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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1993
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
[No Fee Required]
For the transition period from to
Commission file number 0-14237
FIRST UNITED CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 52-138077 0
(State or other jurisdiction (I.R.S. Employer
of incorporation or identification No.)
19 South Second Street
Oakland, Maryland 21550
(Address of principal executive offices) (Zip code)
Registrant's telephone number: (301) 334-9471
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, Par Value $.01 per share
(Title of Class)
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, and
(2) has been subject to such filing requirements for the past 90
days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
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The aggregate market value of the voting stock held by
non-affiliates of the registrant as of February 28, 1994:
Common Stock, $.01 Par Value - $146,363,528
The number of shares outstanding of the registrant classes of
common stock as of February 28, 1994.
Common Stock $.01 Par Value - 6,186,177 Shares
Documents Incorporated by Reference
Portions of the registrant's Annual Report to Shareholders for
the year ended December 31, 1993 are incorporated by reference into
Parts I and II.
Portions of the registrant's definitive proxy statement for the
annual shareholders meeting to be held April 26, 1994 are
incorporated by reference into Part III.
Part I
Item 1. Business
FIRST UNITED CORPORATION
First United Corporation (the "Corporation") is a multi-bank
holding company with one non-bank subsidiary. The Corporation was
organized under the laws of the State of Maryland in 1985. On July
1, 1985 the Corporation acquired all the outstanding stock of First
United Interim National Bank, successor by merger of First United
National Bank & Trust.
On November 30, 1993, the Corporation merged with HomeTown
Bancorp, Inc. (and its subsidiary Myersville Bank). On that date,
the Corporation issued up to 697,500 shares of its common stock in
exchange for all of the outstanding shares of HomeTown Bancorp's
common stock. On December 23, 1993, HomeTown Bancorp (the holding
company) was dissolved resulting in Myersville Bank becoming a direct subsidiary
of the Corporation. The consolidated financial statements of the Corporation
give retroactive effect to the merger, which has been accounted for as a pooling
of interests. Accordingly, the financial statements of the Corporation and
Myersville Bank have been combined and are included in the consolidated
financial statements of the Corporation for all periods presented.
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First United National Bank & Trust, headquartered in Oakland,
Maryland, First United Bank of West Virginia, N.A. headquartered in
Piedmont, West Virginia, Myersville Bank, headquartered in
Myersville, Maryland, and Oakfirst Life Insurance Corporation,
headquartered in Phoenix, Arizona, are the only operating
subsidiaries of the Corporation.
FIRST UNITED NATIONAL BANK & TRUST
First United National Bank & Trust is a national banking
association chartered in 1900, and is a member of the Federal
Reserve System. The deposits of First United National Bank & Trust
are insured by the Federal Deposit Insurance Corporation (FDIC).
First United National Bank & Trust operates sixteen banking
offices, six facilities in Garrett County, Maryland, nine in
Allegany County, Maryland and one in Washington County, Maryland.
First United also operates a total of sixteen Automatic Teller
Machines (ATM's), seven of which are located in Garrett County,
eight in Allegany County, and one in Washington County. First United National
Bank & Trust provides a complete range of retail and commercial banking and
trust services to a customerbase in Garrett, Allegany and Washington counties in
Maryland and residents in neighboring counties in Pennsylvania and
West Virginia. The customer base in the aforementioned
geographical area consists of individuals, businesses and various
governmental units. The services provided by First United National
Bank & Trust include checking, savings, NOW and Money Market
Deposit accounts,business loans, personal loans, mortgage loans,
educational loans, lines of credit and consumer-oriented financial
services including IRA and KEOGH accounts. In addition, First
United National Bank & Trust provides a variety of insurance
products such as annuities and home owner's insurance, and full
brokerage services through a networking arrangement with PrimeVest
Financial Services, Inc., a full service broker-dealer. First
United National Bank & Trust also provides safe deposit and night
depository facilities, and a complete line of trust services. As
of December 31, 1993, total market value of assets under the
supervision of the Trust Department were approximately $110 million.
FIRST UNITED BANK OF WEST VIRGINIA, N.A.
First United Bank of West Virginia, N.A. is a national banking
association chartered in 1887, and is a member of the Federal
Reserve System.
The deposits of First United Bank of West Virginia, N.A. are also
insured by the Federal Deposit Insurance Corporation.
-3-
First United Bank of West Virginia, N.A. operates four banking
offices. Two are located in Mineral County, West Virginia, one is
located in Hampshire County, West Virginia, and one in Hardy
County, West Virginia. In addition, First United Bank of West
Virginia, N.A. also operates three ATM's, one in each of Mineral,
Hampshire and Hardy Counties. First United Bank of West
Virginia, N.A. provides a complete range of retail and commercial
banking services to a customer base in Mineral, Hampshire and Hardy
Counties, West Virginia and to residents in neighboring Garrett and
Allegany Counties in Maryland. The customers in these geographical
areas consist of individuals, businesses, and various governmental
units. The services provided by the First United Bank of
West Virginia, N.A. include checking, savings, NOW, and Money
Market deposit accounts, business loans, personal loans, mortgage
loans, educational loans, lines of credit, trust services, and a
variety of insurance products such as annuities and home owner's
insurance. First United Bank of West Virginia, N.A. also provides
safe deposit and night depository facilities. First United Bank of
West Virginia, N.A. opened a banking office in Romney, Hampshire
County, and Moorefield, Hardy County, West Virginia during 1993.
MYERSVILLE BANK
Myersville Bank is a commercial bank incorporated under the
laws of the State of Maryland on October 26, 1898. The deposits
of Myersville Bank are insured with the Federal Deposit Insurance
Corporation. It is engaged in a general commercial and retail
banking business serving individuals, businesses, and governmental
units in Frederick County, Maryland, Washington County, Maryland,
and neighboring areas. Myersville Bank has its main office in
Myersville, Maryland, which is located in Frederick County.
Myersville Bank also has branch offices in Smithburg, Maryland, and
Hagerstown, Maryland which are located in Washington County.
In addition, Myersville Bank plans to open a banking office in
Frederick City, Maryland in 1994.
Myersville Bank provides a variety of products and services to
individuals and businesses in its market area. Deposit accounts
include savings, checking (including NOW and Super NOW), money
market, Christmas Club and individual retirement accounts, as well
as certificates of deposit. The lending products of Myersville
Bank include first and second mortgages, home equity loans, vehicle
loans, personal loans and commercial loans including agribusiness
loans. Myersville Bank also offers services such as automated teller machines,
money orders, Visa cards, safe deposit boxes, direct deposit and banking by
mail. Management emphasizes "hometown banking with the personal touch".
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Historically, Myersville Bank has been a consumer-oriented
institution that has made loans to individuals and small and
medium-sized businesses. As part of its provision of services in
the Frederick/Washington County market, Myersville Bank, in
conjunction with its Community Reinvestment Act planning process
and the local housing authority, has adopted policies and
strategies which management believes have been helpful in
determining both lending and deposit patterns. Analysis of this
information permits the Board of Directors and senior management to
ensure that potential borrowers are treated in a fair and
nondiscriminatory manner and to promote services in all areas of
Myersville Bank's market.
OAKFIRST LIFE INSURANCE CORPORATION
Oakfirst Life Insurance Corporation is a reinsurance company
that reinsures credit life and credit accident and health insurance
written by U.S. Life Credit Life Insurance Corporation on consumer
loans made by First United National Bank & Trust. Oakfirst Life
Insurance Corporation, which was chartered in 1989, is a wholly
owned subsidiary of First United Corporation.
Competition
The Corporation's banking subsidiaries, First United National
Bank & Trust, First United Bank of West Virginia, N.A., and
Myersville Bank, compete with various other national banking
associations, state banks, branches of major regional banks,
savings and loan associations, savings banks, and credit unions, as
well as other financial service institutions such as insurance
companies, brokerage firms and various other investment firms. In
addition to this local competition, First United National Bank &
Trust, First United Bank of West Virginia, N.A., and Myersville
Bank also compete for banking business with institutions located
outside the States of Maryland and West Virginia.
Supervision and Regulation of Banking Entities
The Corporation is a registered bank holding company subject to regulation
and examination by the board of governors of the Federal Reserve System under
the Bank Holding Company Act of 1956 (the "Act"). The Corporation is required
to file with the board of governors quarterly and annual reports and any
additional information that may be required according to the Act. The Act
also requires every bank holding company to obtain the prior
approval of the Federal Reserve Board before acquiring direct or
indirect ownership or control of more than 5% of the voting shares
-5-
of any bank which is not already majority owned. The Act also
prohibits a bank holding company, with certain exceptions, from
engaging in or acquiring direct or indirect control of more than 5%
of the voting shares of any company engaged in non-banking
activities. One of the principal exceptions to these provisions is
for engaging or acquiring shares of a company engaged in activities
found by the Federal Reserve Board to be so closely related
to banking or managing banks as to be a proper incident thereto.
First United National Bank & Trust, and First United Bank of West Virginia,
N.A. are federally insured national banking associations. The operation of
both subsidiaries is subject to Federal and state laws applicable to commercial
banks with trust powers and to regulation by the Comptroller of the Currency,
the Federal Reserve Board, and the Federal Deposit Insurance
Corporation. Myersville Bank is a federally insured state chartered bank.
It is subject to Federal and state laws applicable to commercial
banks and to regulation by the Maryland State Banking
Commission and the Federal Deposit Insurance Corporation. The
Corporation is examined regularly by the Federal Reserve Board, the
national banking subsidiaries are periodically examined by the
Office of the Comptroller of the Currency, while Myersville is
examined by the State of Maryland and FDIC, and Oakfirst Life
Insurance Corporation is periodically examined by the Arizona
Department of Insurance.
In accordance with Federal Reserve regulations, the Banks are limited
as to the amount they may loan affiliates, including the Corporation,
unless such loans are collateralized by specific obligations.
Additionally, banking law limits the amount of dividends that a bank can
pay without prior approval from bank regulations. (See "Dividends" on
page 28 of the Corporation's Annual Report to Shareholders.)
Governmental Monetary Policies and Economic Controls
The earnings and growth of the banking industry and ultimately of First
United National Bank & Trust, First United Bank of West
Virginia, N.A., and Myersville Bank are affected by the credit
policies of monetary authorities, including the Federal Reserve
System. An important function of the Federal Reserve System is to
regulate the national supply of bank credit in order to control
recessionary and inflationary pressures. Among the instruments of monetary
policy used by the Federal Reserve to implement these objectives are open
market operations in U.S. Government securities, changes in the discount
member bank borrowings, and changes in reserve requirements against member bank
deposits. These means are used in varying combinations to influence overall
growth of bank loans, investments and deposits and may also affect
interest rates charged on loans or paid for deposits. The monetary
-6-
policies of the Federal Reserve authorities have had a significant
effect on the operating results of commercial banks in the past and
are expected to continue to have such an effect in the future.
In view of changing conditions in the national economy and in the
money markets, as well as the effect of actions by monetary a
fiscal authorities, including the Federal Reserve System, no
prediction can be made as to possible future changes in interest
rates, deposit levels, loan demand or their effect on the business
and earnings of the Corporation and its subsidiaries.
Employees
At December 31, 1993, the Corporation and its subsidiaries
employed approximately 364 individuals of which 52 were officers,
223 were full time employees, and 89 part-time employees.
At December 31, 1993, First United National Bank & Trust
employed 291 individuals of which 38 were officers, 187 were full
time employees, and 66 part-time employees.
At December 31, 1993, First United Bank of West Virginia, N.A.
employed 33 individuals of which 6 were officers, 15 were full time
employees, and 12 part-time employees.
At December 31, 1993, Myersville Bank employed 40 individuals
of which 8 were officers, 21 were full-time employees, and 11
part-time employees.
Executive Officers
Information concerning executive officers of the Corporation
is contained on page 5 of the Proxy Statement of the Registrant for
the annual meeting of its Shareholders.
Statistical Information
The statistical information required in this section is
incorporated herein by reference from the Corporation's Annual
Report to Shareholders for the year ended December 31, 1993 and
from pages 15 through 26 of this Form 10-K.
-7-
Item 2. PROPERTIES
The main office of the Corporation and First United National
Bank & Trust occupies approximately 29,000 square feet at 19 South
Second Street, Oakland, Maryland and is owned by First United
National Bank & Trust. First United National Bank & Trust also has
sixteen branch offices, twelve of which are owned.
First United Bank of West Virginia, N.A. maintains four
offices located in West Virginia, two of which are owned. The main
office in Piedmont, West Virginia occupies approximately 2,720
square feet.
Myersville Bank is located at 207-09 Main Street, Myersville,
Maryland. The Myersville property, as well as the branch offices
in Smithburg, Maryland and in Hagerstown, Maryland, are owned in
fee simple.
The properties of the Corporation which are not owned are held
under long-term leases. Total rent expense for 1993, 1992 and 1991
was equal to $136,413, $71,598 and $56,284.
Item 3. LEGAL PROCEEDINGS
In the normal course of business, the Corporation and its
subsidiaries may become subject from time to time to various claims
and legal actions filed or threatened by customers and others
arising in connection with regular business activities. However,
no such claims are pending or, to management's knowledge,
threatened as of the date here of.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of shareholders of the Corporation was held
on November 18, 1993 to vote upon the acquisition by the
Corporation of HomeTown Bancorp, Inc., the corporate parent of
Myersville Bank. The transaction was approved by a vote of
2,567,151 in favor and 56,185 against, with 42,490 abstentions and
non-votes. Pursuant to such shareholder vote, Paul Cox, Jr., Terry
L. Reiber and Tod Salisbury became directors of the Corporation.
The transaction was consummated on November 30, 1993.
-8-
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Information on page 33 of the Annual Report to Shareholders
for year ended December 31, 1993, is incorporated herein by
reference with respect to the trading market and the prices for the
Corporation Common Stock as well as the dividends paid thereon.
At such date, the number of shareholders of record thereof was
2,082. With respect to payment of dividends, reference is made to
the discussion of certain bank regulatory requirements
appearing under the caption "Corporate Financial Review" in the
Corporation's 1993 Annual Report to Shareholders.
Item 6. SELECTED FINANCIAL DATA
Information required by this item is incorporated by reference
from data appearing under the caption "Consolidated Five Year
Financial Highlights" on page 17 of the Corporation Annual Report
to Shareholders for the year ended December 31, 1993.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information required by this item is incorporated by reference
from information appearing under the caption "Corporate Financial
Review" on pages 10 through 17 of Corporation's Annual Report to
Shareholders for the year ended December 31, 1993, and from pages
15 through 26 of this Form 10-K.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is incorporated by reference
from information appearing on pages 19 through 29 of the
Corporation's Annual Report to Shareholders for the year ended
December 31, 1993.
-9-
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Part III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to Directors of the Registrant is
incorporated by reference from the definitive Proxy Statement of the Registrant
from pages 2 through 4.
Executive Officers of the Registrant are:
Name Position Age
Richard G. Stanton Chairman of the Board 54
President and
Chief Executive Officer
Robert W.Kurtz Executive Vice President 47
and Treasurer
William B. Grant Executive Vice President 40
and Secretary
William B. Grant, Executive Vice President and Secretary, is
the son of Director Dr. B.L. Grant. No other family relationships,
as defined by the rules and regulations of the Securities and
Exchange Commission, exist among any of the Executive Officers.
All officers are elected annually by the Board of Directors
and hold office at the pleasure of the Board.
Mr. Stanton has been President and CEO of First United Corporation since
1987, Chairman of the Board of First United Corporation since 1990 and First
United National Bank & Trust since 1987.
Mr. Kurtz has been Treasurer of First United Corporation since
1990, and Executive Vice-President of First United National Bank &
Trust since 1987.
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Mr. Grant has been Secretary of First United Corporation since
1990, and Executive Vice-President of First United National Bank &
Trust since 1987.
OTHER SIGNIFICANT EMPLOYEES OF THE REGISTRANT ARE:
NAME POSITION AGE
Philip D. Frantz Senior Vice President 33
and Controller
Benjamin W. Ridder Senior Vice President 52
Director of Sales
and Training
L. Scott Rush Senior Vice President 40
Mr. Frantz has been Controller of First United Corporation
since 1988, Vice President since 1990. He was appointed Senior
Vice President in 1993.
Mr. Ridder and Mr. Rush have both been Senior Vice Presidents
since 1987.
Item 11. EXECUTIVE COMPENSATION
Information required by item 11 is incorporated by reference
from pages 5 and 6 of the definitive Proxy Statement of the
Corporation for the annual meeting of Shareholders to be held on
April 26, 1994.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information required by item 12 is incorporated by reference
from pages 1 and 2 of the definitive Proxy Statement of the
Corporation for the annual meeting of Shareholders to be held on
April 26, 1994.
-11-
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by item 13 is incorporated by
reference from Note 14 on page 29 of the Corporation's Annual
Report to Shareholders. There are no other relationships required
to be disclosed in this item pursuant to the instructions for this
report.
Part IV.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) (1) and (2) List of Financial Statements:
The following consolidated financial statements of the
Registrant and its subsidiaries, included in the Annual Report to
Shareholders for the year ended December 31, 1993, are incorporated
herein by reference in item 8:
Consolidated Statements of Financial Condition -
December 31, 1993 and 1992.
Consolidated Statements of Income -
Years ended December 31, 1993, 1992 and 1991.
Consolidated Statements of Changes in Shareholders' Equity -
Years ended December 31, 1993, 1992 and 1991.
Consolidated Statements of Cash Flows -
Years ended December 31, 1993, 1992 and 1991.
Notes to Consolidated Financial Statements
Report of Ernst & Young, Independent Auditors.
-12-
All other schedules to the consolidated financial statements
required by Article 9 of Regulation S-X and all other schedules to
the financial statements of the Registrant required by Article 5 of
Regulation S-X are not required under the related instructions or
are inapplicable and, therefore, have been omitted.
(3) Listing of Exhibits.
(a) 3.2 - Articles of Incorporation of the Corporation,
filed herewith.
3.1 - By-laws of the Corporation, filed herewith.
10.1 - Employment contract of Terry L. Reiber, President
and Chief Executive Officer of Myersville Bank and
a Director of the Corporation, filed herewith.
11.1 - Statement regarding recomputation of per share
earnings incorporated by reference from the 1993
Annual Report to Shareholders, filed herewith.
13.1 - 1993 Annual Report to Shareholders, filed
herewith.
21.1 - Subsidiaries of the Corporation incorporated by
reference from the 1993 Annual Report to
Shareholders, filed herewith.
23.1 - Consent of independent accountants, filed
herewith.
(b) The Registrant filed one report on Form 8-K during the
fourth quarter of 1993. The Form 8-K was filed December
15, 1993, as an Item 2 event, reporting the acquisition
of HomeTown Bancorp, Inc.
(c) List of financial items attached:
Consolidated Average Statements of Financial Condition
and Ratios
Consolidated Statements of Income
Consolidated Statements of Average Rates Earned and Paid
Interest Variance Analysis
Investment Securities - Book Value
Investment Securities - Weighted Rate by Maturity
Investment Securities - Market Value
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Investment Securities - Maturities
Loan Distribution
Summary of Loan Loss Experience
Risk Elements of Loan Portfolio
Loan Maturities and Sensitivity
Time Certificates - $100,000 Maturities
(d) Financial Statement Schedules -- None Applicable or
Required
-14-
CONSOLIDATED AVERAGE STATEMENTS OF FINANCIAL CONDITION & RATIOS
YEAR ENDED DECEMBER 31 1993 1992 1991
ASSETS (000'S)
----------- ------------ ----------
U.S. TREASURY SECURITIES $22,883 $20,557 $13,320
U.S. GOVERNMENT AGENCIES 34,820 35,701 30,376
STATE & MUNICIPAL SECURITIES 8,954 12,617 14,814
OTHER INVESTMENTS 15,859 16,039 18,322
FED FUNDS SOLD 7,851 9,857 17,162
----------- ------------- ----------
90,367 94,771 93,994
COMMERCIAL, FINANCIAL
& AGRICULTURAL LOANS 43,874 45,319 46,566
REAL ESTATE - CONSTRUCTION 4,968 2,912 1,319
REAL ESTATE - MORTGAGE 210,810 189,253 177,766
INSTALLMENT 49,152 52,288 57,907
----------- ------------- ----------
LOANS NET OF UNEARNED INCOME 308,804 289,772 283,558
----------- ------------- ----------
TOTAL EARNING ASSETS
399,171 384,543 377,552
----------- ------------- ----------
ALLOWANCE FOR POSSIBLE LOSSES (2,775) (2,714) (2,318)
OTHER ASSETS
25,875 24,336 22,676
----------- ------------- ----------
TOTAL ASSETS
$422,271 $406,165 $397,910
=========== ============= ==========
LIABILITIES & SHAREHOLDERS'S EQUITY
NON-INTEREST BEARING DEPOSITS $36,054 $32,667 $31,548
INTEREST BEARING TRANSACTION
ACCOUNTS 87,538 79,722 71,120
SAVINGS 73,528 66,924 55,359
TIME $100,000 OR MORE 17,093 19,568 22,038
OTHER TIME 154,863 158,945 172,995
----------- ------------ ----------
TOTAL DEPOSITS 369,076 357,826 353,060
OTHER LIABILITIES 6,455 5,676 5,723
----------- ------------- ----------
TOTAL LIABILITIES 375,531 363,502 358,783
SHAREHOLDERS' EQUITY 46,740 42,663 39,127
----------- ------------- ----------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $422,271 $406,165 $397,910
=========== ============= ==========
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RATIOS
1993 1992 1991
----------- ------------- ----------
AVERAGE EQUITY TO
AVERAGE TOTAL ASSETS 11.07% 10.50% 9.83%
RETURN ON ASSETS 1.42% 1.53% 1.33%
RETURN ON EQUITY 12.86% 14.54% 13.57%
DIVIDEND PAYOUT RATIO 37.26% 33.91% 44.90%
CAPITAL SCHEDULE
FIRST FIRST MYERSVILLE FIRST REGULATION
UNITED UNITED BANK UNITED REQUIREMENT
CORPORATION NATIONAL BANK OF
BANK & WEST
TRUST VIRGINIA
TOTAL CAPITAL 9.71% 10.45% 11.43% 8.45% 6.00%
PRIMARY CAPITAL 10.37% 10.90% 11.90% 8.95% 5.50%
RISK-BASED CAPITAL 18.88% 17.30% 17.52% 13.83% 8.00%
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CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31,
(000'S except per share data) 1993 1992 1991
------------ ------------ ----------
TOTAL INTEREST & FEES ON LOANS 27,712 28,385 30,856
------------- ------------ ---------
INTEREST ON TAXABLE
INVESTMENT SECURITIES 3,929 5,155 5,511
INTEREST ON NON-TAX
INVESTMENT SECURITIES 583 973 1,167
INTEREST ON FED FUNDS SOLD 260 468 1,104
------------- ----------- -------
TOTAL INTEREST INCOME 32,484 34,981 38,638
------------- ----------- ---------
INTEREST EXPENSE:
INTEREST ON DEPOSITS:
SAVINGS 1,983 2,496 2,757
INTEREST BEARING TRANSACTION
ACCOUNTS 2,115 2,846 3,463
TIME $100,000 OR MORE 445 757 1,677
OTHER TIME 6,813 8,735 12,411
------------ ----------- --------
TOTAL INTEREST ON DEPOSITS 11,356 14,834 20,308
------------ ----------- --------
NET INTEREST INCOME 21,128 20,147 18,330
PROVISION FOR POSSIBLE CREDIT LOSSES 269 719 952
------------- ----------- --------
NET INTEREST INCOME AFTER 20,859 19,428 17,378
------------- ----------- --------
PROVISION FOR POSSIBLE CREDIT LOSSES
OTHER INCOME 3,460 2,731 2,670
INVESTMENT SECURITY GAINS (LOSSES) 28 19 4
OTHER EXPENSE 15,158 13,058 12,386
------------- ----------- --------
INCOME BEFORE TAXES 9,189 9,120 7,666
APPLICABLE INCOME TAX 3,177 2,918 2,356
------------- ----------- --------
NET INCOME 6,012 6,202 5,310
============= =========== ========
PER COMMON SHARE:
NET INCOME $0.97 $1.01 $0.86
============= =========== ========
DIVIDENDS PER SHARE (1) $0.47 $0.34 $0.39
============= =========== ========
NOTE: 1) PER SHARE AMOUNTS HAVE BEEN RESTATED FOR STOCK SPLITS
AND DIVIDENDS INCLUDING A 50% STOCK DIVIDEND EFFECTED IN
THE FORM OF A 3-2 SPLIT PAID ON FEBRUARY 8, 1994.
