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 September 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 October 31, 1996:
2,464,936 shares of common stock, $1.67 Par Value
<PAGE>
TABLE OF CONTENTS
PAGE
PART I ITEM 1 FINANCIAL INFORMATION
Consolidated Balance Sheets
September 30, 1996 (unaudited) and
December 31, 1995...............................................1
Consolidated Statements of Income
Three months ended September 30, 1996
and 1995 (unaudited)............................................2
Consolidated Statements of Income
Nine Months ended September 30, 1996
and 1995 (unaudited)............................................3
Consolidated Statement of Changes in
Shareholders' Equity
Nine months ended September 30, 1996
(unaudited) and year ended December 31, 1995....................4
Consolidated Statement of Cash Flows
Nine months ended September 30, 1996
and 1995 (unaudited)............................................5
Notes to Consolidated Financial Statements
(unaudited).....................................................6
PART I ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................7
PART II OTHER INFORMATION..............................................18
SIGNATURES..............................................................19
i
<PAGE>
FIRST UNITED BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---- ----
(In thousands)
ASSETS:
<S> <C> <C>
Cash and due from banks $ 7,354 $ 6,353
Federal funds sold 8,070 5,100
Investment securities:
Held to maturity (Market value of $8,224 and $9,668) 8,093 9,481
Available for sale (Cost of $24,666 and $19,134) 24,495 19,032
Total loans 186,120 147,994
Less: Allowance for loan losses (2,829) (2,320)
-------- --------
Net loans 183,291 145,674
-------- --------
Premises, furniture and equipment (net) 7,031 5,588
Other real estate owned 85 74
Other assets 3,834 3,112
-------- --------
TOTAL ASSETS $242,253 $194,414
======== ========
LIABILITIES:
Demand deposits $ 21,726 $ 20,949
NOW accounts 24,703 24,710
Savings and money market deposits 30,856 25,420
Time deposits, $100,000 and over 33,735 23,855
Other time deposits 83,537 65,447
-------- --------
TOTAL DEPOSITS 194,557 160,381
-------- --------
Securities sold under repurchase agreements 2,983 3,096
Federal Home Loan Bank Advances 10,830 2,910
Other borrowed funds 13,600 9,470
Obligation under capital lease - 21
Other liabilities 2,431 2,129
-------- --------
TOTAL LIABILITIES 224,401 178,007
-------- --------
SHAREHOLDERS' EQUITY:
Common stock ($1.67 par value, 15,000,000 shares authorized; 4,110 3,859
2,464,936 and 2,431,300 shares issued and outstanding,
respectively)
Paid-in capital 12,648 11,269
Retained earnings 1,202 1,343
Unrealized gain (loss) on securities available for sale, net of (108) (64)
-------- --------
income taxes
TOTAL SHAREHOLDERS' EQUITY 17,852 16,407
-------- --------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $242,253 $194,414
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
FIRST UNITED BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
September 30, September 30,
1996 1995
---- ----
(In thousands except per share data)
INTEREST INCOME:
<S> <C> <C>
Loans $5,649 $4,534
Federal funds sold 151 36
Taxable investment securities 420 375
Non-taxable investment securities 65 65
Interest bearing accounts 1 -
------ ------
Total interest income 6,286 5,010
------ ------
INTEREST EXPENSE:
Interest on deposits 2,049 1,578
Interest on securities sold under repurchase 36 40
agreements
Interest on other borrowed funds 379 254
------ ------
Total interest expense 2,464 1,872
------ ------
Net interest income 3,822 3,138
Provision for loan losses 468 209
------ ------
Net interest income after provision for loan 3,354 2,929
------ ------
losses
OTHER INCOME:
Service fees 222 195
Other income 270 325
------ ------
Total other income 492 520
------ ------
OTHER EXPENSES:
Salaries, wages and benefits 1,646 1,490
Occupancy expenses 204 159
Furniture and equipment expenses 149 138
Other operating expenses 977 728
------ ------
Total other expenses 2,976 2,515
------ ------
