FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 31, 1994
Commission file number 0-14237
First United Corporation
(Exact name of registrant as specified in its charter)
Maryland 52-1380770
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification no.)
19 South Second Street, Oakland, Maryland 21550
(address of principal executive offices) (zip code)
(301) 334-9471
Registrant's telephone number, including area code
Not applicable
Former name, address and former fiscal year, if changed since last
report.
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.
X Yes No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical date.
Common stock, $.01 Par value--6,191,910 shares outstanding as of
March 31, 1994 Preferred stock, No par value--No shares outstanding
as of March 31, 1994
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INDEX
FIRST UNITED CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1994
(Unaudited), December 31, 1993 and March 31, 1993
(Unaudited).
Consolidated Statements of Income (Unaudited) - Three
months ended March 31, 1994 and 1993.
Consolidated Statement of Cash Flows (Unaudited) - Three
months ended March 31, 1994 and 1993.
Notes to Unaudited Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-k.
SIGNATURES
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Part I. Financial Information
Item II. Management's Discussion and Analysis
First United Corporation's consolidated net earnings for the
first quarter of 1994 totaled $1.60 million which represents an
increase of $.05 million over the net income earned for the same
period in 1993. Translated into per share amounts, net income for
the first three months of 1994 totaled $.26 per share versus $.25
per share during the first quarter of 1993. Return on average
assets (ROAA), one key measure of profitability, was 1.53 percent
for the first quarter. This represents a significant increase from
the year end 1993 return on average assets of 1.42 percent. The
13.12% return on average equity (ROAE) also compares favorably to
the December 31, 1993, return on average equity of 12.86 percent.
Interest income, which amounted to $7.84 million during the
first quarter, decreased 5.08 percent over the first quarter in
1993. At the same time, interest expense totalled $2.48 million,
representing a decrease of 16.34 percent over the same quarter in
1993. The increase in net interest income was responsible for the
Corporation's net interest margin of 5.42 percent, which represents
an increase over the 5.37 percent at the end of 1993. Despite an
increase in interest rates during the first quarter, First United
was able to maintain a positive net interest margin by utilizing
the Company's asset/liability management committee. The Committee
monitors interest rates on assets and liabilities continually to
assure an adequate spread is maintained at all times.
The provision for possible credit losses amounted to
$.08 million during the first quarter of 1994. This compares
favorably to the $.17 million provision during the same time period
in 1993. Net charge offs for the quarter were $.06 million versus
$.17 million during the first quarter in 1993. By maintaining
prudent lending practices and a stringent loan review process, the
Corporation has been able to maintain a quality loan portfolio.
As the market continues to place pressure on interest margins,
it is important for the Corporation to continually enhance
non-interest income. During the quarter First United realized an
increase of 22.1 percent in non-interest income over the first
quarter of 1993. The increase was attributed to increased earnings
in the Trust Department, which now manages assets in excess of $111
million, and increased brokerage commissions generated by PRIMEVEST
Financial Services. The Appraisal Department also continues to
have positive effects on the Corporation's earnings stream.
As the Corporation looks for new ways to enhance non-interest
income, an ongoing emphasis of controlling non-interest expense
continues. During the first quarter non-interest expenses totalled
$3.87 million versus $3.55 million in the first quarter of 1993,
representing an increase of 9.01 percent. The increase in expense
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can be attributed to increased personnel costs from the
Corporation's expansion into the new market areas of Romney,
Moorefield, and Hagerstown during 1993. The increase in non-interest
expense can also be attributed to higher Federal Deposit
Insurance Premiums and Regulatory Supervision Assessments Fees.
During the quarter the Corporation began the process of
consolidating the backroom functions of it's newest subsidiary,
Myersville Bank. As the consolidation effort moves forward,
economies of scale will be realized helping to reduce the costs
associated with providing quality customer service.
Net loans have increased $2.22 million in the first quarter.
The increase occurred despite the sale of loans during the first
quarter by our West Virginia subsidiary. The loan sale will allow
the Corporation to meet anticipated loan growth in the upcoming
months.
Deposits for the quarter remained little changed from December
31, 1993. The competition for deposits remained fierce during the
quarter. The Corporation continues to face competition not only
from companies in the local market area, but also from non-bank
competitors who offer mutual funds and other investment products.
Shareholder's equity increased to $49.92 million, a 3.2
percent increase year to date. Risk-based capital as of March 31,
1994 was a healthy 19.47 percent which is well above required
regulatory minimum of 8%.
On February 1, 1994, the Corporation paid a cash dividend of
$.1067 per share, adjusted for the 50% stock dividend effected in
the form of a 3 for 2 stock split paid February 8, 1994. In
addition, a cash dividend of $.10 per share was declared on April
13, 1994. The dividend is payable May 1, 1994, to shareholders of
record as of April 21, 1994.
