflect no material problems under Environmental Laws.
(h) Due Diligence. United shall have had the opportunity
to do general due diligence regarding any and all matters related to Bank's
business, including but not limited to a review of all loan files, trust
records and legal proceedings, an analysis of the investment securities
portfolio, and access to bank personnel, and shall be satisfied that no
material contingent liability exists other than those, if any, disclosed in the
Bank Disclosure Statement and that Bank's overall financial condition is
satisfactory to United.
(i) Escrow Agreement. The Escrow Agreement described in
Section 2.01(a) hereof shall be funded and in effect as of the Effective Time.
(j) Federal Income Tax Consequences. United shall have
received an opinion of tax counsel acceptable to United in form and substance
satisfactory to United to the effect that no gain or loss will be recognized by
Bank as a result of the Merger.
7.03. Conditions to Obligations of Bank and Sellers. The obligations
of Bank and Sellers to effect the Merger are subject to the satisfaction of the
following conditions unless waived by Bank and Sellers:
(a) Representations and Warranties. Each of the
representations and warranties of United set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date as though made on and as of the Closing Date, except for
changes expressly contemplated by this Agreement, and Bank and Sellers shall
have received a certificate signed on behalf of United by the Chief Executive
Officer and by the Chief Financial Officer of United to such effect.
(b) Performance of Obligations of United. United shall have
performed in all material respects each of the obligations required to be
performed by it under this Agreement and the Plan of Merger at or prior to the
Closing Date, and
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Bank shall have received a certificate signed on behalf of United by the Chief
Executive Officer and by the Chief Financial Officer of United to such effect.
(c) Opinion of Counsel. United shall have delivered to
Bank an opinion of its counsel, Ivester, Skinner & Camp, P.A., dated as of the
Closing Date and in form and substance satisfactory to counsel for Bank, to the
aggregate effect that: (i) United is a corporation validly existing under the
laws Arkansas with full corporate power and authority to enter into this
Agreement and the Plan of Merger and to consummate the transactions
contemplated thereby; (ii) all corporate proceedings and other actions on the
part of United necessary to be taken in connection with the Merger and
necessary to make same effective have been duly and validly taken; and (iii)
this Agreement has been duly and validly authorized, executed and delivered on
behalf of United and constitutes (subject to standard exceptions to
enforceability arising from the bankruptcy laws and rules of equity) a valid
and binding agreement of United.
(d) Federal Income Tax Consequences. Bank and Sellers
shall have received an opinion of tax counsel acceptable to Bank and Sellers,
in form and substance satisfactory to Bank and Sellers, to the effect that (i)
no gain or loss will be recognized by Bank as a result of the Merger and (ii)
gain or loss will be recognized to the stockholders of Bank only to the extent
that cash is received by them as a result of the conversion of Bank Common
Stock and the distribution of cash payments as provided in Section 2.01(a)
hereof.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.01 Termination. This Agreement and the Plan of Merger may be
terminated at any time prior to the Effective Time:
(a) by mutual consent of the Board of Directors of United
and the Board of Directors of Bank;
(b) by either United or Bank (A) if there has been a breach
in any material respect of any representation, warranty, covenant or agreement
on the part of Bank or Sellers, on the one hand, or United on the other hand,
respectively, set forth in this Agreement, or (B) if any representation or
warranty of Bank or Sellers, on the one hand, or United on the other hand,
respectively, shall be discovered to have become untrue in any material
respect, in either case which breach or other condition has not been cured
within 10 business days following receipt by the nonterminating party of notice
of such breach or other condition;
(c) by either United or Bank if any permanent Injunction
preventing the consummation of the Merger shall have become final and
nonappealable;
(d) by either United or Bank if the Merger shall not have
been consummated on or before March 31, 1995, for a reason other than the
failure of the terminating party to comply with its obligations under this
Agreement;
25
<PAGE> 34
(e) by either United or Bank if the Federal Reserve Board
has denied approval of creation of First Texas and such denial has become final
and not subject to further review or appeal;
(f) by either United or Bank if the Texas Banking
Department has denied approval of the Merger and such denial has become final
and not subject to further review or appeal;
(g) by United or Bank if any condition precedent to the
terminating party's obligation to effect the Merger has not been satisfied and
such condition cannot reasonably be expected to be satisfied prior to the date
specified in Subsection 8.01(d).
8.02. Effect of Termination. In the event of termination of this
Agreement by either Bank or United as provided in Section 8.01, this Agreement
and the Plan of Merger shall forthwith become void and there shall be no
liability or obligation on the part of Sellers, United, Bank or their
respective officers or directors except that all costs incurred by FirstBank to
take the actions specified in Section 1.05 shall be reimbursed by United
despite such termination, and except to the extent that such termination
results from the willful breach by a party hereto of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
8.03. Amendment. Subject to the next following sentence, this
Agreement and the Plan of Merger may be amended by the parties hereto by action
taken or authorized by Sellers and the respective Boards of Directors of United
and Bank at any time prior to the Closing Date, but after approval by Bank's
Shareholders as contemplated by Section 6.01, no amendment shall be made which
changes in a manner adverse to Sellers the consideration to be provided to
Sellers pursuant to the Merger Agreements. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
8.04. Extension; Waiver. At any time prior to the Effective Time,
United, on the one hand, and Bank, on the other hand, by action taken or
authorized by their respective Board of Directors, may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties of the other contained herein or in any document
delivered by the other pursuant hereto, and (iii) waive compliance by the other
with any of the agreements or conditions contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in a written instrument signed on behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
9.01. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally (with receipt
confirmed) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
26
<PAGE> 35
(a) if to United, to
Mr. John E. Burns
Chief Financial Officer
First United Bancshares, Inc.
Main and Washington Streets
El Dorado, Arkansas 71730
with a copy to:
Hermann Ivester, Esquire
Ivester, Skinner & Camp, P.A.
111 Center Street, Suite 1200
Little Rock, Arkansas 72201
(b) if to Bank, to
Mr. Gene D. Wyatt
Chairman of the Board
FirstBank of Texarkana
P. O. Box 5608
Texarkana, Texas 75505-5608
with a copy to:
Charles J. Hlavinka, Esquire
Atchley, Russell, Waldrop & Hlavinka, L.L.P.
1710 Moores Lane
Texarkana, Texas 75505
9.02. Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation." The phrase "made available" in
this Agreement shall mean that the information referred to has been made
available if requested by the party to whom such information is to be made
available.
9.03. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.04. Entire Agreement. This Agreement (including the documents and
the instruments referred to herein, including the Plan of Merger) (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
9.05. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Texas.
27
<PAGE> 36
9.06. Publicity. The parties hereto agree that they will consult with
each other concerning any proposed press release or public announcement
pertaining to the Merger and will use their best efforts to agree upon the text
of such press release or public announcement prior to the publication of such
press release or the making of such public announcement.
9.07. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
9.08. Knowledge of the Parties. Wherever in this Agreement any
representation or warranty is made upon the knowledge of a party hereto that is
not an individual, such knowledge shall include the actual knowledge, after due
inquiry, of any executive officer of such party or an executive officer of any
Subsidiary thereof.
9.09. Expenses. Except as otherwise provided herein, all Expenses
incurred by United and Bank in connection with or related to the authorization,
preparation and execution of this Agreement, the Plan of Merger, and all other
matters related to the closing of the transactions contemplated hereby,
including, without limitation of the generality of the foregoing, all fees and
expenses of agents, representatives, counsel and accountants employed by either
such party or its affiliates, shall be borne solely and entirely by the party
which has incurred the same.
9.10. Effect of Closing on Representations and Warranties. Except as
hereinafter provided, the representations and warranties contained in this
Agreement shall merge in the closing documents and shall not survive Closing.
Any claim which is based upon willful fraud by a party with respect to the
representations and warranties set forth in this Agreement shall survive and
shall expire only upon expiration of the applicable statute of limitations.
Any liability for willful fraud with respect to the representations and
warranties contained in this Agreement shall be asserted only against the
particular Seller who shall have participated therein and/or any Seller who had
actual knowledge thereof at Closing.
9.11. Binding Effect. This Agreement shall bind and inure to the
benfit of the parties and their respective heirs, personal representatives,
successors and assigns.
IN WITNESS WHEREOF, United, Bank, and Sellers have signed or have caused
this Agreement to be
28
<PAGE> 37
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
<TABLE>
<S> <C>
FIRSTBANK, TEXARKANA, TEXAS
By: /s/ Gene D. Wyatt
-----------------------------------------
Gene D. Wyatt
Attest: Chairman of the Board and President
/s/ Kenneth K. Martin
----------------------------------
SELLERS:
/s/ James M. Carlow /s/ H. J. Trammell
---------------------------------- -----------------------------------
James M. Carlow H. J. Trammell
/s/ Lucille T. Cook /s/ Graton E. White, Jr.
---------------------------------- -----------------------------------
Lucille T. Cook Graton White
/s/ Delton B. Gwinn /s/ Gene D. Wyatt
---------------------------------- -----------------------------------
Delton Gwinn Gene D. Wyatt
/s/ Joe Connor Hart
----------------------------------
Joe Connor Hart
/s/ Kenneth K. Martin
----------------------------------
Kenneth Martin
/s/ M. L. Mayo
----------------------------------
M. L. Mayo
</TABLE>
29
<PAGE> 38
<TABLE>
<S> <C>
FIRST UNITED BANCSHARES, INC.
By: /s/ James V. Kelley
-----------------------------------------
James V. Kelley
Chairman, President and
ATTEST: Chief Executive Officer
/s/ John E. Burns
-----------------------------------------
John E. Burns
Vice President and
Chief Financial Officer
</TABLE>
30
<PAGE> 39
EXHIBIT A
PLAN OF MERGER
This Plan of Merger, dated as of July 28, 1994 ("Plan of Merger"), by and
between First United Bancshares, Inc., an Arkansas corporation ("United"),
FirstBank of Texarkana, a Texas state bank ("Bank"), and Sellers, as defined
herein.
WHEREAS, Bank is a Texas state-chartered bank with authorized capital
stock consisting of 107,747 shares of common stock, $27.843 par value of which
all shares of common stock ("Bank Common Stock") are validly issued and
outstanding on the date hereof;
WHEREAS, United is a corporation with authorized capital stock of
24,000,000 shares of common stock, $1.00 par value, of which 5,177,799 shares
are validly issued and outstanding on the date hereof;
WHEREAS, United is a corporation duly organized and existing under the
laws of Arkansas;
WHEREAS, Sellers are the shareholders of Bank listed in Exhibit 1 attached
hereto, said shareholders referred to collectively as "Sellers" and
individually as "Seller";
WHEREAS, United has made application to the Board of Governors of the
Federal Reserve System to establish First United of Texas, Inc. and conditioned
upon approval of said application United will own one hundred percent (100%) of
the issued and outstanding stock of First United of Texas, Inc. ("First
Texas");
WHEREAS, United has made application to the Texas Banking Department to
establish an interim bank charter under the name and title of FirstBank of
Texarkana ("Interim Bank") under the laws of Texas, as described more fully
below, the capital stock of which First Texas will wholly own conditioned upon
approval of said application;
WHEREAS, concurrently with the execution and delivery of this Plan of
Merger, United, Bank and Sellers have entered into an Agreement and Plan of
Reorganization (the "Agreement" and, together with this Plan of Merger, the
"Merger Agreements") that contemplates the merger of Interim Bank with and into
Bank (the "Merger") upon the terms and conditions provided in this Plan of
Merger and the Agreement and pursuant to the Texas Banking Code, as amended
(the "TBC");
WHEREAS, the Boards of Directors of United and Bank deem it fair and
equitable to, and in the best short-term and long-term interests of, their
respective organizations and shareholders that Interim Bank be merged with and
into Bank with Bank being the surviving bank, and each such Board of Directors
has approved this Plan of Merger, has authorized its execution and delivery,
and Bank has directed that this Plan of Merger and the Merger be submitted to
its shareholders for approval; and
WHEREAS, the Board of Directors of United has authorized the execution and
delivery of this Plan of Merger.
NOW, THEREFORE, in consideration of the promises and the agreements herein
contained, the parties hereto adopt and agree to the following agreements,
terms and conditions relating to the Merger and the mode of carrying the same
into effect:
<PAGE> 40
ARTICLE I
THE MERGER
1.01. The Merger. Subject to the terms and conditions of the Merger
Agreements, Interim Bank will be merged with and into Bank, which will continue
as the surviving corporation, in accordance with and with the effect provided
in the TBC.
1.02. Effective Time of the Merger. Subject to the provisions of the
Merger Agreements, the Merger shall become effective at 5:00 p.m. Central
Standard Time on the date of Closing (the "Effective Time").
1.03. Effects of the Merger. (a) At the Effective Time, (i) the separate
existence of Interim Bank shall cease and Interim Bank shall be merged with and
into Bank (Bank and Interim Bank are sometimes referred to herein as the
"Constituent Banks" and Bank is sometimes referred to herein as the "Surviving
Bank"), (ii) the Articles of Association of Bank in effect as of the Effective
Time (the "Articles") shall be the Articles of Association of the Surviving
Bank, subject to any amendments of the Articles required by the TBC as a result
of the Merger, and (iii) the Bylaws of Bank in effect as of the Effective Time
(the "Bylaws") shall be the Bylaws of the Surviving Bank.
(b) At and after the Effective Time, the Surviving Bank
shall possess all the rights, privileges, powers and franchises of a public as
well as of a private nature, and be subject to all the restrictions,
disabilities and duties of each of the Constituent Banks; and all and singular
rights, privileges, powers and franchises of each of the Constituent Banks, and
all property, real, personal and mixed and all debts due to either of the
Constituent Banks on whatever account, as well as for stock subscriptions and
all other things in action or belonging to each of the Constituent Banks, shall
be vested in the Surviving Bank; and all property, rights, privileges, powers
and franchises, and all and every other interest shall be thereafter as
effectually the property of the Surviving Bank as they were of the Constituent
Banks, and the title to any real estate vested by deed or otherwise, in either
of the Constituent Banks, shall not revert or be in any way impaired; but all
rights of creditors and all liens upon any property of either of the
Constituent Banks shall be preserved unimpaired, and all debts, liabilities and
duties of the Constituent Banks shall thenceforth attach to the Surviving Bank,
and may be enforced against it to the same extent as if said debts and
liabilities had been incurred by it. Any action or proceeding, whether civil,
criminal or administrative, pending by or against either Constituent Bank shall
be prosecuted as if the Merger had not taken place, and the Surviving Bank may
be substituted as a party in such action or proceeding in place of any
Constituent Bank.
ARTICLE II
EFFECT OF THE MERGER ON THE COMMON STOCK OF THE CONSTITUENT BANKS;
EXCHANGE OF CERTIFICATES
2.01. Conversion of Bank Common Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Bank Common Stock, but subject to the rights of dissenting
shareholders of Bank:
2
<PAGE> 41
(a) Conversion of Bank Common Stock. The issued and
outstanding shares of Bank Common Stock shall be converted in accordance with
the Agreement into the right to receive a cash payment as provided in Section
2.01 of the Agreement.
(b) Cancellation of Shares. All shares of Bank Common
Stock issued and outstanding immediately prior to the Effective Time shall no
longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto, except the right to
receive the cash to be paid in consideration therefor upon the surrender of
such certificate in accordance with the Plan of Merger, without interest.
2.02. Exchange of Certificates. (a) Exchange Agent. As of the Effective
Time, United shall deposit with the Trust Department of First National Bank of
El Dorado, El Dorado, Arkansas or such other bank or trust company designated
by United (the "Exchange Agent") for the benefit of the holders of shares of
Bank Common Stock, for exchange in accordance with this Article II through the
Exchange Agent, an amount of cash (the "Exchange Fund") to be paid pursuant to
Section 2.01 of the Agreement in exchange for shares of Bank Common Stock
outstanding immediately prior to the Effective Time.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall mail to each
holder of record of a certificate or certificates which immediately prior to
the Effective Time represented outstanding shares of Bank Common Stock (the
"Certificates") whose shares were converted into the right to receive a cash
payment pursuant to Section 2.01 of the Agreement, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent and shall be in such form and have such other provisions as
United may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the cash payment due. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by United, together with such letter
of transmittal, duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor the amount of cash specified in Section 2.01 of
the Agreement, and the Certificate so surrendered shall forthwith be cancelled.
Until surrendered as contemplated by this Section 2.02, each Certificate shall
be deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the amount of cash specified in Section 2.01 of the
Agreement.
(c) Distributions with Respect to Unexchanged Shares. No
cash payment of any kind shall be paid to the holder of any unsurrendered
Certificate until the holder of record of such Certificate shall surrender such
Certificate.
(d) No Further Ownership Rights in Bank Common Stock. The
cash paid upon the surrender of shares of Bank Common Stock in accordance with
the terms hereof shall be deemed to have been paid in full satisfaction of all
rights pertaining to such shares of Bank Common Stock, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Bank of the shares of Bank Common Stock which were outstanding immediately
prior to the Effective Time.
3
<PAGE> 42
If, after the Effective Time, Certificates are presented to the Surviving Bank
for any reason, they shall be cancelled and payment shall be made as provided
in this Plan of Merger.
(e) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the shareholders of Bank for six
months after the Effective Time shall be delivered to United, upon demand, and
any shareholders of Bank who have not theretofore complied with this Section
2.02 shall thereafter look only to United for payment of the cash due for their
stock.
(f) No Liability. Neither United nor Bank shall be
liable to any holder of shares of Bank Common Stock for cash from the Exchange
Fund delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(g) Conversion of Stock of Interim Bank. At the
Effective Time, the shares of the Interim Bank common stock validly issued and
outstanding immediately prior to the Effective Time will, by virtue of the
Merger and without any action by the holder thereof, be converted into 107,747
shares of common stock, $27.843 par value, of the Surviving Bank so that all
shares of capital stock of the Surviving Bank will be owned by First Texas.
The outstanding certificates representing shares of the Interim Bank common
stock will, after the Effective Time, be deemed to represent the number of
shares of the Surviving Bank into which they have been converted and may be
exchanged for new certificates of the Surviving Bank upon request of the holder
thereof.
ARTICLE III
CONDITIONS; TERMINATION; AMENDMENT
3.01. Conditions to the Merger. Consummation of the Merger is
conditional upon the fulfillment or waiver of the conditions precedent set
forth in Article VII of the Agreement.
3.02. Termination. This Plan of Merger may be terminated and the
Merger abandoned by mutual consent of the respective Boards of Directors of
Bank and United at any time prior to the Effective Time. If the Agreement is
terminated in accordance with Article IX thereof, then this Plan of Merger will
terminate simultaneously and the Merger will be abandoned without further
action by Bank or United.
3.03. Amendment. Subject to the next following sentence, this Plan of
Merger may be amended by the parties hereto by action taken or authorized by
their respective Boards of Directors at any time before the Closing Date. This
Plan of Merger may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
3.04. Extension; Waiver. At any time prior to the Closing Date,
United and Bank, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other party hereto
and (ii) waive compliance by the other with any of the agreements or conditions
4
<PAGE> 43
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument on
behalf of such party.
ARTICLE IV
GENERAL PROVISIONS
4.01. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally (with receipt
confirmed) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to United, to
Mr. John E. Burns
Chief Financial Officer
First United Bancshares, Inc.
P. O. Box 751
El Dorado, Arkansas 71731
with a copy to:
Hermann Ivester, Esquire
Ivester, Skinner & Camp, P.A.
111 Center Street, Suite 1200
Little Rock, Arkansas 72201
(b) if to Bank, to
Mr. Gene D. Wyatt
Chairman of the Board
FirstBank of Texarkana
P. O. Box 5608
Texarkana, Texas 75505-5608
with a copy to:
Charles J. Hlavinka, Esquire
Atchley, Russell, Waldrop & Hlavinka, L.L.P.
1710 Moores Lane
Texarkana, Texas 75505
4.02. Interpretation. When a reference is made in this Plan of
Merger to Sections, such reference shall be to a Section of this Plan of Merger
unless otherwise indicated. The headings contained in this Plan of Merger are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Plan of Merger.
4.03. Counterparts. This Plan of Merger may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
4.04. Governing Law. This Plan of Merger shall be governed and
construed in accordance with the laws of the State of Texas.
5
<PAGE> 44
IN WITNESS WHEREOF, Bank and United have caused this Plan of Merger to
be signed by their respective officers thereunto duly authorized, all as of the
date first written above.