FOR THE PURPOSE OF THESE COMPUTATIONS, NONACCRUING LOANS ARE
INCLUDED IN THE DAILY AVERAGE LOAN AMOUNTS OUTSTANDING.
-17-
Following is a chart that illustrates the average rates earned
or paid stated on a tax equivalent basis assuming a tax rate of 34%.
AVERAGE RATES EARNED: (TAXABLE EQUIVALENT)
YEAR ENDED DECEMBER 31 1993 1992 1991
---------- -------- --------
AVERAGE RATES EARNED:
LOANS NET OF UNEARNED INCOME 8.97% 9.80% 10.88%
TAXABLE INVESTMENT SECURITIES 5.34% 7.13% 8.89%
NON TAXABLE INVESTMENT SECURITIES 9.89% 11.72% 11.97%
FED FUNDS SOLD 3.31% 4.75% 6.43%
------------ ---------- ----------
TOTAL EARNING ASSETS 8.21% 9.23% 10.39%
============ ========== ==========
AVERAGE RATES PAID:
INTEREST BEARING TRANSACTION
ACCOUNTS 2.42% 3.57% 4.87%
SAVINGS 2.70% 4.25% 4.98%
TIME $100,000 OR MORE 4.40% 5.50% 5.63%
TIME DEPOSITS 2.60% 3.87% 7.61%
------------ ---------- ---------
TOTAL INTEREST BEARING
DEPOSITS 3.41% 4.56% 6.32%
----------- ---------- ---------
TOTAL INTEREST BEARING
LIABILITIES 3.41% 4.56% 6.32%
=========== ========== =========
NET YIELD ON EARNING
ASSETS 5.37% 5.37% 5.02%
=========== ========== =========
-18-
The following table sets forth for the periods indicated a
summary of the changes in interest earned and interest paid
resulting from changes in volume and changes in rates:
INTEREST VARIANCE ANALYSIS
ALL AMOUNTS IN (000's)
1993 COMPARED TO 1992 COMPARED TO
1992 INCREASE 1991 INCREASE
(DECREASE) DUE TO (DECREASE) DUE TO
VOLUME RATE NET VOLUME RATE NET
INTEREST INCOME:
LOANS $1,865 ($2,538) ($673) $676 ($3,147) ($2,471)
TAXABLE INVESTMENTS (87) (1,139) (1,226) 914 (1,270) (356)
NON-TAXABLE INVEST. (429) 39 (390) (263) 69 (194)
FED FUNDS SOLD (95) (113) (208) (469) (167) (636)
--------- --------- ------- ------ ------- -------
TOTAL INT. INCOME $1,254 ($3,751)($2,497) $858 ($4,515) ($3,657)
========= ========= ======= ====== ====== ========
INTEREST EXPENSE:
INTEREST BEARING
TRANSACTION ACCT. 121 (852) (731) 54 (671) (617)
SAVINGS 281 (794) (513) 575 (836) (261)
TIME DEPOSITS 349 (2,583) (2,234)(1,193) (3,403) (4,596)
-------- -------- ------- ------ ------- -------
TOTAL DEPOSITS 751 (4,229) (3,478) (564) (4,910) (5,474)
TOTAL INT. EXPENSE $751 ($4,229)($3,478) ($564)($4,910)($5,474)
======== ======== ======= ====== ======= =======
NET INT. INCOME $503 $478 $981 $1,422 $395 $1,817
======== ======== ======= ====== ======= =======
NOTE: THE CHANGE IN INTEREST DUE TO BOTH VOLUME AND RATE HAS BEEN
ALLOCATED TO VOLUME AND RATE CHANGES IN PROPORTION TO THE
RELATIONSHIP TO THE ABSOLUTE DOLLAR AMOUNTS OF THE CHANGE IN EACH.
FOR THE PURPOSE OF THESE COMPUTATIONS, NONACCRUING LOANS ARE
INCLUDED IN THE DAILY AVERAGE LOAN AMOUNTS OUTSTANDING.
-19-
The following table shows the Corporation's Investment
Security maturity distribution for the period ending December 31,
1993.
INVESTMENT SECURITIES - BOOK VALUE
ALL AMOUNTS IN (000's)
MATURING MATURING
AFTER AFTER
ONE BUT FIVE BUT MATURING
MATURING WITHIN WITHIN AFTER
WITHIN FIVE TEN TEN
ONE YEAR YEARS YEARS YEARS TOTAL
U.S. TREASURY $10,386 $13,081 $0 $0 $23,467
U.S. GOVERNMENT
AGENCIES 15,514 17,751 0 50 33,315
STATE & POLITICAL
SUBDIVISIONS 2,426 3,984 1,508 620 8,838
OTHER SECURITIES 1,869 8,541 2,038 3,763 16,211
---------------------------------------------
TOTAL $30,195 $43,357 $3,546 $4,433 $81,831
=============================================
The following table shows the weighted average interest rates
on a tax equivalent basis assuming a tax rate of 34% for the
Company's Investment Securities for the period ending December 31,
1993.
INVESTMENT SECURITIES
Weighted Rate By Maturity
MATURING MATURING
MATURING AFTER ONE AFTER MATURING
WITHIN BUT FIVE AFTER
ONE YEAR WITHIN BUT TEN
FIVE WITHIN YEARS
YEARS TEN YEARS TOTAL
U.S. TREASURY 5.00% 4.10% 0% 0% 4.50%
U.S. GOVERNMENT
AGENCIES 4.47% 5.51% 0% 7.33% 5.03%
STATE & POLITICAL
SUBDIVISIONS 10.78% 8.69% 6.81% 8.38% 8.93%
OTHER SECURITIES 3.03% 5.08% 6.50% 5.74% 5.18%
------- ------- ------- ------- ------
TOTAL 5.07% 5.29% 6.63% 6.13% 5.32%
======= ======= ======= ======= ======
-20-
The following table sets forth the carrying amount and the
market value of the Corporation's investment securities at the
dates indicated.
INVESTMENT SECURITIES - MARKET VALUE
ALL AMOUNTS IN (000's)
1993 1992 1991
BOOK MARKET BOOK MARKET BOOK MARKET
------------ ------------ -------------
U.S. TREASURY $23,467 $23,508 $22,565 $22,832 $11,731 $11,991
U.S. GOVERNMENTAL
AGENCY 33,315 33,711 34,498 35,049 33,303 34,290
STATE & POLITICAL
SUBDIVISIONS 8,538 8,789 10,967 11,830 13,557 14,154
OTHER SECURITIES 16,211 16,291 14,218 14,861 20,162 19,216
------- ------- ------- ------ ------ -------
TOTAL $81,531 $82,299 $82,248 $84,572 $78,753 $79,651
======= ======= ======= ======= ======= =======
As of December 31, 1993, there were no issues under the
captions "State and Political Subdivisions" or "Other
Securities" that exceeded 10.0% of total Shareholders' Equity.
-21-
Following is a table that shows the Corporation's loan
distribution at the end of each of the last five years.
LOAN DISTRIBUTION
DECEMBER 31,
ALL AMOUNTS IN (000's) 1993 1992 1991 1990 1989
---------- -------- -------- ------ -------
COMMERCIAL, FINANCIAL AND
AGRICULTURAL $38,351 $48,295 $46,666 $46,524 $44,248
REAL ESTATE -
CONSTRUCTION 10,902 4,568 2,118 1,798 4,218
REAL ESTATE -
MORTGAGE 220,228 198,659 173,364 175,206 163,239
INSTALLMENT 47,301 50,939 61,940 64,065 70,265
-------- ------- -------- ------- -------
TOTAL $316,782 $302,461 $284,088 $287,593 $281,970
======== ======== ======== ======== ========
LOAN DISTRIBUTION (%)
DECEMBER 31,
1993 1992 1991 1990 1989
-------- ------- ------ ----- -----
COMMERCIAL, FINANCIAL AND
AGRICULTURAL 12.11% 15.97% 16.43% 16.18% 15.69%
REAL ESTATE-CONSTRUCTION 3.44% 1.51% 0.75% 0.62% 1.50%
REAL ESTATE - MORTGAGE 69.52% 65.68% 61.02% 60.92% 57.89%
INSTALLMENT 14.93% 16.84% 21.80% 22.28% 24.92%
---------- -------- ------ ------- -------
TOTAL 100.00% 100.00% 100.00% 100.00% 100.00%
========== ======== ====== ======= =======
-22-
Below is a chart that gives the summary of the loan loss
experience for the years ended December 31, 1993, 1992, 1991, 1990,
1989.
SUMMARY OF LOAN LOSS EXPERIENCE
YEAR ENDED DECEMBER 31,
ALL AMOUNTS IN (000's)
1993 1992 1991 1990 1989
------ ------- ------- -------- -------
BALANCE AT BEGINNING $2,798 $2,572 $2,527 $2,033 $1,914
LOANS CHARGED OFF:
COMMERCIAL, FINANCIAL,
& AGRICULTURAL 469 53 250 465 43
REAL ESTATE-CONSTRUCTION
REAL ESTATE-MORTGAGE 359 359 276 244 336
INSTALLMENT 264 349 588 606 612
---------- ------- ------- ------- -------
TOTAL LOAN 1,092 761 1,114 1,315 991
CHARGED OFF
RECOVERIES OF LOANS:
COMMERCIAL, FINANCIAL,
& AGRICULTURAL 135 87 50 13 17
REAL ESTATE - CONSTRUCTION
REAL ESTATE-MORTGAGE 97 79 60 76 129
INSTALLMENT 99 102 97 106 105
-------- ------ ----- ------ --------
TOTAL LOANS 331 268 207 195 251
RECOVERED -------- ------ ----- ------ --------
NET LOANS CHARGED OFF 761 493 907 1,120 740
-------- ------ ----- ------ --------
PROVISIONS CHARGED TO 269 719 952 1,614 859
OPERATIONS -------- ------ ------ ------ --------
BALANCE AT END OF $2,306 $2,798 $2,572 $2,527 $2,033
PERIOD ======== ======= ======= ======= =======
LOANS NET OF UNEARNED INCOME
AT END OF PERIOD $316,782 $302,461 $284,088 $287,593 $281,970
======== ======== ======== ======== ========
DAILY AVG. AMOUNT $308,804 $289,772 $283,558 $285,051 $277,978
OF LOANS ========= ======== ======== ======== ========
ALLOWANCE FOR POSSIBLE LOAN LOSSES TO LOANS
OUTSTANDING 0.73% 0.93% 0.91% 0.88% 0.72%
========= ======== ======== ======= =======
NET CHARGE OFFS TO AVERAGE
LOANS OUTSTANDING 0.25% 0.17% 0.32% 0.39% 0.27%
========= ======== ======== ======= =======
-23-
RISK ELEMENTS OF LOAN PORTFOLIO
DECEMBER 31,
ALL AMOUNT IN (000's)
1993 1992 1991 1990 1989
NON-ACCRUAL LOANS $ 438 $ 2,337 $ 3,155 $ 2,067 $ 230
ACCRUING LOANS PAST
DUE 90 DAYS OR MORE 1,243 463 887 652 591
RESTRUCTURED LOANS NONE 1,530 NONE NONE NONE
Information with respect to non-accrual loans at December 31, 1993
and December 31, 1992 is as follows:
1993 1992
NON-ACCRUAL LOANS $ 438 $ 2,337
INTEREST INCOME THAT WOULD
HAVE BEEN RECORDED UNDER
ORIGINAL TERMS: 132 231
INTEREST INCOME RECORDED DURING
THE PERIOD: $ 5 $ 13
It is the policy of the Corporation to place a loan on
non-accrual status whenever there is substantial doubt about the
ability of a borrower to pay principal or interest on any
outstanding credit. Management considers such factors as payment
history, the nature of the collateral securing the loan, and the
overall economic situation of the borrower when making a non-
accrual decision. Non-accrual loans are closely monitored by
management. A non-accruing loan is restored to accrual status when
principal and interest payments have been brought current or it
becomes well-secured or is in the process of collection and the
prospects of future contractual payments are no longer in doubt.
At December 31, 1993 $438,000 of non-accrual loans were secured by
collateral with an estimated value of $317,000. The amount
listed above under restructured loans in 1993 is also included in
the non-accrual loans total in 1993.
POTENTIAL PROBLEM LOANS
At December 31, 1993, the Corporation had $1.9 million in
loans for which payments are presently current, but the borrowers
are experiencing financial difficulties. Those loans are subject
to constant management attention and their classification is
reviewed monthly.
As of December 31, 1993, the Corporation had no large loan
concentrations in any one category.
-24-
Management analyzes the reserve for loan losses on a monthly
basis. Those factors considered in determining the adequacy of the
reserve include specific identification of known risk loans,
adequacy of collateral on specific past-due, non-accrual, and
restructured loans, past experience, the ratio of the reserve to
net loans and current and anticipated economic conditions affecting
the area we serve.
Management does not allocate the reserve for loan loss by type
of loan. Instead, both performing and non-performing loans are
reviewed periodically to identify high risk assets and their
potential impact upon the reserve. Based on all information known
to date, management does not expect significant increases in the
level of net losses as a percentage of average loans in 1993 as
compared to prior years.
Following is a table that shows the maturity of loans as of
December 31,
1993.
DECEMBER 31, 1993
ALL AMOUNTS IN (000's)
MATURITIES & RATE MATURING
SENSITIVITY MATURING AFTER ONE MATURING
OF THE WITHIN BUT WITHIN AFTER FIVE
LOAN PORTFOLIO ONE YEAR FIVE YEARS YEARS TOTAL
COMMERCIAL, FINANCIAL
& AGRICULTURAL $ 25,824 $ 8,893 $ 3,634 $38,351
REAL ESTATE -
CONSTRUCTION 10,902 10,902
REAL ESTATE-MORTGAGE 45,665 39,709 134,854 220,228
INSTALLMENT 16,306 29,870 1,125 47,301
TOTAL $ 87,795 $ 89,374 $139,613 $316,782
CLASSIFIED BY SENSITIVITY TO CHANGES IN INTEREST RATES
FIXED INTEREST RATE
LOANS............ $ 81,562 $ 61,536 $ 33,620 $176,718
ADJUSTABLE INTEREST
RATE LOANS...... 6,233 27,838 105,993 140,064
TOTAL............. $ 87,795 $ 89,374 $139,613 $316,782
-25-
Maturities of time certificates of deposit of $100,000 or more
outstanding at December 31, 1993, and December 1992 are summarized.
TIME CERTIFICATES OVER $100,000
ALL AMOUNTS IN (000's)
MATURING: 1993 1992
THREE MONTHS OR LESS $ 6,223 $ 5,174
THREE TO SIX MONTHS 6,288 4,101
SIX TO TWELVE MONTHS 7,329 8,612
OVER TWELVE MONTHS 2,197 1,351
TOTAL $ 22,037 $ 19,238
Pursuant to the requirements of Section 13 or 15 (d) 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
By /s/__________________________
Richard G. Stanton
President and CEO
March 30, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on March
30, 1994.
/s/_________________________ President and CEO
Richard G. Stanton (Principal Executive Officer)
/s/_________________________ Treasurer
Robert W. Kurtz (Principal Financial & Accounting Officer)
Directors:
/s/_________________________ /s/____________________________
David J. Beachy B. L. Grant
/s/_________________________ /s/_____________________________
Horace P. Whitworth Andrew E. Mance
-26-
/s/_________________________ /s/_____________________________
Donald M. Browning Donald E. Moran
/s/_________________________ /s/______________________________
John L. Conway Terry L. Reiber
/s/_________________________ /s/_______________________________
James F. Scarpelli, Sr. Richard G. Stanton
/s/________________________ /s/________________________________
Robert W. Kurtz Rex W. Burton
/s/________________________ /s/_________________________________
Karen F. Spiker I. Robert Rudy
/s/________________________ /s/________________________________
Tod P. Salisbury Paul Cox, Jr.
EXHIBIT 3.1
BY-LAWS OF FIRST UNITED CORPORATION
ORGANIZED UNDER MARYLAND CORPORATION LAWS
Article 1
CORPORATE OFFICE
SECTION 1.1 - The corporation shall have and continuously
maintain in Maryland a registered office located in Oakland,
Maryland, at its place of business at an address to be designated
from time to time by the Board of Directors.
-27-
SECTION 1.2 - The corporation may also have offices in such
other places as the Board of Directors may from time to time
designate or the business of the corporation may require.
Article 2
STOCKHOLDERS MEETINGS
SECTION 2.1 - All meetings of the stockholders shall be held
at such time and place as may be fixed from time to time by the
Board of Directors. The President of the Corporation shall preside
at meetings of stockholders, and in his absence the Chairman of the
Board shall preside, or in his absence, the Executive Officer of
the bank shall preside, or the Board of Directors may designate any
Director to preside.
SECTION 2.2 - The annual meeting of the stockholders shall be
held on the third Tuesday in April in each year, or on any other
date so designated, at a time to be set by the Board of Directors
when they shall elect a Board of Directors and transact such other
business as may properly be brought before the meeting.
SECTION 2.3 - Special meetings of the stockholders may be
called at any time by the Board of Directors or by any three or
more stockholders owning in the aggregate not less than 25% of the
votes which all stockholders are entitled to cast at the particular
meeting.
-28-
If a request for a special meeting is made by stockholders, it
shall state the purpose of the meeting and the matters proposed to
be acted on at it and the Secretary shall inform the stockholders
making the request of the reasonable estimated cost of preparing
and mailing a notice of the meeting, and upon payment of these
costs, the Secretary shall notify each stockholder entitled to
notice of the meeting.
Furthermore, unless requested by stockholders entitled to cast
a majority of all votes entitled to be cast at the meeting, a
special meeting need not be called to consider any matter which is
substantially the same as the matter voted on at any special
meeting of the stockholders held during the preceding 12 months.
SECTION 2.4 - Written notice of all meetings other than
adjourned meetings of stockholders, stating the place, date and
hour, and, in case of special meetings of stockholders and meetings
where notice of the purpose is required by law, the purpose thereof
shall be personally delivered to the stockholder, left at the
residence or usual place of business of the stockholder, or mailed
to his address as it appears on the records of the corporation, not
less than ten nor more than ninety days before such meeting, unless
a different period of notice is required by statute.
Article 3
QUORUM OF STOCKHOLDERS
SECTION 3.1 - The presence, in person or by proxy of
stockholders entitled to cast a majority of the votes entitled to
-29-
be cast at the meeting shall constitute a quorum, and unless
otherwise provided by statute or the Articles of Incorporation, a
majority of all the votes cast at a meeting where a quorum is
present is sufficient to approve any matter which properly comes
before the meeting.
Article 4
VOTING RIGHTS
SECTION 4.1 - Except as may be otherwise provided by statute
or by the Articles of Incorporation, at every stockholders meeting,
every stockholder entitled to vote thereat shall have the right to
one vote for every share having voting power standing in his name
on the books of the corporation on the record date fixed for the
meeting.
In all elections of Directors, each stockholder shall have the
right to vote the number of shares owned by him or her for as many
persons as there are Directors to be elected, or to distribute them
among as many candidates as he or she shall desire. There shall be
no cumulative voting rights granted.
Article 5
PROXIES
SECTION 5.1 - Every stockholder entitled to vote a meeting of
stockholders or to express consent or dissent to corporate action
in writing without a meeting may authorize another person or
persons to act for him by proxy. Every proxy shall be executed in
-30-
writing by the stockholder of his duly authorized attorney-in-fact
and filed with the Secretary of the corporation. A proxy, unless
coupled with an interest, shall be revocable at will, notwith-
standing any other agreement or any provision in the proxy to the
contrary, but the revocation of a proxy shall not be effective
until notice thereof has been given to the Secretary of the
corporation.
No unrevoked proxy shall be valid after eleven months from the
date of its execution, unless a longer time is expressly provided
therein. A proxy shall not be revoked by the death or incapacity
of the maker, unless before the vote is counted or the authority is
exercised, written notice of such death or incapacity is given to
the Secretary of the corporation. Proxies shall be valid only for
one meeting to be specified therein, and any adjournments of such
meeting. Proxies shall be dated and shall be filed with the
records of the meeting.
Article 6
RECORD DATE
SECTION 6.1 - The Board of Directors may fix a time, not more
than ninety days prior to the date of any meeting of stockholders,
of the date fixed for the payment of any dividend or distribution,
or the date for the allotment of rights, or the date when any
change or conversion or exchange of shares will be made or go into
effect, as a record date for the determination of the stockholders
entitled to notice of, and to vote at, any such meeting, or
-31-
entitled to receive payment of any such dividend or distribution,
or to receive any such allotment of rights, or to exercise the
rights in respect to any such change, conversion or exchange of
shares.
In such case, only such stockholders who shall be stockholders
of record on the date so fixed shall be entitled to notice of, or
to vote at, such meetings or to receive payment of such dividend or
to receive such allotment of rights or to exercise such rights, as
the case may be, notwithstanding any transfer of any shares of the
books of the corporation after any record date fixed as aforesaid.
The Board of Directors may close the books of the corporation
against transfers of shares for a period not longer than twenty
days, or longer when required by law or ruling of regulatory
authorities. While the stock transfer books of the corporation are
closed, no transfer of shares shall be made thereon.
Article 7
VOTING LISTS
SECTION 7.1 - The officer or agent having charge of the
transfer books or shares of the corporation shall make before each
meeting of stockholders, a complete alphabetical list of the
stockholders entitled to vote at the meeting, with their addresses
and the number of shares held by each, which list shall be kept on
file at the registered office or principal place of business of the
corporation and shall be subject to inspection by those
stockholders who are allowed to inspect such records under the laws
of Maryland.
-32-
The original transfer book for shares of stock of the
corporation, or a duplicate thereof kept in this State shall be
prima facie evidence as to who are the stockholders entitled to
exercise the rights of a stockholder.
Article 8
JUDGES OF ELECTION
SECTION 8.1 - In advance of any meeting of stockholders, the
Board of Directors may appoint judges of election, who need not be
stockholders, to act at such meeting or any adjournment thereof.
If judges of election are not so appointed, the Chairman of any
such meeting may, and on the request of any stockholder of his
proxy shall make such appointment at the meeting. The number of
judges shall be one or three. If appointed at a meeting on the
request of one or more stockholders or proxies, the majority of
shares present and entitled to vote shall determine whether one or
three judges are to be appointed. No person who is a candidate for
office shall act as a judge.
The judges of election shall do all such acts as may be proper
to conduct the election or vote, and such other duties as may be
prescribed by statute, with fairness to all stockholders, and if
requested by the Chairman of the meeting, or any stockholder or
his proxy, shall make a written report of any matter determined by
them and execute a certificate of any fact found by them. If there
are three judges of election, the decision, act or certificate of
a majority shall be the decision, act or certificate of all.
-33-
Article 9
DIRECTORS
SECTION 9.1 - The number of Directors that shall constitute
the entire Board of Directors shall be not less than three nor more
than twenty-five, the exact number to be fixed and determined from
time to time by resolution of a majority of the full Board of
Directors or by resolution of the stockholders at any annual or
special meeting thereof. The Directors shall be natural persons of
full age, stockholders of the corporation, and need not be
residents of Maryland.
SECTION 9.2 - Director Retirement - All future members of the
elected Board of Directors, specifically excluding all present
members who were serving as of May 13, 1975 as Directors of First
United National Bank & Trust, and excluding Messrs. John L. Conway,
Clay E. Durrett, Robert A. Reinhard and James F. Scarpelli, shall
be subject to the following policy:
1. No Director will stand for re-election on the date of the
annual meeting of stockholders of the year in which he or she
reaches the age of seventy, or five years after the date of
retirement from his or her primary business or professional
relationship, whichever comes first.
2. Upon the effective date of retirement of any member, he or
she shall become a non-voting honorary member of the Board for a
period of two years with the full privilege of participation in the
discussion of the Board. Said member shall be paid the regular
Director's fee for each meeting attended.
