-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, COPg/ERKVY6h6ffiiZtmZ0NxmtyC4VU5qUYpad+Ty8RQKAk5Fn5oocXtxY8Q/ySV xiGcrZq/HaQr+xOTPRLkmQ== 0000763907-99-000014.txt : 19990817 0000763907-99-000014.hdr.sgml : 19990817 ACCESSION NUMBER: 0000763907-99-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST UNITED CORP/MD/ CENTRAL INDEX KEY: 0000763907 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 521380770 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14237 FILM NUMBER: 99693097 BUSINESS ADDRESS: STREET 1: 19 S SECOND ST CITY: OAKLAND STATE: MD ZIP: 21550 BUSINESS PHONE: 3013349471 MAIL ADDRESS: STREET 1: 19 S SECOND ST CITY: OAKLAND STATE: MD ZIP: 21550 10-Q 1 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, 1999 Commission file number 0-14237 First United Corporation (Exact name of registrant as specified in its charter) Maryland 52-1380770 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification no.) 19 South Second Street, Oakland, Maryland 21550-0009 (address of principal executive offices) (zip code) (301) 334-4715 Registrant's telephone number, including area code Not applicable Former name, address and former fiscal year, if changed since last report. 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 periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common stock, $.01 Par value--6,085,192 shares outstanding as of June 30, 1999 Preferred stock, No par value--No shares outstanding as of June 30, 1999. -01- INDEX FIRST UNITED CORPORATION PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - June 30, 1999 (Unaudited), December 31, 1998, and June 30, 1998(Unaudited). Consolidated Statements of Income (Unaudited) - Six months ended June 30, 1999 and 1998 and three months ended June 30, 1999 and 1998. Consolidated Statement of Cash Flows (Unaudited) - Six months ended June 30, 1999 and 1998. Notes to Unaudited Consolidated Financial Statements. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. PART II. OTHER INFORMATION Item 1. Legal Proceedings. Item 2. Changes in Securities. Item 3. Defaults upon Senior Securities. Item 4. Submission of Matters to a Vote of Security Holders. Item 5. Other Information. Item 6. Exhibits and Reports on Form 8-K. SIGNATURES -02- FIRST UNITED CORPORATION Consolidated Balance Sheet (In Thousands) June 30, Dec. 31, June 30, Assets 1999 1998 1998 (Unaudited) (*) (Unaudited) ----------------------------- Cash and due from banks $18,545 $13,633 $13,754 Investment securities: Available-for-sale: U.S. Treasury Securities 1,105 1,921 10,237 Obl. of other U S Gov. Agen. 40,574 45,082 39,540 Obl. of St. and Loc. Govt 25,237 22,327 6,214 Other investments 33,048 31,365 12,427 ------------------------- Total available-for-sale 99,964 100,695 68,418 Held-to-maturity: Obl. of other U S Govt Agen - - 200 Obl. of St. and Loc. Govt - - 13,339 Other investments - - 11,983 --------------------------- Total held-to-maturity - - 25,522 --------------------------- Total investment securities 99,964 100,695 93,940 Federal funds sold - - 2,950 Loans 551,003 508,972 466,914 Reserve for poss. credit losses (3,751) (3,304) (2,957) --------------------------- Net loans 547,252 505,668 463,957 Bank premises and equipment 9,284 9,136 9,616 Acc. int. Rec. and other assets 14,843 11,982 11,254 ---------------------------- Total Assets $689,888 $641,114 $595,471 ============================ * The balance sheet at December 31, 1998 has been derived from the audited financial statements at that date. See notes to unaudited consolidated financial statements. () Indicates Deduction -03- FIRST UNITED CORPORATION Consolidated Balance Sheet June 30, Dec. 31, June 30, 1999 1998 1998 (Unaudited) (*) (Unaudited) Liabilities ------------------------------ Deposits Non-int. bearing deposits $ 53,976 $ 54,554 $ 56,182 Interest bearing deposits 485,185 456,946 437,001 --------------------------- Total deposits 539,161 511,500 493,183 Reserve for taxes, int., & other liabilities 5,811 5,594 5,688 Federal Home Loan Bank borrowings and other borrowed money 86,800 64,575 38,200 Dividends payable 959 971 946 ---------------------------- Total Liabilities 632,731 582,640 538,017 Shareholders' Equity Preferred stock -no par value Authorized and unissued; 2,000 Shares Capital Stock -par value $.01 per share: Authorized 25,000 shares; issued and outstanding 6,085 shares at June 30, 1999, 6,260 outstanding at December 31, 1998, and 6,222 outstanding at June 30, 1998 61 62 62 Surplus 20,397 21,384 22,736 Retained earnings 37,903 36,559 34,442 Accumulated other comprehensive income (1,204) 469 214 --------------------------- Total Shareholders' Equity 57,157 58,474 57,454 --------------------------- Total Liabilities and Shareholders' Equity $689,888 $641,114 $595,471 ============================ * The balance sheet at December 31, 1998 has been derived from the audited financial statements at that date. See Notes to unaudited consolidated financial statements. () Indicates Deduction -04- FIRST UNITED CORPORATION Consolidated Statement Of Income (In Thousands, except per share data) Six Months Ended June 30, 1999 1998 ------------------- (Unaudited) Interest