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, 1997
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 September 30, 1997:
3,971,721 shares of common stock, $1 1/9 Par Value
<PAGE>
TABLE OF CONTENTS
PAGE
PART I ITEM 1 FINANCIAL INFORMATION
Consolidated Balance Sheets 3
September 30, 1997 (unaudited) and
December 31, 1996
Consolidated Statements of Income 4
Three months ended September 30, 1997
and 1996 (unaudited)
Consolidated Statements of Income 5
Nine months ended September 30, 1997
and 1996 (unaudited)
Consolidated Statements of Changes in
Shareholders' Equity 6
Year ended December 31, 1996 and nine
months ended September 30, 1997 (unaudited)
Consolidated Statements of Cash Flows
Nine months ended September 30, 1997 7
and 1996(unaudited)
Notes to Consolidated Financial Statements 8
(unaudited)
PART I ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
PART II OTHER INFORMATION 25
SIGNATURES 26
2
<PAGE>
FIRST UNITED BANCORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(Unaudited)
---- ----
(In thousands)
ASSETS:
<S> <C> <C>
Cash and due from banks ................................................................ $ 8,967 $ 8,128
Federal funds sold ..................................................................... 9,000 13,700
Investment securities:
Held to maturity (Market value of $7,327 and 8,006) .................................. 7,193 7,843
Available for sale (Cost of $26,151 and $26,318) ..................................... 26,186 26,304
Loans .................................................................................. 237,620 205,551
Less: Allowance for loan losses ........................................................ (3,503) (3,160)
--------- ---------
Net loans ............................................. 234,117 202,391
Premises, furniture and equipment (net) ................................................ 7,118 7,627
Other real estate owned ................................................................ 53 85
Other assets ........................................................................... 4,519 4,117
--------- ---------
TOTAL ASSETS ...................................................................... $ 297,153 $ 270,195
========= =========
LIABILITIES:
Demand deposits ........................................................................ $ 26,143 $ 23,180
NOW accounts ........................................................................... 27,144 25,143
Savings and money market deposits ...................................................... 36,116 34,113
Certificates of deposit greater than $100,000 .......................................... 53,115 41,073
Certificates of deposit less than $100,00 and other time deposits ...................... 113,706 94,710
--------- ---------
TOTAL DEPOSITS ..................................................................... 256,224 218,219
--------- ---------
Securities sold under repurchase agreements ............................................ 2,989 8,167
Federal Home Loan Bank Borrowings ...................................................... 2,750 10,830
Other borrowed funds .................................................................. 10,300 11,900
Other liabilities ...................................................................... 3,733 2,794
--------- ---------
TOTAL LIABILITIES .................................................................. 275,996 251,910
--------- ---------
SHAREHOLDERS' EQUITY:
Common stock ($1.12 par value, 15,000,000
shares authorized; 3,971,721 and 2,587,895
shares issued and outstanding, respectively) ......................................... 4,416 4,315
Paid-in capital ........................................................................ 14,313 13,965
Retained earnings ...................................................................... 2,406 14
Unrealized gain (loss) on securities available for
sale, net of income taxes ............................................................ 22 (9)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ............................................................... 21,157 18,285
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY .............................................. $ 297,153 $ 270,195
========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
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FIRST UNITED BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
September 30 September 30,
1997 1996
---- ----
(In thousands except per share data)
INTEREST INCOME:
<S> <C> <C>
Loans .............................................................................. $ 7,005 $ 5,649
Federal funds sold ................................................................. 112 152
Taxable investment securities ...................................................... 472 420
Non-taxable investment securities .................................................. 65 65
------- -------
Total interest income .............................................................. 7,654 6,286
------- -------
INTEREST EXPENSE:
Interest on deposits ............................................................... 2,947 2,049
Interest on securities sold under repurchase agreements............................. 37 36
Interest on other borrowed funds ................................................... 304 379
------- -------
Total interest expense ............................................................. 3,288 2,464
------- -------
Net interest income ................................................................ 4,366 3,822
Provision for loan losses .......................................................... 505 468
------- -------
Net interest income after provision for loan losses................................. 3,861 3,354
------- -------
OTHER INCOME:
Service charges on deposit accounts ................................................ 210 167
Other service charges, commissions & fees .......................................... 272 233
Other income ....................................................................... 96 92
------- -------
Total other income ................................................................. 578 492
------- -------
OTHER EXPENSES:
Salaries, wages and benefits ....................................................... 1,795 1,646
Occupancy expenses ................................................................. 219 204
Furniture and equipment expenses ................................................... 203 149
Other operating expenses ........................................................... 904 977
------- -------
Total other expenses ............................................................... 3,121 2,976
------- -------
Income before income taxes ........................................................... 1,318 870
Provision for income taxes ........................................................... 456 317
------- -------
NET INCOME ........................................................................... $ 862 $ 553
======= =======
PER SHARE DATA:
Primary ............................................................................ $ 0.21 $ 0.14
Fully diluted ...................................................................... $ 0.21 $ 0.14
AVERAGE COMMON SHARES OUTSTANDING:
Primary ............................................................................ 4,164 4,042
Fully diluted ...................................................................... 4,173 4,042
Cash dividends ..................................................................... $0.0225 $0.0225
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
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FIRST UNITED BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
September 30 September 30,
1997 1996
---- ----
(In thousands except per share data)
INTEREST INCOME:
<S> <C> <C>
Loans ................................................................................ $20,049 $15,809
Federal funds sold ................................................................... 370 405
Taxable investment securities ........................................................ 1,406 1,155
Non-taxable investment securities .................................................... 190 191
------- -------
Total interest income ................................................................ 22,015 17,560
------- -------
INTEREST EXPENSE:
Interest on deposits ................................................................. 8,077 5,663
Interest on securities sold under repurchase agreements .............................. 121 117
Interest on other borrowed funds ..................................................... 1,107 925
------- -------
Total interest expense ............................................................... 9,305 6,705
------- -------
Net interest income .................................................................. 12,710 10,855
Provision for loan losses ............................................................ 1,075 1,253
------- -------
Net interest income after provision for loan losses .................................. 11,635 9,602
------- -------
OTHER INCOME:
Service charges on deposit accounts .................................................. 611 490
Other service charges, commissions & fees ............................................ 720 748
Other income ......................................................................... 272 254
------- -------
Total other income ................................................................... 1,603 1,492
------- -------
OTHER EXPENSES:
Salaries, wages and benefits ......................................................... 5,373 5,017
Occupancy expenses ................................................................... 615 559
Furniture and equipment expenses ..................................................... 590 408
Other operating expenses ............................................................. 2,593 2,755
------- -------
Total other expenses ................................................................. 9,171 8,739
------- -------
Income before income taxes ............................................................. 4,067 2,355
Provision for income taxes ............................................................. 1,425 824
------- -------
NET INCOME ............................................................................. $ 2,642 $ 1,531
======= =======
PER SHARE DATA:
Primary .............................................................................. $ 0.64 $ 0.38
Fully diluted ........................................................................ $ 0.63 $ 0.38
AVERAGE COMMON SHARES OUTSTANDING:
Primary .............................................................................. 4,128 4,067
Fully diluted ........................................................................ 4,168 4,067
Cash dividends ....................................................................... $0.0625 $0.0625
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
FIRST UNITED BANCORPORATION
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR YEAR ENDED DECEMBER 31, 1996 AND THE NINE MONTHS
ENDED SEPTEMBER 30,1997
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
NUMBER OF COMMON PAID-IN RETAINED UNREALIZED NET SHARE-