-34-
3. Nothing in the foregoing statement of policy shall be
considered as restricting to any degree the voting of stock by a
stockholder. A stockholder shall have complete freedom to vote
stock which stands in his or her name (either as an individual or
as a fiduciary) in favor of himself or herself as a Director or for
whomsoever he or she pleases.
SECTION 9.3 - Between annual meetings of stockholders, the
Board of Directors may increase the number of Directors subject to
the limit set forth in Section 9.1. At each annual meeting of
stockholders after 1985, successors to the Directors shall be
elected in accordance with provisions stated in Section 9.1.
Article 10
VACANCIES ON BOARD OF DIRECTORS
SECTION 10.1 - Any vacancies occurring in the Board of
Directors shall be filled, in accordance with the laws of the State
of Maryland, by appointment by the remaining Directors, and any
Director so appointed shall hold office until the next election.
Article 11
NOMINATIONS FOR ELECTION OF DIRECTORS
SECTION 11.1 - Nominations to the Board of Directors may be
made by the Board of Directors or by any stockholder of any
outstanding class of capital stock of the corporation entitled to
vote for the election of Directors. Nominations, other than these
made by or on behalf of the existing management of the corporation,
-35-
shall be made in writing and shall be delivered or mailed to the
President of the corporation and to any regulatory authority of the
State of Maryland or of the United States as required by law, not
less than fourteen days nor more than fifty days prior to any
meeting of stockholders called for the election of Directors,
provided however, that if less than twenty-one days' notice of the
meeting is given to stockholders, such nominations shall be mailed
or delivered to the President of the corporation and to the proper
regulatory authority as required by law not later than the close of
business on the seventh day following the day on which the notice
of the meeting was mailed. Such notification shall contain the
following information to the extent known to the notifying stock-
holder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total
number of shares of capital stock of the corporation that will be
voted for each proposed nominee; (d) the name and address of the
notifying stockholder; and (e) the number of shares of capital
stock of the corporation owned by the notifying stockholder.
Nominations not made in accordance herewith may, in his or her
discretion, be disregarded by the Chairman of the meeting, and upon
his or her instructions, the vote tellers may disregard all votes
cast for each nominee.
Article 12
POWERS OF BOARD OF DIRECTORS
SECTION 12.1 - The business and affairs of the corporation
shall be managed under the direction of its Board of Directors,
-36-
which may exercise all such powers of the corporation and do all
such lawful acts and things as are not by statute or by the
Articles of Incorporation or by these By-Laws directed or required
to be exercised and done by the stockholders.
SECTION 12.2 - The Board of Directors shall have the power and
authority to appoint an Executive Committee and such other
committees as may be deemed necessary by the Board of Directors for
the efficient operation of the corporation.
The Executive Committee shall consist of the Chairman of the
Board, if any, the President, and such other Directors as may be
determined by the Board. The Executive Committee shall meet at
such time as may be fixed by the Board of Directors, or upon call
of the Chairman of the Board or the President. A majority of
members of the Executive Committee shall have and exercise the
authority of the Board of Directors in the intervals between the
meetings of the Board of Directors as far as may be permitted by
law.
Telephone communications to members of the Executive Committee
may be authorized if contact is made by the Chairman of the Board
or the President.
Article 13
MEETING OF THE BOARD OF DIRECTORS
SECTION 13.1 - An organization meeting may be held immediately
following the annual stockholders meeting without the necessity of
notice to the Directors to constitute a legally convened meeting,
or the Directors may meet at such time and place as may be fixed by
-37-
either a notice, or waiver of notice or consent signed by all of
such Directors.
SECTION 13.2 - Regular meetings of the Board of Directors
shall be held not less often than semi-annually at a time and place
determined by the Board of Directors at the preceding meeting.
SECTION 13.3 - Special meetings of the Board of Directors may be
called by the Chairman of the Board or the President on one day's
notice to each Director, either personally or by mail, telegram or
telephone; special meetings shall be called by the Chairman of the
Board or the President in like manner and on like notice upon the
written request of three Directors.
SECTION 13.4 - At all meetings of the Board of Directors, a
majority of the Directors shall constitute a quorum for the
transaction of business, and the acts of a majority of the
Directors present at a meeting in person shall be the acts of the
Board of Directors, except as may be otherwise specifically
provided by statute or by the Articles of Incorporation or by these
By-Laws.
If a quorum shall not be present in person at any meeting of
the Directors, the Directors present may adjourn the meeting from
time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Article 14
INFORMAL ACTION BY THE BOARD OF DIRECTORS
SECTION 14.1 - If all the Directors shall severally or
-38-
collectively consent in writing, signed by each of them, to any
action required or permitted to be taken at a meeting of the Board
of Directors, such action shall be valid as though it had been
authorized at a meeting of the Board of Directors.
Article 15
COMPENSATION OF DIRECTORS
SECTION 15.1 - Directors, as such, may receive a fixed sum and
expenses for attendance at regular and special meetings, or any
combination of the foregoing as may be determined from time to time
by resolution of the Board of Directors, and nothing contained
herein shall be construed to preclude any Director from serving the
corporation in any other capacity and receiving compensation
therefor. No person who receives a salary, director's fee or other
remuneration from First United National Bank & Trust shall be
eligible to receive any remuneration for service as a Director of
the corporation.
Article 16
OFFICERS
SECTION 16.1 - The officers of the corporation shall be
elected by the Board of Directors at its organization meeting and
shall be a President, a Secretary and Treasurer. At its option,
the Board of Directors may elect a Chairman of the Board. The
Board of Directors may also elect one or more Vice Presidents
and such other officers and appoint such agents as it shall deem
necessary, and who shall hold their offices for such terms, have
such authority and perform such duties as may from time to time be
prescribed by the Board of Directors. Any two or more offices may
-39-
be held by the same person, but a person may not serve concurrently
as both President and Vice President.
SECTION 16.2 - The compensation of all officers of the
corporation shall be fixed by the Board of Directors.
SECTION 16.3 - The Board of Directors may remove any officer
or agent, elected or appointed, at any time and within the period,
if any, for which such person was elected or employed whenever, in
the Board of Directors' judgment, it is the best interests of the
corporation, and all persons shall be elected and employed subject
to the provisions hereof. If the office of any officer becomes
vacant for any reason, the vacancy shall be filled by the Board of
Directors.
Article 17
THE CHAIRMAN OF THE BOARD
SECTION 17.1 - The Chairman of the Board shall supervise the
carrying out of the policies adopted or approved by the Board of
Directors. He shall have general executive power, as well as the
specific powers conferred by these By-Laws. He shall also have and
may exercise such further powers and duties as from time to time
may be conferred upon or assigned by him by the Board of Directors.
Article 18
PRESIDENT
SECTION 18.1 - The President shall be the chief executive
officer of the corporation; he shall have general and active
management of the business of the corporation; shall see that all
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orders and resolutions of the Board of Directors are put into
effect, subject, however, to the right of the Board of Directors to
delegate any specific powers, except such as may be by statute
exclusively conferred on the President, to any other officer or
officers of the said corporation; shall execute bonds, mortgages
and other contracts requiring a seal under the seal of the
corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation. The
President shall preside at meetings of the Directors and the
President or any Director designated by the Board of Directors
shall preside at meetings of stockholders. If there is no Chairman
of the Board, the President shall have and exercise all powers
conferred by these By-Laws or otherwise on the Chairman of the
Board. The President shall be an ex officio member of all
committees of the Board, except any audit or examining committee.
Article 19
VICE PRESIDENT
SECTION 19.1 - The Vice President, or if more than one, the
Vice Presidents in the order established by the Board of Directors,
shall in the absence or incapacity of the President, exercise all
the powers and perform the duties of the President. The Vice
presidents respectively, shall also have such other authority and
perform such other duties as may be provided by these By-Laws or as
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shall be determined by the Board of Directors or the President.
Any Vice President may, in the discretion of the Board of
Directors, be designated as "executive", "senior", or by
departmental or functional classification.
Article 20
SECRETARY
SECTION 20.1 - The Secretary shall attend all meetings of the
Board of Directors and of the stockholders and keep accurate
records thereof in one or more minute books kept for that purpose
and shall perform the duties customarily performed by the secretary
of a corporation and such other duties as may be assigned to him or
her by the Board of Directors or the President.
Article 21
TREASURER
SECTION 21.1 - The Treasurer shall have the custody of the
corporate funds and securities; shall keep full and accurate
accounts of receipts and disbursements in books belonging to the
corporation and shall perform such other duties as may be assigned
to him by the Board of Directors or the President. He shall give
bond in such sum and with such surety as the Board of Directors may
from time to time direct.
Article 22
ASSISTANT OFFICER
SECTION 22.1 - Each assistant officer shall assist in the
performance of the duties of the officer to whom he is assistant
and shall perform such duties in the absence of the officer. He
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shall perform such additional duties as the Board of Directors, the
President, or the officer to whom he is assistant may from time to
time assign him. Such officers may be given such functional titles
as the Board of Directors shall from time to time determine.
Article 23
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 23.1 - The corporation shall indemnify any director,
officer and/or employee, or any former director, officer and/or
employee who was or is a party to or is threatened to be made a
party to, or who is called to be a witness in connection with any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, other
than an action by or in the right of the corporation, by reason of
the fact that such person is or was a director, officer and/or
employee of the corporation, or is or was serving at the request of
the corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he had acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests
of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful.
The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or
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its equivalent, shall create a rebuttable presumption that the
person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests
of the corporation, and with respect to any criminal action or
proceeding, did not have reasonable cause to believe that his
conduct was unlawful.
SECTION 23.2 - The corporation shall indemnify any director,
officer and/or employee, who was or is a party to, or is threatened
to be made a party to, or who is called as a witness in connection
with, any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer
and/or employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including
attorney's fees) actually and reasonably incurred by him in
connection with the defense or settlement of, or serving as a
witness in, such action or suit if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation and except that no indemnification
shall be made in respect of any such claim, issue or matter as to
which such person shall have been adjudged to be liable to the
corporation.
SECTION 23.3 - Expenses incurred by any director, officer
and/or employee in defending a civil or criminal action, suit or
proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the
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Articles of Corporations and Associations of the Annotated Code of
Maryland.
SECTION 23.4 - The indemnification provided in this Article
shall not be deemed exclusive of any other rights to which a person
seeking indemnification may be entitled under any agreement, vote
of stockholders or disinterested directors, or otherwise, both as
to action in his official capacity while serving as a director,
officer and/or employee and as to actions in another capacity while
holding such office, and shall continue as to a person who has
ceased to be a director, officer and/or employee and shall inure to
the benefit of the heirs and personal representatives of such a
person.
Furthermore, directors, officers and employees shall be
indemnified as permitted by the Maryland business corporation law
and in the event of any conflict between these By-Laws and Maryland
statutes, then the provisions of the statute shall prevail.
Article 24
STOCK CERTIFICATES
SECTION 24.1 - The stock certificates of the corporation shall
be numbered and registered in a stock ledger as they are issued;
shall bear the name of the registered holder, the number and class
of shares represented thereby, the par value of each share or a
statement that such shares are without par value, as the case may
be, shall be signed by the President or Vice President and the
Secretary or the Treasurer, or any other person properly authorized
by the Board of Directors, which signatures may be manual or
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facsimile, and shall bear the corporate seal, which seal may be a
facsimile, engraved or printed.
Where the certificate is signed by a transfer agent or a
registrar, the signature of any corporate officer on such
certificate may be a facsimile, engraved or printed. In case of
any officer who has signed, or whose facsimile signature has been
placed upon any stock certificate, shall have ceased to be such
officer because of death, resignation or otherwise before the
certificate is issued, it may be issued by the corporation with the
same effect as if the officer had not ceased to be such at the date
of its issue.
Article 25
TRANSFER OF STOCK
SECTION 25.1 - Upon surrender to the corporation of a stock
certificate duly endorsed by the person named in the certificate or
by the attorney duly appointed in writing and accompanied where
necessary by proper evidence of succession, assignment or authority
to transfer, a new certificate shall be issued to the person
entitled thereto and the old certificate canceled and the transfer
recorded upon the share register of the corporation. No transfer
shall be made if it would be inconsistent with the law of Maryland.
Article 26
LOST CERTIFICATES
SECTION 26.1 - Where a stockholder of the corporation alleges
the loss, theft or destruction of one or more certificates for
shares of the corporation and requests the issuance of a substitute
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certificate therefor, the Board of Directors may direct a new
certificate of the same tenor and for the same number of shares to
be issued to such person upon such person's making of an affidavit
in form satisfactory to the Board of Directors setting forth the
facts in connection therewith, provided that prior to the receipt
of such request the corporation shall not have either registered a
transfer of such certificate or received notice that such
certificate has been acquired by a bona fide purchaser.
When authorizing such issue of a new certificate, the Board of
Directors may require the owner of such loss, stolen or destroyed
certificate, or his heirs or legal representatives, as the case may
be, to give the corporation a bond in such form and with surety or
sureties, with fixed or open penalty, as shall be satisfactory to
the Board of Directors, as indemnity for any liability or expense
which it may incur by reason of the original certificate remaining
outstanding.
Article 27
DIVIDENDS
SECTION 27.1 - The Board of Directors may, from time to time,
at any duly convened regular or special meeting, or by unanimous
consent in writing, declare and pay dividends upon the outstanding
shares of capital stock of the corporation in cash, property or
stock of the corporation, as long as any dividend shall not be in
violation of law or the Articles of Incorporation.
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SECTION 27.2 - Before payment of any dividend, there may be
set aside out of any funds of the corporation available for
dividends, such sum or sums as the Board of Directors from time to
time, in their absolute discretion, think proper as a reserve fund
to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for
such other purposes as the Board of Directors shall believe to be
for the best interests of the corporation, and the Board of
Directors may reduce or abolish any such reserve in the manner in
which it was created.
Article 28
FINANCIAL REPORT TO STOCKHOLDERS
SECTION 28.1 - The President shall present at each annual
meeting of the stockholders a full and complete statement of the
business and affairs of the corporation for the preceding year.
Article 29
INSTRUMENTS
SECTION 29.1 - All checks or demands for money and notes of
the corporation shall be signed by such officer or officers or such
other person or persons as the President or the Board of Directors
may from time to time designate.
SECTION 29.2 - All agreements, indentures, mortgages, deeds,
conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions,
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schedules, accounts, affidavits, bonds, undertakings, proxies and
other instruments and documents may be signed, executed,
acknowledged, verified, delivered or accepted, including those in
connection with the fiduciary powers of the corporation, on behalf
of the corporation by the President or other persons as may be
designated by him or the Board of Directors.
Article 30
FISCAL YEAR
SECTION 30.1 - The fiscal year of the corporation shall be the
calendar year.
Article 31
SEAL
SECTION 31.1 - The corporate seal shall have inscribed thereon
the name of the corporation, the year of its organization and the
word "Maryland". Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any manner
reproduced.
Article 32
NOTICES AND WAIVERS THEREOF
SECTION 32.1 - Whenever, under the provisions of applicable
law or of the Articles of Incorporation or of these By-Laws,
written notice is required to be given to any person, it may be
given to such person either personally or be sending a copy thereof
through the mail or by other method permitted by law, charges
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prepaid, to his address appearing on the books of the corporation
or supplied by him to the corporation for the purpose of notice.
If the notice is sent by mail, it shall be deemed to have been
given to the person entitled thereto when deposited in the United
States mail for transmission to such person. Such notice shall
specify the place, day and hour of the meeting, and in the case of
a special meeting of stockholders, the general nature of the
business to be transacted.
SECTION 32.2 - Any written notice required to be given to any
person may be waived in writing signed by the person entitled to
such notice whether before or after the time stated therein.
Attendance of any person entitled to notice, whether in person or
by proxy, at any meeting shall constitute a waiver of notice of
such meeting, except where any person attends a meeting for the
express purpose of objecting to the transaction of any business
because the meeting was not lawfully called or convened. Where
written notice is required of any meeting, the waiver thereof must
specify the purpose only if it is for a special meeting of
stockholders.
Article 33
AMENDMENTS
SECTION 33.1 - These By-Laws may be amended upon vote of a
majority of the entire Board of Directors at any meeting of the
Board, provided ten days' notice of the proposed amendment has been
given to each member of the Board of Directors. No amendment may
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be made unless the By-Law, as amended, is consistent with the
requirements of the laws of the United States and of the Articles
of Association.
CERTIFICATION
At a meeting of the Board of Directors of the First United
Corporation, Oakland, Maryland, regularly held on the 9th day of
October, 1985, the aforegoing By-Laws were adopted.
IN TESTIMONY WHEREOF, we, the Directors of this Corporation
who were present at said meeting have hereunto subscribed our
names.
______________________________(SEAL)
David J. Beachy
______________________________(SEAL)
Donald M. Browning
______________________________(SEAL)
John L. Conway
______________________________(SEAL)
Clay E. Durrett
______________________________(SEAL)
Gerald L. Glass
______________________________(SEAL)
Alva G. Gortner
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______________________________(SEAL)
Bowie L. Grant
______________________________(SEAL)
Andrew E. Mance
______________________________(SEAL)
Robert A. Reinhard
_______________________________(SEAL)
Irvin R. Rudy, Jr.
_______________________________(SEAL)
James F. Scarpelli, Sr.
_______________________________(SEAL)
Richard G. Stanton
_______________________________(SEAL)
Courtney R. Tusing
_______________________________(SEAL)
Horace P. Whitworth, Jr.
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EXHIBIT 3.2
FIRST UNITED CORPORATION
__________________
AMENDED ARTICLES OF INCORPORATION
THIS IS TO CERTIFY:
FIRST: The undersigned, Cleaveland D. Miller, Esquire,
whose address is 10 Light Street, Baltimore, Maryland 21202, is
the sole incorporator of First United Corporation, and as the
sole incorporator, in that there has not been an organizational
meeting of the Board of Directors, does hereby submit these
Amended Articles of Incorporation of First United Corporation
under the General Laws of the State of Maryland.
SECOND: The name of the corporation (hereinafter called
the "Corporation") is:
FIRST UNITED CORPORATION
THIRD: The purposes for which the Corporation is formed
are as follows:
(1) To purchase, own and hold the stock of
other corporations, and to direct the operations of other
corporations, and especially banking or financial
associations or institutions, through the ownership of
stock therein: to cause other corporations to be formed;
to purchase, subscribe for, acquire, own, hold, sell,
exchange, assign, transfer, mortgage, pledge, or other-
wise dispose of shares or voting trust certificates for
shares of the capital stock, or any bonds, notes,
securities, or evidences of indebtedness created by, any
other corporation or corporations organized under the
laws of this state or any other state or district or
country, nation, or government and also bonds or
evidences of indebtedness of the United States or of any
state, district, territory, dependency, or county or
subdivision or municipality thereof; to issue in exchange
therefor shares of the capital stock, bonds, noted, or
other obligations of the Corporation and while the owner
thereof to exercise all the rights, powers, and
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privileges of ownership including the right to vote on
any shares of stock or voting trust certificates so
owned; to promote, lend money to and guarantee the
dividends, stocks, bonds, notes, evidences of
indebtedness, contracts, or other obligations of an
otherwise aid in any manner which shall be lawful, any
corporation or association of which any bonds, stocks,
voting trust certificates, or other securities or
evidences of indebtedness shall be hold by or for this
Corporation, or in which, or in the welfare of which,
this Corporation shall have any interest, and to do any
acts and things permitted by law and designed to protect,
preserve, improve, or enhance the value of any such
bonds, stocks, or other securities or evidences of
indebtedness or the property of this Corporation.
(2) To acquire, and pay for in cash, stock or bonds
of this Corporation or otherwise, the good will, rights,
assets and property, and to undertake or assume the whole
or any part of the obligations or liabilities of any
person, firm, association or corporation, and to hold,
possess and improve such properties and to conduct in any
legal manner the whole or any part of the business so
acquired; and to pledge, mortgage, sell or otherwise
dispose of the same; to aid in any lawful manner, by
loan, subsidy, guaranty or otherwise, any corporation
whose stocks, bonds, notes, debentures or other
securities are held or controlled, directly or
indirectly, by the Corporation, and to do any and all
lawful acts or things necessary or advisable to protect,
preserve, improve or enhance the value of any such
stocks, bonds, notes, debentures, or other securities or
obligations; and to endorse or guarantee the payment of
principal or interest or both, or dividends upon any
stocks, bonds, obligations or other securities or
evidences of indebtedness, and to guarantee the
performance of any contracts or other undertakings in
which the Corporation is or becomes interested, of any
corporation, association, partnership, firm individual or
others, or any country, nation or governmental or
political authority.
(3) To acquire, hold, use, sell, assign, lease,
grant licenses in respect of, mortgage or otherwise
dispose of letters patent of the United States or any
foreign country, patent rights, licenses and privileges,
inventions, improvements and processes, copyrights,
trade-marks and trade names, relating to or useful in
connection with any business of this Corporation.
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(4) To make, enter into and carry out any
arrangements which may be deemed to be for the benefit of
the Corporation, with any domestic or foreign
governmental, municipal or public authority, or with any
corporation, partnership, association, combination,
organization, entity or person; to obtain therefrom or
otherwise to acquire by purchase, lease, assignment or
otherwise, any powers, rights, privileges, immunities,
franchises, quarantines, grants and concessions; to hold,
own, exercise, exploit, dispose of and realize upon the
same, and to undertake and prosecute any business
dependent thereon which may lawfully be undertaken by a
corporation, domestic or foreign, for any such purpose.
(5) To act in any and all parts of the world as
principal, agent or otherwise, either alone or in
association with any other persons, firms association,
entities, combinations, domestic or foreign corporations,
states, governments and other public and private bodies.
(6) To produce, buy, sell and dispose of all kinds
of services, goods, wares, merchandise, commodities,
supplies and products.
(7) To borrow or raise money for any of the
purposes of the Corporation and, from time to time
without limit as to amount, to draw, make, accept,
endorse, execute and issue promissory notes, drafts,
bills of exchange, warrants, bonds, debentures and other
negotiable or non-negotiable instruments and evidences of
indebtedness, and to secure the payment of any thereof
and of the interest thereon by mortgage upon or thereof
and of the interest thereon by mortgage upon or pledge,
conveyance or assignment in trust of or lien upon the
whole or any part of the property of the Corporation,
whether at the time owned or thereafter acquired, and to
sell, pledge or otherwise dispose of such bonds,
debentures or other obligations of the Corporation for
its corporate purposes; to confer upon the holders of any
bonds, debentures or obligations of the Corporation,
secured or unsecured, the right to convert the principal
thereof into stock of the Corporation upon such terms and
conditions as may be deemed advisable; to create, issue,
sell and otherwise dispose of, for money, property or
other considerations deemed useful for the purpose of the
Corporation, certificates entitling the purpose of the
Corporation, certificates entitling the holder to an
interest in all or any part of the securities from time
to time hold by the Corporation; to permit the holders of
any bonds, debentures or obligations of the Corporation,
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secured by specific securities, to share in the income of
such securities in lieu of or in addition to, a fixed
return on their investment; and to issue certificates for
partly-paid stock of the Corporation.
(8) To the extent permitted by law, to lend to any
person, firm or corporation any of its uninvested funds,
either with or without security.
(9) To purchase or otherwise acquire, hold, sell
and transfer the shares of its capital stock; provided it
shall not use its funds or property for the purchase or
acquisition of its own shares of capital stock when such
use would cause any impairment of its capital except as
otherwise permitted by law, and provided further that
shares of its own capital stock belonging to it shall not
be voted upon directly or indirectly.
(10) To have one or more offices, to carry on all or
any of its operations and business and without
restriction or limit as to amount, to purchase or
otherwise acquire, hold, own, mortgage, sell, convey or
otherwise dispose of, real and personal property of every
class and description in any of the states, districts or
territories of the United States, and in any and all
foreign countries, subject to the laws of such state,
district, territory or country; to erect, construct,
rebuild, enlarge, alter, improve, maintain, manage and
operate houses, buildings or other works of any
description on any lands owned or leased by the
Corporation, or upon any other lands; to sell, lease,
sublet, mortgage, exchange or otherwise depose of any of
the lands or any interest therein, or any houses,
buildings or other works owned by the Corporation; to
engage generally in the real estate business, as
principal, agent, broker or otherwise, and generally to
buy, sell, lease, mortgage, exchange, manage, operate and
deal in lands or interests in lands, houses, buildings or
other works; and to purchase, acquire, hold, exchange,
pledge, hypothecate, sell, deal in and dispose of tax
liens and transfers of tax liens on real estate.
