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 0-17565
FIRST UNITED BANCORPORATION
(Exact name of registrant as specified in its charter)
South Carolina 57-0850174
(State or other jurisdiction (I. R. S. Employer
of incorporation) Identification No.)
304 North Main Street
Anderson, South Carolina 29621
(Address of principal executive
offices, including zip code)
(864) 224-1112
(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 period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past ninety (90) days.
YES [X] NO [ ]
The number of shares outstanding of each of registrant's classes of common stock
as of June 30, 1996:
2,333,093 shares of common stock, $1.67 Par Value
<PAGE>
TABLE OF CONTENTS
PAGE
PART I ITEM 1 FINANCIAL INFORMATION
Consolidated Balance Sheets ......................................... 3
June 30, 1996 (unaudited) and
December 31, 1995
Consolidated Statements of Income ................................... 4
Three months ended June 30, 1996
and 1995 (unaudited)
Consolidated Statements of Income ................................... 5
Six Months ended June 30, 1996
and 1995 (unaudited)
Consolidated Statement of Changes in
Shareholders' Equity ................................................ 6
Six months ended June 30, 1996 (unaudited)
and year ended December 31, 1995
Consolidated Statement of Cash Flows
Six months ended June 30, 1996 and ........................... 7
1995(unaudited)
Notes to Consolidated Financial Statements .......................... 8
(unaudited)
PART I ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS .............................. 9
PART II OTHER INFORMATION ................................................ 23
SIGNATURES ................................................................ 24
Page 2
<PAGE>
FIRST UNITED BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
(In thousands)
ASSETS:
<S> <C> <C>
Cash and due from banks $ 6,651 $ 6,353
Federal funds sold 12,540 5,100
Investment securities:
Held to maturity (Market value of $8,443 8,344 9,481
and $9,668)
Available for sale (Cost of $23,955 and $19,134) 23,668 19,032
Total loans 170,852 147,994
Less: Allowance for loan losses (2,622) (2,320)
-------- --------
Net loans 168,230 145,674
Premises, furniture and equipment (net) 6,574 5,588
Other real estate owned 74 74
Other assets 3,614 3,112
-------- --------
TOTAL ASSETS $229,695 $194,414
======== ========
LIABILITIES:
Demand deposits $ 22,666 $ 20,949
NOW accounts 25,373 24,710
Savings and money market deposits 29,399 25,420
Time deposits, $100,000 and over 30,719 23,855
Other time deposits 79,746 65,447
-------- --------
TOTAL DEPOSITS 187,903 160,381
-------- --------
Securities sold under repurchase agreements 4,174 3,096
Federal Home Loan Bank Advances 5,870 2,910
Other borrowed funds 12,240 9,470
Obligation under capital lease 6 21
Other liabilities 2,278 2,129
-------- --------
TOTAL LIABILITIES 212,471 178,007
-------- --------
SHAREHOLDERS' EQUITY:
Common stock ($1.67 par value, 3,890 3,859
15,000,000 shares authorized; 2,449,511
and 2,431,300 shares issued and
outstanding, respectively)
Paid-in capital 11,334 11,269
Retained earnings 2,181 1,343
Unrealized gain (loss) on securities available (181) (64)
for sale, net of income taxes
-------- --------
TOTAL SHAREHOLDERS' EQUITY 17,224 16,407
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $229,695 $194,414
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Page 3
<PAGE>
FIRST UNITED BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
June 30, June 30,
1996 1995
------------ ------------
(In thousands except per share data)
INTEREST INCOME:
<S> <C> <C>
Loans $5,257 $4,225
Federal funds sold 175 39
Taxable investment securities 383 400
Non-taxable investment securities 62 63
Interest bearing accounts 3 -
------ ------
Total interest income 5,880 4,727
------ ------
INTEREST EXPENSE:
Interest on deposits 1,889 1,397
Interest on securities sold under 41 43
repurchase agreements
Interest on other borrowed funds 283 236
------ ------
Total interest expense 2,213 1,676
------ ------
Net interest income 3,667 3,051
Provision for loan losses 464 139
------ ------
Net interest income after provision for 3,203 2,912
loan losses
------ -----
OTHER INCOME:
Service fees 217 200
Other income 282 236
------ ------
Total other income 499 436
------ ------
OTHER EXPENSES:
Salaries, wages and benefits 1,637 1,412
Occupancy expenses 182 153
Furniture and equipment expenses 133 153
Other operating expenses 1,031 693
------ ------
Total other expenses 2,983 2,411
------ ------
Income before income taxes 719 937
Provision for income taxes 250 333
------ ------
NET INCOME $ 469 $ 604
====== ======
PER SHARE DATA:
Primary $0.18 $0.24
Fully diluted $0.18 $0.23
AVERAGE COMMON SHARES OUTSTANDING:
Primary 2,583 2,566
Fully diluted 2,583 2,576
Cash dividends $0.03 $0.03
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Page 4
<PAGE>
FIRST UNITED BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
June 30, June 30,
1996 1995
------------ ------------
(In thousands except per share data)
INTEREST INCOME:
<S> <C> <C>
Loans $10,160 $8,200
Federal funds sold 250 108
Taxable investment securities 735 794
Non-taxable investment securities 126 129
Interest bearing accounts 3 -
------- ------
Total interest income 11,274 9,231
------- ------
INTEREST EXPENSE:
Interest on deposits 3,614 2,616
Interest on securities sold under 81 88
repurchase agreements
Interest on other borrowed funds 546 470
------- ------
Total interest expense 4,241 3,174
------- ------
Net interest income 7,033 6,057
Provision for loan losses 785 211
------- ------
Net interest income after provision for loan 6,248 5,846
losses
------- ------
OTHER INCOME:
Service fees 425 385
Other income 575 422
------- ------
Total other income 1,000 807
------- ------
OTHER EXPENSES:
Salaries, wages and benefits 3,371 2,763
Occupancy expenses 355 316
Furniture and equipment expenses 259 321
Other operating expenses 1,778 1,429
------- ------
Total other expenses 5,763 4,829
------- ------
Income before income taxes 1,485 1,824
Provision for income taxes 507 644
------- ------
NET INCOME $ 978 $1,180
======= ======
PER SHARE DATA:
Primary $0.38 $0.47
Fully diluted $0.38 $0.46
AVERAGE COMMON SHARES OUTSTANDING:
Primary 2,589 2,536
Fully diluted 2,589 2,553
Cash dividends $0.06 $0.06
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Page 5
<PAGE>
