U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the Quarterly period ended SEPTEMBER 30, 1996
--------------------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the transition period from ________________ to ___________
Commission File Number: 0-20254
------------------
1ST UNITED BANCORP
- -------------------------------------------------------------------------------
(Exact name of Registrant)
FLORIDA 65-0178023
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
980 N. FEDERAL HIGHWAY, BOCA RATON, FL 33432
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(Address of principal executive offices)
(561) 392-4000
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(Registrant's telephone number)
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 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of September 30, 1996.
7,449,704
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<PAGE>
1ST UNITED BANCORP AND SUBSIDIARIES
INDEX
PAGE
Part I. FINANCIAL INFORMATION NUMBERS
--------------------- --------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of
Income - nine months ended September 30, 1996
and 1995 4
Condensed Consolidated Statement of Income -
three months ended September 30, 1996 and
1995 5
Condensed Consolidated Statements of Cash
Flows - nine months ended September 30, 1996
and 1995 6
Condensed Consolidated Statement of
Shareholders' Equity - nine months ended
September 30, 1996 7
Notes to Condensed Consolidated Financial
Statements 8-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12-17
Part II OTHER INFORMATION 18
Signatures 19
Item 6. Exhibits and Reports on Form 8-K
Exhibit 11
Exhibit 27
This Form 10-Q contains forward-looking statements that involve risks
and uncertainties, and there are certain important factors that could cause
actual results to differ materially from those anticipated. These important
factors include, but are not limited to, economic conditions both generally and
more specifically in the markets in which 1st United Bancorp ("Bancorp") and 1st
United Bank ("1st United") operate, competition for Bancorp's and 1st United's
customers from other providers of financial services, government legislation and
regulation (which changes from time to time and over which Bancorp and 1st
United have no control), changes in interest rates, the impact of Bancorp's
rapid growth, and other risks detailed in the Annual Report on Form 10-KSB and
in Bancorp's other filings with the Securities and Exchange Commission, all of
which are difficult to predict and many of which are beyond the control of
Bancorp.
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<PAGE>
ITEM 1
1ST UNITED BANCORP AND SUBSIDIARIRY
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1996 1995
( UNAUDITED ) ( NOTE )
------------- -------------
(in thousands except per share data)
ASSETS
Cash and due from banks $24,963 $ 18,256
Federal funds sold 0 8,370
-------- -------
Cash and cash equivalents 24,963 26,626
Investment securities available for
sale 16,817 7,599
Investment securities held to maturity
market value of $33,275 and $25,793
at 1996 and 1995) 34,013 25,735
Loans, net of allowance for loan
losses of $8,766 in 1996 and
$6,299 in 1995 335,393 228,240
Premises and equipment, net 13,539 5,636
Accrued interest receivable 1,988 1,640
Other real estate owned 4,660 1,552
Goodwill, net 7,866 4,229
Other assets 6,934 5,458
-------- --------
$446,173 $306,715
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Demand deposits, non-interest
bearing $112,357 $ 79,538
NOW and Money Market accounts 139,172 101,401
Savings deposits 46,843 32,434
Time deposits of $100,000 or more 19,745 15,345
Time deposits less than $100,000 72,475 41,038
--------- --------
Total deposits 390,592 269,756
Long-term debt 0 39
Federal funds purchased and
repurchase agreements 6,693 700
Accrued interest and
Other liabilities 4,121 2,251
---------- --------
Total liabilities 401,406 272,746
Shareholders' equity:
Common Stock, par value $.01 per
share - authorized 20,000,000
shares, issued and outstanding
7,449,704 shares in 1996 and
6,629,804 in 1995 74 66
Additional paid-in capital 30,680 24,317
Retained earnings 14,118 9,655
Unrealized losses on available
for sale securities (105) ( 69)
-------- --------
44,767 33,969
-------- --------
$446,173 $306,715