(11) To endorse or guarantee the payment of
principal or interest, or both, or dividends upon any
stocks, bonds, obligations or other securities of
evidences of indebtedness issued or created by any other
corporation of the State of Maryland, or any other state,
or of any country, nation or government, or political
authority, so far as the same may be permitted by law.
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(12) To undertake, contract for or carry on any
business incidental to or in aid of, or convenient or
advantageous in pursuance of, any of the objects or
purposes of the Corporation.
(13) In general, to carry on any other and exercise
all the powers conferred by the laws of Maryland upon
corporations formed under the General Corporation Law of
the State of Maryland, and to do any or all of the things
hereinbefore set forth to the same extent as natural
persons might or could do.
(14) The objects and purposes specified in the
foregoing clauses shall, except where otherwise
expressed, be in nowise limited or restricted by
reference to, or inference from, the terms of any other
clause herein contained, but the objects and purposes
specified in each of the foregoing clauses of this
Article THIRD shall be regarded as independent objects
and purposes.
FOURTH: The post office address of the principal office
of this Corporation in this State is 19 South Second Street,
Oakland, Maryland 21550-0009. The name and post office address of
the resident agent of the Corporation in this State is Richard G.
Stanton, 19 South Second Street, Oakland, Maryland 21550-0009.
Said resident agent is a citizen of the State of Maryland and
actually resides therein.
FIFTH: The total number of shares of stock of all
classes which the Corporation has authority to issue is four
million five hundred thousand (4,500,000) shares, divided into two
million five hundred thousand (2,500,000) shares of Preferred Stock
of the par value of Ten Dollars ($10.00) each and two million
(2,000,000) shares of Common Stock of the par value of Five Dollars
($5.00) each. The aggregate par value of all shares having par
value of all classes is Thirty-Five Million Dollars ($35,000,000).
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A description of each class, with the preferences,
conversion and other rights, voting powers, restrictions,
limitations to dividends and qualifications of each class, is as
follows:
PREFERRED STOCK
The Board of Directors shall have authority to
classify and reclassify any unissued shares of the
Preferred Stock, by fixing or altering in any one or more
respects from time to time before issuance, the
preferences, right, voting powers, restrictions and
qualifications of, the dividends on, the times and prices
of redemption of, and the conversion rights of, such
shares; provided, that the Board of Directors shall not
classify or reclassify any of such shares into shares of
the Common Stock, or into any class or series of stock
(i) which is not prior to the Common Stock either as to
dividends or upon liquidation and (ii) which is not
limited in some respect either as to dividends or upon
liquidation. Subject to the foregoing, the power if the
Board of Directors to classify and reclassify any of the
shares of Preferred Stock shall include, without
limitation, subject to the provisions of the charter,
authority to classify or reclassify any unissued shares
of such stock into a class or classes of preferred stock,
preference stock, special stock or other stock and to
divide and classify shares of any class into one or more
series of such class, by determining, fixing or altering
one or more of the following:
(a) The distinctive designation of such class or
series and the number of shares to constitute such class
or series; provided that, unless otherwise prohibited by
the terms of such or any other class or series, the
number of shares of any class or series may be decreased
by the Board of Directors in connection with any
classification or reclassification of unissued shares and
the number of shares of such class or series may be
increased by the Board of Directors in connection with
any such classification or reclassification, and any
shares of any class or series which have been redeemed,
purchased, otherwise acquired or converted into shares of
Common Stock or any other class or series shall remain
part of the authorized Preferred Stock and be subject to
classification and reclassification as provided in this
Section;
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(b) Whether or not and, if so, the rates and times
at which, and the conditions under which, dividends shall
be payable on shares of such class or series, whether any
dividends shall rank senior or junior to or on a parity
with the dividends payable on any other class or series
of Preferred Stock, and the status of any such dividends
as cumulative or non-cumulative and as participating or
non-participating;
(c) Whether or not shares of such class or series
shall have voting right, in addition to any voting rights
provided by law and, if so, the terms of such voting
rights;
(d) Whether or not shares of such class or series
shall have conversion or exchange privileges and, if so,
the terms and conditions thereof, including provision for
adjustment of the conversion or exchange rate in such
events or at such times as the Board of Directors shall
determine;
(e) Whether or not the shares of such class or
series shall be subject to redemption and, if so, the
terms and conditions of such redemption, including the
date or dates upon or after which they shall be
redeemable and the amount per share vary under different
conditions and at different redemption dates; and whether
or not there shall be any sinking fund or purchase
account in respect thereof, and if so, the terms thereof;
(f) The rights of the holders of shares of such
class or series upon the liquidation, dissolution or
winding up of the affairs of, or upon any distribution of
the assets of, the Corporation, which rights may vary
depending upon whether such liquidation, dissolution or
winding up is voluntary or involuntary and, if voluntary,
may vary at different dates, and whether such rights
shall rank senior or junior to or on a parity with such
rights of any other class or series of Preferred Stock;
(g) Whether or not there shall be any limitations
applicable, while shares of such class or series are
outstanding, upon the payment of dividends or making of
distributions on, or the acquisition of, or the use of
moneys for purchase or redemption of, any stock of the
Corporation, or upon any other action of the Corporation,
including action under this Section, and, if so, the
terms and conditions thereof; or
(h) Any other preferences, rights, restrictions and
qualifications of shares of such class or series, not
inconsistent with law and the charter of the
Corporations.
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COMMON STOCK
Subject to the foregoing provision, dividends may be
declared on the Common Stock at such time and in such
amounts as the Board of Directors may deem advisable; and
each share of Common Stock shall entitle the holder
thereof to one (1) vote in all proceedings in which
action shall be taken by stockholders of the Corporation,
and at all elections of directors of the Corporation,
each stockholder shall have the right to vote, in person
or by proxy, the shares owned of record by him, for as
many persons as there are directors to be elected and for
whose election he has a right to vote.
SIXTH: The number of directors of the Corporation shall
be three (3), and the number of directors may be increased or
decreased pursuant to the By-Laws of the Corporation, but shall
never be less than three.
The names of the directors who shall act until the first
annual meeting of stockholders or until their successors are duly
chosen and qualify are: Courtney R. Tusing, Richard G. Stanton and
Horace P. Whitworth, Jr.
SEVENTH: Each director and officer shall be indemnified
by the Corporation to the full extent permitted by the General
Corporation Law of Maryland.
The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred
by him in any such capacity or arising out of his status as such,
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whether or not the Corporation would have the power to indemnify
him against such liability.
EIGHTH: The following provisions are hereby adopted for the
purpose of defining, limiting and regulating the powers of the
Corporation and of the directors and stockholders:
(1) The Board of Directors of the Corporation is
hereby empowered to authorize the issuance from time to
time of shares of its stock, with or without par value,
of any class, whether now or hereafter authorized and
securities convertible into shares if its stock, with or
without par value, of any class, for such considerations
as said Board of Directors may deem advisable,
irrespective of the value or amount of such
considerations.
(2) No transaction or contract of the Corporation
shall be void or voidable by reason of the fact that any
Director or any firm of which any Director is a member or
any other corporation of which any Director is a
shareholder, officer or director is in any was interested
in such transaction or contract; provided such
transaction or contract is or shall be authorized,
ratified or approved in the manner provided by the
General Corporation Law of Maryland,
(3) No holders of stock of the Corporation, of
whatever class, shall have any preferential right of
subscription to any shares of any class or to any
securities convertible into shares of stock of the
Corporation, nor any right of subscription to any thereof
other than such, if any, as the Board of Directors in its
discretion may determine, and at such price as the Board
of Directors in its discretion may fix; and any shares or
convertible securities which the Board of Directors may
determine to offer for subscription to the holders of
stock may, as said Board of Directors shall determine, be
offered to holders os any class or classes of stock at
the time existing to the exclusion of holders of any or
all other classes at the time existing.
(4) The Board of Directors shall have power to
declare and authorize the payment of stock dividends,
whether or not payable in stock of one class to holders
of stock of another class or classes; and shall have
authority to exercise, without a vote of stockholders,
all powers of the Corporation, whether conferred by law
or by these articles, to purchase, lease, or otherwise
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acquire the business, assets or franchises, in whole or
in part, of other corporations or unincorporated business
entities.
NINTH: The duration of the Corporation shall be
perpetual.
IN WITNESS WHEREOF, I have signed these Amended
Articles of Incorporation, acknowledging the same to be my act on
the day of March 1994.
Witness:
_______________________(SEAL)
Cleaveland D. Miller, Esquire
FIRST UNITED CORPORATION
ARTICLES OF AMENDMENT
THIS IS TO CERTIFY THAT:
FIRST: The charter of First United Corporation, a
Maryland corporation having its principal office at 19 South Second
Street, Oakland, Maryland 21550-0009 (the "Corporation:), is hereby
amended by deleting existing Article FIFTH in its entirety and
adding a new article to read as follows:
"FIFTH: The total number of shares of stock which the
Corporation has authority to issue is fourteen million
(14,000,000) shares, consisting of twelve million
(12,000,000) shares of common stock, $.01 par value per
share, and two million (2,000,000) shares of preferred
stock, without par value. The aggregate value of all
authorized shares having a par value is one hundred
twenty thousand dollars (120,000).
A description of each class of stock of the Corporation,
including any preferences, conversion and other rights,
voting powers, restriction, limitations as to dividends,
qualifications, and terms and conditions of redemption,
is as follows:
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1. Common Stock. Subject to the rights of holders of
any series of preferred stock established pursuant to
paragraph 2 of this Article FIFTH, each share of common
stock shall entitle the holder to one vote per share on
all matters upon which stockholders are entitled to vote,
to receive dividends and other distributions as
authorized by the Board of Directors in accordance with
the Maryland General Corporation Law ("MGCL"), and to all
rights of a stockholder pursuant to the MGCL. The common
stock shall have no preference, preemptive, conversion or
exchange rights. The Board of Directors may classify or
reclassify any unissued common stock from time to time by
setting or changing the preferences, conversion or other
rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of
redemption of common stock.
2. Series Preferred Stock. The Board of Directors shall
have the power from time to time to (a) classify or
reclassify, in one or more series, any unissued shares of
series preferred stock and (b) reclassify any unissued
shares of any series of series preferred stock, in the
case of either (a) or (b), by setting or changing the
designation, preferences conversion or other rights,
voting powers, restriction, limitations as to dividends,
qualifications and terms and conditions of redemption of
such shares and, in such event, the Corporation shall
file for record with the State Department of Assessments
and Taxation of Maryland articles supplementary in
substance and form as prescribed by Maryland law.
The Board of Directors may classify or reclassify any
unissued stock from time to time by setting or changing
the preferences, conversion or other rights, voting
powers, restriction, limitations as to dividends,
qualifications or terms of conditions of redemption of
the stock.
Dividends may be declared on the common stock at such
time and in such amounts as the Board of Directors may
deem advisable; however, any such dividends shall be
subject to the rights of any preferred stock outstanding,
and any share of common stock shall entitle the holder
thereof to one (1) vote in all proceedings in which
action shall be taken by stockholders of the
Corporation."
SECOND: The amendment to the charter of the Corporation
as hereinabove set forth has been duly advised by the Board of
Directors and approved by the Stockholders of the Corporation as
required by law.
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THIRD: The total number of shares of stock which the
Corporation had authority to issue immediately prior to this
amendment was ten million (10,000,000) shares, consisting of eight
million (8,000,000) shares of common stock, $5.00 par value per
share, and two million (2,000,000) shares of preferred stock,
without par value, such total number of shares having an aggregate
par value of Forty Million Dollars ($40,000,000.00).
FOURTH: The total number of shares of stock which the
Corporation has authority to issue, pursuant to the charter of the
Corporation as hereby amended, is fourteen million (14,000,000)
shares, consisting of twelve million (12,000,000) shares of common
stock, $.01 par value per share, and two million (2,000,000) shares
of common stock, without par value, such total number of shares
having an aggregate par value of One Hundred Twenty Thousand
Dollars ($120,000.00).
FIFTH: The undersigned President acknowledges these
Articles of Amendment to be the corporate act of the Corporation
and as to all matters or facts required to be verified under oath,
the undersigned President acknowledges that to the best of his
knowledge, information and belief, these matters and facts are true
in all material respects and that this statement is made under the
penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these
presents to be signed in its name and on its behalf by its
President and attested to by its Secretary on this day of
March 1994.
FIRST UNITED CORPORATION
By:___________________________
Richard G. Stanton
Chairman of the Board,
President and CEO
ATTEST:
____________________________
William B. Grant, Secretary
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of
the 18th day of May, 1993, by and between MYERSVILLE BANK, a
commercial bank organized under the laws of the State of Maryland
(hereinafter referred to as the "Employer"), and TERRY L. REIBER, a
Maryland resident (hereinafter referred to as the "Employee").
EXPLANATORY STATEMENT
A. Employer desires to retain the services of Employee
as President and Chief Executive Officer of Employer.
B. Employee desires to enter into this Agreement with
Employer.
NOW, THEREFORE, in consideration of the mutual covenants,
promises, and agreements of the parties hereto, each to the other
made, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
covenant, promise, and agree as follows:
SECTION 1. EMPLOYMENT
1.1. Engagement of Employment. The Employer hereby
employs Employee, and Employee accepts such employment, as President
and Chief Executive Officer of Employer, and agrees to
render such duties as are assigned to Employee by Employer's Board
of Directors, in addition to those set forth in Section 1.2,
subject to the terms and conditions of this Agreement.
1.2. Duties. During Employee's employment under
this Agreement, Employee shall render to the best of Employee's
ability, on behalf of Employer and at the direction of Employer,
services as President and Chief Executive Officer of Employer
including, but not limited to the duties prescribed by the By-Laws
of Employer and other such duties and assignments in accordance
with the policies and directives of the Employer as may from time
to time be established.
SECTION 2. TERM.
2.1. Initial Term and Renewal Terms. Unless sooner
terminated as provided in Section 2.2 of this Agreement, the term
of this Agreement shall be
(a) for an "Initial Term" of five (5) years
beginning January 1, 1993, even date and extending until and
through December 31, 1997; and
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(b) for successive one (1) year "Renewal Terms"
thereafter at the Board of Directors' discretion and subject to the
written approval of the parent company of Employer.
2.2. Termination. This Agreement shall terminate in
the event of the occurrence of one or more of the following
specific events or conditions:
(a) by mutual written consent of Employer and
Employee;
(b) by Employer upon the conviction of Employee
for a felony committed by Employee
determined in a Court of Law;
(c) by Employer for "cause" as hereinafter
defined;
(d) by death of Employee; or
(e) by Employee's "disability" as defined in
Section 2.3.
In subsection 2.2(c) the term "cause" means only (i)fraud,
misappropriation or intentional material damage to the business of
the company; (ii)continuance of failure of Employee to perform his
duties in compliance with this Agreement for a period of thirty
days after written notice to Employee from Employer's Board of
Directors specifying such failure; or (iii)other egregious
dishonest act.
2.3. Disability. Employee shall be deemed disabled
if for a period of ninety (90) consecutive days, or for a period of
one hundred and twenty (120) days in any twelve (12) month period,
Employee is rendered wholly incapable of carrying out Employee's
job responsibilities.
SECTION 3. COMPENSATION
3.1. Employee Compensation. Employer agrees to pay
Employee (in addition to any benefits and bonuses provided for in
this Agreement) a "Salary" in the amounts set forth below, as the
same may be modified from time to time by Employer. Salary
payments shall be made in equal semi-monthly installments.
(a) Initial Term
Year 1 $73,000
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The salary for years 2 through 5 will be the salary for the
immediately preceding year plus an increase of not less than the
average percent increase given to all other employees at Myersville
Bank.
(b) Renewal Term
Salary during each Renewal Term shall be
determined annually by the Board of Directors of Employer, but
shall not be less than the Salary payable in the immediately
preceding year increased by not less than the average percent
increase given to all other employees at Myersville Bank.
3.2. Deductions. Employer is authorized to deduct
from the actual compensation of Employee such sums as may be
required to be deducted or withheld under the provisions of any law
now in effect or hereafter put into effect during the Initial Term
and any Renewal Term of this Agreement, including, but not limited
to, social security and unemployment and income withholding taxes.
SECTION 4. BENEFITS AND BUSINESS EXPENSES
4.1. Benefits. Subject to Employee's insurability,
Employee shall be entitled to such medical insurance, life
insurance, and other fringe benefits as may be provided to
employees holding comparable positions with Employer from time to
time. This Section 4 shall not commit Employer to any specific
policy of benefits, but shall only obligate Employer to extend
benefits to Employee on a basis comparable to that upon which and
only for so long as benefits are made available to employees
holding executive positions with Employer.
4.2. Business Expenses. Employee shall be
reimbursed for expenses incurred in connection with Employee's
exercise of Employee's duties under this Agreement; provided that
such expenses are approved in advance by the Employer. It is
intended by Employer and Employee that all such expenses shall be
ordinary and necessary expenses incurred in connection with
Employer's business. Employer will establish guidelines pertaining
to Employee's authorization to incur business expenses on behalf of
Employer and Employee agrees to comply with all Employer's policies
relating to the authorization and verification of such expenses.
SECTION 5. VACATION AND OTHER LEAVE
5.1. Vacation Time. Employee shall be entitled to
"Vacation Time" in the amount of working days per year prescribed
under the Employer's personnel policy from time to time, but
Vacation times shall not be less than three (3) weeks annually.
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Employee shall take Employee's Vacation Time at such time or times
as shall be approved by the Employer. Employee's Salary and all
benefits shall be paid and provided in full during Employee's
Vacation Time.
5.2. Holidays and Sick Leave. Employee shall be
entitled to holidays observed by Employer in the course of its
banking business. Employee shall be entitled to sick leave and
personal days as prescribed under Employer's personnel policy from
time to time. Employee's Salary shall be paid and provided for in
full during the holidays listed above and during Employee's
permitted sick leave and personal days.
SECTION 6. PAYMENTS UPON CERTAIN EVENTS OF TERMINATION.
In the event that Employee's employment with Employer is terminated
upon or after a change in control (hereinafter defined) of Employer
for any reason whatsoever, except pursuant to Section 2.2 of this
Agreement, Employer shall continue to pay Employee his Salary as
liquidated damages in equal semi-monthly installments during the
period commencing on the effective date of such termination and
ending on the date that this Agreement would otherwise have expired
pursuant to Section 2.1. The term "control" means the ability of a
shareholder of Employer, or a group of shareholders of Employer
acting in concert, to elect a majority of the members of the Board
of Directors of Employer.
SECTION 7. GOVERNING LAW. The validity, legality, and
construction of this Agreement or of any of its provisions shall be
determined under the laws of the State of Maryland.
SECTION 8. ASSIGNMENT. Neither this Agreement nor any
part hereof shall be assigned by the Employee without the
Employer's express written consent.
SECTION 9. CONSENTING PARTIES. Any changes made to this
Employment Agreement, including any renewals thereof, must have the
prior written consent of the parent company of Employer.
SECTION 10. NOTICES. All notices and communications
hereunder shall be in writing and shall be deemed given when sent
postage prepaid by registered or certified mail, return receipt
requested, or by hand delivery with a signed returned copy, and
addressed as follows:
If intended for Employer: 207-09 Main Street
Myersville, MD 21773
Attn: Chairman of the
Board of Directors
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with a copy to: Melissa Allison Warren, Esq.
Shapiro and Olander
2000 Charles Center South
36 South Charles Street
Baltimore, MD 21201
If intended for Employee: 924 Kenwood Drive
Hagerstown, MD 21740
If, however, a party furnishes another party with notice of a
change of address, as provided in this Section, then all notices
and communications thereafter shall be addressed as provided in
such notice.
SECTION 11. ENTIRE AGREEMENT. This agreement contains the
entire understanding between Employer and Employee and supersedes
all other oral and written agreements (including prior executed
employment agreements) or understandings between them.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
ATTEST/WITNESS: MYERSVILLE BANK
/s/ Clara Mae Baker By: /s/ Maynard G. Grossnickle(SEAL)
Chairman of the Board
WITNESS:
/s/ Clara Mae Baker /s/ Terry L. Reiber (SEAL)
TERRY L. REIBER
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FIRST UNITED CORPORATION
19 South Second Street
P.O. Box 9
Oakland, Maryland 21550-0009
March 25, 1994
PROXY STATEMENT
INFORMATION CONCERNING THE SOLICITATION
The enclosed Proxy is solicited on behalf of the Board of
Directors of First United Corporation (the "Company") and it is
requested that it be completed, signed and returned to the Company
promptly. The cost of soliciting proxies will be borne by the Company.
In addition to solicitation by mail, proxies may be
solicited by officers, directors and regular employees of the
Company personally or by telephone, telegraph or facsimile. No
additional remuneration will be paid to officers, directors or
regular employees who solicit proxies. The Company may reimburse
brokers, banks, custodians, nominees and other fiduciaries for
their reasonable out-of-pocket expenses in forwarding proxy
materials to their principals. Should you attend the meeting and
desire to vote in person, you may withdraw your proxy by requesting
management to do so, prior to exercise by the named attorneys.
Also, your proxy may be revoked before it is exercised, whether or
not you attend the meeting, by notifying William B. Grant,
Secretary, First United Corporation, P.O. Box 9, Oakland, Maryland
21550-0009, in writing prior to the annual meeting which will be
held on April 26, 1994 and your proxy may be revoked by using a
subsequently signed proxy. The proxy materials are first being
mailed to shareholders on or about March 25, 1994.
SHAREHOLDERS' PROPOSALS FOR 1995 ANNUAL MEETING
Shareholders' proposals intended to be presented at the
1995 Annual Meeting must be received by the Company no later than
November 25, 1994.
OUTSTANDING VOTING SECURITIES; VOTING RIGHTS
The holders of record of Common Stock at the close of
business on March 18, 1994, will be entitled to vote at the annual
meeting. As of that date, there were 6,186,117 shares of Common
Stock outstanding and entitled to be voted at the annual meeting
except that 422,644 shares, or 6.83%, held by the Trust Department
of First United National Bank & Trust (the "Bank"), as sole
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trustee, may not be voted in the election of Directors. Each share
is entitled to one vote. Directors are elected by a plurality of the
votes cast by the holders of shares of Common Stock present in
person or represented by proxy at the meeting, with a quorum
present. For purposes of the election of directors, abstentions and
broker non-votes do not affect the plurality vote.
STOCK OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth information regarding the
number of shares of Common Stock owned as of December 31, 1993 by
directors and nominees for director, each executive officer named
in the Summary Compensation Table, all directors and executive
officers as a group. To the Company's knowledge, no person
beneficially owns more than 5% of the Company's outstanding Common
Stock.
Common Stock Percent of
Beneficially Outstanding
NAME Owned (1) (2) Common Stock
David J. Beachy 5,339 .08%
Donald M. Browning 16,774 .27%
Rex W. Burton 8,485 .14%
John L. Conway 62,818 1.01%
Paul Cox, Jr 962 .01%
Bowie Linn Grant 43,072 .70%
William B. Grant 3,818 .06%
Robert W. Kurtz 10,643 .17%
Andrew E. Mance 43,525 .70%
Donald E. Moran 92,398 1.49%
Terry L. Reiber 3,914 .06%
I. Robert Rudy 23,929 .39%
Tod P. Salisbury 6,124 .10%
James F. Scarpelli, Sr. 98,184 1.59%
Karen F. Spiker 4,268 .07%
Richard G. Stanton 11,674 .19%
Horace P. Whitworth, Jr. 69,550 1.12%
Directors & Executive Officers
As a group (17 persons) 505,477 8.17%
(1) Except as otherwise indicated and except for shares held by members
of an individual's family or in trust, all shares are held with sole
dispositive and voting power.
(2) Does not include 620,209 shares held in the nominee name
First Oak & Co. administered by the Trust Department of the Bank,
none of which shares are beneficially owned by any director or
executive officer of the Company.
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(3) Does not include 432 shares, 279 shares, and 265 shares held
in the First United Corporation ESOP for Richard G. Stanton,
Robert W. Kurtz, and William B. Grant respectively, as to which
voting rights have been retained. Does not include 71,130 shares
held by the Trust Department of the Bank in revocable, living
trusts of the family of James F. Scarpelli, Sr. and 50,130 shares
held by family members of John L. Conway in which voting rights
have been retained.