Income before income taxes 870 934
Provision for income taxes 317 317
------ ------
NET INCOME $ 553 $ 617
====== ======
PER SHARE DATA:
Primary $0.22 $0.24
Fully diluted $0.22 $0.24
AVERAGE COMMON SHARES OUTSTANDING:
Primary 2,567 2,573
Fully diluted 2,567 2,581
Cash dividends $ 0.03 $ 0.03
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
FIRST UNITED BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
September 30, September 30,
1996 1995
---- ----
(In thousands except per share data)
INTEREST INCOME:
<S> <C> <C>
Loans $15,809 $12,734
Federal funds sold 401 144
Taxable investment securities 1,155 1,169
Non-taxable investment securities 191 194
Interest bearing accounts 4 -
------- -------
Total interest income 17,560 14,241
------- -------
INTEREST EXPENSE:
Interest on deposits 5,663 4,194
Interest on securities sold under repurchase 117 128
agreements
Interest on other borrowed funds 925 724
------- -------
Total interest expense 6,705 5,046
------- -------
Net interest income 10,855 9,195
Provision for loan losses 1,253 420
------- -------
Net interest income after provision for loan losses 9,602 8,775
------- -------
OTHER INCOME:
Service fees 647 580
Other income 845 747
------- -------
Total other income 1,492 1,327
------- -------
OTHER EXPENSES:
Salaries, wages and benefits 5,017 4,253
Occupancy expenses 559 475
Furniture and equipment expenses 408 459
Other operating expenses 2,755 2,157
------- -------
Total other expenses 8,739 7,344
------- -------
Income before income taxes 2,355 2,758
Provision for income taxes 824 961
------- -------
NET INCOME $ 1,531 $ 1,797
======= =======
PER SHARE DATA:
Primary $0.59 $0.71
Fully diluted $0.59 $0.70
AVERAGE COMMON SHARES OUTSTANDING:
Primary 2,583 2,545
Fully diluted 2,583 2,557
Cash dividends $0.09 $0.09
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
FIRST UNITED BANCORPORATION
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR YEAR ENDED DECEMBER 31, 1995 AND THE NINE MONTHS
ENDED SEPTEMBER 30,1996
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Unrealized Net
Number of Gain (Loss) on Share-
Shares Common Paid-In Retained Securities Holders'
Outstanding Stock Capital Earnings Available For Sale Equity
<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 104,155 shares of common 104 174 1,194 (1,371) - (3)
stock relating to 5% stock dividend
Issuance of 110,201 shares of common 110 184 1698 (1,887) - (5)
stock relating to 5% stock dividend
Cash dividends declared - - - (264) - (264)
Employee stock options exercised 18 30 68 - - 98
Net income - - - 2,413 - 2,413
Change in unrealized net gain/loss on - - - - 577 577
----- ------ ------- ------ ----- -------
securities available for sale
Balance at December 31, 1995 2,315 3,859 11,269 1,343 (64) 16,407
Issuance of 116,418 shares of common 116 195 1,260 (1,458) (3)
stock relating to 5% stock dividend
Cash dividends declared - - - (214) - (214)
Employee stock options exercised 34 56 119 - - 175
Net income - - - 1,531 - 1,531
Changed in unrealized net gain/loss on - - - - (44) (44)
----- ------ ------- ------ ----- -------
securities available for sale
Balance at September 30, 1996 2,465 $4,110 $12,648 $1,202 $(108) $17,852
===== ====== ======= ====== ===== =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
FIRST UNITED BANCORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
September 30, September 30,
1996 1995
------------ --------
(In thousands)
Cash flows from operating activities :
<S> <C> <C>
Net income $ 1,531 $ 1,797
Adjustments needed to reconcile net income to net cash used by operating
activities :
Provision for loan losses 1,253 420
Depreciation and amortization 528 475
Increase in other assets (796) (413)
Increase in other liabilities 302 280
------- -------
Net cash provided by operating activities 2,818 2,559
------- -------
Cash flows from investing activities :
Purchases of investment securities held to maturity (459) (680)
Proceeds from maturities of investment securities held to 1,412 752
maturity
Purchase of investment securities available for sale (9,580) (1,952)