SHARES STOCK CAPITAL EARNINGS GAIN(LOSS)ON HOLDERS'
OUTSTANDING SECURITIES EQUITY
AVAILABLE
FOR SALE
----------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995........... 3,472 $ 3,859 $ 11,269 $ 1,343 $ (64) $ 16,407
Issuance of 174,627 shares
of common stock relating to
5% stock dividend...................... 175 195 1,260 (1,458) - (3)
Issuance of 184,438 shares of
common stock relating to 5%
stock dividend ........................ 184 205 1,317 (1,525) - (3)
Cash dividends declared ............... - - - (292) - (292)
Employee stock options exercised ...... 51 56 119 - - 175
Net income ............................ - - - 1,946 - 1,946
Change in unrealized net gain/loss
on securities available for sale....... - - - - 55 55
----- -------- -------- -------- -------- --------
Balance at December 31, 1996 .......... 3,882 4,315 13,965 14 (9) 18,285
Cash dividends declared ............... - - - (245) - (245)
Cash in lieu of fractional shares
on 3 for 2 stock split ................ - - - (5) - (5)
Employee stock options exercised....... 90 101 348 - - 449
Net income ............................ - - - 2,642 - 2,642
Change in unrealized net gain/loss
on securities available for sale ...... - - - - 31 31
----- -------- -------- -------- -------- --------
Balance at September 30, 1997.......... 3,972 $ 4,416 $ 14,313 $ 2,406 $ 22 $ 21,157
===== ======== ======== ======== ======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
FIRST UNITED BANCORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
September 30, September 30,
1997 1996
------------ ------------
(In thousands)
Cash flows from operating activities :
<S> <C> <C>
Net income ............................................................................... $ 2,642 $ 1,531
Adjustments needed to reconcile net income to
net cash used by operating activities :
Provision for loan losses .............................................................. 1,075 1,253
Depreciation and amortization .......................................................... 681 528
Gain on sale of investments securities available for sale .............................. (38) -
Net increase in other assets ........................................................... (461) (796)
Net increase in other liabilities ...................................................... 1,058 302
-------- --------
Net cash provided by operating activities ............................................ 4,957 2,818
-------- --------
Cash flows from investing activities :
Purchases of investment securities held to maturity ...................................... (1,103) (459)
Proceeds from maturities of investment securities held to maturity ....................... 1,748 1,412
Purchase of investment securities available for sale ..................................... (8,163) (9,580)
Proceeds from maturities of investment securities available for sale ..................... 8,310 4,483
Proceeds from sale of investment securities available for sale ........................... 63 -
Net increase in loans .................................................................... (32,801) (38,870)
Net additions to premises and equipment .................................................. (99) (1,883)
-------- --------
Net cash used by investing activities ................................................ (32,045) (44,897)
-------- --------
Cash flows from financing activities :
Net increase in deposits ................................................................. 38,005 34,176
Proceeds from other borrowed funds ....................................................... 46,160 44,735
Principal repayment of other borrowed funds .............................................. (55,840) (32,706)
Net decrease in securities sold under repurchase agreements .............................. (5,178) (113)
Proceeds from issuance of common stock ................................................... 319 175
Cash dividends ........................................................................... (239) (217)
-------- --------
Net cash provided by financing activities ............................................ 23,227 46,050
-------- --------
Net increase (decrease) in cash and cash equivalents ....................................... (3,861) 3,971
Cash and cash equivalents, beginning of period ............................................. 21,828 11,453
-------- --------
Cash and cash equivalents, end of period ................................................... $ 17,967 $ 15,424
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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 wholly owned
subsidiaries, Anderson National Bank, Spartanburg National Bank, The
Community Bank of Greenville, N. A., and Quick Credit Corporation.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies is included in
the 1996 Annual Report to Shareholders.
(3) COMMON STOCK, EARNINGS PER SHARE, STOCK DIVIDEND AND STOCK SPLIT
On December 13, 1996, the Company's Board of Directors declared a five
percent stock dividend. 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.
On July 29, 1997, the Company's Board of Directors declared a
three-for-two stock split payable to shareholders of record as of August
15, 1997. The distribution date was August 29, 1997, with fractional
shares paid in cash based on the adjusted market value of the stock at
the record date.
The components of shareholders' equity, weighted average shares
outstanding, and earnings per share amounts for the prior periods
presented have been restated to reflect the distributions of the stock
dividend and the stock split. Shares granted upon exercise of options and
shares underlying exercisable options pursuant to the Company's stock
option plans were increased for the effects of the stock dividend and the
three-for-two stock split.
During the nine month period ended September 30,1997, the Company issued
90,066 shares of its common stock at an average price of $3.54 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.
8
<PAGE>
(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, 1997, the
results of their operations for the three and nine month periods ended
September 30, 1997 and 1996, and the statements of their cash flows for
the nine month periods ended September 30, 1997 and 1996.
9
<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 $26,958,000, or 10%, from December 31, 1996 to
$297,153,000 at September 30, 1997.
As a result of an increase in the amount of outstanding loans at the
Company's three bank subsidiaries, total loans, the largest single category of
assets, increased $32,069,000, or 15.6%, to $237,620,000 at September 30, 1997.
Total loans outstanding at September 30, 1997 for Spartanburg National Bank
amounted to $99,437,000, a 9.5% increase from the $90,833,000 reported at
December 31, 1996. Total outstanding loans at Anderson National Bank at
September 30, 1997 amounted to $94,322,000, a 10.2% increase from the
$85,610,000 in total outstanding loans at December 31, 1996. At September 30,
1997, total loans outstanding for The Community Bank of Greenville, N.A.
amounted to $34,678,000, an increase of $15,642,000, or 82.2%, from the
$19,036,000 in outstanding loans at December 31, 1996. During the nine month
period ended September 30, 1997 Quick Credit Corporation experienced a decrease
in total outstanding loans of $889,000, or 8.8%.
Premises, furniture and equipment decreased $509,000 during the period.
Of the decrease, $389,000 resulted from the sale of a parcel of real estate
adjoining the Greenville bank's main office originally purchased for future
expansion of the Greenville bank. The remaining decrease is attributable to
depreciation associated with these categories of assets.
The Company's securities portfolios, collectively, at amortized cost,
decreased slightly from year-end 1996 levels as a result of maturities during
the period. Cash and due from banks increased $839,000, or 10.3%, to $8,967,000
at September 30, 1997 as a result of an increase in uncollected funds in
correspondent bank accounts at quarter end. Federal funds sold decreased
$4,700,000, or 34.3%, during the period as the Company used these funds to help
fund its loan growth.
Other real estate owned decreased $32,000, or 37.7%, during the nine
month period ended September 30, 1997 as a result of the liquidation of one
parcel of other real estate owned and the write down of another parcel.
Management continues to pursue liquidation of the one remaining piece of
property currently owned.
Other assets, comprised largely of accrued income receivable, prepaid
expenses and deferred taxes, increased $402,000, or 9.8%, from the year-end 1996
level primarily as a result of an increase
10
<PAGE>
in the amount of accrued income receivable on the Company's loan portfolio
resulting from the increase in the volume of outstanding loans during the nine
month period ended September 30, 1997.
Total liabilities increased $24,086,000, or 9.6%, as a result of a
$38,005,000, or 17.4%, increase in total deposits at the Company's bank
subsidiaries. The largest dollar increase in a single category of deposits was
in certificates of deposit of less than $100,000, which increased $18,996,000,
or 20.1%. The largest percentage increase in a single category of deposits was
in certificates of deposit of more than $100,000, which increased 29.3%, or
$12,042,000. The Company also experienced increases in various other categories
of deposits during the period.
Securities sold under agreements to repurchase, comprised largely of
overnight repurchase agreements, decreased $5,178,000, or 63.4%, from the
year-end 1996 level. This significant decrease is largely attributable to a
single customer of Spartanburg National Bank which reduced its level of invested
temporary funds during the period from the unusually high level it had at
December 31, 1996.
During the period ended September 30, 1997, the Company decreased its
balance of Federal Home Loan Bank borrowings $8,080,000, or 74.6%, to $2,750,000
at September 30, 1997. Other borrowed funds, comprised of various types of
borrowings by Quick Credit Corporation and borrowings by the parent company,
decreased $1,600,000, or 13.5%, during the period as a result of principal
reductions made by Quick Credit Corporation and the parent company on their
borrowings.
Other liabilities, comprised largely of accrued expenses payable
increased $939,000, or 33.6%, to $3,733,000 at September 30, 1997. The increase
resulted largely from an increase in interest payable on deposit accounts
resulting from an increase in the amount of interest-bearing deposits
outstanding during the period.
Shareholders' equity increased $2,872,000, or 15.7%, from December 31,
1996 to $21,157,000 at September 30, 1997 as a result of net earnings for the
nine month period of $2,642,000, the exercise of stock options under the
Company's Employee Stock Option Plans in the amount of $449,000 and a $31,000
increase in the amount of net unrealized gains on the Company's "Available For
Sale" securities portfolio . These increases were partially offset by the
declaration of cash dividends and the payment of cash in lieu of fractional
shares relating to the Company's recent three-for-two stock split in the amount
of $250,000 during the period.