======== ========
NOTE: The balance sheet at December 31, 1995
has been derived from the audited financial statements
See Accompanying Notes
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<PAGE>
1ST UNITED BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
NINE MONTHS
ENDED
SEPTEMBER 30,
1996 1995
--------- -----------
(in thousands except per-share data)
Interest income:
Loans, including fees $ 22,327 $ 16,366
Due from banks 415 116
Federal funds sold 729 50
Investment securities 2,689 1,920
-------- -------
26,160 18,452
Interest expense:
Interest expense on deposits 6,430 4,386
Interest expense on federal funds
and borrowings 128 317
-------- --------
6,558 4,703
-------- --------
Net interest income 19,602 13,749
Provision for loan losses 70 132
-------- --------
Net interest income after provision
for loan losses 19,532 13,617
Other income:
Service charges on deposit accounts 2,762 1,186
Gain on sale of loans 551 204
Gain on sale of asset 385 0
Credit card discount 100 83
Rental income 80 104
Miscellaneous 1,395 768
------- ------
5,273 2,345
Other expenses:
Salaries and employee benefits 7,660 4,797
Occupancy and furniture
and equipment 3,173 2,172
Insurance 229 160
Other real estate 395 377
Stationery, printing and supplies 383 242
Professional fees 604 579
FDIC insurance 0 377
Miscellaneous taxes 154 97
Telephone 405 217
Postage 264 138
Goodwill amortization 465 175
Advertising and public relations 384 170
Miscellaneous 2,351 1,399
------- ------
16,467 10,900
------- ------
Income before income taxes 8,338 5,062
Income taxes 3,070 1,845
-------- ------
Net Income $ 5,268 $3,217
======== ======
Income per common share:
Net income $ .68 $ .48
======= ======
Dividends per share $ .11 $ .13
======= ======
See Accompanying Notes
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1ST UNITED BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS
ENDED
SEPTEMBER 30,
1996 1995
---------- ----------
(in thousands except per share data)
Interest income:
Loans, including fees $ 7,875 $ 5,969
Due from banks 97 63
Federal funds sold 16 10
Investment securities 809 587
-------- -------
8,797 6,629
Interest expense:
Interest expense on deposits 2,060 1,637
Interest expense on federal funds
and borrowings 21 65
-------- --------
2,081 1,702
-------- --------
Net interest income 6,716 4,927
Provision for loan losses 10 39
-------- --------
Net interest income after provision
for loan losses 6,706 4,888
Other income:
Service charges on deposit accounts 901 427
Gain on sale of loans 229 95
Miscellaneous 344 379
------- ------
1,474 901
Other expenses:
Salaries and employee benefits 2,430 1,701
Occupancy and furniture
and equipment 993 763
Insurance 89 66
Other real estate 135 147
Stationery, printing and supplies 120 100
Professional fees 254 256
FDIC insurance 0 80
Miscellaneous taxes 45 32
Telephone 134 73
Postage 79 53
Goodwill amortization 155 72
Advertising and public relations 91 43
Miscellaneous 864 457
------- ------
5,389 3,843
------- ------
Income before income taxes 2,791 1,946
Income taxes 1,020 714
-------- ------
Net income $ 1,771 $1,232
======== ======
Income per common share:
Net income $ .23 $ .18
======= ======
Dividends per share $ .04 $ .03
======= ======
See Accompanying Notes
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<PAGE>
1ST UNITED BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS
ENDED
SEPTEMBER 30,
1996 1995
-------- -------
(in thousands)
Operating Activities:
Net income $ 5,268 $3,217
Adjustments to reconcile net
income to net cash provided
by operating activities, net
of effect of acquisition 1,948 569
-------- -------
Net cash provided by
operating activities 7,216 3,786
Investing Activities:
Net cash received (paid) in
acquisition 26,298 ( 316)
Purchases of investment securities
held to maturity ( 1,982) ( 150)
Maturities of investment securities
held to maturity 6,120 25,124
Purchases of securities available
for sale ( 2,196) 0
Maturities and sales of securities
available for sale 28,979 0
Increase in loans, net (33,865) (1,974)
Other 2,049 2,246
-------- -------
Net cash provided by investing
activities 25,403 24,930
Financing Activities:
Payment of dividends ( 805) ( 892)
Increase in short term borrowings 5,993 2,023
Payments on long-term debt ( 2,782) (2,044)
Notes payable, related party 2,168 0