Proceeds from sale of investment securities available for sale - 896
Proceeds from maturities of investment securities available for 4,483 4,226
sale
Net increase in loans (38,870) (21,724)
Net additions to premises and equipment (1,883) (1,767)
------- -------
Net cash used by investing activities (44,897) (20,249)
------- -------
Cash flows from financing activities :
Net increase in deposits 34,176 14,243
Proceeds from other borrowed funds 44,735 28,905
Principal repayment of other borrowed funds (32,706) (26,993)
Net increase (decrease) in securities sold under repurchase (113) 421
agreements
Proceeds from issuance of common stock 175 93
Cash dividends (217) (198)
------- -------
Net cash provided by financing activities 46,050 16,471
------- -------
Net increase in cash and cash equivalents 3,971 (1,219)
Cash and cash equivalents, beginning of period 11,453 9,166
------- -------
Cash and cash equivalents, end of period $15,424 $ 7,947
======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<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 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 nine month period ended September 30, 1996, the Company issued
33,636 shares of its common stock at an average price of $ 5.19 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 its subsidiaries at September 30, 1996, the results of their
operations for the quarters and year-to-date periods ended September 30, 1996
and 1995, and the statements of their cash flows for the nine months ended
September 30, 1996 and 1995.
6
<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 $47,839,000, or 24.6%, from $194,414,000 at December
31, 1995 to $242,253,000 at September 30, 1996.
Total loans, the largest single category of assets, increased $38,126,000,
or 25.8%, to $186,120,000 at September 30, 1996, as a result of an increase in
the amount of outstanding loans at the Company's three bank subsidiaries. Total
loans outstanding at September 30, 1996 for Spartanburg National Bank amounted
to $85,179,000, a $11,490,000, or 15.6% increase, over the $73,689,000 reported
at December 31, 1995. Total outstanding loans, net of inter-company loans, at
Anderson National Bank at September 30, 1996 amounted to $78,494,000, an
increase of $15,360,000, or 24.3%, 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
$12,889,000 at September 30, 1996.
While the Company's bank subsidiaries experienced significant loan growth
during the first nine months of 1996, the Company's consumer finance subsidiary,
Quick Credit Corporation, experienced a decrease in outstanding loans of
$1,614,000, or 14.5%. Total loans outstanding at September 30, 1996 for Quick
Credit Corporation amounted to $9,557,000 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 amount of loan charge-offs
during the period.
Premises, furniture and equipment increased $1,443,000, or 25.8%, during
the period ended September 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 building and equipment costs associated with a new branch facility
for Spartanburg National Bank which officially opened for business on September
16, 1996.
The Company's securities portfolios, collectively, at amortized cost,
increased $4,144,000, or 14.5%, from year-end 1995 levels as a result of
securities purchased by The Community Bank of Greenville during the nine-month
period ended September 30, 1996. Cash and due from banks increased $1,001,000,
or 15.8%, to $7,354,000 at September 30, 1996. This increase is largely the
result of additional uncollected funds in correspondent bank accounts at
quarter-end resulting from a larger deposit base at September 30, 1996. The
amount of Federal funds sold at September 30, 1996 was $2,970,000, or 58.2%,
higher than the 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 $85,000 at September 30, 1996 compared
to $74,000 at December 31, 1995. Management is pursuing liquidation of these two
pieces of property.
7
<PAGE>
Other assets increased $722,000, or 23.2%, during the period ended
September 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 September 30, 1996.
