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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, 1996
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
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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, 1997, 8,246,209 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 $264,500,000.00. (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, 1996 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, 1996
CROSS REFERENCE SHEET AND INDEX
<TABLE>
<CAPTION>
ITEM NO. LOCATION*
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PART I.
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 1996
Annual Report
to Stockholders
Item 6. Selected Financial Data.......................................... Page 20 of the 1996
Annual Report to
Stockholders
Item 7. Managements's Discussion and Analysis
of Financial Condition and Results of
Operations....................................................... Pages 4-19 of the
1996 Annual Report
to Stockholders
Item 8. Financial Statements and Supplementary Data...................... Pages 23-40 of the
1996 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, 1996
CROSS REFERENCE SHEET AND INDEX (CONTINUED)
<TABLE>
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PART III.
ITEM NO. LOCATION*
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Item 10. Directors and Executive Officers of the
Registrant ...................................................... Pages 41-43 of the
1996 Annual Report
to Stockholders
The remaining information for Item 10 and the information required by
Items 11 through 13 are incorporated by reference to the Registrant's
Definitive Proxy Statement for the 1997 Annual Meeting of Stockholders
filed with the Securities and Exchange Commission.
PART IV.
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, 1996. The
Registrant's 1996 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 1996 Annual Report to Stockholders
and Definitive Proxy Statement.
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FIRST UNITED BANCSHARES, INC.
ANNUAL REPORT ON FORM 10-K
December 31, 1996
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 1996,
First United acquired ten 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 n\k\a First United Bank (FUB),
FirstBank, Texarkana, Texas (FBTX), Citizens Bank & Trust of Carlisle (CBT),
Hazen First State Bank of Hazen (HFSB) and First Bank of Arkansas of Brinkley
(FBA). First United formed First United Trust Company, N.A. (FUTC) in 1996.
Each of the banks and the trust company 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, correspondent banking
services and safe deposit box activities. The trust company provides trust
services and fiduciary functions of First United's affiliated banks except
FBTX. 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 and trust
subsidiaries of First United compete actively with national and state banks,
savings and loan associations, trust companies, 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 eleven 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, FUB, CBT, HFSB, and FBA are subject to the regulation of the Arkansas
State Bank Department and FBTX is subject to the regulation of the Texas
Department of Banking. FABE, MPBC, CNBFS, FNBM and FUTC are members of the
Federal Reserve System and subject to regulation by the Federal Reserve Board.
FUTC is also subject to regulation by the Comptroller of Currency.
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
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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, 1996, First United and its subsidiaries had
approximately 639 full-time equivalent employees and considers its relationship
with its employees to be good.
ITEM 2. PROPERTIES.
PROPERTIES
The eleven banking subsidiaries of First United hold in fee and
primarily occupy their main office buildings. In addition, the subsidiaries
occupy and operate branches located in twenty-eight (28) 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 and FUTC 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
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James V. Kelley, 47 Chairman, President and Chief Executive Officer of First
United since 1987; Chairman and Chief Executive Officer of
FNBE since 1985.
Robert G. Dudley, 64 Secretary of First United since 1983; President of
FNBE since 1985.
John E. Burns, 38 Vice President and Chief Financial Officer of First
United since 1993; Vice President and Director of
Audit from 1988 to 1993.
SIGNIFICANT OTHER EMPLOYEES
Robert L. Jones, 61 President and Chief Executive Officer of FNBM since 1991;
President and Chief Executive Officer of MPBC from 1984 to
1991.
Jim N. Harwood, 57 President and Chief Executive Officer of CNBFS since 1993;
Executive Vice President of CNBFS from 1983 to 1993.
</TABLE>
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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.
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
1996 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
1996 fiscal year covered by this Annual Report on 10-K.
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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
1996 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
1996 fiscal year covered by this Annual Report on 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORT ON FORM 8-K.
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, 1996 as required by Item 8, are:
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Page(s) in 1996 Annual
Report to Stockholders
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Reports of Management and Independent Auditors ........................ Page 40
Consolidated Statements of Condition as of
December 31, 1996 and 1995 ....................................... Page 23
Consolidated Statement of Income
for the three years ended December 31, 1996, 1995 and 1994 ....... Page 24
Consolidated Statements of Changes in Capital Accounts
for the three years ended December 31, 1996, 1995 and 1994 ....... Page 25
Consolidated Statements of Cash Flows
for the three years ended December 31, 1996, 1995 and 1994 ....... Page 26
Notes to Consolidated Financial Statements-December 31, 1996 .......... 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.
On September 9, 1996, First United filed a Current Report on Form 8-K
under Items 2 and 7 regarding the Company's August 30, 1996 acquisition of all
of the issued and outstanding shares of common stock in Carlisle Bancshares,
Inc., Little Rock, Arkansas ("Carlisle") pursuant to a Restated Agreement and
Plan of Reorganization, dated April 1, 1996, whereby the Company acquired all
of the issued and outstanding shares of common stock of Carlisle in exchange
for the issuance of 506,717 shares of Company common stock and satisfied
unexercised stock options of Carlisle common stock by issuing an additional
1,383 shares of Company common stock.
<PAGE> 8
First United filed a current report on Form 8-K dated October 3,
1996, disclosing under Item 5 that the merger by and between First United and
Carlisle was accounted for using the pooling of interest method and providing
summary financial data of the combined operations of Carlisle and First United
for the period ended September 30, 1996.
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 the17th day of
March, 1997.
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.
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SIGNATURE TITLE DATE
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/s/ JAMES V. KELLEY Chairman of the Board, President, Chief March 17, 1997
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James V. Kelley Executive Officer
/s/ JOHN E. BURNS Vice President, Chief Financial Officer, March 17, 1997
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John E. Burns Principle Accounting Officer
/s/ E. LARRY BURROW Director March 17, 1997
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E. Larry Burrow
Director March 17, 1997
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Claiborne P. Deming
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/s/ WILLIAM A. ECKERT, JR Director March 17, 1997
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William A. Eckert, Jr.
/s/ ROY E. LEDBETTER Director March 17, 1997
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Roy E. Ledbetter
/s/ MICHAEL F. MAHONY Director March 17, 1997
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Michael F. Mahony
/s/ RICHARD H. MASON Director March 17, 1997
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Richard H. Mason
/s/ JACK W. MCNUTT Director March 17, 1997
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Jack W. McNutt
/s/ WILLIAM E. MORGAN Director March 17, 1997
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William E. Morgan
Director March 17, 1997
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R. Madison Murphy
/s/ ROBERT C. NOLAN Director March 17, 1997
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Robert C. Nolan
/s/ PAULA M. O'CONNOR Director March 17, 1997
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Paula M. O'Connor
/s/ KATHERINE P. OZMENT Director March 17, 1997
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Katherine P. Ozment
/s/ CAL PARTEE, JR. Director March 17, 1997
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Cal Partee, Jr.
</TABLE>
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<TABLE>
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/S/ CHESLEY PRUET Director March 17, 1997
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Chesley Pruet
Director March 17, 1997
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John D. Trimble, Jr.
/S/ RALPH C. WEISER Director March 17, 1997
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Ralph C. Weiser
Director March 17, 1997
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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, 1996
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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2 Restated Agreement and Plan of Reorganization between First United
Bancshares, Inc. and Carlisle Bancshares, Inc. and Plan of Merger
attached as Exhibit A thereto (previously filed by First United in
its Form S-4 Registration Statement under the Securities Act of 1933,
Registration No. 333-06185 as filed with the Securities and Exchange
Commission on June 18, 1996, and Amendment No. 1 thereto, filed on
July 10, 1996, which became effective July 12, 1996) incorporated
herein by reference.
3(a) Amended and Restated Articles of Incorporation of First United
Bancshares, Inc.
3(b) Restated Bylaws of First United Bancshares, Inc. (Filed as Exhibit
3(b) to the Annual Report on form 10-K for the Year Ended December
31, 1995) incorporated herein by reference.
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 1996 Annual Report to Stockholders which is included
herein as Exhibit 13).
13 First United Bancshares, Inc. 1996 Annual Report to Stockholders.
21 Subsidiaries of First United Bancshares, Inc.
23 Consent of Arthur Andersen LLP.
24 Power of Attorney (see signature page).
27 Financial Data Schedule.
</TABLE>
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EXHIBIT 3(a)
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FIRST UNITED BANCSHARES, INC.
FIRST. The name of the corporation is FIRST UNITED BANCSHARES, INC.
SECOND. The period of its duration is perpetual.
THIRD. The purposes for which the corporation is organized are:
(a) To engage in all business activities allowable for a bank holding
company and to own and manage banks and other businesses in the
area of financial services.
(b) To acquire and own property, both real and personal, including
common stock or other beneficial interest incorporations,
associations, trusts and other forms of business whether
incorporated or unincorporated, and to provide services to and
for such businesses, and to engage in businesses related to any
such businesses, and to do any and all lawful acts necessary,
convenient, advisable or desirable which may be incidental or
pertinent to such businesses.
(c) To engage in any business not prohibited by law.
FOURTH. The total number of shares of authorized capital stock which
the corporation shall have the authority to issue shall be as follows:
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SHARES CLASS PAR VALUE PER SHARE
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<S> <C> <C> <C>
24,000,000 Common $1.00
500,000 Preferred $1.00
</TABLE>
The board of directors may determine, in whole or in part, the preferences,
limitations, and relative rights of any class of stock, or one (1) or more
series within a class, before the issuance of such class or series,
respectively, and may amend The Articles of Incorporation to set forth such
preferences, limitations, and relative rights without shareholders approval or
action.
FIFTH. Shareholders shall have no pre-emptive right to acquire
additional or treasury shares of the corporation.
SIXTH. All shareholders are entitled to cumulate their votes for the
election of directors.
SEVENTH. Except upon the approval of two-thirds (2/3) of all shares
issued and outstanding that are entitled to vote at a duly called shareholders
meeting, the corporation shall not:
(i) effect any transaction pursuant to which a purchaser would
acquire control of the corporation, whether by merger,
consolidation, purchase of stock or otherwise,
(ii) effect a merger or share exchange with another entity pursuant to
which the corporation would issue shares of common stock in an
amount greater than twenty percent (20%) of the number of shares
of common stock issued and outstanding immediately prior to
consummation of the transaction,
<PAGE> 2
(iii)effect a merger or share exchange with another entity pursuant to
which the corporation would issue shares of common stock in an
amount that would cause the total number of shares issued during
any consecutive twelve month period in connection with such
transactions to exceed twenty percent (20%) of the number of
shares of common stock issued and outstanding immediately prior
to consummation of the transaction,
(iv) sell, exchange, lease or otherwise dispose of all or
substantially all of the corporation's assets and property other
than in the usual and regular course of business of the
corporation,
(v) effect a dissolution or liquidation of the corporation, or
(vi) amend these Articles of Incorporation.
EIGHTH. The internal affairs of the corporation shall be regulated in
accordance with the By-Laws duly adopted in accordance with the laws of the
State of Arkansas.
NINTH. The address of the registered office of the corporation is
First National Bank Building, Main at Washington, El Dorado, Arkansas 71730.
The name of its registered agent at such address is Robert G. Dudley.
TENTH. The number of directors that constitutes the Board of Directors
of the corporation shall not exceed twenty-five (25). The number of directors
shall be determined by the stockholders at each annual meeting or may be
determined at any special meeting. The Board of Directors may increase or
decrease by thirty percent (30%) or less the number of directors last fixed by
the stockholders, provided that the number of directors shall not be less than
three (3) nor more than twenty-five (25). The Board of Directors may fill a
vacancy created by the Board of Directors under this Article Tenth.
ELEVENTH. To the fullest extent permitted by the Arkansas Business
Corporation Act, as is now exists or may hereafter be amended, a director of
this corporation shall not be liable to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director.
TWELFTH. The corporation may indemnify any person who was, or is, a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding to the fullest extent permitted by the
Arkansas Business Corporation Act as it now exists or may hereafter be amended.