Repayment of notes payable,
related parties ( 2,168) 0
Repurchase of common stock 0 (1,302)
Decrease in deposits, net (37,028) (37,212)
Other 340 ( 946)
-------- -------
Net cash used in financing
activities (34,282) (40,373)
-------- -------
Decrease in cash and cash
equivalents (1,663) (11,657)
Cash and cash equivalents at
beginning of period 26,626 27,695
-------- -------
Cash and cash equivalents at end
of period $ 24,963 $16,038
======== =======
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<TABLE>
<CAPTION>
1ST UNITED BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, 1996
UNREALIZED LOSSES TOTAL
COMMON STOCK ADDITIONAL RETAINED ON AVAILABLE FOR SHAREHOLDERS'
SHARES AMOUNT PAID-IN-CAPITAL EARNINGS SALE SECURITIES EQUITY
--------- --------- --------------- -------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1994 .......................... 6,319,304 $ 63 $ 22,322 $ 6,243 ($ 292) $ 28,336
Repurchase of
common stock .................. (180,000) ( 2) (1,305) 0 0 (1,307)
Stock issued
for acquisition
of Jupiter Tequesta
National Bank ................. 486,000 5 3,285 0 0 3,290
Exercise of
stock options ................. 4,500 0 15 0 0 15
Unrealized loss
on available for
sale securities,
net of tax .................... 0 0 0 0 223 223
Cash dividends -
$.16 per share ................ 0 0 0 (1,090) 0 (1,090)
Net income .................... 0 0 0 4,502 0 4,502
--------------------------------------------------------------------------------------------------
Balance at
December 31,
1995 ......................... 6,629,804 $ 66 24,317 9,655 (69) 33,969
Stock issued
for acquisition
of The American
Bancorporation
of the South,
unaudited ..................... 819,900 8 6,363 6,371
Adjustment to
unrealized
losses on
available for
sale securities,
net of tax, unaudited ......... (36) (36)
Cash dividends
- $.11 per share, unaudited ... (805) (805)
Net income through
Sept. 30, 1996,
unaudited ..................... 5,268 5,268
--------- --------- ---------- -------- --------- ----------
Balance at
Sept. 30, 1996,
unaudited ..................... 7,449,704 $ 74 $ 30,680 $14,118 ($105) $ 44,767
========= ========= ========== ======== ========= ==========
</TABLE>
See Accompanying Notes
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<PAGE>
1ST UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information, the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended September
30, 1996 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in 1st United
Bancorp's ("Bancorp") annual report on FORM 10-KSB for the year ended December
31, 1995.
NOTE B - ALLOWANCE FOR LOAN LOSSES
At September 30, 1996, Bancorp's allowance for loan losses was
approximately $8.8 million. Although management believes the allowance for
possible losses is adequate, their evaluation of possible losses is a continuing
process which may necessitate adjustments to the allowance in future periods.
The following summarizes the activity in the allowance for loan losses for
the period ended September 30, 1996 and the year ended December 31, 1995:
(in 000's)
NINE MONTHS YEAR ENDED
ENDED SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------------ -----------------
Balance at
beginning of
period $6,299 $6,339
Charge-offs (489) (795)
Recoveries 318 260
------ ------
Net charge-offs (171) (535)
Provision for loan losses 70 162
Allowance of purchased banks
at date acquired 2,568 333
------ ------
Balance at end of period $8,766 $6,299
====== ======
NOTE C - INCOME PER COMMON SHARE
Income per common share is calculated by dividing net income by the
weighted average number of shares of common stock and common stock equivalents
outstanding during each period. Common stock equivalents represent the
potentially dilutive effect of the assumed exercise of certain outstanding stock
options. Average shares outstanding after the dilutive effect of common stock
equivalents for the nine months ended September 30, 1996 and 1995 were 7,743,000
and 6,755,000, respectively, and for the quarter ended September 1996 and 1995
were 7,777,000 and 6,905,000, respectively.
-8-
<PAGE>
NOTE D - ACQUISITIONS
Bancorp executed an acquisition agreement (the "Agreement") on July 29,
1996 to acquire Park Bankshares, Inc. ("Park") and its wholly owned subsidiary
First National Bank of Lake Park (First National").