<TABLE>
<S> <C>
FIRSTBANK, TEXARKANA, TEXAS
By: /s/ Gene D. Wyatt
-------------------------------------
Gene D. Wyatt
Attest: Chairman of the Board and President
/s/ Kenneth K. Martin
--------------------------------
SELLERS:
/s/ James M. Carlow /s/ H. J. Trammell
-------------------------------- ----------------------------------
James M. Carlow H. J. Trammell
/s/ Lucille T. Cook /s/ Graton E. White, Jr.
-------------------------------- ----------------------------------
Lucille T. Cook Graton White
/s/ Delton B. Gwinn /s/ Gene D. Wyatt
-------------------------------- ----------------------------------
Delton Gwinn Gene D. Wyatt
/s/ Joe Connor Hart
--------------------------------
Joe Connor Hart
/s/ Kenneth K. Martin
--------------------------------
Kenneth Martin
/s/ M. L. Mayo
--------------------------------
M. L. Mayo
</TABLE>
6
<PAGE> 45
<TABLE>
<S> <C>
FIRST UNITED BANCSHARES, INC.
By: /s/ James V. Kelley
-------------------------------------------------
James V. Kelley
Attest: Chairman, President and Chief Executive Officer
/s/ Robert G. Dudley
--------------------------------------------------
Robert G. Dudley, Secretary
</TABLE>
7
<PAGE> 46
EXHIBIT 1
SELLERS
<TABLE>
<CAPTION>
NUMBER OF SHARES
AND PERCENTAGE OF BANK
SELLER OWNED OR CONTROLLED
------ -------------------------
<S> <C>
James M. Carlow 985
Rt. 1, Box 306 0.91%
New Boston, Texas 75570
Lucille T. Cook 6,029
6606 North Park Road 5.59%
Texarkana, Texas 75505
Delton Gwinn 2,799
P. O. Box 6838 2.60%
Texarkana, Texas 75505
Joe Connor Hart 1,000
Rt. 1, Box 109 0.93%
Hooks, Texas 75561
Kenneth Martin 3,820
2804 Magnolia 3.55%
Texarkana, Texas 75503
M. L. Mayo 2,584
2 Hickory Ridge 2.40%
Texarkana, Texas 75503
H. J. Trammell 10,207
4217 Ghio Fish Boulevard 9.48%
Texarkana, Texas 75503
Graton White 730
3616 Wyatt .68%
Texarkana, Texas 75503
Gene Wyatt 1,002
P. O. Box 5608 .93%
Texarkana, Texas 75505
</TABLE>
<PAGE> 47
EXHIBIT 2.01(A)
ESCROW AGREEMENT
This Escrow Agreement ('Escrow Agreement") made July 28, 1994, between
FIRST UNITED BANCSHARES, INC. ("United"), certain Shareholders of FIRSTBANK,
Texarkana, Texas ("Bank") listed in Exhibit 1 attached hereto (collectively,
the "Sellers" and, individually, a "Seller"); and FIRST NATIONAL BANK OF EL
DORADO, El Dorado, Arkansas (the "Escrow Agent").
WHEREAS, United, on the one hand, and Sellers and Bank, on the other,
have entered into a certain Agreement and Plan of Reorganization whereby an
interim bank established by United has been merged with and into Bank (the
"Surviving Bank"), for and in consideration of a cash payment of Twenty-Five
Million Dollars ($25,000,000.00);
WHEREAS, Article II, Section 2.01(a) of the Agreement and Plan of
Reorganization ("Agreement") provides for a certain sum of cash to be escrowed,
with the Escrow Agent, for any payment of the Bank's potential liability and
costs arising in the cases of Dennis Shirk, Administrator of Estates of Daniel
Clay Sparks and Edna Lovette Sparks, deceased vs. FirstBank, et al., Graco
Robotics, Inc. v. Oaklawn Bank, and Otis Weaver v. various parties, including
FirstBank;
WHEREAS, the Escrow Agent is a National Banking Association
incorporated and organized under the Laws of the United States and is a wholly
owned subsidiary of United and desires and is willing to act and service
pursuant to the terms of the Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties, it is agreed as
follows:
1. DEPOSIT OF FUNDS. United, pursuant to Section 2.01(a) of the
Agreement, hereby deposits Two Hundred Thousand Dollars ($200,000.00) (the
"Escrow Fund") with the Escrow Agent for any payment of potential liability and
costs arising in the cases of Dennis Shirk, Administrator of Estates of Daniel
Clay Sparks and Edna Lovette Sparks, deceased vs. First Bank, et al, Graco
Robotics, Inc. v. Oaklawn Bank, and Otis Weaver v. various parties, including
FirstBank (the "Lawsuits"). Notwithstanding the foregoing, the liability and
costs associated with the case of Graco Robotics, Inc. v. Oaklawn Bank shall be
paid from the Escrow Fund only to the extent such liability and costs exceed
the amount reserved by FirstBank for such liability and costs as of June 30,
1994.
<PAGE> 48
2. ACCEPTANCE BY ESCROW AGENT. The Escrow Agent hereby accepts
the deposit of the Escrow Fund by United and agrees to hold the Escrow Fund
pursuant to the terms and conditions set forth herein.
3. TERM. The Escrow Agent shall hold the Escrow Fund deposited
hereunder for a period not to exceed three (3) months following the
satisfaction, settlement or other termination of all other liabilities or
potential liabilities described in Section 1 hereof.
4. NOTIFICATION AND ACCOUNTING BY BANK. The Surviving Bank
shall, from time to time, notify, in writing, the Sellers, United and the
Escrow Agent of any liabilities (as that term is defined in the next sentence
hereof) incurred by Surviving Bank regarding the Lawsuits. Said liabilities
are to include all legal expenses, costs, fees and any and all liability
incurred by the Surviving Bank in the adjudication or settlement of the
Lawsuits (the "Liabilities"). Surviving Bank shall make an accounting, in
writing, to the Sellers, the Escrow Agent and United of the Liabilities, which
shall be verified by the Escrow Agent.
5. RELEASE OF FUNDS. The Escrow Agent shall disburse funds from
the Escrow Fund from time to time on or before the expiration of the term set
forth in Section 3 of this Escrow Agreement in reimbursement to the Surviving
Bank of the Liabilities upon written instructions signed by United and the
Sellers. Any portion of the Escrow Fund remaining on deposit at the expiration
of the term set forth in Section 3 of this Escrow Agreement shall be disbursed
to the shareholders of record of Bank as of the Effective Time of the Merger
(or the respective heirs, personal representatives, successors and assigns of
such shareholders).
6. ESCROW FEES. United shall pay the Escrow Agent its normal
escrow fees in consideration for performances and services hereunder.
7. INDEMNIFICATION. United, the Surviving Bank and Sellers
hereby agree to hold harmless and indemnify the Escrow Agent and its employees,
agents, and representatives against loss, damage, liability or claims arising
out of this Escrow Agreement and the escrow created hereunder other than those
caused by the agents' own gross negligence or willful misconduct. The Escrow
Agent shall not be bound in any way by any other agreement between the parties
hereto as to which the Escrow Agent is not a party, whether or not it has
knowledge thereof. The Escrow Agent shall not in any way be required to
determine whether or not the terms and conditions of this Escrow Agreement have
been complied with by the parties, except as herein provided. The Escrow Agent
may act in reliance upon any instrument or signature which it believes to be
genuine and may assume that any person purporting to give notice or
2
<PAGE> 49
advice or instruction in connection with the provisions hereof has been duly
authorized to do so. It is agreed that the duties of the Escrow Agent are only
such as herein specifically provided, being purely ministerial in nature, and
that it shall incur no liability whatever so long as it has acted without gross
negligence or willfulness conduct.
8. BINDING EFFECT. This Escrow Agreement shall bind and inure to
the benefit of the parties and their respective heirs, personal
representatives, successors and assigns.
9. AMENDMENT. This Escrow Agreement may be amended only by a
writing signed by all of the parties.
10. GOVERNING LAW. This Escrow Agreement shall be enforced and
construed under the laws of the state of Texas.
11. ENTIRE AGREEMENT. This Escrow Agreement constitutes the
entire agreement among the parties hereto and supersedes all prior agreements
and understandings related to the subject matter hereof. There are not
agreements, understandings, restrictions, warranties, or representations among
the parties other than those set forth herein.
12. NOTICES. Notices contemplated by this Escrow Agreement shall
be directed to the parties as set forth below or as a party may hereafter
designate by notice in writing given to all other parties.
If to FIRST UNITED BANCSHARES, INC.
at: Main & Washington Streets
El Dorado, Arkansas 71730
Attention: James V. Kelley
Chairman, President and Chief
Executive Officer
If to FIRSTBANK, TEXARKANA, TEXAS
at: 3000 New Boston Road
Texarkana, Texas 75501
Attention: Gene D. Wyatt
If to FIRST NATIONAL BANK OF EL DORADO
at: Main & Washington Streets
El Dorado, Arkansas 71730
Attention: Robert G. Dudley, President
If to SELLERS
c/o Charles J. Hlavinka
ATCHLEY, RUSSELL, WALDROP & HLAVINKA
at: 1710 Moores Lane - P.O. Box 5517
Texarkana, Texas 75505-5517
3
<PAGE> 50
All communications required or permitted hereunder shall be given in writing by
certified mail, return receipt requested, or by personal delivery.
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement on
the day and year first above written.
<TABLE>
<CAPTION>
SELLERS: SURVIVING BANK:
<S> <C>
FIRSTBANK, TEXARKANA, TEXAS
/s/ James M. Carlow 3000 New Boston Road
--------------------------------------- Texarkana, Texas 75501
JAMES M. CARLOW
/s/ Lucille T. Cook
--------------------------------------- By: /s/ Gene D. Wyatt
LUCILLE T. COOK -------------------------------------
Gene D. Wyatt
Chairman of the Board and President
/s/ Delton B. Gwinn
---------------------------------------
DELTON GWINN
/s/ Joe Connor Hart
---------------------------------------
JOE CONNOR HART
/s/ Kenneth K. Martin
---------------------------------------
KENNETH MARTIN
/s/ M. L. Mayo
---------------------------------------
M. L. MAYO
/s/ H. J. Trammell
---------------------------------------
H. J. TRAMMELL
/s/ Graton E. White, Jr.
---------------------------------------
GRATON WHITE
/s/ Gene D. Wyatt
---------------------------------------
GENE WYATT
</TABLE>
4
<PAGE> 51
UNITED:
FIRST UNITED BANCSHARES, INC.
Main & Washington Streets,
El Dorado, Arkansas 71730
By: /s/ James V. Kelley
-------------------------------------
James V. Kelley
Chairman, President and Chief
Executive Officer
ESCROW AGENT:
FIRST NATIONAL BANK OF EL DORADO
Main & Washington Streets
El Dorado, Arkansas 71730
By: /s/ Robert G. Dudley
-------------------------------------
Robert G. Dudley
President
5
<PAGE> 1
EXHIBIT 3(A)
RESTATED ARTICLES OF INCORPORATION OF FIRST UNITED BANCSHARES, INC.
<PAGE> 2
EXHIBIT 3(A)
RESTATED
ARTICLES OF INCORPORATION
OF
FIRST UNITED BANCSHARES, INC.
FIRST. The name of the corporation is FIRST UNITED BANCSHARES, INC.
SECOND. The period of its duration is perpetual.
THIRD. The purposes for which the corporation is organized are:
(a) To engage in all business activities allowable for a bank
holding company and to own and manage banks and other
businesses in the area of financial services.
(b) To acquire and own property, both real and personal, including
common stock or other beneficial interest incorporations,
associations, trusts and other forms of business whether
incorporated or unincorporated, and to provide services to and
for such businesses, and to engage in businesses related to
any such businesses, and to do any and all lawful acts
necessary, convenient, advisable or desirable which may be
incidental or pertinent to such businesses.
(c) To engage in any business not prohibited by law.
FOURTH. The total number of shares of authorized capital stock which
the corporation shall have the authority to issue shall be as follows:
<TABLE>
<CAPTION>
SHARES CLASS PAR VALUE PER SHARE
----------- ------- -------------------
<S> <C> <C>
24,000,000 Common $1.00
500,000 Preferred $1.00
</TABLE>
The board of directors may determine, in whole or in part, the preferences,
limitations, and relative rights of any class of stock, or one (1) or more
series within a class, before the issuance of such class or series,
respectively, and may amend the Articles of Incorporation to set forth such
preferences, limitations, and relative rights without shareholders approval or
action.
FIFTH. Shareholders shall have no pre-emptive right to acquire
additional or treasury shares of the corporation.
SIXTH. All shareholders are entitled to cumulate their votes for the
election of directors.
SEVENT. Except upon the approval of two-thirds (2/3) of all shares
issued and outstanding that are entitled to vote on all the following
transactions, the corporation shall not (i) effect a merger or share exchange
with another corporation provided, however, that mergers authorized by the Ark.
Code Ann 4-27-1104 (as the same may be amended from time to time) may be
effected without shareholder approval, (ii) sell, exchange, lease, or otherwise
dispose of all, or substantially all, of the corporations's assets and property
except when accomplished in the usual and regular course of business of the
corporation, (iii) effect a dissolution or liquidation of the corporation, or
(iv) amend these Articles of Incorporation.
EIGHTH. The internal affairs of the corporation shall be regulated in
accordance with the By-Laws duly adopted in accordance with the laws of the
State of Arkansas.
<PAGE> 3
NINTH. The address of the registered office of the corporation is
First National Bank Building, Main at Washington, El Dorado, Arkansas 71730.
The name of its registered agent at such address is Robert G. Dudley.
TENTH. The number of directors that constitute the Board of Directors
of the corporation shall not exceed twenty-five (25). The number of directors
shall be determined by the stockholders at each annual meeting or may be
determined at any special meeting, and the number of directors so determined
shall be applicable until the next meeting of stockholders at which directors
are elected and a new number of directors determined.
ELEVENTH. To the fullest extent permitted by the Arkansas Business
Corporation Act, as is now exists or may hereafter be amended, a director of
this corporation shall not be liable to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director.
TWELFT. The corporation may indemnify any person who was, or is, a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding to the fullest extent permitted by the
Arkansas Business Corporation Act as it now exists or may hereafter be amended.
THIRTEENTH. The corporation elects to be governed by the provisions
of the Arkansas Business Corporation Act of 1987 as it now exists or may
hereafter be amended from time to time.
FOURTEENTH. The name and address of the incorporator is:
Robert G. Dudley
Main at Washington Streets
El Dorado, Arkansas 71730
2
<PAGE> 4
EXHIBIT 3(B)
RESTATED BYLAWS OF FIRST UNITED BANCSHARES, INC.
<PAGE> 1
EXHIBIT 3(B)
FIRST UNITED BANCSHARES, INC.
RESTATED BYLAWS
ARTICLE I
STOCKHOLDERS
Section 1. PLACE OF HOLDING MEETINGS. All meetings of the
Stockholders shall be held at the office of the Corporation at Main and
Washington Streets, El Dorado, Arkansas 71730, unless, written notice of
another place, either within or without the state, for the meeting is given in
the meeting notice.
Section 2. ANNUAL ELECTION OF DIRECTORS. The annual meeting of
Stockholders for the election of Directors and the transaction of other
business shall be held on the fourth Tuesday in May of each year. If this date
shall fall upon a legal holiday, the meeting shall be held on the next
succeeding business day. At each annual meeting, the Stockholders entitled to
vote shall by plurality vote, by ballot, elect a Board of Directors, and they
may transact such other corporate business as shall be stated in the notice of
the meeting.
No change of time or place of a meeting for the election of Directors,
as fixed by the By-Laws, shall be made within thirty (30) days next before the
day on which such election is to be held. In case of any change in such time
or place for election of Directors, notice thereof shall be given to each
Stockholder entitled to vote, in person or by letter mailed to his last known
post office address, twenty (20) days before the election is held.
Section 3. VOTING. Each stockholder entitled to vote in accordance
with the terms of the Articles of Incorporation and in accordance with the
provisions of these By-Laws shall be entitled to one vote, in person or by
proxy, for each share of stock entitled to vote held by such stockholder, but
no proxy shall be voted after eleven (11) months from its date unless such
proxy provides for a longer period. After the first election of directors,
except where the transfer books of the Corporation shall have been closed or a
date shall have been fixed as the record date for the determination of
stockholders entitled to vote, as hereinafter provided in Section 4 of Article
IV, no share of stock shall be voted on at any election for directors which
shall have been transferred on the books of the Corporation within twenty (20)
days next preceding such election. The vote for directors, and, upon the
demand of any stockholder the vote upon any question before the meeting, shall
be by ballot. All elections shall be had and all questions decided by
plurality vote except as otherwise provided by the Articles of Incorporation
and/or the laws of the State of Arkansas.
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the residence of each, and the
number of voting shares held by each,shall be prepared by the Secretary and
filed in the office where the election is to be held, at least ten (10) days
before every election, and shall at all times during the usual hours for
business, and during the whole time of said election, be open to examination of
any stockholder.
Section 4. QUORUM. Except as provided in the next section hereof, any
number of stockholders together holding at least fifty-one percent (51%) of the
stock issued and outstanding entitled to vote there at, who shall be present in
person or represented by proxy at any meeting duly called, shall constitute a
quorum for the transaction of business.
Section 5. ADJOURNMENT OF MEETINGS. If less than a quorum shall be in
attendance at any time for which this meeting shall have been called, the
meeting may, after the lapse of at least half an hour, be adjourned from time
to time by a majority of the stockholders present or represented and entitled
to vote there at, and no further notice thereof need be given other than by
announcement at said meeting which shall be adjourned.
Section 6. SPECIAL MEETINGS. HOW CALLED. Special meetings of the
stockholders for any purpose or purposes may be called by the Chairman,
President or Secretary. The Board of Directors of this Corporation, or any
three or more shareholders owning, in the aggregate, not less than 25 percent
of the stock of this Corporation, or any three or more shareholders owning, in
the aggregate, not less than 25 percent of the stock of this Corporation may
call a special meeting of shareholders at any time. Unless otherwise provided
by the laws of the United States, a notice of the time, place and purpose of
every annual and special meeting of the shareholders shall be given by first
class mail, postage prepaid, mailed at least ten days prior to the date of such
meeting to each shareholder of record at his address as shown upon the books of
this Corporation.
<PAGE> 2
Section 7. NOTICE OF STOCKHOLDERS MEETING. Written or printed notice,
stating the place and time of the meeting, and the general nature of the
business to be considered, shall be given by the President or Secretary to each
stockholder entitled to vote there at his last known post office address, at
least ten (10) days before the meeting in the case of any annual meeting, and
at least two (2) business days before the meeting in the case of a special
meeting, unless a greater time is prescribed by statute.
ARTICLE II
DIRECTORS
Section 1. NUMBER. TERM. QUORUM. The number of directors shall not
be less than three nor more than twenty-five. The directors shall be elected
at the annual meeting of the stockholders and each director shall be elected to
serve until his successor shall be elected and shall qualify; provided that in
the event of failure to hold such meeting or to hold such election at such
meeting, it may be held at any special meeting of the stockholders called for
that purpose. (Directors need not be stockholders.)
A majority of the directors shall constitute a quorum for the
transaction of business. If at any meeting of the Board there shall be less
than a quorum present, a majority of those present may adjourn the meeting from
time to time until a quorum is obtained, and no further notice need be given
other than by announcement at said meeting which shall be so adjourned.
Section 2. FIRST MEETING. The newly elected directors may hold their
first meeting for the purpose of organization and the transaction of business,
if a quorum be present, immediately after the annual meeting of the
stockholder; or the time and place of such meeting may be fixed by consent in
writing of a majority of all the directors.
Section 3. ELECTION OF OFFICERS. At the first meeting, or at any
subsequent meeting called for the purpose, the directors shall elect a
President, and a Secretary. Such officers shall hold office until the next
election of officers and until their successors are elected and shall qualify.
A person may be elected to hold one or more of the above mentioned offices
simultaneously.
Section 4. REGULAR MEETINGS. Regular meetings of the directors may be
held with or without notice at such places and times as shall be determined
from time to time by resolution of the directors.
Section 5. SPECIAL MEETING. HOW CALLED. NOTICE. Special meeting of
the Board may be called by the President or by the Secretary or upon call of
any two directors on at least two (2) business days' notice to each director.
Section 6. PLACE OF MEETINGS. The directors may hold their meetings
and have one or more offices and keep the books of the corporation inside or
outside the State of Arkansas, at any office or offices of the corporation, or
at any other place as they may from time to time by resolution determine,
provided, however, that a duplicate stock ledger shall always be kept at the
principal office in Arkansas.