Total liabilities increased $46,394,000, or 26.1%, largely as a result of a
$34,176,000, or 21.3%, increase in total deposits at the Company's bank
subsidiaries. Of the $34,176,000 increase in total deposits, $22,862,000, or
66.9%, 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 $18,090,000, or
27.6% during the period ended September 30, 1996. The largest percentage
increase in a single category of deposits was in certificates of deposit of
$100,000 or more, which increased 41.4%, or $9,880,000, during the period. The
increases in these two categories of deposits are largely the result of deposits
generated by The Community Bank of Greenville. During the period ended September
30, 1996, the Company also experienced an increase in savings and money market
deposits of $5,436,000, or 21.4% which resulted largely from a single money
market account at Spartanburg National Bank. The Company also experienced modest
growth in non-interest bearing demand deposits during the period while the level
of NOW accounts remained relatively unchanged from year-end.
Securities Sold Under Agreements to Repurchase, comprised largely of
overnight repurchase agreements, decreased slightly during the period as a
result of a decrease in temporary quarter-end investment of funds by customers
of the Company's bank subsidiaries. Federal Home Loan Bank advances increased
$7,920,000, or 272.2%, to $10,830,000 at September 30, 1996. These additional
advances were utilized to help fund the loan growth at Anderson National Bank
and Spartanburg National Bank. Other borrowed funds, comprised of Federal funds
purchased, various types of borrowings by Quick Credit Corporation and
borrowings by the parent company, increased $4,130,000, or 43.6%, during the
period. During the period ended September 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 $2,000,000 in the form of Federal funds purchased for additional
liquidity purposes while Quick Credit Corporation reduced its outstanding debt
by $1,720,000. During the period ended September 30, 1996 the Company satisfied
all lease obligations associated with previous capitalized leases.
Shareholders' equity increased $1,445,000 from December 31, 1995 to
September 30, 1996 as a result of net earnings for the period of $1,531,000 and
the exercise of stock options under the Company's Employee Stock Option Plans in
the amount of $175,000. These additions to shareholders' equity were partially
offset by $217,000 relating to the declaration and payment of cash dividends and
cash in lieu of fractional shares associated with the 5% stock dividend paid in
the third quarter of 1996 and an increase in the amount of net unrealized losses
on the Company's "available for sale" securities portfolio of $44,000 during the
period.
8
<PAGE>
RESULTS OF OPERATIONS
Year-to-date period ended September 30, 1996 vs. Year-to-date period ended
September 30, 1995
Earnings Review
The consolidated Company's operations for the nine months ended September
30, 1996 resulted in net income of $1,531,000, a 14.8% decrease from the
$1,797,000 in net income recorded for the comparable 1995 nine-month period. The
decrease in consolidated earnings for the 1996 period is largely attributable to
an $833,000, or 198.3%, increase in the provision for loan losses, of which
$725,000 of the increase is attributable to Quick Credit Corporation, and
pre-tax start up expenses and early operating losses of $557,000 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 $163,000 associated with borrowings used to capitalize The Community
Bank of Greenville and $152,000 in consulting fees associated with the Company's
re-engineering of its banking operations.
Anderson National Bank recorded net earnings of $1,084,000 for the
nine-month period ended September 30, 1996, a 50.1% increase over the $722,000
recorded for the nine-month period ended September 30, 1995. The increase in
earnings for this subsidiary resulted primarily from an increase in net interest
income of $651,000, or 21.4%.
Spartanburg National Bank recorded net earnings of $798,000 for the
nine-month period ended September 30, 1996, a 26.3% increase over the $632,000
recorded for the nine-month period ended September 30, 1995. The increase in
earnings for this subsidiary, like that of Anderson National Bank's, resulted
largely from an increase in net interest income of $466,000, or 16.6%.
The Community Bank of Greenville, which commenced banking operations on
April 17, 1996, recorded net losses for the nine-month period ended September
30, 1996 of $371,000. Of the $371,000 in losses recorded, $57,000, or 15.4%,
were incurred prior to commencing banking operations.
Quick Credit Corporation recorded net earnings of $155,000 for the
nine-month period ended September 30, 1996, a 71.3% decrease from the $539,000
recorded for the nine-month period ended September 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 $1,660,000, or 18.1%, to $10,855,000 for
the nine-month period ended September 30, 1996 compared to $9,195,000 for the
nine-month period ended September 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.