FIRST UNITED BANCORPORATION
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR YEAR ENDED DECEMBER 31, 1995 AND THE SIX MONTHS
ENDED June 30,1996
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
NUMBER OF COMMON PAID-IN RETAINED UNREALIZED SHARE-HOLDERS'
SHARES STOCK CAPITAL EARNINGS NET GAIN EQUITY
OUTSTANDING (LOSS) ON
SECURITIES
AVAILABLE
FOR SALE
----------- ------ ------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1994 2,083 $3,471 $ 8,309 $2,452 $ (641) $13,591
Issuance of 104 174 1,194 (1,371) - (3)
104,155 shares of
common stock
relating to 5%
stock dividend
Issuance of 110 184 1698 (1,887) - (5)
110,201 shares of
common stock
relating to 5%
stock dividend
Cash dividends - - - (264) - (264)
declared
Employee stock 18 30 68 - - 98
options exercised
Net income - - - 2,413 - 2,413
Change in - - - - 577 577
unrealized net
gain/loss on
securities
available for sale
----- ------ ------- ------ ------ -------
Balance at 2,315 3,859 11,269 1,343 (64) 16,407
December 31, 1995
Cash dividends - - - (140) - (140)
declared
Employee stock 18 31 65 - - 96
options exercised
Net income - - - 978 - 978
Changed in - - - - (117) (117)
unrealized net
gain/loss on
securities
available for sale
----- ------ ------- ------- ------ -------
Balance at June 2,333 $3,890 $11,334 $ 2,181 $ (181) $17,224
30, 1996
===== ====== ======= ======= ====== =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Page 6
<PAGE>
FIRST UNITED BANCORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
June 30, June 30,
1996 1995
------------ ------------
(In thousands)
Cash flows from operating activities :
<S> <C> <C>
Net income $ 978 $ 1,180
Adjustments needed to reconcile net income to
net cash used by operating activities :
Provision for loan losses 785 211
Depreciation and amortization 316 348
Increase in other assets (492) (235)
Increase in other liabilities 182 177
-------- --------
Net cash provided by operating activities 1,769 1,681
-------- --------
Cash flows from investing activities :
Purchases of investment securities held to maturity (100) (139)
Proceeds from maturities of investment securities held 1,237 747
to maturity
Purchase of investment securities available for sale (8,064) (1,216)
Proceeds from sale of investment securities available 3,243 2,678
for sale
Proceeds from maturities of investment - 896
securities available for sale
Net increase in loans (23,374) (14,996)
Net additions to premises and equipment (1,244) (1,517)
-------- --------
Net cash used by investing activities (28,302) (13,547)
-------- --------
Cash flows from financing activities :
Net increase in deposits 27,522 8,423
Proceeds from other borrowed funds 19,360 22,145
Principal repayment of other borrowed funds (13,645) (19,820)
Net increase (decrease) in securities sold under 1,078 (176)
repurchase agreements
Proceeds from issuance of common stock 96 39
Cash dividends (140) (132)
-------- --------
Net cash provided by financing activities 34,271 10,479
--------- --------
Net increase in cash and cash equivalents 7,738 (1,387)
Cash and cash equivalents, beginning of period 11,453 9,166
-------- --------
Cash and cash equivalents, end of period $ 19,191 $ 7,779
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
PAGE 7
<PAGE>
FIRST UNITED BANCORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The interim consolidated financial statements include the accounts of First
United Bancorporation (the "Company") and its four wholly owned subsidiaries;
Anderson National Bank, Spartanburg National Bank, The Community Bank of
Greenville, National Association and Quick Credit Corporation.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies is included in
the 1995 Annual Report to Shareholders.
(3) COMMON STOCK, EARNINGS PER SHARE, AND STOCK DIVIDENDS
On May 2, 1995, October 22, 1995 and June 17, 1996 the Company's Board of
Directors declared five percent stock dividends. Accordingly, outstanding shares
of common stock were increased and a transfer representing the fair market value
of additional shares issued was made from retained earnings to common stock at
par value, cash for payment of fractional shares and the balance to additional
paid-in-capital. Per share data for the 1995 periods have been restated to
reflect these dividends as if they had occurred prior to the 1995 periods
presented.
During the period ended June 30, 1996, the Company issued 18,790 shares of
its common stock at an average price of $5.06 per share in connection with the
exercise of stock options under its employee stock option plans.
The Company calculates its earnings per share by dividing net earnings for
the periods presented by the weighted average equivalent shares outstanding
using the treasury stock method. Common stock equivalents include options issued
under the Company's Employee Stock Option Plans. These options were dilutive for
the periods presented.
(4) MANAGEMENT'S OPINION
In the opinion of management, the accompanying interim consolidated
financial statements reflect all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the financial position of the
Company and itssubsidiaries at June 30, 1996, the results of their operati for
the quarters and six month periods ended June 30, 1996 and 1995, and the
statements of their cash flows for the six month periods ended June 30, 1996 and
1995.
Page 8
<PAGE>
PART I
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DISCUSSION OF CHANGES IN FINANCIAL CONDITION
Total assets increased $35,281,000, or 18.2%, from December 31, 1995 to
$229,695,000 at June 30, 1996.
Total loans, the largest single category of assets, increased $22,858,000,
or 15.5%, to $170,852,000 at June, 1996, as a result of an increase in the
amount of outstanding loans at the Company's three bank subsidiaries. Total
loans outstanding at June 30, 1996 for Spartanburg National Bank amounted to
$81,118,000, a $7,429,000, or 10.1% increase, over the $73,689,000 reported at
December 31, 1995. Total outstanding loans, net of inter-company loans, at
Anderson National Bank at June 30, 1996 amounted to $75,241,000, an increase of
$12,107,000, or 19.2%, over total outstanding loans, net of inter-company loans,
of $63,134,000 at December 31, 1995. The Community Bank of Greenville, National
Association ("The Community Bank of Greenville"), which officially opened for
business on April 17, 1996, reported outstanding loans of $4,974,000 at June 30,
1996.