Section 7. GENERAL POWERS OF DIRECTORS. The Board of Directors shall
have the direction of the business of the corporation, and subject to the
restrictions imposed by law, by the Articles of Incorporation, or by these
By-Laws may exercise all powers of the corporation.
Section 8. SPECIFIC POWERS OF DIRECTORS. Without prejudice to such
general powers, it is hereby expressly declared that the directors shall have
the following powers:
(1) To adopt and alter a common seal of the corporation.
(2) To make and change regulations, not inconsistent with these
By-Laws; for the management of the corporation's business and
affairs.
(3) To authorize the purchase or other acquisition for the
corporation any property, rights or privileges which the
corporation is authorized to acquire.
2
<PAGE> 3
(4) To pay for any property purchased for the corporation wither
wholly or partly in money, stocks, bonds, debentures or other
securities of the corporation.
(5) To borrow money and to make and issue notes, bonds, and other
negotiable and transferrable instruments, mortgages, deeds of
trust and trust agreements, and to do every act and thing
necessary to effectuate the same.
(6) To remove any officer or any employee for cause, or any
officer and any employee other than the president summarily
with or without cause, and in their discretion, from time to
time, to devolve the powers and duties of any officers upon
any other person for the time being.
(7) To appoint and remove or suspend such subordinate officers,
agents or employees as they may deem necessary and to
determine their duties and fix, and from time to time change
their salaries or remuneration, and to acquire security as
when they think fit.
(8) To confer upon the Chief Executive Officer of the Corporation
the power to appoint, remove and suspend subordinate officers,
agents and employees.
(9) To determine who shall be authorized on the corporation's
behalf to make and sign bills, notes, acceptances,
endorsements, checks, releases, receipts, contracts and other
instruments.
(10) To determine who shall be entitled to vote in the name and
behalf of the corporation upon, or to assign and transfer, any
shares of stock, bonds, or other securities of other
corporations held by this corporation.
(11) To delegate any of the powers of the Board to any standing or
special committee, or to any officer or agent (with power to
sub-delegate), upon such terms as they think fit other than
election of officers and declaration of dividends.
(12) To call special meetings of the stockholders for any purpose
or purposes.
Section 9. COMPENSATION OF DIRECTORS. Directors shall not receive any
stated salary for their services as directors, but by resolution of the Board a
fixed fee and expenses of attendance may be allowed for attendance at each
meeting. Nothing herein contained shall be construed to preclude any director
from serving the corporation in any other capacity as an officer, agent or
otherwise, and receiving compensation therefor.
Section 10. BOARD ACTION WITHOUT A MEETING. Action taken by a
majority of the directors without a meeting in respect to any corporate matter
is nevertheless valid Board action if either before or after such action is
taken all members of the Board sign, and file with the Secretary of the
corporation, for inclusion in the corporate minute book, a memorandum showing
(a) the nature of the action taken, (b) that each member of the Board consented
to the Board acting informally in respect to such matter, and (c) the names of
the directors who approve the action taken and the names of those who oppose
it, if any.
ARTICLES III
COMMITTEES
Section 1. CREATION OF EXECUTIVE AND OTHER COMMITTEES - There shall
be an Executive Committee created from the membership of the Board of
Directors, and it shall consist of not less than three (3) directors which
shall be authorized to exercise all authority of the Board of Directors in the
intervals between the meetings of the Board of Directors with respect to the
business affairs of the Corporation. Such Executive Committee shall be subject
to the control and direction of the Board of Directors and shall serve at the
pleasure of the Board of Directors.
Section 2. LIMITATIONS ON ACTIONS AND EFFECT THEREOF - The Executive
Committee shall not be authorized to take any action other than ordinary
business affairs of the corporation and may not be authorized to conduct any
action specifically prohibited by applicable laws of the United States of
America or State of Arkansas. Otherwise, an act or authorization by the
Executive Committee within the authority lawfully delegated to it shall be the
act or authorization
3
<PAGE> 4
of the Board of Directors for all legal purposes, provided, however, that such
action shall not operate to relieve the Board of Directors of any
responsibility imposed upon it by law.
Section 3. ACTION BY EXECUTIVE COMMITTEE - The Executive Committee may
act by a majority of its members at a meeting or informally without a meeting
provided all members consent to such informal action.
Section 4. In addition to the Executive Committee, the Board of
Directors may, by resolution or resolutions, passed by a majority of the Board,
designate one or more committees, each committee to consist of three or more of
the directors of the corporation, which, to the extent provided in said
resolution of resolutions or in these By-Laws shall have an may exercise the
powers of the Board of Directors in the management of the business and affairs
of the corporation and may have the power to authorize the seal of the
corporation to be affixed to all papers which may require it. Such committee
or committees shall have such name or names as may be stated in these By-Laws
or as may be determined from time to time by resolution adopted by the Board of
Directors.
Section 5. All committees shall keep regular minutes of their
proceedings and report the same to the Board when required.
ARTICLE IV
OFFICERS
Section 1. The officers of the Corporation, in addition to the
directors, shall be a Chairman of the Board, a President, a Treasurer and a
Secretary, and such other officers as may from time to time be elected or
appointed by the Board of Directors. One person may hold one or more of the
officer positions in the company.
Section 2. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the stockholders and directors at which he may be
present. He may enter into any contract or execute any deeds, mortgages,
bonds, contracts or other instruments in the name and on behalf of the Company
except in cases in which the authority to enter into such contract or execute
and deliver such instrument, as the case may be, shall be otherwise expressly
delegated. In general he shall perform all duties incident to the office of
Chairman of the Board as herein defined and all such other duties as from time
to time may be assigned to him by the Board of Directors.
Section 3. PRESIDENT. The President shall be the chief executive
officer of the Company and shall, subject to the control of the Board of
Directors, supervise and manage the affairs of the Company. He shall in the
absence or disability of the Chairman of the Board perform the duties and
exercise the powers of such office. In the absence or disability of the
Chairman of the Board he shall preside at meetings of the stockholders and
directors. In general he shall perform all duties incident to the office of
President as herein defined and all such other duties as from time to time may
be assigned to him by the Board of Directors.
Section 4. SECRETARY. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors, and other notices
required by Law or by these By-Laws, and in such case of his absence or refusal
or neglect to do so, any such notice may be given by any person designated by
the President, or by the directors, or stockholders, upon whose requisition the
meeting is called as provided in these By-Laws. He shall record all the
proceedings of the meeting of the corporation and of the directors in a book to
be kept for that purpose, and shall perform such other duties as may be
assigned to him by the directors or by the President. He shall have the
custody of the seal of the corporation and shall affix the same to all
instruments requiring it, when authorized by the directors or the President,
and attest the same.
Section 5. TREASURER. The Treasurer shall have the custody of all
funds, securities, evidences of indebtedness and other valuable documents of
the corporation; he shall receive and give or cause to be given receipts and
acquitances for moneys paid in on account of the corporation and shall pay out
of the funds on hand all just debts of the corporation of whatever nature upon
maturity of the same; he shall enter or cause to be entered in books of the
corporation to be kept for that purpose full and accurate accounts of all
moneys received and paid out on account of the corporation, and whenever
required by the directors, he shall render a statement of his cash accounts; he
shall keep or cause to be kept such other books as will show true record of the
expenses, losses, gains, assets, and liabilities of the corporation; he shall,
unless otherwise determined by the directors, have charge of the original stock
books, transfer books and stock ledgers and act as transfer agent in respect to
the stock and securities of the corporation; and shall perform all of the other
duties incident to the office
4
<PAGE> 5
of the Treasurer. He shall, if required by the Board, give the Corporation a
bond for the faithful discharge of his duties in such amount and with such
surety as the Board may prescribe.
ARTICLE V
RESIGNATIONS. FILLING OF VACANCIES.
Section 1. RESIGNATIONS. Any director, member of committee or other
officer may resign at any time. Such resignation shall be made in writing, and
shall take effect at the time specified therein, and if no time be specified,
at the time of its receipt by the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
Section 2. FILLING OF VACANCIES. If the office of any director,
member of a committee or other officer becomes vacant the remaining directors
in office, though less than a quorum, by a majority vote, may appoint any
qualified person to fill such vacancy, who shall hold office of the unexpired
term and until his successors shall be duly chose.
Section 3. INCREASE OF NUMBER OF DIRECTORS. The number of directors
may be increased or decreased at any time by the affirmative vote of a majority
of the directors (or, by the affirmative vote of a majority in interest of the
stockholder), at a regular meeting or at a special meeting called for that
purpose, and, by like vote, the additional directors may be chosen at such
meeting to hold office until the next election and until their successors are
elected and qualify.
ARTICLE VI
CAPITAL STOCK
Section 1. CERTIFICATE OF STOCK. Certificates of stock, numbered and
with the seal of the corporation affixed, signed by the President, or Secretary
or Assistant Secretary, shall be issued to each stockholder certifying the
number of shares owned by him in the corporation. When such certificates are
signed by a transfer agent or an assistant transfer agent or by a transfer
clerk acting on behalf of the corporation and a registrar, the signature of
such officers may be facsimile.
Section 2.LOST CERTIFICATES. A new certificate of stock may be issued
in the place of any certificate theretofore issued by the corporation, alleged
to have been lost or destroyed, and the directors may, in their discretion,
require the owner of the lost or destroyed certificates, or his legal
representative, to give the corporation a bond, in such sum as they may direct,
not exceeding double the value of the stock, to indemnify the company against
any claim that may be made against it on account of the alleged loss of any
such certificates.
Section 3. TRANSFER OF SHARES. The shares of stock of the corporation
shall be transferable only upon its books by the holders thereof in person or
by their duly authorized attorneys or legal representatives, and upon such
transfer, the old certificates shall be surrendered to the corporation by the
delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such person as the directors may designate, by whom they shall
be cancelled, and new certificates shall thereupon be issued. A record shall
be made of each transfer, and a duplicate thereof mailed to the Arkansas
office, and whenever a transfer shall be made for collateral security, and not
absolutely, it shall be expressed in the entry of the transfer.
Section 4. CLOSING OF THE TRANSFER BOOKS. The board of Directors
shall have the power to close the stock transfer books of the corporation for a
period not exceeding seventy (70) days preceding the date of any meeting of
stockholders or the date for payment of any dividend or the date for the
allotment of rights or the date when any change or conversion or exchange of
capital stock shall go into effect; provided, however, that in lieu of the
closing of the stock transfer books as aforesaid, the Board of Directors may
fix in advance a date, not exceeding seventy (70) days preceding the date of
any meeting of stockholders or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting, or entitled to receive payment of any such dividends, or to any
allotment of rights, or to exercise the rights in respect of any such change,
conversion or exchange of capital stock, and in such case such stockholders
only as shall be stockholders of record on the date so fixed and shall be
entitled to such notice of, and to vote at, such meeting, or to receive payment
of such dividend, or to receive
5
<PAGE> 6
such allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any stock on the books of the corporation after
any such record dated fixed as aforesaid.
Section 5. DIVIDENDS. Subject to the provisions of the Articles of
Incorporation, if any, the directors may declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors from time to time in their
discretion think proper for working capital or as reserve funds to meet
contingencies or for equalizing dividends, or for other such purposes as the
directors shall think conducive to the interests of the corporation.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 1. CORPORATE SEAL. The corporate seal shall be circular form
and shall contain the mane of the corporation, the year of its creation and the
words "CORPORATE SEAL ARKANSAS". Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 2. PRINCIPAL OFFICE. The principal office of the corporation
shall be at Main and Washington Streets, El Dorado, arkansas 71730, with
offices at such other places as the Board of Directors may, from time to time,
designate or the business of the corporation may require.
Section 3. FISCAL YEAR. The fiscal year of the corporation shall
begin on January 1 and end on December 31 following.
Section 4. CHECKS. DRAFTS. NOTES. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the corporation shall be signed by such officers, agent
or agents of the corporation, and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 5. NOTICE AND WAIVER OF NOTICE. Whenever any notice is
required by these By-Laws to be given, personal notice is not meant unless
expressly so stated; and any notice so required shall be deemed to be
sufficient if given by depositing the same in a post office box in a sealed
wrapper bearing adequate postage, addressed to the person entitled thereto at
his last known post office address, and such notice shall be deemed to have
been given three (3) days after such mailing. Any notice required to be given
under these By-Laws may be waived by the person entitled thereto. Stockholders
not entitled to vote shall not be entitled to receive notice of any meeting
except as otherwise provided by the statute.
Section 6. INDEMNIFICATION. Every person who was or is a party or is
threatened to be made a party to or is involved in any action, suit,
proceeding, whether civil, criminal, administrative, or investigative, by
reason of the fact that he is or was a director or officer of the Corporation
or is or was serving at the request of the Corporation as a director or officer
of another corporation, or as its representative in a partnership, joint
venture, trust, or other enterprise, shall be indemnified and held harmless to
the fullest extent legally permissible under and pursuant to any procedure
specified in the Arkansas Business Corporation Act of the State of Arkansas, as
amended and as the same may be amended hereafter, against all expenses,
liabilities, and losses (including attorney's fees, judgements, fines and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
him in connection therewith. Such right of indemnification shall be a contract
right that may be enforced in any lawful manner by such person. Such right of
indemnification shall not be exclusive of any other right which such director
or officer may have or hereafter acquire and, without limiting the generality
of such statement, he shall be entitled to his rights of indemnification under
any agreement, vote of stockholders, provisions of law, or otherwise, as well
as his rights under this paragraph.
The board of directors may cause the Corporation to purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out
of such status, whether or not the Corporation would have power to indemnify
such person.
Section 7. ADVANCEMENT OF EXPENSES. Expenses incurred by a director
or officer of the Corporation in defending a civil or criminal action, suit or
proceeding by reason of the fact that he is, or was a director or officer of
the
6
<PAGE> 7
Corporation (or was serving at the Corporation's request as a director or
officer of another corporation, or as its representative in a partnership,
joint venture, trust or other enterprise) shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by, or on behalf of, such person to repay such amount
if it shall ultimately be determined that he is not entitled to be indemnified
by the Corporation as authorized by relevant provision of the Arkansas Business
Corporation Act as the same now exists or as it may hereafter be amended.
ARTICLE VIII
AMENDMENTS
Section 1. AMENDMENTS OF BY-LAWS. The stockholders, by the
affirmative vote of the holders of a majority of the common stock issued and
outstanding may, at any meeting, amend or alter any of these By-Laws, as may a
majority of the members of the Board of Directors, subject and pursuant to the
Articles of Incorporation and By-Laws.
7
<PAGE> 1
EXHIBIT 13
FIRST UNITED BANCSHARES, INC. 1994 ANNUAL REPORT TO STOCKHOLDERS.
<PAGE> 2
EXHIBIT 13
FIRST UNITED BANCSHARES, INC.
1994 ANNUAL REPORT TO STOCKHOLDERS
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Letter to the Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Financial Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-19
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Quarterly Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22-38
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Report of Management on Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Executive Officers and Directors of First United and its Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 40-42
Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
=================================================================================================================
FIRST UNITED BANCSHARES, INC.(1)
(Dollars in Thousands Except Per Share Data) 1994 1993 % Change
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME DATA
Income Before Cumulative Effect of the 1993
Change in Accounting Principle $ 14,008 $ 13,215 6%
Net Income 14,008 15,737 (11%)
Net Interest Income 42,961 43,063 0%
-----------------------------------------------------------------------------------------------------------------
PER COMMON SHARE DATA
Income Before Cumulative Effect of the 1993
Change in Accounting Principle $ 2.72 $ 2.56 6%
Net Income 2.72 3.05 (11%)
Book Value(End of Period) 21.23 20.97 1%
Tangible Book Value(End of Period) 20.48 20.13 2%
Market Value(End of Period) 30.25 29.50 3%
Cash Dividends .74 .66 12%
-----------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA (YEAR END)
Total Securities(2) $ 489,036 $ 513,399 (5%)
Loans(3) 512,493 499,305 3%
Earning Assets(3) 1,026,283 1,046,555 (2%)
Total Assets 1,106,610 1,123,598 (2%)
Deposits 953,904 969,749 (2%)
Stockholders' Equity 109,509 108,122 1%
-----------------------------------------------------------------------------------------------------------------
KEY RATIOS
Return on Average Assets 1.24% 1.22%
Return on Average Equity 12.87% 12.70%
Net Interest Margin(FTE) 4.29% 4.45%
Allowance for Loan Losses to Loans(3) 1.88% 1.99%
Equity to Assets(4) 10.69% 9.72%
Leverage Ratio 10.20% 9.31%
Primary Capital Ratio 11.46% 10.53%
=================================================================================================================
</TABLE>
(1) Restated to reflect the June 1994 acquisition of InvestArk Bankshares, Inc.
in a transaction accounted for as a pooling-of-interests.
(2) Includes available-for-sale and investment securities.
(3) Net of unearned income.
(4) Excludes unrealized loss on securities available-for-sale.
1
<PAGE> 4
LETTER TO THE STOCKHOLDERS
To Our Stockholders and Friends:
In 1994, First United Bancshares, Inc. posted the highest earnings in its
14-year history. As First United continues to expand into new markets, your
Company is strategically and financially positioned to face the challenges of a
changing banking environment.
Our profits on continuing operations in 1994 exceeded $14 million for the
first time. This profitability equates to a 1.24% return on assets and a 12.87%
return on equity. In spite of rapidly rising interest rates that elevated our
cost of funds and tightened interest margins, earnings per share increased by
6% to $2.72, compared with $2.56 in 1993.
Higher than expected loan demand in the commercial and business sectors led
to a 3% increase in total loans in 1994 when compared to 1993. Rising interest
rates during 1994 tended to lower demand in some parts of the consumer area,
particularly home mortgage loans. Asset quality continued to improve for the
fourth consecutive year with non-performing assets totaling only $3.52 million
at year-end. Our reserves to total loans (1.88%) and reserves to non-performing
loans (3.22 times) continue to remain at levels consistent with First United's
goals and objectives.
Our equity to assets (excluding unrealized loss on securities
available-for-sale) ended the year at 10.69%. The capital base of your Company
will not only assist in providing funds for expansion through acquisition of
new institutions, but also contribute to a high level of security for our
stockholders and depositors. This fact was illustrated on January 31, 1995 as
we closed on the cash purchase of FirstBank (Texarkana, Texas), a $154 million
bank with outstanding staff and management. We expect FirstBank and its
employees to make a significant contribution to the future success of First
United.
With the addition of FirstBank, total assets of your Company are now
approximately $1.3 billion. It is our desire to continue expanding into new
markets through the acquisition of other companies, as well as through the
branching efforts of our existing banks, with the explicit goal of increasing
the value of our stockholders' investment.
For the third consecutive year, the Board of Directors raised the quarterly
dividend rate on our common stock. The 12% increase to $.19 per share reflects
higher sustainable earnings as well as a desire on the part of your Board of
Directors to have the stockholders more fully participate in First United's
financial success.
We enter 1995 cognizant of the challenges we face. Competition for deposits,
loans and other services we offer will continue to be vigorous. Technology,
industry consolidation and expansion will bring new competitors to our markets.
First United will aggressively meet this competitive challenge by increasing
its level of service through investment in technology and the offering of
innovative products and services in order to enhance our franchise value.
Our strong capital base and asset quality will continue to afford us
expansion opportunities that we desire to pursue. Because our expansion goals
and operating philosophy are directly related to long-term and consistent
profitability, the strategies mentioned elsewhere in this letter are intended
to further this end.
As always, these results would not be possible without the efforts of our
dedicated directors and staff. On behalf of our 8 affiliate banks and nearly
600 employees serving 21 communities in Arkansas and Texas, First United thanks
you for your encouragement and support of our efforts.
James V. Kelley
Chairman, President and Chief Executive Officer
2
<PAGE> 5
IN 1994
FIRST UNITED BANCSHARES, INC.
POSTED THE HIGHEST EARNINGS
IN ITS 14-YEAR HISTORY
3
<PAGE> 6
FINANCIAL ANALYSIS
OVERVIEW
The following financial review and analysis is intended to highlight the
significant factors affecting First United Bancshares, Inc. (First United)
Consolidated Statements of Condition and Statements of Income presented in this
Annual Report. This discussion is designed to provide readers with a more
comprehensive review of the operating results and financial position than would
be obtained from an examination of the financial statements alone. Reference
should be made to those statements and the selected financial data presented
elsewhere in this Annual Report for an understanding of the following review
and analysis.
In May 1994, First United increased its quarterly cash dividend by 12% as a
result of higher sustainable earnings. The current annual dividend rate is
$.76 per share versus $.68 prior to the increase.
