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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, 1995
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:
NAME OF EACH EXCHANGE ON
TITLE OF CLASS WHICH REGISTERED
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Common Stock, $1.00 par value NASDAQ-NMS
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, 1996, 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 $182,790,000.00. (For purposes of the above
stated amount only, all directors and officers of the registrant are presumed
to be affiliates.)
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, 1995 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, 1995
CROSS REFERENCE SHEET AND INDEX
PART I.
<TABLE>
<CAPTION>
ITEM NO. LOCATION*
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<S> <C> <C>
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 1995
Annual Report
to Stockholders
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . Page 20 of the 1995
Annual Report to
Stockholders
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pages 4-19 of the
1995 Annual Report
to Stockholders
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . Pages 23-40 of the
1995 Annual Report
to Stockholders
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
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FIRST UNITED BANCSHARES, INC.
ANNUAL REPORT ON FORM 10-K
December 31, 1995
CROSS REFERENCE SHEET AND INDEX (CONTINUED)
PART III.
<TABLE>
<CAPTION>
ITEM NO. LOCATION*
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<S> <C> <C>
Item 10. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pages 41-43 of the
1995 Annual Report
to Stockholders
</TABLE>
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 1996 Annual Meeting of Stockholders
filed with the Securities and Exchange Commission.
PART IV.
<TABLE>
<S> <C> <C>
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 7
</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, 1995. The
Registrant's 1995 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 1995 Annual Report to Stockholders
and Definitive Proxy Statement.
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FIRST UNITED BANCSHARES, INC.
ANNUAL REPORT ON FORM 10-K
December 31, 1995
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 1995,
First United acquired seven other banks in different cities within Arkansas and
Texas. 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),
First Stuttgart Bank and Trust Company (FSBTC) and FirstBank, Texarkana, Texas
(FBTX). 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 eight 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 and FBTX is subject to the regulation of the Texas Department of
Banking. 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 12 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, 1995, First United had approximately 578 full-time
equivalent employees and considers its relationship with its employees to be
good.
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ITEM 2. PROPERTIES.
PROPERTIES
The Banks hold in fee and primarily occupy their main office
buildings. In addition, the subsidiaries occupy and operate branches located in
twenty-three (23) communities throughout Arkansas and Texas. 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.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<S> <C>
James V. Kelley, 46 . . . . . . . . . . . . Chairman, President and Chief Executive Officer
of First United since 1987; Chairman and Chief
Executive Officer of FNBE since 1985.
Robert G. Dudley, 63 . . . . . . . . . . . . Secretary of First United since 1983; President
of FNBE since 1985.
John E. Burns, 37 . . . . . . . . . . . . . Vice President and Chief Financial Officer of
First United since 1993; Vice President and
Director of Audit from 1988 to 1993.
</TABLE>
SIGNIFICANT OTHER EMPLOYEES
<TABLE>
<S> <C>
Robert L. Jones, 60 . . . . . . . . . . . . President and Chief Executive Officer of FNBM
since 1991; President and Chief Executive
Officer of MPBC from 1984 to 1991.
Jim N. Harwood, 56 . . . . . . . . . . . . . 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 23-40 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 41-43 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
1995 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
1995 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
1995 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
1995 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, 1995 as required by Item 8, are:
<TABLE>
<CAPTION>
Page(s) in 1995 Annual
Report to Stockholders
<S> <C>
Reports of Management and Independent Auditors ............................ Page 40
Consolidated Statements of Condition as of
December 31, 1995 and 1994 ............................................ Page 23
Consolidated Statement of Income
for the three years ended December 31, 1995, 1994 and 1993 ............ Page 24
Consolidated Statements of Changes in Capital Accounts
for the three years ended December 31, 1995, 1994 and 1993 ............ Page 25
Consolidated Statements of Cash Flows
for the three years ended December 31, 1995, 1994 and 1993 ............ Page 26
Notes to Consolidated Financial Statements-December 31, 1995 .............. Pages 28-39
</TABLE>
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 February 8, 1995, describing under Item 2 that First United Bancshares, Inc.
had consummated an Agreement and Plan of Reorganization with FirstBank,
Texarkana, Texas, whereby First United Bancshares, Inc. acquired ownership of
one hundred percent (100%) of the issued and outstanding stock of FirstBank,
Texarkana, Texas.
First United Bancshares, Inc. filed an amendment to its Current Report
on Form 8-K dated February 8, 1995 on Form 8-K/A on April 14, 1995, which
provided pro forma financial statements of First United and FirstBank,
Texarkana, Texas and historical financial statements of FirstBank, Texarkana,
Texas.
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 18th day of
March, 1996.
FIRST UNITED BANCSHARES, INC.
By: /s/ JOHN E. BURNS
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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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
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<S> <C> <C>
/s/ JAMES V. KELLEY
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James V. Kelley Chairman of the Board, President, Chief March 18, 1996
Executive Officer
/s/ JOHN E. BURNS
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John E. Burns Vice President, Chief Financial Officer, March 18, 1996
Principle Accounting Officer
/s/ E. LARRY BURROW
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E. Larry Burrow Director March 18, 1996
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Claiborne P. Deming Director March 18, 1996
</TABLE>
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<TABLE>
<S> <C> <C>
/s/ WILLIAM A. ECKERT, JR. Director March 18, 1996
- --------------------------
William A. Eckert, Jr.
/s/ ROY E. LEDBETTER Director March 18, 1996
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Roy E. Ledbetter
/s/ MICHAEL F. MAHONY Director March 18, 1996
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Michael F. Mahony
/s/ RICHARD H. MASON Director March 18, 1996
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Richard H. Mason
/s/ JACK W. MCNUTT Director March 18, 1996
- ----------------------------
Jack W. McNutt
/s/ WILLIAM E. MORGAN Director March 18, 1996
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William E. Morgan
Director March 18, 1996
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R. Madison Murphy
/s/ ROBERT C. NOLAN Director March 18, 1996
- -----------------------------
Robert C. Nolan
/s/ PAULA M. O'CONNOR Director March 18, 1996
- --------------------------
Paula M. O'Connor
/s/ KATHERINE P. OZMENT Director March 18, 1996
- ------------------------
Katherine P. Ozment
/s/ CAL PARTEE, JR. Director March 18, 1996
- ---------------------------------
Cal Partee, Jr.
</TABLE>
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<TABLE>
<S> <C> <C>
/S/ CHESLEY PRUET Director March 18, 1996
- ------------------------------
Chesley Pruet
Director March 18, 1996
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John D. Trimble, Jr.
Director March 18, 1996
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Ralph C. Weiser
Director March 18, 1996
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David M. Yocum, Jr.
</TABLE>
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FIRST UNITED BANCSHARES, INC.
ANNUAL REPORT ON FORM 10-K
December 31, 1995
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
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<S> <C>
2 Agreement and Plan of Reorganization dated July 28, 1994 between First United
Bancshares, Inc. and FirstBank, Texarkana, Texas (filed as Exhibit 2 to the
Annual Report on Form 10-K for the year ended December 31, 1994) incorporated
herein by reference.
3(a) Restated Articles of Incorporation of First United Bancshares, Inc. (filed as
Exhibit 3(a) to the Annual Report on Form 10-K for the year ended December 31,
1994) incorporated herein by reference.
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 1995 Annual Report to Stockholders which is included herein as Exhibit
13).
13 First United Bancshares, Inc. 1995 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.
</TABLE>
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EXHIBIT 3(B)
RESTATED BYLAWS OF FIRST UNITED BANCSHARES, INC.
<PAGE> 2
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, and shall at all times
during the usual hours for business, beginning two (2) business days after
notice of the meeting is given, 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 a majority of the stock issued and
outstanding entitled to vote thereat, 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 stockholders owning, in the aggregate, not less than 25 percent
of the stock of this Corporation, or any three or more stockholders owning, in
the aggregate, not less than 25 percent of the stock of this Corporation may
call a special meeting of stockholders at any time.
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Section 7. NOTICE OF STOCKHOLDERS MEETING. Written or printed
notice, stating the place and time of any annual or special stockholders
meeting, and the general nature of the business to be considered, shall be
given by first class mail, postage prepaid, by the President or Secretary to
each stockholder entitled to vote thereat at his last known post office
address, mailed at least ten (10) days before the 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 number of Directors shall
be fixed at the number elected to serve at the annual meeting of stockholders.
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. 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 3. 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 4. 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 5. 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 and originals or copies of all
other records required by law shall always be kept at the principal office in
Arkansas.
Section 6. 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 7. 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> 4
(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 tine 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 8. 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 9. BOARD ACTION WITHOUT A MEETING. Action taken by all 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, and (b) that each member of the Board consented to the
Board acting informally and to the action taken in respect to such matter.
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
3
<PAGE> 5
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 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 shall be a Chairman of the
Board, a President, and a Secretary, and such other officers, including a
Treasurer, 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
Corporation.
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
Corporation 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 Corporation and shall, subject to the control of the Board of
Directors, supervise and manage the affairs of the Corporation. 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
acquittances 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
4
<PAGE> 6
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 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. If the office of Treasurer is not filled it shall be the
duty of the President to see that the duties of the Treasurer are performed.
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. CERTIFICATES OF STOCK. Certificates of stock, numbered
and with the seal of the Corporation affixed, signed by the President, and the
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
Corporation 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
5
<PAGE> 7
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 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,
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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 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.
1995 ANNUAL REPORT TO STOCKHOLDERS
<PAGE> 2
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22-39
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Report of Management on Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Executive Officers and Directors of First United and its Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 41-43
Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
================================================================================================================
FIRST UNITED BANCSHARES, INC.
(Dollars in Thousands, Except Per Share Data) 1995 1994 % Change
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME DATA
Net Income $ 15,204 $ 14,008 8.54%
Net Interest Income 49,485 42,961 15.19%
- ----------------------------------------------------------------------------------------------------------------
PER COMMON SHARE DATA
Net Income $ 2.95 $ 2.72 8.46%
Book Value (End of Period) 25.28 21.23 19.08%
Tangible Book Value (End of Period) 23.00 20.48 12.30%
Market Value (End of Period) 41.50 30.25 37.19%
Cash Dividends .85 .74 14.86%
- ----------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA (Year End)
Total Securities(1) $540,121 $489,036 10.45%
Loans(2) 642,118 512,493 25.29%
Earning Assets(2) 1,238,149 1,026,283 20.64%
Total Assets 1,336,020 1,106,610 20.73%
Deposits 1,127,914 953,904 18.24%
Stockholders' Equity 130,405 109,509 19.08%
- ----------------------------------------------------------------------------------------------------------------
KEY RATIOS
Return on Average Assets 1.19% 1.24%
Return on Average Equity 12.38% 12.87%
Net Interest Margin (FTE) 4.33% 4.29%
Allowance for Loan Losses to Loans(2) 1.65% 1.88%
Equity to Assets(3) 9.67% 10.69%
Leverage Ratio 8.87% 10.20%
Primary Capital Ratio 10.39% 11.46%
================================================================================================================
</TABLE>
(1) Includes available-for-sale and investment securities.
(2) Net of unearned income.
(3) Excludes unrealized gains or losses on securities available-for-sale.
[1]
<PAGE> 3
<PAGE> 4
To Our Stockholders and Friends:
Consolidation of the banking industry was certainly prevalent in 1995 and this
coming year promises to be no different. Since we are an active and willing
participant in this consolidation through the purchase of banks, it is
appropriate that we review our operating philosophy.