While the Company's bank subsidiaries experienced significant loan growth
during the first six months of 1996, the Company's consumer finance subsidiary,
Quick Credit Corporation, experienced a decrease in outstanding loans of
$1,652,000, or 14.7%. Total loans outstanding at June 30, 1996 for Quick Credit
Corporation amounted to $9,519,000 compared to $11,171,000 at December 31, 1995.
The decrease in Quick Credit Corporation's outstanding loans resulted from a
seasonal decrease and an increase in the number of loans charged off during the
period.
Premises, furniture and equipment increased $986,000, or 17.6%, during the
period ended June 30, 1996. This increase is attributable to building and
equipment costs associated with the Company's newest bank subsidiary, The
Community Bank of Greenville, which officially opened for business on April 17,
1996, and to year-to-date construction costs associated with a new branch
facility for Spartanburg National Bank.
The Company's securities portfolios, collectively, at amortized cost,
increased $3,684,000, or 11.4%, from year-end 1995 levels as a result of
securities purchased, largely by The Community Bank of Greenville, during the
six-month period ended June 30, 1996. Cash and due from banks increased
$771,000, or 12.1%, to $7,124,000 at June 30, 1996 as a result of uncollected
funds in correspondent bank accounts at quarter end. The amount of Federal funds
sold at June 30, 1996 was $7,440,000 higher than the
Page 9
<PAGE>
amount sold at December 31, 1995 largely as a result of amounts sold by The
Community Bank of Greenville.
Other real estate owned amounted to $74,000 at June 30, 1996 and December
31, 1995, respectively. Management continues to pursue liquidation of this one
piece of property.
Other assets increased $502,000, or 16.1%, during the period ended June 30,
1996 largely as a result of increases in tax benefits associated with
year-to-date losses attributable to The Community Bank of Greenville, and to an
increase in interest receivable on loans resulting from a larger base of
outstanding loans at June 30, 1996.
Total liabilities increased $34,464,000, or 19.4%, largely as a result of a
$27,522,000, or 17.2%, increase in total deposits at the Company's bank
subsidiaries. Of the $27,522,000 increase in deposits, $17,995,000, or 65.4%, is
attributable to new deposits generated by the Community Bank of Greenville since
opening on April 17, 1996.
The largest dollar increase in a single category of deposits was in
certificates of deposits of $100,000 or less, which increased $14,199,000, or
21.9% during the period ended June 30, 1996. The largest percentage increase in
a single category of deposits was in certificates of deposit of $100,000 or
more, which increased 28.8%, or $6,864,000 during the period, largely as a
result of this size of deposit generated by the Community Bank of Greenville.
During the period ended June 30, 1996, the Company also experienced an increase
in savings and money market deposits of $3,979,000, or 15.7% which resulted
largely from a single money market account at Spartanburg National Bank. The
Company also experienced modest growth in the other categories of deposits
during the period.
Securities Sold Under Agreements to Repurchase, comprised largely of
overnight repurchase agreements, increased $1,078,000, or 34.8%, during the
period as a result of an increase in temporary quarter-end investment of funds
by customers of the Company's bank subsidiaries. Federal Home Loan Bank advances
increased $2,960,000, or 101.7%, to $5,870,000 at June 30, 1996. These
additional advances were utilized to help fund the loan growth at the Company's
bank subsidiaries. Other borrowed funds, comprised of Federal funds purchased,
various types of borrowings by Quick Credit Corporation and borrowings by the
parent company, increased $2,770,000, or 29.3%, during the period. During the
period ended June 30, 1996, the Company borrowed an additional $3,850,000 under
an existing line of credit with a third party lender to fully capitalize The
Community Bank of Greenville; Spartanburg National Bank borrowed $490,000 in the
form of Federal funds purchased for additional liquidity purposes; and Quick
Credit Corporation reduced its outstanding debt $1,570,000. Obligations under
capital leases declined $15,000, or 71.4%, during the period ended June 30, 1996
as a result of lease payments made during the period.
Page 10
<PAGE>
Shareholders' equity increased $817,000 from December 31, 1995 to June 30,
1996 as a result of net earnings for the period of $978,000 and the exercise of
stock options under the Company's Employee Stock Option Plans in the amount of
$96,000. These additions to shareholders' equity were partially offset by the
declaration and payment of cash dividends in the amount of $140,000 and an
increase in the amount of net unrealized losses on the Company's "available for
sale" securities portfolio of $117,000 during the period.
RESULTS OF OPERATIONS
Six month period ended June 30, 1996 vs. Six months period ended June 30, 1995
Earnings Review
The consolidated Company's operations for the six months ended June 30,
1996 resulted in net income of $978,000, a 17.1% decrease from the $1,180,000 in
net income recorded for the comparable 1995 six month period. The decrease in
consolidated earnings for the 1996 period is largely attributable to a $527,000,
or 446.6%, increase in the provision for loan losses at Quick Credit Corporation
in the 1996 period and pre-tax start up expenses and early operating losses of
$326,000 incurred in the 1996 period associated with the Company's new bank
subsidiary, The Community Bank of Greenville, which officially commenced banking
operations on April 17, 1996. During the 1996 period, the Company also incurred
additional interest expense of $80,000 associated with borrowings used to
capitalize The Community Bank of Greenville and $57,000 in consulting fees
associated with the Company's re-engineering of its banking operations.
Anderson National Bank recorded net earnings of $663,000 for the six-month
period ended June 30, 1996, a 39.0% increase over the $477,000 recorded for the
six-month period ended June 30, 1995. The increase in earnings for this
subsidiary resulted primarily from an increase in net interest income of
$336,000, or 16.5%, and an increase in other income of $31,000, or 7.2%.