The Agreement calls for Bancorp to issue to Park shareholders up to a
maximum of $8.75 million in Bancorp Common Stock. The purchase price may
decrease depending on the value of Park's adjusted closing equity as defined in
the Agreement. The number of Bancorp Common Shares issued will also depend on
the average of the daily closing stock price of Bancorp Common Stock for the 20
days prior to closing as determined in the Agreement. If the computed average is
below $8.50 per share, then the stock will be valued at $8.50 per share,
correspondingly, if the stock price is above $11.50 per share, then the stock
will be valued at $11.50 per share. Management anticipates the acquisition will
be accounted for as a "pooling-of-interests" under generally accepted accounting
principles.
Park operates out of four locations; its main office in Lake Park and a
branch in each of West Palm Beach, Riviera Beach and Jupiter, Florida. At June
30, 1996, Park had net loans, deposits, assets and shareholders' equity of
approximately $32.6 million, $62.1 million, $67.2 million and $4.2 million,
respectively.
The anticipated completion of the acquisition is in the fourth quarter of
1996. The Agreement is subject to regulatory and Park shareholder approval and
satisfaction of other contingencies.
On January 5, 1996, Bancorp acquired The American Bancorporation of the
South ("American") and merged its wholly-owned subsidiary, The American Bank of
the South, into 1st United. Consideration paid by Bancorp to the shareholders of
American was $10,017,000 and was paid in the form of 30% cash and 70% stock.
Approximately 820,000 shares of Bancorp common stock were issued in this
acquisition. This acquisition was accounted for using the purchase method of
accounting and approximately $3.5 million in goodwill was recorded and is being
amortized over 15 years under the straight-line method.
Approximately $170 million in total assets were acquired. Included in this
total was approximately $20 million, $48 million, $77 million, $8 million and $5
million in fed funds, investments, gross loans, bank premises and equipment, and
other real estate, respectively. Included in loans were approximately $11
million in nonaccrual loans. Approximately $158 million in deposits, which
includes approximately 30% in non interest bearing demand deposits, were assumed
and sixteen (16) bank- owned branch locations throughout Brevard County were
acquired.
To facilitate the acquisition of American, certain of the directors of
Bancorp and senior management of 1st United committed to loan Bancorp $2.5
million. On January 4, 1996 Bancorp borrowed approximately $2.2 million from
these individuals at a 10% annual interest rate, payable quarterly, with the
entire outstanding principal balance due in one year. Bancorp paid a 1%
commitment fee and 1% funding fee to these individuals and also had the option
of extending the maturity of these notes for five one-year terms. Bancorp repaid
these borrowings in full on May 1, 1996.
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<PAGE>
The following summarizes (in thousands) the approximate fair value of the assets
of American acquired and the liabilities assumed:
Cash and federal funds sold $ 31,028
Investment securities 48,452
Net loans 72,807
Other assets 17,297
Total deposits (157,864)
Borrowings ( 2,742)
Accrued interest and
other liabilities ( 1,530)
--------
Net assets $ 7,448
========
Pro forma financial information for Bancorp, as if the American acquisition had
taken place as of January 1, 1996 and 1995 for income and per share data is as
follows:
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
(in thousands except per share data)
1996 1995
-------- ------
Total interest income $26,160 $27,081
Provision for loan losses 70 132
Net interest income after
provision for loan losses 19,532 18,323
Income before taxes 8,338 4,422
Net income 5,268 2,830
Net income per share .67 .37
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<PAGE>
NN-PERFORMING ASSETS
American had approximately $5.1 million in other real estate owned ("ORE")
and $11 million in non-performing loans. Included in ORE is a condominium
project in Cocoa Beach, Florida with a carrying value of approximately $3.0
million, representing 33 completed units and undeveloped land. Of the $16.1
million in non performing assets acquired, approximately $5.2 million of ORE has
been sold, $3.2 million in loans have been repaid and $2.4 million has been
returned to accrual in the first nine months of 1996. In addition, there are
contracts to sell another $.6 million in ORE of the former American. These
figures do not include the $2.3 million in FHA/VA government guaranteed loans
which were repurchased in the second quarter and subsequently sold in the third
quarter with no adverse effect on earnings. The repurchase resulted from the
sale of the mortgage servicing portfolio acquired from American which occurred
in May, 1996. Substantially all of the non-performing loans are secured by real
estate. Both the other real estate and non-performing loans are carried at the
lower of cost or fair value less costs of disposal. No significant writedowns
affecting ongoing earnings are anticipated by management in 1996 on American
nonaccrual loans or ORE.
