FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 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 June 30, 1997:
2,629,025 shares of common stock, $1.67 Par Value
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TABLE OF CONTENTS
PAGE
PART I ITEM 1 FINANCIAL INFORMATION
Consolidated Balance Sheets....................................... 3
June 30, 1997 and December 31, 1996
(unaudited)
Consolidated Statements of Income................................. 4
Three months ended June 30, 1997
and 1996 (unaudited)
Consolidated Statements of Income................................. 5
Six Months ended June 30, 1997
and 1996 (unaudited)
Consolidated Statements of Changes in
Shareholders' Equity.............................................. 6
Year ended December 31, 1996 and six
months ended June 30, 1997 (unaudited)
Consolidated Statements of Cash Flows
Six months ended June 30, 1997 and....................... 7
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................................................. 24
SIGNATURES................................................................. 26
2
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FIRST UNITED BANCORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
(Unaudited)
--------- ----
(In thousands)
ASSETS:
Cash and due from banks .......................... $ 9,835 $ 8,128
Federal funds sold ............................... 6,250 13,700
Investment securities:
Held to maturity (Market value of $7,149
and $8,006) .................................. 7,006 7,843
Available for sale (Cost of $28,810
and $26,218) ................................. 28,794 26,304
Total loans ...................................... 231,925 205,551
Less: Allowance for loan losses .................. (3,445) (3,160)
--------- ---------
Net loans ...................................... 228,480 202,391
Premises, furniture and equipment (net) .......... 7,524 7,627
Other real estate owned .......................... 74 85
Other assets ..................................... 4,503 4,117
--------- ---------
TOTAL ASSETS ................................. $ 292,466 $ 270,195
========= =========
LIABILITIES:
Demand deposits .................................. $ 24,604 $ 23,180
NOW accounts ..................................... 26,846 25,143
Savings and money market deposits ................ 35,283 34,113
Certificates of deposit greater than $100,000 .... 46,673 41,073
Certificates of deposit less than $100,00
and other time deposits ........................ 108,037 94,710
--------- ---------
TOTAL DEPOSITS ............................... 241,443 218,219
--------- ---------
Securities sold under repurchase agreements ...... 3,360 8,167
Federal Home Loan Bank Borrowings ................ 13,290 10,830
Other borrowed funds ............................. 10,800 11,900
Other liabilities ................................ 3,309 2,794
--------- ---------
TOTAL LIABILITIES ............................ 272,202 251,910
--------- ---------
SHAREHOLDERS' EQUITY:
Common stock ($1.67 par value, 15,000,000
shares authorized; 2,629,025 and 2,587,895
shares issued and outstanding, respectively) ... 4,384 4,315
Paid-in capital .................................. 14,252 13,965
Retained earnings ................................ 1,638 14
Unrealized gain (loss) on securities
available for sale, net of income taxes ....... (10) (9)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ......................... 20,264 18,285
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY ......... $ 292,466 $ 270,195
========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
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FIRST UNITED BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED
June 30, June 30,
1997 1996
---- ----
(In thousands except
per share data)
INTEREST INCOME:
Loans .............................................. $6,691 $5,257
Federal funds sold ................................. 116 175
Taxable investment securities ...................... 480 386
Non-taxable investment securities .................. 61 62
------ ------
Total interest income .............................. 7,348 5,880
------ ------
INTEREST EXPENSE:
Interest on deposits ............................... 2,665 1,889
Interest on securities sold under
repurchase agreements ............................ 47 41
Interest on other borrowed funds ................... 385 283
------ ------
Total interest expense ............................. 3,097 2,213
------ ------
Net interest income ................................ 4,251 3,667
Provision for loan losses .......................... 300 464
------ ------
Net interest income after provision
for loan losses .................................. 3,951 3,203
------ ------
OTHER INCOME:
Service charges on deposit accounts ................ 215 157
Other service charges, commissions & fees .......... 228 239
Other income ....................................... 70 103
------ ------
Total other income ................................. 513 499
------ ------
OTHER EXPENSES:
Salaries, wages and benefits ....................... 1,758 1,637
Occupancy expenses ................................. 195 182
Furniture and equipment expenses ................... 194 133
Other operating expenses ........................... 839 1,031
------ ------
Total other expenses ............................... 2,986 2,983
------ ------
Income before income taxes ........................... 1,478 719
Provision for income taxes ........................... 517 250
------ ------
NET INCOME ........................................... $ 961 $ 469
====== ======
PER SHARE DATA:
Primary ............................................ $ 0.35 $ 0.17
Fully diluted ...................................... $ 0.35 $ 0.17
AVERAGE COMMON SHARES OUTSTANDING:
Primary ............................................ 2,747 2,717
Fully diluted ...................................... 2,757 2,717
Cash dividends ..................................... $ 0.03 $ 0.03
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
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FIRST UNITED BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
SIX MONTHS ENDED
June 30, June 30,
1997 1996
---- ----
(In thousands except
per share data)
INTEREST INCOME:
Loans ............................................ $13,044 $10,160