Spartanburg National Bank recorded net earnings of $514,000 for the
six-month period ended June 30, 1996, a 34.6% increase over the $382,000
recorded for the six-month period ended June 30, 1995. The increase in earnings
for this subsidiary, like that of Anderson National Bank's, resulted from an
increase in net interest income of $274,000, or 14.8%, and an increase in other
income of $88,000, or 35.1%.
The Community Bank of Greenville, which commenced banking operations on
April 17, 1996, recorded net losses for the six-month period ended June 30, 1996
of $214,000. Of the $214,000 in losses recorded,$57,000, or 26.6%, were incurred
prior to commencing banking operations.
Page 11
<PAGE>
Quick Credit Corporation recorded net earnings of $88,000 for the six-month
period ended June 30, 1996, a 76.9% decrease from the $381,000 recorded for the
six-month period ended June 30, 1995. The significant decrease in earnings for
this subsidiary resulted primarily from higher loan charge-offs which required a
significant increase in the provision for loan losses for the 1996 period and an
increase in other operating expenses.
Interest Income, Interest Expense and Net Interest Income
Net interest income, the major component of the Company's income, is the
amount by which interest and fees on interest earning assets exceeds the
interest paid on interest bearing deposits and other interest bearing funds. The
Company's net interest income increased $976,000, or 16.1%, to $7,033,000 for
the six-month period ended June 30, 1996 compared to $6,057,000 for the
six-month period ended June 30, 1995. The increase is largely attributable to an
increase in interest income on loans at the Company's banking subsidiaries
resulting from an increase in the volume of outstanding loans for the 1996
period when compared to the 1995 period.
The Company's interest income increased $2,043,000, or 22.1%, to
$11,274,000 for the 1996 period compared to $9,231,000 for the 1995 period. The
increase is largely attributable to a $1,960,000, or 23.9% increase in loan
interest income resulting from a $31,098,000, or 24.8%, increase in the volume
of average outstanding loans for the 1996 period. The average yield on loans for
the six month period ended June 30, 1996 was 12.97% compared to 13.05% for the
comparable 1995 period.
Average balances on securities and federal funds sold, collectively,
increased by $4,233,000, or 12.5%, in the 1996 period when compared to the 1995
period. Largely as a result of this increase, interest income on these
categories of earning assets, collectively, increased $83,000, or 8.1%.
Interest expense on deposits increased $998,000, or 38.2%, to $3,614,000
for the six-month period ended June 30, 1996 compared to $2,616,000 for the
six-month period ended June 30, 1995. The increase is attributable to an
increase of $30,748,000, or 25.5%, in the volume of average interest-bearing
deposits for the 1996 period when compared to the 1995 period, coupled with an
increase in the Company's costs of interest-bearing deposits resulting from
increases in the rates paid for those deposits. The weighted average cost of
interest bearing deposits for the first six months of 1996 was 4.78% compared to
4.34%% for the first six months of 1995.
Interest expense on Securities Sold Under Repurchase Agreements declined
slightly in the 1996 period as a result of a decline in the rates paid on these
short-term funds in the 1996 period. Interest expense incurred by the Company's
banking subsidiaries on average borrowings of $2,881,000 from the Federal Home
Loan Bank of Atlanta for the 1996 period amounted to $84,000,
Page 12
<PAGE>
a 10.6% decline from the $94,000 incurred in the 1995 period and resulted
largely from a decline in the average amount borrowed during the 1996 period.
Interest expense on the various categories of other interest-bearing
liabilities, which includes Capitalized Leases, Subordinated Debt, Federal Funds
Purchased and Other Borrowed Funds, collectively, increased $86,000, or 22.9%,
in the 1996 period when compared to the 1995 period. The increase in interest
expense associated with these otherinterest-bearing liabilities is primarily
attributable to an increase in interest expense at the parent company level on
borrowings utilized to capitalize The Community Bank of Greenville.
Provision and Allowance for Loan Losses, Loan Loss Experience
The purpose of the Company's allowance for loan losses is to absorb loan
losses that occur in the loan portfolio. The allowance for loan losses
represents management's estimate of an amount adequate in relation to the risk
of future losses inherent in the loan portfolio and also reflects the
consideration of the amount of high rate/higher risk loans held by the Company's
consumer finance subsidiary, Quick Credit Corporation.
While it is the Company's policy to charge off in the current period loans
in which a loss is considered probable, there are additional risks of future
losses which cannot be quantified precisely or attributed to particular loans or
classes of loans. Because these risks include the state of the economy, industry
trends and conditions affecting individual borrowers, management's judgment of
the allowance is necessarily approximate and imprecise. The Company is also
subject to regulatory examinations and determinations as to adequacy, which may
take into account such factors as the methodology used to calculate the
allowance for loan losses and the size of the allowance for loan losses in
comparison to a group of peer companies identified by the regulatory agencies.
Management determines the adequacy of the allowance quarterly and considers
a variety of factors in establishing the level of the allowance for losses and
the related provision, which is charged to expense. In assessing the adequacy of
the allowance, management relies predominantly on its ongoing review of the loan
portfolio, which is undertaken both to ascertain whether there are probable
losses which must be charged off and to assess the risk characteristics of the
portfolio in the aggregate. The review considers the judgments of management and
also those of bank regulatory agencies that review the loan portfolio as part of
their regular examination process. The Comptroller of the Currency, as part of
its routine examination process of various national banks, including Anderson
National Bank, Spartanburg National Bank and The Community Bank of Greenville,
may require additions to the allowance for loan losses based upon information
available to them at the time of their examination.
Management considers the allowance for loan losses adequate to absorb
possible losses on loans outstanding at June 30, 1996 and in
Page 13
<PAGE>
the opinion of management, there are no material risks or significant loan
concentrations in the present portfolio.