In addition to gross loans, on January 5, 1996 1st United added
approximately $2.6 million to its allowance for loan losses representing the
historical allowance for loan losses acquired from American. The allowance
represents approximately 3.4% of total loans acquired.
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<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
The significant variances noted below are substantially a result of
Bancorp's acquisitions (the "Acquisitions") of Jupiter Tequesta National Bank
("JTNB") in April, 1995 and The American Bancorporation of the South
("American") on January 5, 1996. Due to the Acquisitions, average assets for the
third quarter of 1996 increased $146 million to $448 million as compared to the
third quarter of 1995, the number of branches increased from 11 to 27, and
personnel increased from 160 full time equivalents to 270 full time equivalents.
On April 14, 1995, Bancorp acquired JTNB, a one location national bank
headquartered in Tequesta, Florida, which had total assets, deposits and capital
of approximately $57 million, $53 million and $4 million, respectively. Bancorp
issued approximately 486,000 shares (value per share of $6.77 net of issuance
costs) of common stock and paid $3.4 million cash to the shareholders of JTNB.
The acquisition was accounted for using the purchase method of accounting and
approximately $3.6 million in goodwill was recorded which is being amortized
over 15 years under the straight-line method.
On January 5, 1996, Bancorp acquired American and merged its wholly-owned
subsidiary, The American Bank of the South, into 1st United. Consideration paid
by Bancorp to the shareholders of American was $10,017,000 and was paid in the
form of 30% cash and 70% stock. Approximately 820,000 shares of Bancorp common
stock were issued in this Acquisition. This Acquisition was accounted for using
the purchase method of accounting and approximately $3.5 million in goodwill was
recorded and is being amortized over 15 years under the straight-line method.
Approximately $160 million in total assets were acquired from American
including $20 million, $48 million, $77 million, $8 million and $5 million in
fed funds, investments, gross loans, bank premises and equipment, and other real
estate, respectively. Included in loans were approximately $11 million in
nonaccrual loans. Approximately $157 million in deposits, which includes
approximately 30% in non interest bearing demand deposits, were acquired along
with sixteen(16) bank-owned branch locations throughout Brevard County.
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
Bancorp's results of operations depend, to a large extent, on the level of
its net interest income, which is the difference between the interest income it
receives on its interest-earning assets and the interest expense it pays on its
interest-bearing liabilities.
For the three month periods ended September 30, 1996 and 1995, $10
thousand and $39 thousand, respectively, were charged against normal operations
for the provision for loan losses.
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<PAGE>
Net interest income after provision for loan losses in the quarter ended
September 30, 1996 increased to $6.706 million from $4.888 million for the same
period in 1995. This 37% increase is primarily due to the Acquisitions which
resulted in average earning assets increasing from $280 million in 1995 to $398
million in 1996. The net interest margin on earning assets for the quarter ended
September 30, 1996 decreased to 6.75% as compared to 7.05% for the quarter ended
September 30, 1995. This difference was primarily a result of the difference in
the asset mix between these quarters. During the third quarter of 1995 the loan
to deposit ratio was 90% and due to the Acquisitions, this ratio decreased to
84% during the quarter ended September 30, 1996.
OTHER INCOME
Non-interest income for the three months ended September 30, 1996 was
$1.474 million - an increase of $573 thousand or 64%, over non-interest income
for the same period in 1995. This increase was primarily a result of service
charges on deposits which increased $474 thousand (111%) to $901 thousand in
1996. This increase was primarily due to the Acquisitions, resulting in average
deposits increasing $132 million in 1996 compared to 1995. Gain on sale of loans
increased $134 thousand (141%) to $229 thousand due to an increase in total SBA
guaranteed loans sold.
