<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
----------------------
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended:
March 31, 2000
Commission file number: 0-11916
FIRST UNITED BANCSHARES, INC.
(Exact name of Registrant as specified in its charter)
Arkansas 71-0538646
(State of Incorporation) (I.R.S. Employer
Identification No.)
Main and Washington Streets
El Dorado, Arkansas 71730
(Address of principal executive offices) (Zip Code)
(870) 863-3181
(Registrant's telephone number, including area code)
-------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of registrant's common stock, par value $1.00
per share, at May 1, 2000 was 25,297,444.
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FIRST UNITED BANCSHARES, INC.
FORM 10-Q
MARCH 31, 2000
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Consolidated Statements of Condition,
March 31, 2000 and December 31, 1999. 3
Consolidated Statements of Income for the
Three Months Ended March 31, 2000 and 1999. 4
Consolidated Statements of Cash Flow for
the Three Months Ended March 31, 2000 and 1999. 5
Notes to Consolidated Financial Statements. 6
Item 2. Management`s Discussion and Analysis of
Financial Condition and Results of Operation. 7 - 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Change in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of
Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
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Part I. FIRST UNITED BANCSHARES, INC.
Item 1 CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
<S> <C> <C>
(In thousands, except per share data)
ASSETS
Cash and Due From Banks .......................................... $ 98,620 $ 113,476
Short-Term Investments
Federal Funds Sold and Securities Purchased
Under Agreement to Resell .................................... 52,219 45,875
Other Short-Term Investments ................................... 34,349 5,384
----------- -----------
Total Short-Term Investments ..................................... 86,568 51,259
Securities Available-for-Sale .................................... 738,921 728,779
Investment Securities ............................................ 194,118 196,407
Total Loans ...................................................... 1,509,760 1,492,356
Unearned Discount .............................................. (3,398) (3,953)
Allowance for Loan Losses ...................................... (19,541) (18,675)
----------- -----------
Net Loans ..................................................... 1,486,821 1,469,728
Premises and Equipment ........................................... 42,435 42,689
Goodwill ......................................................... 15,376 15,877
Other Real Estate ................................................ 3,027 3,418
Other Assets ..................................................... 50,021 44,414
----------- -----------
Total Assets .................................................. $ 2,715,907 $ 2,666,047
=========== ===========
LIABILITIES
Deposits:
Demand ......................................................... $ 362,321 $ 352,327
Savings and Interest-Bearing Demand ............................ 643,992 622,326
Time ........................................................... 1,264,378 1,276,978
----------- -----------
Total Deposits ................................................ 2,270,691 2,251,631
Federal Funds Purchased and Securities Sold Under
Agreements to Repurchase ....................................... 139,766 106,951
Other Liabilities ................................................ 13,738 13,509
Notes Payable .................................................... 27,642 34,246
----------- -----------
Total Liabilities ............................................. 2,451,837 2,406,337
----------- -----------
CAPITAL ACCOUNTS
Preferred Stock (Par value of $1.00; 500 shares authorized in 2000
and 1999; none outstanding) .................................... -0- -0-
Common Stock (Par value of $1.00; 50,000 shares authorized;
25,297 and 25,296 shares issued and outstanding in 2000
and 1999, respectively) ........................................ 25,297 25,296
Surplus .......................................................... 26,665 26,636
Undivided Profits ................................................ 227,161 221,832
Accumulated Other Comprehensive Income ........................... (15,053) (14,054)
----------- -----------
Total Capital Accounts ........................................ 264,070 259,710
----------- -----------
Total Liabilities and Capital Accounts ........................ $ 2,715,907 $ 2,666,047
=========== ===========
</TABLE>
3
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FIRST UNITED BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