Federal funds sold ............................... 256 250
Taxable investment securities .................... 936 738
Non-taxable investment securities ................ 125 126
------- -------
Total interest income ............................ 14,361 11,274
------- -------
INTEREST EXPENSE:
Interest on deposits ............................. 5,130 3,614
Interest on securities sold
under repurchase agreements .................... 84 81
Interest on other borrowed funds ................. 803 546
------- -------
Total interest expense ........................... 6,017 4,241
------- -------
Net interest income .............................. 8,344 7,033
Provision for loan losses ........................ 570 785
------- -------
Net interest income after provision
for loan losses ............................... 7,774 6,248
------- -------
OTHER INCOME:
Service charges on deposit accounts .............. 401 316
Other service charges, commissions
and fees ....................................... 448 538
Other income ..................................... 176 146
------- -------
Total other income ............................... 1,025 1,000
------- -------
OTHER EXPENSES:
Salaries, wages and benefits ..................... 3,578 3,371
Occupancy expenses ............................... 396 355
Furniture and equipment expenses ................. 387 259
Other operating expenses ......................... 1,689 1,778
------- -------
Total other expenses ............................. 6,050 5,763
------- -------
Income before income taxes ......................... 2,749 1,485
Provision for income taxes ......................... 969 507
------- -------
NET INCOME ......................................... $ 1,780 $ 978
======= =======
PER SHARE DATA:
Primary .......................................... $ 0.65 $ 0.36
Fully diluted .................................... $ 0.65 $ 0.36
AVERAGE COMMON SHARES OUTSTANDING:
Primary .......................................... 2,732 2,723
Fully diluted .................................... 2,751 2,723
Cash dividends ................................... $ 0.03 $ 0.03
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
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FIRST UNITED BANCORPORATION
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR YEAR ENDED DECEMBER 31, 1996 AND THE SIX MONTHS
ENDED June 30,1997
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
UNREALIZED
NET GAIN
(LOSS) ON
NUMBER OF SECURITIES SHARE-
SHARES COMMON PAID-IN RETAINED AVAILABLE HOLDERS'
OUTSTANDING STOCK CAPITAL EARNINGS FOR SALE EQUITY
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995................ 2,315 $3,859 $11,269 $ 1,343 $(64) $ 16,407
Issuance of 116,418
shares of common stock
relating to 5% stock
dividend ................................... 116 195 1,260 (1,458) - (3)
Issuance of 122,959
shares of common stock
relating to 5% stock
dividend ................................... 123 205 1,317 (1,525) - (3)
Cash dividends declared .................... - - - (292) - (292)
Employee stock options
exercised .................................. 34 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................ 2,588 4,315 13,965 14 (9) 18,285
Cash dividends declared .................... - - - (156) - (156)
Employee stock options
exercised .................................. 41 69 287 - - 356
Net income ................................. - - - 1,780 - 1,780
Change in unrealized
net gain/loss on
securities available
for sale ................................... - - - - (1) (1)
----- ------ ------- ------- ---- --------
Balance at June 30, 1997.................... 2,629 $4,384 $14,252 $ 1,638 $(10) $ 20,264
===== ====== ======= ======= ==== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
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FIRST UNITED BANCORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
June 30, June 30,
1997 1996
---- ----
(In thousands)
Cash flows from operating activities :
Net income ....................................... $ 1,780 $ 978
Adjustments needed to reconcile net income to
net cash used by operating activities :
Provision for loan losses ...................... 570 785
Depreciation and amortization .................. 455 316
Net increase in other assets ................... (429) (492)
Net increase in other liabilities .............. 645 182
-------- --------
Net cash provided by operating activities .... 3,021 1,769
-------- --------
Cash flows from investing activities :
Purchases of investment securities held
to maturity .................................... (549) (100)
Proceeds from maturities of investment
securities held to maturity .................... 1,386 1,237
Purchase of investment securities available
for sale ....................................... (5,987) (8,064)
Proceeds from maturities of investment
securities available for sale .................. 3,495 3,243
Net increase in loans ............................ (26,659) (23,374)
Net additions to premises and equipment .......... (297) (1,244)
-------- --------
Net cash used by investing activities .......... (28,611) (28,302)
-------- --------
Cash flows from financing activities :
Net increase in deposits ......................... 23,224 27,522
Proceeds from other borrowed funds ............... 39,960 19,360
Principal repayment of other borrowed funds ...... (38,600) (13,645)
Net increase (decrease) in securities
sold under repurchase agreements ............... (4,807) 1,078
Proceeds from issuance of common stock ........... 226 96
Cash dividends ................................... (156) (140)
------- --------
Net cash provided by financing activities ...... 19,847 34,271
------- --------
Net increase (decrease) in cash and cash
equivalents ...................................... (5,743) 7,738
Cash and cash equivalents, beginning of period ..... 21,828 11,453
-------- --------
Cash and cash equivalents, end of period ........... $ 16,085 $ 19,191
======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
7
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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, AND STOCK DIVIDENDS
On July 15, 1996 and December 13, 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 1996 periods have been restated to reflect
these dividends as if they had occurred prior to the 1996 periods presented.