On June 14, 1994, First United acquired InvestArk Bankshares, Inc.
(InvestArk) through the issuance to InvestArk's stockholders of 886,000 shares
of First United common stock in a transaction accounted for as a
pooling-of-interests. InvestArk, with total assets of approximately $184.9
million, was the parent company of First Stuttgart Bank and Trust Company and
The Bank of North Arkansas.
On July 22, 1994, First United and FirstBank, Texarkana, Texas (FirstBank)
entered into an agreement pursuant to which First United proposed to acquire
the issued and outstanding stock of FirstBank for cash payments of
approximately $25.0 million. The transaction closed on January 31, 1995.
Operations for 1994 resulted in net income of $14.0 million or $2.72 per
share compared to $13.2 million or $2.56 per share in 1993 and $12.7 million or
$2.46 per share in 1992. The 1993 amounts exclude the impact of the required
implementation of the new standard on accounting for income taxes. The effect
of this change in accounting principle was $2.5 million or $0.49 per share for
the year. As shown in Table 1, the most significant changes in per share net
income for 1994 as compared to 1993 occurred in the provision for loan losses
and the cumulative effect of a change in accounting principle. A more detailed
discussion of the components of net income is given throughout this Financial
Analysis.
TABLE 1: CHANGES IN PER SHARE INCOME
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------------------------------------------
1994 1993 1992
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prior year income $3.05 $2.46 $1.64
Increase(decrease)
attributable to:
Net interest income (.02) .11 1 .12
Provision for loan losses .29 .13 .43
Non-interest income (.10) (.07) .09
Non-interest expense .06 .02 (.43)
Income taxes (.07) (.09) (.39)
Cumulative Effect of Accounting
Change (.49) .49 -0-
-----------------------------------------------------------------------------------------------------------------
Current year income $2.72 $3.05 $2.46
-----------------------------------------------------------------------------------------------------------------
</TABLE>
Net income as a percentage of total average assets (ROA) was 1.24% in 1994
versus 1.22% in 1993 and 1.19% in 1992. The return on stockholders' equity
(ROE) was 12.87% in 1994 versus 12.70% in 1993 and 14.0% in 1992. These
measures compare favorably with banks of similar size nationwide. The 1993
percentages exclude the impact of the implementation of the new standard on
accounting for income taxes.
Total assets remained stable at December 31, 1994 at a level of $1.1 billion
as compared to the year-end 1993 balance. The book value of First United's
common stock increased 1.2% to $21.23 per share in 1994 from $20.97 per share
in 1993. Cash dividends were $.74 per share in 1994 and $.66 per share in 1993
and $.60 per share in 1992.
4
<PAGE> 7
EARNINGS ANALYSIS
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 it is referred to in
this discussion, is on a fully tax-equivalent basis, which adjusts for the
tax-exempt status of income earned on certain municipal loans and investments.
The reported interest income for these tax-free assets is increased by the
amount of income tax savings less the nondeductible portion of interest expense
incurred to acquire the tax-free assets.
On a tax-equivalent basis, net interest income for the year ended December
31, 1994 was $45.0 million, a decrease of 0.3% over the year-end 1993 total of
$45.1 million. Net interest income for the year ended December 31, 1992 was
$44.3 million. The 1.8% increase in net interest income for 1993 was primarily
the result of a lower interest rate environment which, combined with First
United's negative GAP position, allowed for improved margins.
TABLE 2: ANALYSIS OF NET INTEREST MARGIN
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------------------------------------------------
1994 1993 1992
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Yield on earning assets 7.18% 7.30% 8.00%
Break-even yield 2.89% 2.85% 3.53%
Net interest margin 4.29% 4.45% 4.47%
Net interest spread 3.51% 3.85% 3.76%
--------------------------------------------------------------------------------------------------------------------
</TABLE>
The net interest spread decreased in 1994 when compared with the previous
two years, from 3.85% and 3.76%, respectively, in 1993 and 1992 to 3.51% in
1994. First United's negative GAP position, as well as a higher cost of funds,
has contributed to the decrease in net interest margin and spread.
Earning assets remained relatively stable at a level of $1.03 billion at
December 31, 1994 as compared to $1.05 billion at year-end 1993. Total
securities decreased $24.3 million and total short-term investments decreased
$9.1 million while loans increased $13.2 million. As a percentage of earning
assets, loans increased from 48% to 50%, total securities decreased from 49% to
48% and short-term investments decreased from 3% to 2%. The mix of earning
assets reflected a shift from short-term investments and securities to loans.
The change in mix can be attributed to increased loan demand resulting from an
improving economic environment.
Interest-bearing deposits decreased $20.4 million during 1994. Total
interest-bearing deposits were $798.5 million at December 31, 1994 compared
with $818.9 million at year-end 1993. Non-interest-bearing demand deposits
increased $4.6 million or 3% during 1994.
NON-INTEREST INCOME
Securities gains totalled $.01 million in 1994 compared to $.14 million in
1993 and $.45 million in 1992. During 1992, First United realized security
gains primarily from the sale of fixed-rate Mortgage-Backed Securities. These
securities were sold and reinvested in similar securities with adjustable
rates. The carrying value of securities sold during 1994 was approximately $1.0
million as compared to $1.0 million and $15.4 million in 1993 and 1992,
respectively.
Total non-interest income, excluding security gains, was $6.1 million for
1994 compared with $6.5 million in each of 1993 and 1992. The decrease in 1994
compared to prior year levels was primarily the result of decreases in fee
income earned on deposits and trust department accounts.
PROVISION FOR LOAN LOSSES
The provision for possible loan losses is the amount charged to current
period earnings. In order to ensure that the provisions maintain the allowance
at an adequate level, First United considers factors such as watch list
trends, the collateral adequacy of loans on the watch list, economic
conditions, net charge-offs and the size of the loan portfolio in determining
the current period provision.
The provision for loan losses totalled $0.3 million in 1994 versus $1.8
million in 1993 and $2.5 million in 1992. Net loan losses in 1992 were
primarily the result of commercial credits at First National Bank of El Dorado
(El Dorado) and First National Bank of Magnolia (Magnolia) and commercial real
estate credits at Ft. Smith which were deemed
5
<PAGE> 8
uncollectible. Since 1992, improving economic conditions in the communities
that First United serves have resulted in a reduction in net loan losses,
thereby reducing the need to provide for loan losses at prior years' levels.
NON-INTEREST EXPENSE
Non-interest expense decreased 1% or $0.3 million in 1994 over 1993 levels,
and decreased 1% in 1993 over 1992 levels. The decreases in 1994 and 1993 were
primarily in data processing and other operating expenses.
The decrease in other operating expenses was attributable primarily to
decreased costs associated with holdings of other real estate owned. Additional
information concerning other real estate can be found in Note 2 in the Notes to
the Consolidated Financial Statements.
INCOME TAXES
Federal income taxes as a percentage of pre-tax income were 29.3% in 1994,
29.8% in 1993 and 28.9% in 1992. Additional information regarding income taxes
can be found in Note 10 in the Notes to the Consolidated Financial Statements.
BALANCE SHEET ANALYSIS
LOANS AND CREDIT RISK MANAGEMENT
A sound credit policy combined with periodic and independent credit reviews
are the key factors for First United's credit risk management program. All
subsidiary 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, First United has an internal audit and loan review staff
that operates independently of the subsidiary 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 of First United, the management and boards of the respective subsidiary
banks, and the First United Audit Committee.
TABLE 3: LOAN PORTFOLIO
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands) 1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, Financial and
Agricultural $144,371 $108,979 $130,527 $142,818 $156,437
Real Estate 283,621 309,550 250,789 247,157 243,704
Consumer Loans 82,712 78,289 65,670 64,875 59,213
Loans for Purchasing or
Carrying Securities 2,065 2,655 3,035 2,799 2,721
Financing Leases 181 439 1,037 12 2,656
-------- -------- -------- -------- --------
Total Loans $512,950 $499,912 $451,058 $457,661 $464,731
======== ======== ======== ======== ========
Non-Performing Assets $ 3,518 $ 4,237 $ 8,579 $ 13,979 $ 15,535
======== ======== ======== ======== ========
</TABLE>
Construction loans outstanding at December 31, 1994 are not material in
amount. However, to the extent loans are made to finance construction, those
amounts are included in Table 3 as Real Estate Loans.
A primary measure of loan quality is the percentage of the loan portfolio
that moves from an earning category to one of non-performing and thus becomes a
burden to earnings performance. Non-performing loans totalling $3.0 million
represent 0.58% of 1994 year-end loans compared to 0.64% at December 31, 1993.
6
<PAGE> 9
IT IS OUR DESIRE TO
CONTINUE EXPANDING
INTO NEW MARKETS
THROUGH THE ACQUISITION
OF OTHER COMPANIES,
AS WELL AS THROUGH THE
BRANCHING EFFORTS OF OUR
EXISTING BANKS.
7
<PAGE> 10
Non-accrual loans are those where management has considerable doubt about
the borrower's ability to repay on the terms originally contracted. In addition
to discontinuing the accrual of interest, interest previously recorded in the
current period as earned that has not been collected is reversed. Non-accrual
loans at December 31, 1994 totalled $2.1 million compared with $2.6 million at
year ended 1993. It is the policy of First United to place loans on non-accrual
status when interest and/or principal payments for such loans become 90 days or
more past due. However, there are instances when loans 90 days or more past
due continue to accrue interest because management considers that such loans
are in the process of collection. First United's non-accrual policy had the
effect of reducing interest income on non-performing loans in 1994 by
approximately $0.2 million. The amount of interest income on such
non-performing loans included in net income for 1994 was not material.
Certain loans are renegotiated to provide a reduction or deferral of
interest or principal because of deterioration in the financial condition of
the respective borrowers. Once a loan is placed in this category, it remains
there until the terms are not more favorable than those of other customers.
Other real estate (ORE) that has been acquired through foreclosure has a
carrying value of $0.5 million at year ended 1994. This compares with $1.0
million and $3.9 million at year ended 1993 and 1992, respectively.
First United has no foreign credits in its loan portfolio. The intent of
management is to deploy its funds in its primary trade area where management is
familiar with its customers. This policy of First United permits funds obtained
locally to be re-channeled into the communities First United serves, promoting
economic growth.
Although First United maintains sound credit policies, certain credits
unexpectedly deteriorate and are charged off as a loss. The reserve for
possible loan losses is maintained to absorb potential losses, and the
management of First United views the reserve as a source of financial strength.
The reserve is increased by regular provisions which are based on the current
level of net loan and lease size and character of the loan and lease portfolio,
historical charge-off experience, current national and local economic
conditions and the evaluation of specific loans.
TABLE 4: LOAN MATURITIES
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands) December 31, 1994
--------------------------------------------------------------------------------------------------------------------
1 Year Over 1 Over
or Less through 5 years 5 years Total
------- ---------------- ------- -------
<S> <C> <C> <C> <C>
Commercial, Financial &
Agricultural $90,695 $46,781 $6,895 $144,371
======= ======= ====== ========
Variable Rate $ 73,560
Pre-determined Rate $ 70,811
--------------------------------------------------------------------------------------------------------------------
</TABLE>
The amount of the provision for possible loan losses is based upon the
current level of loans and leases, watch list trends, economic trends,
collateral value of watch list loans and net charge-offs on a historical basis.
First United continues to revise and enhance its credit policies as well as its
formal loan review program, and is committed to reducing the level of
non-performing assets.
Allowance for possible loan losses as a percentage of non-performing loans
was approximately 322%, 312% and 169% at December 31, 1994, 1993 and 1992,
respectively.
All non-performing assets of First United as of December 31, 1994 were
previously classified as substandard, doubtful or loss by First United or its
regulators. At December 31, 1994, First United's management has no loans about
which serious doubts exist as to collectibility other than those disclosed in
Table 7.
SECURITIES
First United's goal in managing the securities portfolio is to maximize the
long-term total return on invested funds. On January 1, 1994, First United
adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." Under this accounting
standard, debt securities
8
<PAGE> 11
TABLE 5: SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------------------------------------------------
(Dollars in Thousands) 1994 1993 1992 1991 1990
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance of Allowance for Loan
Losses at Beginning of Period $9,972 $7,972 $7,499 $7,111 $6,990
------ ------ ------ ------ ------
Allowance Applicable to Loans of
Acquired Bank -0- 520 -0- -0- -0-
------ ------ ------ ------ ------
Loans Charged-Off:
Commercial, Financial and
Agricultural 862 511 1,836 2,261 1,775
Real Estate 193 311 1,035 1,755 1,423
Consumer 1,138 536 409 1,018 387
Other 9 276 -0- -0- -0-
------ ------ ------ ------ ------
Total Loans Charged-Off 2,202 1,634 3,280 5,034 3,585
------ ------ ------ ------ ------
Recoveries of Loans Previously
Charged-Off:
Commercial, Financial and
Agricultural 543 397 469 356 335
Real Estate 180 683 581 395 173
Consumer 840 219 217 286 316
------ ------ ------ ------ ------
Total Recoveries 1,563 1,299 1,267 1,037 824
------ ------ ------ ------ ------
Net Loans Charged-Off 639 335 2,013 3,997 2,761
------ ------ ------ ------ ------
Provision to Allowance 334 1,815 2,486 4,385 2,882
------ ------ ------ ------ ------
Balance at End of Period $9,667 $9,972 $7,972 $7,499 $7,111
====== ====== ====== ====== ======
Ratio of Net Charge-Offs to Loans
Outstanding .12% .07% .45% .87% .59%
---------------------------------------------------------------------------------------------------------------
</TABLE>
TABLE 6: ALLOCATION OF RESERVE BY CATEGORY
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
------------------------------------------------------------------------------------------------------------------------------------
% LOANS % Loans % Loans % Loans % Loans
(Dollars in IN EACH in each in each in each in each
Thousands) AMOUNT CATEGORY Amount Category Amount Category Amount Category Amount Category
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and
Financial $4,756 29% $5,313 22% $2,922 29% $3,385 32% $4,036 35%
Real Estate 923 55% 1,044 62% 2,063 56% 1,364 54% 905 52%
Consumer 1,484 16% 1,113 16% 576 15% 1,157 14% 1,075 13%
Unallocated 2,504 -0- 2,502 -0- 2,411 -0- 1,593 -0- 1,095 -0-
------------------------------------------------------------------------------------------------------------------------------------
Total $9,667 100% $9,972 100% $7,972 100% $7,499 100% $7,111 100%
Allowance as a
Percentage of
Total Loans 1.88% 1.99% 1.77% 1.64% 1.53%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 12
TABLE 7: RISK ELEMENTS
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------------------------------------
(Dollars in Thousands) 1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-Performing Loans:
Non-Accrual Loans:
Commercial & Financial $ 620 $ 1,840 $ 1,610 $ 4,373 $ 6,057
Real Estate 1,427 713 829 1,075 683
Consumer 70 80 68 106 139
--------------------------------------------------------------------------------------------------------
Total Non-Accrual Loans 2,117 2,633 2,507 5,554 6,879
--------------------------------------------------------------------------------------------------------
Past Due 90 Days or More and Still
Accruing:
Commercial 197 64 92 1,176 2,004
Real Estate 151 51 554 192 468
Consumer 207 227 156 256 320
--------------------------------------------------------------------------------------------------------
Total Past Due 90 Days
or More and Still
Accruing 555 342 802 1,624 2,792
--------------------------------------------------------------------------------------------------------
Renegotiated Loans 326 223 1,414 16 231
--------------------------------------------------------------------------------------------------------
Total Non-Performing Loans 2,998 3,198 4,723 7,194 9,902
Other Real Estate 520 1,039 3,856 6,785 5,633
--------------------------------------------------------------------------------------------------------
Total Non-Performing Assets $ 3,518 $ 4,237 $8,579 $13,979 $15,535
--------------------------------------------------------------------------------------------------------
Non-Performing Loans
as a % of Outstanding Loans .58% .64% 1.05% 1.57% 2.13%
Non-Performing Assets
as a % of Equity Capital 3.21% 3.92% 8.99% 16.34% 19.56%
--------------------------------------------------------------------------------------------------------
</TABLE>
TABLE 8: SECURITIES CARRYING VALUE(1)
<TABLE>
<CAPTION>
(Dollars in Thousands) December 31,
------------------------------------------------------------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
U.S. Treasury Securities and
Other U.S. Government
Agencies $266,180 $285,431 $198,216
Obligations of States and
Political Subdivisions 72,980 70,942 54,774
Mortgage-Backed Securities 139,368 144,089 141,158
Other Securities 10,508 12,937 16,155
-------- -------- --------
$489,036 $513,399 $410,303
======== ======== ========
</TABLE>
(1) Includes available-for-sale and investment securities.
that First United has the positive intent and ability to hold to maturity
are classified as investment securities and reported at amortized
cost. Debt and equity securities which are not classified as investment
securities are classified as available-for-sale and reported at fair value, with
unrealized gains and losses reported as a separate component of stockholders'
equity, net of income taxes. Securities available-for-sale include securities
that management intends to use as part of its asset-liability strategy and that
may be sold in response to changes in interest rates or economic factors. At the
date of adoption, First United transferred securities of approximately $218.6
million from held-to-maturity to available-for-sale. Also in connection with
First United's acquisition of InvestArk, First United reclassified to
available-for-sale securities approximately $55.7 million of securities that
InvestArk had previously classified as investment securities. See Notes 4 and 5
of the Notes to the Consolidated Financial Statements for additional information
on Available-for-Sale and Investment Securities.
10
<PAGE> 13
TABLE 9: SECURITIES MATURITY AND WEIGHTED AVERAGE YIELDS(1)
<TABLE>
<CAPTION>
Maturing
----------------------------------------------------------------------------------
After One But After Five But Mortgage-Backed
Within One Year Within Five Years Within Ten Years After Ten Years Securities
--------------------------------------------------------------------------------------------------------
(Dollars in
Thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
Securities and
Other U.S.
Government
Agencies $45,742 4.27% $195,101 4.60% $23,393 4.96% $ 1,944 7.75% $ -0- -0-
State &
Political
Subdivisions 4,934 6.10% 26,614 6.10% 32,248 4.52% 9,184 3.39% -0- -0-
Mortgage-Backed
Securities -0- -0- -0- -0- -0- -0- -0- -0- 139,368 6.80%
Other 936 8.01% 5,696 5.97% 437 9.22% 3,439 3.86% -0- -0-
------- ---- -------- ---- ------- ---- ------- ---- -------- ----
Total $51,612 4.37% $227,411 4.66% $56,078 4.67% $14,567 3.17% $139,368 0.00%
======= ==== ======== ==== ======= ==== ======= ==== ======== ====
</TABLE>
(1) Includes available-for-sale and investment securities.
CAPITAL ADEQUACY AND RESOURCES
CAPITAL AND LIQUIDITY
The adequacy of bank capital in the banking industry has received
considerable attention in the past few years and continues to be a concern to
regulators and depositors.
First United is well capitalized with a primary capital to asset ratio of
11.46% at December 31, 1994 compared with 10.53% in 1993 and 9.59% in 1992.
First United's stockholders' equity for the year ended December 31, 1994
totalled $109.5 million compared with $108.1 million in 1993 and $95.4 million
in 1992. Retention of earnings will continue to be emphasized in order to
provide a strong capital base to support future growth.
TABLE 10: AVERAGE DEPOSITS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------------------------------------
(Dollars in Thousands) 1994 1993 1992
-----------------------------------------------------------------------------------------------------------
AMOUNT RATE Amount Rate Amount Rate
<S> <C> <C> <C> <C> <C> <C>
Non-interest-bearing
Demand Deposits $179,742 0.00% $136,322 0.00% $132,305 0.00%
Savings Deposits and
Interest-bearing
Deposits 324,084 2.95% 341,338 2.62% 301,819 2.99%
Time Deposits of $100
or more 127,848 3.95% 139,776 3.98% 140,459 5.26%
Other Time Deposits 334,838 4.18% 316,725 4.10% 343,119 4.89%
-------- -------- --------
Total $966,512 $934,161 $917,702
======== ======== ========
</TABLE>
11
<PAGE> 14
FOR THE THIRD
CONSECUTIVE YEAR,
THE BOARD OF DIRECTORS
RAISED THE QUARTERLY
DIVIDEND RATE ON OUR
COMMON STOCK.