THIRTEENTH. The corporation elects to be governed by the provisions of
the Arkansas Business Corporation Act of 1987 as it now exists or may hereafter
be amended from time to time.
FOURTEENTH. The name and address of the incorporator is:
Robert G. Dudley
Main at Washington Streets
El Dorado, Arkansas 71730
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EXHIBIT 13
FIRST UNITED BANCSHARES, INC.
1996 ANNUAL REPORT TO STOCKHOLDERS
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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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>
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FINANCIAL HIGHLIGHTS
<TABLE>
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FIRST UNITED BANCSHARES, INC. %
(Dollars in Thousands, Except Per Share Data) 1996 1995 Change
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME DATA
Net Income $ 18,259 $ 15,204 20.09%
Net Interest Income 57,257 49,485 15.71%
------------- ------------- -------------
PER COMMON SHARE DATA
Net Income $ 2.21 $ 1.96 12.76%
Book Value (End of Period) 18.14 16.85 7.66%
Tangible Book Value (End of Period) 16.75 15.33 9.26%
Market Value (End of Period) 33.00 27.67 19.26%
Cash Dividends .64 .57 12.28%
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BALANCE SHEET DATA (YEAR END)
Total Securities1 $ 639,240 $ 540,121 18.35%
Loans2 721,161 642,118 12.31%
Earning Assets2 1,417,279 1,238,149 14.47%
Total Assets 1,531,039 1,336,020 14.60%
Deposits 1,297,273 1,127,914 15.02%
Stockholders' Equity 149,601 130,405 14.72%
------------- ------------- -------------
KEY RATIOS
Return on Average Assets 1.23% 1.19%
Return on Average Equity 13.08% 12.38%
Net Interest Margin (FTE) 4.30% 4.39%
Allowance for Loan Losses to Loans2 1.55% 1.65%
Equity to Assets3 9.75% 9.67%
Leverage Ratio 9.07% 8.87%
Primary Capital Ratio 10.41% 10.39%
============= =============
================================================================================================
</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> 4
To Our Stockholders and Friends:
I am pleased to share with you First United's 1996 operating report. Our
results were good in almost every area and the Company made important
investments in preparing for increasing competition and a changing customer
profile. While I will summarize some of these results and actions, the complete
report will be more illustrative of these achievements.
Net income was $18.3 million in 1996, 20% higher than 1995's $15.2 million.
Earnings per share for 1996 were $2.21 compared with $1.96 in 1995, a 12.8%
increase. The return on average assets (ROA) and the return on average equity
(ROE) for 1996 were 1.23% and 13.08%, respectively. Several events during the
year caused reported net income to rise, including the acquisition of Carlisle
Bancshares, Inc. and a 17.7% growth in recurring revenues. On a tax-equivalent
basis, reported net interest income was $59.5 million, an increase of 15% from
the 1995 total of $51.6 million. This resulted from a 12.31% growth in loans to
$721.2 million.
During the second quarter of 1996, the quarterly cash dividend rate was
increased for the fifth consecutive year to $.17 per share from the previous
rate of $.15 per share. Book value per share advanced 7.7% during 1996 to
$18.14 per share compared with $16.85 per share at year-end 1995. Tangible book
value also grew during the year, from $15.33 per share at year-end 1995 to
$16.75 per share or 9.3%. More importantly, the market value of First United's
common stock reached a historical high during the year, closing at $33 per
share, a 19.3% increase.
In August 1996, First United merged with Carlisle Bancshares, Inc. Its
subsidiary banks, Citizens Bank and Trust (Carlisle, AR), Hazen First State
Bank (Hazen, AR) and FirstBank of Arkansas (Brinkley, AR), along with our
existing Stuttgart subsidiary, have given First United a solid presence in the
Grand Prairie area of Arkansas.
First United banks have been investing in growth through the establishment of
new banking offices this year, both traditional facilities as well as
non-traditional locations. Many of our banks are opening banking centers inside
supermarkets, convenience stores, and supercenters. For 24-hour banking, First
United banks now have a total of 33 ATMs in a wide variety of convenient
locations, with plans for additional locations to open during 1997.
The First United Trust Company became a subsidiary of First United in March
1996. This enhancement to our Company allowed us to merge the operations
functions of all the trust departments of the First United banks, thereby
allowing each trust office to concentrate exclusively on customer service and
new business development.
During 1996, First United began a re-engineering of its management information
systems and technology services. The scope of the conversion includes core
processing, as well as the implementation of enhanced banking services, such as
optical disk, document imaging, home banking, E-mail, check imaging, ATM
processing and branch automation. Four of First United's banks were converted
to the new system during 1996. The remaining banks will be integrated into the
new system over the next two years. As a part of the conversion process, First
United has established an Operations Center in Little Rock at which all daily
work is captured and processed.
The change in data processing systems also coincided with the introduction of
First United's own ATM network, the Eclipse network. A proprietary ATM network
will provide access to regional and national switches and allow flexibility to
establish new ATM outlets. As an enhanced service, customers can now receive
instant issue ATM cards.
A challenge for First United in the future will be efficient and effective
capital utilization. It is always a question of what is the optimum amount of
capital in order to balance safety and soundness with shareholder returns.
Certainly the strong capital levels that we have offer us options for growth,
dividends and the like not otherwise available.
As this letter is written, bank stocks are trading at a high level. This would
indicate increased and continuing consolidation within this industry in 1997.
As we search for new merger partners, it will be for those banks with the same
commitment to shareholder enrichment and community service as our existing
banking organizations.
On behalf of our employees and directors, I want to sincerely thank you for
your continued support of our efforts on your behalf.
James V. Kelley
Chairman, President and Chief Executive Office
[2]
<PAGE> 5
THE MARKET VALUE OF FIRST UNITED'S COMMON STOCK REACHED A HISTORICAL HIGH -
CLOSING AT $33 PER SHARE, A 19.5% INCREASE.
[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 1996, First United increased its quarterly cash dividend by 15% as
a result of higher sustainable earnings. The current annual dividend rate is
$.68 per share versus $.59 prior to the increase.
On August 31, 1996, First United acquired the issued and outstanding
stock of Carlisle Bancshares, Inc. (Carlisle) in a transaction accounted for as
a pooling-of-interests. First United issued approximately 508,000 shares in
exchange for all of the outstanding shares of Carlisle. Carlisle had assets of
approximately $110.0 million at the date of acquisition. First United's
statements for years prior to the merger with Carlisle have not been restated
to include the results of Carlisle.
Operations for 1996 resulted in net income of $18.3 million or $2.21
per share compared to $15.2 million or $1.96 per share in 1995 and $14.0
million or $1.81 per share in 1994. As shown in Table 1, the most significant
changes in per share net income for 1996 as compared to 1995 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 1.23% in
1996 versus 1.19% in 1995 and 1.24% in 1994. The return on stockholders'
equity (ROE) was 13.08% in 1996
versus 12.38% in 1995 and 12.87% in 1994. These measures compare favorably with
banks of similar size nationwide.
Total assets at December 31, 1996 were $1.5 billion as compared to the
year-end 1995 balance of $1.3 billion. The book value of First United's common
stock increased 7.66% to $18.14 per share in 1996 from $16.85 per share in
1995. Cash dividends were $.64 per share in 1996 and $.57 per share in 1995 and
$.49 per share in 1994.
EARNINGS ANALYSIS
NET INTEREST INCOME
Net interest income, the principal source of earnings, is the
difference between the income generated by earning assets and the total
interest cost of the funds obtained to carry them. Net interest income, as it
is referred to in this discussion, is on a fully tax-equivalent basis, which
adjusts for the tax-exempt status of income earned on certain municipal loans
and investments. The reported interest income for these tax-free assets is
increased by the amount of income tax savings less the nondeductible portion of
interest expense incurred to acquire the tax-free assets.
TABLE 1: CHANGES IN PER SHARE INCOME
<TABLE>
<CAPTION>
December 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Prior year income $ 1.96 $ 1.81 $ 2.03
Increase(decrease) attributable to:
Effect of Carlisle acquisition 0.02 -0- -0-
Net interest income 0.59 0.84 (0.01)
Provision for loan losses (0.10) (0.03) 0.19
Non-interest income 0.23 0.21 (0.06)
Non-interest expense (0.50) (0.75) 0.04
Income taxes 0.01 (0.12) (0.05)
Cumulative Effect of Accounting Change 0.00 0.00 (0.33)
-------- -------- --------
Current year income $ 2.21 $ 1.96 $ 1.81
-------- -------- --------
</TABLE>
[4]
<PAGE> 7
FINANCIAL ANALYSIS
On a tax-equivalent basis, net interest income for the year ended
December 31, 1996 was $59.5 million, an increase of 15% over the year-end 1995
total of $51.6 million. Net interest income for the year ended December 31,
1994 was $45.0 million. The 15% increase in net interest income for 1996 was
the result of the effects of increased levels of earning assets. 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 margin decreased in 1996 when compared with the
previous year, from 4.39% in 1995 to 4.34% in 1996. First United's growth in
interest-bearing liabilities at a rate greater than the growth in
interest-earning assets has contributed to the decrease in net interest margin.
Earning assets increased from a level of $1.24 billion at December 31,
1995 to a level of $1.42 billion at year-end 1996. Short-term investments
increased $1.0 million, securities increased $99.1 million and loans increased
$79.0 million. As a percentage of earning assets, short-term investments
decreased from 5% to 4%, total securities increased from 44% to 45% and loans
decreased from 52% to 51%. The relative level and mix of earning assets
reflected the effect of higher earnings being available in the investment
market.
Interest-bearing deposits increased $141.4 million during 1996. Total
interest-bearing deposits were $1.08 billion at December 31, 1996 compared with
$934.4 million at year-end 1995. Non-interest-bearing demand deposits increased
$27.9 million or 14% during 1996. The increase is attributable to a general
increase in deposits on hand at First United's subsidiary banks.
TABLE 2: ANALYSIS OF NET INTEREST MARGIN
<TABLE>
<CAPTION>
December 31,
-----------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Yield on earning assets ...... 8.05% 8.07% 7.18%
Break-even yield ............. 3.71% 3.68% 2.89%
Net interest margin .......... 4.34% 4.39% 4.29%
Net interest spread .......... 3.52% 3.41% 3.51%
</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 $1.5 million in 1996 versus
$0.6 million in 1995 and $0.3 million in 1994. First United's loan portfolio
modestly reflects the national trend of increased consumer spending and
borrowings. After two years of substantially reduced levels of loans charged
off, 1995 and 1996 resulted in increasing levels of charge-offs. As a result,
First United increased its 1996 provision together with a more modest increase
in 1995 to ensure that the allowance is maintained at an adequate level.
NON-INTEREST INCOME
Total non-interest income was $10.3 million for 1996 compared with
$7.8 million in 1995 and $6.1 million in 1994. The increase in 1996 compared to
prior year levels is primarily the result of continued increases in fee income
earned on deposits and trust department accounts, as both of these have
increased. The increased level of deposits subject to service charges in 1996
and 1995 was directly attributable to First United's acquisition of Carlisle
and FirstBank, respectively.
[5]
<PAGE> 8
FINANCIAL ANALYSIS
NON-INTEREST EXPENSE
Non-interest expense increased 17% or $5.8 million in 1996 over 1995
levels, and increased 20% in 1995 over 1994 levels. First United's 1996
conversion of four of its subsidiary banks to a new computer system accounts
for the increase in non-interest expense in 1996. 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 28.7% in
1996, 31.1% in 1995 and 29.9% in 1994. 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, 1996 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 totalled $3.7
million and $4.0 million at December 31, 1996 and 1995, respectively. The level
of non-performing loans represented 0.5% and 0.6% of loans for the years ended
1996 and 1995, respectively.