During the period ended June 30,1997, the Company issued 41,130 shares of its
common stock at an average price of $5.49 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.
(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 June 30, 1997, the results of their operations for the
quarters and six months ended June 30, 1997 and 1996, and the statements of
their cash flows for the six months ended June 30, 1997 and 1996.
(5) FORWARD LOOKING STATEMENTS
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.
8
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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 $22,271,000, or 8.2%, from December 31, 1996 to
$292,466,000 at June 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 $26,374,000, or 12.8%, to $231,925,000 at June 30, 1997. Total
loans outstanding at June 30, 1997 for Spartanburg National Bank amounted to
$100,049,000, a 10.2% increase from the $90,833,000 reported at December 31,
1996. Total outstanding loans, net of inter-company loans, at Anderson National
Bank at June 30, 1997 amounted to $91,252,000, a 6.6% increase from the
$85,610,000 in total outstanding loans, net of inter-company loans, at December
31, 1996. At June 30, 1997, total loans outstanding for The Community Bank of
Greenville, N.A. amounted to $31,567,000, an increase of $12,531,000, or 65.8%,
from the $19,036,000 in outstanding loans at December 31, 1996. During the six
month period ended June 30, 1997 Quick Credit Corporation experienced a decrease
in total outstanding loans of $1,015,000, or 10.1%, largely as a result of
seasonal pay downs.
Premises, furniture and equipment decreased slightly during the period as a
result of depreciation associated with these assets.
The Company's securities portfolios, collectively, at amortized cost,
increased slightly from year-end 1996 levels as a result of additional purchases
during the period. Cash and due from banks increased $1,707,000, or 21.0%, to
$9,835,000 at June 30, 1997 as a result of an increase in uncollected funds in
correspondent bank accounts at quarter end. Federal funds sold decreased
$7,450,000, or 54.4%, during the period as the Company used these funds to help
fund its loan growth and to purchase additional securities.
During the six month period ended June 30, 1997, the Company liquidated one
parcel of other real estate owned valued at $11,000, thus reducing the amount of
other real estate owned to $74,000 at June 30, 1997. Management continues to
pursue liquidation of the remaining piece of property currently owned.
Other assets, comprised largely of accrued interest receivable, prepaid
expenses and deferred taxes, increased $386,000, or 9.4%, from the year-end 1996
level primarily as a result of an increase in the amount of accrued interest
receivable on the Company's loan portfolio resulting from the increase in the
volume of outstanding loans during the six-month period ended June 30, 1997.
Total liabilities increased $20,292,000, or 8.1%, as a result of a
$23,224,000, or 10.6%, increase in total deposits at the Company's banking
subsidiaries. The largest dollar and percentage increase in a single category of
deposits was in certificates of deposit of less than $100,000, which increased
$13,327,000, or 14.1%. During the six month period ended June 30, 1997, the
Company also experienced an increase in the volume of certificates of deposit
greater than $100,000 of $5,600,000, or 13.6%.
9
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Securities sold under agreements to repurchase, comprised largely of
overnight repurchase agreements, decreased $4,807,000, or 58.9%, 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 levels it had at
year-end 1996.
During the period ended June 30, 1997, the Company increased its level of
Federal Home Loan Bank advances $2,460,000, or 22.7%, to $13,290,000 at June 30,
1997. The increased Federal Home Loan Bank advances were utilized to help fund
the Company's loan growth during the period. Other borrowed funds, comprised of
various types of borrowings by Quick Credit Corporation and borrowings by the
parent company, decreased $1,100,000, or 9.2%, during the period as a result of
principal reductions made by Quick Credit Corporation on its borrowings.