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Part I. Financial Information
Item II. Financial Statements
FIRST UNITED CORPORATION
CONSOLIDATED BALANCE SHEETS (In Thousands)
March 31 Dec. 31 March 31
1994 1993 1993
ASSETS (Unaud.) (*) (Unaud.)
Cash and due from banks............ $ 13,451 $ 12,832 $ 9,510
Investments:
Available for Sale:
U.S. Treasury securities........... 22,480
Obligations of other U.S.Government
agencies 30,922
Other Investments.................. 17,519
-------- -------- --------
Total Available for Sale 70,921
Held to Maturity:
U.S. Treasury securities.......... 23,467 21,442
Obligations of other U.S.Government
agencies 33,315 35,718
Other Investments................. 16,211 15,898
Obligations of state and political
subdivisions.............. 8,687 8,538 9,601
-------- -------- --------
Total Held to Maturity 8,687 81,531 82,659
-------- -------- --------
Total investment securities.... 79,608 81,531 82,659
Federal funds sold.................. 2 1,903 15,215
Loans............................... 319,018 316,781 299,060
Reserve for possible credit losses.. (2,320) (2,305) (2,806)
-------- -------- --------
Net loans........................... 316,698 314,476 296,254
Bank premises and equipment......... 8,165 8,026 7,420
Accrued interest receivable and
other assets........................ 4,541 4,612 6,240
-------- -------- --------
TOTAL ASSETS $422,465 $423,380 $417,298
======== ======== =======
* The balance sheet at December 31, 1993 has been derived from the
audited financial statements at that date.
See Notes to unaudited consolidated financial statements.
() Indicates Deduction
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FIRST UNITED CORPORATION
CONSOLIDATED BALANCE SHEET (IN THOUSANDS)
March 31 Dec. 31 March 31
1994 1993 1993
(Unaud.) (*) (Unaud.)
LIABILITIES
Deposits:
Non-interest bearing deposits.......... $ 38,535 $ 41,456 $ 33,758
Interest bearing deposits.............. 327,957 327,071 329,664
--------- -------- --------
TOTAL DEPOSITS $366,492 $368,527 $363,422
Dividends payable....................... 660 1,017
Reserve for taxes, interest, and other
liabilities........................ 6,146 5,821 7,446
--------- -------- --------
TOTAL LIABILITIES $372,638 $375,008 $371,885
SHAREHOLDERS' EQUITY
Preferred Stock - no par value
Authorized and unissued; 2,000 shares...
Capital stock-par value $.01 per share:
Authorized 12,000 shares; issued and
outstanding 6,192 at March 31, 1994,
6,186 shares outstanding at December 31,
1993, 6,167 and March 31, 1993 .......... 62 62 62
Surplus................................... 23,141 23,005 22,638
Retained earnings......................... 26,899 25,305 22,713
Unrealized (losses) on available for.........
sale securities, net of tax................. (182)
-------- -------- -------
TOTAL SHAREHOLDERS' EQUITY 49,920 48,372 45,413
-------- -------- -------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $422,465 $423,380 $417,298
======== ======== ========
* The balance sheet at December 31, 1993 has been derived from the
audited financial statements at that date.
See Notes to unaudited consolidated financial statements.
() Indicates Deduction
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FIRST UNITED CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, except per share data)
Three Months
Ended March 31,
1994 1993
(Unaudited)
INTEREST INCOME
Interest and fees on loans.................. $ 6,878 $ 6,892
Interest on investment securities:
Available for Sale - Taxable............ 789 1,090
Held to Maturity - Exempt for Taxes...... 152 182
------- -------
941 1,272
Interest on federal funds sold.............. 22 97
------- -------
Total Interest Income................. 7,841 8,261
INTEREST EXPENSE
Interest on deposits:
Savings.................................. 447 519
Interest-bearing transaction accounts.... 428 607
Time, $100,000 or more................... 102 81
Other time............................... 1,506 1,761
------- -------
Total Interest Expense................ 2,483 2,968
Net Interest Income................... 5,358 5,293
Provision for possible credit losses........ 80 173
------- -------
Net Interest Income After Provision
For Possible Credit Losses....... 5,278 5,120
OTHER OPERATING INCOME
Trust department income.................... 210 164
Service charges on deposit accounts........ 369 349
Security Gains............................. 3 28
Other income............................... 309 189
------- -------
891 730
OTHER OPERATING EXPENSES
Salaries and employee benefits............. 2,070 1,814
Occupancy expense of premises.............. 268 242
Equipment expense.......................... 263 216
Data processing expense.................... 104 93
Deposit assessments and related fees....... 247 224
Other expense.............................. 915 956
------- -------
3,867 3,545
------- -------
Income Before Income Taxes............ 2,302 2,305
Applicable income taxes.................... 702 757
------- -------
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Net Income............................ $ 1,600 $ 1,548
========= =======
EARNINGS PER SHARE.......................... $ .26 $ .25
========= =======
AVERAGE COMMON SHARES OUTSTANDING 6,191 6,167
========= ========
See Notes A and C to unaudited consolidated financial statements.