(In thousands, except per share data) 2000 1999
------- -------
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $33,031 $30,164
Interest on Securities:
Taxable Securities 12,399 11,335
Nontaxable Securities 1,930 1,870
Interest on Federal Funds Sold and
Securities Purchased Under
Agreements to Resell 787 782
Interest on Deposits in Banks 250 204
------- -------
TOTAL INTEREST INCOME 48,397 44,355
------- -------
INTEREST EXPENSE
Interest on Deposits 20,640 18,925
Interest on Federal Funds Purchased
and Securities Sold Under
Agreements to Repurchase 1,465 835
Interest on Notes Payable 465 347
------- -------
TOTAL INTEREST EXPENSE 22,570 20,107
------- -------
NET INTEREST INCOME 25,827 24,248
Provision for Possible Loan Losses 1,302 688
------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 24,525 23,560
------- -------
OTHER INCOME
Service Charges on Deposit Accounts 2,795 2,395
Trust Fee Income 650 619
Security Gains 160 187
Other Operating Income 1,358 1,577
------- -------
TOTAL OTHER INCOME 4,963 4,778
------- -------
OTHER EXPENSE
Salaries 7,419 6,970
Pension and Other Employee Benefits 2,324 2,138
Net Occupancy Expense 1,337 1,267
Equipment Expense 1,088 1,069
Data Processing Expense 1,060 1,179
Other Operating Expenses 4,339 4,027
------- -------
TOTAL OTHER EXPENSE 17,567 16,650
------- -------
INCOME BEFORE INCOME TAXES 11,921 11,688
INCOME TAX EXPENSE 3,430 3,565
------- -------
NET INCOME $ 8,491 $ 8,123
======= =======
EARNINGS PER SHARE:
BASIC $ 0.34 $ 0.32
======= =======
DILUTED $ 0.34 $ 0.32
======= =======
CASH DIVIDENDS PER SHARE $ 0.125 $ 0.115
======= =======
AVERAGE SHARES ISSUED AND
OUTSTANDING 25,296 25,294
</TABLE>
4
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FIRST UNITED BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
2000 1999
--------- ---------
<S> <C> <C>
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income .............................................................. $ 8,491 $ 8,123
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation ......................................................... 923 1,026
Amortization of Intangible Assets .................................... 501 321
Provision for Possible Loan Losses ................................... 1,302 688
Provision for Deferred Taxes ......................................... 63 253
Gain on Sales of Securities .......................................... (160) (187)
Accretion of Bond Discount, Net ...................................... (624) (439)
(Increase) Decrease in Other Assets .................................. (5,216) 169
Increase (Decrease) in Other Liabilities ............................. 229 (614)
--------- ---------
Net Cash Provided by Operating Activities ............................... 5,509 9,340
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturities of Investment Securities........................ 11,166 18,243
Proceeds from Maturities of Securities Available-for-Sale ............... 36,417 84,294
Proceeds from Sales of Securities Available-for-Sale .................... 1,984 18,524
Purchase of Investment Securities ....................................... (11,080) (6,854)
Purchase of Available-for-Sale Securities ............................... (46,588) (108,011)
Increase (Decrease) in Federal Funds, Net ............................... 26,471 (13,038)
Increase in Other Short-Term Investments ................................ (28,965) (7,757)
(Increase) Decrease in Loans ............................................ (18,395) 6,610
Capital Additions ....................................................... (669) (978)
--------- ---------
Net Cash Used in Investing Activities ................................... (29,659) (8,967)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (Decrease) in Demand, Savings and Interest-bearing
Demand Deposits ..................................................... 31,660 (9,460)
Increase (Decrease) in Time Deposits .................................... (12,600) 7,271
Repayment of Notes Payable .............................................. (6,604) (527)
Dividends Paid .......................................................... (3,162) (2,908)
--------- ---------
Net Cash Provided by Financing Activities ............................... 9,294 (5,624)
--------- ---------
Net Decrease in Cash and Cash Equivalents ............................... (14,856) (5,251)
Cash and Cash Equivalents, Beginning .................................... 113,476 91,207
--------- ---------
Cash and Cash Equivalents, Ending ....................................... $ 98,620 $ 85,956
========= =========
</TABLE>
5
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FIRST UNITED BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of First United Bancshares, Inc.