We are an owner-operator of community banks. As such, we are committed to the
communities and customers we serve. It is our desire that we keep
decision-making as close to the customer as prudently possible. Within the
framework of our overall structure and policies, our banks are able to respond
and respond quickly to the needs of their particular market. This type of
"operating model" appeals not only to loyal customers but also to energetic,
achievement-oriented employees.
By incorporating this philosophy, our individual banks are able to offer their
communities quality, personal service. Together, our banks are able to offer
even more - more loan capabilities, more resources, and more security. This
combination allows our banks to combine the best of locally developed products
and services with greater security and lending capacity through joint
affiliation.
First United's operating model also allows our banks to take advantage of
efficiencies of scale. For example, in the area of technology, there have been
systems developed which will allow our customers new and additional ways to
interact with their bank. With growing customer acceptance of this technology,
First United is evaluating various new management information and product
delivery systems for installation to begin in the third quarter of this year.
This investment will allow us to redirect our costs and focus of operations
away from back office support and directly to the customer at the point of
sale. This will be a positive addition to our already convenient distribution
system.
Another example of a joint effort among our banks is the formation of the First
United Trust Company. Approval has recently been received for the First United
Trust Company, N.A., which will function as a subsidiary of First United. The
Trust Company was formed to allow the banks to further solidify customer
relationships by combining the operational support in one location. This
streamlining effect will free the personnel at the individual banks to
concentrate on developing and maintaining account relationships. The formation
of the Trust Company demonstrates our continued commitment to providing quality
service at the local level.
Let me take this opportunity to now briefly summarize our financial results for
1995. Our profits from continuing operations in 1995 were $15.2 million or
$2.95 per share, the highest in your Company's history. This compares with
earnings of $14.0 million or $2.72 per share in 1994 and $13.2 million or $2.56
per share in 1993. These sustainable earnings build value for our stockholders,
a value which is reflected in the 37% increase in our stock's market value
during 1995.
Another key measure of our profitability is return on average assets (ROA). In
1995, our ROA was 1.19% compared with 1.24% in 1994. While loan demand in many
of our markets remains soft, our ROA consistently remains at or above
acceptable levels because of our focus on maintaining and increasing operating
efficiencies.
Total assets of your Company were approximately $1.34 billion as of year-end
1995, while total deposits reached $1.13 billion and total loans grew 25.29% to
$642 million. We continue to focus our attention on asset and loan quality
because of the impact these factors have on earnings. Non-performing loans as a
percentage of outstanding loans remained at a low level of .62% at year-end
1995, compared to .58% in 1994 and .64% in 1993.
For the fourth consecutive year, your Board of Directors raised the quarterly
dividend rate on our common stock. During the second quarter of 1995, the cash
dividend was raised 16% to $.22 per share which reflects our confidence in the
Company's ability to generate sustainable earnings.
As always, 1995's good results would not have been possible without the
professionalism, hard work and dedication of our employees and directors. They
join me in thanking you for your continued support and recommendation of First
United and its banks.
James V. Kelley
Chairman, President and Chief Executive
Officer
[2]
<PAGE> 5
Rain, sun, earth and time unite to create a towering oak from a tiny acorn.
Private enterprise and the assets of First United also work together to grow
new homes and businesses in the communities we serve.
[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 1995, First United increased its quarterly cash dividend by 16% as
a result of higher sustainable earnings. The current annual dividend rate is
$.88 per share versus $.76 prior to the increase.
On January 31, 1995, First United acquired the issued and outstanding
stock of FirstBank, Texarkana, Texas (FirstBank) for cash payments of
approximately $25.0 million in a transaction accounted for as a purchase.
FirstBank had assets of approximately $154.0 million at the date of
acquisition.
Operations for 1995 resulted in net income of $15.2 million or $2.95
per share compared to $14.0 million or $2.72 per share in 1994 and $13.2
million or $2.56 per share in 1993. 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 1995 as compared to 1994 occurred in net interest income,
non-interest income and non-interest expense. A more detailed discussion of the
components of net income is given throughout this Financial Analysis.
Net income as a percentage of total average assets (ROA) was 1.19% in
1995 versus 1.24% in 1994 and 1.22% in 1993. The return on stockholders' equity
(ROE) was 12.38% in 1995 versus 12.87% in 1994 and 12.70% in 1993. 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 at December 31, 1995 were $1.3 billion as compared to the
year-end 1994 balance of $1.1 billion. The book value of First United's common
stock increased 19% to $25.28 per share in 1995 from $21.23 per share in 1994.
Cash dividends were $.85 per share in 1995 and $.74 per share in 1994 and $.66
per share in 1993.
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.
TABLE 1: CHANGES IN PER SHARE INCOME
<TABLE>
<CAPTION>
December 31,
- -----------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prior year income $2.72 $3.05 $2.46
Increase(decrease)
attributable to:
Net interest income 1.26 (.02) .11
Provision for loan losses (.05) .29 .13
Non-interest income .32 (.10) (.07)
Non-interest expense (1.13) .06 .02
Income taxes (.17) (.07) (.09)
Cumulative Effect of Accounting Change .00 (.49) .49
- -----------------------------------------------------------------------------------------------------
Current year income $2.95 $ 2.72 $ 3.05
- -----------------------------------------------------------------------------------------------------
</TABLE>
[4]
<PAGE> 7
<PAGE> 8
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, 1995 was $51.6 million, an increase of 15% over the year-end
1994 total of $45.0 million. Net interest income for the year ended December
31, 1993 was $45.1 million. The 15% increase in net interest income for 1995
was primarily the result of the effect of First United's January 1995
acquisition of FirstBank.
The net interest spread decreased in 1995 when compared with the
previous two years, from 3.51% and 3.85%, respectively, in 1994 and 1993 to
3.41% in 1995. 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 increased from a level of $1.03 billion at December 31,
1994 to a level of $1.24 billion at year-end 1995. Short-term investments
increased $31.2 million, securities increased $51.1 million and loans increased
$129.6 million. As a percentage of earning assets, short-term investments
increased from 2% to 5%, total securities decreased from 48% to 44% and loans
increased from 50% to 52%. The relative level and mix of earning assets
reflected the effects of the 1995 acquisition of FirstBank. The change in mix
can also be attributed to increased loan demand resulting from an improving
economic environment.
Interest-bearing deposits increased $135.9 million during 1995. Total
interest-bearing deposits were $934.4 million at December 31, 1995 compared
with $798.5 million at year-end 1994. Non-interest-bearing demand deposits
increased $38.1 million or 25% during 1995. The increase is attributable to the
1995 acquisition of FirstBank.
TABLE 2: ANALYSIS OF NET INTEREST MARGIN
<TABLE>
<CAPTION>
December 31,
- -------------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Yield on earning assets 8.07% 7.18% 7.30%
Break-even yield 3.68% 2.89% 2.85%
Net interest margin 4.39% 4.29% 4.45%
Net interest spread 3.41% 3.51% 3.85%
- -------------------------------------------------------------------------------
</TABLE>
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 $0.6 million in 1995 versus
$0.3 million in 1994 and $1.8 million in 1993. Since 1993, 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 the 1993 level.
NON-INTEREST INCOME
Total non-interest income was $7.8 million for 1995 compared with $6.1
million in 1994 and $6.7 million in 1993. The increase in 1995 compared to
prior year levels was primarily the result of increases in fee income earned on
deposits and trust department accounts. The increased level of deposits subject
to service charges and the level of assets under trust supervision was directly
attributable to the FirstBank acquisition.
[5]
<PAGE> 9
<PAGE> 10
NON-INTEREST EXPENSE
Non-interest expense increased 20% or $5.8 million in 1995 over 1994
levels, and decreased 1% in 1994 over 1993 levels. The acquisition of
FirstBank was largely responsible for the 1995 increase in non-interest
expense.
INCOME TAXES
Federal income taxes as a percentage of pre-tax income were 31.1% in
1995, 29.9% in 1994 and 29.8% in 1993. On January 1, 1993, First United adopted
Statement of Financial Accounting Standard (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. Additional information
regarding income taxes can be found in Note 8 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 internal audit and loan review staffs
that operate independently of the subsidiary banks. These review teams perform
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.
Construction loans outstanding at December 31, 1995 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 totaled $4.0
million and $3.0 million at December 31, 1995 and 1994, respectively. The level
of non-performing loans represented 0.6% of loans as of each of the years
ended 1995 and 1994.
TABLE 3: LOAN PORTFOLIO
<TABLE>
<CAPTION>
December 31,
- ----------------------------------------------------------------------------------------------------------------
(Dollars in Thousands) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, Financial and
Agricultural $161,804 $144,371 $108,979 $130,527 $142,818
Real Estate 366,992 283,621 309,550 250,789 247,157
Consumer Loans 108,360 82,712 78,289 65,670 64,875
Loans for Purchasing or
Carrying Securities 6,643 2,065 2,655 3,035 2,799
Financing Leases 298 181 439 1,037 12
-------- -------- -------- -------- --------
Total Loans $644,097 $512,950 $499,912 $451,058 $457,661
======== ======== ======== ======== ========
Non-Performing Assets $ 4,678 $ 3,518 $ 4,237 $ 8,579 $ 13,979
======== ======== ======== ======== ========
</TABLE>
[6]
<PAGE> 11
<PAGE> 12
In nature, strong, abundant growth always inspires. The growth of First
United, too, has been impressive as we spread beyond our home state for the
first time.
[7]
<PAGE> 13
TABLE 4: LOAN MATURITIES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
December 31, 1995
- ------------------------------------------------------------------------------------------------------
1 Year Over 1 Over
(Dollars in Thousands) or Less through 5 years 5 years Total
------- ---------------- ------- -------
<S> <C> <C> <C> <C>
Commercial, Financial & Agricultural $107,640 $42,617 $11,547 $161,804
======== ======= ======= ========
Variable Rate $49,506
Pre-determined Rate $112,298
- ------------------------------------------------------------------------------------------------------
</TABLE>
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, 1995 totalled $2.6 million compared with $2.1
million at year ended 1994. 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
1995 by approximately $0.1 million. The amount of interest income on such
non-performing loans included in net income for 1995 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 $0.7 million at year ended 1995. This compares with $0.5
million and $1.0 million at year ended 1994 and 1993, 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 allowance for
possible loan losses is maintained to absorb potential losses, and the
management of First United views the allowance as a source of financial
strength. The allowance is increased by regular provisions which are based on
the current level and character of the loan and lease portfolio, historical
charge-off experience, watch list trends and national and local economic trends
and the evaluation of specific loans. 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.
On January 1, 1995, First United adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan," as amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosure." Under
the new standard, the 1995 allowance for loan losses related to loans that are
identified for evaluation in accordance with SFAS No. 114 is based on
discounted cash flows using the loan's initial effective interest rate or the
fair value of the collateral for certain collateral dependent loans. The effect
of this statement upon adoption was not material.
Allowance for possible loan losses as a percentage of non-performing
loans was approximately 267%, 322% and 312% at December 31, 1995, 1994 and
1993, respectively.
