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, 1996
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 21550-0009
(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--6,506,295 shares outstanding as of
March 31, 1996 Preferred stock, No par value--No shares
outstanding as of March 31, 1996.
-01-
<PAGE>
INDEX
FIRST UNITED CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1996
(Unaudited), December 31, 1995, and March 31, 1995
(Unaudited).
Consolidated Statements of Income (Unaudited) - Three months
ended March 31, 1996 and 1995.
Consolidated Statement of Cash Flows (Unaudited) - Three
months ended March 31, 1996 and 1995.
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
-02-
<PAGE>
FIRST UNITED CORPORATION
Consolidated Balance Sheet
(In Thousands)
Mar. 31, Dec. 31, Mar. 31,
Assets 1996 1995 1995
(Unaudited) (*) (Unaudited)
-----------------------------
Cash and due from banks $15,978 $16,011 $15,494
Investment securities:
Available-for-sale:
U.S. Treasury Securities 15,493 11,375 18,289
Obl. of other U S Gov. Agen. 37,343 36,424 30,360
Obl. of St. and Loc. Govt 5,508 4,023 3,566
Other investments 23,583 21,835 19,684
--------------------------
Total available-for-sale 81,927 73,657 71,899
Held-to-maturity:
Obl. of other U S Govt Agen 1,528 800 3,800
Obl. of St. and Loc. Govt 4,748 4,546 5,239
Other investments 15,884 17,148 11,558
---------------------------
Total held-to-maturity 22,160 22,494 20,597
---------------------------
Total investment securities 104,087 96,151 92,496
Federal funds sold 0 0 500
Loans 356,417 360,584 344,590
Reserve for poss. credit losses (2,164) (2,120) (2,370)
---------------------------
Net loans 354,253 358,464 342,220
Bank premises and equipment 9,392 9,605 9,510
Acc. int. Rec. and other assets 6,136 6,938 6,772
----------------------------
Total Assets $489,846 $487,169 $466,992
============================
* The balance sheet at December 31, 1995 has been derived from
the audited financial statements at that date.
See notes to unaudited consolidated financial statements.
() Indicates Deduction
-03-
<PAGE>
FIRST UNITED CORPORATION
Consolidated Balance Sheet
Mar. 31, Dec. 31, Mar. 31,
1996 1995 1995
(Unaudited) (*) (Unaudited)
Liabiliities ------------------------------
Deposits
Non-int. bearing deposits $ 46,830 $ 49,541 $ 44,155
Interest bearing deposits 380,462 374,753 362,352
---------------------------
Total deposits 427,292 424,294 406,507
Reserve for taxes, int., &
Other liabilities 6,459 4,371 3,857
Fed funds purchased & other
borrowed money 0 3,000 4,000
Dividends payable 846 0 743
----------------------------
Total Liabitities 434,597 431,665 415,107
Shareholder's 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 6,506 shares at March 31,
1996, 6,194 outstanding at December
31, 1995, and 6,192 outstanding at
March 31, 1995 65 62 62
Surplus 27,314 23,184 23,141
Retained earnings 27,908 32,065 29,347
Unrealized (loss)gain on
available-for-sale securities
net of taxes (38) 193 (665)
---------------------------
Total Shareholder's Equity 55,249 55,504 51,885
---------------------------
Total Liabilities and
Shareholder's Equity $489,846 $487,169 $466,992
============================
* The balance sheet at December 31, 1995 has been derived from
the audited financial statements at that date.
See Notes to unaudited consolidated financial statements.
() Indicates Deduction
-04-
<PAGE>
FIRST UNITED CORPORATION
Consolidated Statement Of Income
(In Thousands, except per share data)
Three Months
Ended March 31,
1996 1995
-------------------
(Unaudited)
Interest income
Interest and fees on loans $ 8,093 $ 7,471
Interest on investment securities:
Taxable 1,310 1,236
Exempt from federal income tax 119 108
--------------------
1,429 1,344
Interest on federal funds sold 63 32
--------------------
Total interest income 9,585 8,847
Interest expense
Interest on deposits:
Savings 462 527
Interest-bearing transaction acct. 694 583
Time, $100,000 or more 469 384
Other time 2,322 1,801
Interest on fed funds purchased
& other borrowed money 25 69
--------------------
Total interest expense 3,972 3,364
--------------------
Net interest income 5,613 5,483
Provision for possible credit losses 99 30
--------------------
Net interest income after provision
for possible credit losses 5,514 5,453
Other operating income
Trust department income $300 $234
Service charges on deposit accts. 395 349
Insurance premium income 76 62
Other income 309 304
--------------------
Total other operating income 1,080 949
-05-
<PAGE>
Other operating expenses
Salaries and employees benefits 2,218 2,329
Occupancy expense of premises 277 177
Equipment expense 336 293
Data processing expense 139 161
Deposit assess. and related fees 19 263
Other expense 1,187 1,082
---------------------
Total other operating expenses 4,176 4,305
---------------------
Income before income taxes 2,418 2,097
Applicable income taxes (819) (698)
---------------------
Net income $1,599 $1,399
=====================
Earnings per share $0.25 $0.21
=====================
Per share data has been restated to reflect the 5% stock dividend
paid on March 29, 1996.