NOMINEES FOR DIRECTORS (PROPOSAL NO. 1)
(1) The Board has set the number of Directors at sixteen
(16). The shareholders will vote at this Annual Meeting for
directors who will serve a one year term expiring at the Annual
Meeting of shareholders in 1995. The persons named in the enclosed
proxy will vote for the election of the nominees named below unless
authority to vote is withheld. In the event that any of the
nominees should be unable to serve, the persons named in the proxy
will vote for such substitute nominee or nominees as they, in their
discretion, shall determine. The Board of Directors has no reason
to believe that any nominee herein will be unable to serve.
(2) The Board of Directors has placed into nomination the
following nominees:
NAME AGE OCCUPATION DURING PAST DIRECTOR OF
(As of 12/31/93) FIVE YEARS THE COMPANY OR ANY
OF ITS SUBSIDIARIES
(1) (2)
David J. Beachy 53 Vice President, 1979
Fred E. Beachy Lumber Co., Inc.
Building Supplies
Donald M. Browning 68 Chairman of the Board 1963
Brownings, Inc., Retail Groceries
Rex W. Burton 59 Owner & President 1991
Burton's, Inc., Dry Goods
John L. Conway 73 Banker, Retired 1986 1983
Paul Cox, Jr. 54 President, Antietam Business 1993
Equipment
Bowie Linn Grant 68 Retired Physician, 1990 1981
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Robert W. Kurtz 47 Executive Vice President 1990
and Treasurer
First United Corporation
Executive Vice President, First United
National Bank & Trust
Andrew E. Mance 79 Physician 1958
Donald E. Moran 63 Chairman of the Board 1961
and President,
First United Bank of West
Virginia, N.A.,
Secretary/Treasurer, Moran Coal
Company
I. Robert Rudy 41 Owner, Rudy's Dept. Store, 1992
Dry Goods
Terry L. Reiber 46 Banker, President/CEO 1988
Myersville Bank
Tod P. Salisbury 41 Partner, Salisbury & McLister 1989
Law Firm
James F. Scarpelli, 79 Owner, Scarpelli Funeral Home 1983
Sr.
Karen F. Spiker 42 Real Estate Broker, A & A Realty 1988
Better Homes and Gardens
Richard G. Stanton 54 Chairman of the Board, President 1973
and CEO First United Corporation and
First United National Bank & Trust
Horace P. Whitworth,81 Attorney-at-Law, General Counsel 1970
Jr. of First United Corporation,
First United National Bank & Trust,
First United Securities, Inc.,
Oakfirst Life Insurance Corp. and
First United Insurance Agency, Inc. (3)
(1) Except as otherwise indicated, there has been no change in
the principal occupation or employment during the past five years.
(2) This date refers to the year when the individual, with the
exception of Messers. Moran, Reiber, Rudy, Salisbury, and Ms.
Spiker, became a Director of First United National Bank & Trust, a
subsidiary of the Company. Donald E. Moran became a Director of
First United Bank of West Virginia, N.A. in 1961 and a Director of the
Company in 1988. Robert W. Kurtz became a Director of the
Company in 1990. I. Robert Rudy and Karen F. Spiker became
Directors of the Company in 1992. All other directors became
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directors of the Company in 1985. Paul Cox, Jr., Terry L. Reiber,
and Tod P. Salisbury became directors of the Company in
1993 and Myersville Bank in 1993, 1988, and 1989 respectively.
(3) Horace P. Whitworth, Jr., Esquire has been retained as
General Counsel for the Company and several subsidiaries of the
Company, (First United National Bank & Trust, First United
Securities, Inc., Oakfirst Life Insurance Corporation, and First United
Insurance Agency, Inc.). The Company and the aforementioned
subsidiaries propose to retain Mr. Whitworth as General Counsel for
the current fiscal year.
The Board of Directors recommends that shareholders vote "FOR" such
nominees.
Directors Fees and Meeting Attendance
A director of the Company receives up to $350 for a Board
meeting and up to $175 for each committee meeting of the Board of
which the Director is a member, depending on the length of the
meeting. Directors of subsidiaries of the Company are compensated
for their attendance of meetings of the subsidiaries' Boards.
During 1993 the Board of Directors of the Company held
sixteen meetings. All incumbent Directors who are nominees for
re-election attended at least 75% of the Board Meetings and
meetings of each committee of the Board on which such Director
served, with the exception of Donald M. Browning, who attended 44%
of such Board meetings and 100% of meetings of the committees on
which he serves. In addition, Directors of the Company's
subsidiaries have met in accordance with guidelines established by
the Board of Directors.
Committees of the Board of Directors
In addition to meeting as a group, certain members of the
Board also devote their time to certain standing committees. Among
those committees are the Audit, Investment and Funds Management and
Executive Committees, whose members and principal functions are
listed below. The Chairman of the Board, President and CEO of the
Company, Richard G. Stanton, is an ex-officio member of all
committees, except the Audit Committee.
Audit Committee - The Audit Committee, which consists of Donald M.
Browning, Dr. B.L. Grant, Donald E. Moran, and Karen F. Spiker,
reviews significant audit and accounting principles, policies and
practices, meets with the Company's auditor to review the Company's
internal auditing function, and meets with the Company's
independent auditors to review the results of the annual
examination. This Committee met four times in 1993.
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Investment and Funds Management Committee - This Committee
reviews and recommends changes to the Company's asset and
liability, investment, liquidity, and capital plans. The
Investment and Funds Management Committee met once in 1993.
Members of the Committee are: David J. Beachy, Robert W. Kurtz,
Dr. Andrew Mance, I. Robert Rudy, and James F. Scarpelli, Sr.
Executive Committee - This Committee is responsible for
reviewing and recommending changes to the Company's insurance
program, overseeing compliance with the Company's By-Laws and
Articles of Incorporation, supervising the Company's CEO,
monitoring the performance of the Company and its subsidiaries,
recommending changes to the Company's and subsidiaries' personnel
policies, serving as a director nomination committee, and functions
with the authority of the full Board between meetings of the Board.
The Executive Committee met one time in 1993. Members of the
Committee are: Rex W. Burton, Dr. B.L. Grant, Robert W. Kurtz, I.
Robert Rudy, and Horace P. Whitworth, Jr.
Executive Compensation Committee - The Executive
Compensation Committee is responsible for recommending to the Board
a compensation policy for the CEO and other Executive Officers of
the Company and its subsidiaries. Members of this Committee are:
David J. Beachy, Rex W. Burton, I. Robert Rudy, and Horace P.
Whitworth, Jr. This Committee met four times in 1993. The
following directors from First United National Bank & Trust Board
also served on this Committee: Richard D. Dailey, Elaine L.
McDonald, and Robert G. Stuck.
Compensation Committee Interlocks and Insider Participation
The Executive Compensation Committee is comprised of
members of the Board of Directors of the Company and of First
United National Bank & Trust who are not employees of the Company.
Mr. Whitworth, who serves as General Counsel to the Company and
certain of its affiliates, received approximately $20,000 in legal
fees in connection with such services during 1993.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS (PROPOSAL NO. 2)
Subject to ratification by shareholders, the Board of
Directors has reappointed Ernst & Young as Independent Auditors to
audit the consolidated financial statements of the Company and its
subsidiaries. Ernst & Young has advised the Company that no one
within the firm nor any of its members or associates has any direct
financial interest in or has any connection with the Company or its
subsidiaries other than as Independent Auditors. No
representatives of Ernst & Young are expected to be present at the
Annual Meeting.
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The Board of Directors recommends that shareholders vote "FOR" such
ratification.
REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation Table
The following sets forth the total remuneration for services
in all capacities paid during each of the last three fiscal years
to the chief executive officer and each of the other executive
officers of the Company as to whom total remuneration exceeded
$100,000 during the fiscal year ended December 31, 1993.
Name and Year Salary Bonus All other
Principal Position Compensation
(1) (2) (3) (4)
Richard G. Stanton 1993 $158,939 $18,637 $19,463
Chairman of the Board 1992 158,532 35,564 21,970
President and CEO 1991 142,836 0 17,842
Robert W. Kurtz 1993 $107,396 $17,945 $10,187
Executive Vice President 1992 104,711 25,198 12,221
and Treasurer 1991 93,396 0 10,658
William B. Grant 1993 $95,196 $17,945 $12,567
Executive Vice President 1992 95,196 25,198 13,885
and Secretary 1991 84,996 0 11,258
(1) Includes directors fees.
(2) The bonus was issued in 1994 for 1993 performance.
(3) Includes (i) basic and matching contributions made by the
Company under the Company's Profit Sharing Plan of $18,429,
$9,520, $11,900 for Messrs. Stanton, Kurtz, and Grant,
respectively, and (ii) contributions made by the Company under the
Employee Stock Ownership Plan of $1,035, $668, and $668 for Messrs.
Stanton, Kurtz, and Grant respectively. Each of Messrs. Stanton,
Kurtz, and Grant has in excess of 7 years of credited service under
the respective plans, and is therefore 100% vested.
(4) First United National Bank & Trust's profit sharing plan and
pension and salary deferral plan are described under the caption
"Pension and Profit Sharing".
Executive Compensation Committee Report
The basic philosophy of the Company's compensation program
is to offer competitive compensation for all executive employees
that takes into account both individual contributions and corporate
performance. Compensation levels for executives were recommended
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by the Executive Compensation Committee and approved by the
non-employee directors of the Board.
The principal elements of executive compensation are salary
and bonus. Base salaries are set at levels intended to foster a
career orientation among executives, consistent with the long-term
nature of the Company's business objectives. Salary adjustments
and bonus amounts are determined in accordance with the Annual
Incentive Program established for executive officers and other
members of senior management in 1992.
The program, which was developed in consultation with the
Company's independent auditors, utilizes a targeted goal oriented
approach whereby each year the Compensation Committee establishes
performance goals based on the recommendation of the Chairman and
Chief Executive Officer. The performance goals include such
strategic financial measures as: Return on Equity, Return on
Assets, and Efficiency Ratio. Each of these elements is weighted
approximately the same. The measures are established annually at
the start of each fiscal year and are tied directly to the
Company's business strategy, projected budgeted results and
competitive peer group performance.
The targeted goals are set at levels which reward only
continued exceptional Company performance in the upper percentile
of the competitive peer group. The incentive awards (consisting of
upward salary adjustments and bonus amounts) are expressed as a
percent of base pay (excluding director fees) and measured on a
range around the targeted goals with a fixed maximum incentive
award. Performance below certain stated minimum threshold levels
will result in no incentive payout to the executives. The goals
established at the beginning of fiscal 1993 were met, and
accordingly, bonuses were awarded. However, since the targets were
not exceeded to the same extent as in prior years, the amounts of
salary adjustment were lower.
BY: EXECUTIVE COMPENSATION COMMITTEE
I. Robert Rudy, Chairman
David J. Beachy
Rex W. Burton
Richard D. Dailey
Elaine L. McDonald
Robert G. Stuck
Horace P. Whitworth, Jr.
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PERFORMANCE GRAPH
Set forth below is a graph showing 5 year cumulative total return
of the First United Corporation Common Stock as compared with the
NASDAQ - listed bank index and the NASDAQ total index.
Total NASDAQ First United
Year NASDAQ Banks Corp
1989 121.24 111.15 123.22
1990 102.95 81.41 110.97
1991 165.19 133.41 111.76
1992 192.08 193.95 139.65
1993 219.19 221.04 254.23
PENSION AND PROFIT SHARING PLANS
The following table shows the maximum annual retirement
benefits payable under the Company's Defined Benefit Pension Plan
for various levels of compensation during the year of service:
APPROXIMATE ANNUAL BENEFIT UPON RETIREMENT AT AGE 65 BASED ON YEARS
OF CREDITED SERVICE FINAL ANNUAL
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
$ 30,000 $ 6,000 $ 8,000 $ 10,000 $ 12,000 $ 14,000
70,000 15,000 20,000 25,000 30,000 35,000
110,000 24,000 32,000 40,000 48,000 56,000
150,000 33,000 44,000 55,000 66,000 77,000
190,000 33,000 44,000 55,000 66,000 77,000
For purposes of this table, final average compensation shown is
twelve times the average of the highest sixty consecutive months in
the last one hundred twenty months preceding normal retirement.
Also, for purposes of the table, benefits are payable for life with
a minimum guarantee of ten years. Benefits are computed on an
actuarial basis to convert the benefits as normal retirement to a
lifetime only benefit, the amounts would be increased by a factor
of 1.0677% during 1993. Social Security benefits are not shown on
the table and would not reduce retirement benefits under the plan.
Projected Benefits for Highly Compensated Employees:
CURRENT CREDITED ESTIMATED ANNUAL
COMPENSATION SERVICE BENEFITS AT
COVERED BY AT NORMAL RETIREMENT
THE PLAN RETIREMENT
Richard G. Stanton $147,439 44 Years $ 88,925
Robert W. Kurtz 95,196 38 Years 51,084
William B. Grant 95,196 40 Years 52,987
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The Company also has a Profit Sharing Plan wherein all
eligible officers and employees share in the net earnings.
Eligibility is determined by one year of service requiring one
thousand or more hours worked during that year. Benefits under the
plan which consist of a percentage of salary, vest as follows:
Vested Years of Vested
Years of Service Percentage Service Percentage
Less than 3 years 0% More than 5 but less than 6 60%
More than 3 but
less than 4 20% More than 6 but less than 7 80%
More than 4 but
less than 5 40% 7 years and over 100%
Contributions to the Plan are within the discretion of the
Board of Directors. Contributions to the Plan for 1993 and 1992
were $566,448 and $459,014, respectively. The Plan also provides
for salary deferrals pursuant to Section 401(k) of the Internal
Revenue Code. The Company matches 50% of the first 4% of deferred
salary and 25% of deferrals over 4% and up to 6% of salary. The
Profit Sharing Plan is administered by the Trust Department of
First United National Bank & Trust.
The Company implemented an Employee Stock Ownership Plan in
1988. Eligibility parameters for the ESOP are similar to the
Profit Sharing Plan. In 1993 and 1992, the Company contributed
$33,887 and $92,047 respectively to the Plan.
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
Some of the directors and officers of the Company and their
associates were customers of and had banking transactions with
banking subsidiaries of the Company in the ordinary course of
business during 1993. All loans and loan commitments included in
such transactions were made on the same terms, including interest
rates and collateral, as those prevailing at the same time for
comparable transactions with others, and in the opinion of the
management of the Company, do not involve more than a normal risk
of collectability or present other unfavorable features.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Securities Exchange Act of
1934 and the rules thereunder, the Company's executive officers and
directors are required to file with the Securities and Exchange
Commission reports of their ownership of Common Stock. Based
solely on a review of copies of such reports furnished to the
Company, or written representations that no reports were required,
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the Company believes that during the fiscal year ended December 31,
1993 its executive officers and directors complied with the Section
16(a) requirements, except that late filings were made with respect
to the following reporting persons. One report was filed
approximately 4 days late by Mr. Kurtz; one report was filed
approximately 4 days late by Mr. Moran; one report was filed
approximately 5 days late by Mr. Rudy; and one report was filed
approximately 5 months late by Mr. Scarpelli.
OTHER MATTERS
As of the date of this proxy statement, the Board of
Directors is not aware of any matters, other than those stated
above, that may be brought before the meeting. The persons named in
the enclosed form of proxy or their substitutes will vote with
respect to any such matters in accordance with their best judgement.
BY ORDER OF THE BOARD OF DIRECTORS
WILLIAM B. GRANT
Secretary to the Board
This past year was one of change. Although the economy
began showing signs of a slow recovery, businesses and consumers
continued to look closely at a new administration in
Washington for changes that could impact the economic climate for
years to come. A deficit reduction package, a health care reform
proposal, NAFTA and a host of other critical issues kept business
focused on developing strategies to survive and prosper in the
coming years.
On a local level, First United continued changing through
expansion into new markets, enhancing its product and service line
and recording solid loan growth. These factors helped fuel our
earnings performance. The net result was another year of very
strong earnings and a favorable positioning for managing future
growth in the years ahead.
For 1993, net income decreased slightly to $6.01 million,
compared with the $6.20 million recorded in 1992. This represents
$.97 per common share versus $1.01 per share in 1992, a 3.96
percent decrease.
Our key performance ratios were once again well above
industry standards. Return on average assets (ROAA) was 1.42
percent as compared with 1.53 percent in 1992. Total shareholders'
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equity increased 7.75 percent in 1993, to $48.3 million. Return on
average shareholders' equity (ROAE) decreased to 12.86 percent from
14.54 percent for 1992.
We feel confident that the high quality of our assets
combined with our strict cost control program is the proper mix to
ensure continued long-term growth of our Corporation.
The value of your investment in First United Corporation
continues to grow. As you recall, your Corporation paid a 100
percent stock dividend in June of 1993 in the form of a two-for-one
stock split. In addition, the Board announced another special 50
percent stock dividend at the end of the year representing a
three-for- two stock split.
At the end of 1993, your shares had gained 84.21 percent
with a year end high ask price of $23.45, as compared with $12.73
at the end of 1992, when adjusted for the stock splits.
Investing In Our Communities
As one of the few independent commercial banks left in our
region, we feel a particular responsibility to ensure that the
financial needs of our customers are met in all the communities we
serve.
We are first and foremost a community bank, whether we are
serving our traditional markets in Garrett and Allegany counties in
Maryland, Mineral, Hampshire and Hardy counties in West Virginia or
in our newest market serving Frederick and Washington counties in
Maryland. Our focus remains the same-we deliver quality services
throughout every level of our organization.
In order to remain a top performer, we must be where our
customers are located, we must price our products competitively and
we must offer convenience and customer ease. As part of our mix for
growth, we are looking at geographic diversity as one important
strategy.
Investing In Our Customers
Our merger with HomeTown Bancorp, Inc., and its subsidiary
Myersville Bank, which was completed on November 30, 1993, has
provided us with a solid presence in the growth areas of Frederick
and Washington counties. We have a receptive market for our
products, delivered through a quality organization and staffed by
talented professionals. We plan to further strengthen our already
strong customer base in this area. In 1994, we also will place a
strong emphasis on intensive product training for Myersville
employees. Every-one is excited about the professional development
courses offered. They underscore our commitment to our employees
and to our customers.
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Our other expansion markets showed strong growth in 1993.
Our West Virginia affiliate doubled its community office presence
with the addition of full service offices in Romney and Moorefield.
First United Bank of West Virginia has per-formed beyond our
expectations for 1993 and has boasted an increase in loans of $7.9
million while increasing deposits $4.7 million. This growth is
important because these funds are invested locally, helping to
support the needs of our communities.
Investing in our communities also means providing a broad
array of products and services for our customers so that they may
make important, personal investment choices. Continued low interest
rates helped spark a renewed interest in home mortgage refinancing
and new home purchases. Our special fixed rate mortgage program
was successful by any measure.
Overall, First United Corporation's loans grew by $14.8
million with the majority serving the residential market.
Also, we diversified our product line and balanced our core
banking business with other key specialty businesses such as
brokerage and insurance. While interest rates remain low, banks
must look for ways to compete with non-financial organizations for
investment dollars. We remain confident that our position as a full
service financial provider is a strategy our customers will embrace.
We completed our first full year with PRIMEVEST Financial
Services, Inc., a registered broker-dealer at First United that
provides full service brokerage services.* Investment executives
available through PRIMEVEST now sell a broad array of investment
products including stocks, bonds and mutual funds.
Likewise, our insurance business created a foundation for
growth during the past year. We now have 45 licensed agents
selling annuities, having added seven of those agents in 1993. We
continue to have 26 licensed agents to sell property and casualty
insurance.
Our Trust Department again recorded impressive gains with
a 25 percent growth in assets from the previous year. For the year
we earned $.74 million in income, and now manage more than $110
million in assets. Our trust officers utilize all of the
investment and advisory vehicles available through First United and
its other services. Our customers work with individual officers who
understand their particular needs and goals and provide advice and
guidance. These customers continually tell us they value this
relationship and actively refer their friends to us.
As we add to our traditional banking services, we move
closer to our goal of providing complete financial relationships
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with our customers. Another ingredient needed to meet this goal is
conveniently located community offices.
During 1993, we added three community offices and three
ATMs to our network. We expanded our supermarket banking presence
with another full service office in Martin's Food Market in
Hagerstown, the ultimate in customer convenience. We will continue
to look for the right opportunities to expand our retail franchise
where it makes sense, continuing our long-term growth strategy.
Investing In Our Future
While growth is indeed important to support our long-term
performance, we remain prudent in the management of our loan
portfolio. We scrutinize each loan carefully to fully understand
and minimize any risks. Our ongoing loan review process helps us to
detect problems in the early stages and prompts us to react in a
timely fashion.
Even though our net credit losses increased to $.76 million
in 1993 from $.49 million in 1992, the largest portion of this
increase was represented in one loan, with the loss provided for
from previous years' earnings. Therefore, the loan loss provision
actually was $.45 million less than in 1992.
Each of our businesses, while profitable and important
individually, works synergistically to create greater overall
investments for our shareholders. In order to deliver these
products and services in a high quality manner, we rely on our
talented and dedicated staff who routinely "go the extra mile."
This is an opportunity to thank them publicly for their efforts.
Our performance is also a result of the guidance and
commitment by our board of directors. We thank them all and welcome
three new directors from Myersville Bank: Terry L. Reiber, Tod P.
Salisbury and Paul Cox, Jr. We wish to thank Gerald L. Glass who
retired from the board as an honorary director, and Robert W.
Prichard, who resigned from the board but has joined First United
as a Community Office Manager for Myersville Bank's Walkersville
Community Office scheduled to open later in 1994. We are delighted
to use his talents in a full-time capacity.
Just as important, we thank you our shareholders for your
investment in First United and your ongoing support. With the
progress we have made this year, I am excited about our prospects
for 1994.
Richard G. Stanton
Chairman of the Board,
President and Chief Executive Officer
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With its headquarters in Oakland, Maryland, First United
National Bank & Trust has served customers in the primary markets
of Allegany and Garrett counties as well as parts of Pennsylvania
and West Virginia since 1900. As the leading independent commercial
bank in the area, First United has supported its communities and
has been pivotal in their growth and economic development.
With 15 full service community banking offices and 14 ATMs,
First United National Bank & Trust offers access and convenience,
including its successful full service community office in Martin's
Food Market in LaVale. During 1993, the Bank continued its
tradition of quality service with an emphasis on building stronger
relationships with current First United customers.
First United staff members are trained to help customers
identify additional products they might need or to help customers
receive the best value for their investment dollar.
With a continued emphasis on training, First United staff
members furthered their education in all aspects of traditional and
non-traditional product lines -as well as new technologies through
computer courses-all aimed at better serving the customers' needs
in a more efficient and effective manner.
First United works at building relationships. Customers
are referred to a customer service officer for assistance in
choosing deposit, credit or insurance products. Customers with
additional investment needs are served through First United's Trust
Department or through PRIMEVEST Financial Services, Inc., a
registered broker-dealer at First United.
Many of First United's customers have joined the
President's Club, an enhanced program of services offered to
individuals who maintain a strong aggregate deposit balance. Club
members enjoy numerous benefits of membership including workshops,
discounts, seminars, trips and special events.
For example, PRIMEVEST investment executives offered
President's Club members a series of informative investment
opportunities seminars during the year. Members learned about
tax-free investments, Collateralized Mortgage Obligations, annuities
and mutual funds. On a lighter note, members attended many social
outings including a professional baseball game, historical tour and
Broadway series shows such as Phantom of the Opera and Les
Miserables. The President's Club Coordinator keeps in close
contact with members to make sure that the programming is diverse
and appeals to members' interests.
First United's employees are mindful of their
responsibilities to the communities in which they live. They
recognize that improving the quality of life is everyone's business
so they willingly offer their time and expertise to projects,
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events and campaigns. It is not unusual to see at least one First United
employee taking a leadership role in any civic organization.
During the year, First United continued its tradition of
providing support to numerous projects and programs in Allegany and
Garrett counties. And, once again, a First United banker was
nationally recognized by the American Bankers Association for
outstanding contributions to the Personal Economics Program (PEP),
a program to inform students and residents about fundamentals of
personal finance. Gretchen Rush, PEP Coordinator was the third
First United banker to receive this prestigious award.