12
<PAGE> 15
TABLE 11: MATURITIES OF TIME DEPOSITS OF $100,000 AND OVER
<TABLE>
<CAPTION>
(Dollars in Thousands) December 31, 1994
-------------------------------------------------------------
<S> <C>
Three Months or Less $ 66,733
Over 3 Through 6 Months 37,557
Over 6 Through 12 Months 26,587
Over 12 Months 8,599
--------
Total $139,476
========
</TABLE>
TABLE 12: AVERAGE SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands) 1994 1993 1992
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31 $22,480 $30,512 $29,978
Daily Average Amount Outstanding 30,197 33,247 32,331
Maximum Month-End Balance 40,405 30,512 34,655
Daily Average Interest Rate 3.43% 2.26% 2.57%
Weighted Average Interest Rate on
Balance at December 31 4.77% 2.86% 2.41%
</TABLE>
In today's environment, liquidity for a banking organization is essentially
a function of its ability to renew and acquire new purchased liabilities. First
United is aided significantly in this respect by its strong capital position
and its continuing high rate of internal capital generation. Additional
liquidity is derived from the short maturity of First United's investment
portfolio, its relatively low level of problem loans and its substantial local
customer base at each member bank.
TABLE 13: CAPITAL RATIOS(1)
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------------------------------------------------
1994 1993 1992
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Capital to Assets 10.69% 9.72% 8.89%
Primary Capital to Assets 11.46% 10.53% 9.59%
Leverage Ratio 10.20% 9.31% 8.58%
Tier 1 Capital 18.85% 18.83% 18.45%
Risk-Based Capital 20.10% 19.53% 20.11%
Dividend Payout Ratio(2) 27.53% 23.62% 24.54%
</TABLE>
(1) Excludes unrealized loss on securities available-for-sale.
(2) Based upon net income before the cumulative effect of the change in
accounting principle.
TABLE 14: REGULATORY COMPARISON OF CAPITAL RATIOS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Regulatory
December 31, 1994 First United Requirements
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total Capital/Total Assets 11.46% 6.00%
Primary Capital/Total Assets 11.46% 5.50%
Total Risk-Based Capital 20.10% 8.00%
Tier 1 Capital 18.85% 4.00%
Leverage Ratio 10.20% 3.00%
</TABLE>
COMMON STOCK AND DIVIDENDS
First United anticipates continuing its policy of regular cash dividends,
although there is no assurance as to future dividends because they are
dependent on future earnings, capital requirements and the financial condition
of First United. First United strives to maintain a balance between the
retention of earnings for a support of growth and expansion and a fair cash
return for its stockholders. National banking law limits the amount of
dividends which banks can pay without obtaining prior approval from bank
regulatory authorities.
On July 27, 1992, the Board of Directors of First United declared a 2-for-1
stock split effected in the form of a 100% stock dividend. The dividend was
distributed on September 8, 1992.
13
<PAGE> 16
During the second quarter of 1993, First United increased its annual cash
dividend from $.60 per share to $.68 per share and during the second quarter of
1994, First United increased its annual dividend to $.76 per share. These
increases result from higher sustainable earnings.
First United Common Stock is traded on the NASDAQ-NMS Over-the-Counter
Market under the symbol "UNTD."
All Over-the-Counter Market quotations are interdealer quotations without
retail mark-up, mark-down or commission, and may not represent actual
transactions. The high and low common stock market price quotations for each of
the quarters during 1994 and 1993 are listed in Table 15. Table 15 also lists
dividends paid by First United to its stockholders during each of those
quarters.
On February 9, 1995, the Company had approximately 1,058 stockholders of
record.
TABLE 15: COMMON STOCK MARKET PRICE AND DIVIDENDS PER SHARE
<TABLE>
<CAPTION>
1994 High Low Div. Paid
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
First quarter $29 1/2 $26 1/2 $.17
Second quarter 31 28 .19
Third quarter 33 28 .19
Fourth quarter 33 28 .19
</TABLE>
<TABLE>
<CAPTION>
1993 High Low Div. Paid
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
First quarter $26 $23 $.15
Second quarter 26 1/4 23 .17
Third quarter 29 1/2 26 .17
Fourth quarter 29 1/2 26 1/2 .17
----------------------------------------------------------------------------------------------------------------
</TABLE>
ASSET - LIABILITY MANAGEMENT
CHANGING INTEREST RATES
First United, like most financial institutions, provides for the relative
stability in profits and the control in interest rate risk through
asset-liability management. An important element of asset-liability management
is the analysis and examination of the extent to which such assets and
liabilities are "interest rate sensitive" and by monitoring an institution's
interest rate sensitivity "gap". An asset or liability is said to be interest
rate sensitive within a specific time period if it will mature or reprice
within that time period. The interest rate sensitivity gap is defined as the
difference between the amount of interest-earning assets expected to mature or
reprice within a time period and the amount of interest-bearing liabilities
expected to mature or reprice within that same time period. A gap is considered
negative when the amount of interest rate sensitive liabilities maturing within
a specific time frame exceeds the amount of interest rate sensitive assets
maturing within that same time frame. During a period of falling interest
rates, a negative gap tends to result in an increase in net interest income.
Whereas in a rising interest rate environment, an institution with a negative
gap could experience the opposite results. At December 31, 1994, First United's
interest-bearing liabilities maturing or repricing within one year exceeded the
interest-bearing assets maturing or repricing within the same time period.
First United continually monitors its asset-liability position in order to
maximize profits and minimize interest rate risk. Additionally, First United
can reduce the impact that changing interest rates have on earnings and adapt
to changes in the economic environment by closely monitoring its Statement of
Condition. An interest rate sensitive balance sheet as of December 31, 1994 is
presented in Table 16.
INFLATION
Inflation also impacts the banking industry, but the problem with inflation
for banking institutions differs substantially from those incurred by
non-financial institutions. In industries with a high proportion of property
and equipment, there is a greater potential for earnings to be inflated by
understated depreciation charges, as well as the potential for significant
understatement of the current values of those assets. In industries with high
levels of inventories, reported earnings may reflect significant increases in
inventory values. Neither of these factors is important in the banking industry
since bank assets are primarily monetary assets which move in concert with
inflation; however, interest
14
<PAGE> 17
TABLE 16: INTEREST RATE SENSITIVE BALANCE SHEET
<TABLE>
<CAPTION>
By Repricing Dates At December 31, 1994
--------------------------------------------------------------------------------------------------------------
(Dollars in 0-30 31-90 91-180 181-365 1-5 Over
Thousands) Days Days Days Days Years 5 Years Total
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Total Securities $ 57,167 $20,533 $33,299 $36,941 $282,165 $ 58,931 $489,036
Loans and Leases,
Net of Unearned
Income 133,298 44,471 53,425 88,463 162,223 30,613 512,493
Short-Term
Investments 23,774 -0- 685 -0- 295 -0- 24,754
-------- -------- --------- -------- --------- ------ --------
Total Rate
Sensitive Assets $214,239 $ 65,004 $ 87,409 $125,404 $444,683 $ 89,544 $1,026,283
-------- -------- -------- -------- -------- -------- ----------
SOURCES OF FUNDS
Savings and
Interest-
bearing Demand
Deposits 330,506 -0- -0- -0- -0- -0- 330,506
Time Deposits 107,641 94,743 110,181 85,296 69,534 590 467,985
Short-Term
Borrowings 22,297 -0- -0- 183 -0- -0- 22,480
Long-Term Debt -0- -0- -0- 1,107 6,512 5,206 12,825
-------- -------- -------- -------- -------- -------- --------
Total Rate
Sensitive
Liabilities $460,444 $94,743 $110,181 $86,586 $ 76,046 $ 5,796 $833,796
-------- ------- -------- ------- -------- -------- --------
Interest Rate
Sensitivity Gap (246,205) (29,739) (22,772) 38,818 368,637 83,748 192,487
Cumulative Interest
Rate Sensitivity Gap (246,205) (275,944) (298,716) (259,898) 108,739 192,487
Cumulative Interest
Rate Sensitivity Gap
as a Percent of
Total Assets (22%) (25%) (27%) (23%) 10% 17%
</TABLE>
15
<PAGE> 18
FIRST UNITED IS
STRATEGICALLY AND
FINANCIALLY POSITIONED
TO FACE THE CHALLENGES
OF A CHANGING BANKING
ENVIRONMENT.
16
<PAGE> 19
rates earned and paid by banks do not necessarily move in the same directions
or magnitude as general inflation. Because First United has a significant
investment in long-term securities and fixed-rate loans, earnings on these
assets will not keep up with yields available on alternative investments during
periods of rising inflation. Furthermore, First United's liabilities are more
sensitive to changes in interest rates than its assets are, so in this respect,
inflation has a negative impact on earnings.
REGULATORY AND ACCOUNTING ISSUES
REGULATORY ISSUES
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, First United's subsidiary banks are required to comply with the
Arkansas usury laws on loans made within the State of Arkansas.
The Federal Deposit Insurance Corporation Improvement Act of 1991 contains
broad legislation which includes not only recapitalization of the bank
insurance fund (BIF) but also includes supervisory and examination reforms. The
Act imposes strict statutory rules for a bank's senior management, outside
directors, independent auditors, examiners and regulators to ensure that a
bank's finances, management and legal compliance are thoroughly analyzed.
ACCOUNTING STANDARDS
On January 1, 1993, First United adopted SFAS No. 109 "Accounting for Income
Taxes." First United's 1993 adoption of SFAS No. 109 changed the method of
accounting for income taxes to the liability method. The cumulative effect of
adopting SFAS No. 109 on First United's 1993 results of operations was to
increase net income by $2.5 million or $.49 per share.
During 1993 the Financial Accounting Standards Board (FASB) issued SFAS No.
114 "Accounting by Creditors for Impairment of a Loan" which becomes effective
beginning in 1995. This statement defines the measurement requirements for
loans that are impaired or deemed to be troubled debt restructurings.
Management believes that the effect of this statement upon adoption will not be
material.
On January 1, 1994, First United adopted SFAS No. 115 "Accounting for
Certain Investments in Debt and Equity Securities." This statement addresses
the accounting and reporting for investments in debt and certain equity
securities. Debt securities not classified as trading account securities or
investment securities expected to be held to maturity and all equity securities
were classified as available-for-sale securities and reported at fair value,
with net unrealized gains and losses reported, net of tax, as a separate
component of stockholders' equity. The adoption of this statement on January 1,
1994 resulted in reflecting an unrealized gain, net of tax, of approximately
$1,271,000 as a separate component of the capital accounts.
During 1994 the FASB issued SFAS No. 119 "Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments." First United
has adopted the disclosure requirements required by SFAS No. 119, as
applicable.
17
<PAGE> 20
TABLE 17: SUMMARY OF AVERAGE BALANCE SHEETS, INTEREST RATES AND CHANGES IN NET
INTEREST INCOME (FTE) (1)
<TABLE>
<CAPTION>
1994
------------------------------------------------------------------------------------------------------------------------------------
Average
(Dollars in Thousands) Balance Interest Rate
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
INTEREST-EARNING ASSETS:
Loans (net of unearned income) $501,721 $41,084 8.19%
Investment Securities:
Taxable Securities 449,150 26,792 5.97%
Non-taxable Securities 68,417 5,812 8.49%
Money-Market Assets:
Federal Funds Sold and Securities Purchased Under
Agreements to Resell and Other Short-Term
Investments 28,701 1,560 5.44%
------------------------------------------------------------------------------------------------------------------------------------
Total Interest-Earning Assets 1,047,989 75,248 7.18%
------------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST-EARNING ASSETS:
Cash and Due From Banks 55,417
Premises and Equipment, Net 14,577
Other Assets 19,112
Less Allowance for Loan Losses (9,778)
------------------------------------------------------------------------------------------------------------------------------------
Total $1,127,317
====================================================================================================================================
LIABILITIES
INTEREST-BEARING LIABILITIES
Savings and Interest-bearing Deposits $324,084 $ 9,563 2.95%
Time Deposits of $100 or More 127,848 5,054 3.95%
Other Time Deposits 334,838 14,001 4.18%
Federal Funds Purchased and Securities Sold Under
Agreements to Repurchase 30,197 1,037 3.43%
Notes Payable 6,784 598 8.81%
------------------------------------------------------------------------------------------------------------------------------------
Total Interest-bearing Liabilities 823,751 30,253 3.67%
------------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST-BEARING LIABILITIES:
Demand Deposits 179,742
Other Liabilities 15,008
Stockholders' Equity 108,816
------------------------------------------------------------------------------------------------------------------------------------
Total $1,127,317
====================================================================================================================================
Net Interest-Earnings $44,995
====================================================================================================================================
Net Yield on Interest-Earning
Assets 4.29%
====================================================================================================================================
</TABLE>
(1) Marginal Tax Rate of 35% in 1994 and 1993 and 34% in 1992.
<TABLE>
<CAPTION>
1993 1994 Compared to 1993
------------------------------------------------------------------------------------------------------------------------------------
Total Due To Due to
Average Increase Change in Change in
Balance Interest Rate (Decrease) Volume Rate
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$457,425 $37,910 8.29% $ 3,174 $2,677 $497
470,478 29,292 6.23% (2,500) (3,672) 1,172
56,412 5,860 10.39% (48) (1,343) 1,295
30,285 957 3.16% 603 1,256 (653)
------------------------------------------------------------------------------------------------------------------------------------
1,014,600 74,019 7.30% 1,229 (1,082) 2,311
------------------------------------------------------------------------------------------------------------------------------------
49,771
12,425
19,109
(8,693)
------------------------------------------------------------------------------------------------------------------------------------
$1,087,212
====================================================================================================================================
$341,338 $8,931 2.62% 632 1,715 (1,083)
139,776 5,562 3.98% (508) (541) 33
316,725 12,996 4.10% 1,005 1,267 (262)
33,247 750 2.26% 287 643 (356)
7,894 666 8.44% (68) (42) (26)
------------------------------------------------------------------------------------------------------------------------------------
838,980 28,905 3.45% 1,348 3,042 (1,694)
------------------------------------------------------------------------------------------------------------------------------------
136,322
7,857
104,052
------------------------------------------------------------------------------------------------------------------------------------
$1,087,211
====================================================================================================================================
$45,114 $(119) $(4,124) $4,005
====================================================================================================================================
4.45%
====================================================================================================================================
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
1992 1993 Compared to 1992
------------------------------------------------------------------------------------------------------------------------------------
Total Due To Due To
Average Increase Change in Change in
Balance Interest Rate (Decrease) Volume Rate
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$445,747 $40,278 9.04% $(2,368) $ (5,791) $3,423
465,742 32,796 7.04% (3,504) (7,341) 3,837
51,651 5,311 10.28% 549 609 (60)
28,550 991 3.47% (34) (128) 94
------------------------------------------------------------------------------------------------------------------------------------
991,690 79,376 8.00% (5,357) (12,651) $7,294
------------------------------------------------------------------------------------------------------------------------------------
45,878
8,969
21,726
(7,770)
------------------------------------------------------------------------------------------------------------------------------------
$1,060,493
====================================================================================================================================
$301,819 $ 9,033 2.99% (102) (1,387) 1,285
140,459 7,385 5.26% (1,823) (3,610) 1,787
343,119 16,777 4.89% (3,781) (6,271) 2,490
32,331 830 2.57% (80) (184) 104
9,005 1,034 11.48% (368) (608) 240
------------------------------------------------------------------------------------------------------------------------------------
826,733 35,059 4.24% (6,154) (12,060) 5,906
------------------------------------------------------------------------------------------------------------------------------------
132,305
10,795
90,659
------------------------------------------------------------------------------------------------------------------------------------
$1,060,492
====================================================================================================================================
$44,317 $797 $(591) $ 1,388
====================================================================================================================================
4.47%
====================================================================================================================================
</TABLE>
19
<PAGE> 22
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
(In Thousands, Except Per Share Data)
-----------------------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Total Interest Income $ 73,214 $ 71,968 $ 77,570 $ 84,935 $ 83,999
Net Interest Income 42,961 43,063 42,511 36,710 33,084
Provision for Possible
Loan Losses 334 1,815 2,486 4,712 3,698
Income Before
Cumulative Effect of a
Change In Accounting
Principle 14,008 13,215 12,676 8,454 7,724
Net Income 14,008 15,737 12,676 8,454 7,724
PER SHARE DATA
Income Before
Cumulative Effect of a
Change in Accounting
Principle $ 2.72 $ 2.56 $ 2.46 $ 1.64 $ 1.49
Net Income 2.72 3.05 2.46 1.64 1.49
Cash Dividends Paid .74 .66 .60 .50 .50
SELECTED BALANCE SHEET
ITEMS
Year Ended Balances
Total Assets $1,106,610 $1,123,598 $1,086,467 $1,038,320 $980,356
Total Securities(1) 489,036 513,399 509,552 446,063 369,056
Net Loans(2) 512,493 499,305 450,633 456,471 464,165
Total Deposits 953,904 969,749 943,097 909,703 849,649
Notes Payable 12,825 7,723 8,821 10,299 11,406
Capital Accounts 109,509 108,122 95,438 85,571 79,428
</TABLE>
(1) Includes available-for-sale and investment securities.
(2) Net of unearned discount.
20
<PAGE> 23
QUARTERLY RESULTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended
(In Thousands, Except Per Share Data)
---------------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- -------
<S> <C> <C> <C> <C>
1994
Interest Income $17,515 $18,080 $18,378 $19,241
Interest Expense 7,117 7,258 7,706 8,172
Net Interest Income 10,398 10,822 10,672 11,069
Provision for Possible Loan Losses (45) (199) (45) (45)
Other Income 1,711 1,582 1,810 1,044
Other Expense 7,097 7,018 7,278 7,404
Income Tax Expense 1,477 1,575 1,583 1,334
Change in Accounting Principle -0- -0- -0- -0-
------- ------- ------- -------
Net Income $ 3,490 $ 3,612 $ 3,576 $ 3,330
======= ======= ======= =======
Earnings Per Share $ 0.68 $ 0.70 $ 0.69 $ 0.65
======= ======= ======= =======
1993
Interest Income $18,091 $18,037 $17,917 $17,923
Interest Expense 7,341 7,325 7,114 7,125
Net Interest Income 10,750 10,712 10,803 10,798
Provision for Possible Loan Losses (465) (405) (245) (700)
Other Income 1,661 1,570 1,733 1,699
Other Expense 6,534 7,020 7,158 8,365
Income Tax Expense 1,646 1,384 1,719 870
Change in Accounting Principle 2,522 -0- -0- -0-
------- ------- ------- -------
Net Income $ 6,288 $ 3,473 $ 3,414 $ 2,562
======= ======= ======= =======
Earnings Per Share $ 1.23 $ 0.67 $ 0.66 $ 0.49
======= ======= ======= =======
</TABLE>
21
<PAGE> 24
FINANCIAL STATEMENTS AND NOTES
22
<PAGE> 25
CONSOLIDATED STATEMENTS OF CONDITION
First United Bancshares, Inc.
(in thousands, except per share data)
<TABLE>
<CAPTION>
December 31,
-------------------------------
1994 1993
---------- ----------
<S> <C> <C>
ASSETS
Cash and Due from Banks . . . . . . . . . . . . . . . . . . . . $ 49,419 $ 52,227
---------- ----------
Short-Term Investments:
Federal Funds Sold and Securities
Purchased Under Agreements to Resell . . . . . . . . . . . 17,490 27,765
Other Short-Term Investments . . . . . . . . . . . . . . . . 7,264 6,086
---------- ---------
Total Short-Term Investments . . . . . . . . . . . . . . . 24,754 33,851
---------- ---------
Securities Available For Sale . . . . . . . . . . . . . . . . . 324,679 83,468
---------- ----------
Investment Securities (Fair Value of $156,850 and
$439,429 at December 31, 1994 and 1993, respectively.) . . . 164,357 429,931
---------- ----------
Total Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 512,950 499,912
Unearned Discount . . . . . . . . . . . . . . . . . . . . . . (457) (607)
Allowance for Possible Loan Losses . . . . . . . . . . . . . (9,667) (9,972)
---------- ----------
Net Loans . . . . . . . . . . . . . . . . . . . . . . . . . 502,826 489,333
---------- ----------
Premises and Equipment . . . . . . . . . . . . . . . . . . . . 15,541 13,904
---------- ----------
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,831 4,308
---------- ----------
Other Real Estate . . . . . . . . . . . . . . . . . . . . . . . 520 1,039
---------- ----------
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . 20,683 15,537
---------- ----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . $1,106,610 $1,123,598
========== ==========
LIABILITIES
Deposits:
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 155,413 $ 150,842
Savings and Interest-bearing Demand . . . . . . . . . . . . . 330,506 350,325
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467,985 468,582
---------- ----------
Total Deposits . . . . . . . . . . . . . . . . . . . . . . 953,904 969,749
Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase . . . . . . . . . . . . . . . 22,480 30,512
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . 7,892 7,492
Notes Payable:
Unaffiliated Bank . . . . . . . . . . . . . . . . . . . . . . 7,825 2,723
Affiliated Company . . . . . . . . . . . . . . . . . . . . . 5,000 5,000
---------- ----------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . 997,101 1,015,476
---------- ----------
Commitments and Contingencies
CAPITAL ACCOUNTS
Preferred Stock(Par value of $1.00; 500
shares authorized in 1994 and 1993; none
outstanding) . . . . . . . . . . . . . . . . . . . . . . . . -0- -0-
Common Stock(Par value of $1.00; 24,000
shares authorized; 5,159 shares issued and outstanding in
1994; 5,170 shares issued and 5,158 outstanding in 1993) . . 5,159 5,170
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,551 13,524
Undivided Profits . . . . . . . . . . . . . . . . . . . . . . . 99,612 89,579
Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . -0- (130)
Net Unrealized Loss on Securities Available for Sale, Net
of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . (8,813) (21)
---------- ----------
Total Capital Accounts . . . . . . . . . . . . . . . . . . 109,509 108,122
---------- ----------
Total Liabilities and Capital
Accounts . . . . . . . . . . . . . . . . . . . . . . . . $1,106,610 $1,123,598
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE> 26
CONSOLIDATED STATEMENTS OF INCOME
First United Bancshares, Inc.