The allowance for loan losses was $2,622,000 at June 30, 1996 compared to
$2,042,000 at June 30, 1995. At June 30, 1996 and June 30, 1995, the allowance
for loan losses as a percentage of outstanding loans was 1.54% and 1.52%,
respectively. During the six month period ended June 30, 1996, the Company
experienced net charge-offs of $482,000, or 0.31%, of average loans, compared to
net charge-offs of $121,000, or 0.10% of average loans during the period ended
June 30, 1995. The Company made provisions for loan losses of $785,000 during
the six-month period ended June 30, 1996 compared to $211,000 for the six-month
period ended June 30, 1995. The increase in net charge-offs and resulting
increase in the provision for loan losses for the 1996 period is attributable to
Quick Credit Corporation.
Anderson National Bank made no provisions for loan losses in either of the
two comparable periods. For the six-month period ended June 30, 1996, this
subsidiary recorded net recoveries of $14,000 compared to net recoveries of
$67,000 for the 1995 period.
Spartanburg National Bank recorded a provision for loan losses of $95,000
for the six-month period ended June 30, 1996 compared to $93,000 for the 1995
period. The slight increase in the provision made by this subsidiary was a
result of loan growth experienced by this subsidiary during the 1996 period. For
the six-month period ended June 30, 1996, this subsidiary recorded net
charge-offs of $26,000 compared to net charge-offs of $10,000 for the 1995
period.
The Community Bank of Greenville began to provide for it's allowance for
loan losses during the period and recorded a provision for loan losses of
$45,000 for the six-month period ended June 30, 1996.
Quick Credit Corporation recorded a provision for loan losses of $645,000
for the six-month period ended June 30, 1996 compared to $118,000 for the 1995
period and compared to $728,000 for the year ended December 31, 1995. The
increase in this subsidiary's provision for the 1996 period resulted from an
increase in the number of loans charged off and an increase in the volume of
outstanding loans at June 30, 1996 compared to June 30, 1995. For the six-month
period ended June 30, 1996, this subsidiary recorded net charge offs of
$471,000, or 4.74% of average outstanding loans, compared to net charge offs of
$178,000, or 2.07%, of average outstanding loans for the 1995 six-month period
and to $499,000, or 5.39%, of average outstanding loans for the year ended
December 31, 1995. Management continues to believe the significant increase in
net charge offs and the related increase in this subsidiary's provision is an
industry-wide trend. Quick Credit Corporation's customers are generally in the
low-to-moderate income group of borrowers. Over the past several years there has
been a proliferation of small consumer loan companies and other consumer debt
providers competing for pieces of this segment of the consumer debt market. It
is not unusual for customers of Quick Credit
Page 14
<PAGE>
Corporation simultaneously to have loans outstanding at several small loan
companies which results in some customers incurring more debt than they can
service. As a result of increased charge offs experienced during the later half
of 1995 and during the first half of 1996, Quick Credit Corporation has
increased its allowance for loan losses as a percentage of outstanding loans,
net of unearned income, from 3.58% at June 30, 1995 to 8.15% at June 30, 1996.
Management expects this subsidiary to experience similar levels of defaults in
the second half of 1996 as that experienced in the first six months of 1996.
At June 30, 1996 the Company had $223,000 in non-accrual loans, which are
considered impaired, $296,000 in loans past due 90 days or more and still
accruing interest and $74,000 in OREO, compared to $124,000, $148,000, and
$74,000, respectively, at June 30, 1995 and to $241,000, $271,000, and $74,000,
respectively at December 31, 1995. At June 30, 1996 and 1995, and December 31,
1995, the Company did not have a material amount of restructured loans.
In the cases of all non-performing loans, management of the Company has
reviewed the carrying value of any underlying collateral. In those cases where
the collateral value may be less than the carrying value of the loan the Company
has taken specific write downs to the credits, even though such credits may
still be performing. Management of the Company does not believe it has any
non-accrual loans which, individually, could materially impact the allowance for
loan losses or long term future operating results of the Company.
Other Income
Total consolidated other income increased $193,000 or 23.9%, during the
six-month period ended June 30, 1996. The increase resulted largely from a
$114,000, or 98.3%, increase in fee income generated, collectively, from the
sale of alternative investment products and mortgage lending activities at the
Company's bank subsidiaries. As a result of an increase in mortgage lending
activity during the first six months of 1996, fee income from the Company's
mortgage lending activities increased $53,000, or 70.7%, to $129,000 in the 1996
period compared to $75,000 for the 1995 period. Simultaneously, fee income
generated from the sale of alternative investment products (mutual funds and
annuities), which amounted to $41,000 in the 1995 period, increased $60,000, or
146.4%, to $101,000 for the 1996 period. This increase was a result of an
increase in the volume of sales of these type products during the 1996 period.
The remaining increase in other income is primarily attributable to increases in
service charge income on deposit accounts resulting from a larger base of
deposit accounts at the Company's bank subsidiaries.
Other Expenses
Total other expenses increased $934,000, or 19.3%, in the 1996 period over
the 1995 comparable period. Salaries, wages and
Page 15
<PAGE>
benefits ("personnel expense"), the largest category of other operating
expenses, increased $608,000, or 22.0%, in the 1996 period over the 1995 period.
The increase in personnel expense resulted from additions to the staff of Quick
Credit Corporation associated with four additional offices opened during the
last six months of 1995, personnel expenses associated with the Company's new
bank subsidiary, The Community Bank of Greenville, and increases in personnel
expenses at the Company's two other bank subsidiaries.
Occupancy expense increased $39,000, or 12.3% during the 1996 period as a
result of additional expenses associated with the new offices of Quick Credit
Corporation opened during the second half of 1995 and expenses associated with
opening The Community Bank of Greenville during the second quarter of 1996.
Furniture and equipment expenses decreased $62,000, or 19.3%, in the 1996 period
as a result of a decline in depreciation expense associated with the Company's
data processing equipment which was sold during the second quarter of 1995.
Other operating expenses, the second largest category of other expenses,
increased $349,000, or 24.4%, during the 1996 period largely as a result of
additional expenses associated with the new offices of Quick Credit Corporation
opened during the second half of 1996, additional expenses associated with the
opening of The Community Bank of Greenville during the second quarter of 1996,
and $57,000 in consulting fees associated with the Company's re-engineering
project.