Other liabilities, comprised largely of accrued expenses payable increased
$515,000, or 18.4%, to $3,309,000 at June 30, 1997. The increase resulted
largely from an increase in interest payable on deposit accounts and an increase
in income taxes payable.
Shareholders' equity increased $1,979,000 from December 31, 1996 to
$20,264,000 at June 30, 1997 as a result of net earnings for the six month
period of $1,780,000 and the exercise of stock options under the Company's
Employee Stock Option Plans in the amount of $356,000. These increases were
partially offset by the declaration of cash dividends in the amount of $156,000
during the period and an increase in the amount of net unrealized losses on the
Company's "available for sale" securities portfolio of $1,000.
RESULTS OF OPERATIONS
Six month period ended June 30, 1997 vs. Six month period ended June 30, 1996
Earnings Review
The consolidated Company's operations for the six months ended June 30,
1997 resulted in net income of $1,780,000, an 82.0% increase over the $978,000
in net income recorded for the comparable 1996 six month period. The increase in
consolidated earnings for the 1997 period is largely attributable to a
$1,311,000, or 18.6%, 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, an increase in earnings recorded by the Company's
consumer finance subsidiary, Quick Credit Corporation, mainly attributable to a
decrease in this subsidiary's provision for loan losses in the 1997 period and
to profitable operations of the Company's newest bank subsidiary, The Community
Bank of Greenville, N.A. during the 1997 period.
Anderson National Bank recorded net earnings of $892,000 for the six month
period ended June 30, 1997, a 34.5% increase over the $663,000 recorded for the
six month period ended June 30, 1996. The increase in earnings for this
subsidiary is largely attributable to an increase in net interest income of
$454,000, or 19.1%, resulting primarily from an increase of $989,000, or 28.4%,
in interest and fee income on a larger loan portfolio in the 1997 period.
Spartanburg National Bank recorded net earnings of $663,000 for the six
month period ended June 30, 1997, a 29.0% increase over the $514,000 recorded
for the six month period ended June 30, 1996. The increase in earnings for this
subsidiary, like that of Anderson National Bank, resulted from an increase in
net interest income of $377,000, or 17.7%, and is primarily attributable to an
increase of $820,000, or 22.4%, in interest and fee income on a larger loan
portfolio in the 1997 period.
10
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The Community Bank of Greenville, N.A., which commenced banking operations
on April 17, 1996, recorded net earnings of $1,000 for the six month period
ended June 30, 1997 compared to a net loss of $214,000 for the six month period
ended June 30, 1996.
Quick Credit Corporation recorded net earnings of $307,000 for the six
month period ended June 30, 1997, a 248.9% increase over the $88,000 recorded
for the 1996 six month period. The significant increase in earnings for this
subsidiary resulted primarily from a $450,000, or 69.8%, reduction in the
provision for loan losses for the 1997 period when compared to the 1996 period.
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 $1,311,000, or 18.6%, to $8,344,000 for
the six month period ended June 30, 1997 compared to $7,033,000 for the six
month period ended June 30, 1996. The increase is primarily attributable to an
increase in interest and fee income on loans at the Company's banking
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 $3,087,000, or 27.4%, to
$14,361,000 for the 1997 period compared to $11,274,000 for the 1996 period. Of
the $3,087,000 increase in total interest income, $2,884,000, or 93.4%, is
attributable to an increase in loan interest and fee income resulting from a
$60,223,000, or 38.4%, increase in the volume of average outstanding loans
during the 1997 period. The Company's average outstanding loans for the 1997
period were $217,050,000 compared to $156,827,000 for the 1996 period. The
average yield on loans for the six month period ended June 30,1997 was 12.02%
compared to 12.97% for the six month period ended June 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 $5,914,000, or 15.5%, 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 $203,000, or 18.2%.
Interest expense on deposits increased $1,516,000, or 42.0%, to $5,130,000
for the six month period ended June 30, 1997 compared to $3,614,000 for the six
month period ended June 30, 1996. The increase is attributable to an increase of
$54,235,000, or 35.8%, 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 six months of 1997 was 5.00% compared to
4.78% for the first six 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 banking subsidiaries on average
borrowings of $12,164,000 from the Federal Home Loan Bank of Atlanta for the
1997 period amounted to $360,000, a 328.6% increase over the $84,000 incurred in
the 1996 quarter. The 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 $19,000, or 4.1%, 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 lower average of outstanding borrowings in the 1997 period.