9
<PAGE>
The Company's total interest income increased $3,319,000, or 23.3%, to
$17,560,000 for the 1996 period compared to $14,241,000 for the 1995 period. The
increase is largely attributable to a $3,075,000, or 24.2% increase in loan
interest income resulting from a $34,017,000, or 26.3%, increase in the volume
of average outstanding loans for the 1996 period. The average yield on loans for
the September 30, 1996 year-to-date period was 12.89% compared to 13.10% for the
September 30, 1995 year-to-date period.
Average balances on securities and federal funds sold, collectively,
increased by $6,622,000, or 20.0%, 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 $244,000, or 16.2%.
Interest expense on deposits increased $1,469,000, or 35.0%, to $5,663,000
for the nine-month period ended September 30, 1996 compared to $4,194,000 for
the nine-month period ended September 30, 1995. The increase is attributable to
an increase of $33,985,000, or 27.5%, 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 nine months of 1996 was 4.80% compared
to 4.53% for the first nine 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 $4,770,000 from the Federal Home
Loan Bank of Atlanta for the 1996 period amounted to $203,000, a 55.0% increase
over the $148,000 incurred in the 1995 period and resulted largely from an
increase 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 $146,000, or 25.4%, in the 1996 period
when compared to the 1995 period. The increase in interest expense associated
with these other interest-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.
10
<PAGE>
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 September 30, 1996 and in the opinion of
management, there are no material risks or significant loan concentrations in
the present portfolio.
The allowance for loan losses was $2,829,000 at September 30, 1996 compared
to $2,140,000 at September 30, 1995 and $2,320,000 at December 31, 1995. At
September 30, 1996, September 30, 1995 and December 31, 1995, the allowance for
loan losses as a percentage of outstanding loans was 1.52%, 1.51% and 1.57%,
respectively. During the period ended September 30, 1996, the Company
experienced net charge-offs of $744,000, or 0.45%, of average loans, compared to
net charge-offs of $231,000, or 0.18% of average loans during the period ended
September 30, 1995. The Company made provisions for loan losses of $1,253,000
during the nine-month period ended September 30, 1996 compared to $420,000 for
the nine-month period ended September 30, 1995, a 198.3% increase. 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 nine-month period ended September 30, 1996, this
subsidiary recorded net charge-offs of $23,000 compared to net recoveries of
$74,000 for the 1995 period.
Spartanburg National Bank recorded a provision for loan losses of $145,000
for the nine-month period ended September 30, 1996 compared to $155,000 for the
1995 period. For the nine-month period ended September 30, 1996, this subsidiary
recorded net charge-offs of $41,000 compared to net charge-offs of $15,000 for
the 1995 period.
The Community Bank of Greenville began to build its allowance for loan
losses during the period and recorded a provision for loan losses of $118,000
for the nine-month period ended September 30, 1996.
Quick Credit Corporation recorded a provision for loan losses of $990,000
for the nine-month period ended September 30, 1996 compared to $265,000 for the
1995 period and to $728,000 for fiscal 1995. The increase in this subsidiary's
provision for the 1996 period resulted from an increase in the number and volume
of loans charged off and management's decision to increase the allowance for
loan losses as a result of a continued increase in the number and amounts of
delinquent accounts. For the nine-month period ended September 30, 1996, this
subsidiary recorded net charge offs of $680,000, or 6.91% of average outstanding
loans, compared to net charge offs of $290,000, or 3.26%, of average outstanding
loans for the 1995 nine-month period and to $499,000, or 5.39%, of average
outstanding loans for fiscal 1995. Management continues to believe the
significant increase in net charge offs and delinquency rate is an industry-wide
trend. Quick Credit Corporation's customers are generally in the low-to-moderate
11
<PAGE>
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 Corporation simultaneously to have loans
outstanding as 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 latter half of 1995 and during the first three quarters
of 1996, Quick Credit Corporation has increased its allowance for loan losses as
a percentage of outstanding loans, net of unearned income, from 3.61% at
September 30, 1995 to 9.54% at September 30, 1996. Management expects this
subsidiary to experience similar levels of defaults in the fourth quarter of
1996 as those experienced in the previous three quarters of 1996.