11
<PAGE>
RESULTS OF OPERATIONS
Nine month period ended September 30, 1997 vs. Nine month period ended September
30, 1996
Earnings Review
The Company's operations for the nine months ended September 30, 1997
resulted in net income of $2,642,000, a 72.6% increase over the $1,531,000 in
net income recorded for the comparable 1996 nine month period. The increase in
earnings for the 1997 period is largely attributable to a $1,855,000, or 17.1%,
increase in the Company's net interest income resulting largely from an increase
in interest and fee income generated by a larger loan portfolio in the 1997
period, a $121,000, or 24.7%, increase in service charge income on deposit
accounts and a $178,000, or 14.2%, reduction in the provision for loan losses,
largely attributable to Quick Credit Corporation.
Anderson National Bank recorded net earnings of $1,312,000 for the nine
month period ended September 30, 1997, a 21.0% increase over the $1,084,000
recorded for the nine month period ended September 30, 1996. The increase in
earnings for this subsidiary is largely attributable to an increase in net
interest income of $579,000, or 15.7%, resulting primarily from an increase of
$1,386,000, or 25.4%, in interest and fee income on a larger loan portfolio in
the 1997 period.
Spartanburg National Bank recorded net earnings of $889,000 for the nine
month period ended September 30, 1997, an 11.4% increase over the $798,000
recorded for the nine month period ended September 30, 1996. The increase in
earnings for this subsidiary, like that of Anderson National Bank's, resulted
from an increase in net interest income of $533,000, or 16.3%. This increase in
net interest income is primarily attributable to an increase of $1,248,000, or
22.1%, in interest and fee income on a larger loan portfolio in the 1997 period.
The Community Bank of Greenville, N.A., which commenced banking operations
on April 17, 1996, recorded net earnings of $62,000 for the nine month period
ended September 30, 1997 compared to a net loss of $371,000 for the nine month
period ended September 30, 1996. Profitable operation of this subsidiary in the
1997 period resulted from a larger base of earning assets, primarily loans, when
compared to the 1996 period.
Quick Credit Corporation recorded net earnings of $543,000 for the nine
month period ended September 30, 1997, a 250.3% increase over the $155,000
recorded for the 1996 nine month period. The significant increase in earnings
for this subsidiary resulted primarily from a $780,000, or 78.8%, reduction in
the provision for loan losses for the 1997 period when compared to the 1996
period.
12
<PAGE>
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 $1,855,000, or 17.1%, to $12,710,000 for
the nine month period ended September 30, 1997 compared to $10,855,000 for the
nine month period ended September 30, 1996. The increase is primarily
attributable to an increase in interest and fee income on loans at the Company's
bank subsidiaries resulting from an increase in the volume of outstanding loans
for the 1997 period when compared to the 1996 period.
The Company's total interest income increased $4,455,000, or 25.4%, to
$22,015,000 for the 1997 period compared to $17,560,000 for the 1996 period. Of
the $4,455,000 increase in total interest income, $4,240,000, or 95.2%, is
attributable to an increase in loan interest and fee income resulting from a
$59,136,000, or 36.2%, increase in the volume of average outstanding loans
during the 1997 period. The Company's average outstanding loans for the 1997
period were $222,718,000 compared to $163,582,000 for the 1996 period. The
average yield on loans for the nine month period ended September 30,1997 was
12.01% compared to 12.89% for the nine month period ended September 30, 1996.
Primarily as a result of the impact of The Community Bank of Greenville,
N.A. on the Company's consolidated balance sheet, average balances on securities
and federal funds sold, collectively, increased by $3,840,000, or 9.7%, in the
1997 period when compared to the 1996 period. Largely as a result of this
increase, interest income on these categories of earning assets, collectively,
increased by $215,000, or 12.3%.
Interest expense on deposits increased $2,414,000, or 42.6%, to $8,077,000
for the nine month period ended September 30, 1997 compared to $5,663,000 for
the nine month period ended September 30, 1996. The increase is attributable to
an increase of $54,724,000, or 34.8%, in the volume of average interest-bearing
deposits for the 1997 period when compared to the 1996 period coupled with an
increase in the Company's costs of interest-bearing deposits resulting from
increases in the rates paid for those deposits in the 1997 period. The weighted
average cost of interest bearing deposits for the first nine months of 1997 was
5.08% compared to 4.80% for the first nine months of 1996.
Interest expense on Securities Sold Under Repurchase Agreements increased
slightly in the 1997 period primarily as a result of a small increase in the
average volume of outstanding Repurchase Agreements during the 1997 period.
Interest expense incurred by the Company's bank subsidiaries on average
borrowings of $9,594,000 from the Federal Home Loan Bank of Atlanta for the 1997
period amounted to $439,000, a 116.3% increase over the $203,000 incurred in the
1996 period. The
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<PAGE>
increase in interest expense on Federal Home Loan Bank borrowings resulted from
an increase in the average amount borrowed during the 1997 period.
Interest expense on the various categories of other interest-bearing
liabilities, which includes Subordinated Debt, Federal Funds Purchased and Other
Borrowed Funds, collectively, decreased $54,000, or 8.1%, in the 1997 period
when compared to the 1996 period. The decrease in interest expense associated
with these other interest-bearing liabilities is largely attributable to a
decrease in interest expense incurred by Quick Credit Corporation on a smaller
balance of outstanding borrowings in the 1997 period.
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
on 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,
N.A., may require additions to the allowance for loan losses based upon
information available to the Comptroller at the time of the examination.
Management considers the allowance for loan losses adequate to absorb
losses on loans outstanding at September 30, 1997 and in the
14
<PAGE>
opinion of management, there are no material risks or significant loan
concentrations in the present portfolio.
The allowance for loan losses was $3,503,000 at September 30, 1997
compared to $3,160,000 at September 30, 1996. At September 30, 1997 and
September 30, 1996, the allowance for loan losses as a percentage of outstanding
loans was 1.48% and 1.54%, respectively. During the nine month period ended
September 30, 1997, the Company experienced net charge-offs of $732,000, or
0.33%, of average loans, compared to net charge-offs of $744,000, or 0.45% of
average loans for the nine month period ended September 30, 1996. The Company
made provisions for loan losses of $1,075,000 during the 1997 nine month period
compared to $1,253,000 for the 1996 nine month period, a decrease of 14.2%. The
decrease in net charge-offs and resulting decrease in the provision for loan
losses for the 1997 period is attributable to improved results at Quick Credit
Corporation.
Anderson National Bank recorded a provision for loan losses of $195,000
in the 1997 period as a result of increases in the volume of its outstanding
loans and charge-offs experienced during the period. Anderson National Bank made
no provision in the 1996 period. For the nine month period ended September 30,
1997, this subsidiary recorded net charge-offs of $143,000 compared to net
recoveries of $23,000 for the 1996 nine month period.
The Community Bank of Greenville, N.A. recorded a provision for loan
losses of $170,000 in the 1997 period compared to $118,000 for the 1996 period
as it continued to establish its allowance for loan losses. This subsidiary
recorded net charge-offs of $12,000 in the 1997 period.
Spartanburg National Bank recorded a provision for loan losses of
$500,000 for the 1997 period compared to $145,000 for the 1996 period. The
increase in the provision made by this subsidiary was a result of loan growth,
an increase in the amount of charged-off loans and an increase in the amount of
non-accrual loans experienced by this subsidiary during the 1997 period. For the
nine month period ended September 30, 1997, this subsidiary recorded net
charge-offs of $162,000 compared to net charge-offs of $41,000 for the 1996
comparable period.