TABLE 3: LOAN PORTFOLIO
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------
(Dollars in Thousands) 1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Commercial, Financial and Agricultural $191,031 $161,804 $144,371 $108,979 $130,527
Real Estate 414,434 366,992 283,621 309,550 250,789
Consumer Loans 117,006 108,360 82,712 78,289 65,670
Loans for Purchasing or Carrying Securities 79 6,643 2,065 2,655 3,035
Financing Leases 468 298 181 439 1,037
-------- -------- -------- -------- --------
Total Loans $723,018 $644,097 $512,950 $499,912 $451,058
======== ======== ======== ======== ========
Non-Performing Assets $ 4,203 $ 4,678 $ 3,518 $ 4,237 $ 8,579
======== ======== ======== ======== ========
</TABLE>
[6]
<PAGE> 9
FIRST UNITED BANKS HAVE BEEN INVESTING IN GROWTH THROUGH THE
ESTABLISHMENT OF NEW BANKING OFFICES, BOTH TRADITIONAL FACILITIES AS WELL
AS NONTRADITIONAL.
[7]
<PAGE> 10
FINANCIAL ANALYSIS
TABLE 4: LOAN MATURITIES
<TABLE>
<CAPTION>
(Dollars in Thousands) December 31, 1996
-------------------------------------------------
1 Year Over 1 through Over
or Less 5 years 5 years Total
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Commercial,
Financial &
Agricultural $ 121,407 $ 60,599 $ 9,025 $ 191,031
========== ========== ========== ==========
Variable Rate $ 62,488
Pre-determined Rate $ 128,543
</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, 1996 totalled $2.2 million compared with $2.6
million at year ended 1995. 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
1996 by approximately $0.1 million. The amount of interest income on such
non-performing loans included in net income for 1996 was not material.
Certain loans are renegotiated to provide a reduction or deferral of
interest or principal because of deterioration in the financial condition of
the respective borrowers. Once a loan is placed in this category, it remains
there until the terms are not more favorable than those of other customers.
Other real estate (ORE) that has been acquired through foreclosure has
a carrying value of $0.5 million at year ended 1996. This compares with $0.7
million and $0.5 million at year ended 1995 and 1994, 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 Statement of Financial
Accounting Standards ("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 305%, 267% and 322% at December 31, 1996, 1995 and
1994, respectively.
All non-performing assets of First United as of December 31, 1996 were
previously classified as substandard, doubtful or loss by First United or its
regulators. At December 31, 1996, First United's management has no loans about
which serious doubts exist as to collectibility other than those disclosed in
Table 7.
[8]
<PAGE> 11
FINANCIAL ANALYSIS
TABLE 5: SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------
(Dollars in Thousands) 1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balance of Allowance for Loan
Losses at Beginning of Period $10,581 $ 9,667 $ 9,972 $ 7,972 $ 7,499
------- ------- ------- ------- -------
Allowance Applicable to Loans of Acquired Bank 1,215 1,627 -0- 520 -0-
------- ------- ------- ------- -------
Loans Charged-Off:
Commercial, Financial and Agricultural 901 937 862 511 1,836
Real Estate 508 424 193 311 1,035
Consumer 2,374 1,323 1,138 536 409
Other -0- 7 9 276 -0-
------- ------- ------- ------- -------
Total Loans Charged-Off 3,783 2,691 2,202 1,634 3,280
------- ------- ------- ------- -------
Recoveries of Loans Previously Charged-Off:
Commercial, Financial and Agricultural 582 728 543 397 469
Real Estate 204 158 180 683 581
Consumer 967 518 840 219 217
------- ------- ------- ------- -------
Total Recoveries 1,753 1,404 1,563 1,299 1,267
------- ------- ------- ------- -------
Net Loans Charged-Off 2,030 1,287 639 335 2,013
------- ------- ------- ------- -------
Provision to Allowance 1,475 574 334 1,815 2,486
------- ------- ------- ------- -------
Balance at End of Period $11,241 $10,581 $ 9,667 $ 9,972 $ 7,972
======= ======= ======= ======= =======
Ratio of Net Charge-Offs to Loans Outstanding .28% .20% .12% .07% .45%
</TABLE>
TABLE 6: ALLOCATION OF RESERVE BY CATEGORY
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------------- -------------------- -------------------- ------------------- -------------------
% LOANS % Loans % Loans % Loans % Loans
(Dollars in IN EACH in each in each in each in each
Thousands) AMOUNT CATEGORY Amount Category Amount Category Amount Category Amount Category
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and
Financial $ 3,479 26% $ 3,969 26% $ 4,756 29% $ 5,313 22% $ 2,922 29%
Real Estate 1,567 57% 1,307 57% 923 55% 1,044 62% 2,063 56%
Consumer 2,267 17% 2,132 17% 1,484 16% 1,113 16% 576 15%
Unallocated 3,928 -0- 3,173 -0- 2,504 -0- 2,502 -0- 2,411 -0-
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total $11,241 100% $ 10,581 100% $ 9,667 100% $ 9,972 100% $ 7,972 100%
======= ======== ======== ======== ======== ======== ======== ======== ======== ========
Allowance as a
Percentage of
Total Loans 1.55% 1.65% 1.88% 1.99% 1.77%
</TABLE>
[9]
<PAGE> 12
FINANCIAL ANALYSIS
TABLE 7: RISK ELEMENTS
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
(Dollars in Thousands) 1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Non-Performing Loans:
Non-Accrual Loans:
Commercial & Financial $ 869 $1,843 $ 620 $1,840 $1,610
Real Estate 1,143 724 1,427 713 829
Consumer 150 76 70 80 68
------ ------ ------ ------ ------
Total Non-Accrual Loans 2,162 2,643 2,117 2,633 2,507
------ ------ ------ ------ ------
Past Due 90 Days or More and Still Accruing:
Commercial 282 83 197 64 92
Real Estate 250 117 151 51 554
Consumer 316 272 207 227 156
------ ------ ------ ------ ------
Total Past Due 90 Days or More and Still Accruing 848 472 555 342 802
------ ------ ------ ------ ------
Renegotiated Loans 677 851 326 223 1,414
------ ------ ------ ------ ------
Total Non-Performing Loans 3,687 3,966 2,998 3,198 4,723
Other Real Estate 516 712 520 1,039 3,856
------ ------ ------ ------ ------
Total Non-Performing Assets $4,203 $4,678 $3,518 $4,237 $8,579
------ ------ ------ ------ ------
Non-Performing Loans as a % of Outstanding Loans .51% .62% .58% .64% 1.05%
Non-Performing Assets as a % of Equity Capital 2.81% 3.59% 3.21% 3.92% 8.99%
------ ------ ------ ------ ------
</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 recorded an unrealized gain, net of tax, of
approximately $1.3 million as a
TABLE 8: SECURITIES CARRYING VALUE(1)
<TABLE>
<CAPTION>
December 31,
------------------------------
(Dollars in Thousands) 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
U.S. Treasury Securities and Other U.S Government Agencies $398,226 $279,981 $266,180
Obligations of States and Political Subdivisions 66,238 80,623 72,980
Mortgage-Backed Securities 168,711 166,627 139,368
Other Securities 6,065 12,890 10,508
-------- -------- --------
$639,240 $540,121 $489,036
======== ======== ========
</TABLE>
(1)Includes available-for-sale and investment securities.
[10]
<PAGE> 13
FINANCIAL ANALYSIS
TABLE 9: SECURITIES MATURITY AND WEIGHTED AVERAGE YIELDS(1)
<TABLE>
<CAPTION>
Investment Securities
--------------------------------------------------------------------------------------
Maturing
--------------------------------------------------------------------------------------
After One But After Five But Mortgage-Backed
Within One Year Within Five Years Within Ten Years After Ten Years Securities
--------------------------------------------------------------------------------------
(Dollars in Thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
- ------------------------- ------- ---- ------- ---- ------- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities
and Other U.S.
Government Agencies $17,435 5.40% $20,921 5.32% $12,801 5.90% $18,236 5.76% $ -0- 0.00%
State & Political
Subdivisions 8,137 5.84% 26,782 5.08% 26,003 5.38% 4,010 6.34% -0- 0.00%
Mortgage-Backed
Securities -0- 0.00% -0- 0.00% -0- 0.00% -0- 0.00% 82,911 6.84%
Other 716 5.72% 250 6.74% 0- 0.00% 85 5.91% -0- 0.00%
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Total $26,288 5.54% $47,953 5.19% $38,804 5.55% $22,331 5.86% $82,911 6.84%
======= ==== ======= ==== ======= ==== ======= ==== ======= ====
</TABLE>
<TABLE>
<CAPTION>
Available-for-Sale Securities
-----------------------------
Amount Yield
-----------------------------
<S> <C> <C>
U.S. Treasury Securities and Other U.S. Government Agencies................................. $328,833 6.24%
State & Political Subdivisions.............................................................. 1,306 5.61%
Mortgage-Backed Securities.................................................................. 85,800 6.58%
Other....................................................................................... 5,014 6.60%
--------- -----
Total....................................................................................... $420,953 6.31%
======== =====
</TABLE>
(1)Yield information does not give effect to changes in fair value that are
reflected as a separate component of stockholders' equity.
separate component of the capital accounts. The carrying value of
available-for-sale securities that were sold during 1996 was approximately
$17.2 million as compared to $42.4 million and $3.6 million in 1995 and
1994, respectively. 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,
- -----------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands) AMOUNT RATE Amount Rate Amount Rate
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Non-interest-bearing
Demand Deposits $ 217,942 0.00% $ 220,080 0.00% $179,742 0.00%
Savings Deposits and
Interest-bearing Deposits 388,837 2.74% 318,525 3.25% 324,084 2.95%
Time Deposits of $100 or more 175,106 4.88% 153,077 5.48% 127,848 3.95%
Other Time Deposits 485,360 5.68% 403,623 5.32% 334,838 4.18%
----------
Total $1,267,245 $1,095,305 $966,512
========== ========== ========
</TABLE>
[11]
<PAGE> 14
DURING 1996, FIRST UNITED BEGAN A RE-ENGINEERING OF ITS MANAGEMENT INFORMATION
SYSTEMS AND TECHNOLOGY SERVICES.
[12]
<PAGE> 15
FINANCIAL ANALYSIS
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 10.41% at December 31, 1996 compared with 10.39% in 1995 and 11.46% in 1994.
First United's stockholders' equity for the year ended December 31, 1996
totalled $149.6 million compared with $130.4 million in 1995 and $109.5 million
in 1994. 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, 1996
-----------------
<S> <C>
Three Months or Less $ 106,622
Over 3 Through 6 Months 68,454
Over 6 Through 12 Months 36,066
Over 12 Months 18,605
---------
Total $ 229,747
=========
</TABLE>
TABLE 12: SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
December 31,
-----------------------------
(Dollars in Thousands) 1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Balance at December 31 $50,024 $46,895 $22,480
Daily Average Amount Outstanding 52,229 36,003 30,197
Maximum Month-End Balance 58,357 46,988 40,405
Daily Average Interest Rate 4.46% 4.89% 3.43%
Weighted Average Interest Rate on Balance at December 31 4.99% 4.96% 4.77%
</TABLE>
TABLE 13: CAPITAL RATIOS(1)
<TABLE>
<CAPTION>
December 31,
-----------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Equity Capital to Assets 9.75% 9.67% 10.69%
Primary Capital to Assets 10.41% 10.39% 11.46%
Leverage Ratio 9.07% 8.87% 10.20%
Tier 1 Capital 16.36% 15.65% 18.85%
Risk-Based Capital 17.61% 16.90% 20.10%
Dividend Payout Ratio(2) 28.90% 28.81% 27.53%
</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, 1996 First United Requirements
- -----------------------------------------------------------------------------------
<S> <C> <C>
Total Capital/Total Assets 9.75% 6.00%
Primary Capital/Total Assets 9.75% 5.50%
Total Risk-Based Capital 17.61% 8.00%
Tier 1 Capital 16.36% 4.00%
Leverage Ratio 9.07% 3.00%
</TABLE>
[13]
<PAGE> 16
FINANCIAL ANALYSIS
TABLE 15: COMMON STOCK MARKET PRICE AND DIVIDENDS PER SHARE
<TABLE>
<CAPTION>
1996 HIGH LOW DIV. PAID
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIRST QUARTER $28 1/2 $26 1/2 $.15
SECOND QUARTER 28 26 1/2 .17
THIRD QUARTER 28 26 3/4 .17
FOURTH QUARTER 33 27 .17
</TABLE>
<TABLE>
<CAPTION>
1995 High Low Div. Paid
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
First quarter $22 1/2 $19 $.13
Second quarter 25 21 1/2 .15
Third quarter 28 1/2 25 .15
Fourth quarter 28 1/2 26 1/2 .15
</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 1996, First United increased its annual
cash dividend from $0.59 per share to $0.68 per share and during the second
quarter of 1995, First United increased its annual dividend from $0.51 to $0.59
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 1996 and 1995 are listed in Table 15. Table 15 also lists
dividends paid by First United to its stockholders during each of those
quarters.