At September 30, 1996 the Company had $414,000 in non-accrual loans, which
are considered impaired, $652,000 in loans past due 90 days or more and still
accruing interest and $85,000 in OREO, compared to $106,000, $311,000, and
$74,000, respectively, at September 30, 1995 and to $241,000, $271,000, and
$74,000, respectively at December 31, 1995. At September 30, 1996 and 1995, and
December 31, 1995, the Company did not have a material amount of restructured
loans.
In the cases of all loans considered as 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 loan, even though
such loan may still be performing. Management of the Company does not believe it
has any non-accrual loan 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 $165,000 or 12.4%, during the
nine-month period ended September 30, 1996. The increase resulted largely from
an $87,000, or 44.0%, increase in fee income generated, collectively, from the
sale of alternative investment products and mortgage lending activities and an
increase in service charge income on deposit accounts of $67,000, or 11.6% at
the Company's banking subsidiaries. As a result of an increase in mortgage
lending activity during the first nine months of 1996, fee income from the
Company's mortgage lending activities increased $26,000, or 19.4%, to $162,000
in the 1996 period compared to $136,000 for the 1995 period. Simultaneously, fee
income generated from the sale of alternative investment products (mutual funds
and annuities), which amounted to $63,000 in the 1995 period, increased $61,000,
or 96.8%, to $124,000 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.
Other Expenses
Total other expenses increased $1,395,000, or 19.0%, in the 1996 period
over the 1995 comparable period. Salaries, wages and benefits ("personnel
expense"), the largest category of other operating expenses, increased $764,000,
or 18.0%, 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 $84,000, or 17.9%, 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
12
<PAGE>
1995 and expenses associated with opening The Community Bank of Greenville
during the second quarter of 1996. Furniture and equipment expenses decreased
$51,000, or 11.1%, 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 due to the outsourcing of the Company's data
processing function.
Other operating expenses, the second largest category of other expenses,
increased $598,000, or 27.7%, 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,
$157,000 in consulting fees associated with the Company's re-engineering project
and data processing expense associated with the Company's outsourcing of its
data processing function.
Income Taxes
As a result of a decrease in income before income taxes, the Company
incurred income tax expense of $824,000 for the year-to-date period ended
September 30, 1996 compared to income tax expense of $961,000 for the period
ended September 30, 1995.
Quarter ended September 30, 1996 vs. Quarter ended September 30, 1995
Earnings Review
The Company's operations for the quarter ended September 30, 1996, resulted
in net income of $553,000, a $64,000, or 10.4%, decrease from the $617,000
reported for the comparable 1995 quarter. The decrease in 1996 third quarter
profits resulted primarily from a $259,000, or 123.9%, increase in the Company's
provision for loan losses, which is largely attributable to Quick Credit
Corporation, $232,000 in pre-tax early operating losses associated with The
Community Bank of Greenville, which commenced banking operations on April 17,
1996 and to $95,000 in consulting fees incurred during the third quarter of 1996
associated with the Company's re-engineering project.
Anderson National Bank, Spartanburg National Bank and Quick Credit
Corporation, the Company's three seasoned subsidiaries, recorded 1996 third
quarter net earnings of $421,000, $284,000 and $67,000, respectively, compared
to $245,000, $250,000 and $157,000, respectively, for the third quarter of 1995.
The Company's newest bank subsidiary, The Community Bank of Greenville, recorded
1996 third quarter net losses of $158,000.
Interest Income, Interest Expense and Net Interest Income
The Company's net interest income increased $684,000, or 21.8%, during the
third quarter of 1996 over the third quarter of 1995 and was primarily
attributable to a $1,115,000, or 24.6%, 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 $177,221,000 for the
1996 quarter compared to $137,676,000 for the 1995 quarter, a 28.7% increase.
The average yield on the Company's loan portfolios was 12.76% for the 1996
quarter compared to 13.17% for the 1995 quarter.