OTHER EXPENSES
Non-interest expenses increased $1.546 million (40%) to $5.389 million for
the three months ended September 30, 1996 as compared to the same period in
1995. Due to the Acquisitions, Bancorp grew approximately 80% in assets and
added 17 branches resulting in increases in expenses. Specifically, Bancorp had
the following increases in individual expense categories: salaries and employee
benefits $729 thousand (43%), occupancy and furniture and equipment $230
thousand (30%), stationary, printing and supplies $20 thousand (20%), insurance
$23 thousand (35%), miscellaneous taxes $13 thousand (41%), telephone $61
thousand (84%), postage $26 thousand (49%), goodwill amortization $83 thousand
(115%), and advertising and public relations $48 thousand (112%). Goodwill
amortization in 1996 includes amortization of the American Acquisition ($75
thousand) not present in 1995. Other miscellaneous expenses increased $313
thousand (33%) from 1995. Included in other miscellaneous expense for 1996 are
$80 thousand costs associated with the acquisition of Park.
Bancorp experienced a reduction in FDIC insurance expense of $80 thousand
(100%) from the prior period as a result of new assessment rates set by the
Federal Deposit Insurance Corporation.
INCOME TAXES
Total provision for income taxes of $1.020 million and $714 thousand for
the three months ended September 30, 1996 and 1995, respectively, was computed
using the statutory federal and state income tax rates.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
During the nine month period ended September 30, 1996 and 1995, $70
thousand and $132 thousand, respectively, were charged against operations for
the provision for loan losses.
Net interest income after provision for loan losses in the nine months
ended September 30, 1996 increased to $19.532 million from $13.617 million for
the same period in 1995. This 43% increase is primarily due to the increase in
average earning assets in 1996 compared to 1995. Average earning assets
increased from $266 million to $399 million or 50% due to the Acquisitions.
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<PAGE>
OTHER INCOME
Non-interest income for the nine months ended September 30, 1996 was
$5.273 million - an increase of $2.928 million or 125%, over non-interest income
for the same period in 1995. Service charges on deposit accounts increased
$1.576 million (133%) to $2.762 million in 1996. Miscellaneous other income
increased $627 thousand (82%) to $1.395 million in 1996. These increases are
primarily attributable to the Acquisitions, which substantially increased the
deposit and loan base of Bancorp. Gain on sale of loans increased $347 thousand
(170%) to $551 thousand due to an increase in the volume of SBA loans being
originated and sold during the period ended September 30, 1996. During the
second quarter of 1996, Bancorp sold its merchant credit card accounts to the
company that has processed these accounts for the prior two years. A gain of
approximately $385 thousand was recorded in this period due to this sale. The
effect of this sale on the ongoing operations of the Company is to reduce future
net earnings by less than $10 thousand per quarter.
OTHER EXPENSE
Non-interest expenses increased $5.567 million (51%) to $16.467 million in
1996. Due to the Acquisitions, Bancorp grew approximately 80% in assets and
added 17 branches resulting in these increases. Specifically, Bancorp had the
following increases in individual expense categories: salaries and employee
benefits $2.863 million (60%), occupancy and furniture and equipment $1.001
million (46%), stationary, printing and supplies $141 thousand (58%),
professional fees $25 thousand (4%), insurance $69 thousand (43%), other real
estate $18 thousand (5%), miscellaneous taxes $57 thousand (59%), telephone $188
thousand (87%), postage $126 thousand (91%), goodwill amortization $290 thousand
(166%), advertising and public relations $214 thousand (126%) and miscellaneous
other expenses $952 thousand (68%). Goodwill amortization in 1996 includes
amortization of the JTNB ($59 thousand) and American ($225 thousand)
acquisitions not present in 1995.
Bancorp experienced a reduction in FDIC insurance expense of $377 thousand
in the period as a result of new assessment rates set by the Federal Deposit
Insurance Corporation.
INCOME TAXES
Total provision for income taxes of $3.070 million and $1.845 million for
the nine months ended September 30, 1996 and 1995, respectively, was computed
using the statutory federal and state income tax rates.
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<PAGE>
FINANCIAL CONDITION
Bancorp's total assets, deposits and capital increased $139.5 million
(45%), $120.8 million (45%) and $10.8 million (32%), respectively, during the
nine months ended September 30, 1996. These increases are primarily the result
of the acquisition of American on January 5, 1996. On the acquisition date,
American had cash and federal funds sold of $31.0 million, securities of $48.5
million, and deposits of $157.9 million.