("First United") include the accounts of the parent company and its
wholly-owned subsidiaries, First United Trust Company, N.A., El Dorado,
Arkansas, The First National Bank of El Dorado, Arkansas, First National Bank
of Magnolia, Arkansas, Merchants and Planters Bank, N.A. of Camden, Arkansas,
City National Bank of Fort Smith, Arkansas, The Bank of North Arkansas,
Melbourne, Arkansas, FirstBank, Texarkana, Texas, First United Bank, Stuttgart,
Arkansas, Fredonia State Bank, Nacogdoches, Texas, City Bank and Trust,
Shreveport, Louisiana, Citizens National Bank, Hope, Arkansas, and First
Republic Bank, Rayville, Louisiana. All material intercompany transactions have
been eliminated.
The consolidated statements of condition as of March 31, 2000 and the
related consolidated statements of income for the three month period ended
March 31, 2000 and 1999 and the consolidated statements of cash flows for the
three month period ended March 31, 2000 and 1999 are unaudited. Certain
information, accounting policies and footnote disclosures normally included in
complete financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted in accordance with such
rules and regulations. It is therefore suggested that these consolidated
financial statements be read in conjunction with the audited consolidated
financial statements and notes thereto included in First United's annual report
on Form 10-K for the year ended December 31, 1999.
In the opinion of management, all adjustments necessary for a fair
presentation of the financial statements are included. Operating results for
the three months ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the full year.
2. BUSINESS COMBINATIONS
On July 9, 1999, First United, through its wholly owned subsidiary
Fredonia State Bank, acquired from the Federal Deposit Insurance Corporation
substantially all of the assets and liabilities of East Texas National Bank, a
failed bank in Marshall, Texas. The acquisition included approximately
$100,000,000 in deposits and $75,000,000 in loans. In connection with the
transaction, First United recorded approximately $7,000,000 in core deposit
intangibles. The results of operations, which are not material, have been
included in the financial statements from the merger date.
3. RESULTS OF OPERATIONS
The results for the three month period ended March 31, 2000 are not
necessarily indicative of the results for the entire year of 2000. This report
should be read in conjunction with First United's 1999 Annual Report to
Shareholders for a complete understanding of First United's accounting policies
and their effect on the financial statements as a whole.
4. CAPITAL ACCOUNTS
Basic EPS was computed by dividing net income by the weighted average
shares of common stock outstanding of 25,297,444 and 25,294,296 for the first
quarter of 2000 and 1999, respectively. Diluted EPS was computed by dividing
net income by the sum of the weighted average shares of common stock
outstanding and the effect of stock options outstanding. The effect of the
stock options was to increase the weighted average number of shares by 27,000
in 2000 and 34,000 in 1999.
5. COMPREHENSIVE INCOME (LOSS)
In January 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income", which establishes standards for reporting comprehensive
income and its components. Comprehensive income is defined as all changes in
the equity of a business enterprise from transactions and other events and
circumstances, except those resulting from investments by owners and
distributions to owners. The Company's comprehensive income, which includes net
income and the change in unrealized gain(loss) on securities available for
sale, net of tax, was $7.49 million and $5.53 million for the three months
ended March 31, 2000 and 1999, respectively.
6
<PAGE> 7
6. SUPPLEMENTARY DATA FOR CASH FLOWS
Interest paid on notes payable during the three months ended March 31,
2000 and 1999 amounted to $82,000 and $167,000 respectively.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and review of First United Bancshares, Inc.
("First United") and its subsidiaries, The First National Bank of El Dorado
("El Dorado"), City National Bank of Fort Smith ("Ft. Smith"), First National
Bank of Magnolia ("Magnolia"), Merchants and Planters Bank, N.A. of Camden
("Camden"), The Bank of North Arkansas ("Melbourne"), FirstBank ("Texarkana"),
First United Bank ("Stuttgart"), First United Trust Company, N.A. ("FUTC"),
Fredonia State Bank ("Nacogdoches"), City Bank and Trust ("Shreveport"),
Citizens National Bank ("Hope"), and First Republic Bank ("Republic"), focuses
on the results from operations which are not otherwise apparent from the
consolidated financial statements. Reference should be made to these financial
statements and the notes to the financial statements for an understanding of
this review and discussion.