On February 14, 1997, 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.
Whereas in a rising interest rate environment, an institution with a negative
gap could experience the opposite results. At December 31, 1996, 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.
[14]
<PAGE> 17
FINANCIAL ANALYSIS
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, 1996 is presented in Table 16.
TABLE 16: INTEREST RATE SENSITIVE BALANCE SHEET
<TABLE>
<CAPTION>
By Repricing Dates At December 31, 1996
----------------------------------------------------------------------------------------------------------------------------
(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 $ 53,661 $ 1,160 $ 986 $ 1,071 $ -0- $-0- $ 56,878
Total Securities 70,864 59,454 50,217 62,720 287,837 108,148 639,240
Loans and Leases,
Net of Unearned
Income 169,320 59,573 79,023 114,167 255,136 43,942 721,161
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Rate Sensitive
Assets $ 293,845 $ 120,187 $ 130,226 $ 177,958 $ 542,973 $ 152,090 $1,417,279
---------- ---------- ---------- ---------- ---------- ---------- ----------
SOURCES OF FUNDS
Savings and Interest-
bearing Demand
Deposits 391,874 -0- -0- -0- -0- -0- 391,874
Time Deposits 116,888 149,921 164,011 150,145 102,706 255 683,926
Short-Term
Borrowings 49,821 -0- -0- 203 -0- -0- 50,024
Long-Term Debt 5,000 3,395 -0- 871 10,042 3,118 22,426
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Rate Sensitive
Liabilities $ 563,583 $ 153,316 $ 164,011 $ 151,219 $ 112,748 $ 3,373 $1,148,250
---------- ---------- ---------- ---------- ---------- ---------- ----------
Interest Rate
Sensitivity Gap (269,738) (33,129) (33,785) 26,739 430,225 148,717 269,029
Cumulative Interest
Rate Sensitivity Gap (269,738) (302,867) (336,652) (309,913) 120,312 269,029
Cumulative Interest
Rate Sensitivity Gap
as a Percent of Total
Assets (18%) (20%) (22%) (20%) 8% 18%
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
[15]
<PAGE> 18
A CHALLENGE FOR FIRST UNITED IN THE FUTURE WILL BE EFFICIENT AND EFFECTIVE
CAPITAL UTILIZATION.
[16]
<PAGE> 19
FINANCIAL ANALYSIS
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 direction 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
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. SFAS No.
121 also addresses the accounting for long-lived assets that are expected to be
disposed of. First United adopted SFAS No. 121 on January 1, 1996. The adoption
of this statement did not have a material impact on First United's consolidated
financial statements.
First United also adopted SFAS No. 122, "Accounting for Mortgage
Servicing Rights and Excess Servicing Receivables and for Securitization of
Mortgage Loans" on January 1, 1996. The 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. The adoption
of this statement did 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
disclosure standards for stock-based employee compensation plans. First United
adopted the disclosure standards of SFAS No. 123 during the year ended December
31, 1996.
In June 1996, FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities." SFAS No. 125
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishment of liabilities based on consistent
application of a "financial- components approach" that focuses on control. The
impact of SFAS No. 125, when adopted on January 1, 1997, will not be material
to the Company's financial condition or results of operations.
[17]
<PAGE> 20
TABLE 17: SUMMARY OF AVERAGE BALANCE SHEETS, INTEREST RATES AND CHANGES IN
NET INTEREST INCOME (FTE)
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
Average Average
(Dollars in Thousands) Balance Interest Rate Balance Interest Rate
- ---------------------------------------------------------- ------------ ---------- ------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
INTEREST-EARNING ASSETS:
Loans (net of unearned income) $ 710,852 $ 67,290 9.47% $ 615,338 $ 57,082 9.28%
Securities2:
Taxable Securities 522,705 33,053 6.32% 454,186 29,948 6.59%
Non-taxable Securities 77,540 6,454 8.32% 76,060 6,120 8.05%
Money-Market Assets:
Federal Funds Sold and Securities Purchased Under
Agreements to Resell and Other Short-Term
Investments 59,362 3,489 5.88% 30,401 1,726 5.68%
---------- -------- ----- ---------- -------- -----
Total Interest-Earning Assets 1,370,459 110,286 8.05% 1,175,985 94,876 8.07%
---------- -------- ----- ---------- -------- -----
NON-INTEREST-EARNING ASSETS:
Cash and Due From Banks 68,716 58,086
Premises and Equipment, Net 28,630 23,754
Other Assets 35,237 32,384
Less Allowance for Loan Losses (11,736) (11,132)
---------- ----------
Total $1,491,306 $1,279,077
========================================================== ========== ======== ===== ========== ======== =====
LIABILITIES
INTEREST-BEARING LIABILITIES
Savings and Interest-bearing Deposits $ 388,837 $ 10,643 2.74% $ 318,525 $ 10,348 3.25%
Time Deposits of $100 or More 175,106 8,539 4.88% 153,077 8,384 5.48%
Other Time Deposits 485,360 27,569 5.68% 403,623 21,456 5.32%
Federal Funds Purchased and Securities Sold Under
Agreements to Repurchase 52,229 2,332 4.46% 36,003 1,761 4.89%
Notes Payable 20,194 1,687 8.35% 17,221 1,301 7.55%
---------- -------- ----- ---------- -------- -----
Total Interest-Bearing Liabilities 1,121,726 50,770 4.53% 928,449 43,250 4.66%
---------- -------- ----- ---------- -------- -----
NON-INTEREST-BEARING LIABILITIES:
Demand Deposits 217,942 220,080
Other Liabilities 11,991 11,809
Stockholders' Equity 139,647 118,739
---------- ----------
Total $1,491,306 $1,279,077
========================================================== ========== ======== ===== ========== ======== =====
Net Interest-Earnings $ 59,516 $ 51,626
========================================================== ========== ======== ===== ========== ======== =====
Net Interest Margin 4.34% 4.39%
========================================================== ========== ======== ===== ========== ======== =====
</TABLE>
(1) Marginal Tax Rate of 35%.
(2) Includes available-for-sale and investment securities.
[18]
<PAGE> 21
<TABLE>
<CAPTION>
1996 Compared to 1995 1994 1995 Compared to 1994
- -------------------------------------------- ------------------------------------------- -----------------------------------------
Total Due To Due to Total Due To Due To
Increase Change in Change in Average Increase Change in Change in
(Decrease) Volume Rate Balance Interest Rate (Decrease) Volume Rate
- --------------- -------------- ------------ ---------------- ------------- ----------- ----------- ----------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 10,208 $ 8,860 $ 1,348 $ 501,721 $ 41,084 8.19% $ 15,998 $ 9,304 $ 6,694
3,105 4,518 (1,413) 449,150 26,792 5.97% 3,156 300 2,856
334 119 215 68,417 5,812 8.49% 308 649 (341)
1,763 1,644 119 28,701 1,560 5.44% 166 92 74
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
15,410 15,141 269 1,047,989 75,248 7.18% 19,628 10,345 9,283
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
55,417
14,577
19,112
(9,778)
-----------
$ 1,127,317
=========== =========== =========== =========== =========== =========== =========== =========== ===========
$ 295 $ 2,284 $ (1,989) $ 324,084 $ 9,563 2.95% $ 785 $ (164) $ 949
155 1,207 (1,052) 127,848 5,054 3.95% 3,330 997 2,333
6,113 4,345 1,768 334,838 14,001 4.18% 7,455 2,876 4,579
571 794 (223) 30,197 1,037 3.43% 724 199 525
386 225 161 6,784 598 8.81% 703 920 (217)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
7,520 8,855 (1335) 823,751 30,253 3.67% 12,997 4,828 8,169
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
179,742
15,008
108,816
-----------
$ 7,890 $ 6,286 $ 1,604 $ 1,127,317
$ 44,995 $ 6,631 $ 5,517 $ 1,114
=========== =========== =========== =========== =========== =========== =========== =========== ===========
4.29%
=========== =========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
[19]
<PAGE> 22
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
(In Thousands, Except Per Share Data)
--------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Total Interest Income $ 108,027 $ 92,735 $ 73,214 $ 71,968 $ 77,570
Net Interest Income 57,257 49,485 42,961 43,063 42,511
Provision for Possible Loan Losses 1,475 574 334 1,815 2,486
Income Before Cumulative Effect of
a Change In Accounting Principle 18,259 15,204 14,008 13,215 12,676
Net Income 18,259 15,204 14,008 15,737 12,676
PER SHARE DATA
Income Before Cumulative
Effect of a Change in
Accounting Principle $ 2.21 $ 1.96 $ 1.81 $ 1.71 $ 1.64
Net Income 2.21 1.96 1.81 2.03 1.64
Cash Dividends Paid .64 .57 .49 .44 .40
SELECTED BALANCE SHEET ITEMS
Year Ended Balances
Total Assets $1,531,039 $1,336,020 $1,106,610 $1,123,598 $1,086,467
Total Securities(1) 639,240 540,121 489,036 513,399 509,552
Net Loans(2) 721,161 642,118 512,493 499,305 450,633
Total Deposits 1,297,273 1,127,914 953,904 969,749 943,097
Notes Payable 22,426 16,832 12,825 7,723 8,821
Capital Accounts 149,601 130,405 109,509 108,122 95,438
</TABLE>
(1)Includes available-for-sale and investment securities.
(2)Net of unearned discount.
[20]
<PAGE> 23
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>
1996
Interest Income $ 26,109 $ 26,586 $ 27,122 $ 28,210
Interest Expense 12,460 12,587 12,647 13,076
-------- -------- -------- --------
Net Interest Income 13,649 13,999 14,475 15,134
Provision for Possible Loan Losses (93) (572) (420) (390)
Other Income 2,602 2,384 2,620 2,686
Other Expense 9,381 9,989 10,032 11,080
Income Tax Expense 2,030 1,386 1,952 1,965
-------- -------- -------- --------
Net Income $ 4,747 $ 4,436 $ 4,691 $ 4,385
======== ======== ======== ========
Earnings Per Share $ 0.58 $ 0.54 $ 0.57 $ 0.53
======== ======== ======== ========
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 $ 0.47 $ 0.49 $ 0.51 $ 0.49
======== ======== ======== ========
</TABLE>
[21]
<PAGE> 24
FINANCIAL STATEMENTS AND NOTES
[22]
<PAGE> 25
CONSOLIDATED STATEMENTS OF CONDITION
First United Bancshares, Inc.