LIQUIDITY
The total of cash and due from banks and federal funds sold, Bancorp's
primary source of liquidity, decreased $1.7 million for the period - $25.0
million at September 30, 1996 compared to $26.6 million at December 31, 1995.
The second source of liquidity is Bancorp's investment securities of $50.8
million at September 30, 1996 which increased $17.5 million during the period
primarily as a result of the acquisition of American.
An additional external source of liquidity is two unsecured federal funds
lines of credit that 1st United Bank has established with two of its
correspondent banks totaling $12 million. In addition, 1st United Bank has
entered into a master repurchase agreement with the two financial institutions.
1st United Bank is also a member of the Federal Home Loan Bank and has a
borrowing capability of approximately $45 million under a blanket security
agreement.
At September 30, 1996, cash and due from banks, short-term investments
(due within one year), and federal funds sold totaled $33.1 million versus
potentially volatile liabilities (C.D.'s of $100,000 or more, Federal Funds
purchased and public funds) of $26.4 million.
CAPITAL RESOURCES
At September 30, 1996, Bancorp had total shareholders' equity of $44.8
million, an increase of $10.8 million over that of December 31, 1995. This
increase was the result of net income through September 30, 1996 of $5.268
million, declaration of $805 thousand cash in dividends, an increase in
unrealized loss in available for sale securities of $36 thousand and issuance of
stock related to the American purchase resulting in $6.371 million in additional
equity.
Dividends per share for the nine months ended September 30, 1996 were $.11
per share compared to $.14 per share in 1995. During the first quarter of 1995,
the Company paid an annual dividend of $.08 per share. Subsequent to March 31,
1995, the Company began quarterly dividends. As a result, the nine months ended
September 30, 1995 include an annual dividend of $.08 and the Company's first
and second quarter dividends of $.03 each. Dividends for the period ended
September 30, 1996 included the first quarter, second and third quarter 1996
dividends of $.03 and $.04 and $.04, respectively.
-15-
<PAGE>
The components of capital resources are as follows:
(in thousands)
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- -----------
Long term debt $ 0 $ 39
------- -------
Risk adjusted assets 373,169 276,276
------- -------
Total assets 446,173 306,715
------- -------
Tier 1 Capital
Common shareholders' equity $44,767 $33,969
Unrealized losses on available
for sale securities, net of tax 105 69
Goodwill and other excludable
intangibles (8,234) (4,424)
------- -------
36,638 29,614
Tier 2 Capital
Includable portion of allowance
for loan losses 4,665 3,453
------- -------
Total regulatory capital $41,303 $33,067
======= =======
Tier 1 risk adjusted capital
ratio 9.79% 10.72%
Total risk adjusted capital
ratio 11.04% 11.97%
Leverage ratio 8.15% 9.66%
Long-term debt to common equity
ratio N/A .1%
The Federal Reserve Board has adopted supervisory risk based capital
ratios of capital to risk weighted assets which require Bancorp and its
subsidiary to maintain a minimum 8.00% total risk based capital ratio at least
half of which must be Tier I capital. Bancorp's total risk based capital ratio
was 11.04% at September 30, 1996.
NON-PERFORMING ASSETS
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
Loans 90 days or more past
due and still accruing interest $ 0 $ 951
Non-accrual loans 9,209 2,459
------ ------
Total non-performing loans $ 9,209 $ 3,410
====== ======
Restructured loans $ 614 $ 242
====== ======
Other real estate owned $ 4,660 $ 1,552
====== ======
Ratio of non-performing loans
to total loans 2.67% 1.45%
Ratio of allowance for loan
losses to total loans 2.55% 2.68%
Ratio of allowance for loan
losses to non-performing loans 95% 185%
-16-
<PAGE>
Approximately $4.053 million in non-performing loans and $3.854 million in
other real estate owned at September 30, 1996 was acquired in the American
acquisition on January 5, 1996. Since the acquisition of American, approximately
$10.8 million in non-performing loans and other real estate was sold, returned
to earning status or repaid.