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans . . . . . . . . . . . . $ 41,084 $ 37,910 $ 40,278
Interest on Securities:
Taxable Securities . . . . . . . . . . . . . . . 26,792 29,292 32,796
Non-taxable Securities . . . . . . . . . . . . . 3,778 3,809 3,505
Interest on Federal Funds Sold and
Securities Purchased Under
Agreements to Resell . . . . . . . . . . . . . . 1,021 752 988
Interest on Deposits in Banks . . . . . . . . . . . 539 205 3
--------- --------- ---------
TOTAL INTEREST INCOME 73,214 71,968 77,570
--------- --------- ---------
INTEREST EXPENSE
Interest on Deposits . . . . . . . . . . . . . . . 28,618 27,489 33,195
Interest on Federal Funds Purchased
and Securities Sold Under
Agreements to Repurchase . . . . . . . . . . . . 1,037 750 830
Interest on Notes Payable . . . . . . . . . . . . . 598 666 1,034
--------- --------- ---------
TOTAL INTEREST EXPENSE 30,253 28,905 35,059
--------- --------- ---------
NET INTEREST INCOME . . . . . . . . . . . . . . 42,961 43,063 42,511
Provision for Loan Losses . . . . . . . . . . . . . (334) (1,815) (2,486)
--------- --------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES . . . . . . . . . . 42,627 41,248 40,025
--------- --------- ---------
OTHER INCOME
Service Charges on Deposit Accounts . . . . . . . . 3,229 3,280 3,211
Trust Department Income . . . . . . . . . . . . . . 1,379 1,515 1,407
Security Gains . . . . . . . . . . . . . . . . . . 9 144 454
Other Operating Income . . . . . . . . . . . . . . 1,530 1,724 1,947
--------- --------- ---------
TOTAL OTHER INCOME 6,147 6,663 7,019
--------- --------- ---------
OTHER EXPENSE
Salaries . . . . . . . . . . . . . . . . . . . . . 11,071 10,356 9,858
Pension and Other Employee Benefits . . . . . . . . 3,644 3,211 3,065
Net Occupancy Expense . . . . . . . . . . . . . . . 2,435 2,215 2,304
Equipment Expense . . . . . . . . . . . . . . . . . 1,318 1,267 1,037
Data Processing Expense . . . . . . . . . . . . . . 1,511 1,744 2,026
Other Operating Expenses . . . . . . . . . . . . . 8,818 10,284 10,931
--------- --------- ---------
TOTAL OTHER EXPENSE . . . . . . . . . . . . . . 28,797 29,077 29,221
--------- --------- ---------
INCOME BEFORE INCOME TAX EXPENSE . . . . . . . . . 19,977 18,834 17,823
INCOME TAX EXPENSE . . . . . . . . . . . . . . . . 5,969 5,619 5,147
--------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE . . . . . . . . . . . . . . . 14,008 13,215 12,676
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE . . . . . . . . . . . . . . . . . . . . -0- 2,522 -0-
--------- --------- ---------
NET INCOME . . . . . . . . . . . . . . . . . . . . $ 14,008 $ 15,737 $ 12,676
========= ========= =========
EARNINGS PER SHARE
Income Before Cumulative Effect of a Change
in Accounting Principle . . . . . . . . . . . . $ 2.72 $ 2.56 $ 2.46
Cumulative Effect of a Change in
Accounting Principle . . . . . . . . . . . . . -0- .49 -0-
--------- --------- ---------
Earnings Per Share . . . . . . . . . . . . . . . $ 2.72 $ 3.05 $ 2.46
========= ========= =========
CASH DIVIDENDS PER SHARE . . . . . . . . . . . . . $ .74 $ .66 $ .60
========= ========= =========
AVERAGE SHARES ISSUED AND OUTSTANDING . . . . . . . 5,159 5,158 5,158
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE> 27
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL ACCOUNTS
First United Bancshares, Inc.
(in thousands)
<TABLE>
<CAPTION>
Net Unrealized
Loss on
Securities
Common Stock Available-
------------------ Undivided Treasury For-Sale, Net
Shares Amount Surplus Profits Stock of Tax
------ ------- ------- --------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 5,170 $ 5,170 $13,518 $67,002 $ (119) $ -0-
Net Income -0- -0- -0- 12,676 -0- -0-
Cash Dividends -0- -0- -0- (2,768) -0- -0-
Increase in Unrealized Loss on
Securities Available-For-Sale,
Net of Tax -0- -0- -0- -0- -0- (3)
Purchase of Common Stock -0- -0- -0- -0- (38) -0-
----- ------- ------- ------- ------ -------
Balance, December 31, 1992 5,170 5,170 13,518 76,910 (157) (3)
Net Income -0- -0- -0- 15,737 -0- -0-
Cash Dividends -0- -0- -0- (3,068) -0- -0-
Increase in Unrealized Loss on
Securities Available-For-Sale,
Net of Tax -0- -0- -0- -0- -0- (18)
Sale of Common Stock -0- -0- 6 -0- 27 -0-
----- ------- ------- ------- ------ -------
Balance, December 31, 1993 5,170 5,170 13,524 89,579 (130) (21)
Change in Accounting Method -0- -0- -0- -0- -0- 1,271
Retirement of Treasury Stock (12) (12) -0- (118) 130 -0-
Net Income -0- -0- -0- 14,008 -0- -0-
Cash Dividends -0- -0- -0- (3,857) -0- -0-
Increase in Unrealized Loss on
Securities Available-For-Sale,
Net of Tax -0- -0- -0- -0- -0- (10,063)
Issuance of Common Stock 1 1 27 -0- -0- -0-
----- ------- ------- ------- ------ -------
Balance, December 31, 1994 5,159 $ 5,159 $13,551 $99,612 $ -0- $(8,813)
===== ======= ======= ======= ====== =======
</TABLE>
The accompanying notes are an integral
part of these financial statements.
25
<PAGE> 28
CONSOLIDATED STATEMENTS OF CASH FLOWS
First United Bancshares, Inc.
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income . . . . . . . . . . . . . . . . . . . . . . . $ 14,008 $ 15,737 $12,676
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating
Activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . 1,558 1,460 1,268
Amortization of Goodwill . . . . . . . . . . . . . . . 477 345 345
Provision for Possible Loan Losses . . . . . . . . . . 334 1,815 2,486
Utilization of Tax Credit Carryforward
of Acquired Subsidiary Bank . . . . . . . . . . . . . -0- -0- 440
Provision for Deferred Taxes . . . . . . . . . . . . . 722 (223) (654)
Change in Accounting Principle . . . . . . . . . . . . -0- (2,522) -0-
Gain on Sales of Securities . . . . . . . . . . . . . (9) (129) (402)
Accretion of Bond
Discount, Net . . . . . . . . . . . . . . . . . . . . (1,618) (2,122) (1,663)
(Increase) Decrease in Other Assets . . . . . . . . . . (642) 384 2,675
Increase (Decrease) in Other
Liabilities . . . . . . . . . . . . . . . . . . . . . 426 (1,911) 447
--------- --------- ---------
Net Cash Provided by Operating
Activities . . . . . . . . . . . . . . . . . . . . . . 15,256 12,834 17,618
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturities of Investment Securities . . . 26,774 138,339 119,874
Proceeds from Maturities of Securities Available-for-
Sale . . . . . . . . . . . . . . . . . . . . . . . . 133,063 -0- -0-
Proceeds from Sales of Securities Available-for-Sale . 3,622 1,000 15,421
Purchase of Investment Securities . . . . . . . . . . . (34,862) (128,208) (207,236)
Purchase of Available-for-Sale Securities . . . . . . . (116,105) -0- -0-
Decrease in Federal Funds, Net . . . . . . . . . . . . 2,243 13,607 798
(Increase) Decrease in Other Short-
Term Investments . . . . . . . . . . . . . . . . . . (1,178) 2,174 13,075
(Increase) Decrease in Loans . . . . . . . . . . . . . (13,827) (21,830) 6,427
Capital (Additions) Retirements . . . . . . . . . . . . (3,195) 751 96
Purchase of Deposits . . . . . . . . . . . . . . . . . -0- -0- 20,696
Purchase of Subsidiary Bank . . . . . . . . . . . . . . -0- (4,521) -0-
--------- --------- ---------
Net Cash Provided by (Used in) Investing Activities . . . (3,465) 1,312 (30,849)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (Decrease) in Demand, Savings
and Interest-bearing Demand
Deposits . . . . . . . . . . . . . . . . . . . . . . (15,248) (2,293) 44,873
Decrease in Time Deposits . . . . . . . . . . . . . . . (597) (11,305) (32,175)
Issuance (Payment) of Notes Payable . . . . . . . . . . 5,103 (1,958) (1,777)
Dividends Paid . . . . . . . . . . . . . . . . . . . . (3,857) (3,068) (2,768)
Sale (Purchase) of Treasury Stock . . . . . . . . . . . -0- 33 (38)
--------- --------- ---------
Net Cash Provided by (Used in) Financing
Activities . . . . . . . . . . . . . . . . . . . . . . (14,599) (18,591) 8,115
--------- --------- ---------
Net Decrease in Cash and Cash Equivalents . . . . . . . . (2,808) (4,445) (5,116)
Cash and Cash Equivalents, Beginning . . . . . . . . . . 52,227 56,672 61,788
--------- --------- ---------
Cash and Cash Equivalents, Ending . . . . . . . . . . . . $ 49,419 $ 52,227 $56,672
========= ========= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First United Bancshares, Inc.
1. THE MERGER
On June 14, 1994, First United Bancshares, Inc. ("First United") merged with
InvestArk Bankshares, Inc. ("InvestArk") and in connection therewith issued
approximately 886,000 shares of common stock for all of InvestArk's outstanding
common stock (the "Merger"). The Merger was accounted for as a
pooling-of-interests and, accordingly, First United's financial statements for
periods prior to the Merger have been restated to include the results of
InvestArk for all periods presented. Separate and combined results of
operations for periods prior to the Merger are as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED For the Year Ended
MARCH 31, December 31,
------------ -------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net Interest Income:
First United $ 8,601 $ 35,553 $ 34,691
InvestArk 1,797 7,510 7,820
-------- -------- --------
$ 10,398 $ 43,063 $ 42,511
======== ======== ========
Income Before
Cumulative Effect of a
Change in Accounting
Principle:
First United $ 2,907 $11,937 $10,443
InvestArk 584 1,278 2,233
-------- -------- ----------
$ 3,491 $13,215 $12,676
======== ======= =======
</TABLE>
The combined companies of First United and InvestArk are hereinafter referred
to as the "Company."
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting principles and reporting policies followed by the Company
conform with generally accepted accounting principles and with general
practices within the financial services industry. The following is a
description of the more significant of these policies:
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of First United
Bancshares, Inc. and its wholly-owned subsidiaries, 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; First
Stuttgart Bank and Trust Company and The Bank of North Arkansas (Melbourne).
All significant intercompany accounts have been eliminated.
FAIR VALUES OF FINANCIAL INSTRUMENTS:
Disclosure of the fair value for all financial instruments as well as the
methodology and significant assumptions used in estimating fair values have
been incorporated throughout the Notes to the Consolidated Financial
Statements. In cases where quoted market prices are not available, fair values
are based on estimates using present value techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value
estimates for those assets or liabilities cannot be substantiated by comparison
to independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. All non-financial instruments, by definition,
have been excluded from these disclosure requirements. Accordingly, the
aggregate fair value amounts presented in the summary table (in thousands)
below and in the notes do not represent the underlying value of the Company and
may not be indicative of amounts that might ultimately be realized upon
disposition or settlement of those assets and liabilities.
<TABLE>
<CAPTION>
1994 1993
----------------------------- -----------------------------
CARRYING FAIR Carrying Fair
VALUE VALUE Value Value
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and Short-Term Investments $ 74,173 $ 74,173 $ 86,078 $ 86,078
Securities (See notes 4 and 5) 489,036 481,529 513,399 523,879
Loans (See Note 7) 512,493 499,885 499,305 501,297
LIABILITIES
Deposits (See Note 9) $953,904 $951,766 $969,749 $971,836
Federal Funds Purchased and
Securities Sold Under
Agreements to Repurchase 22,480 22,480 30,512 30,512
Notes Payable 12,825 12,825 7,723 7,723
</TABLE>
27
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CASH AND SHORT-TERM INVESTMENTS:
The carrying amounts for cash and due from banks and short-term investments
(federal funds sold and securities purchased under agreements to resell and
other short-term investments) approximate fair value because of the short
maturity of those financial instruments.
SECURITIES:
The Company adopted SFAS No. 115 "Accounting for Certain Investments in Debt
and Equity Securities," on January 1, 1994. Pursuant to SFAS No. 115, debt
securities not classified as trading account securities or investment
securities expected to be held to maturity and all equity securities are
classified as available-for-sale securities and reported at fair value, with
net unrealized gains and losses reported, net of tax, as a separate component
of stockholders' equity. The adoption of this statement on January 1, 1994
resulted in reflecting an unrealized gain, net of tax, of approximately
$1,271,000 as a separate component of the capital accounts.
Management determines the appropriate classification of securities at the
time of purchase. Available-for-sale securities are held for indefinite
periods of time and are carried at fair value. Securities available-for-sale
prior to the adoption of the new accounting standard included securities that
Management intended to use as part of its asset-liability management strategy
and that could be sold in response to changes in interest rates or other
economic factors. The amortized costs of the specific securities sold were
used to compute gains and losses on the sale of securities. Adjustments to
market and realized gains or losses upon sale of the securities
available-for-sale are classified as securities gains (losses). When Management
has the intent and ability at the time of purchase to hold securities until
maturity, these securities are classified as investment securities and carried
at amortized cost.
Fair values for securities available-for-sale and investment securities are
based on quoted market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments.
LOANS:
Loans are stated at the amount of unpaid principal, reduced by unearned
income and an allowance for possible loan losses. Unearned income on a portion
of installment loans is recognized as income over the terms of the loans by a
method which approximates the interest method. Interest on other loans is
calculated by using the simple interest method on daily balances of the
principal amount outstanding.
The allowance for loan losses is established through a provision for
possible loan losses charged to expense. Loans are charged against the
allowance for loan losses when Management believes that the collectibility of
the principal is unlikely. The allowance is an amount that Management believes
will be adequate to absorb possible losses on existing loans that may become
uncollectible, based on evaluations of the collectibility of loans and prior
loan loss experience. The evaluations take into consideration such factors as
changes in the nature and volume of the loan portfolio, overall portfolio
quality, review of specific problem loans and current economic conditions that
may affect the borrower's ability to pay. Accrual of interest is discontinued
on a loan when Management believes, after considering economic and business
conditions and collection efforts, that the borrower's financial condition is
such that collection of principal or interest is doubtful.
The fair value of loans, as disclosed in Note 7, is estimated for portfolios
of loans with similar financial characteristics. For variable-rate loans that
reprice frequently and with no significant change in credit risk, fair values
are based on carrying values. The fair values for loans with a pre-determined
or fixed rate are estimated by discounting the future cash flows using the
current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities. Fair values for
non-performing loans are estimated using the current carrying value less any
specific reserve for which the Company has provided.
The Financial Accounting Standards Board has issued SFAS No. 114 "Accounting
by Creditors for Impairment of a Loan" which becomes effective beginning in
1995. This statement defines the measurement requirements for loans that are
impaired or deemed to be troubled debt restructurings. Management believes that
the effect of this statement upon adoption will not be material.
PREMISES AND EQUIPMENT:
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation expense is computed over the estimated useful lives of assets
utilizing several depreciation methods as disclosed in Note 8. Maintenance,
repairs and minor improvements are charged to operating expenses. Gains or
losses on dispositions are reflected currently in the Statement of Income.
28
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GOODWILL:
Goodwill represents the excess of the purchase price over the fair market
value of net assets acquired in business combinations accounted for under the
purchase method. The Company amortizes goodwill over fifteen years using the
straight-line method. Accumulated amortization of goodwill was $2,256,000 and
$1,808,000 at December 31, 1994 and 1993, respectively.
OTHER REAL ESTATE:
Other real estate owned represents properties that have been acquired in
satisfaction of debt. Other real estate is valued at the lower of its fair
value or the recorded investment in the related loan upon foreclosure. If at a
later date it is determined that the recorded investment cannot be recovered,
the loss is recognized by a charge to income. When the property is in a
condition for use or sale at the time of the foreclosure, any subsequent
holding costs are included in expense as incurred. Legal fees and other direct
costs incurred by the Company in foreclosure are expensed when they are
incurred. Payments received for the rental or lease of property held in other
real estate are recognized as income in the period in which the payment is
received. The net costs of operating other real estate (including provisions
for real estate losses and gains and losses on sales of real estate) were
approximately $342,000, and $1,452,000 for the years ended December 31, 1993
and 1992, respectively. The Company had a net gain of $11,000 in 1994.
DEPOSITS:
The fair value of deposits with no stated maturity, such as
non-interest-bearing demand deposits, interest-bearing demand deposits and
savings accounts are, by definition, equal to the amount payable on demand at
the reporting date, commonly referred to as the carrying value. Fair value of
certificates of deposit are based upon the discounted value of contractual cash
flows. The discount rate is estimated using the rates currently offered for
deposits of similar remaining maturities. See Note 9 for a detail of carrying
values and fair values for all deposit liabilities.
SHORT-TERM LIABILITIES:
The carrying amounts for federal funds purchased, securities sold under
agreements to repurchase and other liabilities approximate their fair values.
INCOME TAXES:
The Company and its subsidiaries file consolidated state and Federal income
tax returns. The Company adopted SFAS No. 109 "Accounting for Income Taxes"
effective January 1, 1993. The adoption of SFAS No. 109 changed the Company's
method of accounting for income taxes to the liability method. The cumulative
effect of adopting SFAS No. 109 on the Company's financial statements was to
increase net income in the amount of $2,522,000 or $0.49 per share for the year
ended December 31, 1993.
STATEMENT OF CASH FLOWS:
For purposes of the Statement of Cash Flows, the Company considers all
currency on hand as well as all due from bank balances to be cash equivalents.
STOCK SPLIT:
On July 27, 1992, the Board of Directors of the Company declared a 2-for-1
stock split effected in the form of a 100% stock dividend. The stock dividend
was distributed on September 8, 1992. Unless otherwise indicated, all per
share data, numbers of common shares and the statements of changes in capital
accounts have been adjusted to reflect this stock split.
RECLASSIFICATIONS:
Certain reclassifications have been made to the 1993 and 1992 financial
statements to conform to the 1994 method of presentation.
3. ACQUISITIONS
On July 22, 1994, the Company and FirstBank, Texarkana, Texas ("FirstBank")
entered into an agreement pursuant to which the Company agreed to acquire all
of the issued and outstanding stock of FirstBank for cash payments of
approximately $25.0 million funded through cash and borrowings. The
transaction, which will be accounted for as a purchase, is expected to close in
the first quarter of 1995. FirstBank has assets of approximately $154.0 million
and estimates 1994 earnings of approximately $1.6 million.