(in thousands, except per share data)
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Cash and Due from Banks ........................................ $ 61,194 $ 50,485
----------- -----------
Short-Term Investments:
Federal Funds Sold and Securities
Purchased Under Agreements to Resell ....................... 35,285 31,658
Other Short-Term Investments ................................. 21,593 24,252
----------- -----------
Total Short-Term Investments ............................... 56,878 55,910
----------- -----------
Securities Available-For-Sale .................................. 420,953 339,028
----------- -----------
Investment Securities (Fair Value of $219,517 and $202,949
at December 31, 1996 and 1995, respectively) ................ 218,287 201,093
----------- -----------
Total Loans .................................................... 723,018 644,097
Unearned Discount ............................................ (1,857) (1,979)
Allowance for Possible Loan Losses ........................... (11,241) (10,581)
----------- -----------
Net Loans .................................................. 709,920 631,537
----------- -----------
Premises and Equipment ......................................... 29,524 26,319
----------- -----------
Goodwill ....................................................... 11,447 11,761
----------- -----------
Other Real Estate .............................................. 516 712
----------- -----------
Other Assets ................................................... 22,320 19,175
----------- -----------
Total Assets ............................................... $ 1,531,039 $ 1,336,020
=========== ===========
LIABILITIES
Deposits:
Demand ....................................................... $ 221,473 $ 193,533
Savings and Interest-bearing Demand .......................... 391,874 346,119
Time ......................................................... 683,926 588,262
----------- -----------
Total Deposits ............................................. 1,297,273 1,127,914
Federal Funds Purchased and Securities Sold Under
Agreements to Repurchase ..................................... 50,024 46,895
Other Liabilities .............................................. 11,715 13,974
Notes Payable:
Unaffiliated Bank ............................................ 17,426 11,832
Affiliated Company ........................................... 5,000 5,000
----------- -----------
Total Liabilities .......................................... 1,381,438 1,205,615
----------- -----------
Commitments and Contingencies
CAPITAL ACCOUNTS
Preferred Stock (Par value of $1.00; 500 shares
authorized in 1996 and 1995; none outstanding) ............ -0- -0-
Common Stock (Par value of $1.00; 24,000 shares authorized;
8,246 and 7,738 shares issued and outstanding in
1996 and 1995, respectively) .............................. 8,246 7,738
Surplus ........................................................ 13,297 10,972
Undivided Profits .............................................. 127,683 110,431
Net Unrealized Gain on Securities Available-for-Sale,
Net of Tax .............................................. 375 1,264
----------- -----------
Total Capital Accounts ..................................... 149,601 130,405
----------- -----------
Total Liabilities and Capital Accounts ..................... $ 1,531,039 $ 1,336,020
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
[23]
<PAGE> 26
CONSOLIDATED STATEMENTS OF INCOME
First United Bancshares, Inc.
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans ............................ $ 67,290 $ 57,082 $ 41,084
Interest on Securities:
Taxable Securities .................................. 33,053 29,260 26,792
Non-taxable Securities .............................. 4,195 3,979 3,778
Interest on Federal Funds Sold and Securities
Purchased Under Agreements to Resell ............... 2,501 1,726 1,021
Interest on Deposits in Banks ......................... 988 688 539
--------- --------- ---------
TOTAL INTEREST INCOME ............................. 108,027 92,735 73,214
--------- --------- ---------
INTEREST EXPENSE
Interest on Deposits .................................. 46,751 40,188 28,618
Interest on Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase .................. 2,332 1,761 1,037
Interest on Notes Payable ............................. 1,687 1,301 598
--------- --------- ---------
TOTAL INTEREST EXPENSE ............................ 50,770 43,250 30,253
--------- --------- ---------
NET INTEREST INCOME ............................... 57,257 49,485 42,961
Provision for Loan Losses ............................. (1,475) (574) (334)
--------- --------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES ....................... 55,782 48,911 42,627
--------- --------- ---------
OTHER INCOME
Service Charges on Deposit Accounts ................... 4,953 4,227 3,229
Trust Department Income ............................... 2,180 1,799 1,379
Security Gains (Losses) ............................... 122 (108) 9
Other Operating Income ................................ 3,037 1,887 1,530
--------- --------- ---------
TOTAL OTHER INCOME ................................ 10,292 7,805 6,147
--------- --------- ---------
OTHER EXPENSE
Salaries .............................................. 15,595 13,288 11,071
Pension and Other Employee Benefits ................... 5,022 4,209 3,644
Net Occupancy Expense ................................. 3,670 2,924 2,435
Equipment Expense ..................................... 2,480 1,766 1,318
Data Processing Expense ............................... 1,934 1,705 1,511
Other Operating Expenses .............................. 11,781 10,752 8,818
--------- --------- ---------
TOTAL OTHER EXPENSE ............................... 40,482 34,644 28,797
--------- --------- ---------
INCOME BEFORE INCOME TAX EXPENSE ...................... 25,592 22,072 19,977
INCOME TAX EXPENSE .................................... 7,333 6,868 5,969
--------- --------- ---------
NET INCOME ............................................ $ 18,259 $ 15,204 $ 14,008
========= ========= =========
EARNINGS PER SHARE .................................... $ 2.21 $ 1.96 $ 1.81
========= ========= =========
CASH DIVIDENDS PER SHARE .............................. $ .64 $ .57 $ .49
--------- ========= =========
AVERAGE SHARES ISSUED AND OUTSTANDING ................. 8,246 7,738 7,738
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
[24]
<PAGE> 27
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL ACCOUNTS
First United Bancshares, Inc.
(in thousands)
<TABLE>
<CAPTION>
Net Unrealized
Gain (Loss) on
Securities
Common Stock Undivided Treasury Available-For-
Shares Amount Surplus Profits Stock Sale, Net of Tax
---------- ---------- ---------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 7,749 $ 7,749 $ 10,945 $ 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 7,738 7,738 10,972 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
on Securities
Available-For-Sale, Net of Tax -0- -0- -0- -0- -0- 10,077
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1995 7,738 7,738 10,972 110,431 -0- 1,264
Effect of Carlisle Acquisition 508 508 2,325 4,247 -0- (77)
Net Income -0- -0- -0- 18,259 -0- -0-
Cash Dividends -0- -0- -0- (5,254) -0- -0-
Decrease in Unrealized Gain
on Securities
Available-For-Sale, Net of Tax -0- -0- -0- -0- -0- (812)
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1996 8,246 $ 8,246 $ 13,297 $ 127,683 $-0- $ 375
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
[25]
<PAGE> 28
CONSOLIDATED STATEMENTS OF CASH FLOWS
First United Bancshares, Inc.
(in thousands)
<TABLE>
<CAPTION>
Year Ended Decemer 31,
-----------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 18,259 $ 15,204 $ 14,008
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating
Activities:
Depreciation 2,624 2,067 1,558
Amortization of Goodwill 1,119 940 477
Provision for Possible Loan Losses 1,475 574 334
Provision for Deferred Taxes 142 470 722
(Gain) Loss on Sales of Securities (122) 108 (9)
Accretion of Bond Discount, Net (3,853) (1,785) (1,618)
Decrease (Increase) in Other Assets (807) 2,660 (642)
Increase (Decrease) in Other Liabilities (5,030) 3,860 426
--------- --------- ---------
Net Cash Provided by Operating Activities 13,807 24,098 15,256
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturities of Investment Securities 33,967 27,795 26,774
Proceeds from Maturities of Securities Available-for-Sale 116,059 82,105 133,063
Proceeds from Sales of Securities Available-for-Sale 17,187 42,446 3,622
Purchase of Investment Securities (40,078) (41,733) (34,862)
Purchase of Available-for-Sale Securities (193,338) (112,303) (116,105)
Decrease in Federal Funds, Net 3,175 23,940 2,243
(Increase) Decrease in Other Short-Term Investments 2,802 (16,988) (1,178)
Increase in Loans (18,283) (38,447) (13,827)
Capital Additions (4,286) (8,113) (3,195)
Purchase of Subsidiary Bank -0- (19,079) -0-
--------- --------- ---------
Net Cash Used in Investing Activities (82,795) (60,377) (3,465)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (Decrease) in Demand, Savings and
Interest-bearing Demand Deposits 39,043 (13,689) (15,248)
Increase (Decrease) in Time Deposits 46,785 51,412 (597)
Issuance (Repayment) of Notes Payable (877) 4,007 5,103
Dividends Paid (5,254) (4,385) (3,857)
--------- --------- ---------
Net Cash Provided by (Used in) Financing
Activities 79,697 37,345 (14,599)
--------- --------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents 10,709 1,066 (2,808)
Cash and Cash Equivalents, Beginning 50,485 49,419 52,227
--------- --------- ---------
Cash and Cash Equivalents, Ending $ 61,194 $ 50,485 $ 49,419
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
[26]
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First United Bancshares, Inc.
1. 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 United Bank
(Stuttgart); The Bank of North Arkansas (Melbourne); FirstBank (Texarkana,
Texas); Citizens Bank & Trust (Carlisle); Hazen First State Bank; FirstBank of
Arkansas (Brinkley) and First United Trust Company, N.A. All significant
intercompany accounts have been eliminated.
SECURITIES:
The Company adopted Statement of Financial Accounting Standards
("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. Securities available-for-sale include securities that
Management intends 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. 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 doubtful. This evaluation is
[27]
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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 the straight-line method of depreciation 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
$4,149,000 and $3,179,000 at December 31, 1996 and 1995, 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 $42,000 and $73,000 for the years ended December 31, 1996 and
1995, respectively. The Company had a net gain of $11,000 in 1994.
PER SHARE DATA:
Income per share is based on the weighted average shares outstanding
during the year. All per share data and number of shares outstanding have been
retroactively restated to reflect the effect of a 3-for-2 stock split. (See
Note 15).
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. The Company adopted SFAS No. 121 on January 1, 1996. The adoption
of this statement did not have a material impact on the Company's consolidated
financial statements.
The Company also adopted SFAS No. 122, "Accounting for Mortgage
Servicing Rights and Excess Servicing Receivables and for Securitization of
Mortgage Loans" on January 1, 1996. 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 did 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 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
[28]
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
prescribed by Accounting Principles Board ("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 elected to remain with the accounting in Opinion No.
25. The adoption of this statement did not have a material impact on the
Company's consolidated financial statements.
In June 1996, FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities." SFAS No. 125
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishment of liabilities based on consistent
application of a "financial-components approach" that focuses on control. The
impact of SFAS No. 125, when adopted on January 1, 1997, will not be material
to the Company's financial condition or results of operations.
2. ACQUISITIONS
On August 31, 1996, the Company acquired Carlisle Bancshares, Inc.
("Carlisle") in a merger accounted for as a pooling-of-interests (the
"Merger"). In connection with the Merger, the Company issued approximately
508,000 shares of common stock for all of Carlisle's outstanding common stock.
As the effect of the Merger has been deemed immaterial, the Company's
statements for years prior to the Merger have not been restated to include the
results of Carlisle.
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 $1.95.
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 "InvestArk
Merger"). The InvestArk Merger was accounted for as a pooling-of-interests. The
Company's financial statements for periods prior to the InvestArk Merger have
been restated to include the results of InvestArk for all periods presented.
3. SECURITIES AVAILABLE-FOR-SALE
The carrying values and estimated fair values of securities
available-for-sale at December 31, 1996 and 1995 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1996
U.S. Treasury Securities and
Other U.S. Government Agencies $ 328,453 $ 1,838 $ 1,458 $ 328,833
Obligations of States and Political 1,294 19 7 1,306
Subdivisions 85,566 657 423 85,800
Mortgage-Backed Securities 4,982 38 6 5,014
---------- ---------- ---------- ----------
Other $ 420,295 $ 2,552 $ 1,894 $ 420,953
========== ========== ========== ==========
1995
U.S. Treasury Securities and
Other U.S. Government Agencies $ 269,544 $ 2,675 $ 1,306 $ 270,913
Obligations of States and Political 1,730 21 8 1,743
Subdivisions 56,022 810 271 56,561
Mortgage-Backed Securities 9,624 204 17 9,811
---------- ---------- ---------- ----------
Other $ 336,920 $ 3,710 $ 1,602 $ 339,028
========== ========== ========== ==========
</TABLE>
The amortized cost and estimated fair value of securities
available-for-sale at December 31, 1996, 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> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
---------- ----------
<S> <C> <C>
Due in One Year or Less $ 106,453 $ 106,668
Due After One Year Through Five Years 203,332 203,550
Due After Five Years Through Ten Years 24,302 24,282
Due After Ten Years 642 653
Mortgage-Backed Securities 85,566 85,800
---------- ----------
$ 420,295 $ 420,953
========== ==========
</TABLE>
Proceeds from sales of securities available-for-sale were $17,187,000,
$42,446,000 and $3,622,000 during 1996, 1995 and 1994, respectively. Gross
gains realized on these sales during 1996 and 1994 were $122,000 and $9,000,
respectively. There were gross losses of $108,000 during 1995.