[8]
<PAGE> 14
<PAGE> 15
TABLE 5: SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
December 31,
- ------------------------------------------------------------------------------------------------------------
(Dollars in Thousands) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance of Allowance for Loan
Losses at Beginning of Period $ 9,667 $9,972 $7,972 $7,499 $7,111
------- ------ ------ ------ ------
Allowance Applicable to Loans of
Acquired Bank 1,627 -0- 520 -0- -0-
------- ----- ------ ------ ------
Loans Charged-Off:
Commercial, Financial and
Agricultural 937 862 511 1,836 2,261
Real Estate 424 193 311 1,035 1,755
Consumer 1,323 1,138 536 409 1,018
Other 7 9 276 -0- -0-
------- ------ ------ ------ ------
Total Loans Charged-Off 2,691 2,202 1,634 3,280 5,034
------- ------ ------ ------ ------
Recoveries of Loans Previously
Charged-Off:
Commercial, Financial and
Agricultural 728 543 397 469 356
Real Estate 158 180 683 581 395
Consumer 518 840 219 217 286
------- ------ ------ ------ ------
Total Recoveries 1,404 1,563 1,299 1,267 1,037
------- ------ ------ ------ ------
Net Loans Charged-Off 1,287 639 335 2,013 3,997
------- ------ ------ ------ ------
Provision to Allowance 574 334 1,815 2,486 4,385
------- ------ ------ ------ ------
Balance at End of Period $10,581 $9,667 $9,972 $7,972 $7,499
======= ====== ====== ====== ======
Ratio of Net Charge-Offs to
Loans Outstanding .20% .12% .07% .45% .87%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
TABLE 6: ALLOCATION OF RESERVE BY CATEGORY
<TABLE>
<CAPTION>
December 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------
% Loans in % Loans in % Loans in % Loans in % Loans in
(Dollars in each each each each 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 $ 3,969 26% $4,756 29% $5,313 22% $2,922 29% $3,385 32%
Real Estate 1,307 57% 923 55% 1,044 62% 2,063 56% 1,364 54%
Consumer 2,132 17% 1,484 16% 1,113 16% 576 15% 1,157 14%
Unallocated 3,173 -0- 2,504 -0- 2,502 -0- 2,411 -0- 1,593 -0-
- -----------------------------------------------------------------------------------------------------------------------------------
Total $10,581 100% $9,667 100% $9,972 100% $7,972 100% $7,499 100%
- -----------------------------------------------------------------------------------------------------------------------------------
Allowance as a
Percentage of
Total Loans 1.65% 1.88% 1.99% 1.77% 1.64%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[9]
<PAGE> 16
All non-performing assets of First United as of December 31, 1995 were
previously classified as substandard, doubtful or loss by First United or its
regulators. At December 31, 1995, First United's management has no loans about
which serious doubts exist as to collectibility other than those disclosed in
Table 7.
TABLE 7: RISK ELEMENTS
<TABLE>
<CAPTION>
December 31,
- ---------------------------------------------------------------------------------------------------------
(Dollars in Thousands) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-Performing Loans:
Non-Accrual Loans:
Commercial & Financial $ 1,843 $ 620 $ 1,840 $ 1,610 $ 4,373
Real Estate 724 1,427 713 829 1,075
Consumer 76 70 80 68 106
- ---------------------------------------------------------------------------------------------------------
Total Non-Accrual Loans 2,643 2,117 2,633 2,507 5,554
- ---------------------------------------------------------------------------------------------------------
Past Due 90 Days or More
and Still Accruing:
Commercial 83 197 64 92 1,176
Real Estate 117 151 51 554 192
Consumer 272 207 227 156 256
- ---------------------------------------------------------------------------------------------------------
Total Past Due 90 Days
or More and Still
Accruing 472 555 342 802 1,624
- ---------------------------------------------------------------------------------------------------------
Renegotiated Loans 851 326 223 1,414 16
- ---------------------------------------------------------------------------------------------------------
Total Non-Performing Loans 3,966 2,998 3,198 4,723 7,194
Other Real Estate 712 520 1,039 3,856 6,785
- ---------------------------------------------------------------------------------------------------------
Total Non-Performing Assets $ 4,678 $ 3,518 $ 4,237 $8,579 $13,979
- ---------------------------------------------------------------------------------------------------------
Non-Performing Loans
as a % of Outstanding Loans .62% .58% .64% 1.05% 1.57%
Non-Performing Assets
as a % of Equity Capital 3.59% 3.21% 3.92% 8.99% 16.34%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
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 SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." Under this accounting standard, debt 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
TABLE 8: SECURITIES CARRYING VALUE(1)
<TABLE>
<CAPTION>
(Dollars in Thousands) December 31,
- --------------------------------------------------------------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
U.S. Treasury Securities and
Other U.S. Government
Agencies $279,981 $266,180 $285,431
Obligations of States and
Political Subdivisions 80,623 72,980 70,942
Mortgage-Backed Securities 166,627 139,368 144,089
Other Securities 12,890 10,508 12,937
-------- -------- --------
$540,121 $489,036 $513,399
======== ======== ========
</TABLE>
(1) Includes available-for-sale and investment securities.
[10]
<PAGE> 17
TABLE 9: SECURITIES MATURITY AND WEIGHTED AVERAGE YIELDS
<TABLE>
<CAPTION>
Investment Securities
-----------------------------------------------------------------------------
Maturing
-----------------------------------------------------------------------------
After One But After Five But
Within One Year Within Five Years Within Ten Years After Ten Years
------------------------------------------------------------------------------
(Dollars in Thousands)
Amount Yield Amount Yield Amount Yield Amount Yield
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities
and Other U.S.
Government Agencies $ 4,438 5.54% $ 4,133 5.85% $ 497 7.35% $ -0- 0.00%
State & Political
Subdivisions 9,888 6.05% 41,125 4.98% 25,755 5.31% 2,112 6.24%
Mortgage-Backed
Securities -0- 0.00% -0- 0.00% -0- 0.00% -0- 0.00%
Other -0- 0.00% 10 5.50% 1,010 6.65% 2,059 3.98%
------- ----- ------- ----- ------- ----- ------ -----
Total $14,326 5.90% $45,268 5.06% $27,262 5.40% $4,171 5.13%
======= ===== ======= ===== ======= ===== ====== =====
</TABLE>
TABLE 9a: SECURITIES MATURITY AND WEIGHTED AVERAGE YIELDS(1)
<TABLE>
<CAPTION>
Mortgage-Backed Available-for-Sale
Securities Securities
-------------------------------------------
(Dollars in Thousands)
Amount Yield Amount Yield
-------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities
and Other U.S.
Government Agencies $ -0- 0.00% $270,913 6.17%
State & Political
Subdivisions -0- 0.00% 1,743 6.01%
Mortgage-Backed
Securities 110,066 6.59% 56,561 6.87%
Other -0- 0.00% 9,811 8.66%
-------- ----- -------- -----
Total $110,066 6.59% $339,028 6.36%
======== ===== ======== =====
</TABLE>
(1) Yield information does not give effect to changes in fair value that are
reflected as a separate component of stockholders' equity.
to available-for-sale and recorded an unrealized gain, net of tax, of
approximately $1.3 million as a separate component of the capital accounts.
Also in connection with First United's acquisition of InvestArk Bankshares,
Inc. ("InvestArk"), First United reclassified to available-for-sale securities
approximately $55.7 million of securities that InvestArk had previously
classified as investment securities. The carrying value of available-for-sale
securities that were sold during 1995 was approximately $42.4 million as
compared to $3.6 million and $1.0 million in 1994 and 1993, respectively. The
1995 sales of available-for-sale securities were largely attributable to
management's effort to maintain an appropriate position after the impact of
available-for-sale securities acquired through the FirstBank transaction. See
Notes 3 and 4 of the Notes to the Consolidated Financial Statements for
additional information on available-for-sale and investment securities.
TABLE 10: AVERAGE DEPOSITS
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------
(Dollars in Thousands) 1995 1994 1993
- --------------------------------------------------------- --------------------- --------------------
Amount Rate Amount Rate Amount Rate
- --------------------------------------------------------- --------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Non-interest-bearing
Demand Deposits $ 220,080 0.00% $179,742 0.00% $136,322 0.00%
Savings Deposits and
Interest-bearing
Deposits 318,525 3.25% 324,084 2.95% 341,338 2.62%
Time Deposits of
$100 or more 153,077 5.48% 127,848 3.95% 139,776 3.98%
Other Time Deposits 403,623 5.32% 334,838 4.18% 316,725 4.10%
---------- -------- --------
Total $1,095,305 $966,512 $934,161
========== ======== ========
</TABLE>
[11]
<PAGE> 18
Even the most mature and established tree must be renewed each year. Likewise,
First United continues to blossom, adding new growth in towns such as
Stuttgart.
[12]
<PAGE> 19
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 10.39% at December 31, 1995 compared with 11.46% in 1994 and 10.53% in 1993.
First United's stockholders' equity for the year ended December 31, 1995
totalled $130.4 million compared with $109.5 million in 1994 and $108.1 million
in 1993. Retention of earnings will continue to be emphasized in order to
provide a strong capital base to support future growth.
TABLE 11: MATURITIES OF TIME DEPOSITS OF $100,000 AND OVER
<TABLE>
<CAPTION>
(Dollars in Thousands) December 31, 1995
-----------------
<S> <C>
Three Months or Less $ 76,359
Over 3 Through 6 Months 39,157
Over 6 Through 12 Months 42,034
Over 12 Months 29,779
--------
Total $187,329
========
</TABLE>
TABLE 12: SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
December 31,
------------------------------------
(Dollars in Thousands) 1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Balance at December 31 $46,895 $22,480 $30,512
Daily Average Amount Outstanding 36,003 30,197 33,247
Maximum Month-End Balance 46,988 40,405 30,512
Daily Average Interest Rate 4.89% 3.43% 2.26%
Weighted Average Interest Rate on
Balance at December 31 4.96% 4.77% 2.86%
</TABLE>
TABLE 13: CAPITAL RATIOS(1)
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1995 1994 1993
--------- -------- -------
<S> <C> <C> <C>
Equity Capital to Assets 9.67% 10.69% 9.72%
Primary Capital to Assets 10.39% 11.46% 10.53%
Leverage Ratio 8.87% 10.20% 9.31%
Tier 1 Capital 15.65% 18.85% 18.83%
Risk-Based Capital 16.90% 20.10% 19.53%
Dividend Payout Ratio(2) 28.81% 27.53% 23.62%
</TABLE>
(1) Excludes unrealized gains and losses 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, 1995 First United Requirements
- -----------------------------------------------------------------------------
<S> <C> <C>
Total Capital/Total Assets 10.39% 6.00%
Primary Capital/Total Assets 10.39% 5.50%
Total Risk-Based Capital 16.90% 8.00%
Tier 1 Capital 15.65% 4.00%
Leverage Ratio 8.87% 3.00%
</TABLE>
[13]
<PAGE> 20
<PAGE> 21
TABLE 15: COMMON STOCK MARKET PRICE AND DIVIDENDS PER SHARE
<TABLE>
<CAPTION>
1995 High Low Div. Paid
- ----------------------------------------------------------------------
<S> <C> <C> <C>
First quarter $34 $28 1/2 $.19
Second quarter 37 1/2 32 1/2 .22
Third quarter 43 37 1/2 .22
Fourth quarter 43 40 .22
<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>
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.
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.
During the second quarter of 1994, First United increased its annual
cash dividend from $0.68 per share to $0.76 per share and during the second
quarter of 1995, First United increased its annual dividend to $0.88 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 1995 and 1994 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, 1996, the Company had approximately 2,000 stockholders
of record.
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.
[14]
<PAGE> 22
<PAGE> 23
Whereas in a rising interest rate environment, an institution with a negative
gap could experience the opposite results. At December 31, 1995, 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, 1995 is presented in Table 16.
