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 June 30, 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--6,506,281 shares outstanding as of
June 30, 1996 Preferred stock, No par value--No shares
outstanding as of June 30, 1996.
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<PAGE>
INDEX
FIRST UNITED CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1996
(Unaudited), December 31, 1995, and June 30, 1995
(Unaudited).
Consolidated Statements of Income (Unaudited) - Six months
ended June 30, 1996 and 1995 and three months ended June 30, 1996
and 1995.
Consolidated Statement of Cash Flows (Unaudited) - Six
months ended June 30, 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
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FIRST UNITED CORPORATION
Consolidated Balance Sheet
(In Thousands)
June 30, Dec. 31, June 30,
Assets 1996 1995 1995
(Unaudited) (*) (Unaudited)
-----------------------------
Cash and due from banks $15,767 $16,011 $18,367
Investment securities:
Available-for-sale:
U.S. Treasury Securities 17,651 11,375 10,030
Obl. of other U S Gov. Agen. 35,057 36,424 28,393
Obl. of St. and Loc. Govt 5,824 4,023 3,839
Other investments 22,436 21,835 22,566
--------------------------
Total available-for-sale 80,968 73,657 64,828
Held-to-maturity:
Obl. of other U S Govt Agen 1,497 800 3,800
Obl. of St. and Loc. Govt 5,458 4,546 5,157
Other investments 14,186 17,148 10,805
---------------------------
Total held-to-maturity 21,141 22,494 19,762
---------------------------
Total investment securities 101,109 96,151 84,590
Federal funds sold 2,020 0 1,700
Loans 359,420 360,584 349,777
Reserve for poss. credit losses (2,172) (2,120) (2,203)
---------------------------
Net loans 357,248 358,464 347,574
Bank premises and equipment 9,195 9,605 9,787
Acc. int. Rec. and other assets 6,056 6,938 5,230
----------------------------
Total Assets $492,395 $487,169 $467,248
============================
* 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-
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FIRST UNITED CORPORATION
Consolidated Balance Sheet
June 30, Dec. 31, June 30,
1996 1995 1995
(Unaudited) (*) (Unaudited)
Liabilities ------------------------------
Deposits
Non-int. bearing deposits $ 48,058 $ 49,541 $ 46,981
Interest bearing deposits 383,396 374,753 362,697
---------------------------
Total deposits 431,454 424,294 409,678
Reserve for taxes, int., &
Other liabilities 4,003 4,371 3,696
Fed funds purchased & other
borrowed money 585 3,000 300
Dividends payable 0 0 0
----------------------------
Total Liabilities 436,042 431,665 413,674
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 June 30,
1996, 6,194 outstanding at December
31, 1995, and 6,192 outstanding at
June 30, 1995 65 62 62
Surplus 27,314 23,184 23,141
Retained earnings 29,527 32,065 30,377
Unrealized (loss)gain on
available-for-sale securities
net of taxes (553) 193 (6)
---------------------------
Total Shareholder's Equity 56,353 55,504 53,574
---------------------------
Total Liabilities and
Shareholder's Equity $492,395 $487,169 $467,248
============================
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* 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
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FIRST UNITED CORPORATION
Consolidated Statement Of Income
(In Thousands, except per share data)
Six Months
Ended June 30,
1996 1995
-------------------
(Unaudited)
Interest income
Interest and fees on loans $ 16,149 $ 15,355
Interest on investment securities:
Taxable 2,756 2,397
Exempt from federal income tax 252 229
--------------------
3,008 2,626
Interest on federal funds sold 80 86
--------------------
Total interest income 19,237 18,067
Interest expense
Interest on deposits:
Savings 917 1,047
Interest-bearing transaction acct. 1,355 1,218
Time, $100,000 or more 901 760
Other time 4,670 3,834
Interest on fed funds purchased
& other borrowed money 57 94
--------------------
Total interest expense 7,900 6,953
--------------------
Net interest income 11,337 11,114
Provision for possible credit losses 198 0
--------------------
Net interest income after provision
for possible credit losses 11,139 11,114
Other operating income
Trust department income 600 469
Service charges on deposit accts. 838 752
Insurance premium income 143 125
Other income 698 590
--------------------
Total other operating income 2,279 1,936
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Six Months
Ended June 30,
1996 1995
-------------------
(Unaudited)
Other operating expenses
Salaries and employees benefits 4,456 4,510
Occupancy expense of premises 637 465
Equipment expense 688 597
Data processing expense 269 293
Deposit assess. and related fees 47 524
Other expense 2,464 3,067
---------------------
Total other operating expenses 8,561 9,456
---------------------
Income before income taxes 4,857 3,594
Applicable income taxes (1,640) (1,165)
---------------------
Net income $3,217 $2,429
=====================
Earnings per share $0.49 $0.37
=====================
Per share data has been restated to reflect the 5% stock dividend
paid on March 29, 1996.