Quick Credit Corporation recorded a provision for loan losses of $210,000
for the nine month period ended September 30, 1997 compared to $990,000 for the
1996 nine month period and to $1,731,000 for all of fiscal 1996. The decrease in
this subsidiary's provision for the 1997 period resulted from a decrease in the
number and volume of loans charged off, a decrease in the volume of outstanding
loans during the 1997 period and a moderate decline in the volume of overdue
loans. For the nine month period ended September 30, 1997, this subsidiary
recorded net charge offs of $415,000, or 4.53 % of average outstanding loans,
compared to net charge offs of $680,000, or 6.91%, of average outstanding loans
for the 1996 nine month period and to $1,144,000, or 11.66%, of average
outstanding loans for fiscal 1996. Quick Credit
15
<PAGE>
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 Corporation simultaneously to have loans outstanding at several
small loan companies which results in some customers incurring more debt than
they can service. Quick Credit Corporation increased its allowance for loan
losses as a percentage of outstanding loans, net of unearned income, from 9.54%
at September 30, 1996 to 10.70% at September 30, 1997 as a result of the
increase in charge offs experienced during 1996. The increase in charge offs
experienced during 1996 resulted from an increase in customers' inability to
make scheduled payments and an increase in declarations of bankruptcy.
At September 30, 1997 the Company had $1,875,000 in non-accrual loans,
which are considered impaired, $422,000 in loans past due 90 days or more and
still accruing interest and $53,000 in OREO, compared to $414,000, $652,000, and
$85,000, respectively at September 30, 1996 and to $437,000, $416,000, and
$85,000, respectively at December 31, 1996. The significant increase in
non-accrual loans is primarily attributable to four loans at Spartanburg
National Bank totaling $1,385,000. Of these four loans, three loans totaling
$808,000 are Small Business Administration loans of which $606,000 is fully
guaranteed by the Small Business Administration. At September 30, 1997 and 1996,
and December 31, 1996, 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 believes that it has fully provided for
potential losses on these loans in its Allowance for Loan Losses and does not
have 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 other income for the 1997 period increased $111,000, or 7.4%, over
other income recorded for the 1996 period. During the 1997 period the Company
experienced a $121,000, or 24.7%, increase in service charge income on deposit
accounts as a result of a larger deposit base and increases in fees levied on
its existing deposit base. The increase in service charge income on deposit
accounts was partially offset by a decline of $28,000 in other service charges,
commission and fee income items. The largest two contributors to this decrease
were a decline in fee income derived from the sale of alternative investment
products and a decrease in mortgage loan fees. During the 1997 period the
Company recorded a gain on the sale of equity securities from its available for
sale securities portfolio of $38,000, which is included in other income.
16
<PAGE>
Other Expenses
Total other expenses increased $432,000, or 4.9%, in the 1997 period over
the 1996 comparable period. Salaries, wages and benefits ("personnel expense"),
the largest category of other operating expenses, increased $356,000, or 7.1%,
in the 1997 period over the 1996 period. The increase in personnel expense is
attributable to additional staffing for The Community Bank of Greenville, N.A.,
which commenced operations on April 17, 1996, normal merit and promotional
adjustments and increased incentive accruals tied to performance.
Occupancy expense increased 10.0% in the 1997 period as a result of
expenses associated with The Community Bank of Greenville, N.A., which opened
for business April 17, 1996 and the opening of a new branch for Spartanburg
National Bank, which opened in September of 1996.
Furniture and equipment expense increased $182,000, or 44.6%, in the 1997
period as a result of additional depreciation expense associated with the
Company's wide area network installed during the first quarter of 1997 and
additional depreciation expense associated with furniture and equipment for The
Community Bank of Greenville and the new branch for Spartanburg National Bank.
Miscellaneous other operating expenses declined $162,000, or 5.9%, largely
as a result of a decrease in the amount of consultant fees incurred in the 1997
period.
Income Taxes
As a result of increased income before income taxes, the Company incurred
income tax expense of $1,425,000 for the nine month period ended September 30,
1997 compared to income tax expense of $824,000 for the nine month period ended
September 30, 1996.
Quarter ended September 30, 1997 vs. Quarter ended September 30, 1996
Earnings Review
The Company's operations for the three months ended September 30, 1997
resulted in net income of $862,000, a 55.9% increase over the $553,000 in net
income recorded for the comparable 1996 three month period. The increase in
earnings for the 1997 period is primarily attributable to an increase in the
Company's net interest income resulting largely from an increase in interest and
fee income generated by a larger loan portfolio in the 1997 period.
Anderson National Bank and Spartanburg National Bank recorded net earnings
of $420,000 and $227,000, respectively, for the quarter ended September 30,
1997, compared to $421,000 and $283,000, respectively, for the quarter ended
September 30, 1996.
17
<PAGE>
The decrease in earnings for Spartanburg National Bank is attributable to an
increase in the provision for loan losses in the 1997 period.
The Community Bank of Greenville, N.A., which commenced operations on April
17, 1996, recorded net earnings of $61,000 for the quarter ended September 30,
1997 compared to a recorded loss of $158,000 for the quarter ended September 30,
1996.
Quick Credit Corporation recorded net earnings of $236,000 for the quarter
ended September 30, 1997, a 252.3% increase over the $67,000 recorded for the
same quarter of 1996. The significant increase in earnings for this subsidiary
resulted primarily from a $330,000 reduction in the provision for loan losses
for the 1997 quarter when compared to the 1996 quarter.
Interest Income, Interest Expense and Net Interest Income
The Company's net interest income increased $544,000, or 14.2%, to
$4,366,000 for the three month period ended September 30, 1997 compared to
$3,822,000 for the three month period ended September 30, 1996. The increase is
largely attributable to an increase in interest and fee income on loans at the
Company's bank subsidiaries resulting from an increase in the volume of
outstanding loans for the 1997 quarter when compared to the 1996 quarter.
The Company's total interest income increased $1,368,000, or 21.8%, to
$7,654,000 for the 1997 quarter compared to $6,286,000 for the 1996 quarter. Of
the increase, $1,356,000 is attributable to an increase in loan interest and fee
income resulting from a $57,718,000, or 32.6%, increase in the volume of
outstanding loans for the 1997 quarter. The Company's average outstanding loans
for the 1997 quarter were $234,939,000 compared to $177,221,000 for the 1996
quarter and the average yield on loans for the 1997 quarter was 11.93% compared
to 12.76% for the 1996 quarter.
Primarily as a result of the impact of the Community Bank of Greenville,
N.A. on the Company's consolidated balance sheet, average balances on securities
increased by $2,221,000, or 6.8%, in the 1997 quarter when compared to the 1996
quarter. Largely as a result of this increase, interest income on the Company's
securities portfolios, collectively, increased $52,000, or 12.4%.
Interest income on Federal funds sold decreased $40,000, or 26.3%, in the
1997 quarter as a result of a decrease in the average amounts sold during the
quarter. This source of funds was used to help fund the increase in the
Company's loan portfolio during the 1997 period.
Interest expense on deposits increased $898,000, or 43.8%, to $2,947,000
for the 1997 quarter compared to $2,049,000 for the 1996 quarter. The increase
is attributable to increases in the Company's costs of interest-bearing deposits
and an increase of $54,802,000, or 32.3%, in the volume of average
interest-bearing
18
<PAGE>
deposits for the 1997 quarter when compared to the 1996 quarter. The weighted
average cost of interest bearing deposits for the quarter ended September 30,
1997 was 5.25% compared to 4.83% for the quarter ended September 30, 1996.
Interest expense on Securities Sold Under Repurchase Agreements increased
slightly in the 1997 quarter compared to the 1996 quarter. Interest expense
incurred by the Company's bank subsidiaries on average borrowings of $6,020,000
from the Federal Home Loan Bank of Atlanta for the 1997 quarter amounted to
$78,000, a $70,000, or 41.0% decrease from the $119,000 incurred in the 1996
quarter. The decrease in interest expense on Federal Home Loan Bank borrowings
resulted from a decrease in the amount borrowed during the 1997 quarter.
Interest expense on the various categories of other interest-bearing
liabilities, which includes Subordinated Debt, Federal Funds Purchased and Other
Borrowed Funds, collectively, decreased slightly in the 1997 quarter when
compared to the 1996 quarter.
Provision and Allowance for Loan Losses, Loan Loss Experience
The provision for loan losses was $505,000 for the quarter ended September
30, 1997, a $37,000, or 7.9%, increase from the $468,000 provision made for the
quarter ended September 30, 1996. The increase for the 1997 period is the result
of increases in the provision made by the Company's bank subsidiaries during the
1997 quarter. For the quarter ended September 30, 1997, the Company recorded net
loan charge-offs of $448,000, or 0.20%, of average outstanding loans compared to
$263,000, or 0.15%, of average outstanding loans for the 1996 quarter.