TABLE 16: INTEREST RATE SENSITIVE BALANCE SHEET
<TABLE>
<CAPTION>
By Repricing Dates At December 31, 1995
- --------------------------------------------------------------------------------------------------------------
(Dollars in 0-30 31-90 91-180 181-365 1-5 Over 5
Thousands) Days Days Days Days Years Years Total
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Short-Term
Investments $55,126 $ -0- $ 689 $ -0- $ 95 $ -0- $ 55,910
Total Securities 49,228 39,786 33,716 60,128 283,786 73,477 540,121
Loans and Leases,
Net of Unearned
Income 145,461 56,285 72,314 118,326 208,281 41,451 642,118
------- --------- --------- --------- --------- --------- -----------
Total Rate Sensitive
Assets $249,815 $ 96,071 $106,719 $178,454 $492,162 $114,928 $1,238,149
-------- --------- -------- -------- -------- -------- ----------
SOURCES OF FUNDS
Savings and Interest-
bearing Demand
Deposits 346,119 -0- -0- -0- -0- -0- 346,119
Time Deposits 93,938 134,533 136,955 125,297 97,309 230 588,262
Short-Term
Borrowings 46,895 -0- -0- -0- -0- -0- 46,895
Long-Term Debt 5,000 -0- -0- 872 8,599 2,361 16,832
---------- ---------- ---------- ----------- ---------- --------- -----------
Total Rate Sensitive
Liabilities $491,952 $134,533 $136,955 $126,169 $105,908 $ 2,591 $ 998,108
-------- -------- -------- -------- -------- --------- ----------
Interest Rate
Sensitivity Gap (242,137) (38,462) (30,236) 52,285 386,254 112,337 240,041
Cumulative Interest
Rate Sensitivity Gap (242,137) (280,599) (310,835) (258,550) 127,704 240,041
Cumulative Interest
Rate Sensitivity Gap
as a Percent of Total
Assets (18%) (21%) (23%) (19%) 10% 18%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
[15]
<PAGE> 24
With each season come changes that offer special opportunity. First
United is moving into new territory, allowing us to diversify our investments
in different communities, such as Melbourne in North Central Arkansas.
[16]
<PAGE> 25
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 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
In March 1995, the Financial Accounting Standards Board (FASB) issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." This statement requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the asset's carrying amount. SFAS No.
121 is effective for fiscal years beginning after December 15, 1995. The
adoption of this statement will not have a material impact on the consolidated
financial statements.
The FASB has also issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights and Excess Servicing Receivables and for Securitization of
Mortgage Loans." The new statement amends Statement No. 65, "Accounting for
Certain Mortgage Banking Activities" and primarily eliminates the distinction
between purchased mortgage servicing rights and mortgage servicing rights on
loans originated by the financial institution. SFAS No. 122 is effective for
fiscal years beginning after December 15, 1995. The adoption of this statement
will not have a material impact on the consolidated financial statements.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation." This statement establishes financial accounting and
reporting standards for stock-based employee compensation plans and is
effective for fiscal years beginning after December 15, 1995. The adoption of
this statement will not have a material effect on First United's consolidated
financial statements.
[17]
<PAGE> 26
<PAGE> 27
TABLE 17: SUMMARY OF AVERAGE BALANCE SHEETS, INTEREST RATES AND CHANGES IN NET
INTEREST INCOME (FTE)(1)
<TABLE>
<CAPTION>
1995
- --------------------------------------------------------------------------------------------------------------------------
Average
(Dollars in Thousands) Balance Interest Rate
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
INTEREST-EARNING ASSETS:
Loans (net of unearned income) $ 615,338 $57,082 9.28%
Securities(2):
Taxable Securities 454,186 29,948 6.59%
Non-taxable Securities 76,060 6,120 8.05%
Money-Market Assets:
Federal Funds Sold and Securities Purchased
Under Agreements to Resell and Other Short-
Term Investments 30,401 1,726 5.68%
- --------------------------------------------------------------------------------------------------------------------------
Total Interest-Earning Assets 1,175,985 94,876 8.07%
- --------------------------------------------------------------------------------------------------------------------------
NON-INTEREST-EARNING ASSETS:
Cash and Due From Banks 58,086
Premises and Equipment, Net 23,754
Other Assets 32,384
Less Allowance for Loan Losses (11,132)
- --------------------------------------------------------------------------------------------------------------------------
Total $1,279,077
==========================================================================================================================
LIABILITIES
INTEREST-BEARING LIABILITIES
Savings and Interest-bearing Deposits $ 318,525 $10,348 3.25%
Time Deposits of $100 or More 153,077 8,384 5.48%
Other Time Deposits 403,623 21,456 5.32%
Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase 36,003 1,761 4.89%
Notes Payable 17,221 1,301 7.55%
- --------------------------------------------------------------------------------------------------------------------------
Total Interest-bearing Liabilities 928,449 43,250 4.66%
- --------------------------------------------------------------------------------------------------------------------------
NON-INTEREST-BEARING LIABILITIES:
Demand Deposits 220,080
Other Liabilities 11,809
Stockholders' Equity 118,739
- --------------------------------------------------------------------------------------------------------------------------
Total $1,279,077
==========================================================================================================================
Net Interest-Earnings $51,626
==========================================================================================================================
Net Yield on Interest-Earning Assets 4.39%
==========================================================================================================================
</TABLE>
(1) Marginal Tax Rate of 35%.
(2) Includes available-for-sale and investment securities.
<TABLE>
<CAPTION>
1994 1995 Compared to 1994
- --------------------------------------------------------- ---------------------------------------------
Total Due To Due to
Average Increase Change in Change in
Balance Interest Rate (Decrease) Volume Rate
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 501,721 $41,084 8.19% $15,998 $ 9,304 $ 6,694
449,150 26,792 5.97% 3,156 300 2,856
68,417 5,812 8.49% 308 649 (341)
28,701 1,560 5.44% 166 92 74
- --------------------------------------------------------------------------------------------------------
1,047,989 75,248 7.18% 19,628 10,345 9,283
- --------------------------------------------------------------------------------------------------------
55,417
14,577
19,112
(9,778)
- --------------------------------------------------------------------------------------------------------
$1,127,317
========================================================================================================
$ 324,084 $ 9,563 2.95% $ 785 $ (164) $ 949
127,848 5,054 3.95% 3,330 997 2,333
334,838 14,001 4.18% 7,455 2,876 4,579
30,197 1,037 3.43% 724 199 525
6,784 598 8.81% 703 920 (217)
- --------------------------------------------------------------------------------------------------------
823,751 30,253 3.67% 12,997 4,828 8,169
- --------------------------------------------------------------------------------------------------------
179,742
15,008
108,816
- --------------------------------------------------------------------------------------------------------
$1,127,317 $ 6,631 $ 5,517 $ 1,114
========================================================================================================
$44,995
========================================================================================================
4.29%
========================================================================================================
</TABLE>
[18]
<PAGE> 28
<PAGE> 29
<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 $ 3,671 $ (497)
470,478 29,292 6.23% (2,500) (1,328) (1,172)
56,412 5,860 10.39% (48) 1,247 (1,295)
30,285 957 3.16% 603 (50) 653
- --------------------------------------------------------------------------------------------------------
1,014,600 74,019 7.30% 1,229 3,540 (2,311)
- --------------------------------------------------------------------------------------------------------
49,771
12,425
19,109
(8,693)
- --------------------------------------------------------------------------------------------------------
$1,087,212
========================================================================================================
$ 341,338 $ 8,931 2.62% $ 632 $ (451) $ 1,083
139,776 5,562 3.98% (508) (475) (33)
316,725 12,996 4.10% 1,005 743 262
33,247 750 2.26% 287 (69) 356
7,894 666 8.44% (68) (94) 26
- --------------------------------------------------------------------------------------------------------
838,980 28,905 3.45% 1,348 (346) 1,694
- --------------------------------------------------------------------------------------------------------
136,322
7,858
104,052
- --------------------------------------------------------------------------------------------------------
$1,087,212
========================================================================================================
$45,114 $ (119) $ 3,886 $(4,005)
========================================================================================================
4.45%
========================================================================================================
</TABLE>
[19]
<PAGE> 30
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
(In Thousands, Except Per Share Data)
------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Total Interest Income $ 92,735 $ 73,214 $ 71,968 $ 77,570 $ 84,935
Net Interest Income 49,485 42,961 43,063 42,511 36,710
Provision for Possible
Loan Losses 574 334 1,815 2,486 4,712
Income Before
Cumulative Effect of a
Change In Accounting
Principle 15,204 14,008 13,215 12,676 8,454
Net Income 15,204 14,008 15,737 12,676 8,454
PER SHARE DATA
Income Before
Cumulative Effect of a
Change in Accounting
Principle $ 2.95 $ 2.72 $ 2.56 $ 2.46 $ 1.64
Net Income 2.95 2.72 3.05 2.46 1.64
Cash Dividends Paid .85 .74 .66 .60 .50
SELECTED BALANCE SHEET ITEMS
Year Ended Balances
Total Assets
Total Securities(1) $1,336,020 $1,106,610 $1,123,598 $1,086,467 $1,038,320
Net Loans(2) 540,121 489,036 513,399 509,552 446,063
Total Deposits 642,118 512,493 499,305 450,633 456,471
Notes Payable 1,127,914 953,904 969,749 943,097 909,703
Capital Accounts 16,832 12,825 7,723 8,821 10,299
130,405 109,509 108,122 95,438 85,571
</TABLE>
(1) Includes available-for-sale and investment securities.
(2) Net of unearned discount.
[20]
<PAGE> 31
QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Quarter Ended
(In Thousands, Except Per Share Data)
-----------------------------------------------------
(Unaudited) March 31 June 30 Sept. 30 Dec. 31
-------- --------- --------- --------
<S> <C> <C> <C> <C>
1995
Interest Income $ 21,052 $ 22,948 $ 23,600 $ 25,135
Interest Expense 9,497 10,792 11,288 11,673
Net Interest Income 11,555 12,156 12,312 13,462
Provision for Possible Loan Losses (46) (61) (300) (167)
Other Income 1,905 2,157 2,173 1,570
Other Expense 8,188 8,696 8,434 9,326
Income Tax Expense 1,557 1,742 1,804 1,765
--------- --------- --------- ---------
Net Income $ 3,669 $ 3,814 $ 3,947 $ 3,774
========= ========= ========= =========
Earnings Per Share $ 0.71 $ 0.74 $ 0.77 $ 0.73
========= ========= ========= =========
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
--------- --------- --------- ---------
Net Income $ 3,490 $ 3,612 $ 3,576 $ 3,330
========= ========= ========= =========
Earnings Per Share $ 0.68 $ 0.70 $ 0.69 $ 0.65
========= ========= ========= =========
</TABLE>
[21]
<PAGE> 32
FINANCIAL STATEMENTS AND NOTES
[22]
<PAGE> 33
CONSOLIDATED STATEMENTS OF CONDITION
First United Bancshares, Inc.