29
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On November 30, 1993, the Company acquired all of the outstanding stock of
Commerce Financial Corporation and its wholly-owned subsidiary, Commercial Bank
at Alma ("Alma"), for $5,467,000. The consolidated assets of Alma were
approximately $45,000,000 at the date of acquisition. The transaction was
accounted for as a purchase, and, accordingly, the excess of the purchase price
over the fair market value of the net assets acquired was allocated to
goodwill. The results of operations for Alma are included in the consolidated
statements of income from the date of acquisition. Unaudited pro forma results
of operations of the Company assuming that the acquisition of Alma had been
completed at the beginning of 1992 do not differ materially from the Company's
actual results.
On March 27, 1992, Merchants and Planters Bank, N.A. of Camden acquired
substantially all of the deposits of the former Camden, Arkansas branch of Home
Federal Savings of Kansas City from the Resolution Trust Corporation for
approximately $170,000 in cash. Merchants and Planters received cash and
acquired deposits of $20,696,000.
4. SECURITIES AVAILABLE-FOR-SALE
The carrying values and estimated fair values of securities
available-for-sale at December 31, 1994 and 1993 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1994
U.S. Treasury Securities and
Other U.S. Government
Agencies $265,423 $ 99 $ 11,246 $254,276
Obligations of States and
Political Subdivisions 2,522 22 51 2,493
Mortgage-Backed Securities 63,530 251 2,345 61,436
Other 6,495 95 116 6,474
-------- -------- -------- --------
$337,970 $ 467 $ 13,758 $324,679
======== ======== ======== ========
1993
U.S. Treasury Securities and
Other U.S. Government
Agencies $ 69,582 $ 1,297 $ 515 $ 70,364
Mortgage-Backed Securities 13,886 273 73 14,086
-------- -------- -------- --------
$ 83,468 $ 1,570 $ 588 $ 84,450
======== ======== ======== ========
</TABLE>
The amortized cost and estimated fair value of securities available-for-sale
at December 31, 1994, by contractual maturity, are shown below (in thousands).
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
--------- ----------
<S> <C> <C>
Due in One Year or Less $ 46,874 $ 46,154
Due After One Year Through Five Years 198,620 190,935
Due After Five Years Through Ten Years 26,123 23,382
Due After Ten Years 2,823 2,772
Mortgage-Backed Securities 63,530 61,436
-------- --------
$337,970 $324,679
======== ========
</TABLE>
Proceeds from sales of securities available-for-sale were $3,622,000 during
1994. Gross gains realized from the sale of these securities available-for-sale
were immaterial.
30
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. INVESTMENT SECURITIES
The carrying values and estimated fair values of investments in debt
securities as of December 31, 1994 and 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1994
U.S. Treasury Securities and
Other U.S. Government
Agencies $ 11,904 $ 3 $ 677 $ 11,230
Obligations of States and
Political Subdivisions 70,487 492 2,944 68,035
Mortgage-Backed Securities 77,932 46 4,405 73,573
Other 4,034 3 25 4,012
-------- -------- -------- --------
$164,357 $ 544 $ 8,051 $156,850
======== ======== ======== ========
1993
U.S. Treasury Securities and
Other U.S. Government
Agencies $215,849 $ 3,965 $ 447 $219,367
Obligations of States and
Political Subdivisions 70,942 3,823 201 74,564
Mortgage-Backed Securities 130,203 2,483 411 132,275
Other 12,937 312 26 13,223
-------- -------- -------- --------
$429,931 $ 10,583 $ 1,085 $439,429
======== ======== ======== ========
</TABLE>
The amortized cost and estimated fair value of debt securities at December
31, 1994, by contractual maturity, are shown below (in thousands). Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
--------- ----------
<S> <C> <C>
Due in One Year or Less $ 5,458 $ 5,447
Due After One Year Through Five Years 36,476 35,586
Due After Five Years Through Ten Years 32,696 30,993
Due After Ten Years 11,795 11,281
Mortgage-Backed Securities 77,932 73,543
-------- --------
$164,357 $156,850
======== ========
</TABLE>
There were no sales of investment securities during 1994.
Securities with a carrying value of $173,905,000 at December 31, 1994 were
pledged to secure public deposits and for other purposes required by law.
6. ALLOWANCE FOR POSSIBLE LOAN LOSSES
The changes in the allowance for possible loan losses during 1994, 1993 and
1992 were as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Balance at Beginning of Year $ 9,972 $ 7,972 $ 7,499
Allowance Applicable to Loans of
Acquired Bank -0- 520 -0-
Provision Charged Against Income 334 1,815 2,486
Recoveries on Loans Charged-Off 1,563 1,299 1,267
Loans Charged-Off (2,202) (1,634) (3,280)
-------- -------- --------
Balance at End of Year $ 9,667 $ 9,972 $ 7,972
======== ======== ========
</TABLE>
31
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LOANS
Loans consist of the following categories (in thousands):
<TABLE>
<CAPTION>
TYPE 1994 1993
-------- --------
<S> <C> <C>
Real Estate Loans Collateralized by -
Residential Properties, Primarily
Single Family Residences $148,346 $159,844
Commercial Properties 135,275 149,706
Commercial and Industrial Loans, Other Than
Real Estate and Energy-Related 128,461 92,465
Energy-Related Loans 15,910 16,514
Consumer Loans 82,712 78,289
Loans for Purchasing or Carrying
Securities 2,065 2,655
Financing Leases 181 439
-------- --------
$512,950 $499,912
======== ========
</TABLE>
The estimated fair value of these loans was $499,885,000 and $501,297,000 at
December 31, 1994 and 1993, respectively. Pursuant to the Interest Rate Control
Amendment to the Constitution of the State of Arkansas, all "general loans"
have a maximum financing limitation of 5% over the Federal Reserve Discount
Rate. As of December 31, 1994, the maximum financing limitation is 9.75%. This
law limits the Company's flexibility in pricing loans according to credit and
rate risk through the use of a greater spread in financing rates. Accordingly,
the difference between the carrying amount and estimated fair value of the
Company's loans is not as great as would be the case without such a law.
In the normal course of business, officers and directors of the Company and
their related interests maintain certain loan relationships with the Company's
subsidiary banks. At December 31, 1994 and 1993, officers, directors, and
related parties had loans of approximately $12,856,000 and $15,045,000,
respectively. During the year ended December 31, 1994, loans made to these
parties totalled $10,921,000 and repayments totalled $12,933,000. Loans to
related parties at December 31, 1993 included loans of $177,000 to directors
who retired during 1993.
The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include standby letters of credit and commitments
to extend credit. Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
Statement of Condition.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Company evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Company upon extension of credit, is based
on Management's credit evaluation of the counterparty. The extent of
collateral varies for each commitment but may include accounts receivable,
inventory, property, plant and equipment, and income-producing commercial
properties.
Standby letters of credit are commitments issued by the Company to guarantee
the performance of a customer to a third party. Those guarantees are primarily
issued to support public and private borrowing arrangements, including
commercial paper, bond financing, and similar transactions. Most guarantees
expire in 1995. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. The Company holds collateral supporting those commitments for which
collateral is deemed necessary. The extent of collateral held for those
commitments at December 31, 1994 varies from 0 percent to 100 percent; the
average amount collateralized is 50 percent.
Financial instruments whose amounts represent credit risk as of December 31,
1994, and 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Commitments to Extend Credit $74,822 $62,112
Standby Letters of Credit 6,842 7,012
</TABLE>
The fair value of loan commitments and letters of credit would approximate
the fees currently charged (which are immaterial) for similar agreements.
32
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of non-performing assets as of December 31, 1994 and 1993 is as
follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Non-Accrual Loans $2,117 $2,633
Past Due Loans (90 Days or more and
still accruing) 555 342
Renegotiated Loans 326 223
------ ------
2,998 3,198
Other Real Estate 520 1,039
------ ------
Total Non-Performing Assets $3,518 $4,237
====== ======
</TABLE>
The Company's non-accrual policy had the effect of reducing interest and
fees on loans in 1994 and 1993 by approximately $179,000 and $208,000,
respectively. Substantially all payments on non-accrual loans were applied to
principal.
8. PREMISES AND EQUIPMENT
Premises and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
Principal
Depreciation Estimated
Method Useful Life 1994 1993
---------------- ----------- -------- --------
<S> <C> <C> <C> <C>
Land $ 4,658 $ 3,909
Buildings and Leasehold
Improvements Straight-line 5-40 years 18,262 16,807
Furniture, Fixtures and
Equipment Declining Balance 3-10 years 9,796 9,062
-------- --------
32,716 29,778
Less: Accumulated
Depreciation (17,175) (15,874)
-------- --------
$ 15,541 $ 13,904
======== ========
</TABLE>
Depreciation included in other expense, net occupancy expense and equipment
expense was $1,558,000 in 1994, $1,476,000 in 1993, and $1,268,000 in 1992.
The Company leases land on which two branches are located and rents on a
monthly basis an employee parking lot from First Land & Timber Corporation, a
company with common officers and directors of the Company. Rentals paid to
First Land & Timber Corporation on these arrangements were approximately
$20,000 during each of the years ended December 31, 1994, 1993 and 1992.
9. DEPOSITS
At December 31, 1994 and 1993, deposits consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1994 1993
----------------------------- -----------------------------
CARRYING ESTIMATED Carrying Estimated
VALUE FAIR VALUE Value Fair Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Non-interest-bearing Demand
Deposits $155,413 $155,413 $150,842 $150,842
Savings and Interest-bearing
Demand Deposits 330,506 330,506 350,325 350,325
Certificates of Deposit 467,985 465,847 468,582 470,669
-------- -------- -------- --------
$953,904 $951,766 $969,749 $971,836
======== ======== ======== ========
</TABLE>
33
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As disclosed in Note 2, fair value of demand deposits is defined as the
amount payable upon demand and does not consider any value derived from
retaining these deposits for an expected future period in time. That component,
commonly referred to as a core deposit intangible, is not considered in the
above fair value amounts.
10. INCOME TAXES
Income tax expense is composed of the following (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Currently Payable $ 5,247 $ 5,842 $ 5,802
Deferred:
Effects of Temporary
Differences 722 (223) (655)
-------- -------- --------
$ 5,969 $ 5,619 $ 5,147
======== ======== ========
</TABLE>
The income tax provision included $3,000, $56,000 and $173,000 for the years
ended December 31, 1994, 1993 and 1992, respectively, resulting from securities
transactions.
The effective income tax rates in the accompanying statements of income are
less than the statutory income tax rate because of the following:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory Federal Income Tax Rate 35.0% 35.0% 34.0%
Less:
Non-Taxable Interest Income (6.1) (5.6) (6.9)
State Income Taxes (0.3) 1.2 -0-
Other Items, Net 0.7 (0.8) 1.8
----- ----- -----
Effective Income Tax Rate 29.3% 29.8% 28.9%
===== ===== =====
</TABLE>
At December 31, 1994 and 1993, temporary differences between the financial
statement carrying amounts and the tax bases of assets and liabilities give rise
to the following net deferred tax asset, which is included in other assets (in
thousands).
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Accelerated Depreciation $ (963) $ (813)
Provision for Possible Loan Losses 3,079 3,184
Unrealized Loss on Marketable
Securities 4,707 -0-
Effects of Pension and Benefit
Plans -0- (273)
Difference in Tax and Book Basis
of Securities (332) (186)
Write-down of Other Real Estate 194 729
Other 18 77
------- -------
$ 6,703 $ 2,718
======= =======
</TABLE>
The Company has evaluated the need for a valuation allowance and, based on
the weight of available evidence, has determined that it is more likely than
not that all deferred tax assets will be realized.
34
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. NOTES PAYABLE
A summary of notes payable as of December 31, 1994 and 1993 is as follows
(in thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Promissory Note Bearing Interest at 1.20%
Above the 30-Day LIBOR (5.625% at December 31,
1994 and 1993), Principal Due 1997 $ 5,000 $ 5,000
Note Payable Bearing Interest at 0.1%
Above the 30-Day LIBOR 5,000 -0-
Installment Note Payable to Unaffiliated
Bank, Interest at 1.20% Above the 30-Day LIBOR,
Principal Due 1995 1,107 2,213
Other Installment Notes Payable, Interest at Rates
Varying From 4.4% to 7.47% 1,718 510
------- -------
$12,825 $ 7,723
======= =======
</TABLE>
In connection with the anticipated first quarter 1995 acquisition of
FirstBank, the Company will borrow an additional $5 million under the
Installment Note Payable to Unaffiliated Bank. Pursuant to the terms, the total
principal of $6,107,000 will be due in seven annual installments of
approximately $872,000 each beginning in 1996. The installment note payable to
an unaffiliated bank is secured by the outstanding stock of City National Bank
of Fort Smith and contains financial covenants relating to the issuance of
additional debt and maintenance of minimum tangible net worth.
After the additional anticipated borrowings of $5,000,000, the notes payable
will require principal repayments as follows: 1995 - $121,000; 1996 -
$1,000,000; 1997 - $6,008,000; 1998 - $988,000; 1999 - $1,953,000 and
thereafter - $7,755,000.
12. BENEFIT PLANS
The Company has a defined benefit pension plan (the "Plan") which covers
substantially all of the Company's employees. Operating expenses of the Plan
are paid by the Company and no contributions are required of participants. The
annual contribution to the Plan by the Company ($618,000 in 1994, $848,000 in
1993 and $458,000 in 1992) is determined by various actuarial factors. The
Plan contains provisions for early retirements, disability and death benefits.
The following tables set forth the Plan's funded status and amounts recognized
in the Company's balance sheet at December 31, 1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
Actuarial Present Value of Benefit
Obligation at December 31: 1994 1993
-------- --------
<S> <C> <C>
Accumulated Benefit Obligation $(10,309) $(10,287)
Effect of Projected Future
Compensation Levels (865) (440)
-------- --------
Projected Benefit Obligation for
Service Rendered to Date (11,174) (10,727)
Plan Assets at Fair Value, Primarily
Stock and U.S. Securities 11,279 11,434
-------- --------
Plan Assets Greater than
Projected Benefit Obligation 105 707
Unrecognized Net Loss From Past
Experience Different From That Assumed 2,794 1,308
Unrecognized Net Obligations (1,415) (891)
-------- ---------
Prepaid Pension Cost $ 1,484 $ 1,124
======== ========
</TABLE>
35
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Plan's net pension cost for 1994, 1993 and 1992 included the following
components (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Service Cost $ 412 $ 524 $ 480
Interest Cost on Projected
Benefit Obligation 801 860 826
Actual Return on Assets (99) (702) (1,112)
Net Amortization and
Deferral (854) (77) 352
------- ------- -------
$ 260 $ 605 $ 546
======= ======= =======
Significant Assumptions:
Weighted Average
Discount Rate 7.5% 7.5% 7.5%
Estimated Future Pay
Increases 4.0% 4.0% 4.0%
Expected Return on
Assets 7.5% 7.5% 7.5%
</TABLE>
The Company has an Employee Stock Ownership Plan for substantially all of
its employees. Contributions to the Plan during any one year are determined by
the Company and limited to 15 percent of the payroll for the participants.
During 1994, 1993 and 1992, the Company's expenses totalled approximately
$525,000, $362,000, and $388,000, respectively.
Effective January 1, 1994, the Company adopted a defined contribution
employee benefit plan, qualified under IRC Section 401(k) that covers all
employees, with the exception of employees who are highly compensated.
Contributions to the plan are based on the total amount of salary the employee
elects to defer, a matching contribution not to exceed 2.75% of each employee's
salary, and a discretionary amount determined each year by the Company. The
amount of expense recognized in 1994 was $138,000.
13. COMMITMENTS AND CONTINGENCIES
The Company has been named as a defendant in certain lawsuits which are
currently pending. In the opinion of Management, after consulting with legal
counsel, any liability incurred in connection with the ultimate outcome of
these suits will not have a material adverse effect on the Company.
The Company has a facilities management contract with a data processing firm
to provide computer equipment and the needed personnel for systems support.
Payments related to this contract, which expires in 1998, are expensed when
paid. This contract requires future annual minimum payments as follows: 1995
- $1,305,000; 1996 - $1,357,000; 1997 - $1,411,000; 1998 - $1,223,000.
Certain branch facilities and warehouse space are leased under various
operating lease agreements. These leases require approximate minimum rentals
as follows: 1995-$106,000; 1996-$110,000; 1997-$110,000; 1998-$105,000; 1999-
$52,000; and thereafter-$135,000.
14. RESTRICTIONS
Each of the Company's subsidiary banks is subject to either national or
state banking regulations which restrict the level of dividends that may be
paid in a given year. Such restrictions are based on a percentage of the
subsidiary bank's net income. During 1995, the Company's subsidiary banks will
have available for payment of dividends, without regulatory approval,
approximately $3,458,000 of undistributed earnings plus the net income earned
in 1995.
At December 31, 1994, the Company was required to maintain reserve
balances in cash and due from accounts of approximately $9,521,000.
Banking regulations also require that banks pay insurance premiums to the
Federal Deposit Insurance Corporation (the "FDIC") in exchange for the FDIC
insuring the deposits of the Company's customers. Insurance premiums paid to
the FDIC for the years ended December 31, 1994, 1993 and 1992, were
approximately $2,186,000, $2,111,000 and $2,054,000, respectively, and those
premiums were included in other operating expenses on the Company`s
Consolidated Statements of Income.
36
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. SUPPLEMENTARY DATA FOR CASH FLOWS
Income taxes paid by the Company during the years ended December 31, 1994,
1993 and 1992, amounted to $5,901,000, $7,126,000 and $4,248,000, respectively.
Interest paid on notes payable during the years ended December 31, 1994, 1993
and 1992, was $598,000, $525,000 and $883,000, respectively.
In connection with the November 1993 acquisition of Alma, the Company
acquired assets and assumed liabilities as follows (in thousands):
Fair Value of Assets Acquired $ 44,436
Goodwill 1,622
Liabilities Assumed (40,591)
--------
Cash Paid 5,467
Cash Acquired (946)
--------
Net Payment for Purchase $ 4,521
========
16. CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
The financial position of First United Bancshares, Inc. (parent company
only), its results of operations and cash flows are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
December 31,
---------------------------------
1994 1993
-------- --------
<S> <C> <C>
CONDENSED FINANCIAL POSITION:
Assets:
Cash $ 11,433 $ 5,302
Investment in Subsidiary Banks 105,389 110,694
Other Assets 1,487 1,242
-------- --------
Total Assets $118,309 $117,238
======== ========
Liabilities and Capital Accounts:
Notes Payable $ 6,107 $ 7,215
Other Liabilities 2,693 1,901
-------- --------
Total Liabilities 8,800 9,116
-------- --------
Total Capital 109,509 108,122
-------- --------
Total Liabilities and Capital $118,309 $117,238
======== ========
</TABLE>
37
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
(Dollars in Thousands) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
CONDENSED OPERATING RESULTS:
Dividend Income From Subsidiary Banks $ 11,613 $ 11,584 $ 5,400
Management Fees 1,458 1,745 1,574
-------- -------- --------
13,071 13,329 6,974
-------- -------- --------
Interest Expense 457 525 883
Other Expense 2,620 2,381 2,410
-------- -------- --------
3,077 2,906 3,293
-------- -------- --------
Income Before Tax Benefit and
Equity in Undistributed Income of
Subsidiary Banks 9,994 10,423 3,681
Income Tax Benefit 602 325 493
-------- -------- --------
Income Before Equity in Undistributed
Income of Subsidiary Banks and
Cumulative Effect of a Change in
Accounting Principle 10,596 10,748 4,174
Cumulative Effect of a Change in
Accounting Principle -0- (279) -0-
-------- --------- --------
Income Before Equity in Undistributed
Income of Subsidiary Banks 10,596 10,469 4,174
Equity in Undistributed Income of
Subsidiary Banks 3,412 5,269 8,505
-------- -------- --------
Net Income $ 14,008 $ 15,738 $ 12,679
======== ======== ========
CONDENSED STATEMENTS OF CASH FLOWS:
Cash Flows From Operating Activities:
Net Income $ 14,008 $ 15,738 $ 12,679
Depreciation 13 11 8
Undistributed Income (3,412) (5,269) (8,505)
Utilization of Tax Credit -0- -0- 440
Carryforwards (305) (576) 27
(Increase) Decrease in Other Assets 791 442 263
-------- -------- --------
Increase in Other Liabilities 11,095 10,346 4,912
-------- -------- --------
Cash Flows From Investing Activities: -0- (5,505) -0-
-------- -------- --------
Purchase of Subsidiary Bank
Cash Flows From Financing Activities: (1,107) (1,607) (1,478)
Principal Repayments on Notes Payable -0- 33 (38)
Sale (Purchase) of Treasury Stock (3,857) (3,068) (2,768)
-------- -------- --------
Payment of Dividends (4,964) (4,642) (4,284)
-------- -------- --------
6,131 199 628
Net Increase in Cash 5,302 5,103 4,475
-------- -------- --------
Cash at Beginning of Year $ 11,433 $ 5,302 $ 5,103
======== ======== ========
Cash at End of Year
Supplementary Data for Cash Flows:
Taxes Paid $ 5,901 $ 7,126 $ 4,248
Interest Paid on Notes Payable 598 525 883
</TABLE>
38
<PAGE> 41
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of First United Bancshares, Inc.:
We have audited the accompanying consolidated statements of condition of
First United Bancshares, Inc. (an Arkansas corporation) and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of income,
changes in capital accounts and cash flows for each of the years in the
three-year period ended December 31, 1994. We did not audit the financial
statements of InvestArk, a company acquired during 1994 in a transaction
accounted for as a pooling-of-interests, as of December 31, 1993 and for each
of the years in the two-year period ended December 31, 1993. Such statements
are included in the consolidated financial statements of First United
Bancshares, Inc. and reflect 16% of total assets as of December 31, 1993 and
17% and 18% of net interest income for the years ended December 31, 1993 and
1992, respectively. These statements were audited by other auditors whose
report thereon has been furnished to us, and our opinion, insofar as it relates
to amounts included for InvestArk, is based solely on the report of the other
auditors. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material
respects, the financial position of First United Bancshares, Inc. and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
As explained in Note 2 to the consolidated financial statements, effective
January 1, 1994, First United Bancshares, Inc. changed its method of accounting
for investment securities.