Quick Credit Corporation recorded a provision for loan losses of $15,000
for the quarter ended September 30, 1997 compared to $334,000 for the 1996
quarter and to $1,731,000 for fiscal 1996. The decrease in this subsidiary's
provision for the 1997 period resulted from a decrease in the number and volume
of loans charged off, a decrease in the volume of outstanding loans during the
1997 period and a moderate decline in the volume of overdue loans. For the
quarter ended September 30, 1997, this subsidiary recorded net charge offs of
$116,000, or 1.28% of average outstanding loans, compared to net charge offs of
$210,000, or 2.19%, of average outstanding loans for the 1996 quarter and to
$1,144,000, or 11.66%, of average outstanding loans for fiscal 1996.
Anderson National Bank recorded a provision for loan losses of $100,000 for
the quarter ended September 30, 1997 and made no provision in the 1996 quarter.
For the quarter ended September 30, 1997, this subsidiary recorded net
charge-offs of $222,000 compared to net charge-offs of $38,000 for the 1996
quarter.
19
<PAGE>
Spartanburg National Bank recorded a provision for loan losses of $330,000
for the quarter ended September 30, 1997 compared to $50,000 for the 1996
quarter. The increase in the provision made by this subsidiary was primarily the
result of loan growth experienced by this subsidiary during the 1997 period
coupled with Page 19 a decrease in the likelihood of full collection on its
portfolio of non-accrual loans. For the quarter ended September 30, 1997, this
subsidiary recorded net charge-offs of $98,000 compared to net charge-offs of
$15,000 for the 1996 quarter.
The Community Bank of Greenville, N.A. recorded a provision for loan losses
of $60,000 in the 1997 quarter compared to $73,000 for the 1996 quarter as it
continued to establish its allowance for loan losses. This subsidiary
experienced loan losses of $12,000 in the 1997 quarter.
Other Income
Total other income for the 1997 quarter increased $86,000, or 17.5%, over
total other income recorded for the 1996 quarter. During the 1997 quarter the
Company experienced a $43,000, or 25.8% increase in service charge income on
deposit accounts as a result of a larger deposit base and increases in fees
levied on its existing deposit base. During the 1997 quarter the Company also
experienced an increase in other service charges, commissions and fee income of
$39,000, or 16.7%, primarily as a result of an increase in fees associated with
the Company's mortgage lending activities and an increase in fees associated
with the Company's merchant discount program for credit cards.
Other Expenses
Total other expenses recorded in the 1997 quarter increased $145,000, or
4.9%. Salaries, wages and benefits ("personnel expense"), the largest category
of other operating expenses, increased $149,000, or 9.1%, in the 1997 quarter
when compared to the 1996 quarter. The increase in personnel expense is largely
attributable to normal merit and promotional adjustments, increased incentive
accruals tied to performance and additional staffing required for two new Quick
Credit offices opened during the 1997 quarter.
Occupancy expense and furniture and equipment expenses, collectively,
increased $69,000, or 19.6%, in the 1997 quarter largely as a result of expenses
associated with a new branch facility for Spartanburg National Bank which opened
during the third quarter of 1996 and additional depreciation expense associated
with the Company's wide area network.
Other operating expenses, the second largest category of other expenses,
decreased $73,000, or 7.5%, in the 1997 quarter. The decrease resulted primarily
from a decrease in consultant fees paid in the 1997 quarter and a decrease in
expenses, primarily advertising and supplies, in the 1997 quarter when compared
to the 1996.
Income Taxes
As a result of increased income before income taxes, the Company incurred
income tax expense of $456,000 for the quarter
20
<PAGE>
ended September 30, 1997 compared to income tax expense of $317,000 for the
quarter ended September 30, 1996.
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, N.A.) 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, Anderson National Bank and The Community Bank of Greenville, N.A.
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,
1997 Anderson National Bank had $200,000 in long-term advances from the Federal
Home Loan Bank of Atlanta and $2,000,000 in short term advances. At September
30, 1997 Spartanburg National Bank had $550,000 in long-term advances from the
Federal Home Loan Bank of Atlanta. Both Anderson National Bank and Spartanburg
National Bank have lines of credit established with the Federal Home Loan Bank
of Atlanta in excess of their existing balances at September 30, 1997.
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
$900,000 was available at September 30, 1997. 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 years if certain criteria are met. At the end of five
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 years. The line of credit bears interest at a
variable rate. 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, 1997, the Company's consumer finance subsidiary, Quick
Credit Corporation, had debt outstanding of $900,000 in the form of subordinated
debt and $4,200,000 outstanding under an $18,000,000 line of credit secured by
Quick Credit Corporations's loans receivable with a third party lender.
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.
21
<PAGE>
CAPITAL ADEQUACY AND RESOURCES
The capital needs of the Company have been met through the retention of
earnings and from the proceeds of a prior public stock offering in 1988.
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 7.09 and 6.72% at September 30, 1997 and December 31, 1996,
respectively. The leverage capital ratios for Anderson National Bank,
Spartanburg National Bank and The Community Bank of Greenville, N.A. were
7.65%,7.45% and 8.26%, respectively at September 30, 1997, compared to 7.25%,
6.74% and 10.45%, respectively, at December 31, 1996. The decline in The
Community Bank of Greenville's leverage ratio is a result of asset growth
experienced during the period ended September 30, 1997.
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. 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 10.35% and its Tier 1 capital to risk weighted assets ratio
was 9.02% at September
22
<PAGE>
30, 1997, compared to 10.30% and 8.92%, respectively, at December 31, 1996. The
risk-based capital ratios for Anderson National Bank, Spartanburg National Bank
and The Community Bank of Greenville, N.A. were 10.49%, 10.88% and 12.42%,
respectively, at September 30, 1997 compared to 10.35%, 9.99% and 18.76%,
respectively, at December 31, 1996. Their Tier 1 capital to risk weighted assets
ratios were 9.55%, 9.63% and 11.42%, respectively, at September 30, 1997
compared to 9.34%, 8.90% and 17.88%, respectively, at December 31, 1996. The
decline in The Community Bank of Greenville, N.A.'s risk-based capital ratio and
its Tier 1 capital to risk weighted assets ratio was a result of asset growth
experienced during the period ended September 30, 1997.
The Company opened its new bank subsidiary, The Community Bank of
Greenville, N. A., in the city of Greenville, South Carolina on April 17, 1996.
The Company capitalized this new bank subsidiary with $4.5 million of capital
acquired 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. In June of 1997, the Company injected $500,000 of additional capital
into Spartanburg National Bank to facilitate continued asset growth at this
subsidiary.
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 February 1997, the FASB issued SFAS No. 128, "Earnings Per Share."
SFAS No. 128 simplifies the current computation of earnings per share and makes
the United States standards for the computation more compatible with
international earnings per share standards. The Statement requires dual
presentation of earnings
23
<PAGE>
per share for all entities with complex capital structures. It also replaces the
presentation of primary earnings per share with a presentation of basic earnings
per share. The Statement is effective for the Company for the year ended
December 31, 1997. The Company does not anticipate that adoption of this
Statement will have a material effect on its financial statements.
FORWARD LOOKING INFORMATION
Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations which are not historical in nature are
intended to be, and are hereby identified as "forward looking statements" for
purposes of the safe harbor provided by Section 21E of the Securities Exchange
Act of 1934, as amended. The Company cautions readers that forward looking
statements, including without limitation, those relating to the Company's future
business prospects, revenues, working capital, liquidity, capital needs,
interest costs, and income, are subject to certain risks and uncertainties that
could cause actual results to differ materially from those indicated in the
forward looking statements, due to several important factors herein identified,
among others, and other risks and factors identified from time to time in the
Company's reports filed with the Securities and Exchange Commission.
24
<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.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 3.1 - Articles of Incorporation of the Registrant,
as amended.
Exhibit 27 - Financial Data Schedule
25
<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
s/Mason Y. Garrett
Dated: November 4, 1997 ----------------------------
Mason Y. Garrett, President
and Chief Executive Officer
s/William B. West
----------------------------
William B. West, Sr. Vice
President and Chief Financial
and Accounting Officer
26
<PAGE>
Exhibit Index
Exhibit 3.1 - Articles of Incorporation of the Registrant, as amended.