(in thousands, except per share data)
<TABLE>
<CAPTION>
December 31,
-------------------------------
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash and Due from Banks . . . . . . . . . . . . . . . . . . . . . $ 50,485 $ 49,419
----------- ------------
Short-Term Investments:
Federal Funds Sold and Securities Purchased Under
Agreements to Resell . . . . . . . . . . . . . . . . . . . . 31,658 17,490
Other Short-Term Investments . . . . . . . . . . . . . . . . . 24,252 7,264
----------- ------------
Total Short-Term Investments . . . . . . . . . . . . . . . . 55,910 24,754
----------- ------------
Securities Available-For-Sale . . . . . . . . . . . . . . . . . . 339,028 324,679
----------- ------------
Investment Securities (Fair Value of $202,949 and $156,850 at
December 31, 1995 and 1994, respectively.) . . . . . . . . 201,093 164,357
----------- ------------
Total Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 644,097 512,950
Unearned Discount . . . . . . . . . . . . . . . . . . . . . . . (1,979) (457)
Allowance for Possible Loan Losses . . . . . . . . . . . . . . (10,581) (9,667)
----------- ------------
Net Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 631,537 502,826
----------- ------------
Premises and Equipment . . . . . . . . . . . . . . . . . . . . . 26,319 15,541
----------- ------------
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,761 3,831
----------- ------------
Other Real Estate . . . . . . . . . . . . . . . . . . . . . . . . 712 520
----------- ------------
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 19,175 20,683
----------- ------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . $ 1,336,020 $ 1,106,610
=========== ===========
LIABILITIES
Deposits:
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 193,533 $ 155,413
Savings and Interest-bearing Demand . . . . . . . . . . . . . . 346,119 330,506
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588,262 467,985
----------- ------------
Total Deposits . . . . . . . . . . . . . . . . . . . . . . . 1,127,914 953,904
----------- ------------
Federal Funds Purchased and Securities Sold Under
Agreements to Repurchase . . . . . . . . . . . . . . . . . . . 46,895 22,480
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 13,974 7,892
Notes Payable:
Unaffiliated Bank . . . . . . . . . . . . . . . . . . . . . . . 11,832 7,825
Affiliated Company . . . . . . . . . . . . . . . . . . . . . . 5,000 5,000
----------- ------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . 1,205,615 997,101
----------- ------------
Commitments and Contingencies
CAPITAL ACCOUNTS
Preferred Stock (Par value of $1.00; 500 shares authorized in
1995 and 1994; none outstanding) . . . . . . . . . . . . . . . -0- -0-
Common Stock (Par value of $1.00; 24,000 shares authorized;
5,159 shares issued and outstanding in 1995 and 1994) . . . . 5,159 5,159
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,551 13,551
Undivided Profits . . . . . . . . . . . . . . . . . . . . . . . . 110,431 99,612
Net Unrealized Gain (Loss) on Securities Available-for-Sale, Net
of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,264 (8,813)
----------- ------------
Total Capital Accounts . . . . . . . . . . . . . . . . . . . 130,405 109,509
----------- ------------
Total Liabilities and Capital Accounts . . . . . . . . . . . $ 1,336,020 $ 1,106,610
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
[23]
<PAGE> 34
CONSOLIDATED STATEMENTS OF INCOME
First United Bancshares, Inc.
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans . . . . . . . . . . . . . $ 57,082 $ 41,084 $ 37,910
Interest on Securities:
Taxable Securities . . . . . . . . . . . . . . . . 29,260 26,792 29,292
Non-taxable Securities . . . . . . . . . . . . . . 3,979 3,778 3,809
Interest on Federal Funds Sold and Securities
Purchased Under Agreements to Resell . . . . . . 1,726 1,021 752
Interest on Deposits in Banks . . . . . . . . . . . . 688 539 205
--------- --------- ---------
TOTAL INTEREST INCOME . . . . . . . . . . . . . . 92,735 73,214 71,968
--------- --------- ---------
INTEREST EXPENSE
Interest on Deposits . . . . . . . . . . . . . . . . 40,188 28,618 27,489
Interest on Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase . . . . . . 1,761 1,037 750
Interest on Notes Payable . . . . . . . . . . . . . . 1,301 598 666
--------- --------- ---------
TOTAL INTEREST EXPENSE . . . . . . . . . . . . . 43,250 30,253 28,905
--------- --------- ---------
NET INTEREST INCOME . . . . . . . . . . . . . . . 49,485 42,961 43,063
Provision for Loan Losses . . . . . . . . . . . . . . (574) (334) (1,815)
--------- --------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES . . . . . . . . . . . . . . . . 48,911 42,627 41,248
--------- --------- ---------
OTHER INCOME
Service Charges on Deposit Accounts . . . . . . . . . 4,227 3,229 3,280
Trust Department Income . . . . . . . . . . . . . . . 1,799 1,379 1,515
Security Gains (Losses) . . . . . . . . . . . . . . . (108) 9 144
Other Operating Income . . . . . . . . . . . . . . . 1,887 1,530 1,724
--------- --------- ---------
TOTAL OTHER INCOME . . . . . . . . . . . . . . . 7,805 6,147 6,663
--------- --------- ---------
OTHER EXPENSE
Salaries . . . . . . . . . . . . . . . . . . . . . . 13,288 11,071 10,356
Pension and Other Employee Benefits . . . . . . . . . 4,209 3,644 3,211
Net Occupancy Expense . . . . . . . . . . . . . . . . 2,924 2,435 2,215
Equipment Expense . . . . . . . . . . . . . . . . . . 1,766 1,318 1,267
Data Processing Expense . . . . . . . . . . . . . . . 1,705 1,511 1,744
Other Operating Expenses . . . . . . . . . . . . . . 10,752 8,818 10,284
--------- --------- ---------
TOTAL OTHER EXPENSE . . . . . . . . . . . . . . . 34,644 28,797 29,077
--------- --------- ---------
INCOME BEFORE INCOME TAX EXPENSE . . . . . . . . . . 22,072 19,977 18,834
INCOME TAX EXPENSE . . . . . . . . . . . . . . . . . 6,868 5,969 5,619
--------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . . . . 15,204 14,008 13,215
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE . . . . . . . . . . . . . . . -0- -0- 2,522
--------- --------- ---------
NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 15,204 $ 14,008 $ 15,737
========= ========= =========
EARNINGS PER SHARE
Income Before Cumulative Effect of a Change in
Accounting Principle . . . . . . . . . . . . $ 2.95 $ 2.72 $ 2.56
Cumulative Effect of a Change in Accounting
Principle . . . . . . . . . . . . . . . . . -0- -0- .49
--------- --------- ---------
Earnings Per Share . . . . . . . . . . . . . . . . $ 2.95 $ 2.72 $ 3.05
========= ========= =========
CASH DIVIDENDS PER SHARE . . . . . . . . . . . . . . $ .85 $ .74 $ .66
--------- ========= =========
AVERAGE SHARES ISSUED AND
OUTSTANDING . . . . . . . . . . . . . . . . . . . . 5,159 5,159 5,158
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
[24]
<PAGE> 35
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL ACCOUNTS
First United Bancshares, Inc.
(in thousands)
<TABLE>
<CAPTION>
Net Unrealized
Gain (Loss) on
Common Stock Securities
------------------- Undivided Treasury Available-For
Shares Amount Surplus Profits Stock Sale, Net of Tax
----- --------- ------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
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)
Net Income -0- -0- -0- 15,204 -0- -0-
Cash Dividends -0- -0- -0- (4,385) -0- -0-
Increase in Unrealized Gain (Loss)
on Securities Available-For-Sale,
Net of Tax -0- -0- -0- -0- -0- 10,077
----- --------- ------- -------- -------- --------
Balance, December 31, 1995 5,159 $ 5,159 $13,551 $110,431 $ -0- $ 1,264
===== ========= ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
[25]
<PAGE> 36
CONSOLIDATED STATEMENTS OF CASH FLOWS
First United Bancshares, Inc.
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,204 $ 14,008 $ 15,737
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . 2,067 1,558 1,460
Amortization of Goodwill . . . . . . . . . . . . . . . . . 940 477 345
Provision for Possible Loan Losses . . . . . . . . . . . . 574 334 1,815
Provision for Deferred Taxes . . . . . . . . . . . . . . . 470 722 (223)
Change in Accounting Principle . . . . . . . . . . . . . . -0- -0- (2,522)
(Gain) Loss on Sales of Securities . . . . . . . . . . . . 108 (9) (129)
Accretion of Bond Discount, Net . . . . . . . . . . . . . . (1,785) (1,618) (2,122)
Decrease (Increase) in Other Assets . . . . . . . . . . . . 2,660 (642) 384
Increase (Decrease) in Other Liabilities . . . . . . . . . 3,860 426 (1,911)
-------- -------- --------
Net Cash Provided by Operating Activities . . . . . . . . . . 24,098 15,256 12,834
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturities of Investment Securities . . . . . 27,795 26,774 138,339
Proceeds from Maturities of Securities Available-for-Sale . 82,105 133,063 -0-
Proceeds from Sales of Securities Available-for-Sale . . . 42,446 3,622 1,000
Purchase of Investment Securities . . . . . . . . . . . . . (41,733) (34,862) (128,208)
Purchase of Available-for-Sale Securities . . . . . . . . . (112,303) (116,105) -0-
Decrease in Federal Funds, Net . . . . . . . . . . . . . . 23,940 2,243 13,607
(Increase) Decrease in Other Short-Term Investments . . . . (16,988) (1,178) 2,174
Increase in Loans . . . . . . . . . . . . . . . . . . . . . (38,447) (13,827) (21,830)
Capital (Additions) Retirements . . . . . . . . . . . . . . (8,113) (3,195) 751
Purchase of Subsidiary Bank . . . . . . . . . . . . . . . . (19,079) -0- (4,521)
-------- -------- --------
Net Cash Provided by (Used in) Investing Activities . . . . . (60,377) (3,465) 1,312
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in Demand, Savings and Interest-bearing Demand
Deposits . . . . . . . . . . . . . . . . . . . . . . . . (13,689) (15,248) (2,293)
Increase (Decrease) in Time Deposits . . . . . . . . . . . 51,412 (597) (11,305)
Issuance (Payment) of Notes Payable . . . . . . . . . . . . 4,007 5,103 (1,958)
Dividends Paid . . . . . . . . . . . . . . . . . . . . . . (4,385) (3,857) (3,068)
Sale of Treasury Stock . . . . . . . . . . . . . . . . . . -0- -0- 33
-------- -------- --------
Net Cash Provided by (Used in) Financing Activities . . . . . 37,345 (14,599) (18,591)
-------- -------- --------
Net Increase (Decrease) in Cash and Cash Equivalents . . . . 1,066 (2,808) (4,445)
Cash and Cash Equivalents, Beginning . . . . . . . . . . . . 49,419 52,227 56,672
-------- -------- --------
Cash and Cash Equivalents, Ending . . . . . . . . . . . . . . $ 50,485 $ 49,419 $ 52,227
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
[26]
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First United Bancshares, Inc.
1. BUSINESS, BASIS OF FINANCIAL STATEMENT PRESENTATION, ACCOUNTING
POLICIES AND RECENT PRONOUNCEMENTS
BUSINESS:
First United Bancshares, Inc. ("the Company") engages in the general
banking business and activities closely related to banking and provides these
services primarily to customers in Arkansas and Texas through its subsidiary
banks. The Company is subject to the regulations of certain federal and state
agencies and undergoes periodic examinations by those regulatory authorities.
BASIS OF FINANCIAL STATEMENT PRESENTATION:
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the consolidated
financial statements, the Company is required to make estimates and
assumptions, the most significant of which is the estimate of the required
amount of the allowance for possible loan losses, that affect the reported
amounts of assets and liabilities as of the dates of the statements of
condition and the reported amounts of income and expenses for the years then
ended. Actual results could differ significantly from those estimates.
ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the
Company 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; The Bank of North Arkansas (Melbourne) and FirstBank
(Texarkana, Texas). All significant intercompany accounts have been eliminated.
SECURITIES:
The Company adopted Statement of Financial Accounting Standard
("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 are 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.