Management has developed an internal system for evaluating and grading
loans on a quarterly basis. Watch list assets are those loans that have been
graded substandard or worse by management, regulators, or the independent loan
review consultant, due to potential weaknesses in the borrowers' ability to
repay the loans, weaknesses in collateral, the borrowers' financial condition or
other factors. Loans included in the watch list are reviewed and evaluated
bi-weekly by senior management. At September 30, 1996, $20.7 million in loans
were included on 1st United's internal watch list of which $11.6 million are
performing loans. Watch list loans totalled approximately $12.9 million at
December 31, 1995 of which $9.5 million were performing loans. Substantially all
of the $7.8 million increase in watch list loans from December 31, 1995 was a
result of loans acquired in the American acquisition. Correspondingly,
approximately $2.6 million in allowance for loan losses or 3.4% of the total
loans acquired was recorded upon the acquisition of American.
-17-
<PAGE>
PART II - Other Information
ITEM 6 Exhibits and Reports on Form 8-K
a. 1. Exhibit 11 Computations of per share earnings*
2. Exhibit 27 Financial Data Schedules*
b. On July 29, 1996, Bancorp filed a Form 8-K to report the
Agreement and Plan of Merger dated July 29, 1996 between
Bancorp, Park Bankshares, Inc. and First National Bank of Lake
Park.
* Filed herewith
-18-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
1ST UNITED BANCORP
Date: OCTOBER 18, 1996 /S/ WARREN S. ORLANDO
--------------------------------
Warren S. Orlando, President
and Chief Executive Officer
Date: OCTOBER 18, 1996 /S/ JOHN MARINO
--------------------------------
John Marino, Treasurer
(Principal Financial Officer)
-19-
Exhibit 11
(Unaudited)
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1996 1995
-------- --------
(Amounts in thousands, except per share amounts)
Primary:
Average shares outstanding 7,434 6,511
Net effect of the assumed
exercise of stock options
based on the treasury stock
method using average market
price 309 244
------ ------
Total 7,743 6,755
====== ======
Net income $5,268 $3,217
====== ======
Income per common share:
Net income $ .68 $ .48
====== ======
Fully Diluted:
Average shares outstanding 7,434 6,511
Net effect of the assumed
exercise of stock options
based on the treasury stock
method using average market
price or period ended market
price, whichever is higher 380 289
------ -----
Total 7,814 6,800
====== ======
Net income $5,268 $3,217
====== ======
Income per common share:
Net income $ .67 $ .47
====== ======
<PAGE>
(Unaudited)
Quarter Ended
SEPTEMBER 30,
1996 1995
(Amounts in thousands, except per share amounts)
Primary:
Average shares outstanding 7,450 6,630
Net effect of the assumed
exercise of stock options
based on the treasury stock
method using average market
price 327 275
------ ------
Total 7,777 6,905
====== ======
Net income $1,771 $1,232
====== ======
Income per common share:
Net income $ .23 $ .18
====== ======
Fully Diluted:
Average shares outstanding 7,450 6,630
Net effect of the assumed
exercise of stock options
based on the treasury stock
method using average market
price or period ended market
price, whichever is higher 379 289
------ ------
Total 7,829 6,919
====== ======
Net income $1,771 $1,232
====== ======
Income per common share:
Net income $ .23 $ .18
====== ======
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 24,963
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 16,817
<INVESTMENTS-CARRYING> 34,013
<INVESTMENTS-MARKET> 33,275
<LOANS> 344,159
<ALLOWANCE> 8,766
<TOTAL-ASSETS> 446,173
<DEPOSITS> 390,592
<SHORT-TERM> 6,693
<LIABILITIES-OTHER> 4,121
<LONG-TERM> 0
0
0
<COMMON> 74
<OTHER-SE> 44,693
<TOTAL-LIABILITIES-AND-EQUITY> 446,173
<INTEREST-LOAN> 22,357
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<EXPENSE-OTHER> 16,467
<INCOME-PRETAX> 8,338
<INCOME-PRE-EXTRAORDINARY> 8,338
<EXTRAORDINARY> 0
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<NET-INCOME> 5,268
<EPS-PRIMARY> .68
<EPS-DILUTED> .67
<YIELD-ACTUAL> 6.55
<LOANS-NON> 9,209
<LOANS-PAST> 0
<LOANS-TROUBLED> 614
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<ALLOWANCE-OPEN> 8,766
<CHARGE-OFFS> 489
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<ALLOWANCE-CLOSE> 8,766
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</TABLE>