4. INVESTMENT SECURITIES
The carrying values and estimated fair values of investments in debt
securities as of December 31, 1996 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1996
U.S. Treasury Securities and
Other U.S. Government
Agencies $ 69,393 $ 241 $ 399 $ 69,235
Obligations of States and
Political Subdivisions 64,932 1,220 224 65,928
Mortgage-Backed Securities 82,911 807 438 83,280
Other 1,051 28 5 1,074
---------- ---------- ---------- ----------
$ 218,287 $ 2,296 $ 1,066 $ 219,517
========== ========== ========== ==========
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
========== ========== ========== ==========
</TABLE>
The amortized cost and estimated fair value of debt securities at
December 31, 1996, 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 $ 26,288 $ 26,872
Due After One Year Through Five Years 47,953 47,821
Due After Five Years Through Ten Years 38,804 39,379
Due After Ten Years 22,331 22,165
Mortgage-Backed Securities 82,911 83,280
---------- ----------
$ 218,287 $ 219,517
========== ==========
</TABLE>
There were no sales of investment securities during 1996.
Securities with a carrying value of $278,079,000 at December 31, 1996
were pledged to secure public deposits and for other purposes required by law.
[30]
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. ALLOWANCE FOR POSSIBLE LOAN LOSSES
The changes in the allowance for possible loan losses during
1996, 1995 and 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance at Beginning of Year $ 10,581 $ 9,667 $ 9,972
Allowance Applicable to Loans of
Acquired Bank 1,215 1,627 -0-
Provision Charged Against Income 1,475 574 334
Recoveries on Loans Charged-Off 1,753 1,404 1,563
Loans Charged-Off (3,783) (2,691) (2,202)
---------- ---------- ----------
Balance at End of Year $ 11,241 $ 10,581 $ 9,667
========== ========== ==========
</TABLE>
6. LOANS
Loans consist of the following categories (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
TYPE
Real Estate Loans Collateralized by -
Residential Properties, Primarily Single
Family Residences
Commercial Properties $ 198,195 $ 175,390
Commercial and Industrial Loans, Other Than 216,239 191,602
Real Estate and Energy-Related
Energy-Related Loans
Consumer Loans 173,398 143,536
Loans for Purchasing or Carrying Securities 17,633 18,268
Financing Leases 117,006 108,360
79 6,643
468 298
--------- ---------
$ 723,018 $ 644,097
========= =========
</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, 1996 and 1995, officers,
directors, and related parties had loans of approximately $15,794,000 and
$14,821,000, respectively. At the time of acquisition by the Company, Carlisle
also had loans outstanding of $607,000 to officers, directors and related
parties. During the year ended December 31, 1996, loans made to these parties
totalled $8,819,000 and repayments totalled $8,336,000. Loans to related
parties at December 31, 1995 included loans of $117,000 to directors who
retired during 1996.
A summary of non-performing assets as of December 31, 1996 and 1995 is
as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Non-Accrual Loans $ 2,162 $ 2,643
Past Due Loans (90 Days or more and still accruing) 848 472
Renegotiated Loans 677 851
--------- ---------
3,687 3,966
Other Real Estate 516 712
--------- ---------
Total Non-Performing Assets $ 4,203 $ 4,678
========= =========
</TABLE>
The Company's non-accrual policy had the effect of reducing interest
and fees on loans in 1996 and 1995 by approximately $81,000 and $87,000,
respectively. Substantially all payments on non-accrual loans were applied to
principal.
[31]
<PAGE> 34
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 1996 1995
---------------- ---------------- --------- ---------
<S> <C> <C> <C> <C>
Land $ 5,872 $ 5,408
Buildings and Leasehold
Improvements Straight-line 5-40 years 29,870 28,303
Furniture, Fixtures and
Equipment Straight-line 3-10 years 18,197 11,682
------- --------
53,939 45,393
Less: Accumulated
Depreciation (24,415) (19,074)
------- --------
$29,524 $ 26,319
======= ========
</TABLE>
Depreciation included in other expense, net occupancy expense and
equipment expense was $2,624,000 in 1996, $2,067,000 in 1995 and $1,558,000 in
1994.
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, 1996, 1995
and 1994.
8. INCOME TAXES
Income tax expense is composed of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Currently Payable $ 7,191 $ 6,398 $ 5,247
Deferred:
Effects of Temporary Differences 142 470 722
--------- --------- ---------
$ 7,333 $ 6,868 $ 5,969
========= ========= =========
</TABLE>
The income tax provision included $42,000, $(38,000) and $3,000 for
the years ended December 31, 1996, 1995 and 1994, 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>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Statutory Federal Income Tax Rate 35.0% 35.0% 35.0%
Less:
Non-Taxable Interest Income (5.7) (6.3) (6.1)
Charitable Contributions (0.8) -0- -0-
Amortization of Goodwill 1.3 1.4 0.8
Other Items, Net (1.1) 1.0 0.2
--------- --------- ---------
Effective Income Tax Rate 28.7% 31.1% 29.9%
========= ========= =========
</TABLE>
At December 31, 1996 and 1995, 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).
[32]
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Accelerated Depreciation $ (1,137) $ (789)
Provision for Possible Loan Losses 3,056 3,075
Unrealized Gain on Marketable Securities (202) (706)
Effects of Pension and Benefit Plans (295) (333)
Difference in Tax and Book Basis of Securities (430) (455)
Write-down of Other Real Estate 52 110
Other 138 (82)
--------- ---------
$ 1,182 $ 820
========= =========
</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. OTHER BORROWED FUNDS
Federal funds purchased and securities sold under agreements to
repurchase generally mature within one to four days from the transaction date.
Other borrowed funds consist of term federal funds purchased and treasury tax
and loan deposits and generally are repaid within one to 120 days from the
transaction date. Information concerning securities sold under agreements to
repurchase is summarized below.
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Average balance during the year $ 52,229 $ 36,003
Average interest rate during the year 4.46% 4.89%
Maximum month-end balance during the year $ 58,357 $ 46,988
U.S. government securities pledged as collateral for the repurchase agreements:
Carrying Value $ 80,988 $ 64,821
Estimated Fair Value 81,015 65,063
</TABLE>
10. NOTES PAYABLE
A summary of notes payable as of December 31, 1996 and 1995 is as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Promissory Note Bearing Interest at 1.20% Above the 30-Day LIBOR
(6.763% and 7.1375% at December 31, 1996 and 1995), Principal Due 1997 $ 5,000 $ 5,000
Promissory Note Bearing Interest at 0.1% Above the 30-Day LIBOR
(5.475% and 6.0375% at December 31, 1996 and 1995), Principal Due 2001 5,000 5,000
Promissory Note to Unaffiliated Bank Bearing Interest at 1.20%
Above the 30-Day LIBOR (6.763% and 7.1375% at December 31, 1996
and 1995), $872,000 Due Annually 4,362 5,235
Other Installment Notes Payable Bearing Interest at Rates Varying From
4.400% to 7.470% and With Maturities Varying From 1998 to 2023 4,670 1,597
Line of Credit from Unaffiliated Bank Bearing Interest at 1.20% Above the 30-Day
LIBOR (6.763% at December 31, 1996), Principal Due January 31, 1998 3,394 -0-
------- -------
$22,426 $16,832
======= =======
</TABLE>
The promissory note 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: 1997 -
$6,078,000; 1998 - $4,461,000; 1999 - $2,140,000; 2000 - $1,883,000; 2001 -
$6,215,000; and thereafter - $1,649,000.
11. 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 ($762,000 in 1996, $695,000
in 1995 and $618,000 in 1994) 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, 1996 and 1995 (in thousands):
[33]
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Actuarial Present Value of Benefit
Obligation at December 31:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Accumulated Benefit Obligation $ (11,942) $ (11,310)
Effect of Projected Future Compensation Levels (1,222) (1,099)
--------- ---------
Projected Benefit Obligation for
Service Rendered to Date (13,164) (12,409)
Plan Assets at Fair Value, Primarily Stock
and U.S. Government Securities 13,873 13,059
--------- ---------
Plan Assets Greater Than Projected
Benefit Obligation 709 650
Unrecognized Net Loss From Past Experience
Different From That Assumed 2,496 2,314
Unrecognized Net Obligations (1,156) (1,227)
--------- ---------
Prepaid Pension Cost $ 2,049 $ 1,737
========= =========
</TABLE>
The Plan's net pension cost for 1996, 1995 and 1994 included the following
components (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Service Cost $ 578 $ 424 $ 412
Interest Cost on Projected
Benefit Obligation 915 845 801
Actual Return on Assets (1,104) (1,948) (99)
Net Amortization and Deferral
61 1,120 (854)
--------- --------- ---------
$ 450 $ 441 $ 260
========= ========= =========
Significant Assumptions:
Weighted Average Discount Rate 7.25% 7.50% 7.50%
Estimated Future Pay Increases 4.00% 4.00% 4.00%
Expected Return on Assets 7.50% 7.50% 7.50%
</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 1996, 1995 and 1994, the Company's expenses totalled approximately
$777,000, $601,000, and $525,000 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 1996, 1995 and 1994 was $269,000, $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. The table below
details the stock option activity for the past three years.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------- ----------------------- -------------------------
AMOUNT OF AVERAGE AMOUNT OF AVERAGE AMOUNT OF AVERAGE
OPTIONS EXERCISE OPTIONS EXERCISE OPTIONS EXERCISE
OUTSTANDING PRICE OUTSTANDING PRICE OUTSTANDING PRICE
------------ ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of year 9,444 $ 18.96 4,832 $ 19.00 -0- $ -0-
Granted 31,902 26.45 4,612 18.92 4,832 19.00
Exercised -0- -0- -0- -0- -0- -0-
Canceled -0- -0- -0- -0- -0- -0-
---------- ---------- ----------
Outstanding,
end of year 41,346 $ 24.74 9,444 $ 18.96 4,832 $ 19.00
========== ========== ==========
</TABLE>
[34]
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Options to purchase 3,596 shares of common stock were exercisable at
an average exercise price of $18.97 at December 31, 1996. Using the
Black-Scholes model, the Company determined the pro forma effect of these
options on 1996 and 1995 net income and earnings per share would not be
material.
12. 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 1997. 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, 1996 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, 1996 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Commitments to Extend Credit $114,849 $ 93,561
Standby Letters of Credit 8,409 13,255
</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: 1997 - $1,416,000 and 1998 - $1,473,000.
Certain branch facilities and warehouse space are leased under various
operating lease agreements. These leases require approximate minimum annual
rentals as follows: 1997- $132,000; 1998-$127,000; 1999-$65,000; 2000-$55,000;
2001-$118,000; and thereafter- $66,000.
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.
13. 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 1996, the Company's subsidiary banks will
have available for payment of dividends, without regulatory approval,
approximately $6,520,000 of undistributed earnings plus the net income earned
in 1997.
At December 31, 1996, the Company was required to maintain reserve
balances in cash and due from accounts of approximately $10,228,000.
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, 1996, 1995 and 1994 were
approximately $87,000, $1,238,000 and $2,186,000, respectively, and those
premiums were included in other operating expenses on the Company`s
Consolidated Statements of Income.