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 possible 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
[27]
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
doubtful. This evaluation is inherently subjective as it requires material
estimates including the amounts and timing of future cash flows expected to be
received on impaired loans that may be susceptible to significant change.
Beginning in 1995, the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan," as amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosure." Under
the new standard, the allowance for possible loan losses related to loans that
are identified for evaluation in accordance with SFAS No. 114 is based on
discounted cash flows using the loan's effective interest rate or the fair
value of the collateral for certain collateral dependent loans. The effect of
this statement upon adoption was not 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 7.
Maintenance, repairs and minor improvements are charged to operating expenses.
Gains or losses on dispositions are reflected currently in the Statement of
Income.
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
$3,179,000 and $2,256,000 at December 31, 1995 and 1994, 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 the Company determines 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 $73,000 and $342,000 for the years ended December 31, 1995 and
1993, respectively. The Company had a net gain of $11,000 in 1994.
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.
RECENT PRONOUNCEMENTS:
In March, 1995, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of." This statement requires impairment
losses to be recorded on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount. SFAS No.
121 also addresses the accounting for long-lived assets that are expected to be
disposed of. SFAS No. 121 is effective for fiscal years beginning after
December 15, 1995. The adoption of this statement will not have a material
impact on the Company's consolidated financial statements.
The FASB has also issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights and Excess Servicing Receivables and for Securitization of
Mortgage Loans." The statement amends SFAS No. 65 "Accounting for Certain
Mortgage Banking Activities," and primarily eliminates the distinction between
purchased mortgage servicing rights and mortgage servicing rights on loans
originated by the financial institution. SFAS No. 122 is effective for fiscal
years beginning after December 15, 1995. The adoption of this statement will
not have a material impact on the Company's consolidated financial statements.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation." This statement establishes financial accounting and
reporting standards for stock-based employee compensation
[28]
<PAGE> 39
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
plans and is effective for fiscal years beginning after December 15, 1995. This
statement also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting prescribed by
APB Opinion No. 25, "Accounting for Stock Issued to Employees." However,
entities electing to remain with the accounting in Opinion No. 25 must make pro
forma disclosures as if the fair value based method of accounting defined in
SFAS No. 123 had been applied. Management of the Company anticipates that it
will elect to remain with the accounting in Opinion No. 25. The adoption of
this statement will not have a material impact on the Company's consolidated
financial statements.
2. ACQUISITIONS
On January 31, 1995, the Company acquired all of the issued and
outstanding stock of FirstBank for cash payments of approximately $25,000,000
funded through cash and borrowings. The transaction was accounted for as a
purchase. FirstBank had assets of approximately $154,000,000 at the date of
acquisition. 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
FirstBank are included in the consolidated statements of income from the date
of acquisition. Unaudited pro forma results of operations of the Company for
1994 assuming that the acquisition of FirstBank had been completed at the
beginning of 1994 would reflect net interest income of $49,600,000, net income
of $15,096,000 and earnings per share of $2.93.
On June 14, 1994, the Company 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.
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 1993 do not differ materially from the Company's
actual results.
3. SECURITIES AVAILABLE-FOR-SALE
The carrying values and estimated fair values of securities
available-for-sale at December 31, 1995 and 1994 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Gross Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
-------- ----------- -------- ----------
<S> <C> <C> <C> <C>
1995
U.S. Treasury Securities and
Other U.S. Government
Agencies $269,544 $2,675 $1,306 $270,913
Obligations of States and
Political Subdivisions 1,730 21 8 1,743
Mortgage-Backed Securities 56,022 810 271 56,561
Other 9,624 204 17 9,811
-------- ------ ------ --------
$336,920 $3,710 $1,602 $339,028
======== ====== ====== ========
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
======== ====== ======== ========
</TABLE>
The amortized cost and estimated fair value of securities
available-for-sale at December 31, 1995, 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.
[29]
<PAGE> 41
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
--------- ---------
<S> <C> <C>
Due in One Year or Less $ 93,370 $ 93,348
Due After One Year Through Five Years 172,056 173,335
Due After Five Years Through Ten Years 12,423 12,657
Due After Ten Years 3,049 3,127
Mortgage-Backed Securities 56,022 56,561
-------- --------
$336,920 $339,028
======== ========
</TABLE>
Proceeds from sales of securities available-for-sale were $42,446,000 during
1995. Gross gains realized from the sale of these securities available-for-sale
were $139,000.
4. INVESTMENT SECURITIES
The carrying values and estimated fair values of investments in debt
securities as of December 31, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
1995
U.S. Treasury Securities and
Other U.S. Government
Agencies $ 9,068 $ 35 $ 65 $ 9,038
Obligations of States and
Political Subdivisions 78,880 1,805 450 80,235
Mortgage-Backed Securities 110,066 1,263 715 110,614
Other 3,079 -0- 17 3,062
-------- ------ ------ --------
$201,093 $3,103 $1,247 $202,949
======== ====== ====== ========
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
======== ====== ====== ========
</TABLE>
The amortized cost and estimated fair value of debt securities at December
31, 1995, 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 $ 14,326 $ 14,397
Due After One Year Through Five Years 45,268 45,702
Due After Five Years Through Ten Years 27,262 28,027
Due After Ten Years 4,171 4,209
Mortgage-Backed Securities 110,066 110,614
-------- --------
$201,093 $202,949
======== ========
</TABLE>
There were no sales of investment securities during 1995.
Securities with a carrying value of $228,209,000 at December 31, 1995 were
pledged to secure public deposits and for other purposes required by law.
[30]
<PAGE> 43
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. ALLOWANCE FOR POSSIBLE LOAN LOSSES
The changes in the allowance for possible loan losses during 1995, 1994 and
1993 were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Balance at Beginning of Year $ 9,667 $ 9,972 $ 7,972
Allowance Applicable to Loans of
Acquired Bank 1,627 -0- 520
Provision Charged Against Income 574 334 1,815
Recoveries on Loans Charged-Off 1,404 1,563 1,299
Loans Charged-Off (2,691) (2,202) (1,634)
-------- -------- --------
Balance at End of Year $ 10,581 $ 9,667 $ 9,972
======== ======== ========
</TABLE>
6. LOANS
Loans consist of the following categories (in thousands):
<TABLE>
<CAPTION>
TYPE 1995 1994
-------- --------
<S> <C> <C>
Real Estate Loans Collateralized by -
Residential Properties, Primarily
Single Family Residences $175,390 $148,346
Commercial Properties 191,602 135,275
Commercial and Industrial Loans, Other Than Real
Estate and Energy-Related 143,536 128,461
Energy-Related Loans 18,268 15,910
Consumer Loans 108,360 82,712
Loans for Purchasing or Carrying Securities 6,643 2,065
Financing Leases 298 181
-------- --------
$644,097 $512,950
======== ========
</TABLE>
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, 1995 and 1994, officers, directors, and
related parties had loans of approximately $14,821,000 and $12,856,000,
respectively. At the time of acquisition by the Company, FirstBank also had
loans outstanding of $1,556,000 to officers, directors and related parties.
During the year ended December 31, 1995, loans made to these parties totalled
$8,111,000 and repayments totalled $7,287,000. Loans to related parties at
December 31, 1994 included loans of $415,000 to directors who retired during
1995.
A summary of non-performing assets as of December 31, 1995 and 1994 is as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
Non-Accrual Loans $ 2,643 $2,117
Past Due Loans (90 Days or more and
still accruing) 472 555
Renegotiated Loans 851 326
------- ------
3,966 2,998
Other Real Estate 712 520
------- ------
Total Non-Performing Assets $ 4,678 $3,518
======= ======
</TABLE>
The Company's non-accrual policy had the effect of reducing interest and
fees on loans in 1995 and 1994 by approximately $87,000 and $179,000,
respectively. Substantially all payments on non-accrual loans were applied to
principal.
[31]
<PAGE> 45
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. PREMISES AND EQUIPMENT
Premises and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
Principal
Depreciation Estimated
Method Useful Life 1995 1994
---------------- ------------ --------- ---------
<S> <C> <C> <C> <C>
Land $ 5,408 $ 4,658
Buildings and Leasehold
Improvements Straight-line 5-40 years 28,303 18,262
Furniture, Fixtures and
Equipment Declining Balance 3-10 years 11,682 9,796
--------- --------
45,393 32,716
Less: Accumulated
Depreciation (19,074) (17,175)
-------- --------
$ 26,319 $ 15,541
======== ========
</TABLE>
Depreciation included in other expense, net occupancy expense and equipment
expense was $2,067,000 in 1995, $1,558,000 in 1994, and $1,460,000 in 1993.
The Company leases land on which two branches are located and rents on a
monthly basis an employee parking lot from a company with common officers and
directors of the Company. Rental payments related to these arrangements were
approximately $20,000 during each of the years ended December 31, 1995, 1994
and 1993.
8. INCOME TAXES
Income tax expense is composed of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- -------- --------
<S> <C> <C> <C>
Currently Payable $ 6,398 $ 5,247 $ 5,842
Deferred:
Effects of Temporary
Differences 470 722 (223)
------- -------- --------
$ 6,868 $ 5,969 $ 5,619
======= ======== ========
</TABLE>
The income tax provision included $(38,000), $3,000 and $56,000 for the
years ended December 31, 1995, 1994 and 1993, 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>
1995 1994 1993
----- ----- ------
<S> <C> <C> <C>
Statutory Federal Income Tax Rate 35.0% 35.0% 35.0%
Less:
Non-Taxable Interest Income (6.3) (6.1) (5.6)
Amortization of Goodwill 1.4 0.8 0.6
Other Items, Net 1.0 0.2 (0.2)
---- ---- ----
Effective Income Tax Rate 31.1% 29.9% 29.8%
==== ==== ====
</TABLE>
[32]
<PAGE> 47
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1995 and 1994, 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>
1995 1994
------ -------
<S> <C> <C>
Accelerated Depreciation $ (789) $ (963)
Provision for Possible Loan Losses 3,075 3,079
Unrealized (Gain) Loss on
Marketable Securities (706) 4,707
Effects of Pension and Benefit
Plans (333) -0-
Difference in Tax and Book Basis
of Securities (455) (332)
Write-down of Other Real Estate 110 194
Other (82) 18
------ ------
$ 820 $6,703
====== ======
</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.
9. NOTES PAYABLE
A summary of notes payable as of December 31, 1995 and 1994 is as follows
(in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Promissory Note Bearing Interest at 1.20% Above
the 30-Day LIBOR (7.1375% and 5.625% at
December 31, 1995 and 1994), Principal Due 1997 $5,000 $ 5,000
Promissory Note Bearing Interest at 0.1% Above
the 30-Day LIBOR (6.0375% and 4.525% at
December 31, 1995 and 1994), Principal Due 2001 5,000 5,000
Promissory Note to Unaffiliated Bank Bearing
Interest at 1.20% Above the 30-Day LIBOR
(7.1375% and 5.625% at December 31, 1995 and
1994), $872,000 Due Annually 5,235 1,107
Other Installment Notes Payable Bearing Interest at
Rates Varying From 4.40% to 7.47% and With
Maturities Varying From 1998 to 2009 1,597 1,718
------- -------
$16,832 $12,825
======= =======
</TABLE>
The installment note payable to the 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.
The notes payable require principal repayments as follows: 1996 - $990,000;
1997 - $5,997,000; 1998 - $977,000; 1999 - $1,945,000; 2000 - $907,000 and
thereafter - $6,016,000.