11
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Provision and Allowance for Loan Losses, Loan Loss Experience
The purpose of the Company's allowance for loan losses is to absorb loan
losses that occur in the loan portfolio. The allowance for loan losses
represents management's estimate of an amount adequate in relation to the risk
of future losses inherent in the loan portfolio and also reflects the
consideration of the amount of high rate/higher risk loans held by the Company's
consumer finance subsidiary, Quick Credit Corporation.
While it is the Company's policy to charge off in the current period loans
in which a loss is considered probable, there are additional risks of future
losses which cannot be quantified precisely or attributed to particular loans or
classes of loans. Because these risks include the state of the economy, industry
trends and conditions affecting individual borrowers, management's judgment of
the allowance is necessarily approximate and imprecise. The Company is also
subject to regulatory examinations and determinations as to adequacy, which may
take into account such factors as the methodology used to calculate the
allowance for loan losses and the size of the allowance for loan losses in
comparison to a group of peer companies identified by the regulatory agencies.
Management determines the adequacy of the allowance quarterly and considers
a variety of factors in establishing the level of the allowance for losses and
the related provision, which is charged to expense. In assessing the adequacy of
the allowance, management relies predominantly on its ongoing review of the loan
portfolio, which is undertaken both to ascertain whether there are probable
losses which must be charged off and to assess the risk characteristics of the
portfolio in the aggregate. The review considers the judgments of management and
also those of bank regulatory agencies that review the loan portfolio as part of
their regular examination process. The Comptroller of the Currency, as part of
its routine examination process of various national banks, including Anderson
National Bank, Spartanburg National Bank and The Community Bank of Greenville,
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 June 30, 1997 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 $3,445,000 at June 30, 1997 compared to
$2,622,000 at June 30, 1996. At June 30, 1997 and June 30, 1996, the allowance
for loan losses as a percentage of outstanding loans was 1.49% and 1.54%,
respectively. During the six month period ended June 30, 1997, the Company
experienced net charge-offs of $285,000, or 0.14%, of average loans, compared to
net charge offs of $482,000, or 0.31% of average loans for the six month period
ended June 30, 1996. The Company made provisions for loan losses of $570,000
during the 1997 six month period compared to $785,000 for the 1996 six month
period, a decrease of 27.4%. The decrease in net charge-offs and resulting
decrease in the provision for loan losses for the 1997 period is attributable to
improved collection results at Quick Credit Corporation.
Anderson National Bank recorded a provision for loan losses of $95,000 in
the 1997 period as a result of increases in the volume of outstanding loans.
Anderson National Bank made no provision in the 1996 period. For the six month
period ended June 30, 1997, this subsidiary recorded net recoveries of $79,000
compared to net recoveries of $14,000 for the 1996 six month period.
12
<PAGE>
The Community Bank of Greenville, N.A. recorded a provision for loan losses
of $110,000 in the 1997 period compared to $45,000 for the 1996 period as it
continued to establish its allowance for loan losses. This subsidiary has not
experienced any loan losses since commencing operations.
Spartanburg National Bank recorded a provision for loan losses of $170,000
for the 1997 period compared to $95,000 for the 1996 period. The increase in the
provision made by this subsidiary was a result of loan growth and an increase in
the amount of charged-off loans experienced by this subsidiary during the 1997
period. For the six month period ended June 30, 1997, this subsidiary recorded
net charge-offs of $63,000 compared to net charge-offs of $26,000 for the 1996
comparable period.
Quick Credit Corporation recorded a provision for loan losses of $195,000
for the six month period ended June 30, 1997 compared to $645,000 for the 1996
six 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 six month period ended June 30, 1997, this subsidiary recorded
net charge offs of $300,000, or 3.28% of average outstanding loans, compared to
net charge offs of $471,000, or 4.74%, of average outstanding loans for the 1996
six month period and to $1,144,000, or 11.66%, of average outstanding loans for
fiscal 1996. Quick Credit Corporation's customers are generally in the
low-to-moderate income group of borrowers. Over the past several years there has
been a proliferation of small consumer loan companies and other consumer debt
providers competing for pieces of this segment of the consumer debt market. It
is not unusual for customers of Quick Credit 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 8.15% at June 30, 1996 to 11.96% at June 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 June 30, 1997 the Company had $692,000 in non-accrual loans, which are
considered impaired, $278,000 in loans past due 90 days or more and still
accruing interest and $74,000 in OREO, compared to $233,000, $296,000, and
$74,000, respectively at June 30, 1996 and to $437,000, $416,000, and $85,000,
respectively at December 31, 1996. At June 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 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 other income for the 1997 period increased slightly over other income
recorded for the 1996 period. During the 1997 period the Company experienced an
$85,000, or 26.9% 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 more
than offset by a decline of $90,000, or 16.7%, 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
13
<PAGE>
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.