Income Taxes
As a result of decreased income before income taxes, the Company incurred
income tax expense of $507,000 for the six month period ended June 30, 1996
compared to income tax expense of $644,000 for the six month period ended June
30, 1995.
Quarter ended June 30, 1996 vs. Quarter ended June 30, 1995
Earnings Review
The Company's operations for the quarter ended June 30, 1996, resulted in
net income of $469,000, a $135,000, or 22.4%, decrease from the $604,000
reported for the comparable 1995 quarter. The decrease in 1996 second quarter
profits resulted primarily from a $325,000, or 233.8%, increase in the Company's
provision for loan losses, which is largely attributable to Quick Credit
Corporation, and to $260,000 in start-up and early operating losses associated
with the opening of The Community Bank of Greenville, which commenced banking
operations on April 17, 1996. Additional expenses associated with four new
offices of Quick Credit Corporation opened during the second half of 1995 and
$53,000 in consulting fees paid during the second quarter of 1996 associated
with the Company's re-engineering project also impacted second quarter 1996
profits when compared to second quarter 1995 profits.
Page 16
<PAGE>
Anderson National Bank, Spartanburg National Bank and Quick Credit
Corporation, the Company's three seasoned subsidiaries, recorded 1996 second
quarter earnings of $357,000, $275,000 and $59,000, respectively, compared to
$259,000, $203,000 and $171,000, respectively, for the second quarter of 1995.
Interest Income, Interest Expense and Net Interest Income
The Company's net interest income increased $616,000, or 20.2%, during the
second quarter of 1996 over the second quarter of 1995 and was primarily
attributable to a $1,032,000, or 24.4%, increase in loan interest income. The
increase in loan interest income resulted from a larger base of average
outstanding loans for the 1996 period. Total loans averaged $161,731,000 for the
1996 quarter compared to $128,808,000 for the 1995 quarter, a 25.6% increase.
The average yield on the Company's loan portfolios was 13.01% for the 1996
quarter compared to 13.12% for the 1995 quarter.
Interest expense increased $537,000, or 32.0%, in the 1996 period. Interest
on deposit accounts, the largest category of total interest expense, increased
$492,000, or 35.2%, during the 1996 period as a result of an increase in the
volume of interest-bearing deposits during the 1996 period and an increase in
the rates paid on those deposits. The average rate paid on interest-bearing
deposits was 4.77% for the 1996 quarter compared to 4.57% for the 1995 quarter.
Interest expense on the other categories of interest-bearing liabilities,
collectively, increased $45,000, or 16.1%, largely as a result of interest
expense incurred on the borrowings used to capitalize The Community Bank of
Greenville.
Provision and Allowance for Loan Losses
The provision for loan losses was $464,000 for the quarter ended June 30,
1996, a $325,000, or 233.8%, increase over the $139,000 provision made for the
1995 quarter. The increase for the 1996 period is a result of increases in the
provisions made by Quick Credit Corporation due to a higher number of
charge-offs during the 1996 period and to The Community Bank of Greenville as it
began to reserve for it's allowance for loan losses. For the quarter ended June
30, 1996 the Company recorded net loan charge-offs of $232,000, or 0.14%, of
average outstanding loans compared to $33,000, or 0.03%, of average outstanding
loans for the 1995 quarter.
Quick Credit Corporation made provisions of $359,000 in the 1996 quarter
compared to $86,000 for the 1995 quarter. During the 1996 quarter, Quick Credit
Corporation recorded net loan charge-offs of $223,000, or 2.4%, of average
outstanding loans compared to $75,000, or 0.88%, of average outstanding loans
for the 1995 quarter.
The Community Bank of Greenville made provisions totaling $45,000 during
the quarter.
Page 17
<PAGE>
Spartanburg National Bank made provisions of $45,000 for the 1996 period
compared to $53,000 for the 1995 period and recorded net loan charge-offs of
$14,000 in the 1996 period compared to net loan charge-offs of $2,000 for the
1995 period.
Anderson National Bank made no provisions in the 1996 and 1995 periods.
During the 1996 period Anderson National Bank recorded net loan recoveries of
$5,000 compared to net loan recoveries of $44,000 for the 1995 period.
Other Income
The Company's total other income increased $63,000, or 14.5% during the
1996 quarter. The increase in other income is attributable to increased fee
income generated from the Company's mortgage lending activities and from the
sale of alternative investment products coupled with an increase in service
charge income on deposit accounts at the Company's bank subsidiaries.
Other Expenses
Total other expenses increased $572,000, or 23.7%, during the second
quarter of 1996. Personnel expense, the largest category of total other
expenses, increased $225,000, or 15.9%, in the 1996 period. The increase is
attributable to additional personnel expense associated with the staffing of The
Community Bank of Greenville, additional staffing for four offices of Quick
Credit Corporation, which were non-existent in the second quarter of 1995, and
to increases in personnel expense at Anderson National Bank and Spartanburg
National Bank. Occupancy expense increased $29,000, or 19.0%, in the 1996
quarter as a result of expenses associated with The Community Bank of Greenville
and the additional offices of Quick Credit Corporation. Furniture and equipment
expense decreased $20,000, or 13.1%, during the 1996 period as a result of a
decrease in depreciation expense resulting from the sale of the Company's data
processing equipment during the second quarter of 1995. Other operating
expenses, the second largest category of total other expenses, increased
$338,000, or 48.8%, in the 1996 period. The increase in this category of
expenses is attributable to increased expenses associated with The Community
Bank of Greenville, the new offices of Quick Credit Corporation and increases in
expenses at Anderson National Bank and Spartanburg National Bank. Also
contributing to the increase was $53,000 in consulting fees associated with the
Company's re-engineering project commenced during the latter part of the first
quarter of 1996.
Income Taxes
The Company incurred income tax expense of $250,000 for the quarter ended
June 30, 1996 compared to income tax expense of $333,000 for the quarter ended
June 30, 1995 as a result of lower pre-tax earnings in the 1996 quarter.