FORWARD LOOKING STATEMENTS
This 10-Q contains forward looking statements based on current
expectations that involve a number of risks and uncertainties. The factors that
could cause actual results to differ materially from those we are projecting
include the following: general economic conditions; competitive factors and
pricing pressure; changes in product mix; changes in interest risks; and the
risk factors listed from time to time in the Company's SEC reports, including
but not limited to the report on Form 10-Q for the quarter ended March 31,
2000.
Words such as "anticipate," "believe," "estimate," "expect," "intend"
and similar expressions, as they relate to First United or its management,
identify forward-looking statements. Forward-looking statements made by First
United and its management are based on estimates, projections, beliefs and
assumptions of management at the time of such statements and are not guarantees
of future performance. First United disclaims any obligation to update or
revise any forward-looking statement based on the occurrence of future events,
the receipt of new information, or otherwise.
RESULTS OF OPERATIONS
Net income for the three months ended March 31, 2000 was $8.49
million, or $0.34 per share compared with $8.12 million, or $0.32 per share
during the same period in 1999. The annualized return on average assets from
continuing operations for the three months ended March 31, 2000 and 1999 was
1.27% and 1.32% respectively, while the annualized return on average equity was
12.45% and 13.02% respectively for the same periods.
NET INTEREST INCOME
Net interest income, the principal source of earnings, is the
difference between the income generated by earning assets and the total
interest cost of the funds obtained to carry them. Net interest income, as
referred to in this discussion, is presented on a fully tax-equivalent basis,
which adjusts for the tax-exempt status of income earned on certain loans and
investments. The reported interest income for the tax-free assets is increased
by the amount of tax savings less the nondeductible portion of interest expense
incurred to acquire the tax-free assets. Net interest income is affected by
variations in both interest rates and the volume of interest-earning assets and
interest-bearing liabilities.
On a tax equivalent basis, net interest income for the first three
months of 2000 was $27.00 million compared with $25.00 million in the first
three months of 1999. Net interest income also increased when compared with
1998. This increase in net interest income was primarily the result of higher
loan volumes. The net interest margin through March 31, 2000 was
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<PAGE> 8
4.32% compared with 4.41% and 4.34% for the years ended December 31, 1999 and
1998, respectively. First United expects no material change in the net interest
margin through the remainder of 2000.
First United has debt of approximately $27.64 million at March 31,
2000 and interest expense associated with this debt totaled $0.47 million
during the first three months of 2000 compared with $0.35 million during the
same period in 1999. First United will make a principal payment of $1.10
million on its installment note payable to an unaffiliated bank in November of
this year. Interest is payable quarterly. These borrowings contain financial
covenants relating to the issuance of additional debt and maintenance of
minimum tangible net worth.
Pursuant to the Interest Rate Control Amendment to the Constitution of
the State of Arkansas, "consumer loans and credit sales" have a maximum
limitation of 17% per annum and all "general loans" have a maximum limitation
of 5% over the Federal Reserve Discount Rate in effect at the time the loan was
made. The Arkansas Supreme Court has determined that "consumer loans and credit
sales" are "general loans" and are subject to the limitation of 5% over the
Federal Reserve Discount Rate as well as a maximum limitation of 17% per annum.
As a general rule, the Company and its subsidiary banks are required to comply
with the Arkansas usury laws on loans made within the State of Arkansas.
The following table is a comparison of the net interest margin:
March 31, December 31,
------------------
2000 1999 1998
---- ---- ----
Yield on Earning Assets 7.93 7.93 8.00
Break-even Yield 3.61 3.52 3.66
Net Interest Margin 4.32 4.41 4.34
Net Interest Spread 3.45 3.62 3.45
LOANS
First United's loans totaled $1.51 billion at March 31, 2000 compared
with $1.49 billion at December 31, 1999. The Company has no foreign loans or
leases and it is the policy of the Company to avoid out of territory loans.