income Interest and fees on loans $ 22,462 $ 19,945 Interest on investment securities: Taxable 2,436 2,460 Exempt from federal income tax 523 359 -------------------- 2,959 2,819 Interest on federal funds sold 105 92 -------------------- Total interest income 25,526 22,856 Interest expense Interest on deposits: Savings 250 462 Interest-bearing transaction acct. 1,744 1,657 Time, $100,000 or more 2,450 1,680 Other time 5,811 6,192 Interest on fed funds purchased & other borrowed money 1,664 508 -------------------- Total interest expense 11,919 10,499 -------------------- Net interest income 13,607 12,357 Provision for possible credit losses 836 475 -------------------- Net interest income after provision for possible credit losses 12,771 11,882 Other operating income Trust department income 837 700 Service charges on deposit accts. 993 1,244 Insurance premium income 168 126 Other income 1,076 999 -------------------- Total other operating income 3,074 3,069 Other operating expenses Salaries and employees benefits 5,006 4,719 Occupancy expense of premises 480 522 Equipment expense 811 827 Data processing expense 415 272 Deposit assess. and related fees 54 84 Other expense 3,356 3,273 -------------------- Total other operating expenses 10,122 9,697 -------------------- Income before income taxes 5,723 5,254 Applicable income taxes (1,960) (1,830) -------------------- Net income $3,763 $3,424 ==================== Earnings per share $0.61 $0.55 ==================== See Notes to Unaudited consolidated financial statements. -05- FIRST UNITED CORPORATION Consolidated Statement Of Income (In Thousands, except per share data) Three Months Ended June 30, 1999 1998 ------------------- (Unaudited) Interest income Interest and fees on loans $ 11,449 $ 10,166 Interest on investment securities: Taxable 1,238 1,221 Exempt from federal income tax 258 191 ------------------- 1,496 1,412 Interest on federal funds sold 62 52 ------------------- Total interest income 13,007 11,630 Interest expense Interest on deposits: Savings 77 210 Interest-bearing transaction acct. 885 829 Time, $100,000 or more 1,367 824 Other time 2,877 3,089 Interest on fed funds purchased & other borrowed money 821 331 ------------------- Total interest expense 6,027 5,283 ------------------- Net interest income 6,980 6,347 Provision for possible credit losses 411 225 ------------------- Net interest income after provision for possible credit losses 6,569 6,122 Other operating income Trust department income 418 350 Service charges on deposit accts. 454 640 Insurance premium income 105 59 Other income 606 461 ------------------ Total other operating income 1,583 1,510 Other operating expenses Salaries and employees benefits 2,607 2,363 Occupancy expense of premises 219 253 Equipment expense 407 407 Data processing expense 217 124 Deposit assess. and related fees 30 44 Other expense 1,698 1,759 --------------------- Total other operating expenses 5,178 4,950 --------------------- Income before income taxes 2,974 2,682 Applicable income taxes (1,026) (936) --------------------- Net income $1,948 $1,746 ===================== Earnings per share $0.31 $0.28 ===================== See Notes to Unaudited consolidated financial statements. -06- FIRST UNITED CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) Six Months Ended June 30, 1999 1998 -------------------- (Unaudited) Operating activities Net Income $ 3,763 $ 3,424 Adjustments to reconcile net income to net cash provided by operating activities: Provision for possible credit losses 836 475 Provision for depreciation 803 747 Net accretion & amortization of investment security discounts & premiums 138 99 Realized gain on sale of investment securities 10 3 Increase in acc. interest & other assets (2,858) (2,393) Increase in accrued interest & other liabilities 205 603 -------------------- Net cash provided by operating activities 2,897 2,958 Investing activities Proceeds from maturities of available-for- sale securities 37,160 45,298 Purchases of available-for-sale securities (38,251) (44,719) Proceeds form maturities of held-to-maturity securities - 5,398 Purchases of held-to-maturity securities - (5,494) Net increase in loans (42,421) (25,696) Purchases of premises & equipment (951) (1,113) ------------------- Net cash used in investing activities (44,463) (26,326) Financing activities Increase in Federal Home Loan Bank borrowings and other borrowed money $ 22,225 $31,975 Net increase (decrease) in demand deposits, NOW accounts and savings accounts 5,248 (2,196) Net increase (decrease) in certificates of deposits 22,413 (4,681) Cash dividends paid or declared (2,421) (1,887) Acquisition and retirement of Common Stock (987) (725) Net cash provided by ------------------- financing activities 46,478 22,486 Cash and cash equivalents at beg. of year 13,633 17,586 Increase (decrease) in cash & cash equiv. 