Interest expense increased $592,000, or 31.6%, in the 1996 period. Interest
on deposit accounts, the largest category of total interest expense, increased
$471,000, or 29.9%, during the 1996 period as a
13
<PAGE>
result of an increase in the volume of interest-bearing deposits during the 1996
period. The average rate paid on interest-bearing deposits was 4.83% for the
1996 quarter compared to 4.90% for the 1995 quarter. Interest expense on the
other categories of interest-bearing liabilities, collectively, increased
$121,000, or 41.2%, largely as a result of interest expense incurred on the
borrowings used to capitalize The Community Bank of Greenville and interest
expense associated with a larger volume of Federal Home Loan Bank borrowings by
Anderson National Bank and Spartanburg National Bank.
Provision and Allowance for Loan Losses
The provision for loan losses was $468,000 for the quarter ended September
30, 1996, a $259,000, or 123.9%, increase over the $209,000 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 larger volume of
charge-offs during the 1996 period and to The Community Bank of Greenville as it
began to build its allowance for loan losses. For the quarter ended September
30, 1996 the Company recorded net loan charge-offs of $263,000, or 0.15%, of
average outstanding loans compared to $110,000, or 0.08%, of average outstanding
loans for the 1995 quarter.
Quick Credit Corporation made provisions of $345,000 in the 1996 quarter
compared to $147,000 for the 1995 quarter. During the 1996 quarter, Quick Credit
Corporation recorded net loan charge-offs of $210,000, or 2.19%, of average
outstanding loans compared to $110,000, or 1.20%, of average outstanding loans
for the 1995 quarter.
The Community Bank of Greenville made provisions totaling $73,000 during
the 1996 quarter.
Spartanburg National Bank made provisions of $50,000 for the 1996 period
compared to $62,000 for the 1995 period and recorded net loan charge-offs of
$15,000 in the 1996 period compared to net loan charge-offs of $6,000 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 charge-offs of
$38,000 compared to net loan recoveries of $7,000 for the 1995 period.
Other Income
The Company's total other income decreased $28,000, or 5.4% during the 1996
quarter. The decrease in other income is largely attributable to a decrease in
the amount of gains realized on the sale of SBA loans and OREO in the 1996
quarter when compared to the 1995 quarter. The Company recorded gains on the
sale of SBA loans of $34,000 in the 1996 quarter compared to $50,000 in the 1995
quarter. The Company recorded a gain on the sale of OREO of $25,000 in the 1995
quarter and had no gains in the 1996 quarter. The decreases in these two
categories of other income items were partially offset by an increase in service
charge income on deposit accounts resulting from a larger base of deposits in
the 1996 quarter.
Other Expenses
Total other expenses increased $461,000, or 18.3%, in the 1996 quarter when
compared to the 1995 quarter. Personnel expense, the largest category of total
other expenses, increased $156,000, or 10.5%, in the 1996 period. The increase
in personnel expense is attributable to additional personnel
14
<PAGE>
expense associated with the staffing of The Community Bank of Greenville, the
Company's newest subsidiary which was non-existent in the third quarter of 1995,
and to increases in personnel expense at the Company's other subsidiaries.
Occupancy expense, and furniture and equipment expense increased $45,000, or
28.3%, and $11,000, or 8.0%, respectively, in the 1996 quarter primarily as a
result of expenses associated with The Community Bank of Greenville. Other
operating expenses, the second largest category of total other expenses,
increased $249,000, or 34.2%, in the 1996 period. Increases in this category of
expenses are largely attributable to additional expenses associated with The
Community Bank of Greenville, $95,000 in consulting fees incurred during the
1996 quarter associated with the Company's re-engineering project and increases
in the various categories of other expense items as a result of growth and price
increases.
Income Taxes
The Company incurred income tax expense of $317,000 for the quarters ended
September 30, 1996 and September 30, 1995.