[33]
<PAGE> 49
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. 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 ($695,000 in 1995, $618,000 in
1994 and $848,000 in 1993) 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, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
Actuarial Present Value of Benefit
Obligation at December 31: 1995 1994
--------- ---------
<S> <C> <C>
Accumulated Benefit Obligation $ (11,310) $ (10,309)
Effect of Projected Future
Compensation Levels (1,099) (865)
--------- ---------
Projected Benefit Obligation for
Service Rendered to Date (12,409) (11,174)
Plan Assets at Fair Value, Primarily
Stock and U.S. Government
Securities 13,059 11,279
--------- ---------
Plan Assets Greater than Projected
Benefit Obligation 650 105
Unrecognized Net Loss From Past
Experience Different From That
Assumed 2,314 2,794
Unrecognized Net Obligations (1,227) (1,415)
--------- ---------
Prepaid Pension Cost $ 1,737 $ 1,484
========= =========
</TABLE>
The Plan's net pension cost for 1995, 1994 and 1993 included the
following components (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service Cost $ 424 $ 412 $ 524
Interest Cost on Projected
Benefit Obligation 845 801 860
Actual Return on Assets (1,948) (99) (702)
Net Amortization and
Deferral 1,120 (854) (77)
-------- -------- --------
$ 441 $ 260 $ 605
======== ======== ========
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 1995, 1994 and 1993, the Company's expenses totalled approximately
$601,000, $525,000, and $362,000, 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 1995 and 1994 was $384,000 and $138,000,
respectively.
The Company has a stock option plan under which options to purchase up to
100,000 shares of the Company's common stock may be granted to officers and
other key employees of the Company. Terms and conditions of the Company's
options including exercise price and period in which options are exercisable
are generally at the discretion of the Board of Directors; however, no options
are exercisable for more than 10 years after date of grant. During 1994,
options to purchase 4,800 shares of the Company's common stock at $28.50 per
share were granted under this plan. As of December 31, 1995 and 1994, these
options were still outstanding.
[34]
<PAGE> 51
<PAGE> 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. COMMITMENTS AND CONTINGENCIES
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 1996. 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, 1995 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,
1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
Commitments to Extend Credit $93,561 $74,822
Standby Letters of Credit 13,255 6,842
</TABLE>
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: 1996
- - $1,362,000; 1997 - $1,421,000; 1998 - $1,236,000.
Certain branch facilities and warehouse space are leased under various
operating lease agreements. These leases require approximate minimum annual
rentals as follows: 1996-$58,000; 1997-$58,000; 1998-$53,000; 1999-$52,000;
and thereafter-$135,000.
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.
12. 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 $3,735,000 of undistributed earnings plus the net income earned
in 1996.
At December 31, 1995, the Company was required to maintain reserve
balances in cash and due from accounts of approximately $9,862,000.
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, 1995, 1994 and 1993, were
approximately $1,238,000, $2,186,000 and $2,111,000, respectively, and those
premiums were included in other operating expenses on the Company`s
Consolidated Statements of Income.
[35]
<PAGE> 53
<PAGE> 54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. SUPPLEMENTARY DATA FOR CASH FLOWS
Income taxes paid by the Company during the years ended December 31, 1995,
1994 and 1993, amounted to $5,812,000, $5,901,000 and $7,126,000, respectively.
Interest paid on notes payable during the years ended December 31, 1995, 1994
and 1993, was $1,134,000, $598,000 and $525,000, respectively.
In connection with acquisitions in 1995 and 1993, the Company acquired
assets and assumed liabilities as follows (in thousands):
<TABLE>
<CAPTION>
1995 1993
--------- --------
<S> <C> <C>
Fair Value of Assets Acquired $154,811 $44,436
Goodwill 8,707 1,622
Liabilities Assumed (138,518) (40,591)
--------- --------
Cash Paid 25,000 5,467
Cash Acquired (5,921) (946)
--------- --------
Net Payment for Purchase $ 19,079 $ 4,521
========= =========
</TABLE>
14. 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,
------------------------------
1995 1994
-------- --------
<S> <C> <C>
CONDENSED FINANCIAL POSITION:
Assets:
Cash $ 13,533 $ 11,433
Investment in Subsidiary Banks 126,838 105,389
Other Assets 2,477 1,487
-------- --------
Total Assets $142,848 $118,309
======== ========
Liabilities and Capital Accounts:
Notes Payable $ 10,235 $ 6,107
Other Liabilities 2,208 2,693
-------- --------
Total Liabilities 12,443 8,800
-------- --------
Total Capital 130,405 109,509
-------- --------
Total Liabilities and Capital $142,848 $118,309
======== ========
</TABLE>
[36]
<PAGE> 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
(Dollars in Thousands) 1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CONDENSED OPERATING RESULTS:
Dividend Income From Subsidiary Banks $ 30,170 $ 11,613 $ 11,584
Management Fees 537 1,458 1,745
-------- -------- --------
30,707 13,071 13,329
-------- -------- --------
Interest Expense 771 457 525
Other Expense 1,956 2,620 2,381
-------- -------- --------
2,727 3,077 2,906
-------- -------- --------
Income Before Tax Benefit and Equity in
Undistributed Income of Subsidiary Banks 27,980 9,994 10,423
Income Tax Benefit 864 602 325
-------- -------- --------
Income Before Equity in Undistributed
Income of Subsidiary Banks and Cumulative
Effect of a Change in Accounting Principle 28,844 10,596 10,748
Cumulative Effect of a Change in
Accounting Principle -0- -0- (279)
-------- -------- --------
Income Before Equity in Undistributed
Income of Subsidiary Banks 28,844 10,596 10,469
Equity in Undistributed Income of
Subsidiary Banks (13,640) 3,412 5,269
-------- -------- --------
Net Income $ 15,204 $ 14,008 $ 15,738
======== ======== ========
CONDENSED STATEMENTS OF CASH FLOWS:
Cash Flows From Operating Activities:
Net Income $ 15,204 $ 14,008 $ 15,738
Depreciation 17 13 11
Undistributed Income 13,640 (3,412) (5,269)
Increase in Other Assets (1,019) (305) (576)
(Decrease) Increase in Other Liabilities (485) 791 442
-------- -------- --------
27,357 11,095 10,346
-------- -------- --------
Cash Flows From Investing Activities:
Purchase of Subsidiary Bank (25,000) -0- (5,505)
-------- -------- --------
Cash Flows From Financing Activities:
Principal Repayments on Notes Payable (872) (1,107) (1,607)
Issuance of Notes Payable 5,000 -0- -0-
Sale of Treasury Stock -0- -0- 33
Payment of Dividends (4,385) (3,857) (3,068)
-------- -------- --------
(257) (4,964) (4,642)
-------- -------- --------
Net Increase in Cash 2,100 6,131 199
Cash at Beginning of Year 11,433 5,302 5,103
Cash at End of Year -------- -------- --------
$ 13,533 $ 11,433 $ 5,302
======== ======== ========
Supplementary Data for Cash Flows:
Taxes Paid $ 5,812 $ 5,901 $ 7,126
Interest Paid on Notes Payable 1,134 598 525
</TABLE>
[37]
<PAGE> 56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. FAIR VALUES OF FINANCIAL INSTRUMENTS:
SFAS No. 107 "Disclosure about Fair Values of Financial Instruments,"
requires disclosure of the fair value for all financial instruments as well as
the methodology and significant assumptions used in estimating fair values. 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. The estimated fair values of financial instruments with
immediate and shorter term maturities (generally 90 days or less) are assumed
to be the same as the recorded value. All non-financial instruments, by
definition, have been excluded from these disclosure requirements. Accordingly,
the aggregate fair value amounts presented below 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. The carrying amount and estimated fair values of financial
instruments for December 31, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
--------------------------- -----------------------
Carrying Fair Carrying Fair
Value Value Value Value
--------------------------- -----------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and Short-Term Investments $ 106,395 $ 106,395 $ 74,173 $ 74,173
Securities 540,121 541,977 489,036 481,529
Loans 642,118 637,659 512,493 499,885
LIABILITIES
Deposits $1,127,914 $1,128,713 $953,904 $951,766
Federal Funds Purchased and
Securities Sold Under
Agreements to Repurchase 46,895 46,895 22,480 22,480
Notes Payable 16,832 16,832 12,825 12,825
</TABLE>
The methodology and significant assumptions used in estimating the fair values
presented above are as follows:
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
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
The fair values of loans are 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.
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, 1995, the maximum
financing limitation is 10.25%. 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.
[38]
<PAGE> 57
<PAGE> 58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DEPOSITS
The fair value of deposits with no stated maturity, such as
non-interest-bearing 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.
SHORT-TERM LIABILITIES
The carrying amounts for federal funds purchased, securities sold under
agreements to repurchase and other liabilities approximate their fair values.
OFF-BALANCE SHEET INSTRUMENTS
The fair values of loan commitments and standby letters of credit approximate
the fees currently charged for similar agreements. The fees associated with
these financial instruments are immaterial.
[39]
<PAGE> 59
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, 1995 and 1994, 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, 1995. We did not audit the financial
statements for the year ended December 31, 1993, of InvestArk, a company
acquired during 1994 in a transaction accounted for as a pooling-of-interests.
Such statements are included in the consolidated financial statements of First
United Bancshares, Inc. and reflect 17% of net interest income for the year
ended December 31, 1993. These statements were audited by other auditors whose
report 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 the 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, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three- year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
As explained in Note 1 to the consolidated financial statements, effective
January 1, 1994, First United Bancshares, Inc. changed its method of accounting
for investment securities and effective January 1, 1993, the Company changed
its method of accounting for income taxes.
Arthur Andersen LLP
New Orleans, Louisiana,
January 19, 1996.
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.
[40]
<PAGE> 60
<PAGE> 61
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<S> <C> <C>
FIRST UNITED BANCSHARES, INC. Richard H. Mason DIRECTORS
President
OFFICERS Gibraltar Energy Company Claiborne P. Deming
President & Chief Executive Officer,
James V. Kelley W. E. Morgan, Jr. Murphy Oil Corporation
Chairman of the Board, President,
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 Officer Murphy Oil Corporation
Robert G. Dudley Robert C. Nolan Barry Felton
Secretary Managing Partner, Felton Oil Company, Inc.
Munoco Company
Robert L. Jones
Assistant Secretary Paula M. O'Connor James V. Kelley
Investments Chairman, President & Chief
AUDIT Executive Officer,
Kathering P. Ozment First United Bancshares, Inc. and
Jim Barnes Investments Chairman & Chief Executive Officer
Vice President & Auditor First National Bank of El Dorado
Cal Partee, Jr.
LOAN REVIEW Oil Investments
Michael F. Mahony
Richard E. Ulmer W. C. Partee Attorney
Vice President & Owner, Partee Flooring Mill
Loan Review Officer and Chairman of the Board, Richard H. Mason
First National Bank of Magnolia President,
DIRECTORS Gibraltar Energy Company
Chesley Pruet
Larry Burrow Oil Investments R. Madison Murphy
Plant Manager, Chairman of the Board
Partee Flooring Mill John D. Trimble, Jr. Murphy Oil Corporation
Managing Partner,
Claiborne P. Deming Trimble Properties Robert C. Nolan
President & Chief Executive Officer, Managing Partner,
Murphy Oil Corporation Ralph C. Weiser Munoco Company
Managing Partner,
W. A. Eckert Weiser-Brown Oil Company Robert M. Reynolds
Attorney Shuler Drilling Company, Inc.
Dr. David M. Yocum, Jr.