Other Expenses
Total other expenses increased $287,000, or 5.0%, in the 1997 period over
the 1996 comparable period. Salaries, wages and benefits ("personnel expense"),
the largest category of other operating expenses, increased $207,000, or 6.1%,
in the 1997 period over the 1996 period. The increase in personnel expense is
largely attributable to additional staffing for The Community Bank of
Greenville, N.A., which commenced operations in April 1996.
Occupancy expense and furniture and equipment expense increased, 11.55% and
49.4%, respectively, in the 1997 period as a result of expenses associated with
The Community Bank of Greenville, N.A., which opened in April of 1996 and the
opening of a new branch for Spartanburg National Bank, which opened in September
of 1996.
Miscellaneous other operating expenses declined $89,000, or 5.0%, largely
as a result of a decrease in the amount of consultant fees incurred in the 1997
period and a reduction in expenses attributable to the Company's reengineering
project conducted in 1996.
Income Taxes
As a result of increased income before income taxes, the Company incurred
income tax expense of $969,000 for the year-to-date period ended June 30, 1997
compared to income tax expense of $507,000 for the period ended June 30, 1996.
Quarter ended June 30, 1997 vs. Quarter ended June 30, 1996
Earnings Review
The consolidated Company's operations for the three months ended June 30,
1997 resulted in net income of $961,000, a 104.9% increase over the $469,000 in
net income recorded for the comparable 1996 three month period. The increase in
consolidated earnings for the 1997 period is largely 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,
an increase in earnings recorded by the Company's consumer finance subsidiary,
Quick Credit Corporation, as a result of lower loan loss provisions, and to
profitable operations of the Company's newest subsidiary, The Community Bank of
Greenville, N.A., during the 1997 period.
Anderson National Bank and Spartanburg National Bank recorded net earnings
of $455,000 and $367,000, respectively, for the quarter ended June 30, 1997,
compared to $357,000 and $275,000, respectively, for the quarter ended June 30,
1996. The increases in earnings for these two subsidiaries are attributable to
increases in the net interest margin for both banks resulting from larger
volumes of outstanding loans for the 1997 quarter.
The Community Bank of Greenville, N.A., which commenced operations during
the second quarter of 1996, recorded net earnings of $23,000 for the quarter
ended June 30, 1997 compared to a recorded loss of $171,000 for the second
quarter of 1996.
Quick Credit Corporation recorded net earnings of $165,000 for the quarter
ended June 30, 1997, a 180.0% increase over the $59,000 recorded for the second
quarter of 1996. The significant increase in earnings for this subsidiary
resulted primarily from a $254,000, or 70.9%, reduction in the provision for
loan losses for the 1997 period when compared to the 1996 period.
14
<PAGE>
Interest Income, Interest Expense and Net Interest Income
The Company's net interest income increased $584,000, or 15.9%, to
$4,251,000 for the three month period ended June 30, 1997 compared to $3,667,000
for the three month period ended June 30, 1996. The increase is largely
attributable to an increase in interest and fee income on loans at the Company's
banking 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 $1,468,000, or 25.0%, to
$7,348,000 for the 1997 quarter compared to $5,880,000 for the 1996 quarter. Of
the $1,468,000 increase, $1,434,000 is attributable to an increase in loan
interest and fee income resulting from a 38.1% increase in the volume of
outstanding loans for the 1997 quarter. The Company's average outstanding loans
for the 1997 quarter were $223,488,000 compared to $161,841,000 for the 1996
quarter. The average yield on loans for the 1997 quarter was 11.98% compared to
13.01% 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
and federal funds sold, collectively, increased by $1,891,000, or 4.5%, in the
1997 quarter when compared to the 1996 quarter. Largely as a result of this
increase, interest income on these categories of earning assets, collectively,
increased by $34,000, or 5.5%.
Interest expense on deposits increased $776,000, or 41.1%, to $2,665,000
for the 1997 quarter compared to $1,889,000 for the 1996 quarter. The increase
is attributable to increases in the Company's costs of interest-bearing deposits
and an increase of $52,560,000, or 33.2%, in the volume of average
interest-bearing deposits for the 1997 quarter when compared to the 1996
quarter. The weighted average cost of interest bearing deposits for the second
quarter of 1997 was 5.06% compared to 4.77% for the second quarter of 1996.