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 cash and 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 September 30, 1996 Anderson National Bank had $280,000 in
long-term borrowings and $7,000,000 in short-term borrowings from the Federal
Home Loan Bank of Atlanta. At September 30, 1996 Spartanburg National Bank had
$550,000 in long-term borrowings from the Federal Home Loan Bank of Atlanta and
$3,000,000 in short-term borrowings. At September 30, 1996, Spartanburg National
Bank also had overnight borrowings in the form of federal funds purchased in the
amount of $2,000,000.
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 September 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 September 30,1996, the Company's consumer finance subsidiary, Quick
Credit Corporation, had debt outstanding of $800,000 in the form of subordinated
debt and $6,300,000 outstanding under an
15
<PAGE>
$18,0000 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.
CAPITAL ADEQUACY AND RESOURCES
The capital needs of the Company have been met through the retention of
earnings.
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 7.35% at September 30, 1996 compared to 8.23% December 31,
1995. The leverage capital ratios for Anderson National Bank and Spartanburg
National Bank were 7.68% and 7.15%, respectively at September 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 14.79% at September 30, 1996. The
decrease in the leverage capital ratio for Anderson National Bank during the
period ending September 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 consists 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. The Comptroller 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 11.10% and its Tier 1 capital to risk weighted assets ratio
was 9.71% at September 30, 1996, compared to 12.73% and 11.48%, respectively, at
December 31, 1995. The risk- based capital ratios for Anderson National Bank and
Spartanburg National Bank were 11.29% and 10.33%, respectively, at September 30,
1996 compared to 12.72% and 11.09%, respectively, at December 31, 1995. Their
Tier 1 capital to risk weighted assets ratios were 10.13% and 9.20%,
respectively, at September 30, 1996 compared to 11.47% and 9.88%, respectively,
at December 31, 1995. At September 30, 1996, the risk-based capital ratio for
The Community Bank of Greenville was 26.94% and the Tier 1 capital to risk
16
<PAGE>
weighted assets ratio was 26.17%. 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 ending September 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 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 had committed to lend the Company up to $6 million.
During the third quarter of 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 fixed asset cost of
approximately $600,000 associated with the WAN during the fourth quarter of
1996.
During the third quarter of 1996, the Company entered into a contract for
the purchase and installation of three ATMs. The Company expects to incur fixed
asset cost of approximately $125,000 associated with the ATMs during the fourth
quarter of 1996.
EFFECT OF INFLATION AND CHANGING PRICES
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles 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 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 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
17
<PAGE>
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.
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.
None
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.
18
<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: November 4, 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 (Principal
Financial and Accounting Officer)
19
<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 September 30, 1996, (Unaudited) and the
Consolidated Statement of Income for the Nine Months Ended September 30, 1996
(Unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 7,343
<INT-BEARING-DEPOSITS> 11
<FED-FUNDS-SOLD> 8,070
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 24,495
<INVESTMENTS-CARRYING> 8,093
<INVESTMENTS-MARKET> 8,224
<LOANS> 186,120
<ALLOWANCE> 2,829
<TOTAL-ASSETS> 242,253
<DEPOSITS> 194,557
<SHORT-TERM> 10,000
<LIABILITIES-OTHER> 2,431
<LONG-TERM> 13,600
0
0
<COMMON> 4,110
<OTHER-SE> 13,742
<TOTAL-LIABILITIES-AND-EQUITY> 242,253
<INTEREST-LOAN> 15,809
<INTEREST-INVEST> 1,751
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 17,560
<INTEREST-DEPOSIT> 5,663
<INTEREST-EXPENSE> 6,705
<INTEREST-INCOME-NET> 10,855
<LOAN-LOSSES> 1,253
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 8,739
<INCOME-PRETAX> 2,355
<INCOME-PRE-EXTRAORDINARY> 2,355
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,531
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.59
<YIELD-ACTUAL> 7.12
<LOANS-NON> 414
<LOANS-PAST> 652
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,217
<ALLOWANCE-OPEN> 2,320
<CHARGE-OFFS> 809
<RECOVERIES> 65
<ALLOWANCE-CLOSE> 2,829
<ALLOWANCE-DOMESTIC> 2,829
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