A sound credit policy combined with periodic and independent credit
reviews is the key factor of the credit risk management program. All affiliate
banks operate under written loan policies that help maintain a consistent
lending function and provide sound credit decisions. Credit decisions continue
to be based on the borrower's cash flow position and the value of the
underlying collateral, as well as other relevant factors. Each bank is
responsible for evaluating its loans to identify those credits beginning to
show signs of deterioration so that prompt corrective action may be taken. In
addition, a loan review staff operates independently of the affiliate banks.
This review team performs periodic examinations of each bank's loans and
related documentation. Results of these examinations are reviewed with the
Chairman and Chief Executive Officer, the management and board of the
respective affiliate banks and the Audit Committees.
8
<PAGE> 9
The following table lists those loans and leases by type which are on
non-accrual status; loans by type 90 days or more past due and still accruing;
renegotiated loans and loans transferred to other real estate:
<TABLE>
<CAPTION>
March 31, December 31,
------------
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
(In thousands)
Non-performing loans:
Non-accrual loans:
Commercial & Financial $ 3,906 $ 4,607 $ 3,020
Real Estate 7,573 2,777 3,236
Consumer 777 818 521
------- ------- -------
$12,256 $ 8,202 $ 6,777
------- ------- -------
Past due 90 days or more and still accruing:
Commercial $ 957 $ 1,196 $ 1,225
Real Estate 1,668 1,281 1,293
Consumer 178 456 294
------- ------- -------
$ 2,803 $ 2,933 $ 2,812
------- ------- -------
Renegotiated Loans: $ 901 $ 1,034 $ 1,068
------- ------- -------
Total non-performing Loans: $15,960 $12,169 $10,657
Other Real Estate, Net 3,593 3,418 1,399
------- ------- -------
Total non-performing Assets: $19,553 $15,587 $12,056
======= ======= =======
Non-Performing Loans as a %
of Outstanding Loans 1.06% 0.82% 0.78%
Non-Performing Assets as a
% of Equity Capital 7.40% 6.00% 4.72%
</TABLE>
All loans listed above as non-accrual, 90 days or more past due and
renegotiated were classified as either substandard, doubtful or loss as of
March 31, 2000.
Management is committed to reducing the level of non-performing assets
and to minimize future risks by continuous review of the loan portfolio.
ALLOWANCE FOR LOAN LOSSES
The provision for loan losses represents management's evaluation of
the overall loan portfolio quality and loss experience. During management's
periodic review of the provision throughout each quarter, the amount to be
provided is determined by the level of net charge-offs, the size of the loan
portfolio, non-performing assets, anticipated and current economic conditions
and specific reviews of performing and non-performing loans.
During the first three months of 2000, First United made provisions
for loan losses of $1.30 million compared with $0.69 million for the same
period in 1999. Total non-performing loans increased $3.79 million from $12.17
million at December 31, 1999 to $15.96 million at March 31, 2000. Net
charge-offs through March 31, 2000 totaled $0.44 million
<TABLE>
<CAPTION>
Year Ended December 31,
March 31, -----------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Allowance as a percentage of total loans 1.29% 1.25% 1.27%
</TABLE>
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<PAGE> 10
The allowance for loan losses as a percentage of non-performing loans
was approximately 122% at March 31, 2000 compared with 153% at December 31,
1999.
SECURITIES AVAILABLE FOR SALE
December 31,
March 31, ------------------------
2000 1999 1998
--------- --------- ---------
(In thousands)
Market Value $ 738,921 $ 728,779 $ 684,662
Amortized Cost 762,001 750,326 680,107
--------- --------- ---------
Difference $ (23,080) $ (21,547) $ 4,555
========= ========= =========
INVESTMENT SECURITIES
During the first three months of 2000, First United had security gains
of approximately $0.16 million.
December 31,
March 31, ------------------------
2000 1999 1998
--------- --------- ---------
(In thousands)
Market Value $ 188,972 $ 193,056 $ 228,614
Amortized Cost 194,118 196,407 226,083
--------- --------- ---------
Difference $ (5,146) $ (3,351) $ 2,531
========= ========= =========
At March 31, 2000, First United's securities portfolio classified as
Investment Securities was composed primarily of municipal and short-term fixed
rate CMO securities.