[35]
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. SUPPLEMENTARY DATA FOR CASH FLOWS
Income taxes paid by the Company during the years ended December 31,
1996, 1995 and 1994 amounted to $6,150,000, $5,812,000 and $5,901,000,
respectively. Interest paid on notes payable during the years ended December
31, 1996, 1995 and 1994 was $1,609,000, $1,134,000 and $598,000, respectively.
In connection with the acquisition in 1995, the Company acquired
assets and assumed liabilities as follows (in thousands):
<TABLE>
<CAPTION>
1995
---------
<S> <C>
Fair Value of Assets Acquired $ 154,811
Goodwill 8,707
Liabilities Assumed (138,518)
---------
Cash Paid 25,000
Cash Acquired (5,921)
---------
Net Payment for Purchase $ 19,079
=========
</TABLE>
15. STOCKHOLDERS' EQUITY
On May 20, 1996, the Company declared a 3-for-2 stock split which was
effected in the form of a fifty percent (50%) stock dividend. The dividend was
distributed on June 28, 1996 and increased the issued and outstanding common
stock of the Company from 5,159 to 7,738 shares. All per share data and number
of shares outstanding have been retroactively restated to reflect the effect of
this stock split.
The Company and each of its subsidiary banks are subject to minimum
capital requirements which are administered by various federal regulatory
agencies. These capital requirements, as defined by federal guidelines, involve
quantitative and qualitative measures of assets, liabilities and certain
off-balance sheet instruments. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary, actions by
regulators that, if undertaken, could have a direct material effect on the
financial statements of the Company and its subsidiaries.
Management believes, as of December 31, 1996, that the Company and its
subsidiaries meet all capital adequacy requirements to which they are subject.
At December 31, 1996, the most recent notification from the Office of the
Comptroller of the Currency categorized each of the subsidiaries as well
capitalized. To be categorized as well capitalized, a bank must maintain
minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios (as
defined in applicable regulations) as set forth in the table below. There are
no conditions or events since the notification that Management believes have
changed any of the subsidiary banks' category.
The actual regulatory capital amounts and ratios for the Company and
the most significant of its bank subsidiaries are presented in the table below
(dollars in thousands):
<TABLE>
<CAPTION>
Minimum Regulatory
Actual Minimum Regulatory Provision to be
Regulatory Capital Capital Required Well Capitalized
------------------------- -------------------------- -------------------------
Amount Ratio Amount Ratio Amount Ratio
------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
At December 31, 1996:
Total Capital (to Risk Weighted Assets)
First United Bancshares, Inc. $ 148,387 17.61% $67,410 8.00% N/A
City National Bank of Fort Smith $ 36,846 14.31% $20,478 8.00% $25,597 10.00%
Tier 1 Capital (to Risk Weighted Assets)
First United Bancshares, Inc. $ 137,835 16.36% $33,705 4.00% N/A
City National Bank of Fort Smith $ 33,623 13.06% $10,239 4.00% $15,359 6.00%
Tier 1 Capital (to Average Assets)
First United Bancshares, Inc. $ 137,835 9.07% $60,781 4.00% N/A
City National Bank of Fort Smith $ 33,623 8.39% $16,025 4.00% $20,031 5.00%
At December 31, 1995:
Total Capital (to Risk Weighted Assets)
First United Bancshares, Inc. $ 126,834 16.90% $60,053 8.00% N/A
City National Bank of Fort Smith $ 32,890 14.56% $18,019 8.00% $27,524 10.00%
Tier 1 Capital (to Risk Weighted Assets)
First United Bancshares, Inc. $ 117,451 15.65% $30,026 4.00% N/A
City National Bank of Fort Smith $ 30,067 13.31% $ 9,010 4.00% $13,515 6.00%
Tier 1 Capital (to Average Assets)
First United Bancshares, Inc. $ 117,451 8.87% $52,974 4.00% N/A
City National Bank of Fort Smith $ 30,067 8.62% $13,944 4.00% $17,430 5.00%
</TABLE>
[36]
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
The financial position of First United Bancshares, Inc. (parent
company only), its results of operations and cash flows are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------------
1996 1995
-------- --------
<S> <C> <C>
CONDENSED FINANCIAL POSITION:
Assets:
Cash
Investment in Subsidiaries $ 15,300 $ 13,533
Other Assets 142,512 126,838
Total Assets 5,556 2,477
-------- --------
$163,368 $142,848
======== ========
Liabilities and Capital Accounts:
Notes Payable $ 12,756 $ 10,235
Other Liabilities 1,011 2,208
-------- --------
Total Liabilities 13,767 12,443
-------- --------
Total Capital 149,601 130,405
-------- --------
Total Liabilities and Capital $163,368 $142,848
======== ========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
CONDENSED OPERATING RESULTS:
Dividend Income From Subsidiaries $ 14,135 $ 30,170 $ 11,613
Management Fees 427 537 1,458
Other Income 100 -0- -0-
-------- -------- --------
14,662 30,707 13,071
-------- -------- --------
Interest Expense 812 771 457
Other Expense 3,406 1,956 2,620
-------- -------- --------
4,218 2,727 3,077
-------- -------- --------
Income Before Tax Benefit and Equity in
Undistributed Income of Subsidiaries 10,444 27,980 9,994
Income Tax Benefit 1,761 864 602
-------- -------- --------
Income Before Equity in Undistributed
Income of Subsidiaries 12,205 28,844 10,596
Equity in Undistributed Income
of Subsidiaries 6,054 (13,640) 3,412
-------- -------- --------
Net Income $ 18,259 $ 15,204 $ 14,008
======== ======== ========
</TABLE>
[37]
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C> <C>
CONDENSED STATEMENTS OF CASH FLOWS:
Cash Flows From Operating Activities:
Net Income $ 18,259 $ 15,204 $ 14,008
Depreciation 17 17 13
Undistributed Income (6,054) 13,640 (3,412)
Increase in Other Assets (2,630) (1,019) (305)
(Decrease) Increase in Other Liabilities (1,310) (485) 791
-------- -------- --------
8,282 27,357 11,095
-------- -------- --------
Cash Flows From Investing Activities:
Purchase of Subsidiaries (500) (25,000) -0-
-------- -------- --------
Cash Flows From Financing Activities:
Principal Repayments on Notes Payable (4,155) (872) (1,107)
Issuance of Notes Payable 3,394 5,000 -0-
Payment of Dividends (5,254) (4,385) (3,857)
-------- -------- --------
(6,015) (257) (4,964)
-------- -------- --------
Net Increase in Cash 1,767 2,100 6,131
Cash at Beginning of Year 13,533 11,433 5,302
-------- -------- --------
Cash at End of Year $ 15,300 $ 13,533 $ 11,433
======== ======== ========
Supplementary Data for Cash Flows:
Taxes Paid $ 6,150 $ 5,812 $ 5,901
Interest Paid on Notes Payable 1,609 1,134 598
</TABLE>
17. 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, 1996 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
----------------------- -----------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash and Short-Term Investments $ 118,072 $ 118,072 $ 106,395 $ 106,395
Securities 639,240 640,529 540,121 541,977
Loans 721,161 707,339 642,118 637,659
LIABILITIES
Deposits $1,297,273 $1,296,907 $1,127,914 $1,128,713
Federal Funds Purchased and
Securities Sold Under Agreements
to Repurchase 48,629 48,629 46,895 46,895
Notes Payable 22,426 22,426 16,832 16,832
</TABLE>
[38]
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 1996, the maximum
financing limitation is 10.00%. 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.
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> 42
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, 1996 and 1995, 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, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of First United
Bancshares, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
New Orleans, Louisiana,
January 22, 1997.
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> 43
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<S> <C> <C>
FIRST UNITED Katherine P. Ozment John H. Sample
BANCSHARES, INC. Investments Security Oil Company, Inc.
OFFICERS Cal Partee, Jr. Stephen C. Smart, D.D.S.
Oil Investments Oral Surgeon
James V. Kelly
Chairman of the Board Chesley Pruet Carolyn Tennyson
President & Chief Execuitve Officer Oil Investments Timber Investments
John E. Burns, CPA John D. Trimble, Jr. Charles E. Thomas
Vice President & Managing Partner, Calion Lumber Company, Inc.
Chief Financial Officer Trimble Properties
John D. Trimble, Jr.
Robert G. Dudley Ralph C. Wesier Managing Partner,
Secretary Managing Partner, Trimble Properties
Weiser-Brown Oil Company
Robert L. Jones Dr. Srini Vasan
Assistant Secretary Dr. David M. Yocum, Jr. SARTI
Managing Partner,
AUDIT Alice-Sidney Oil Company FIRST NATIONAL BANK
OF MAGNOLIA
Jim Barnes SUBSIDIARIES' OFFICERS
Vice President & Auditor AND DIRECTORS EXECUTIVE OFFICERS
LOAN REVIEW FIRST NATIONAL BANK Robert L. Jones
OF EL DORADO President &
Richard E. Ulmer Chief Executive Officer
Vice President & EXECUTIVE OFFICERS
Loan Review Officer Steve Nipper
James V. Kelley Executive Vice President -
DIRECTORS Chairman of the Board & Operations
Chief Executive Officer
Larry Burrow John Roewe
Plant Manager, Robert G. Dudley Executive Vice President -
Partee Flooring Mill President Loans
Claiborne P. Deming Larry Kinard DIRECTORS
President and Executive Vice President
Chief Execuitve Officer, & Secretary Larry Burrow
Murphy Oil Corporation Lending Plant Manager,
Partee Flooring Mill
W. A. Eckert DIRECTORS
Attorney Kathy Dickson
Claiborne P. Deming Timber and Land Management
James V. Kelley President & Chief Executive Officer,
Chairman of the Board, President Murphy Oil Corporation Tommy Fallin, Jr.
& Chief Executive Officer, Owner,
First United Bancshares, Inc. Robert G. Dudley Fallin Tractor Compnay
President, First National Bank
Roy E. Ledbetter of El Dorado Robert L. Jones
President & Chief Executive Officer, President & Chief Executive Officer,
Highland Industrial Park, Inc. Barry Felton First National Bank of Magnolia
Felton Oil Company, Inc.
Jack W. McNutt James V. Kelley
Former President and James V. Kelley Chairman of the Board, President
Chief Executive Officer, Chairman, President & Chief & Chief Executive Officer,
Murphy Oil Corporation Executive Officer, First United Bancshares, Inc.
First United Bancshares, Inc. and
Michael F. Mahony Chairman & Chief Executive Officer, Richard G. Murphy
Attorney First National Bank of El Dorado President, Murphy's Jewelers, Inc.
Richard H. Mason Michael F. Mahony Cal Partee, Jr.
President, Attorney Oil Investments
Gibraltar Energy Company
Richard H. Mason David F. Rankin
President, Gibraltar Energy Company Professor,
Southern Arkansas University
W. E. Morgan, Jr. R. Madison Murphy George R. Stuart
President, Chairman of the Board, Cattle, Timber, Investments
Warnock Furniture, Inc. Murphy Oil Corporation
Chris W. Weiser
R. Madison Murphy Robert C. Nolan Weiser-Brown Operating Company
Chairman of the Board, Managing Partner,
Murphy Oil Corporation Munoco Company Joe D. Woodward
Chairman of the Board,
Robert C. Nolan Robert M. Reynolds Amfuel and
Managing Partner Shuler Drilling Company, Inc. Attorney
Munoco Company
Dr. Henry B. Rogers
Paula M. O'Connor Investments
Investments
</TABLE>
[41]
<PAGE> 44
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<S> <C> <C>
CITY NATIONAL BANK MERCHANTS & PLANTERS THE BANK OF NORTH
OF FORT SMITH BANK, N.A. OF CAMDEN ARKANSAS
EXECUTIVE OFFICERS EXECUTIVE OFFICER EXECUTIVE OFFICERS
Jim Harwood James R. Jordan Lloyd T. Jones
President & President & President &
Chief Executive Officer Chief Executive Officer Chief Executive Officer
Bill Staed DIRECTORS W. Mike Cone
Executive Vice Pesident Executive Vice President
Lending Servcies Group Eugene Bramblett Lending
Attorney at Law
DIRECTORS DIRECTORS
James R. Jordan
Thomas J. Barr President & Chief Executive Officer, W. Wesley Arnold
President, Merchants and Planters Bank, N.A. Rancher
Harry G. Barr Company
James V. Kelley Brenda K. Barnes
Morris G. Boren Chairman of the Board, President B&B Supply, Inc.