Interest expense on Securities Sold Under Repurchase Agreements increased
$6,000, or 14.6%, in the 1997 quarter primarily as a result of an increase in
the rates paid on these short-term funds in the 1997 quarter. Interest expense
incurred by the Company's banking subsidiaries on average borrowings of
$12,165,000 from the Federal Home Loan Bank of Atlanta for the 1997 quarter
amounted to $179,000, a 347.5% increase from the $40,000 incurred in the 1996
quarter. The increase in interest expense on Federal Home Loan Bank borrowings
resulted from an increase 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 $37,000, or 18.0%, in the 1997 quarter
when compared to the 1996 quarter. 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 lesser
amount of borrowings in the 1997 quarter.
Provision and Allowance for Loan Losses, Loan Loss Experience
The provision for loan losses was $300,000 for the quarter ended June 30,
1997, a $164,000, or 35.3%, decrease from the $464,000 provision made for the
quarter ended June 30, 1996. The decrease for the 1997 period is largely the
result of a decrease in the provision made by Quick Credit Corporation during
the 1997 period when compared to the 1996 period. For the quarter ended June 30,
1997, the Company recorded net loan charge-offs of $263,000, or 0.12%, of
average outstanding loans compared to $232,000, or 0.14% of average outstanding
loans for the 1996 quarter.
Quick Credit Corporation recorded a provision for loan losses of $105,000
for the quarter ended June 30, 1997 compared to $359,000 for the 1996
15
<PAGE>
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 June 30, 1997, this subsidiary recorded net charge offs of
$132,000, or 1.61% of average outstanding loans, compared to net charge offs of
$223,000, or 2.40%, 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 $20,000 for
the quarter ended June 30, 1997 and made no provision in the 1996 quarter. For
the quarter ended June 30,1997, this subsidiary recorded net charge-offs of
$88,000 compared to net recoveries of $5,000 for the 1996 quarter.
Spartanburg National Bank recorded a provision for loan losses of $120,000
for the quarter ended June 30, 1997 compared to $45,000 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. For the
quarter ended June 30, 1997, this subsidiary recorded net charge-offs of $42,000
compared to net charge-offs of $14,000 for the 1996 quarter.
The Community Bank of Greenville, N.A. recorded a provision for loan losses
of $55,000 in the 1997 quarter compared to $45,000 for the 1996 quarter as it
continued to establish its allowance for loan losses. This subsidiary has not
experienced any loan losses since commencing operations.
Other Income
Total consolidated other income for the 1997 quarter increased slightly
over consolidated total other income recorded for the 1996 quarter. During the
1997 quarter the Company experienced a $58,000, or 36.9% 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 declines in other
service charges, commissions and fee income accounts and miscellaneous other
income items.
Other Expenses
Total other expenses recorded in the 1997 quarter remained relatively
unchanged from the levels recorded in the 1996 comparable quarter. Salaries,
wages and benefits ("personnel expense"), the largest category of other
operating expenses, increased $121,000, or 7.4%, in the 1997 quarter when
compared to the 1996 quarter. The increase in personnel expense is largely
attributable to additional staffing for The Community Bank of Greenville, N.A.,
which commenced operations in the second quarter of 1996 and to normal increases
in employees salaries.
Occupancy expense and furniture and equipment expenses, collectively,
increased $74,000, or 23.5%, in the 1997 quarter largely as a result of expenses
associated with The Community Bank of Greenville, N.A. and a new branch facility
for Spartanburg National Bank which opened during the third quarter of 1996.
Other operating expenses, the second largest category of other expenses,
decreased $192,000, or 18.6%, in the 1997 quarter. The significant 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 quarter associated with the opening of The
Community Bank of Greenville, N.A. which opened during the second quarter of
1996.
16
<PAGE>
Income Taxes
As a result of increased income before income taxes, the Company incurred
income tax expense of $517,000 for the quarter ended June 30, 1997 compared to
income tax expense of $250,000 for the quarter ended June 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 June 30, 1997
Anderson National Bank had $240,000 in long-term advances from the Federal Home
Loan Bank of Atlanta and $8,000,000 in short term advances. At June 30, 1997
Spartanburg National Bank had $550,000 in long-term advances and $4,500,000 in
short-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 advances
at June 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
$300,000 was available at June 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 (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. Further sources of liquidity for First United include management
fees which are paid by all of its subsidiaries and dividends from its
subsidiaries.
At June 30, 1997, the Company's consumer finance subsidiary, Quick Credit
Corporation, had debt outstanding of $800,000 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.
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.