NON-INTEREST INCOME
Management continues to emphasize the growth of non-interest income in
providing new revenue to the income stream. Future profitability depends upon
income derived from providing loan and deposit services, discount brokerage
fees, trust service income, mortgage service fees and service charges on
deposit accounts.
The table represented below is a comparison of the dollar and
percentage change for each component of non-interest income:
Three Months Ended
March 31, Change
--------- ------
2000 1999 $ %
------- ------- ---- ------
(Dollars in Thousands)
Service Charges on Deposit
Accounts $2,795 $2,395 $400 16.70 %
Trust Income 650 619 31 5.00 %
Security Gains (Losses) 160 187 (27) (14.44)%
Other Income 1,358 1,577 (219) (13.89)%
------- ------- ---- ------
Total Other Income $ 4,963 $ 4,778 $185 3.87%
======= ======= ==== ======
Excluding security gains and losses, non-interest income increased
approximately $0.21 million when comparing 2000 with 1999 results. First United
is focusing on non-interest income revenues and opportunities to increase fee
income.
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NON-INTEREST EXPENSE
Control of non-interest expenses continues to be one of First United's
major objectives. Non-interest expenses include salaries, employee benefits,
occupancy costs, equipment and other operating expenses:
Three Months Ended
March 31, Change
--------- ------
2000 1999 $ %
------- ------- ---- -----
(Dollars in Thousands)
Salaries $7,419 $ 6,970 $449 6.44 %
Pension and Employee Benefits 2,324 2,138 186 8.70 %
Net Occupancy Expense 1,337 1,267 70 5.52 %
Equipment Expense 1,088 1,069 19 1.78 %
Data Processing Expense 1,060 1,179 (119) (10.09)%
Other Operating Expense 4,339 4,027 312 7.75 %
------- ------- ---- -----
Total Non-Interest Expense $17,567 $16,650 $917 5.51%
======= ======= ==== =====
INCOME TAXES
The effective tax rate of First United for the three month period
ended March 31, 2000 was 28.77% compared to 30.50% for the same period in 1999.
CAPITAL AND LIQUIDITY
The assessment of capital adequacy depends primarily on a number of
factors which include asset quality, liquidity, stability of earnings, changing
competitive forces, economic conditions in the various markets served and
strength of management. Management of capital focuses on achieving a rate of
return for shareholders while following guidelines set forth by bank
regulators.
First United's equity capital totaled $264.07 million at March 31,
2000, compared to the December 31, 1999 level of $259.71 million. The growth
and retention of earnings continues to be First United's primary source of
additional capital. Currently, First United does not have any plans for issuing
subordinated notes and First United has not issued any new common or preferred
stock during the past twelve months.
The table presented below is a comparison of capital ratios:
December 31,
March 31, ------------
2000 1999 1998
---- ---- ----
Equity Capital to Total Assets 9.72% 9.74% 10.16%
Primary Capital to Total Assets 10.92% 10.89% 10.66%
Note: Equity Capital to Total Assets includes unrealized losses on
available-for-sale securities.
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<PAGE> 12
The table presented below is a comparison of First United's capital
position with regulatory capital requirements:
March 31, Regulatory
2000 Requirements
-------- ------------
Total Capital/Total Assets 10.92% 6.00%
Primary Capital/Total Assets 10.92% 5.50%
Total Risk Based Capital 16.85% 8.00%
Tier 1 Capital 15.69% 4.00%
Leverage Ratio 9.71% 3.00%
Note: Unrealized losses on securities available-for-sale have been excluded
when computing capital ratios.
Liquidity management is concerned with meeting the cash requirements
of customers, including the withdrawal of funds by depositors or drawing down
of approved lines of credit and commitments by borrowers.
DIVIDEND POLICY
First United strives to maintain a balance between the retention of
earnings for the support of growth and expansion and a dividend payout that
meets the required return for investors. First United anticipates continuing
its policy of regular cash dividends, although there is no assurance as to
future increases in dividends because they are dependent upon future earnings,
capital requirements and economic conditions.