Exhibit 27 - Financial Data Schedule
27
Jim Miles
Secretary of State
Filed
August 8, 1997
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF AMENDMENT
Pursuant to Section 33-10-106 of the 1976 South Carolina Code, as
amended, the undersigned corporation adopts the following Articles of Amendment
to its Articles of Incorporation:
1. The name of the corporation is First United Bancorporation.
2. On July 29, 1997, the corporation adopted the following Amendment(s)
of its Articles of Incorporation.
RESOLVED, that pursuant to a three-for-two split of the authorized
shares of the Corporation's common stock, the total number of
authorized shares of the Corporation's common stock shall be increased
from 15,000,000 shares to 22,500,000 shares and the par value of each
authorized share shall be reduced from $1.66 2/3 per share to $1 1/9
per share.
3. The manner, if not set forth in the amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the
Amendment shall be effected, is as follows: (if not applicable, insert
"not applicable" or "NA").
Shareholders of record on August 15, 1997 will be issued additional
stock certificates representing one additional share of the
Corporation's Common Stock for every two shares currently held. Cash
will be paid in lieu of fractional shares.
4. Complete either a or b, whichever is applicable.
a. [ ] Amendment(s) adopted by shareholder action.
At the date of adoption of the amendment, the number of
outstanding shares of each voting group entitled to vote
separately on the Amendment, and the vote of such shares was:
Number of Number of Number of Number of
out- Votes Shares Undisputed*
Voting standing Entitled Represented Shares Voted
Group Shares to be Cast at the meeting For Against
b. [x] The amendment(s) was duly adopted by the Incorporators or
board of directors without shareholder approval pursuant to
Sections 33-6-102(d), 33-10-102 and 33-10-105 of the 1976
South Carolina Code as amended, and shareholder action was
not required.
28
<PAGE>
5. Unless a delayed date is specified, the effective date of these
Articles of Amendments shall be the date of acceptance for filing by
the Secretary of State (See Section 33-1-230(b)) .
DATE: 7/29/97 FIRST UNITED BANCORPORATION
(Name of Corporation)
By: s/William B. West
-------------------
(Signature)
William B. West, Senior Vice President
(Type or Print Name and Office)
*NOTE: Pursuant to Section 33-10-106(6)(i), the Corporation can alternatively
state the total number of votes cast for and against the amendment by
each voting group entitled to vote separately on the amendment or the
total number of undisputed votes cast for the amendment by each voting
group together with a statement that the number cast for the amendment
by each voting group was sufficient for approval by that voting group.
29
<PAGE>
Jim Miles
Secretary of State
Filed
November 28, 1994
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF AMENDMENT
Pursuant to Section 33-10-106 of the 1976 South Carolina Code, as amended,
the undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
1. The name of the corporation is First United Bancorporation.
2. On October 25, 1994, the corporation adopted the following Amendment(s) of
its Articles of Incorporation.
RESOLVED, that pursuant to a three-for-two split of the authorized shares
of the Corporation's common stock, the total number of authorized shares of
the Corporation's common stock shall be increased from 10,000,000 shares to
15,000,000 shares and the par value of each authorized share shall be
reduced from $2.50 per share to $1.66 2/3 per share.
3. The manner, if not set forth in the amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the
Amendment shall be effected, is as follows: (if not applicable, insert "not
applicable" or "NA").
Shareholders of record on November 8, 1994 will be issued additional stock
certificates representing an additional three shares of the Corporation's
Common Stock for every two shares currently held. Cash will be paid in lieu
of fractional shares.
4. Complete either a or b, whichever is applicable.
a. [ ] Amendment(s) adopted by shareholder action.
At the date of adoption of the amendment, the number of outstanding shares
of each voting group entitled to vote separately on the Amendment, and the
vote of such shares was:
Number of Number of Number of Number of
out- Votes Shares Undisputed*
Voting standing Entitled Represented Shares Voted
Group Shares to be Cast at the meeting For Against
b. [x] The amendment(s) was duly adopted by the Incorporators or board
of directors without shareholder approval pursuant to Sections
33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South Carolina
Code as amended, and shareholder action was not required.
5. Unless a delayed date is specified, the effective date of these Articles
of Amendments shall be the date of acceptance for filing by the Secretary
of State (See Section 33-1-230(b)) .
FIRST UNITED BANCORPORATION
DATE:
(Name of Corporation)
By: s/William B. West
--------------------
(Signature)
William B. West, Senior Vice President
(Type or Print Name and Office)
*NOTE: Pursuant to Section 33-10-106(6)(i), the corporation can
alternatively state the total number of votes cast for and
against the amendment by each voting group entitled to vote
separately on the amendment or the total number of undisputed
votes cast for the amendment by each voting group together with
a statement that the number cast for the amendment by each
voting group was sufficient for approval by that voting group.
30
<PAGE>
Jim Miles
Secretary of State
Filed
May 6, 1994
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF AMENDMENT
Pursuant to Section 33-10-106 of the 1976 South Carolina Code, as
amended, the undersigned corporation adopts the following Articles of Amendment
to its Articles of Incorporation:
1. The name of the corporation is First United Bancorporation.
2. On April 26, 1994, the corporation adopted the following Amendment(s) of
its Articles of Incorporation.
Text attached as Exhibit A.
3. The manner, if not set forth in the amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the
Amendment shall be effected, is as follows: (if not applicable, insert "not
applicable" or "NA").
N/A
4. Complete either a or b, whichever is applicable.
a. [x] Amendment(s) adopted by shareholder action.
At the date of adoption of the amendment, the number of outstanding
shares of each voting group entitled to vote separately on the
Amendment, and the vote of such shares was:
Number of Number of Number of Number of
out- Votes Shares Undisputed*
Voting standing Entitled Represented Shares Voted
Group Shares to be Cast at the meeting For Against
Common 1,252,450 1,252,450 1,030,810 918,184 23,354
b. [ ] The amendment(s) was duly adopted by the Incorporators or board
of directors without shareholder approval pursuant to Sections
33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South Carolina
Code as amended, and shareholder action was not required.
31
<PAGE>
5. Unless a delayed date is specified, the effective date of these Articles of
Amendments shall be the date of acceptance for filing by the Secretary of
State (See Section 33-1-230(b)) date of filing.
DATE: 4/26/94 First United Bancorporation
(Name of Corporation)
By: s/William B. West
---------------------------------------------
(Signature)
William B. West, Senior vice President
Anderson, S.C.
(Type or Print Name and Office)
*NOTE: Pursuant to Section 33-10-106(6)(i), the corporation can alternatively
State the total number of undisputed shares cast for the amendment by
each voting group together with a statement that the number of cast
for the amendment by each voting group was sufficient for approval by
that voting group.
32
<PAGE>
EXHIBIT A
RESOLVED, that Article Four of the Company's Articles of Incorporation be, and
hereby is, amended (i) to increase the authorized Common Stock of the Company
($2.50 par value) from 2,000,000 authorized shares to 10,000,000 authorized
shares, and (ii) to authorize 10,000,000 shares of Preferred Stock, and thereby
to read as follows:
Article Four: Stock
The Corporation is authorized to issue two classes of shares as follows:
Class of Shares Authorized Number
--------------- -----------------
Common Stock 10,000,000
Preferred Stock 10,000,000
The Common Stock shall have a par value of $2.50 per share and the Preferred
Stock shall have no par value. The relative rights, preferences, and limitations
of the shares of each class and of each series within a class are as follows:
Common Stock - Shares of this class shall have unlimited voting rights and shall
be entitled, together with any other class having such rights, to receive the
net assets of the Corporation upon dissolution.
Preferred Stock - Shares of this class may be issued in separate series and the
preferences, limitations and relative rights of this class and any series within
this class shall be determined by the board of directors before issuance of any
shares of such class or series.
33
<PAGE>
John T. Campbell
Secretary of State
Filed
July 8, 1987
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF INCORPORATION
OF
FIRST UNITED BANCORPORATION
I, the undersigned natural person having capacity to contract and
acting as an incorporator of a Corporation (hereinafter called the
"Corporation") under the South Carolina Business Corporation Act, do hereby
adopt the following Articles of Incorporation for the Corporation:
ARTICLE ONE: NAME
The name of the Corporation is First United Bancorporation.