James V. Kelley Managing Partner, Dr. Henry B. Rogers
Chairman of the Board, President Alice-Sidney Oil Company Investments
& Chief Executive Officer,
First United Bancshares, Inc. SUBSIDIARIES' OFFICERS John H. Sample
AND DIRECTORS Security Oil Company, Inc.
Roy E. Ledbetter
President & Chief Executive Officer, FIRST NATIONAL BANK Stephen C. Smart, D.D.S.
Highland Industrial Park, Inc. OF EL DORADO Oral Surgeon
Jack W. McNutt EXECUTIVE OFFICERS Carolyn Tennyson
Former President & Timber Investments
Chief Executive Officer, James V. Kelley
Murphy Oil Corporation Chairman of the Board & Charles E. Thomsas
Chief Executive Officer Calion Lumber mCompany, Inc.
Michael F. Mahony Robert G. Dudley John D. Trimble, Jr.
Attorney President Managing Partner,
Trimble Properties
Larry Kinard
Executive Vice President Dr. Srini Vasan
& Secretary SARTI
Lending
</TABLE>
[41]
<PAGE> 62
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<S> <C> <C>
FIRST NATIONAL BANK OF MAGNOLIA CITY NATIONAL BANK ADVISORY DIRECTORS
OF FORT SMITH
EXECUTIVE OFFICERS Edward E. Bedwell
EXECUTIVE OFFICERS Attorney at Law
Robert L. Jones
President & Chief Executive Officer Jim Harwood Franklin Hawkins
President & Chief Executive Officer Investments
Steve Nipper
Executive Vice President-Operations Bill Staed J. L. Swink
Executive Vice President Commercial Warehouses and
John Roewe Lending Services Group Investments
Executive Vice President-Loans
DIRECTORS MERCHANTS & PLANTERS BANK, NA. OF
DIRECTORS CAMDEN
Thomas J. Barr
W. C. Partee President, EXECUTIVE OFFICER
Chairman of the Board, Harry G. Barr Company
First National Bank of Magnolia James R. Jordan
Morris G. Boren President & chief Executive
Larry Burrow General Manager, Baseline Design Officer
Plant Manager,
Partee Flooring Mill Carolyn L. Branch DIRECTORS
Vice President for Institutional
Tommy Fallin, Jr. Development, Westark Community Eugene Bramblett
Owner, Fallin Tractor Company College Attorney at Law
Robert L. Jones George C. Fisher Edward E. Falwell
President & Chief Executive Officer, Director/Manufacturing, Accounting Retired, Western Auto
First National Bank of Magnolia and Budgets, Arkansas Best
Corporation James R. Jordan
James V. Kelley President & Chief Executive
Chairman, President & Chief Executive Jim Harwood, CPA Officer
Officer, First United Bancshares, Inc. President & Chief Executive Officer, Merchants & Planters Bank, N.A.
City National Bank of Fort Smith
Kathy E. Lewis James V. Kelley
Timber and Land Management George R. Jacobs Chairman, President & Chief
Vice President, USA Truck Executive Officer,
W. E. Morgan, Jr. First United Bancshares, Inc.
President, Warnock Furniture, Inc. James V. Kelley
Chairman, President & Chief Executive Roy E. Ledbetter
Richard G. Murphy Officer, First United Bancshares, Inc. President & Chief Executive
President, Murphy's Jewelers, Inc. Officer,
A. Samuel Koenig, III Highland Industrial Park, Inc.
Cal Partee, Jr. Physician
Oil Investments Jim Neeley
Emon A. Mahony, Jr. President, Neeley Forestry
David F. Rankin President, Service
Professor, Arkansas Oklahoma Gas Corporation
Southern Arkansas University Joe M. Rogers
Charles Shufield Owner and President,
George R. Stuart President, Rogers Lumber Company
Cattle, Timber, Investments Sparks Regional Medical Center
Thomas E. Watts
Joe D. Woodward Bill Staed Retired, Watts Department Store
Chairman of the Board, AmFuel Executive Vice President,
and Attorney Lending Services Group COMMERCIAL BANK AT ALMA
City National Bank of Fort Smith
EXECUTIVE OFFICERS
Bobby W. Stephens
Executive Vice President Jim V. Fincher
Beverly Enterprises, Inc. President & Chief Executive
Officer
George Warmack
Partner, Warmack & Co. William N. "Dockey" Brasher, III
Executive Vice President
Robert B. Westphal
Investments
</TABLE>
[42]
<PAGE> 63
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<S> <C> <C>
DIRECTORS Lloyd T. Jones FIRSTBANK
President & Chief Executive Officer
James A. Arnold, II The Bank of North Arkansas EXECUTIVE OFFICERS
Attorney
James E. Miller Gene D. Wyatt
Leonard L. Blaschke G.H. Miller and Sons Chairman of the Board
Grocer & President
Reed M. Perryman
William N. "Dockey" Brasher, III Pharmacist Norman C. Rochelle
Executive Vice President, Executive Vice President,
Commercial Bank at Alma FIRST STUTTGART BANK AND TRUST COMPANY Lending
Jim V. Fincher EXECUTIVE OFFICER Robert L. McDowell
President & Chief Executive Officer, Executive Vice President,
Commercial Bank at Alma Robert M. Koch Branch Lending
President & Chief Executive Officer
John A. Griffin Brice E. Feasel
Retired Oil Distributor DIRECTORS Executive Vice President,
Branch Lending
Jim Harwood, CPA L. Clyde Carter
President & Chief Executive Officer Retired, Former President and DIRECTORS
City National Bank of Fort Smith Chief Executive Officer,
Riceland Foods, Inc. James M. Carlow
Hilda Knight Bowie County Judge
Retired Banker Jack B. Coker
Pharmacist Lucille T. Cook
Paul L. Winborn Investments
Pharmacist Harry C. Erwin
President, Financial Holdings of Delton B. Gwinn
THE BANK OF NORTH ARKANSAS Arkansas, Inc. Investments
EXECUTIVE OFFICERS Tommy Hillman Joe Connor Hart
President, Winrock Farms, Inc. President, Hart Farms, Inc.
Lloyd T. Jones
President & Chief Executive Officer Jerry J. Hoskyn James V. Kelley
President, Prairie Hill Farms, Inc. Chairman of the Board,
W. Mike Cone President & Chief Executive
Executive Vice President Harold Ives Officer,
Lending Vice Chairman of the Board; First United Bancshares, Inc.
Chief Executive Officer,
DIRECTORS Harold Ives Trucking Company Kenneth K. Martin
Investments
W. Wesley Arnold Steven M. Keith
Rancher President, KBX, Inc. M. L. Mayo
Chairman, Mayo Mfg. Corp.
Brenda K. Barnes James V. Kelley
B & B Supply, Inc. Chairman of the Board, Presudent & H. J. Trammell
Chief Executive Officer, Investments
John E. Burns, CPA First United Bancshares, Inc.
Vice President & Chief Graton E. White, Jr.
Financial Officer Robert M. Koch President, Howles, Inc.
First United Bancshares, Inc. President & Chief Executive Officer,
First Stuttgart Bank and Trust Company Gene D. Wyatt
Thomas C. Colsgrove Chairman of the Board
Retired, Moore Business Forms Wanda H. Northcutt & President
and Systems State Repreentative FirstBank
Harlin F. Hames John E. Stephens
Retired, Century Telephone President, Bovine Farms, Inc.
</TABLE>
[43]
<PAGE> 64
CORPORATE INFORMATION
ANNUAL MEETING
The annual meeting of stockholders will convene on May 28,
1996, 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 United
Trust Company, N.A., as follows: ATTN: Corporate Trust,
P. O. Box 751, El Dorado, Arkansas 71731-0751,
Telephone (501) 863-3181, Extension 242.
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
FirstBank, Texarkana, Texas
First United Trust Company, N.A.
[44]
<PAGE> 65
FIRST UNITED BANCSHARES, INC.
P. O. BOX 751
EL DORADO, ARKANSAS 71731-0751
<PAGE> 66
APPENDIX
TO THE
1995 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") 1995 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.
1995 Annual Report to Stockholders."
2. Page 4 of the Report contains a bar graph titled "Earnings Per Share"
which discloses First United's earnings per share (in dollars) of, $1.64,
$2.46, $2.56, $2.72 and $2.95 for the years ended December 1991, 1992, 1993,
1993 and 1995, respectively.
3. 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 $16.59, $18.50, $20.97, $21.23 and
$25.28 for the years ended December 31, 1991, 1992, 1993, 1994 and 1995,
respectively. The graph also discloses the market value of a share of First
United common stock to be $13.50, $26.00, $29.50, $30.25 and $41.50 for the
years ended December 31, 1991, 1992, 1993, 1994 and 1995, respectively.
4. 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 2.85% , 2.89% and
3.68%, the Net Interest Margin" is disclosed as 4.45%, 4.29% and 4.39%, and
the "Net Interest Spread" is disclosed as 3.85%, 3.51% and 3.41%, for the years
ended December 31, 1993, 1994 and 1995, respectively.
5. Page 6 of the Report contains a bar graph titled "Loan Loss Provision"
which discloses the dollar amount (in thousands) that has been allocated to the
loan loss reserve account, which is disclosed as $4,385, $2,486, $1,815, $334
and $574 for the years ended December 31, 1991, 1992, 1993, 1994 and 1995,
respectively.
6. 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 $13,979, $8,579, $4,237, $3,518 and $4,678, the
"Non-Performing Loans" as $7,194, $4,723, $3,198, $2,998 and $3,966, and the
"Allowance for Loan Losses" as $7,499, $7,972, $9,972, $9,667 and $10,581, for
the years ended December 31, 1991, 1992, 1993, 1994 and 1995, respectively.
7. Page 11 of the Report contains a graph titled "Average 1995 Deposit
Composition" which discloses the make-up of the deposits as 29.14% of "Savings
and Interest-Bearing Demand" deposits, 36.85% of "Other Time Deposits", 20.04%
of "Non-Interest Bearing Demand" deposits and 13.98% of "Time Deposits of
$100,000 or More".
8. Page 13 of the Report contains a bar graph titled "Stockholders Equity
at Year-End" which discloses the shareholders equity (in millions) as
approximately $86, $95, $108, $110 and $130 for the years ended December 31,
1991, 1992, 1993, 1994 and 1995, respectively.
9. Page 14 of the Report contains a graph titled "1995 Risked Based
Capital Ratios" which discloses "Tier 1 Capital" and "Total Risk-Based Capital"
of First United as 15.65% and 16.90%, respectively, and the regulatory
requirements of "Tier 1 Capital" and "Total Risked-Based Capital" as 4.0% and
8.0%, respectively.
<PAGE> 67
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
InvestArk Bankshares, Inc.
Stuttgart, Arkansas
We have audited the consolidated statements of income, stockholders' equity and
cash flows of InvestArk Bankshares, Inc. and subsidiaries for the year ended
December 31, 1993. 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 audit 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 results of operations and cash flows of
InvestArk Bankshares, Inc. and subsidiaries, for the year ended December 31,
1993, 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
FirstBank Texas
Texarkana, Texas
</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 19, 1996 included in the First United Bancshares, Inc.
Form 10-K for the year ended December 31, 1995, into the Company's previously
filed Registration Statement on Form S-8 (File No. 033-56387).
ARTHUR ANDERSEN LLP
Jackson, Mississippi
March 29, 1996.
<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 of
our 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, 1995, into First United Bancshares,
Inc's previously filed Registration Statement on Form S-8 (File No. 033-56387).
Martin & Company
Little Rock, Arkansas
March 28, 1996.
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