See Notes to Unaudited consolidated financial statements.
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FIRST UNITED CORPORATION
Consolidated Statement Of Income
(In Thousands, except per share data)
Three Months
Ended June 30,
1996 1995
-------------------
(Unaudited)
Interest income
Interest and fees on loans $ 8,056 $ 7,884
Interest on investment securities:
Taxable 1,446 1,161
Exempt from federal income tax 133 121
--------------------
1,579 1,282
Interest on federal funds sold 17 54
--------------------
Total interest income 9,652 9,220
Interest expense
Interest on deposits:
Savings 455 520
Interest-bearing transaction acct. 661 635
Time, $100,000 or more 432 376
Other time 2,348 2,033
Interest on fed funds purchased
& other borrowed money 32 25
--------------------
Total interest expense 3,928 3,589
--------------------
Net interest income 5,724 5,631
Provision for possible credit losses 99 (30)
--------------------
Net interest income after provision
for possible credit losses 5,625 5,661
Other operating income
Trust department income 300 235
Service charges on deposit accts. 443 403
Insurance premium income 67 63
Other income 389 286
--------------------
Total other operating income 1,199 987
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Three Months
Ended June 30,
1996 1995
-------------------
(Unaudited)
Other operating expenses
Salaries and employees benefits 2,238 2,181
Occupancy expense of premises 360 288
Equipment expense 352 304
Data processing expense 130 132
Deposit assess. and related fees 28 261
Other expense 1,277 1,985
---------------------
Total other operating expenses 4,385 5,151
---------------------
Income before income taxes 2,439 1,497
Applicable income taxes (821) (467)
---------------------
Net income $1,618 $1,030
=====================
Earnings per share $0.25 $0.16
=====================
Per share data has been restated to reflect the 5% stock dividend
paid on March 29, 1996.
See Notes to Unaudited consolidated financial statements.
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FIRST UNITED CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Six Months
Ended June 30,
1996 1995
--------------------
(Unaudited)
Operating activities
Net Income $ 3,217 $ 2,429
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible credit losses 198 0
Provision for depreciation 642 540
Net accretion & amortization of investment
security discounts & premiums 221 262
Realized (loss)/gain on sale
of investment securities 12 (19)
Decrease(increase)decrease in acc. interest
& other receivables. 882 926
Increase(decrease)in accrued interest
& other payables (368) (1,190)
--------------------
Net cash provided by operating activities 4,804 2,948
Investing activities
Proceeds from maturities of available-for-
sale securities 26,874 57,218
Purchases of available-for-sale securities (32,019) (44,669)
Proceeds form maturities of held-to-maturity
securities 2,588 3,810
Purchases of held-to-maturity securities (4,380) (4,072)
Net decrease (increase)in loans 1,018 (14,199)
Purchases of premises & equipment (232) (973)
-------------------
Net cash used in investing activities (6,151) (2,885)
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Six Months
Ended June 30,
1996 1995
--------------------
(Unaudited)
Financing activities
(Decrease)in Fed Fund Purchased
and Other Borrowed Money $ (2,415) 0
Net (decrease) increase in demand deposits,
NOW accounts and savings accounts 1,101 9,654
Net increase in certificates of deposits 6,059 4,515
Cash dividends paid or declared (1,651) (619)
Proceeds from issuance of capital stock 29 130
Net cash (used) provided by -------------------
financing activities 3,123 13,680
Cash and cash equivalents at beg. of year 16,011 14,735
(Decrease) increase in cash & cash equiv. 1,776 1,353
--------------------
Cash & cash equivalents at end of period $ 17,787 $ 16,088
====================
See Notes to unaudited consolidated financial statements.
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FIRST UNITED CORPORATION
Note to Unaudited Consolidated Financial Statements
June 30, 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 six month period ended June 30, 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 6,506 and 6,505 for the six months ended
June 30, 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.
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Part I. Financial Information
Item II. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Consolidated net income for the quarter totaled $1.618
million, which is $.59 million more than was recorded for the
second quarter of 1995. This translates into $.25 per share for
the current period. For the same quarter of 1995, each share
earned $.16. Return on average equity (ROAE) increased from
10.47 percent, at December 31, 1995, to 11.61 percent as of June
30, 1996. The increase in income was the result of the
corporation efforts to improve efficiencies through consolidation
of duplicate functions and the results of the corporation's 1995
restructuring process, which was designed to position First
United for continued profitable growth.