Page 18
<PAGE>
LIQUIDITY
Liquidity management involves meeting the cash flow requirements of the
Company. The Company's liquidity position is primarily dependent upon its need
to respond to short-term demand for funds caused by withdrawals from deposit
accounts and upon the liquidity of its assets. The Company's primary liquidity
sources include cashand due from banks, federal funds sold and "securities
available for sale". In addition, the Company (through Anderson National Bank,
Spartanburg National Bank and The Community Bank of Greenville) has the ability,
on a short-term basis, to borrow funds from the Federal Reserve System and to
purchase federal funds from other financial institutions. Spartanburg National
Bank and Anderson National Bank are also members of the Federal Home Loan Bank
System and have the ability to borrow both short and longer term funds on a
secured basis. At June 30, 1996 Anderson National Bank had $320,000 in long-term
borrowings and $5,000,000 in short-term borrowings from the Federal Home Loan
Bank of Atlanta. At June 30, 1996 Spartanburg National Bank had $550,000 in
long-term borrowings from the Federal Home Loan Bank of Atlanta.
First United Bancorporation, the parent holding company, has limited
liquidity needs. First United requires liquidity to pay limited operating
expenses and dividends, and to service its debt. In addition, First United has
two lines of credit with third party lenders totaling $6,100,000, of which
$1,600,000 was available at June 30, 1996. One of these lines is a $6,000,000
line of credit with an unaffiliated third party lender to be used for general
corporate purposes and allows for interest to be paid on a quarterly basis for a
period of up to five (5) years if certain criteria are met. At the end of five
(5) years, or sooner if the Company desires, the line of credit can be converted
to a term loan with quarterly interest payments and annual principal reductions
required over a period of five (5) years. The line of credit bears interest at a
variable rate. On April 15,1996 the Company utilized $4,500,000 of this line to
capitalize its new bank subsidiary, The Community Bank of Greenville, National
Association, Greenville, South Carolina. Further sources of liquidity for First
United include management fees which are paid by all of its subsidiaries and
dividends from its subsidiaries.
At June 30, 1996, the Company's consumer finance subsidiary, Quick Credit
Corporation, had debt outstanding of $800,000 in the form of subordinated debt
and $6,450,000 outstanding under an $18,000,000 line of credit with a third
party lender secured by Quick Credit Corporation's loans receivable.
Management believes its liquidity sources are adequate to meet its
operating needs and does not know of any trends, other than those previously
discussed, that may result in the Company's liquidity materially increasing or
decreasing.
Page 19
<PAGE>
CAPITAL ADEQUACY AND RESOURCES
For bank holding companies with total assets of more than $150 million,
such as the Company, capital adequacy is generally evaluated based upon the
capital of its banking subsidiaries. Generally, the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") expects bank holding
companies to operate above minimum capital levels. The Office of the Comptroller
of the Currency ("Comptroller") regulations establish the minimum leverage
capital ratio requirement for national banks at 3% in the case of a national
bank that has the highest regulatory examination rating and is not contemplating
significant growth or expansion. All other national banks are expected to
maintain a ratio of at least 1% to 2% above the stated minimum. Furthermore, the
Comptroller reserves the right to require higher capital ratios in individual
banks on a case by case basis when, in its judgment, additional capital is
warranted by a deterioration of financial condition or when high levels of risk
otherwise exist. The Company's subsidiary banks have not been notified that they
must maintain capital levels above regulatory minimums. The Company's leverage
capital ratio was 7.49% at June 30, 1996 compared to 8.23% December 31, 1995.
The leverage capital ratios for Anderson National Bank and Spartanburg National
Bank were 7.55% and 7.15%, respectively at June 30, 1996, compared to 7.86% and
7.01%, respectively, at December 31, 1995. The leverage capital ratio for The
Community Bank of Greenville was 18.85% at June 30, 1996. The decrease in the
leverage capital ratio for Anderson National Bank during the period ending June
30, 1996 resulted from the payment of $325,000 in dividends to the Company and
growth experienced since December 31, 1995. The decrease in the leverage capital
ratio for the Company is attributable to growth experienced since December 31,
1995.
The Federal Reserve Board has adopted a risk-based capital rule which
requires bank holding companies to have qualifying capital to risk-weighted
assets of at least 8.00%, with at least 4% being "Tier 1" capital. Tier 1
capital consists principally of common stockholders' equity, noncumulative
preferred stock, qualifying perpetual preferred stock, and minority interests in
equity accounts of consolidated subsidiaries, less goodwill and certain other
intangible assets. "Tier 2" (or supplementary) capital consist of general loan
loss reserves (subject to certain limitations), certain types of preferred stock
and subordinated debt, and certain hybrid capital instruments and other debt
securities such as equity commitment notes. A bank holding company's qualifying
capital base for purposes of its risk-based capital ratio consists of the sum of
its Tier 1 and Tier 2 capital components, provided that the maximum amount of
Tier 2 capital that may be treated as qualifying capital is limited to 100% of
Tier 1 capital. TheComptroller imposes a similar standard on national banks. The
regulatory agencies expect national banks and bank holding companies to operate
above minimum risk-based capital levels. The Company's risk-based capital ratio
was 11.57% and its Tier 1 capital to risk weighted assets ratio was 10.18% at
June 30, 1996, compared to 12.73% and 11.48%, respectively, at December 31,
Page 20
<PAGE>
1995. The risk-based capital ratios for Anderson National Bank and Spartanburg
National Bank were 10.98% and 10.75%, respectively, at June 30, 1996 compared to
12.72% and 11.09%, respectively, at December 31, 1995. Their Tier 1 capital to
risk weighted assets ratios were 9.75% and 9.58%, respectively, at June 30, 1996
compared to 11.47% and 9.88%, respectively, at December 31, 1995. At June 30,
1996, the risk-based capital ratio for The Community Bank of Greenville was
50.98% and the Tier 1 capital to risk weighted assets ratio was 50.44%. The
decline in Anderson National Bank's risk-based and Tier 1 capital to risk
weighted assets ratios from year-end 1995 levels resulted from the payment of
$325,000 in dividends to the Company during the period ended June 30, 1996 and
from growth experienced since December 31, 1995. The decrease in the Company's
and Spartanburg National Bank's risk-based and Tier 1 capital to risk weighted
assets ratios from year-end 1995 levels is a result of growth experienced during
the first quarter of 1996.