4,912 (882) -------------------- Cash & cash equivalents at end of period $ 18,545 $ 16,704 ==================== See Notes to unaudited consolidated financial statements. -07- FIRST UNITED CORPORATION Note to Unaudited Consolidated Financial Statements June 30, 1999 Note A -- Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring items have been included. Operating results for the six month period ended June 30, 1999, are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. The enclosed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1998. Earnings per share are based on the weighted average number of shares outstanding of 6,127 and 6,240 for the six months ended June 30, 1999 and 1998, respectively. Note B - Comprehensive Income Accumulated other comprehensive income represents the unrealized gains and losses on the company's available-for-sale securities, net of income taxes. During the first six months of 1999 and 1998, total comprehensive income, net income plus the change in unrealized gains (losses) on available-for-sale securities, amounted to $2,090 million and $3,361 million, net of income taxes, respectively. -08- Part I. Financial Information Item II. Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated net income for the quarter ended June 30, 1998 totaled $1.95 million, which is $.20 million more than was recorded for the second quarter of 1998. This translates into $.31 per share for the current period. For the same quarter of 1998, each share earned $.28. Consolidated net income for the six month period ended June 30, 1999 totaled $3.76 million, which is $.34 million more than was recorded for the same period of 1998. This translates into $.61 per share for the year. For the same period of 1998, eachshare earned $.55. Return on Average Equity (ROAE) increased slightly from 12.92%, at December 31, 1998, to 12.98% as of June 30, 1999. The "efficiency ratio" is a key measuring tool for profitability and operating efficiency. The calculation for the efficiency ratio is noninterest expense divided by net operating revenue, (net interest income plus other operating income) excluding nonrecurring items and securities gains and losses. A lower ratio equals higher profitability and operating efficiencies. The Corporation's efficiency ratio was 59.34% for the period ended June 30, 1999. This represents a decline in efficiency from year end 1998 when the ratio was 58.98%. Fee income from our Business Manager, PrimeVest, and Trust Sevices has increased 16.80% or $.1 million compared to the same period in 1998. Salaries and employee benefits for the first half of 1999 increased from $ 4.72 million in 1998 to $ 5.01 million in 1999. This represents an increase of 6.08%. Other operating income and other operating expense for the first six months of 1999 were $3.07 million and $10.12 million compared to $3.07 million and $9.70 million for the same time period in 1998. Other Operating Income has remained constant while Other Operating Expense has increased 4.38% in comparison to June 30, 1998. The growth exhibited by the loan portfolio in the second quarter continued to be strong. In the second quarter, net loans grew $25.47 million to a total of $547.25 million. The growth for the same quarter of 1998 was $16.40 million, bringing the total to $463.96 million. Year to date 1999, net loans have grown $41.59 million. As a result of our loan growth, interest income at June 30, 1999 was $25.53 million compared to $22.86 at June 30, 1998. This total represents an increase of $2.67 million or 11.68%. The corporation's interest expense year to date was $1.42 million higher than was recorded for the same period in 1998.Interest expense increased $.74 million from the same quarter last year. The increase in expense can be attributed to deposit growth of $45.98 million from June 30, 1998 to June 30, 1999 as well as growth of $48.60 million in Federal Home Loan Bank Borrowings and other borrowed funds in the same time frame. The deposits of the Corporation grew $27.66 million year to date and $ 1.84 million for the second quarter. To help fund the liquidity needs of the Corporation, -09- additional borrowings from the Federal Home Loan Bank of Atlanta and various correspondence banks were utilized. Borrowed funds increased from $64.58 million at December 31, 1998 to $86.80 million at June 30, 1999. This represents an increase of $22.23 million or 34.42%. As always, it is of utmost importance that we constantly evaluate the funding sources available to the Corporation to choose the one that not only provides the greatest cost benefit but allows us the flexibility to be competitive in today's market place. Net interest income for the first six months of 1999 increased 10.12% from the same period in 1998, to a total of $13.61 million. The result was a Corporate net interest margin of 4.43% in comparison to the net interest margin of 4.56% at the end of year 1998. The decline can be attributed to the intense competition for traditional deposits which have driven our cost of funds upward. Although the margin is within the expectations of the Corporation, varying market conditions and rising deposit costs constantly cause us to reevaluate our acceptable margin on loans and deposits. Return on Average Assets (ROAA) has decreased 4.24% to 1.13% at June 30, 1999 compared to 1.18% at June 30, 1998. The provision