Consolidated net income for the six month period ended June
30, 1996 totaled $3.217 million, which is $.79 million more than
was recorded for the same period of 1995. This translates into
$.49 per share for the year. For the same period of 1995, each
share earned $.37
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,(net interest income plus other operating income)
excluding nonrecurring items and securities gains and losses. A
lower ratio equals higher profitability and operating
efficiencies. The Corporation's efficiency ratio was -61.68
percent for the period ended June 30, 1996. This represents an
improvement 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 $131,000
to $600,000 in the second quarter of 1996 compared to the second
quarter of 1995. The reduction in salaries and employee benefits
expense from $4.510 million in June, 1995 to $4.456 million in
June, 1996 was the result of the benefits gained from an early
retirement program offered to eleven employees during 1995. Also
as a result of the Corporation's well capitalized position we
were not assessed a FDIC fee. This will result in annual savings
of approximately $.800 million before taxes. Other Operating
income and Other Operating expense in 1996 were $2.28 million and
$8.56 million compared to $1.94 million and $9.46 million in
1995.
The corporation's interest expense as of June 30, 1996 was
$.947 higher than was recorded for the same period in 1995.
Interest expense increased $.339 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
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successful deposit campaign during the first quarter of 1995
which increased deposits $16 million dollars. Through several
different deposit campaigns the Corporation has been able to keep
the majority of these deposits. Since December 31,1995, total
deposits have increased $7.160 million to $431.454 million.
Net interest income for the first six months of 1996 increased
0.22 percent from the same period in 1995, to $11.139 million.
Although interest expense has increased, the Corporation's
Asset/Liability Management Committee has made a concerted effort
to obtain an optimal return on average assets (ROAA), as a result
ROAA was 1.32 percent at June 30, 1996 compared to 1.05 percent
at June 30, 1995. This improvement is due to the significant
improvement in net income. The result was a Corporate net
interest margin of 5.05 percent in comparison to the net interest
margin of 5.19 percent at the end of year 1995. The 5.05 percent
net interest margin, while not as favorable as the comparable
period in 1995, 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 $0.198 million
for the first six months of 1996 compared to no charge for the
same period in 1995. Net charge-offs for the first six months
were $0.147 million, which equates to 0.04 percent of our net
loan total of $357.248 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.
Shareholders' equity increased to $56.353 million, a 5.19
percent increase from the second quarter of 1995, which was
$53.574 million. Risk based capital, which is an expression of
the Corporation's stability and security was 16.57 percent,
which is excess of 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 cash
dividends of $.13 on February 1, 1996 and May 1, 1996. On July 3,
1996, the Corporation declared another dividend of equal amount,
to be paid August 1, 1996, to shareholders on record at July 18,
1996.
On July 31, 1996, the Board of Directors ratified to implement
a stock buy back program. The Corporation has authority to
repurchase up to 5% of the outstanding shares of First United
Corporation at a price management deems appropriate.
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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. Submission of Matters to a Vote of Security Holders.
None.
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 June 30, 1996.
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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 07/25/96 /s/ WILLIAM B. GRANT
---------- ----------------------------------------
William B. Grant, Chairman of the Board
and Chief Executive Officer
Date 07/25/96 /s/ Philip D. Frantz
---------- ----------------------------------------
Philip D. Frantz, Sr. Vice President
and Treasurer
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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 07/25/96
---------- ----------------------------------------
William B. Grant, Chairman of the
Board and Chief Executive Officer
Date 07/25/96
---------- ---------------------------------------
Philip D. Frantz, Sr. Vice President
and Treasurer
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<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-3O-1996
<CASH> 15767
<INT-BEARING-DEPOSITS> 383396
<FED-FUNDS-SOLD> 2020
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 80968
<INVESTMENTS-CARRYING> 21141
<INVESTMENTS-MARKET> 21128
<LOANS> 359420
<ALLOWANCE> 2172
<TOTAL-ASSETS> 492395
<DEPOSITS> 431454
<SHORT-TERM> 585
<LIABILITIES-OTHER> 4003
<LONG-TERM> 0
<COMMON> 65
0
0
<OTHER-SE> 56288
<TOTAL-LIABILITIES-AND-EQUITY> 492395
<INTEREST-LOAN> 16149
<INTEREST-INVEST> 3008
<INTEREST-OTHER> 80
<INTEREST-TOTAL> 19237
<INTEREST-DEPOSIT> 7843
<INTEREST-EXPENSE> 7900
<INTEREST-INCOME-NET> 11337
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (12)
<EXPENSE-OTHER> 8561
<INCOME-PRETAX> 4857
<INCOME-PRE-EXTRAORDINARY> 3217
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3217
<EPS-PRIMARY> .49
<EPS-DILUTED> 0
<YIELD-ACTUAL> 5.05
<LOANS-NON> 1454
<LOANS-PAST> 2655
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 244
<RECOVERIES> 97
<ALLOWANCE-CLOSE> 2172
<ALLOWANCE-DOMESTIC> 2172
<ALLOWANCE-FOREIGN> 0
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</TABLE>