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FIRST UNITED CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
Three Months
Ended March 31, 1994
OPERATING ACTIVITIES 1994 1993
(Unaudited)
Net Income..................................... $ 1,600 $ 1,479
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible credit losses........ 80 206
Provision for depreciation.................. 209 157
Net accretion & amortization of investment
security discounts & premiums .......... 258 165
Increase in accrued interest & other........
receivables............................. 71 (113)
Decrease in accrued interest
& other payables........................ (428) (509)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES.......$ 1,790 $ 1,385
INVESTING ACTIVITIES
Proceeds from maturities of available for sale
securities.....................................$19,696 $11,832
Purchases of available for sale securities..... (17,893) (17,498)
Proceeds from maturities of held to maturity
securities...................................... 552 0
Purchases of held to maturity securities......... (690) 0
Net decrease in short-term loans................ (4,665) 326
Net increase in longer-term loans................ 2,363 (740)
Purchases of premises & equipment................ ( 348) (477)
-------- ---------
NET CASH USED IN INVESTING ACTIVITIES $ (985) $ (6,557)
FINANCING ACTIVITIES
Unrealized gains(losses) on available for sale
securities, net of tax ........................ (182) 0
Net increase in demand deposits, NOW
accounts and savings accounts................ $ (2,864) $ 4,989
Net decrease in certificates of
deposit......................................... 829 (3,151)
Cash dividends declared.......................... 0 (510)
Proceeds from issuance of capital stock.......... 130 0
-------- --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES...........................$(2,087) $ 1,328
-------- --------
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Decrease in cash and cash equivalents $ (1,282) $( 3,844)
Cash & cash equivalents at beginning of quart. $ 14,735 $28,113
--------- --------
Cash & cash equivalents at end of quarter..... $ 13,453 $24,269
========= =========
See Note A to unaudited consolidated financial statements.
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FIRST UNITED CORPORATION
Note to Unaudited Consolidated Financial Statements
March 31, 1994
Note A -- Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all
the information and footnotes required for complete financial
statements. In the opinion of management, all adjustments
considered necessary for a fair presentation, consisting of normal
recurring items have been included. Operating results for the
three month period ended March 31, 1994 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1994. The enclosed consolidated financial statements
should be read in conjunction with the consolidated financial
statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1993.
Per share financial information has been restated for the 100%
stock dividend effective in the form of a 2:1 stock split paid June
15, 1993 and for the 50% stock dividend effective in the form of a
3:2 stock split paid February 8, 1994.
Note B -- Accounting Change
In May 1993 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." The
Company adopted the provisions of the new standard for investments
held as of or acquired after January 1, 1994. In accordance with
the Statement, prior period financial statements have not been
restated to reflect the change in accounting principle. The
cumulative effect as of March 31, 1994 of adopting Statement 115
decreased shareholder's equity by $182,000 (net of $93,000 in
deferred income taxes) to reflect the net unrealized holding losses
on securities classified as available-for-sale. Previously, these
securities were carried at amortized cost or lower-of-cost-or-market.
Note C --
The consolidated financial statements of the Corporation give
retroactive effect to the merger with Myersville Bank, which has
been accounted for as a pooling of interests.
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Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Other Information.
None.
Item 5. Exhibits and Reports on Form 8-K.
The Company did not file any reports on Form 8-K
for the period ending March 31, 1994.
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SIGNATURES
Pursuant to the requirement 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 CORPORATION
Date 5/10/94 /s/ RICHARD G. STANTON
------------ -------------------------------
Richard G. Stanton, Chairman of
the Board, President
and Chief Executive
Officer
Date 5/10/94 /s/ ROBERT W. KURTZ
------------- -------------------------------
Robert W. Kurtz, Executive Vice
President and
Treasurer
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SIGNATURES
Pursuant to the requirements of the Securities Exhange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
FIRST UNITED CORPORATION
Date 5/10/94
--------- ---------------------------
Richard G. Stanton, Chairman of the
Board, President
and Chief
Executive Officer
Date 5/10/94
--------- ---------------------------
Robert W. Kurtz, Executive Vice
President and
Treasurer
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