ARTICLE TWO: INITIAL OFFICE AND AGENT
The initial registered office of the Corporation is located at 304
North Main Street, City of Anderson, County of Anderson, and the State of South
Carolina, and the agent at such address is William B. West.
ARTICLE THREE: DURATION
The Corporation's period of duration is perpetual.
ARTICLE FOUR: STOCK
The Corporation is authorized to issue one class of shares to be
designated "common". The total number of shares which the Corporation is
authorized to issue is 2,000,000 shares, and the par value of each such share is
$2.50. The total authorized capital stock is $5,000,000.
ARTICLE FIVE: INITIAL DIRECTORS
Section A. The number of directors of the Corporation shall be fixed
and may be altered from time to time as provided in the bylaws.
Section B. The Board of Directors shall be divided into three classes,
Class I, Class II and Class III, which shall be as nearly equal in number as
possible. Each director shall serve for a term ending on the date of the third
annual meeting following the annual meeting at which such director was elected.
Section C. In the event of any increase or decrease in the authorized
number of directors (i) each director then serving as such shall nevertheless
continue as a director of the class of which he is a member until the expiration
of his current term, or his prior death, retirement, resignation or removal, and
(ii) the newly created or eliminated directorships resulting from such an
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to maintain such classes as nearly equal as
possible.
34
<PAGE>
Section D. Notwithstanding any of the foregoing provisions of this
Article, each director shall serve until his successor is elected and qualified
or until his death, retirement, resignation or removal for cause. Should a
vacancy occur or be created, whether arising through death, resignation or
removal for cause of a director or through an increase in the number of
directors in any class, each vacancy shall be filled by a majority vote of the
remaining directors. A director so elected to fill a vacancy shall serve until
the next election of the class for which such director shall have been chosen,
and until his successor has been duly elected and qualified.
Section E. The initial directors are:
Irvin L. Cauthen T. Ree McCoy, Jr.
1805 Lindale Road 2601 Milgate Road
Anderson, SC 29621 Anderson, SC 29621
Mason Y. Garrett Donald C. Roberts
1601 N. Boulevard 1206 Northhampton Road
Anderson, SC 29621 Anderson, SC 29621
John C. Ginn Harold P. Threlkeld
2835 Old Williamston Road 2304 Milgate Road
Anderson, SC 29621 Anderson, SC 29621
Randolph V. Hayes William B. West
Concord Road 2810 Rambling Path
Anderson, SC 29621 Anderson, SC 29621
J. Donald King
2900 Little Creek Drive
Anderson, SC 29621
The initial directors will serve until the first annual meeting of stockholders
of the Corporation. At the first annual meeting of stockholders, directors will
be elected to classified terms.
35
<PAGE>
ARTICLE SIX: PURPOSE
The purpose or purposes for which the Corporation is organized are:
(a) To act as a bank holding company;
(b) To transact any and all lawful business for which corporations may be
incorporated under the South Carolina Business Corporation Act;
(c) To do each and every thing necessary, suitable, or proper for the
accomplishment of any of the purposes or for the attainment of any one
or more of the objects herein enumerated or which at any time appear
conducive to or expedient for the protection or benefit of the
Corporation.
The foregoing clauses shall be construed as powers as well as objects and
purposes, and the matter expressed in each clause shall, unless herein otherwise
expressly provided, be in nowise limited by reference to or inference from the
terms of any other clause, but shall be regarded as independent objects,
purposes and powers, and shall not be construed to limit or restrict in any
manner the meaning of the general terms or the general powers of the
Corporation.
ARTICLE SEVEN: PREEMPTIVE RIGHTS DENIED
No holder of shares of any class of the Corporation shall have any
preemptive rights to subscribe for or acquire additional shares of the
Corporation of the same or any other class, whether such shares shall be hereby
or hereafter authorized; and no holder of shares of any class of the Corporation
shall have any right to acquire any shares which may be held in the treasury of
the Corporation; all such additional or treasury shares may be issued for such
consideration, at such time, and to such person or persons as the Board of
Directors of the Corporation may from time to time determine.
ARTICLE EIGHT: CUMULATIVE VOTING
Cumulative voting for the election of directors is prohibited.
ARTICLE NINE: VOTING
Except where otherwise provided in these Articles of Incorporation or the
bylaws of the Corporation, the holders of the common shares shall have the
exclusive voting rights and powers, including the exclusive right to notice of
stockholders' meetings.
36
<PAGE>
ARTICLE TEN: ADOPTION OF BYLAWS
The Board of Directors of the Corporation shall adopt the initial bylaws of
the Corporation and may thereafter alter, amend, or repeal the bylaws of the
Corporation or may adopt new bylaws, subject to the stockholders' concurrent
right to alter, amend, or repeal the bylaws or to adopt new bylaws and to the
express provisions of the bylaws. The stockholders may provide that any or all
bylaws altered, amended, repealed, or adopted by the stockholders shall not be
altered, amended, re-enacted, or repealed by the Board of Directors of the
Corporation.
ARTICLE ELEVEN: REPURCHASE OF STOCK
The Corporation is authorized to purchase, directly or indirectly, its own
shares to the extent of the aggregate of the unreserved and unrestricted earned
surplus and unreserved and unrestricted capital surplus available therefor.
ARTICLE TWELVE: AUTHORITY TO BORROW
The Board of Directors is expressly authorized, without the consent of the
stockholders, except so far as such consent is herein or by law provided, to
issue and sell or otherwise dispose of, for any purpose, the Corporation's
bonds, debentures, notes or other securities or obligations, upon such terms and
for such consideration as the Board of Directors shall deem advisable, and
specifically may issue bonds or debentures convertible into shares of any class
of stock, including common stock, of the Corporation within such period and upon
such conditions as shall be fixed by the Board of Directors, and to authorize
and cause to be executed mortgages, pledges, charges and liens upon all or part
of the real and personal property rights, interest and franchise of the
Corporation, including contract rights, whether at the time owned or thereafter
acquired.
ARTICLE THIRTEEN: CERTAIN BUSINESS COMBINATIONS
Section A. For the purposes of this Article:
(1) The term "beneficial owner" and correlative terms shall have the
meaning as set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, or any similar successor Rule. Without limitation and in addition to
the foregoing, any shares of Voting Stock of this Corporation which any Major
Stockholder has the right to vote or to acquire (i) pursuant to any agreement,
(ii) by reason of tenders of shares by stockholders of the Corporation in
connection with or pursuant to a tender offer made by such Major Stockholder
(whether or not any tenders have been accepted, but excluding tenders which have
been rejected), or (iii) upon the exercise of conversion rights, warrants,
options or otherwise, shall be deemed "beneficially owned" by such Major
Stockholder.
(2) The term "Business Combination" shall mean:
(a) any merger or consolidation (whether in a single transaction
or a series of related transactions, including a series of separate
transactions with a Major Stockholder, any Affiliate or Associate
thereof or any Person acting in concert therewith) of this Corporation
or any Subsidiary with or into a Major Stockholder or of a Major
Stockholder into this Corporation or a Subsidiary;
(b) any sale, lease, exchange, transfer, distribution to
stockholders or other disposition, including without limitation, a
mortgage, pledge or any other security devise, to or with a Major
Stockholder by the Corporation or any of its Subsidiaries (in a single
transaction or a series of related transactions) of all, substantially
all or any Substantial Part of the assets of this Corporation or a
Subsidiary (including, without limitation, any securities of a
Subsidiary);
(c) the purchase, exchange, lease or other acquisition by the
Corporation or any of its Subsidiaries (in a single transaction or a
series of related transactions) of all, substantially all or any
Substantial Part of the assets or business of a Major Stockholder;
37
<PAGE>
(d) the issuance of any securities, or of any rights, warrants or
options to acquire any securities, of this Corporation or a Subsidiary
to a Major Stockholder or the acquisition by this Corporation or a
Subsidiary of any securities, or of any rights, warrants or options to
acquire any securities, or a Major Stockholder;
(e) any reclassification of Voting Stock, recapitalization or
other transaction (other than a redemption in accordance with the
terms of the security redeemed) which has the effect, directly or
indirectly, of increasing the proportionate amount of Voting Stock of
the Corporation or any Subsidiary thereof which is beneficially owned
by a Major Stockholder, or any partial or complete liquidation, spin
off, split off or split up of the Corporation or any Subsidiary
thereof; provided, however, that this Section A(2)(e) shall not relate
to any transaction of the types specified herein that has been
approved by a majority of the Continuing Directors; and
(f) any agreement, contract or other arrangement providing for
any of the transactions described herein.