See Notes to Unaudited consolidated financial statements.
-06-
<PAGE>
FIRST UNITED CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) Three Months
Ended March 31,
1996 1995
--------------------
(Unaudited)
Operating activities
Net Income $ 1,599 $ 1,399
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible credit losses 99 30
Provision for depreciation 318 262
Net accretion & amortization of investment
security discounts & premiums 118 128
Decrease(increase)decrease in acc. interest
& other receivables. 802 (616)
Increase(decrease)in accrued interest
& other payables 2,934 (286)
--------------------
Net cash provided by operating activities 5,870 917
--------------------
Investing activities
Proceeds from maturities of available-for-
sale securities 17,255 30,453
Purchases of available-for-sale securities (23,382) (25,715)
Proceeds form maturities of held-to-maturity
securities 462 1,713
Purchases of held-to-maturity securities (2,620) (2,614)
Net decrease (increase)in loans 4,112 (8,875)
Purchases of premises & equipment (105) (418)
-------------------
Net cash used in investing activities (4,278) (5,456)
-------------------
Financing activities
(Decrease)in Fed Fund Purchased
and Other Borrowed Money $ (3,000) (7,373)
Net (decrease) increase in demand deposits,
NOW accounts and savings accounts (2,693) 6,880
Net increase in certificates of deposits 5,691 7,977
Cash dividends paid or declared (1,651) (1,487)
Proceeds from issuance of capital stock 28 0
-------------------
-07-
<PAGE>
Net cash (used) provided by --------------------
financing activities (1,625) 5,997
--------------------
Cash and cash equivalents at beg. of qtr. 16,011 14,536
(Decrease) increase in cash & cash equiv. (33) 1,458
--------------------
Cash & cash equivalents at end of period $ 15,978 $ 15,994
====================
See Notes to unaudited consolidated financial statements.
-08-
<PAGE>
FIRST UNITED CORPORATION
Note to Unaudited Consolidated Financial Statements
March 31, 1996
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, 1996, are not necessarily
indicative of the results that may be expected for the year
ending December 31, 1996. 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, 1995.
On January 17, 1996, the Board of Directors declared a 5%
stock dividend to shareholders of record on March 15, 1996,
payable March 29, 1996. Earnings and dividends per share for
prior periods have been restated to reflect the stock dividend.
Earnings per share are based on the weighted average number
of shares outstanding of 6,505 and 6,502 for the three months
ended March 31, 1996 and 1995, as restated for the 5% stock
dividend discussed above.
Note B -- Recently Issued Accounting Guidance
In March 1995, the FASB issued Statements No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of". The Corporation was required to
adopt Statement No. 121 on January 1, 1996. The Corporation has
completed the analysis of Statement No. 121 and has determined
that the effect of implementing this Statement was immaterial to
the Corporation's financial position and results of operations.
-09-
<PAGE>
Part I. Financial Information
Item II. Management's Discussion and Analysis
Consolidated net earnings for the quarter totaled $1.599
million, which is $.2 million more than was recorded for the
first quarter of 1995. This translates into $.25 per share for
the current period. For the same quarter of 1995, each share
earned $.21. Return on average equity (ROAE) increased from
10.47 percent, at December 31, 1995, to 11.63 percent as of March
31, 1996. The increase in income was the result of our efforts
to improve efficiencies through consolidation of duplicate
functions and the results of our 1995 restructuring process,
which was designed to position First United for continued
profitable growth.
The efficiency ratio is a key measuring tool for
profitability and operating efficiency. The calculation for the
efficiency ratio is noninterest expense divided by net operating
revenue, excluding nonrecurring items and securities gains and
losses. The Corporation's efficiency ratio was -60.98 percent
for the period ended March 31, 1996. This represents a decrease
from year end 1995 when the ratio was -67.33. The improvement in
our efficiency ratio was the result of an increase in other
operating income and a decrease in other operating expenses.
Income from fiduciary services increased by $70,000 to $300,000
in the first quarter of 1996 compared to the first quarter of
1995. The reduction in salaries and employee benefits expense
from $2.329 million in March, 1995 to $2.218 million in March,
1996 was the result of the benefits gained from an early
retirement program offered to eleven employees during 1995.