Since joining the First United family in 1988, First United
Bank of West Virginia, N.A. has successfully blended quality
service with convenience in order to serve its customers. The
result is a doubling of its presence in its now broader market area.
As a community bank representing the geographically diverse
areas of West Virginia, First United has made a commitment to
reinvest its funds locally in its communities. At the end of 1993,
the bank had provided significant funding to its newest market
areas of Romney and Moorefield, West Virginia.
The growth of both of these markets is particularly
noteworthy because they are the outgrowth of the successful
planning and execution of First United's strategic plan for
long-term development. First United and its Board of Directors
determined that growth needed to come from the combination of
product development, the creation of greater efficiencies
and geographic expansion. First United Bank of West Virginia
exemplifies each of these attributes.
At the same time, profits, quality, safety and soundness
are never sacrificed for growth alone. Through the application of
stringent lending criteria and an ongoing loan review process,
First United lenders maintain a high quality loan portfolio. Each
loan is carefully reviewed and assessed and, because First United
bankers understand the communities where they lend, they can work
directly with customers and better serve their needs.
During the year, many homeowners took advantage of the
favorable interest rate environment for mortgage refinancing. In
addition, many first time home buyers were able to take advantage
of the low rates. This represents the best kind of investment in
the fabric of the community and supports First United's philosophy
of serving its local communities first.
The employees believe in their communities and spend much
of their free time in volunteer work. Staff members of First United
Bank of West Virginia not only continued to participate in ongoing
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projects such as their partnership with Burlington Elementary
School, but added new projects, including the Tri-County Fair and
Romney Heritage Days.
Bringing together profitable community banks which share a
common culture often can be a challenging task. The success of
these efforts is dependent upon the willingness of each bank to
maintain its best qualities, while creating efficiencies which will
benefit the Corporation as a whole and increase shareholder value.
With the merger of Myersville Bank at the end of 1993,
First United Corporation has gained a bank committed to quality
service and one whose customers will benefit from First United's
expanded product line. In addition, Myersville Bank serves the
growing communities in Washington and Frederick counties which
offer excellent opportunities to increase the Corporation's
presence in its regional banking market.
For example, customers of Myersville Bank now have access
to the Trust services of First United. First United offers a
complete spectrum of personal trust services delivered one-on-one
by professional trust officers. Each relationship is
individualized to meet the particular lifestyle needs of each
client.
Myersville customers may also take advantage of the
property and casualty products and annuities offered through First
United's insurance business. And, full service brokerage services
are offered through PRIMEVEST Financial Services, Inc., a
registered broker-dealer at First United.
The convenient location of community offices is important
to customer satisfaction, and First United has added offices and
ATMs throughout its regional market to further improve its network.
Another full service community banking office was added in Martin's
Food Market in Hagerstown, Maryland. Customers of the First United
family of banks have supported supermarket banking with great
enthusiasm, and Myersville customers should be equally pleased with
the added convenience. First United's family of community banks
will continue to look for opportunities to expand its presence in
these locations while growing its traditional community office
locations. For example, later in 1994, Myersville Bank
will open another office in the Walkersville area, broadening its
service in Frederick County.
As a community bank, improving the quality of life is
critical to its mission, and Myersville Bank and its employees have
been active in several endeavors including the Personal Economics
Program (PEP), Hospice of Washington County and the Frederick
County Alliance of Financial Institutions Through Education (FARE),
an organization of bankers seeking to improve the awareness of
financial resources available to small business owners and low to
moderate income households.
-86-
This section presents management's discussion and analysis of the
financial condition and results of operations of First United
Corporation and subsidiaries (collectively, the "Corporation"),
including First United National Bank & Trust, First United Bank of
West Virginia, N.A. and Myersville Bank (the "Banks"), and Oakfirst
Life Insurance Corporation.
This discussion and analysis should be read in conjunction with
the financial statements which appear elsewhere in this report.
In May 1993, the Corporation declared a 100% stock dividend
effected in the form of a two for one stock split which was paid on
June 15, 1993. Share and per share information in the accompanying
financial statements have been restated to reflect this stock split.
On November 30, 1993, the Corporation acquired all the
outstanding stock of HomeTown Bancorp, Inc. in exchange for up to
697,500 shares of the Corporation's common stock, along with cash
in lieu of fractional shares, consummating the acquisition
announced in March 1993. HomeTown's sole subsidiary was Myersville
Bank. The acquisition was accounted for as a pooling-of-interests.
Accordingly, financial data presented has been restated to reflect
this acquisition as if it occurred at the beginning of the periods
presented.
In December 1993, the Corporation declared a 50% stock dividend
effected in the form of a three for two stock split which was paid
on February 8, 1994. Share and per share information in the
accompanying financial statements have been restated to reflect
this stock split.
Earnings Analysis
Overview. The Corporation reported consolidated net income of
$6.01 million in 1993, which represents the second highest level of
net income earned in the Corporation's history, surpassed only by
the record net income of $6.20 million earned in 1992. These net
income amounts compare with net income of $5.31 million reported in
1991. Return on average assets (ROAA) declined to 1.42% in 1993
from 1.53% in 1992 and increased over the ROAA of 1.33% in 1991.
Return on average shareholders' equity (ROAE) was 12.86%, 14.54%
and 13.57% for the years ended December 31, 1993, 1992 and 1991,
respectively. Earnings per share decreased to $.97 in 1993 from
$1.01 in 1992, and compared with $.86 in 1991.
Net Interest Income. The level of net interest income is affected
by changes in interest rates, account balances and the mix of
earning assets and interest-bearing liabilities. In 1993, net
interest income increased to $21.13 million, compared with $20.15
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million in 1992 and $18.33 million in 1991. The improvement in
1993 represents an increase of 4.86% over 1992's net interest
income. The two components which comprise net interest income,
total interest expense and total interest income, both declined in
1993 compared with 1992, due primarily to the declining interest
rate environment. However, the decline in gross interest expense
to $11.36 million in 1993 from $14.83 million in 1992 was greater
than the $2.50 million decrease in gross interest income to $32.48
million in 1993 from $34.98 million in 1992. Interest expense
declined more than interest income because the Corporation's
liabilities repriced faster than its assets.
For analytical purposes, net interest income is adjusted to a
taxable equivalent basis. This adjustment facilitates performance
comparisons among taxable and tax-exempt assets by increasing
tax-exempt income by an amount equivalent to the Federal income
taxes which would have been paid if this income were taxable at the
statutorily applicable rate.
The taxable equivalent net interest margin was 5.37% in 1993
which equals 1992's mark. This compares with 5.02% in 1991.
Declining interest rates throughout most of the year caused a
decrease in the taxable equivalent yield on earning assets to 8.21%
in 1993 from 9.23% in 1992. Similarly, the average cost of funds
also fell to 2.84% in 1993 from 3.86% in 1992. The following table
compares the components of the net interest margin and the changes
occurring between 1993, 1992 and 1991.
Allowance for Loan Losses
The allowance for loan losses is based on management's continuing
evaluation of the loan portfolio, assessment of current economic
conditions, diversification and size of the portfolio, adequacy of
collateral, past and anticipated loss experience and the amount of
non-performing loans. The table below presents the activity in the
allowance for loan losses by major loan category for the past five
years. Specific allocations in any particular category may be
reallocated in the future to reflect current conditions. Accordingly,
the entire allowance is considered available to absorb losses in any category.
Other Operating Income
Non-interest income increased $.74 million or 26.84% in 1993 as
compared to 1992. The increase was due to increased trust
department earnings and other non-interest related fees. Although
these amounts are not a material portion of the Corporation's
earnings as a whole, management anticipates continued growth in
these areas.
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Other Operating Expense
Non-interest expense increased $2.10 million, or 16.08%, in 1993
over 1992. Salaries and employee benefits increased to $7.63
million during 1993 compared with $6.75 million for the previous
year. This 12.98% increase was primarily due to additional
staffing requirements resulting from the opening of the Romney,
Moorefield and Hagerstown Martin's community offices.
Occupancy and equipment expense increased a combined $350,000 in
1993 from 1992. This increase was a result of the opening of the
three community offices and depreciation expense related to the
purchase of equipment in conjunction with automation upgrades.
In addition, the Corporation had approximately $290,000 in
non-deductible costs associated with the acquisition of HomeTown
Bancorp, Inc., which was completed on November 30, 1993.
Applicable Income Taxes
Applicable income taxes include both current and deferred portions,
which are detailed in Note 8 of the audited consolidated financial
statements. At $3.18 million, taxes represented 34.57% of income
before taxes.
Investment Securities
Securities in the investment portfolio at December 31, 1993,
totalled $81.53 million compared with $82.25 million and $78.75
million at December 31, 1992 and 1991, respectively. The
Corporation manages its investment portfolios within policies which
seek to achieve desired liquidity levels, manage interest rate
sensitivity risk, meet earnings objectives, and fulfill
requirements for collateral to support deposit activities. The
Corporation had no concentrations of investment securities from any
single issuer, excluding the U.S. Government and U.S.
Government-sponsored agencies, that constituted 10% or more of
shareholders' equity at year-end 1993. Table 7 shows the
distribution by type of the investment portfolio for the three
years ended, December 31, 1993, 1992, and 1991.
U.S. Treasury and Federal Agency securities decreased $281,000
during 1993. Other investments decreased $2.53 million, while
municipal securities declined $2.43 million from year-end 1992 to
fund loan growth.
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Table 1: Net Interest Margin (As % of Earning Assets)
(Dollar Amounts in Thousands)
1993 1992 1993
Average Equi. Average Equi. Average Equi.
Tax Rate Tax Rate Tax Rate
Balance Balance Balance
- -----------------------------------------------------------------
Earning Assets $399,171 8.21% $384,543 9.23% $377,552 10.39%
Interest-bearing
Liabilities 333,022 3.41% 325,159 4.56% 321,512 6.32%
Net Benefit of Non-
interest-bearing
Funds .57% .70% .95%
Average Cost of Funds 2.84% 3.86% 5.37%
Net Interest Margin 5.37% 5.37% 5.02%
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Table 2: Activity of Loan Loss Reserve
(Dollar Amounts in Thousands)
Summary of Loan Loss Experience
Years Ended December 31
1993 1992 1991 1990 1989
Balance at Beginning
of Period $ 2,798 $ 2,572 $ 2,527 $ 2,033 $ 1,914
Loans Charged Off:
Commercial, Financial,
and Agricultural 469 53 250 465 43
Real Estate-Construction 0 0 0 0 0
Real Estate-Mortgage 359 359 276 244 336
Installment 264 349 588 606 612
Total Loans
Charged Off $ 1,092 $ 761 $ 1,114 $ 1,315 $ 991
Recoveries of Loans:
Commercial, Financial,
and Agricultural 135 87 50 13 17
Real Estate-Construction 0 0 0 0 0
Real Estate-Mortgage 97 79 60 76 129
Installment 99 102 97 106 105
Total Loans Recovered 331 268 207 195 251
Net Loans Charged Off 761 493 907 1,120 740
Provision Charged to
Operations 269 719 952 1,614 859
Balance at End
of Period $ 2,306 $ 2,798 $ 2,572 $ 2,527 $ 2,033
Loans Net of Unearned Income
at End of Period $316,782 $302,461 $284,088 $287,593 $281,970
Daily Average Amount
of Loans $308,804 $289,772 $283,558 $285,051 $277,978
Allowance for Possible Loan Losses
to Loans Outstanding 0.73% 0.93% 0.91% 0.88% 0.72%
Net Charge Offs to Average
Loans Outstanding 0.25% 0.17% 0.32% 0.39% 0.27%
Non-performing loans at the end of 1993 were $1.68 million or .53%
of total loans outstanding. This compares to $2.73 million, or
.91%, of total loans outstanding at the end of 1992. The decrease
in non-performing loans was chiefly due to the disposition of one
loan. This disposition is reflected by increased charge-offs in
1993.
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Table 3: Summary of Assets, Liabilities, and Shareholders' Equity
(Dollar Amounts in Thousands)
Consolidated Average Statements of Financial Condition
Years Ended December 31
ASSETS 1993 1992 1991
U.S. Treasury Securities $ 22,883 $ 20,557 $ 13,320
U.S. Government Agencies 34,820 35,701 30,376
State and Municipal Securities 8,954 12,617 14,814
Other Investments 15,859 16,039 18,322
Federal Funds Sold 7,851 9,857 17,162
90,367 94,771 93,994
Commercial, Financial,
and Agricultural Loans 43,874 45,319 46,566
Real Estate-Construction Loans 4,968 2,912 1,319
Real Estate-Mortgage Loans 210,810 189,253 177,766
Installment Loans 49,152 52,288 57,907
Loans Net of Unearned Income 308,804 289,772 283,558
Total Earning Assets 399,171 384,543 377,552
Allowance for Possible Losses (2,775) (2,714) (2,318)
Other Assets 25,875 24,336 22,676
Total Assets $422,271 $406,165 $397,910
LIABILITIES & SHAREHOLDERS' EQUITY
Non-Interest Bearing Deposits $ 36,054 $ 32,667 $ 31,548
Interest Bearing Transaction Accounts 87,538 79,722 71,120
Savings 73,528 66,924 55,359
Time $100,000 or More 17,093 19,568 22,038
Other Time 154,863 158,945 172,995
Total Deposits 369,076 357,826 353,060
Other Liabilities 6,455 5,676 5,723
Total Liabilities 375,531 363,502 358,783
Shareholders' Equity 46,740 42,663 39,127
Total Liabilities and
Shareholders' Equity $422,271 $406,165 $397,910
-92-
Table 4: Loans Outstanding
(Dollar Amounts in Thousands)
December 31
1993 1992 1991 1990 1989
Commercial, Financial,
and Agricultural $ 38,351 $ 48,295 $ 46,666 $ 46,524 $44,248
Real Estate-Construction 10,902 4,568 2,118 1,798 4,218
Real Estate-Mortgage 220,228 198,659 173,364 175,206 163,239
Installment 47,301 50,939 61,940 64,065 70,265
Total $316,782 $302,461 $284,088 $287,593 $281,970
Loan Distribution (%)
1993 1992 1991 1990 1989
Commercial, Financial,
and Agricultural 12.11% 15.97% 16.43% 16.18% 15.69%
Real Estate-Construction 3.44% 1.51% 0.75% 0.62% 1.50%
Real Estate-Mortgage 69.52% 65.68% 61.02% 60.92% 57.89%
Installment 14.93% 16.84% 21.80% 22.28% 24.92%
Total 100.00% 100.00% 100.00% 100.00%100.00%
Loan Portfolio
The Corporation, through the Banks, is active in originating loans
to customers primarily in Garrett, Allegany, Washington and
Frederick Counties in Maryland, Mineral, Hardy and Hampshire
Counties in West Virginia, and the surrounding regions of West
Virginia and Pennsylvania. The Corporation has policies and
procedures designed to mitigate credit risk and to maintain the
quality of the Corporation's loan portfolio. These policies
include underwriting standards for new credits and the continuous
monitoring and reporting of asset quality and adequacy
of the reserve for loan losses. These policies, coupled with
on-going training efforts, have provided an effective check and
balance for the risk associated with the lending process. Lending
authority is based on the level of risk, size of the loan and the
experience of the lending officer. Table 4 presents the
composition of the Corporation's loan portfolio by significant
concentration.
The Corporation's policy is to make the majority of its loan
commitments in the market area it serves. This tends to reduce
risk because management is familiar with the credit histories and
has an in-depth knowledge of the risk to which a given credit is
subject. The Corporation had no foreign loans in its portfolio as
of December 31, 1993.
In 1993, net loans increased a total of $14.81 million, or 4.94%
from year end 1992. The growth in loans was primarily due to an
increase in mortgage volume, which is attributable to declining
interest rates in 1993. The funding for the increased loan demand
came largely from federal funds sold, which decreased $6.89 million
or 78.36%, and from the maturities of the investment portfolio.
-93-
It is the policy of the Corporation to place a loan in
non-accrual status whenever there is substantial doubt about the
ability of a borrower to pay principal or interest on any
outstanding credit. Management considers such factors as payment
history, the nature of the collateral securing the loan, and
the overall economic situation of the borrower when making a
non-accrual decision. Non-accrual loans are closely monitored by
management. A non-accruing loan is restored to accrual status when
principal and interest payments have been brought current, it
becomes well-secured or is in the process of collection and the
prospects of future contractual payments are no longer in doubt.
At December 31, 1993, $438 of non-accrual loans were secured by
collateral with an estimated value of $317. The amount listed
in Table 5 under restructured loans in 1992 is also included in the
non-accrual loans total for 1992.
At December 31, 1993, the Corporation had $1.9 million in loans for
which payments were current, but the borrowers were experiencing
financial difficulties. Those loans are subject to constant
management attention and their classification is reviewed monthly.
Deposits
Deposits remained relatively unchanged, increasing $2.70 million to
$368.53 million from $365.83 million at December 31, 1993 and 1992,
respectively. This modest growth in deposits can be attributed
largely to the low interest rate environment throughout much of
1993 and the intensifying competition for depositors' funds from
other commercial banks, thrifts, credit unions, mutual fund, and
equity securities. At December 31, 1991, deposits were $354.62
million.
Capital Resources
The banking subsidiaries of the Corporation are subject to
risk-based capital regulations which were adopted by Federal
banking regulators and became fully phased in on December 31, 1992.
These guidelines are used to evaluate capital adequacy, and are
based on an institution's asset risk profile and off-balance-sheet
exposures, such as unused loan commitments and standby letters of
credit. The regulations require that a portion of total capital be
core, or Tier 1, capital consisting of common shareholders' equity and
perpetual preferred stock, less goodwill and certain
other deductions, with the remaining, or Tier 2, capital consisting
of other elements, primarily subordinated debt, mandatory
convertible debt, and grand-fathered senior debt, plus the
allowance for credit losses, subject to certain limitations.
Under the risk-based capital regulations, as of December 31,
1992, banking organizations are required to maintain a minimum 8%
total risk-based capital ratio (the ratio of total qualifying
capital divided by risk-weighted assets), including a Tier 1 ratio
-94-
of 4%. The risk-based capital rules have been further supplemented
by a leverage ratio, defined as Tier 1 capital divided by average
assets, after certain adjustments. The minimum leverage ratio is
3% for banking organizations that do not anticipate significant
growth and have well-diversified risk (including no undue interest
rate risk exposure), excellent asset quality, high
liquidity, and good earnings. Other banking organizations not in
this category are expected to have ratios of at least 4-5%,
depending on their particular condition and growth plans. Higher
capital ratios could be required if warranted by the particular
circumstances or risk profile of a given banking organization. In
the current regulatory environment, banking companies must stay
well capitalized in order to receive favorable regulatory treatment
on acquisition and other expansion activities and favorable
risk-based deposit insurance assessments. At December 31, 1993,
the Corporation's risk-based capital ratio was 18.88%, well above
the regulatory minimum of 8.00%. Risk-based capital at December
31, 1992 was 18.51%.
During 1993, shareholders' equity grew $3.48 million, or 7.75%,
to $48.37 million. This growth was made possible through retained
earnings and the positive effects of stock purchases through the
dividend reinvestment and stock purchase plan. During 1992,
shareholders' equity grew $4.25 million to $44.89 million, a 10.46%
increase over the $40.64 million level at December 31, 1991. This
growth was due to retained earnings and the effects of the dividend
reinvestment and stock purchase plan.
Cash dividends of $.47 per share were declared in 1993, compared
with $.34 per share in 1992 and $.39 per share in 1991.
The Corporation believes that a strong capital position is vital
to continued profitability and to promote depositor and investor
confidence. The Corporation's consolidated capital levels are a
result of its capital policy which establishes guidelines for each
subsidiary based on industry standards, regulatory requirements,
perceived risk of the various businesses, and future growth
opportunities. The Corporation requires its bank affiliates to maintain
capital levels above the regulatory minimums for Tier
1 capital, Total risk adjusted capital (Tier 1 plus Tier 2) and
leverage ratios. The primary source of equity capital available
for the banking subsidiaries and other affiliates is earnings with
other forms of capital available from the holding company.
Asset and Liability Management
Introduction. The Asset/Liability Management Committee of the
Corporation seeks to assess and manage the risk associated with
fluctuating interest rates while maintaining adequate liquidity.
To accomplish this, the Committee formulates and effects policies
which take into account the sources and uses of funds, maturing
distributions, pricing strategies and marketability of assets.
-95-
Liquidity. Liquidity management involves strategy designed to
assure that withdrawal demands and credit needs of the local
marketplace are accommodated. Total liquid assets represented by
cash, investment securities, and loans maturing within one year
amounted to $128.96 million or 30.46% of 1993 year end assets.
Additional liquidity is available from a $43 million line of credit
at the Federal Home Loan Bank of Atlanta and $8 million in unused
lines of credit at various correspondent banks.
Interest Rate Sensitivity. Interest rate sensitivity refers to the
degree that earnings will be impacted by changes in the generally
prevailing level of interest rates. Interest rate risk arises from
mismatches in the repricing or maturity characteristics between
assets and liabilities. Management seeks to avoid fluctuating net
interest margin, to enhance consistent growth of net interest
income through periods of changing interest rates. The
Corporation uses interest sensitivity "gap" analysis and simulation
models to measure and manage these risks. The gap report assigns
each interest-earning asset and interest-bearing liability to a
time frame reflecting its next repricing or maturity date. The
differences between total interest-sensitive assets and liabilities
at each time interval represents the interest sensitivity gap for
that interval. A positive gap generally indicates that rising
interest rates during a given interval will increase net interest
income, as more assets than liabilities will reprice. The opposite
is true for a negative gap position.
In order to manage interest sensitivity risk, management of the
Corporation formulates guidelines regarding asset generation and
pricing, funding sources and pricing and off-balance sheet
commitments. These guidelines are based on management's outlook
regarding future interest rate movements, the state of the regional
and national economy, and other financial and business risk
factors. Management uses computer simulations
to measure the effect on net interest income of various interest
rate scenarios. This modeling reflects interest rate changes and
the related impact on net income over specified periods.
Rates on different assets and liabilities within a single
maturity category adjust to changes in interest rates to varying
degrees and over varying periods of time. The relationships
between prime rates and rates paid on purchased funds are not
constant over time. The rate of growth in interest-free sources of
funds will influence the level of interest-sensitive funding
sources. In addition, the absolute level of interest rates will
affect the volume of earning assets and funding sources. As a
result of these limitations, the interest-sensitive gap is only one
factor to be considered in estimating the net interest margin.
-96-
Table 8 presents the Corporation's interest rate gap position at
December 31, 1993. This is a one-day position which is continually
changing and is not necessarily indicative of the Corporation's
position at any other time.
The table below reflects the Corporation's non-performing assets
for the five years ended December 31, 1993.
Table 5: Risk Elements of Loan Portfolio
(Dollar Amounts in Thousands)
Years Ended December 31
1993 1992 1991 1990 1989
Non-Accrual Loans $ 438 $2,337 $3,155 $2,067 $ 230
Accruing Loans Past
Due 90 Days or More $1,243 $ 463 $ 887 $ 652 $ 591
Restructured Loans - $1,530 - - -
Information with respect to non-accrual loans at December 31, 1993
and December 31, 1992 is as follows:
1993 1992
Non-Accrual Loans $ 438 $2,337
Interest Income That Would Have
Been Recorded Under
Original Terms $ 132 $ 231
Interest Income Recorded During
The Period $ 5 $ 13
Table 6: Deposits by Major Classification
(Dollar Amounts in Thousands)
1993 1992 1991
Average Average Average
Balance Rate Balance Rate Balance Rate
Non-Interest Bearing
Demand Deposits $ 36,054 $ 32,667 $ 31,548
Interest Bearing
Demand Deposits 87,538 2.42% 79,722 3.57% 71,120 4.87%
Savings Deposits 73,528 2.70% 66,924 4.25% 55,359 4.98%
Time Deposits
$100,000 or More 17,093 4.41% 19,568 5.50% 22,038 5.63%
Time Deposits
Less Than $100,000 154,863 2.60% 158,945 3.87% 172,995 7.61%
-97-
Table 7: Investment Security Maturities, Yields, and Market Values
(Dollar Amounts in Thousands)
December 31, 1993
Taxable
U.S. Federal State & Equi.