Consultant, & Chief Executive Officer,
Scott Abell Associates First United Bancshares, Inc. John E. Burns, CPA
Vice President &
Carolyn L. Branch Roy E. Ledbetter Chief Financial Officer,
Vice President for President & Chief Executive Officer, First United Bancshares, Inc.
Institutional Development, Highland Industrial Park, Inc.
Wesark CommunityCollege Thomas C. Colegrove
Jim Neeley Retired, Moore Business Forms
George C. Fisher President, and Systems
Director/Manufacturing, Neeley Forestry Service
Accounting and Budgets, Harlin F. Hames
Arkansas Best Corporation Richard L. Robertson Retired, Century Telephone
Regional Director,
Jim Harwood Camden Medical Supply/Rotech Lloyd T. Jones
President & Chief Executive Officer, Medical Corporation President &
City National Bank of Fort Smith Chief Executive Officer,
Joe M. Rogers The Bank of North Arkansas
George R. Jacobs Owner and President,
Vice President, USA Truck Rogers Lumber Company James E. Miller
G.H. Miller and Sons
James V. Kelly COMMERCIAL BANK
Chairman of the Board, President AT ALMA Reed M. Perryman
& Chief Executive Officer, Pharmacist
First United Bancshares, Inc. EXECUTIVE OFFICERS
FIRST UNITED BANK
A. Samuel Koenig III Jim V. Fincher
Physician President & EXECUTIVE OFFICER
Chief Executive Officer
Emon A. Mahony, Jr. Robert M. Koch
Chairman, Arkansas Oklahoma William N. "Dockey" Brasher III President &
Gas Corporation Executive Vice President Chief Executive Officer
Vice President,
Mahony Corporation DIRECTORS
DIRECTORS
Charles Shuffield James A. Arnold III
President, Sparks Attorney Jack B. Coker
Regional Medical Center Pharmacist
Leonard L. Blaschke
Grocer
Bill Staed William N. "Dockey" Brasher III Tommy Hillman
Executive Vice President, Executive Vice President President, Winrock Farms, Inc.
Lending Services Group Commercial Bank of Alma
City National Bank of Jerry J. Hoskyn
Fort Smith Jim V. Fincher President, Prarie Hill Farms, Inc.
President & Chief Executive Officer,
Bobby W. Stephens Commercial Bank at Alma Harold Ives
Executive Vice President, Vice Chairman of the Board;
Beverly Enterprises, Inc. John A. Griffin Chief Executive Officer,
Retired Oil Distributor Harold Ives Trucking Company
George Warmack
Partner, Warmack & Co. Jim Harwood Steven M. Keith
President & Chief Executive Officer, President, KBX, Inc.
Robert B. Westphal City National Bank of Fort Smith
Investments James V. Kelley
Hilda Knight Chairman of the Board, President
ADVISORY DIRECTOR Retired Banker & Chief Executive Officer
First United Bancshares, Inc.
J. L. Swink Paul L. Winborn
Commercial Warehouses Pharmacist Robert M. Koch
and Investments President &
Chief Executive Officer,
First United Bank
</TABLE>
[42]
<PAGE> 45
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<S> <C> <C>
Wanda H. Northcutt Gene D. Wyatt Ralph Wilson
State Representaive Chairman of the Board Optometrist
& Chief Executive Officer,
John E. Stephens FirstBank FIRST UNITED TRUST
President, Bovine Farms, Inc. COMPANY, N.A.
CITIZENS BANK AND TRUST
HONORARY DIRECTOR EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
L. Clyde Carter Richard P. Clark II
Retired, Former President Robert M. Koch President & Chief Executive Officer
& Chief Executive Officer, President & Chief Executive Officer
Riceland Foods, Inc. Robert McDowell
Bill Shoup Executive Vice President
FIRSTBANK Executive Vice President - Lending
DIRECTORS
EXECUTIVE OFFICERS DIRECTORS
Richard P. Clark II
Gene D. Wyatt Tommy Hillman President & Chief Executive Officer,
Chairman of the Board President, Winrock Farms, Inc. First United Trust Company, N.A.
& Chief Executive Officer
Robert M. Koch Robert G. Dudley
Steve C. Wiggs President & Chief Executive Officer, President, First National Bank of
President & Citizens Bank and Trust El Dorado
Chief Operating Officer
Bill Shoup Harry C. Erwin
Norman C. Rochelle Executive Vice President - Lending Retired CPA
Executive Vice President, Citizens Bank and Trust
Lending Jim Harwood
Randall Snider President & Chief Executive Officer,
Robert L. McDowell Farmer City National Bank of Fort Smith
Executive Vice President
& Trust Officer Gaines Young R. Madison Murphy
Senior Vice President Chairman of the Board,
Brice E. Feasel Citizens Bank and Trust Murphy Oil Corporation
Executive Vice President,
Branch Lending HAZEN FIRST STATE BANK
DIRECTORS EXECUTIVE OFFICERS
James M. Carlow Robert M. Koch
Bowie County Judge President & Chief Executive Officer
Steve Conner Tony Lambert
Conner & Williams Insurance Executive Vice President - Lending
Lucille T. Cook DIRECTORS
Investments
Tommy Hillman
Delton B. Gwinn President, Winrock Farms, Inc.
Investments
Robert M. Koch
Joe Connor Hart President & Chief Executive Officer,
President, Hart Farms, Inc. Hazen First State Bank
James V. Kelley Robert Petter, Sr.
Chairman of the Board, Farmer
President & Chief Executive Officer,
First United Bancshares, Inc. FIRSTBANK OF ARKANSAS
Kenneth K. Martin EXECUTIVE OFFICERS
Investments
Robert M. Koch
M. L. Mayo President & Chief Executive Officer
Chairman, Mayo Mfg. Corp.
Carl A. Gunter
Amos McCulloch, Jr. Executive Vice President
President,
Wholesale Electric Supply
Company, Inc.
H. J. Trammell DIRECTORS
Investments
Tommy Hillman
Graton E. White, Jr. President, Winrock Farms, Inc.
President, Howtex, Inc.
Robert M. Koch
Steve C. Wiggs President & Chief Executive Officer,
President & First Bank of Arkansas
Chief Operating Officer,
FirstBank Ben Myers
Pharmacist
Dewey Snowden
Retired School Superintendent
</TABLE>
[43]
<PAGE> 46
CORPORATE INFORMATION
ANNUAL MEETING
The annual meeting of stockholders will convene on May 27, 1997, 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 United
FirstBank, Texarkana, Texas
Citizens Bank and Trust
Hazen First State Bank
FirstBank of Arkansas
First United Trust Company, N.A.
[44]
<PAGE> 47
FIRST UNITED BANCSHARES, INC.
<PAGE> 48
APPENDIX
TO THE
1996 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") 1996 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 "1996 Annual Report "First
United Bancshares, Inc."
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,
$1.71, $1.81, $1.96, and $2.21 for the years ended December 1992, 1993,
1994,1995, and 1996, 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 $12.43, $13.98, $14.15, $16.85, and
$18.14 for the years ended December 31, 1992, 1993, 1994, 1995, and 1996,
respectively. The graph also discloses the market value of a share of First
United common stock to be $17.33, $19.67, $20.17, $27.67, and $33.00 for the
years ended December 31,1992, 1993, 1994, 1995,and 1996, 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 2.89%, 3.68%, and
3.71%, the Net Interest Margin" is disclosed as 4.29%, 4.39%, and 4.34%, the
"Net Interest Spread" is disclosed as 3.51% , 3.41%, and 3.52%, for the years
ended December 31, 1994, 1995, and 1996, 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 $2,486,
$1,815, $334, $574, and $1,475 for the years ended December 31, 1992, 1993,
1994, 1995, and 1996, 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 $8,579, $4,237, $3,518, $4,678,and $4,203, the
"Non-Performing Loans" as, $4,723, $3,198, $2,998, $3,966, and $3,687,and the
"Allowance for Loan Losses" as $7,972, $9,972, $9,667, $10,581, and $11,241,
for the years ended December 31, 1992, 1993, 1994, 1995, and 1996,
respectively.
7. Page 11 of the Report contains a graph titled "Average 1996 Deposit
Composition" which discloses the make-up of the deposits as 30.68% of "Savings
and Interest-Bearing Demand" deposits, 17.20% of "Other Time Deposits", 38.81%
of "Non-Interest Bearing Demand" deposits and 13.31% 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 $95, $108, $110, $130, and $ 149 for the years ended December 31,
1992, 1993, 1994, 1995, and 1996, respectively.
9. Page 14 of the Report contains a graph titled "1996 Risked Based
Capital Ratios" which discloses "Tier 1 Capital" and "Total Risk-Based Capital"
of First United as 16.36% and 17.61% respectively, and the regulatory
requirements of "Tier 1 Capital" and "Total Risked-Based Capital" as 4.0% and
8.0%, respectively.
<PAGE> 1
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
First United Trust Company, N.A. United States
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
First Bank of Arkansas, Arkansas
Brinkley, Arkansas
Citizens Bank & Trust, Arkansas
Carlisle, Arkansas
Hazen First State Bank Arkansas
Hazen, Arkansas
The Bank of North Arkansas Arkansas
Melbourne, Arkansas
First United Bank Arkansas
Stuttgart, Arkansas
FirstBank Texas
Texarkana, Texas
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated January 22, 1997 included in the First United Bancshares, Inc.
Form 10-K for the year ended December 31, 1996, into the Company's previously
filed Registration Statement on Form S-8 (File No. 033-56387).
ARTHUR ANDERSEN LLP
Jackson, Mississippi
March 26, 1997.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 61,194
<INT-BEARING-DEPOSITS> 21,593
<FED-FUNDS-SOLD> 35,285
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 420,953
<INVESTMENTS-CARRYING> 218,287
<INVESTMENTS-MARKET> 219,517
<LOANS> 721,161
<ALLOWANCE> 11,241
<TOTAL-ASSETS> 1,381,438
<DEPOSITS> 1,297,273
<SHORT-TERM> 50,024
<LIABILITIES-OTHER> 11,715
<LONG-TERM> 22,426
0
0
<COMMON> 8,246
<OTHER-SE> 141,355
<TOTAL-LIABILITIES-AND-EQUITY> 1,531,039
<INTEREST-LOAN> 67,290
<INTEREST-INVEST> 37,248
<INTEREST-OTHER> 3,489
<INTEREST-TOTAL> 108,027
<INTEREST-DEPOSIT> 46,751
<INTEREST-EXPENSE> 50,770
<INTEREST-INCOME-NET> 57,257
<LOAN-LOSSES> 1,475
<SECURITIES-GAINS> 122
<EXPENSE-OTHER> 40,482
<INCOME-PRETAX> 25,592
<INCOME-PRE-EXTRAORDINARY> 25,592
<EXTRAORDINARY> 7,333
<CHANGES> 0
<NET-INCOME> 18,259
<EPS-PRIMARY> 2.21
<EPS-DILUTED> 2.21
<YIELD-ACTUAL> 8.07
<LOANS-NON> 2,162
<LOANS-PAST> 848
<LOANS-TROUBLED> 677
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 10,581
<CHARGE-OFFS> 3,783
<RECOVERIES> 1,753
<ALLOWANCE-CLOSE> 11,241
<ALLOWANCE-DOMESTIC> 11,241
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