(3) The term "Continuing Director" shall mean (i) a person who was a member
of the Board of Directors of this Corporation immediately prior to the time that
any then existing Major Stockholder became a Major Stockholder or (ii) a person
designated (before initially becoming a director) as a Continuing Director by a
majority of the then Continuing Directors. All references to a vote of the
Continuing Directors shall mean a vote of the total number of Continuing
Directors of the Corporation
(4) The term "Major Stockholder" shall mean any Person which, together with
its "Affiliates" and "Associates" (as defined in Rule 12b-2 of the Securities
Exchange Act of 1934, as amended, or any similar successor Rule) any Person
acting in concert therewith, is the beneficial owner of 10% or more of the votes
held by the holders of the outstanding shares of the Voting Stock of this
Corporation, and any Affiliate or Associate of a Major Stockholder, including a
Person acting in concert therewith. The term "Major Stockholder" shall not
include a Subsidiary of this Corporation.
(5) The term "Person" shall mean any individual, corporation, partnership
or other person, group or entity (other than the Corporation, any Subsidiary of
the Corporation or a trustee holding stock for the benefit of employees of the
corporation or its Subsidiaries, or any one of them, pursuant to one or more
employee benefit plans or arrangements). When two or more Persons act as a
partnership, limited partnership, syndicate, association or other group for the
purpose of acquiring, holding or disposing of shares of stock, such
partnerships, syndicate, association or group will be deemed a "Person".
38
<PAGE>
(6) The term "Subsidiary" shall mean any business entity 50% or more of
which is beneficially owned by the Corporation.
(7) The term "Substantial Part", as used in reference to the assets of the
Corporation, of any Subsidiary or of any Major Stockholder means assets having a
value of more than 5% of the total consolidated assets of the Corporation and
its Subsidiaries as of the end of the Corporation's most recent fiscal year
ending prior to the time the determination is made.
(8) The term "Voting Stock" shall mean stock or other securities entitled
to vote upon any action to be taken in connection with any Business Combination
or entitled to vote generally in the election of directors, including stock or
other securities convertible into Voting Stock.
Section B. Notwithstanding any other provisions of these Articles of
Incorporation and except as set forth in Section C. of this Article Thirteen,
neither the Corporation nor any Subsidiary shall be party to a Business
Combination unless:
(1) The Business Combination was approved by the Board of Directors of the
Corporation prior to the Major Stockholder involved in the Business Combination
becoming such; or
(2) The Major Stockholder involved in the Business Combination sought and
obtained the unanimous prior approval of the Board of Directors to become a
Major Stockholder and the Business Combination was approved by a majority of the
Continuing Directors; or
(3) The Business Combination was approved by at least 80% of the Continuing
Directors of the Corporation; or
(4) The Business Combination was approved by at least a 80% vote of the
outstanding Voting Stock of this Corporation and by at least a 80% vote of the
outstanding Voting Stock beneficially owned by stockholders other than any Major
Stockholder.
Section C. During the time a Major Stockholder exists, a resolution to
voluntarily dissolve the Corporation shall be adopted only if: (1) such
resolution is approved by at least 80% of the Continuing Directors of the
Corporation; or (2) such resolution is approved by at least 80% of the
outstanding Voting Stock of this Corporation and by at least 80% of the
outstanding Voting Stock beneficially owned by stockholders other than any Major
Stockholder.
Section D. As to any particular transaction, the Continuing Directors shall
have the power and duty to determine, on the basis of information known to them:
(1) The amount of Voting Stock beneficially held by any;
39
<PAGE>
(2) Whether a Person is an Affiliate or Associate of another;
(3) Whether a Person is acting in concert with another;
(4) Whether the assets subject to any Business Combination constitute a
"Substantial Part" as herein defined;
(5) Whether a proposed transaction is subject to the provisions of this
Article; and
(6) Such other matters with respect to which a determination is required
under this Article.
Any such determination shall be conclusive and binding for all purposes of this
Article.
Section E. The affirmative vote required by this Article is in addition to
the vote of the holders of any class or series of stock of the Corporation
otherwise required by law, these Articles of Incorporation, any resolution which
has been adopted by the Board of Directors providing for the issuance of a class
or series of stock or any agreement between the Corporation and any national
securities exchange.
Section F. Any amendment, change or repeal of this Article or any other
amendment of these Articles of Incorporation which would have the effect of
modifying or permitting circumvention of the provisions of this Article shall
require approval by at least 80% of the outstanding Voting Stock of the
Corporation and at least 80% of the outstanding voting Stock beneficially owned
by stockholders other than any Major Stockholder.
ARTICLE FOURTEEN: INDEMNIFICATION
The Corporation shall indemnify any person who (i) is or was a director,
officer, employee, or agent of the Corporation or (ii) while a director,
officer, employee, or agent of the Corporation, is or was serving at the request
of the corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, to the fullest extent that a corporation may
or is required to grant indemnification to a director under the South Carolina
Business Corporation Act. The Corporation may indemnify any person to such
further extent as permitted by law.
40
<PAGE>
ARTICLE FIFTEEN: INCORPORATOR
The name and address of the incorporator is:
NAME ADDRESS
William B. West 2810 Rambling Path
Anderson, SC 29621
Date: July 2, 1987 s/William B. West
-------------------- -----------------------
William B. West
41
<PAGE>
STATE OF SOUTH CAROLINA )
)
COUNTY OF ANDERSON )
The undersigned, William B. West, does hereby certify that he is the
incorporator of First United Bancorporation, and is authorized to execute this
verification; that he does hereby further certify that he has read the foregoing
document, understands the meaning and purport of the statements therein
contained and the same are true to the best of his information and belief.
Date: July 2, 1987 s/William B. West
-------------------- -----------------------
William B. West
42
<PAGE>
CERTIFICATE OF ATTORNEY
I, Harold P. Threlkeld, an Attorney licensed to practice in the State
of South Carolina, certify that the Corporation, to whose articles of
incorporation this certificate is attached, has complied with the requirements
of Chapter 7 of Title 33 of the South Carolina Code of 1976, relating to the
organization of corporations, and that in my opinion, the Corporation is
organized for a lawful purpose.
Date: July 2, 1987 s/Harold P. Threlkeld
-------------------- -----------------------
Harold P. Threlkeld
Address:
213 East Calhoun Street
Anderson, South Carolina 29622-0917
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at September 30, 1997, and the Consolidated Statement
of Income for the Nine Months Ended September 30, 1997 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-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 8,924
<INT-BEARING-DEPOSITS> 43
<FED-FUNDS-SOLD> 9,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 26,186
<INVESTMENTS-CARRYING> 7,193
<INVESTMENTS-MARKET> 7,327
<LOANS> 237,620
<ALLOWANCE> 3,503
<TOTAL-ASSETS> 297,153
<DEPOSITS> 256,224
<SHORT-TERM> 5,589
<LIABILITIES-OTHER> 3,733
<LONG-TERM> 10,450
0
0
<COMMON> 4,416
<OTHER-SE> 16,741
<TOTAL-LIABILITIES-AND-EQUITY> 297,153
<INTEREST-LOAN> 20,049
<INTEREST-INVEST> 1,966
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 22,015
<INTEREST-DEPOSIT> 8,077
<INTEREST-EXPENSE> 9,305
<INTEREST-INCOME-NET> 12,107
<LOAN-LOSSES> 1,075
<SECURITIES-GAINS> 38
<EXPENSE-OTHER> 9,171
<INCOME-PRETAX> 4,067
<INCOME-PRE-EXTRAORDINARY> 4,067
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,642
<EPS-PRIMARY> 0.64
<EPS-DILUTED> 0.63
<YIELD-ACTUAL> 6.38
<LOANS-NON> 1,875
<LOANS-PAST> 422
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 4,042
<ALLOWANCE-OPEN> 3,160
<CHARGE-OFFS> 1,007
<RECOVERIES> 275
<ALLOWANCE-CLOSE> 3,503
<ALLOWANCE-DOMESTIC> 3,503
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