Treasury Agencies Municipal Other Total Yield
Maturity-book Value
Within One Year $10,386 $15,514 $ 2,426 $ 1,869 $30,195 5.07%
One to Five Years 13,081 17,751 3,984 8,541 43,357 5.29%
Five to Ten Years 1,508 2,038 3,546 6.63%
Over Ten Years 50 620 3,763 4,433 6.13%
Book Value $23,467 $33,315 $ 8,538 $16,211 $81,531 5.32%
Market Value $23,508 $33,711 $ 8,789 $16,291 $82,299
Taxable Equivalent
Yield 4.50% 5.03% 8.93% 5.18% 5.32%
DECEMBER 31, 1992
Book Value $22,565 $34,498 $10,967 $14,218 $82,248
DECEMBER 31, 1991
Book Value $13,709 $32,803 $13,356 $18,885 $78,753
TABLE 8: GAP ANALYSIS
(Dollar Amounts In Thousands)
As of December 31, 1993
0-90 91-365 1-5 Over
Days Days Years 5 Years Total
ASSETS
Rate Sensitive
Securities (1) $ 14,310 $ 17,078 $ 42,465 $ 7,678 $81,531
Loans (2) 44,721 111,882 95,445 64,734 316,782
Federal Funds Sold 1,903 0 0 0 1,903
Total Rate Sensitive 60,934 128,960 137,910 72,412 400,216
LIABILITIES
Rate Sensitive Deposits
CD's <$100,000 26,308 56,544 44,007 0 126,859
CD's >$100,000 6,223 13,617 2,197 0 22,037
IMMA 29,511 0 0 0 29,511
ONE & NOW Account 55,955 0 0 0 55,955
Total Rate Sensitive 117,997 70,161 46,204 0 234,362
(3)
GAP (Rate Sens. Assets Less
Rate Sens. Lia.) (57,063) 58,799 91,706 72,412 165,854
GAP to Total Assets (13.48%) 13.89% 21.66% 17.10% 39.17%
(1) Securities are classified based on estimated maturities.
-98-
(2) Adjustable Rate Loans are shown in the time frame corresponding to
the next contractual interest rate adjustment.
(3) Transaction Accounts such as IMMA, ONE, and NOW are generally
assumed to be subject to repricing within one year. This is based
on the Corporation's historical experience with respect to such
accounts.
(in thousands, except per share data)
1993 1992 1991 1990 1989
Balance Sheet Data (at year end)
Total Assets $423,380 $417,083 $400,296 $398,063 $381,652
Total Deposits 368,527 365,827 354,618 354,687 342,927
Total Loans 314,476 299,663 281,516 285,066 281,550
Total Shareholders'
Equity 48,372 44,894 40,636 37,640 34,126
OPERATING DATA (for the full year)
Interest Income $ 32,484 $ 34,981 $ 38,638 $ 40,634 $ 38,932
Interest Expense 11,356 14,834 20,308 22,623 21,617
Net Interest Income 21,128 20,147 18,330 18,011 17,315
Other Operating Income 3,488 2,750 2,674 2,619 1,971
Provision for Possible
Credit Losses 269 719 952 1,614 859
Other Oper. Expenses 15,158 13,058 12,386 11,824 10,929
Total Oper. Expenses 26,783 28,611 33,646 36,061 33,405
Income before Taxes 9,189 9,120 7,666 7,192 7,498
Income Taxes 3,177 2,918 2,356 2,019 2,123
Net Income $ 6,012 $ 6,202 $ 5,310 $ 5,173 $ 5,375
PER SHARE DATA
Net Income $ .97 $ 1.01 $ .86 $ .84 $ .92
Regular Dividends Paid .36 .34 .33 .33 .32
Special Dividend .06
Book Value 7.83 7.29 6.62 6.14 5.82
Per share data has been restated to reflect the 50% stock dividend
paid on February 8, 1994, 100% stock dividend paid on June 15,
1993, and the 7% stock dividend paid on September 5, 1989.
-99-
To the Shareholders:
The consolidated financial statements, accompanying notes and
related financial data of First United Corporation were prepared by
Management, who has the primary responsibility for the integrity of
the financial information.
The Corporation has a comprehensive system of internal accounting
controls designed to provide reasonable assurance that assets are
safe-guarded and reported financial information accurately reflects
the condition of First United Corporation and its subsidiaries.
This system of controls is reviewed by both internal auditors and
independent auditors who monitor the adequacy and effectiveness of
the control system.
The audit function, selection of independent auditors, and review
of the results of regulatory examinations are under the general
oversight of the Audit Committee of the Board of Directors.
Regular meetings are held with the internal auditors and the
independent auditors, both of whom have free, direct access to the
Committee.
Ernst & Young, independent auditors, have audited the financial
statements of First United Corporation and subsidiaries for the
years ended December 31, 1993, 1992, and 1991, as stated in their
report.
Richard G. Stanton
Chairman of the Board, President
and Chief Executive Officer
Board of Directors and Shareholders
First United Corporation:
We have audited the accompanying consolidated statements of
financial condition of First United Corporation and subsidiaries as
of December 31, 1993 and 1992, the related consolidated statements
of income, changes in shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of HomeTown Bancorp, Inc., a wholly-owned
subsidiary, which statements reflect total assets constituting
13.3% in 1992 and revenues constituting 11.2% in 1992 and 10.1% in
1991 of the related consolidated totals. Those statements were
audited by other auditors whose reports have been furnished to us,
and our opinion, insofar as it relates to data included for
HomeTown Bancorp, is based solely on the report of the other
auditors.
-100-
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other
auditors, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of First United Corporation and subsidiaries at December
31, 1993 and 1992, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted
accounting principles.
-101-
January 21, 1994
(in thousands) December 31
1993 1992
Assets
Cash and Due From Banks $ 12,832 $ 14,532
Federal Funds Sold 1,903 8,792
Investments:
U.S. Treasury Securities 23,467 22,565
Obligations of Other U.S.
Government Agencies 33,315 34,498
Obligations of State and
Political Subdivisions 8,538 10,967
Other Investments 16,211 14,218
Total Investment Securities-Market Value-$82,299 and $84,572 at
December 31, 1993 and 1992, Respectively 81,531 82,248
Loans 316,782 302,461
Reserve for Possible Credit Losses (2,306) (2,798)
Net Loans 314,476 299,663
Bank Premises and Equipment 8,026 6,779
Accrued Int. Receivable & Other Assets 4,612 5,069
Total Assets $423,380 $417,083
Liabilities and shareholders' equity
Liabilities
Non Interest-bearing Deposits $ 41,456 $ 36,649
Interest-bearing Deposits 327,071 329,178
Total Deposits 368,527 365,827
Reserve for Taxes, Interest
and Other Liabilities 6,481 6,362
Total Liabilities 375,008 372,189
Shareholders' Equity
Preferred Stock-No Par Value
Authorized and Unissued 2,000 Shares
Capital Stock-Par Value $.01 Per Share
Authorized 12,000 Shares, Issued and
Outstanding 6,186 Shares in 1993 and
6,165 Shares in 1992 62 62
Surplus 23,005 22,638
Retained earnings 25,305 22,194
Total Shareholders' Equity 48,372 44,894
Total Liabilities and
Shareholders' Equity $423,380 $417,083
-102-
(in thousands, except per share amounts) Years ended
December 31
1993 1992 1991
Interest income:
Interest and Fees on Loans $27,712 $28,385 $30,856
Interest on Investment Securities:
Taxable 3,929 5,155 5,511
Exempt From Federal Income Taxes 583 973 1,167
----- ----- -----
4,512 6,128 6,678
Interest on Federal Funds Sold 260 468 1,104
----- ----- -----
Total Interest Income 32,484 34,981 38,638
Interest expense
Interest on Deposits:
Savings 1,983 2,496 2,757
Interest-bearing Transaction
Accounts 2,115 2,846 3,463
Time, $100,000 or More 445 757 1,677
Other time 6,813 8,735 12,411
------ ------ ------
Total Interest Expense 11,356 14,834 20,308
------ ------ ------
Net Interest Income 21,128 20,147 18,330
Provision for Possible Credit Losses 269 719 952
------ ------ ------
Net Interest Income After
Provision For Possible
Credit Losses 20,859 19,428 17,378
Other operating income
Trust Department Income 744 654 604
Service Charges on Deposit Accounts 1,596 1,392 1,401
Insurance Premium Income 314 348 397
Other Income 834 356 272
----- ----- -----
3,488 2,750 2,674
Other operating expenses
Salaries and Employee Benefits 7,627 6,751 6,392
Occupancy Expense of Premises 977 814 800
Equipment Expense 1,053 866 724
Data Processing Expense 386 362 502
Deposit Assessment and Related Fees 923 787 727
Other Expense 4,192 3,478 3,241
----- ----- -----
15,158 13,058 12,386
----- ----- -----
Income Before Income Taxes 9,189 9,120 7,666
Applicable Income Taxes 3,177 2,918 2,356
----- ----- -----
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Net Income $ 6,012 $ 6,202 $ 5,310
Earnings Per Share $ .97 $ 1.01 $ .86
See notes to consolidated financial statements.
(in thousands, except per share amounts)
Common Retained Total
Stock Surplus Earnings Capital
Balance at January 1, 1991 $ 62 $22,409 $15,169 $37,640
Net Income for the Year 5,310 5,310
Dividend Reinvestment and Stock
Purchase Plan 70 70
Cash Dividends-$.39 Per Share (2,384) (2,384)
----- ------ ------ ------
Balance at December 31, 1991 62 22,479 18,095 40,636
Net Income for the Year 6,202 6,202
Dividend Reinvestment and Stock
Purchase Plan 159 159
Cash Dividends-$.34 Per Share (2,103) (2,103)
----- ------ ------ ------
Balance at December 31, 1992 62 22,638 22,194 44,894
Net Income for the Year 6,012 6,012
Dividend Reinvestment and Stock
Purchase Plan 367 367
Cash Dividends-$.47 Per Share (2,901) (2,901)
----- ------ ------ ------
Balance at December 31, 1993 $ 62 $23,005 $25,305 $48,372
( ) indicate deduction
See notes to consolidated financial statements.
(in thousands) Years ended December 31
1993 1992 1991
Operating activities
Net Income $ 6,012 $ 6,202 $ 5,310
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Provision for Possible Credit
Losses 269 719 952
Provision for Depreciation 821 660 572
Net Accretion and Amortization
of Investment Securities
Discounts and Premiums 1,365 943 263
(Gain) on Sale of Investment
Securities (28) (19) (4)
Decrease in Interest and Other
Receivables 457 567 1,276
Increase (decrease) in Interest and
Other Payables 119 1,245 (701)
----- ------ -----
Net Cash Provided by
Operating Activities 9,015 10,317 7,668
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Investing activities
Proceeds from Sales of Investment
Securities 1,614 944 905
Proceeds From Maturities of Investment
Securities 68,922 41,795 33,637
Purchase of Investment Securities (71,156) (47,053) (43,251)
Net (increase) Decrease in Loans (15,082) (18,900) 3,028
Purchase of Premises and Equipment (2,068) (1,119) (795)
Net Cash Used in Investing -------- -------- -------
Activities (17,770) (24,333) (6,476)
Financing activities
Net Increase in Demand Deposits,
NOW Accounts and Savings Accounts 8,219 32,580 5,104
Net (decrease) in Certificates of
Deposit (5,519) (21,372) (5,173)
Cash Dividends Paid or Declared (2,901) (2,103) (2,384)
Proceeds From Issuance of Common Stock 367 159 70
------- -------- -------
Net Cash Provided by (Used
in) Financing Activities 166 9,264 (2,383)
------- -------- -------
Decrease in Cash and Cash
Equivalents (8,589) (4,752) (1,191)
Cash and Cash Equivalents at
Beginning of Year 23,324 28,076 29,267
------ ------ ------
Cash and Cash Equivalents
at End of Year $ 14,735 $ 23,324 $ 28,076
See notes to consolidated financial statements.
Note 1 - Summary of Significant Accounting Policies
Principles of Consolidation. The accompanying financial statements
of First United Corporation (Corporation) include the accounts of
its wholly owned subsidiaries, First United National Bank & Trust
(Bank), First United Bank of West Virginia, N.A. (Piedmont),
Myersville Bank (Myersville) and Oakfirst Life Insurance
Corporation (Non-Bank). All significant intercompany accounts and
transactions have been eliminated.
Investments. Investment securities are stated at cost, adjusted
for amortization of premiums and accretion of discounts using the
yield method from the date of purchase to the maturity date as the
Corporation has the ability, and it is management's intent to hold
such investments to maturity. The cost of investments sold is
determined using the specific identification method. In the
three-year period ended December 31, 1993, the Corporation sold
securities which resulted in gains of $28, $19, and $4 for 1993,
1992 and 1991, respectively.
-105-
Interest on Loans. Interest on loans is recognized based upon the
principal amount outstanding. It is the Corporation's policy to
discontinue the accrual of interest when circumstances indicate
that collection is doubtful.
Bank Premises and Equipment
Bank premises and equipment are carried at cost, less accumulated
provision for depreciation. The provision for depreciation for
financial reporting generally has been made by using the
straight-line method based on the estimated useful lives of the
assets, which range from 18 to 50 years for buildings and 4 to 20
years for equipment. The provision for depreciation for general tax
purposes and for the Alternative Minimum Tax generally has been
made using the double-declining balance method and the ACRS method
based on the estimated useful lives of the assets which range from
18 to 50 years for buildings and 4 to 10 years for equipment.
Reserve for Possible Credit Losses. For financial reporting
purposes, management regularly reviews the loan portfolio and
determines a provision for possible credit losses based upon the
impact of economic conditions on the borrower's ability to repay,
past collection experience, the risk characteristics of the loan
portfolio and such other factors which, in management's judgement,
deserve current recognition. For income tax purposes, the
Corporation provides the maximum addition to the reserve for possible
credit losses allowable under applicable federal income tax law.
Deferred taxes are provided or reversed in the statement of income
for any difference.
Income Taxes. Effective January 1, 1993, the Corporation adopted
Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." The cumulative effect of adopting
SFAS No. 109 as of January 1, 1993 was not material to the
consolidated statements. The Corporation had previously recorded
income taxes using the deferred method under APB No. 11.
The provision for income taxes is based on income and expense
amounts reported in the Consolidated Statements of Income adjusted
for the effects of the Alternative Minimum Tax. Under the liability
method, the deferred tax liability or asset is determined based on
the difference between the financial statement and tax bases of
assets and liabilities (i.e., temporary differences) and is
measured at the enacted tax rates that will be in effect when these
differences reverse. Deferred tax expense is determined by the
change in the liability or asset for deferred taxes adjusted for
changes in the deferred tax asset valuation allowance.
-106-
Statement of Cash Flow. The Corporation has defined cash and cash
equivalents as those amounts included in the balance sheet captions
"Cash and due from banks" and "Federal funds sold." The Corporation
paid $11,242, $15,689 and $24,388 in interest on deposits and other
borrowed money for the years ending December 31, 1993, 1992 and
1991, respectively.
Earnings Per Share. Earnings per share are based on the weighted
average number of shares outstanding of 6,178, 6,155 and 6,142 for
1993, 1992 and 1991, respectively.
For comparative purposes, earnings per share, dividends per share
and weighted average shares outstanding for the years ended
December 31, 1993, 1992 and 1991, have been restated to reflect the
50% stock dividend effected in the form of a three-for-two stock
split of the Corporation's common stock, paid February 8, 1994, to
shareholders of record as of January 14, 1994.
Recently Issued Accounting Guidance. In May 1993, the FASB issued
Statements No. 114 and 115, "Accounting by Creditors for Impairment
of a Loan," and "Accounting for Certain Investments in Debt and
Equity Securities," respectively. The Corporation is required to
adopt Statements No. 114 and 115 in the fiscal years ending
December 31, 1995, and December 31, 1994, respectively. The
Corporation has not yet completed all of the analyses required to
estimate the impact of adopting Statement No. 114 and, accordingly
has not determined the effect of its implementation on the Corporation's
financial position and results of operations.
Management believes that the effect of adopting Statement No. 115
will not have a material impact on the Corporation's financial
position and results of operations.
Note 2 - Merger
On November 30, 1993, the Corporation merged with HomeTown Bancorp,
Inc. (and its subsidiary Myersville Bank). On that date, the
Corporation issued up to 697,500 shares of its common stock in
exchange for all of the outstanding shares of HomeTown Bancorp's
common stock. On December 23, 1993, HomeTown Bancorp (the holding
company) was dissolved resulting in Myersville Bank becoming a
direct subsidiary of the Corporation. The consolidated financial
statements of the Corporation give retroactive effect to the
merger, which has been accounted for as a pooling of interests.
Accordingly, the financial statements of the Corporation and
Myersville Bank have been combined and are included in the
consolidated financial statements of the Corporation for all
periods presented.
-107-
Note 2 - Merger continued
Revenue, net income and dividends
per share for the Corporation and for
Myersville Bank were as follows:
Years Ended December 31
1993 1992 1991
Revenue:
First United Corp. $31,346 $32,997 $36,430
Myersville Bank 4,626 4,734 4,882
Combined $35,972 $37,731 $41,312
Net Income:
First United Corp. $ 5,332 $ 5,509 $ 4,772
Myersville Bank 680 693 538
Combined $ 6,012 $ 6,202 $ 5,310
Dividends per share:
First United Corp. $ .53 $ .40 $ 46
Myersville Bank 1.40 1.35 1.26
Combined .47 .34 .39
Note 3 - Investment Securities
The amortized cost and market values of
investments in debt securities are as follows:
There were no unrealized losses in the Corporation's
investment portfolio at December 31, 1993 and 1992.
The amortized cost and market value of debt securities at
December 31, 1993, by contractual maturity, are shown at right.
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations without
call or prepayment penalties.
At December 31, 1993, investment securities with a book value
of $23,545 were pledged to secure public and trust deposits as
required or permitted by law.
-108-
December 31, 1993 December 31, 1992
Gross Gross
Amortized Unrealized Market Amortized Unrealized Market
Cost Gains Value Cost Gains Value
U.S. Treasury
Securities $23,467 $ 41 $23,508 $22,565 $ 267 $22,832
U.S. Government
Agencies and
Corporations 33,315 396 33,711 34,498 551 35,049
Obligations of
States and
Political
Subdivisions 8,538 251 8,789 10,967 863 11,830
Mortgage-backed
Securities 14,344 80 14,424 13,668 643 14,311
Other Debt
Securities 1,867 1,867 550 550
------ ---- ------ ------ ---- ------
Totals $81,531 $768 $82,299 $82,248 $2,324 $84,572
Amortized Market
Cost Value
Due in One Year or Less $30,195 $30,363
Due After One Year Through Five Years 43,357 43,723
Due After Five Years Through Ten Years 3,546 3,698
Due After Ten Years 4,433 4,515
------ ------
$81,531 $82,299
Note 4 - Reserve for Possible Credit Losses
Transactions in the reserve for possible credit losses are summarized at right:
Non-accruing loans were $438, $2,337 and $3,155 at December 31,
1993, 1992 and 1991, respectively. Interest income not recognized
as a result of non-accruing loans was $132, $231, and $346 during
the years ended December 31, 1993, 1992, and 1991, respectively.
1993 1992 1991
Balance at January 1 $2,798 $2,572 $2,527
Provision Charged to
Operating Expense 269 719 952
3,067 3,291 3,479
Gross Credit Losses (1,092) (761) (1,114)
Recoveries 331 268 207
Net Credit Losses (761) (493) (907)
Balance at December 31 $2,306 $2,798 $2,572
-109-
Note 5 - Loans and Concentrations of Credit Risk
The Corporation, through its banking subsidiaries, is active in
originating loans to customers primarily in Garrett, Allegany,
Washington and Frederick counties in Maryland and Mineral, Hardy
and Hampshire counties in West Virginia, and the surrounding
regions of West Virginia and Pennsylvania. The table at right
presents the Corporation's composition of credit risk by
significant concentration.
December 31, 1993 Loan
Loans Commitments Total
Commercial, Financial and
Agricultural $ 38,351 $ 8,426 $ 46,777
Real Estate-Construction 10,902 2,152 13,054
Real Estate-Mortgage 220,228 7,361 227,589
Installment 47,301 11,689 58,990
Letters of Credit - 4,037 4,037
-------- ------- --------
$316,782 $33,665 $350,447
December 31, 1992 Loan
Loans Commitments Total
Commercial, Financial and
Agricultural $ 48,295 $ 6,206 $ 54,501
Real Estate-Construction 4,568 722 5,290
Real Estate-Mortgage 198,659 7,075 205,734
Installment 50,939 2,804 53,743
Letters of Credit - 1,683 1,683
------- ------ -------
$302,461 $18,490 $320,951
Loan commitments are made to accommodate the financial needs
of the Corporation's customers. Letters of credit commit the
Corporation to make payments on behalf of customers when certain
specified future events occur. Letters of credit are issued to
customers to support contractual obligations and to insure job
performance. Historically, more than 99 percent of letters
of credit expire unfunded. Loan commitments and letters of credit
have credit risk essentially the same as that involved in extending
loans to customers and are subject to normal credit policies.
Collateral is obtained based on management's credit assessment of
the customer.
Note 6 - Bank Premises and Equipment
The composition of Bank premises and equipment is as follows:
1993 1992
Bank Premises $8,610 $7,611
Equipment 7,538 6,479
16,148 14,090
Less Accumulated
Depreciation (8,122) (7,311)
Total $8,026 $6,779
-110-
Note 7 - Fair Value of Financial Instruments
As required by the Statement of Financial Accounting Standards ("SFAS")
No. 107, "Disclosures about Fair Value of Financial
Instruments," the Corporation has presented fair value information
about financial instruments, whether or not recognized in the
statement of financial condition, for which it is practicable to
estimate that value. Fair value is best determined by values
quoted through active trading markets. Active trading markets are
characterized by numerous transactions of similar financial
instruments between willing buyers and willing sellers. Because no
active trading market exists for various types of financial
instruments, many of the fair values disclosed were derived using
present value discounted cash flow or other valuation techniques.
As a result, the Corporation's ability to actually realize these
derived values cannot be assumed.
The fair values disclosed under SFAS No. 107 may vary significantly
between institutions based on the estimates and assumptions used in
the various valuation methodologies. SFAS No. 107 excludes
disclosure of non-financial assets such as buildings as well as
certain financial instruments such as leases. Accordingly, the
aggregate fair values presented do not represent the underlying
value of the Corporation.
The following methods and assumptions were used by the Corporation
in estimating its fair value disclosures for financial instruments:
Cash and Cash Equivalents. The carrying amounts as reported in the
statement of financial condition for cash and short-term
instruments approximate those assets' fair values.
Investment Securities. Fair values for investment securities are
based on quoted market values.
Loans Receivable. For variable-rate loans that reprice frequently
or "in one year or less," and with no significant change in credit
risk, fair values are based on carrying values. Fair values for
fixed-rate loans and loans that do not reprice frequently are
estimated using a discounted cash flow calculation that applies
current interest rates being offered on the various loan products.
Deposit Liabilities. The fair values disclosed for demand deposits
(e.g., interest and non-interest checking, savings, and certain
types of money market accounts) are, by definition, equal to the
amount payable on demand at the reporting date (i.e., their
carrying amounts.) The carrying amounts for variable rate
certificates of deposit approximate their fair values at the
reporting date. Fair values for fixed rate certificates of deposit
are estimated using a discounted cash flow calculation that applies
interest rates currently being offered on the various certificates
of deposit to the cash flow stream.
-111-
Off-Balance-Sheet Financial Instruments. In the normal course of
business, the Corporation makes commitments to extend credit and
issues standby letters of credit. As a result of excessive costs,
the Corporation considers estimation of fair values for commitments
and standby letters of credit to otherwise be impracticable. The
Corporation's estimate of impairment due to collectability
concerns related to these off-balance-sheet financial instruments
is included in the reserve for possible credit losses.
Carrying Estimated
Amount Fair Value
Cash and Due From Banks $ 12,832 $ 12,832
Investment Securities 81,531 82,299
Loans 316,782 319,929
Deposits 368,527 369,129
Note 8 - Income Tax
Effective January 1, 1993, the Corporation changed its method of
accounting for income taxes from the deferred method to the
liability method required by FASB Statement No. 109, "Accounting
for Income Taxes" (see Note 1). As permitted under the new rules,
prior years' financial statements have not been restated.