The Company opened a new bank subsidiary, The Community Bank of Greenville,
National Association, in the city of Greenville, South Carolina on April 17,
1996. The Company capitalized this new bank subsidiary with $4.5 million of
capital. The capital required to open this new bank came from proceeds available
to the Company under a line of credit with an unaffiliated third-party lender
which has committed to lend the Company up to $6 million.
Spartanburg National Bank has begun construction on a new branch facility
in the Boiling Springs area of Spartanburg County, South Carolina. Spartanburg
National Bankpurchased the property on which this new branch is being
constructed in late 1995 for $201,000 and has incurred approximately $290,000 in
construction cost associated with this new facility thus far in 1996.
Spartanburg National Bank expects to incur additional costs with this new
facility of approximately $330,000 in the third quarter of 1996.
In July, 1996 the Company entered into a contract for the purchase and
installation of a wide area network (WAN). When installed and operative, this
system will link together the data communications of all of the Company's
subsidiaries. The Company expects to incur a total of approximately $550,000 in
fixed asset cost associated with the WAN during the third and fourth quarters of
1996.
EFFECT OF INFLATION AND CHANGING PRICES
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principals which require the measurement of
financial position and results of operations in terms of historical dollars,
without consideration of changes in the relative purchasing power over time due
to inflation. Unlike most other industries, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant effect on a financial
institution's performance than
Page 21
<PAGE>
does the effect of inflation. Interest rates do not necessarily change in the
same magnitude as the prices of goods and services. While the effect of
inflation on banks is normally not as significant as is its influence on those
businesses which have large investments in plant and inventories, it does have
an effect. During periods of high inflation, there are normally corresponding
increases in the money supply, and banks will normally experience above average
growth in assets, loans and deposits. Also, general increases in the prices of
goods and services will result in increased operating expenses.
ACCOUNTING AND REPORTING MATTERS
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation". SFAS No. 123 establishes a new method of accounting
for stock-based arrangements by measuring the value of a stock compensation
award by the fair value method versus the intrinsic value method as currently is
used under the provisions of Opinion 25. If entities do not adopt the fair value
method of accounting for stock-based compensation, they will be required to
disclose in the footnotes pro forma net income and earnings per share
information as if the fair value based method had been adopted. The disclosure
requirements of SFAS No. 123 are effective for the 1996 financial statements.
The Company will continue to use the intrinsic value method for recording
stock-based compensation and will therefore have expanded disclosure
requirements.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities." The Statement
uses a "financial components" approach that focuses on control to determine the
proper accounting for financial asset transfers. Under that approach, after
financial assets are transferred, an entity would recognize on the balance sheet
all assets it controls and liabilities it has incurred. It would remove from the
balance sheet those assets it no longer controls and liabilities it has
satisfied. The statement is effective for transfers and servicing of financial
assets and extinguishment of liabilities occurring after December 31, 1996 and
is to be applied prospectively. The Company does not anticipate that adoption of
this Statement will have a material effect on the Company's financial
statements.
Page 22
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is from time to time involved in various Legal proceedings
arising out of the ordinary course of business, primarily related to the
collection of loans receivable. Based upon current information available,
management believes there are no legal proceedings threatened or pending against
the Company that could result in a materially adverse change in the business or
financial condition of the Company.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's annual shareholders' meeting was held April 23, 1996. The
purpose of the meeting was: (1) to elect four directors to serve three year
terms; (2) to ratify the appointment of KPMG Peat Marwick as independent
auditors for the Company for the fiscal year-ending December 31, 1996; and (3)
to transact such other business as may properly come before the Annual Meeting
or any adjournment thereof.
Results of the meeting were (1)J. Berry Garrett, Randolph V. Hayes, Harold
P. Threlkeld and William B. West were elected as directors to serve three-year
terms by a vote of 1,954,763 shares For and 493 shares Against ; and (2), the
election of KPMG Peat Marwick as the Company's auditors for fiscal 1996 was
approved by a vote of 1,954,705 shares For, 0 shares Against and 551 shares
Abstaining. There was no other business to come before the meeting.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
(b) No reports on form 8-K were filed during the quarter for which this
report is filed.
Page 23
<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 BANCORPORATION
Mason Y. Garrett
Dated: August 6, 1996 ---------------------------
Mason Y. Garrett, President
and Chief Executive Officer
William B. West, Sr.
---------------------------
William B. West, Sr. Vice
President and Chief Financial
and Accounting Officer
Page 24
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- ------------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at June 30, 1996, and the Consolidated Statement of
Income for the Six Months Ended June 30, 1996 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,651
<INT-BEARING-DEPOSITS> 3
<FED-FUNDS-SOLD> 12,540
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 23,668
<INVESTMENTS-CARRYING> 8,344
<INVESTMENTS-MARKET> 8,443
<LOANS> 170,852
<ALLOWANCE> 2,622
<TOTAL-ASSETS> 229,695
<DEPOSITS> 187,903
<SHORT-TERM> 9,180
<LIABILITIES-OTHER> 2,378
<LONG-TERM> 13,110
0
0
<COMMON> 3,890
<OTHER-SE> 13,334
<TOTAL-LIABILITIES-AND-EQUITY> 229,695
<INTEREST-LOAN> 10,160
<INTEREST-INVEST> 1,114
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 19,666
<INTEREST-DEPOSIT> 3,614
<INTEREST-EXPENSE> 4,241
<INTEREST-INCOME-NET> 7,033
<LOAN-LOSSES> 785
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,763
<INCOME-PRETAX> 1,485
<INCOME-PRE-EXTRAORDINARY> 1,485
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 978
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
<YIELD-ACTUAL> 7.22
<LOANS-NON> 240
<LOANS-PAST> 497
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,488
<ALLOWANCE-OPEN> 2,320
<CHARGE-OFFS> 534
<RECOVERIES> 51
<ALLOWANCE-CLOSE> 2,622
<ALLOWANCE-DOMESTIC> 2,622
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