17
<PAGE>
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 6.90% and 6.72% at June 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
7.42%,7.26% and 8.63%, respectively at June 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 June 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 10.26% and its Tier 1 capital to risk weighted assets ratio
was 8.94% at June 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
10.50%, 10.63% and 13.47%, respectively, at June 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 9.39%, 9.51% and 12.51%, respectively, at June
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 from
asset growth experienced during the period ended June 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. During the quarter ended June 30, 1997, the Company injected $500,000
in additional capital in Spartanburg National Bank to facilitate continued asset
growth at this subsidiary.
18
<PAGE>
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 Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("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 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.
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income." This Statement requires that all items that are required to be
recognized under accounting standards as comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. SFAS No. 130 requires that an enterprise classify items of
other comprehensive income by their nature in a financial statement and display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in-capital in the equity section of a statement of
financial position. The Statement is effective for fiscal years beginning after
December 15, 1997. The Company does not anticipate that adoption of SFAS No. 130
will have a material effect on its financial statements.
In June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of
an Enterprise and Related Information." This Statement requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. Operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. SFAS No. 131 requires that a
public enterprise report a measure of segment profit or loss, certain specific
revenue and expense items, segment assets, information about the way the
operating segments were determined, and other items. This Statement is effective
for fiscal years beginning after December 15, 1997. The Company does not
anticipate that adoption of SFAS No. 131 will have a material effect on its
financial statements other than possible reporting changes relative to Quick
Credit Corporation, its consumer finance subsidiary.
19
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is from time to time involved in various legal
proceedings arising out of the ordinary course of business,
primarily related to the collection of loans receivable. Based
upon current information available, management believes there
are no legal proceedings threatened or pending against the
Company that could result in a materially adverse change in
the business or financial condition of the Company.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's annual shareholders' meeting was held April 22,
1997. The purpose of the meeting was: (1) to elect ten
directors of the Company, with four directors to serve
one-year terms; two directors to serve two-year terms and four
directors to serve three-year terms; (2) to ratify the
appointment of KPMG Peat Marwick as independent auditors for
the Company for fiscal year-ending December 31, 1997; and (3)
to transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Results of the meeting were (1) James G. Bagnal III, Ronald
K. Earnest, Frank W. Wingate and J. Donald King, Sr. were
elected to serve one-year terms as directors; Donald C.
Roberts, M.D. and G. Weston Nalley were elected to serve
two-year terms as directors; and Mason Y. Garrett, Dan C.
Breeden, Jr., T.Ree McCoy, Jr. and Robert V. Pinson were
elected to serve three-year terms as directors by a vote of
2,283,055 shares For and 61 shares to Withhold Authority; and
(2) the election of KPMG Peat Marwick as the Company's
auditors for fiscal 1997 was approved by a vote of 2,280,831
shares For and 2,285 shares Abstaining. There was no other
business to come before the meeting.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27- Financial Data Schedule
(b) Reports on Form 8-K
None
20
<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
Dated: July 30, 1997 s/Mason Y. Garrett, President
and Chief Executive Officer
s/William B. West, Sr. Vice
President and Chief Financial
and Accounting Officer
21
<PAGE>
Exhibit Index
Exhibit No. Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at June 30, 1997 (unaudited) and the Consolidated
Statement of Operation for the Six Months Ended June 30, 1997 (unaudited) and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 9,832
<INT-BEARING-DEPOSITS> 3
<FED-FUNDS-SOLD> 6,250
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 28,794
<INVESTMENTS-CARRYING> 7,006
<INVESTMENTS-MARKET> 7,149
<LOANS> 231,925
<ALLOWANCE> 3,445
<TOTAL-ASSETS> 292,466
<DEPOSITS> 241,443
<SHORT-TERM> 15,960
<LIABILITIES-OTHER> 3,309
<LONG-TERM> 11,490
0
0
<COMMON> 4,384
<OTHER-SE> 15,880
<TOTAL-LIABILITIES-AND-EQUITY> 272,202
<INTEREST-LOAN> 13,044
<INTEREST-INVEST> 1,317
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 14,361
<INTEREST-DEPOSIT> 5,130
<INTEREST-EXPENSE> 6,017
<INTEREST-INCOME-NET> 8,344
<LOAN-LOSSES> 570
<SECURITIES-GAINS> 38
<EXPENSE-OTHER> 6,050
<INCOME-PRETAX> 2,749
<INCOME-PRE-EXTRAORDINARY> 2,749
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,780
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.65
<YIELD-ACTUAL> 6.38
<LOANS-NON> 692
<LOANS-PAST> 278
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 4,407
<ALLOWANCE-OPEN> 3,160
<CHARGE-OFFS> 537
<RECOVERIES> 252
<ALLOWANCE-CLOSE> 3,445
<ALLOWANCE-DOMESTIC> 3,445
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