The cumulative effect of adopting Statement 109 as of January 1,
1993 was not material to the consolidated financial statements.
A reconciliation of the statutory income tax at the applicable rates
to the income tax expense included in the statement of income
is at right:
Liability Deferred
Method Method
1993 1992 1991
Income Before Income Taxes $9,189 $9,120 $7,666
Statutory Income Tax rate 34% 34% 34%
Income Tax 3,124 3,101 2,606
State franchise Tax, Net of
Federal Tax Benefit 424 230 185
Effect of Nontaxable Interest
and Loan Income (369) (439) (513)
Effect of TEFRA Interest Limitation 32 40 61
Other (34) (14) 17
Income Tax Expense For the Year $3,177 $2,918 $2,356
Taxes Currently Payable 2,901 2,998 $2,396
Deferred Taxes (Benefit) 276 (80) (40)
Income Tax Expense For the Year $3,177 $2,918 $2,356
-112-
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Corporation's deferred
tax assets and liabilities as of December 31, 1993 are at right:
Deferred tax assets:
Reserve for Possible Credit Losses $ 406
Mortgage Point Fees 286
Pension Expense 264
Merger Costs 115
Other 18
Total Deferred Tax Assets 1,089
Valuation Allowance (142)
Total Deferred Tax Assets
Less Valuation Allowance 947
Deferred tax liabilities:
Depreciation 460
Other 57
Total Deferred Tax Liability 517
Net Deferred Tax Assets $ 430
Note 8 - Income Tax continued
The components of the provision for deferred tax (benefit) for the years
ended December 31, 1992 and 1991 are as follows:
1992 1991
Reserve For Possible Credit Losses $(87) $(27)
Deferred Loan Origination Fees (21) 31
Pension Expense (37) (85)
Excess Depreciation 34 35
Other 31 6
Total Deferred Taxes $(80) $(40)
The Corporation made income tax payments of $2,030, $2,896 and
$2,466 for the years ending December 31, 1993, 1992 and 1991,
respectively.
Note 9 - Employee
Benefit Plans
The Corporation has a noncontributory pension plan covering
substantially all full-time employees who qualify as to age and
length of service.
Consolidated pension expense charged to operations was $225 in
1993, $211 in 1992 and $242 in 1991. The benefits are based on
years of service and the employees' compensation during the last
-113-
five years of employment. The Corporation's funding policy is to
make annual contributions in amounts sufficient to meet required
funding.
The table at the right sets forth the plan's funded status and
amounts recognized in the Corporation's financial statements for
the years ended December 31, 1993 and 1992.
1993 1992
Actuarial Present Value of Accumulated
Benefit Obligations:
Accumulated Benefit Obligation,
Including Vested Benefits
of $3,559 in 1993 and $3,350 in 1992 $(3,584) $(3,375)
Projected Benefit Obligation For Service
Rendered to Date $(5,873) $(5,483)
Plan Assets at Fair Value, Primarily Listed
Stocks and Fixed Income Securities 5,145 5,033
Projected Benefit Obligation in Excess of
Plan Assets (728) (450)
Unrecognized Net Loss 902 890
Unrecognized Prior Service Cost Arising
From Amendment Effective January 1, 1991 (38) (40)
Unrecognized Net Asset arising at Transition
at January 1 (840) (879)
Accrued Pension Cost $ (704) $ (479)
1993 1992 1991
Net Pension Cost Included the Following Components:
Service Costs-Benefits Earned During the Year $249 $223 $217
Interest Cost on Projected Benefit Obligation 426 398 363
Expected Return on Plan Assets (341) (311) (563)
Net Amortization and Deferral (109) (99) 225
Net Pension Expense Included in Employee
Benefits $225 $211 $242
The weighted average discount rate used in determining the
actuarial present value of the projected benefit obligation was 8%
for 1993 and 1992. The expected long-term rate of return on plan
assets in 1993, 1992 and 1991 was 8%. Salaries were assumed to increase
at 5% and 6.25% per year in both 1993 and 1992 for the
Corporation and Myersville, respectively.
The Corporation has a profit-sharing plan covering full-time
employees who have completed one year of service. Contributions
made to the plan are determined by the Board of Directors. The
contributions to the profit-sharing trust fund for 1993, 1992
and 1991 were $566, $458 and $417, respectively.
-114-
The Corporation has an Employee Stock Ownership Plan (ESOP) which
covers full-time employees who have completed one year of service.
The contributions made to the plan are determined by the Board of
Directors of the Corporation, and are accrued when authorized. The
expense relating to the ESOP for 1993, 1992, and 1991 was $33, $92
and $61, respectively. The contribution is used by the plan to
purchase shares of common stock of the Corporation.
Note 10 - Federal Reserve Requirements
The banking subsidiaries are required to maintain reserves with the
Federal Reserve Bank. During 1993, the daily average amount of
these required reserves was approximately $4,539.
Note 11 - Restrictions on Subsidiary Dividends, Loans or Advances
Banking law limits the amount of dividends which a bank can pay
without obtaining prior approval from bank regulators. Under this
law the banking subsidiaries could, without regulatory approval,
declare dividends in 1993 of approximately $7,232 plus an
additional amount equal to the net profits for 1994 up to the date
of any such dividend declaration.
Under Federal Reserve regulations, the banking subsidiaries are
also limited to the amount they may loan to their affiliates,
including the Corporation, unless such loans are collateralized by
specified obligations. At December 31, 1993, the maximum amount
available for transfer from the banking subsidiaries to the
Corporation in the form of loans was approximately $5,068.
-115-
Condensed Statements of Financial Condition
December 31
1993 1992
Assets
Cash $ - $ 5
Investment Securities 216 35
Investment in Bank Subsidiaries 42,985 40,453
Dividends Receivable 660
Land and Bank Houses 548
Investment in Non-bank Subsidiaries 4,623 4,401
Total Assets $49,032 $44,894
Liabilities and shareholders' equity
Dividends Payable 660
Shareholders' Equity 48,372 44,894
$49,032 $44,894
Condensed Statement of Income
Year ended December 31
1993 1992 1991
Income:
Dividend Income from Subsidiaries $3,251 $4,205 $2,923
Other Income 25 7 16
Total Income $3,276 4,212 $2,939
Expense:
Other Expenses 18 15
Total Expense 18 15
Income Before Income Taxes and
Equity in Undistributed Net Income
of Subsidiaries 3,258 4,212 2,924
Equity in Undistributed Net Income of Subsidiaries:
Banks 2,532 1,764 2,259
Non-bank 222 227 127
Net Income $6,012 $6,203 $5,310
Condensed Statement of Cash Flows
Years ended December 31
1993 1992 1991
Operating activities
Net Income $6,012 $6,203 $5,310
Adjustments to Reconcile Net Income to Net
Cash Provided By Operating Activities:
Undistributed Equity in Subsidiaries:
Increase in Other Receivables (660)
Banks (2,532) (1,764) (2,259)
Non-bank (222) (227) (127)
Increase (Decrease) in
Other Payables 660 (35)
Net Cash Provided By
Operating Activities 3,258 4,212 2,889
-116-
Investing activities
Purchase of Premises and Equipment (548)
Purchase of Investment Securities (216) (35)
Proceeds from Investment Maturities 35
Investment in Subsidiary (2,499)
Net Decrease in Short-term Loan (540)
Net Cash Used in Investing Activities (729) (2,534) (540)
Financing activities
Cash Dividends (2,901) (2,103) (2,384)
Proceeds from Issuance of
Common Stock 367 159 70
Net Cash Used by Financing Activities (2,534) (1,944) (2,314)
(Decrease) Increase in Cash and
Cash Equivalents (5) (266) 35
Cash and Cash Equivalents
at Beginning of Year 5 271 236
Cash and Cash Equivalents
at End of Year $ - $ 5 $ 271
Note 13 - Commitments and Contingent Liabilities
The Corporation and its subsidiaries are at times, and in the
ordinary course of business, subject to legal actions. Management,
upon the advice of counsel, is of the opinion that losses, if any,
resulting from the settlement of current legal actions will not
have a material adverse effect on the financial condition of the
Corporation.
Oakfirst Life Insurance Corporation, a wholly owned subsidiary of
the Corporation had $9,565 of life, accident and health insurance
in force at December 31, 1993. In accordance with state insurance
laws, this subsidiary is capitalized at $4,623.
Note 14 - Related Party Transactions
In the ordinary course of business, executive officers and
directors of the Corporation, including their families and
companies in which certain directors are principal owners, were
loan customers of the Corporation and its subsidiaries. Pursuant to
the Corporation's policy, such loans were made on the same terms,
including interest rates and collateral, as those prevailing
at the time for comparable transactions with unrelated persons and
do not involve more than the normal risk of collectibility.
Changes in the dollar amount of loans outstanding to officers,
directors and their associates were as follows for the years ended
December 31.
1993 1992 1991
Balance, January 1 $2,924 $3,004 $3,285
Loans or Advances 1,023 1,149 334
Repayments 1,007 1,229 615
Balance, December 31 $2,940 $2,924 $3,004
-117-
Note 15 - Quarterly Results of Operations (Unaudited)
The following is a summary of the quarterly results of operations
for the years ended December 31, 1993 and 1992.
Three months ended
March 31 June 30 Sept. 30 Dec. 31 1993
Interest Income $8,275 $8,071 $8,089 $8,049
Interest Expense 2,968 3,030 2,786 2,572
Net Interest Income 5,307 5,041 5,303 5,477
Provision For Possible
Credit Losses 173 165 21 (90)
Other Income 715 857 892 1,024
Other Expenses 3,533 3,641 3,969 4,015
Income Before Taxes 2,316 2,092 2,205 2,576
Applicable Income Taxes 769 708 737 963
Net Income $1,547 $1,384 $1,468 $1,613
Earnings Per Share $ 0.25 $ 0.22 $ 0.24 $ 0.26
Three months ended
March 31 June 30 Sept. 30 Dec. 31 1992
Interest Income $8,984 $8,828 $8,560 $8,609
Interest Expense 4,256 3,908 3,556 3,114
Net Interest Income 4,728 4,920 5,004 5,495
Provision For Possible
Credit Losses 216 154 187 162
Other Income 684 677 673 716
Other Expenses 3,061 3,114 3,330 3,553
Income Before Taxes 2,135 2,329 2,160 2,496
Applicable Taxes 672 731 689 826
Net Income $1,463 $1,598 $1,471 $1,670
Earnings Per Share $ 0.24 $ 0.26 $ 0.24 $ 0.27
-118-
Executive Management
Richard G. Stanton
Chairman of the Board, President and
Chief Executive Officer
William B. Grant
Executive Vice President and Secretary
Robert W. Kurtz
Executive Vice President and Treasurer
Philip D. Frantz
Senior Vice President
and Controller
Benjamin W. Ridder
Senior Vice President
Director of Sales and Training
L. Scott Rush
Senior Vice President
Directors
David J. Beachy
Vice President
Fred E. Beachy Lumber Company, Inc.
Donald M. Browning
Chairman of the Board
Brownings, Inc.
Rex W. Burton
President, Burtons, Inc.
John L. Conway
Banker, Retired
Paul Cox, Jr.
President, Antietam Business
Equipment, Inc.
Dr. B. L. Grant
Physician, Retired
Robert W. Kurtz
Executive Vice President and Treasurer
First United Corporation and
First United National Bank & Trust
Dr. Andrew E. Mance
Physician
-119-
Donald E. Moran
Chairman of the Board & President
First United Bank of West Virginia, N.A.
Secretary/Treasurer
Moran Coal Company
Terry L. Reiber
President and Chief Executive Officer
Myersville Bank
I. Robert Rudy
President, Rudy's, Inc.
Tod P. Salisbury
Attorney, Salisbury & McLister
James F. Scarpelli, Sr.
Owner, Scarpelli Funeral Home
Karen F. Spiker
Real Estate Broker
A&A Realty/ Better Homes and Gardens
Richard G. Stanton
Chairman of the Board, President and
Chief Executive Officer
First United Corporation and
First United National Bank & Trust
Horace P. Whitworth, Jr.
Attorney-at-Law, General Counsel,
First United Corporation,
First United National Bank & Trust,
First United Securities, Inc., and
Oakfirst Life Insurance Corporation
Honorary Director
Gerald L. Glass
Masonry Contractor, Retired
Executive Management
Richard G. Stanton
Chairman of the Board, President and
Chief Executive Officer
Robert W. Kurtz
Executive Vice President
William B. Grant
Executive Vice President
-120-
Philip D. Frantz
Senior Vice President
and Controller
Francis L. Grimm
Senior Vice President
and Credit Services Manager
Benjamin W. Ridder
Senior Vice President
Director of Sales and Training
L. Scott Rush
Senior Vice President
Directors
David J. Beachy
Vice President
Fred E. Beachy Lumber Company, Inc.
Donald M. Browning
Chairman of the Board
Brownings, Inc.
Rex W. Burton
President, Burtons, Inc.
John L. Conway
Banker, Retired
Richard D. Dailey, Jr.
President
Cumberland Electric Company
Dr. B. L. Grant
Physician, Retired
Robert W. Kurtz
Executive Vice President and Treasurer
First United Corporation and
First United National Bank & Trust
Dr. Andrew E. Mance
Physician
Elaine L. McDonald
Vice President
Alpine Village/Silver Tree Inn
-121-
Terry L. Reiber
President and Chief Executive Officer
Myersville Bank
I. Robert Rudy
President, Rudy's, Inc.
James F. Scarpelli, Sr.
Owner, Scarpelli Funeral Home
Karen F. Spiker
Real Estate Broker
A&A Realty/ Better Homes and Gardens
Richard G. Stanton
Chairman of the Board, President and
Chief Executive Officer
First United Corporation and
First United National Bank & Trust
Robert G. Stuck
Vice President, Oakview Motors, Inc.
Horace P. Whitworth, Jr.
Attorney-at-Law, General Counsel,
First United Corporation,
First United National Bank & Trust,
First United Securities, Inc., and
Oakfirst Life Insurance Corporation
Honorary Director
Gerald L. Glass
Masonry Contractor, Retired
Cumberland Region Advisory Board
M. Kathryn Burkey
Certified Public Accountant
W. Bruce Douglas
Vice President
Phoenix Construction Company
James R. Hamilton
Vice President, Ort's, Inc.
Lawrence F. Lockard
Secretary/Treasurer,
R. C. Marker Company
-122-
Gary R. Ruddell
President
Hobby House Press, Inc.
F. Perry Smith
Consultant,
Cumberland Box and Mill Company
Executive Management
Donald E. Moran
Chairman of the Board and President
C. Spencer Allen
Executive Vice President and
Chief Executive Officer
Directors
C. Spencer Allen
Executive Vice President and
Chief Executive Officer
First United Bank of West Virginia, N.A.
Richard W. Beckner
Owner, Beckner Machine Company
Dr. Robert W. Bess, Jr.
Physician
Dr. James W. Courrier
Dentist
George R. Failing
Retired, Upper Potomac TV Company
William H. Fredlock, III
Personnel Assistant Benefits,
Westvaco Corporation
Lloyd L. Green
President/ Owner, Retired
Allegany Stone Quarry
William M. Kenny
Partner, Kenny's Market
Donald E. Moran
Chairman of the Board & President
First United Bank of West Virginia, N.A.
Secretary/Treasurer,
Moran Coal Company
-123-
Jack I. Mullen
Attorney-at-Law
David A. Shapiro
President, Shapiro's Stores
Richard G. Stanton
Chairman of the Board, President and
Chief Executive Officer
First United Corporation and
First United National Bank & Trust
Executive Management
Terry L. Reiber
President and Chief Executive Officer
Linda M. Kline
Senior Vice President
Directors
Donald C. Bowers
President and Chief Execuitve Officer
Donald C. Bowers Insurance, Inc.
Paul Cox, Jr.
President, Antietam Business
Equipment, Inc.
C. Basil Grossnickle
President
C. Basil Grossnickle Insurance, Inc.
Maynard G. Grossnickle
Chairman of the Board, Myersville Bank
Farmer, Retired
George C. Harne
Architect
Raymond F. Hinkle
Tax Consultant
Linda M. Kline
Senior Vice President
Myersville Bank
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W. Melvin Lewis
Lewis Brothers Contractors, Retired
Larry K. Lovell
President
Mid-State Building Supplier
Terry L. Reiber
President and Chief Executive Officer
Myersville Bank
Tod P. Salisbury
Attorney, Salisbury & McLister
Richard G. Stanton
Chairman of the Board, President and
Chief Executive Officer
First United Corporation and
First United National Bank & Trust
Executive Management
Richard G. Stanton
President
Robert W. Kurtz
Vice President
L. Scott Rush
Secretary/Treasurer
First United
National Bank & trust
Allegany County
CUMBERLAND
Center City Office
Centre & Harrison Streets
Cumberland, Maryland 21502
(301) 724-8693
Virginia Avenue Office
201 Virginia Avenue
Cumberland, Maryland 21502
(301) 777-0011
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White Oaks Office
1501 Oldtown Road
Cumberland, Maryland 21502
(301) 724-4800
Sheetz Convenience Store
Corner of Industrial Boulevard
and Virginia Avenue
LaVale
LaVale Office
2175 National Highway
LaVale, Maryland 21502
(301) 729-1600
Martin's Office
Braddock Square/Vocke Road
LaVale, MD 21502
(301) 729-3200
National Highway
Corner of National Highway
and Vocke Road
Frostburg
Frostburg Office
Route 36, Near Comfort Inn
Frostburg, Maryland 21532
(301) 689-1134
Frostburg State University
Lane Center
Bel Air Office
Route 220 & Barton Boulevard
Cumberland, Maryland 21502
(301) 729-2320
Citizens Office
Main Street
Westernport, Maryland 21562
(301) 359-3030
Barton Office
Broadway & Eutaw Streets
Barton, Maryland 21521
(301) 463-5676
Garrett County
Oakland
Main Office
19 South Second Street
Oakland, Maryland 21550
(301) 334-9471
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Mid-Towns Office
Mid-Towns Shopping Center
Oakland, Maryland 21550
(301) 334-8895
Thayer Center Office
Route 219 North
Oakland, Maryland 21550
(301) 334-8400
Browning's Foodland
Route 135
The Short-Stop, Inc.
Mid-Way Shopping Plaza
1057 East Oak Street
Deep Creek Lake
Lake Office
Mosser Road
McHenry, Maryland 21541
(301) 387-5500
Arrowhead Grocery & Deli
Route 219, Thayerville
Plaza Deli
Route 219, McHenry
Friendsville Office
First Avenue & Maple Street
Friendsville, Maryland 21531
(301) 746-5755
Grantsville Office
Main Street
Grantsville, Maryland 21536
(301) 895-5105
Washington County
Martin's Office
Valley Park Commons
1520 Wesel Boulevard
Hagerstown, Maryland 21740
(301) 791-6541
First United Bank
of West Virginia, N.A.
Mineral County
Piedmont Office
51 Ashfield Street
Piedmont, West Virginia 26750
(304) 355-2313 (301) 359-9791
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Keyser Office
Keyser Square Mall
Keyser, West Virginia 26726
(304) 788-2552 (301) 786-4570
Hampshire County
Romney Office
Hampshire Square
Route 50
Romney, West Virginia 26757
(304) 822-5549
Hardy County
Moorefield Office
South Branch Square
Route 220
Moorefield, West Virginia 26836
(304) 538-7881
Myersville Bank
Myersville Bank ATMs offer access
to MOST and CIRRUS only.
Frederick County
Myersville Office
207-09 Main Street
Myersville, Maryland 21773
(301) 293-2323
Washington County
Smithsburg Office
100 S. Main Street
Smithsburg, Maryland 21783
(301) 824-3838
Hagerstown Office
751 Knightsbridge Drive
Hagerstown, Maryland 21740
(301) 791-3999
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Market Summary of Stock*
First United Corporation's common stock now trades on the Nasdaq
Market. This change occurred on September 2, 1992. The following
summary sets forth the range of prices for common stock over the
periods noted.
1993 High Ask Low Ask High Bid Low Bid
1st Quarter $13.00 $12.16 $11.66 $11.34
2nd Quarter 14.17 12.66 12.84 11.66
3rd Quarter 17.34 15.66 15.34 14.00
4th Quarter 23.45 17.34 22.34 15.34
1992 High Ask Low Ask High Bid Low Bid
1st Quarter $10.6 7 $9.50 $10.00 $ 9.50
2nd Quarter 10.34 9.67 9.92 9.67
3rd Quarter 11.08 9.33 10.08 9.50
4th Quarter 12.66 11.83 11.17 10.00
Quotes on the common stock can be found on the Nasdaq under
the symbol "FUNC". Market Makers for the stock are:
Ferris Baker Watts
12 North Liberty Street
Cumberland, MD 21502
(301) 724-7161
(800) 247-7223
Legg Mason Wood Walker
125 West Street, Suite 201
Annapolis, MD 21401
(800) 638-9165
Wheat First Securities
33 West Fanklin Street
Hagerstown, MD 21740
(800) 388-1248
29 North Liberty Street
Cumberland, MD 21502
(301) 724-2660
107 South Second Street
Oakland, MD 21550
(301) 334-5806
Parker/Hunter
14th and Chaplin Streets
700 Riley Building
Wheeling, WV 26003
(800) 523-2153
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Cash Dividends*
Cash dividends were paid by the Corporation on the dates indicated
in the following manner:
1993 February $.09
May .09
August .09
November .09
1992 February $.10
May .07
August .10
November .07
*Per share data has been restated to reflect the 100% stock
dividend paid on June 15, 1993, and for the 50% stock dividend
paid on February 8, 1994.
Transfer Agent and Registrar
Mellon Securities
Transfer Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
(800)756-3353
(800)231-5469 - TDD for the hearing and speech impaired.
S.E.C. Form 10-K
The Corporation files an annual report Form 10-K with the
Securities and Exchange Commission. A copy of this statement will
be sent without charge to any shareholder who requests it in
writing to:
William B. Grant, Secretary
First United Corporation
c/o First United National Bank & Trust
19 South Second Street
Oakland, MD 21550-0009
This report also includes exhibits, a copy of which the Corporation
will furnish its shareholders upon payment of a reasonable fee.
Shareholders' meeting
The annual shareholder meeting will be held on:
April 26, 1994, 3:00 p.m.
McHenry House
Wisp Ski Resort
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First United Corporation, headquartered in Oakland, MD, is a
multi-bank holding company whose subsidiaries include, First United
National Bank & Trust, First United Bank of West Virginia, N.A.,
Myersville Bank, and Oakfirst Life Insurance Corporation.
The banking subsidiaries operate as full-service commercial and
retail banks providing a wide range of financial services,
including a broad array of trust, insurance and brokerage services.
Such services are delivered within the realm of safety, soundness
and profitability, responding competitively to the special needs of
our trading area as represented by individual consumers, locally
based enterprises and local governmental units.
We shall look for opportunities for controlled, stable growth
within Western Maryland and the surrounding areas of West Virginia
and Pennsylvania.
Profits, however, will not be sacrificed for the sake of growth alone.
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CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following
Registration Statements (Forms S-3 No. 33-25428 and S-4 No. 33-66090
Amendment No. 2) of First United Corporation, and in the
related Prospectuses of our report dated January 21, 1994, with the
respect to the consolidated financial statements of First United
Corporation, included in the 1993 Annual Report to Shareholders of
First United Corporation and incorporated by reference in this
Annual Report (Form 10-K) for the year ended December 31, 1993.
Ernst & Young
Baltimore, Maryland
March 24, 1994
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INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders of
HomeTown Bancorp, Inc. and Subsidiary
Myersville, Maryland
We have audited the accompanying consolidated balance sheets of HomeTown
Bancorp, Inc. and Subsidiary as of December 31, 1992 and the related
consolidated statements of income, cash flows and changes in shareholders'
equity for the years ended December 31, 1992 and 1991 (none of which are
shown separately herein). These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain resonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements, An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
(none of which are shown separately herein) present fairly, in all material
respects, the financial position of HomeTown Bancorp, Inc. and Subsidiary
as of December 31, 1992 and the results of its operations and its cash
flows for the years ended December 31, 1992 and 1991 in conformity with
generally accepted accounting principles.
Smith Elliott Kerns & Company
Hagerstown, Maryland
January 11, 1993
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