Arthur Andersen LLP
New Orleans, Louisiana,
January 18, 1995.
REPORT OF MANAGEMENT ON FINANCIAL STATEMENTS
The management of First United Bancshares, Inc. (First United) is
responsible for the integrity and objectivity of the financial statements and
other financial information contained in this Annual Report. The financial
statements have been prepared in conformity with generally accepted accounting
principles. Financial information throughout this Annual Report is consistent
with that in the financial statements.
First United maintains a system of internal accounting controls which is
believed to provide, in all material respects, reasonable assurance that assets
are safeguarded against loss from unauthorized use or disposition; transactions
are properly authorized and recorded; and the financial records are reliable
for preparing financial statements and maintaining accountability for assets.
All systems of internal accounting controls are based on management's judgment
that the cost of controls should not exceed the benefits to be achieved.
Management believes First United's system provides the appropriate balance
between costs of controls and the related benefits.
In order to monitor compliance with this system of controls, First United
maintains an internal audit program. Internal audit reports are issued to
appropriate officers, and significant audit exceptions, if any, are reviewed
with management and the Audit Committee of the Board of Directors.
The financial statements in this Annual Report have been audited by First
United's independent public accountants, Arthur Andersen LLP, for the purpose
of determining that the financial statements are presented fairly. Their audit
included a study of the evaluation of First United's system of internal
controls for the purpose of setting the scope of their auditing procedures.
39
<PAGE> 42
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<S> <C> <C>
FIRST UNITED BANCSHARES, INC. Richard H. Mason DIRECTORS
President
OFFICERS Warnock Furniture, Inc. Claiborne P. Deming
President & Chief Executive
James V. Kelley W. E. Morgan, Jr. Officer,
Chairman of the Board, President, Murphy Oil Corporation
President & Chief Executive Officer Warnock Furniture, Inc.
Robert G. Dudley
John E. Burns, CPA R. Madison Murphy President, First National Bank
Vice President & Chairman of the Board, of El Dorado
Chief Financial Office Murphy Oil Corporation
Barry Felton
Robert G. Dudley Robert C. Nolan Felton Oil Company, Inc.
Secretary Managing Partner,
Munoco Company James V. Kelley
Robert L. Jones Chairman, President & Chief
Assistant Secretary Paula M. O'Connor Executive Officer,
Investments First United Bancshares, Inc. and
AUDIT Chairman & Chief Executive Officer,
Kathering P. Ozment First National Bank of El Dorado
Jim Barnes Investments
Vice President & Auditor Michael F. Mahony
Cal Partee, Jr. Attorney
LOAN REVIEW Oil Investments
Richard H. Mason
Richard E. Ulmer W. C. Partee President,
Vice President & Owner, Partee Flooring Mill Gibraltar Energy Company
Loan Review Officer and Chairman of the Board,
First National Bank of Magnolia R. Madison Murphy
DIRECTORS Chairman of the Board
Chesley Pruet Murphy Oil Corporation
Larry Burrow Oil Investments
Plant Manager, Robert C. Nolan
Partee Flooring Mill John D. Trimble, Jr. Managing Partner,
Managing Partner, Munoco Company
Claiborne P. Deming Trimble Properties
President and Chief Executive Officer, Robert M. Reynolds
Murphy Oil Corporation Ralph C. Weiser Shuler Drilling Company, Inc.
Managing Partner,
Grady E. DuPriest Weiser-Brown Oil Company Dr. Henry B. Rogers
Geologist Investments
Dr. David M. Yocum, Jr.
W. A. Eckert Managing Partner, John H. Sample
Attorney Alice-Sidney Oil Company Security Oil Company, Inc.
James V. Kelley SUBSIDIARIES' OFFICERS Charles Thomas
Chairman of the Board, President AND DIRECTORS Calion Lumber Company, Inc.
& Chief Executive Officer,
First United Bancshares, Inc. FIRST NATIONAL BANK John D. Trimble, Jr.
OF EL DORADO Managing Partner, Trimble Properties
Roy E. Ledbetter
President & Chief Executive Officer, EXECUTIVE OFFICERS Dr. Srini Vason
Highland Industrial Park, Inc. SARTI
James V. Kelley
Jack W. McNutt Chairman of the Board & Dr. David M. Yocum, Jr.
Former President and Chief Executive Officer Managing Partner,
Chief Executive Officer, Alice Sidney Oil Company
Murphy Oil Corporation Robert G. Dudley
President
Michael F. Mahony
Attorney Larry Kinard
Executive Vice President
& Secretary
Lending
</TABLE>
40
<PAGE> 43
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<S> <C> <C>
FIRST NATIONAL BANK OF MAGNOLIA CITY NATIONAL BANK OF George Warmack
FORT SMITH Partner, Warmack & Co.
EXECUTIVE OFFICERS
EXECUTIVE OFFICERS Robert B. Westphal
Robert L. Jones Investments
President & Chief Executive Officer Jim Harwood
President & Chief Executive ADVISORY DIRECTORS
John Roewe Officer
Executive Vice President Edward E. Bedwell
Bill Staed Attorney at Law
DIRECTORS Executive Vice President
Lending Services Group Franklin Hawkins
W. C. Partee Investments
Chairman of the Board, DIRECTORS
First National Bank of Magnolia J. L. Swink
Thomas J. Barr Commercial Warehouses and Investments
Larry Burrow President,
Plant Manager, Harry G. Barr Company MERCHANTS & PLANTERS BANK,
Partee Flooring Mill N.A. OF CAMDEN
Morris G. Boren
Tommy Fallin, Jr. General Manager, Baseline Design EXECUTIVE OFFICER
Owner, Fallin Tractor Company
Carolyn L. Branch James R. Jordan
Robert L. Jones Vice President for Institutional President & Chief Executive Officer
President & Chief Executive Officer, Development, Westark Community College
First National Bank of Magnolia DIRECTORS
George C. Fisher
James V. Kelley Director/Manufacturing, Accounting and Eugene Bramblett
Chairman, President & Chief Executive Budgets, Arkansas Best Corporation Attorney at Law
Officer, First United Bancshares, Inc.
Jim Harwood, CPA Edward E. Falwell
Kathy E. Lewis President & Chief Executive Officer, Retired, Western Auto
Timber and Land Management City National Bank of Fort Smith
James R. Jordan
W. E. Morgan, Jr. James V. Kelley President & Chief Executive Officer
President, Warnock Furniture, Inc. Chairman, President & Chief Executive Merchants & Planters Bank, N.A.
Officer, First United Bancshares, Inc.
Richard G. Murphy James V. Kelley
President, Murphy's Jewelers, Inc. A. Samuel Koenig, III Chairman, President and
Physician Chief Executive Officer,
Cal Partee, Jr. First United Bancshares, Inc.
Oil Investments Emon A. Mahony, Jr.
President, Roy E. Ledbetter
David F. Rankin Arkansas Oklahoma Gas Corporation President & Chief Executive Officer,
Professor, Highland Industrial Park, Inc.
Southern Arkansas University Charles Shuffield
President, Jim Neeley
George R. Stuart Sparks Regional Medical Center President,
Cattle, Timber, Investments Neeley Forestry Service
Bill Staed
Joe D. Woodward Executive Vice President, Joe M. Rogers
Chairman of the Board, AmFuel Lending Services Group Owner and President,
and Attorney City National Bank of Fort Smith Rogers Lumber Company
Bobby W. Stephens Thomas E. Watts
Executive Vice President Retired, Watts Department Store
Beverly Enterprises, Inc.
</TABLE>
41
<PAGE> 44
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<S> <C> <C>
COMMERCIAL BANK THE BANK OF NORTH FIRST STUTTGART BANK AND
AT ALMA ARKANSAS TRUST COMPANY
EXECUTIVE OFFICERS EXECUTIVE OFFICERS EXECUTIVE OFFICERS
Jim V. Fincher
President & Lloyd T. Jones Robert M. Koch
Chief Executive Officer President & President and
Chief Executive Officer Chief Executive Officer
William N. "Dockey" Brasher, III
Executive Vice President W. Mike Cone DIRECTORS
Executive Vice President
DIRECTORS Lending James V. Kelley
Chairman, President and
James A. Arnold, II DIRECTORS Chief Executive Officer
Attorney First United Bancshares, Inc.
W. Wesley Arnold
John P. Ballentine Rancher Harold Ives
Retired Banker Vice Chairman of the Board;
Brenda K. Barnes Chief Executive Officer,
Leonard L. Blaschke B & B Supply, Inc. Harold Ives Trucking Company
Grocer
John E. Burns, CPA L. Clyde Carter
William N. "Dockey" Brasher, III Vice President and Retired, Former President and
Executive Vice President, Chief Financial Officer Chief Executive Officer,
Commercial Bank at Alma First United Bancshares, Inc. Riceland Foods, Inc.
Jim V. Fincher Harlin F. Hames Harry C. Erwin, CPA
President & Chief Executive Officer, Retired, Century Telephone President, Financial Holdings
Commercial Bank at Alma of Arkansas, Inc.
Lloyd T. Jones
John A. Griffin President & Chief Executive Officer Tommy Hillman
Retired Oil Distributor The Bank of North Arkansas President, Winrock Farms, Inc.
Jim Harwood, CPA James E. Miller Jerry J. Hoskyn
President & Chief Executive Officer G. H. Miller and Sons President, Prairie Hill Farms, Inc.
City National Bank of Fort Smith
Reed Perryman Steven M. Keith
Hilda Knight Pharmacist President, KBX, Inc.
Retired Banker
Robert M. Koch
Paul L. Winborn President and
Pharmacist Chief Executive Officer,
First Stuttgart Bank and
Trust Company
John E. Stephens
President, Bovine Farms, Inc.
</TABLE>
42
<PAGE> 45
CORPORATE INFORMATION
ANNUAL MEETING
The annual meeting of Stockholders will convene on Tuesday, May 23, 1995, at
2:00 p.m. (CDT) in the Directors Room of the First National Bank, Main and
Washington Streets, El Dorado, Arkansas
CORPORATE HEADQUARTERS
Main and Washington Streets
El Dorado, Arkansas 71730
COMMON STOCK
NASDAQ Symbol: UNTD
Listed: NASDAQ System National Market List
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
New Orleans, Louisiana
FINANCIAL AND GENERAL INFORMATION
First United's Annual Report to the Securities and Exchange Commission on Form
10-K is incorporated in this report. Additional copies and other financial
reports or information are available without charge upon request by writing:
John E. Burns, First United Bancshares, Inc., P. O. Box 751, El Dorado,
Arkansas 71731-0751.
STOCKHOLDER INFORMATION
Stockholders seeking any information concerning their shares or dividends
should contact the transfer agent, First National Bank of El Dorado, as
follows: ATTN: Corporate Trust, P. O. Box 751, El Dorado, Arkansas 71731-0751,
Telephone (501) 863-3181, Extension 237.
43
<PAGE> 46
First United Bancshares, Inc.
El Dorado, Arkansas
And its wholly-owned subsidiaries
First National Bank of El Dorado
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
First Stuttgart Bank and Trust Company
44
<PAGE> 47
APPENDIX
TO THE
1994 ANNUAL REPORT TO STOCKHOLDERS
This Appendix is provided in accordance with Regulation S-T, Item 304.
Graphic and Image Material. It shall list all such graphic and image
information in the First United Bancshares, Inc. ("First United") 1994 Annual
Report to Stockholders ("Report") and is intended to provide a fair and
accurate narrative description of such information.
1. The Cover Page of the Report is titled "First United Bancshares, Inc.
1994 Annual Report to Stockholders."
2. Page 2 of the Report contains a graphic image which reads "We enter
1995 cognizant of the challenges we face."
3. Page 4 of the Report contains a bar graph titled "Earnings Per Share"
which discloses First United's earnings per share (in dollars) of $1.49 , $1.64
, $2.46, $2.56 and $2.72 for the years ended December 1990, 1991, 1992, 1993
and 1994, respectively.
4. Page 4 of the Report contains a double bar graph titled "Book
Value-Market Value at Year End (Dollars)" which discloses the book value of a
share of First United common stock to be $15.40, $16.59, $18.50, $20.97 and
$21.23 for the years ended December 31, 1990, 1991, 1992, 1993 and 1994,
respectively. The graph also discloses the market value of a share of First
United common stock to be $12.75, $13.50, $26.00, $29.50 and $30.25 for the
years ended December 31, 1990, 1991, 1992, 1993 and 1994, respectively.
5. Page 5 of the Report contains a line graph titled "Interest Margin
Analysis" which discloses the "Break-Even Yield", "Net Interest Margin" and
"Net Interest Spread". The Break-Even Yield" is disclosed as 3.54%, 2.85% and
2.89%, the Net Interest Margin" is disclosed as 4.47%, 4.45% and 4.29%, and
the "Net Interest Spread" is disclosed as 3.76%, 3.85% and 3.51%, for the years
ended December 31, 1992, 1993 and 1994, respectively.
6. Page 6 of the Report contains a bar graph titled "Loan Loss Provision"
which discloses the dollar amount (in millions) that has been allocated to the
loan loss reserve account, which is disclosed as $3,698, $4,712, $2,486, $1,815
and $334 for the years ended December 31, 1990, 1991, 1992, 1993 and 1994,
respectively.
7. Page 8 of the Report contains a line graph titled "Non-Performing
Assets and Allowance for Loan Losses" which discloses (in thousands) the
"Non-Performing Assets" as $15,535, $13,979, $8,579, $4,237 and $3,518, the
"Non-Performing Loans" as $9,902, $7,194, $4,723, $3,198 and $2,998, and the
"Allowance for Loan Losses" as $7,111, $7,499, $7,972, $9,972 and $9,667, for
the years ended December 31, 1990, 1991, 1992, 1993 and 1994, respectively.
8. Page 11 of the Report contains a pie chart graph titled "Deposit
Composition During 1994" which discloses the make-up of the deposits as 34.65%
of "Savings and Interest-Bearing Demand" deposits, 34.44% of "Other Time
Deposits", 16.29% of "Non-Interest Bearing Demand" deposits and 14.62% of "Time
Deposits of $100,000 or More".
9. Page 13 of the Report contains a bar graph titled "Stockholders Equity
at Year-End" which discloses the shareholders equity (in millions) as
approximately $79, $86, $95, $108 and $110 for the years ended December 31,
1990, 1991, 1992, 1993 and 1994, respectively.
10. Page 14 of the Report contains a graph titled "1994 Risked Based
Capital Ratios" which discloses "Tier 1 Capital" and "Total Risk-Based Capital"
of First United as 18.85% and 20.10%, respectively, and the regulatory
requirements of "Tier 1 Capital" and "Total Risked-Based Capital" as 4.0% and
8.0%, respectively.
<PAGE> 48
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
InvestArk Bankshares, Inc.
Stuttgart, Arkansas
We have audited the consolidated balance sheet of InvestArk Bankshares, Inc.
and subsidiaries at December 31, 1993, and the consolidated statements of
income, stockholders' equity, and cash flows for the years ended December 31,
1993 and 1992. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated financial position of InvestArk
Bankshares, Inc. and subsidiaries, at December 31, 1993, and the consolidated
results of their operations and their cash flows for the years ended December
31, 1993 and 1992, in conformity with generally accepted accounting principles.
/s/ Martin & Company
MARTIN & COMPANY
Certified Public Accountants
January 28, 1994
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF FIRST UNITED BANCSHARES, INC.
<PAGE> 2
EXHIBIT 21
FIRST UNITED BANCSHARES, INC.
Subsidiaries
<TABLE>
<CAPTION>
Name Jurisdiction of Incorporation
---- -----------------------------
<S> <C>
The First National Bank United States
of El Dorado, El Dorado
Arkansas
City National Bank United States
of Fort Smith, Fort Smith
Arkansas
First National Bank United States
of Magnolia, Magnolia
Arkansas
Merchants and Planters Bank United States
N.A., Camden, Arkansas
Commercial Bank at Alma Arkansas
Alma, Arkansas
The Bank of North Arkansas Arkansas
Melbourne, Arkansas
First Stuttgart Bank and Trust Company Arkansas
Stuttgart, Arkansas
</TABLE>
<PAGE> 1
EXHIBIT 23(A)
CONSENT OF ARTHUR ANDERSEN LLP
<PAGE> 2
EXHIBIT 23(A)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated January 18, 1995 included in the First United Bancshares, Inc.
Form 10-K for the year ended December 31, 1994, into the Company's previously
filed Registration Statement on Form S-8 (File No. 033-56387).
ARTHUR ANDERSEN LLP
Jackson, Mississippi
March 29, 1995.
<PAGE> 1
EXHIBIT 23(B)
CONSENT OF MARTIN & COMPANY
<PAGE> 2
EXHIBIT 23(B)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation or
report on the consolidated financial statements of InvestArk Bankshares, Inc.
dated January 28, 1994 included in the First United Bancshares, Inc. Form 10-K
for the year ended December 31, 1994, into First United Bancshares, Inc.'s
previously filed Registration Statement on Form S-8 (File No. 033-56387).
Martin & Company
Little Rock, Arkansas
March 29, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 49,419
<INT-BEARING-DEPOSITS> 7,264
<FED-FUNDS-SOLD> 17,490
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 324,679
<INVESTMENTS-CARRYING> 164,357
<INVESTMENTS-MARKET> 156,850
<LOANS> 512,493
<ALLOWANCE> 9,667
<TOTAL-ASSETS> 1,106,610
<DEPOSITS> 953,904
<SHORT-TERM> 22,480
<LIABILITIES-OTHER> 7,892
<LONG-TERM> 12,825
<COMMON> 5,159
0
0
<OTHER-SE> 104,350
<TOTAL-LIABILITIES-AND-EQUITY> 1,106,610
<INTEREST-LOAN> 41,084
<INTEREST-INVEST> 30,570
<INTEREST-OTHER> 1,560
<INTEREST-TOTAL> 73,214
<INTEREST-DEPOSIT> 28,618
<INTEREST-EXPENSE> 30,253
<INTEREST-INCOME-NET> 42,961
<LOAN-LOSSES> 334
<SECURITIES-GAINS> 9
<EXPENSE-OTHER> 8,818
<INCOME-PRETAX> 19,977
<INCOME-PRE-EXTRAORDINARY> 19,977
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,008
<EPS-PRIMARY> 2.72
<EPS-DILUTED> 2.72
<YIELD-ACTUAL> 7.18
<LOANS-NON> 2,117
<LOANS-PAST> 555
<LOANS-TROUBLED> 326
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 9,972
<CHARGE-OFFS> 2,202
<RECOVERIES> 1,563
<ALLOWANCE-CLOSE> 9,667
<ALLOWANCE-DOMESTIC> 9,667
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,504
</TABLE>