Noninterest income and noninterest expense in 1996 were $1.08
million and $4.176 million compared to $0.949 million and $4.305
million in 1995.
Interest expense increased $.608 million from the same
quarter last year. As interest rates continue to rise, it is of
utmost importance that we take advantage of increasing our
deposit base which is a less expensive source of funding to
support loan growth versus other sources. The Corporation
conducted a very successful deposit campaign during the first
quarter of 1995 which raised $16 million dollars. In the first
quarter of 1996, the Corporation strived to retain these deposits
through a deposit campaign and pricing strategy. Since year end
1995, total deposits have increased $2.998 million to $427.292
million.
Net interest income for the first three months of 1996
increased 2.37 percent from the same period in 1995, to $5.613
million. Although interest expense has increased, the
Asset/Liability Management Committee has made a concerted effort
to obtain an optimal return on average assets (ROAA), as a result
-10-
<PAGE>
ROAA was 1.32 percent at March 31, 1996 compared to 1.22 percent
March 31, 1995. The result was a Corporate net interest margin
of 5.05 percent in comparison to the interest margin of 5.19
percent at the end of year 1995. The 5.05 percent net interest
margin is within the expectations of the Corporation, as deposit
costs increase and market conditions continue to cause us to
revaluate our margin on loans.
The provision for possible credit losses was $0.099 million
for the first three months of 1996 compared to $0.03 million for
the same period in 1995. Net charge-offs for the first quarter
were $0.055 million, which equates to 0.02 percent of our net
loan total of $354.253 million. First United Corporation
continues to place strong emphasis on maintaining a top quality
loan portfolio, achieved through stringent underwriting standards
and a consistent loan review process.
Another strong quality of First United is its capital
position. Shareholders' equity increased to $55.249 million, a
6.48 percent increase from the first quarter of 1995, which was
$51.885 million. Risk based capital, which is an expression of
your Corporation's stability and security was 17.91 percent,
which far surpasses the regulatory minimum of 8.00 percent.
On January 17, 1996, the Board of Directors declared a five
percent stock dividend payable on March 29, 1996, to shareholders
on record at March 15, 1996. The Corporation paid a cash
dividend of .13 on February 1, 1996, and on March 27, 1996,
declared another dividend of equal amount, to be paid May 1,
1996, to shareholders on record at April 17, 1996.
-11-
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
First United Corporation's annual meeting of
shareholders was held on April 23, 1996. Items
ratified by the 1996 proxy vote included the election
of directors and the appointment of Ernst & Young LLP
as the independent auditors of First United
Corporation. Results of 1996 proxy vote were:
For Against Abstain
-----------------------------------
Directors 4,250,204 33,710
Ernst & Young 4,762,457 11,816 102,546
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
The Company did not file any reports on Form
8-K for the period ending March 31, 1996.
-12-
<PAGE>
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 05/14/96 /s/ WILLIAM B. GRANT
---------- ----------------------------------------
William B. Gramt, Executive Vice
President and Secretary
Date 05/14/96 /s/ ROBERT W. KURTZ
---------- ----------------------------------------
Robert W. Kurtz, Executive Vice
President and Treasurer
-13-
<PAGE>
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 CORPORATION
Date 05/14/96
---------- ----------------------------------------
William B. Gramt, Executive Vice
President and Secretary
Date 05/14/96
---------- ---------------------------------------
Robert W. Kurtz, Executive Vice
President and Treasurer
-14-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 15978
<INT-BEARING-DEPOSITS> 380462
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 81927
<INVESTMENTS-CARRYING> 22160
<INVESTMENTS-MARKET> 22234
<LOANS> 356417
<ALLOWANCE> 2164
<TOTAL-ASSETS> 489846
<DEPOSITS> 427292
<SHORT-TERM> 0
<LIABILITIES-OTHER> 6459
<LONG-TERM> 0
<COMMON> 65
0
0
<OTHER-SE> 55184
<TOTAL-LIABILITIES-AND-EQUITY> 489846
<INTEREST-LOAN> 8093
<INTEREST-INVEST> 1429
<INTEREST-OTHER> 63
<INTEREST-TOTAL> 9585
<INTEREST-DEPOSIT> 3947
<INTEREST-EXPENSE> 3972
<INTEREST-INCOME-NET> 5514
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4176
<INCOME-PRETAX> 2418
<INCOME-PRE-EXTRAORDINARY> 2418
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1599
<EPS-PRIMARY> .25
<EPS-DILUTED> 0
<YIELD-ACTUAL> 5.05
<LOANS-NON> 1172
<LOANS-PAST> 1466
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 107
<RECOVERIES> 52
<ALLOWANCE-CLOSE> 2164
<ALLOWANCE-DOMESTIC> 2164
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