for possible credit losses was $0.84 million for the first six months of 1999 compared to $.48 million for the same period in 1998. Net charge-offs for the first six months were $0.39 million, which equates to 0.07 percent of our net loan total of $547.25 million. For the same period of 1998, net charge-offs were $.17 million or 0.04% of the June 30, 1998 net loans of $463.96 million. The increase in the provision for possible credit losses was made to maintain an adequate reserve in light of the strong loan growth experienced year to date and to provide for the increase in net charge-offs. Our loan quality continues to be strong as demonstrated by the over 30-day delinquency ratio of .94% of gross loans, a number which compares very favorably with our peers. Non performing loans were .34% of total loans as of June 30, 1999, and our loan loss reserve of .68% of total loans represents 198.89% of nonperforming loans. Summary of Loan Loss Experience ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES June 30, 1999 ---------------- Balance at the Beginning of the period $3,304 Charge-offs: Domestic: Commercial, financial and agricultural 106 Real estate - mortgage 15 Installment loans to individuals 471 ---------------- 592 ---------------- Recoveries: Domestics: Commercial, financial and agricultural 128 Real estate - mortgage 17 Installment loans to individuals 58 --------------- 203 --------------- -10- Net Charge-offs 390 --------------- Additions charged to operations 836 --------------- Balance at end of period $3,751 =============== Ratio of net charge-offs during the period to average Loans outstanding during the period .07% =============== Risk Elements of Loan Portfolio The following table provides a comparison of the Risk Elements of the Loan Portfolio in the format prescribed by Item III-C of Industry Guide 3. The Bank has no foreign loans or loans defined as troubled debt restructurings. Further, the Bank has no potential problem loans other than those in the table below. First United's non-accrual loans increased $.43 million in the first half of 1999 from the year end total of $.46 million. June 30 Dec. 31 1999 1998 ---------------------- Non-accrual loans $890 $460 Accruing loans past due 90 days or more 996 544 Information with respect to non-accrual loans at June 30, 1999 and December 31,1998 are as follows: Non-accrual Loans $890 $460 Interest income that would have been recorded under original terms 16 30 Interest income recorded during the period 12 6 A strength of First United has always been its capital position. Shareholders' equity remained strong at $57.16 million, a 2.25% decrease from December 31, 1998, which was $58.47 million. Risk based capital, which is an expression of the Corporation's stability and security was 11.78%, which is less than the 13.40% reported at December 31, 1999 but both are in excess of the regulatory minimum of 8.00 percent. On July 31, 1996, the Board of Directors ratified a stock buy back program. The Corporation's management has authority to repurchase up to 5 percent of the outstanding shares of First United Corporation at a price management deems appropriate. On April 29, 1998 the Board of Directors ratified an amendment to the Plan which would enable the Corporation's management to repurchase an additional 5 percent or 309,048 shares. As of June 30, 1999 the Corporation has repurchased 421,189 at a price of $7.37 million. This represents 6.47% of the approved 10 percent. The Corporation paid cash dividends of $.155 on February 1, 1999 and May 1, 1999. On June 16, 1999, the Corporation declared another dividend of equal amount, to be paid August 1, 1999, to shareholders of record at July 20, 1999. -11- Part II. OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities. None. Item 3. Defaults upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. First United Corporation's annual meeting of Shareholders' was held on April 27, 1999. The only item ratified by 1999 proxy vote was the election of six directors. For Against Abstain Directors 97.99% 2.01% 0.00% Item 5. Other Information. -12- SIGNATURES Pursuant to the requirement of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST UNITED CORPORATION Date 08/3/99 /s/ WILLIAM B. GRANT ---------- ---------------------------------------- William B. Grant, Chairman of the Board and Chief Executive Officer Date 08/3/99 /s/ Robert W. Kurtz ---------- ---------------------------------------- Robert W Kurtz, President and Chief Financial Officer -13- 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 CORPORATION Date 08/3/99 ---------- ---------------------------------------- William B. Grant, Chairman of the Board and Chief Executive Officer Date 08/3/99 ---------- --------------------------------------- Robert W. Kurtz, President and Chief Financial Officer -14- EX-27 2
9 YEAR DEC-31-1999 JUN-3O-1999 18545 485185 0 0 99964 0 0 551003 3751 689888 539161 20800 5811 66000 61 0 0 56096 689888 22462 2959 105 25526 10255 11919 13607 836 10 10122 5723 5723 0 0 3763 .61 0 4.44 890 996 0 0 0 592 202 3751 3751 0 0
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