The following table sets forth the dividend payout ratio for the last
two years and for the three months ended March 31, 2000:
Year Ended,
March 31, -----------
2000 1999 1998
---- ----- -----
Dividend payout ratio 37.24% 37.12% 36.92%
ASSET - LIABILITY MANAGEMENT
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 reprise
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 reprise 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
12
<PAGE> 13
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.
RECENT PRONOUNCEMENTS
Recently, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133 - an Amendment of FASB Statement No. 133." This
statement amends the effective date for SFAS No. 133 which establishes
accounting and reporting standards for derivative instruments and hedging
activities. The FASB concluded that it is appropriate to defer the effective
date of SFAS No. 133 one year, from fiscal years beginning after June 15, 1999,
to fiscal years beginning after June 15, 2000. The FASB continues to encourage
early application of SFAS No. 133. The adoption of this statement will not have
a material impact on the First United's consolidated financial statements.
13
<PAGE> 14
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not Applicable
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION
On April 6, 2000, First United and BancorpSouth, Inc., Tupelo,
Mississippi ("BancorpSouth") entered into an Agreement and Plan of Merger
whereby BancorpSouth would acquire one hundred percent (100%) of the issued and
outstanding shares of First United. Under the terms of the Agreement, First
United stockholders would receive 1.125 shares of BancorpSouth common stock for
each share of First United common stock. In connection with the execution of
the Agreement, First United and BancorpSouth granted the other an option to
purchase up to 19.9% of its outstanding shares in certain circumstances.
Consummation of the Agreement and Plan of Merger is subject to the approval by
the appropriate bank regulatory authorities and both First United and
BancorpSouth stockholders.
BancorpSouth is a financial services company with $5.8 billion in
assets operating 167 banking and mortgage locations and 170 ATMs in 87
Mississippi, Tennessee and Alabama communities. BancorpSouth also provides
investment services through its subsidiary, BancorpSouth Investment Services
Inc. and insurance services through BancorpSouth Insurance Services.
BancorpSouth's common stock is traded on the New York Stock Exchange under the
symbol BXS.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are filed with this report or are incorporated
by reference to previously filed material.
Exhibit No. Description of Exhibit
27 Financial Data Schedule
REPORTS ON FORM 8-K
First United did not file any reports on Form 8-K during the
quarter for which this report is filed.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST UNITED BANCSHARES, INC.
BY /s/ James V. Kelley
----------------------------------------
James V. Kelley
Chairman, President and Chief
Executive Officer
BY /s/ John G. Copeland
----------------------------------------
John G. Copeland
Senior Vice President, Chief Financial Officer
and Principal Accounting Officer
Date: May 15, 2000
15
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 98,620
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 52,219
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 738,921
<INVESTMENTS-CARRYING> 194,118
<INVESTMENTS-MARKET> 188,972
<LOANS> 1,509,760
<ALLOWANCE> 19,541
<TOTAL-ASSETS> 2,715,907
<DEPOSITS> 2,270,691
<SHORT-TERM> 139,766
<LIABILITIES-OTHER> 13,738
<LONG-TERM> 27,642
0
0
<COMMON> 25,297
<OTHER-SE> 238,773
<TOTAL-LIABILITIES-AND-EQUITY> 2,715,907
<INTEREST-LOAN> 33,031
<INTEREST-INVEST> 14,329
<INTEREST-OTHER> 1,037
<INTEREST-TOTAL> 48,397
<INTEREST-DEPOSIT> 20,640
<INTEREST-EXPENSE> 22,570
<INTEREST-INCOME-NET> 25,827
<LOAN-LOSSES> 1,302
<SECURITIES-GAINS> 160
<EXPENSE-OTHER> 17,567
<INCOME-PRETAX> 11,921
<INCOME-PRE-EXTRAORDINARY> 11,921
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,491
<EPS-BASIC> .34
<EPS-DILUTED> .34
<YIELD-ACTUAL> 7.93
<LOANS-NON> 12,256
<LOANS-PAST> 2,803
<LOANS-TROUBLED> 901
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 18,675
<CHARGE-OFFS> 933
<RECOVERIES> 498
<ALLOWANCE-CLOSE> 19,541
<ALLOWANCE-DOMESTIC> 19,541
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
