SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
- - THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended September 30, 2002
Commission file number 0-14237
-------
First United Corporation
------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-1380770
-------- ---------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification no.)
19 South Second Street, Oakland, Maryland 21550-0009
----------------------------------------------------
(address of principal executive offices) (zip code)
(301) 334-4715
--------------
Registrant's telephone number, including area code
N/A
---
Former name, address and former fiscal year, if changed since
last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
-
Indicate by check mark whether the registrant is an accelerated filer (As
defined in Rule 12b-2 of the Exchange Act). Yes X No __
-
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common stock, $.01 Par value--6,080,589 shares outstanding as of September 30,
2002 Preferred stock, No par value--No shares outstanding as of September 30,
2002.
INDEX TO REPORT
FIRST UNITED CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 2002 (unaudited) and December
31, 2001.
Consolidated Statements of Income (unaudited) - For the three and nine
months ended September 30, 2002 and 2001.
Consolidated Statements of Cash Flows (unaudited) - For the nine months
ended September 30, 2002 and 2001.
Notes to Unaudited Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
CERTIFICATIONS
FIRST UNITED CORPORATION
Consolidated Balance Sheets
September 30, December 31,
Assets 2002 2001
(unaudited)
---------------------------
(in thousands)
Cash and due from banks $ 14,268 $ 22,827
Federal funds sold 1,950 9,875
Interest-bearing deposits in banks 330 1,167
Investment securities:
U.S. Treasury Securities and - 301
Obligations of other U.S.
Government Agencies 20,947 30,358
Obligations of State and
Local Government 31,598 25,915
Other investments 170,067 74,118
---------------------------
Total investment securities 222,612 130,692
Federal Home Loan Bank stock, at cost 8,686 5,950
Loans and Leases 629,915 607,136
Reserve for possible credit losses (5,984) (5,752)
---------------------------
Net loans 623,931 601,384
Bank premises and equipment 12,268 11,527
Accrued interest receivable and other assets 32,836 34,691
---------------------------
Total Assets $916,881 $818,113
==============================
FIRST UNITED CORPORATION
Consolidated Balance Sheets
September 30, December 31,
2002 2001
(unaudited)
Liabilities and Shareholders' Equity -----------------------------
(in thousands)
Liabilities
Non-interest bearing deposits $ 64,747 $ 64,366
Interest bearing deposits 565,023 552,403
-----------------------------
Total deposits 629,770 616,769
Reserve for taxes, accrued interest, and
other liabilities 8,510 9,132
Federal Home Loan Bank borrowings
and other borrowed funds 199,820 120,104
Dividends payable 1,032 1,032
-----------------------------
Total Liabilities 839,132 747,037
Shareholders' Equity
Preferred stock -no par value
Authorized and unissued; 2,000 Shares
Capital Stock -par value $.01 per share:
Authorized 25,000 shares; issued and
outstanding 6,081 shares at September 30,
2002, and December 31, 2001 61 61
Surplus 20,199 20,199
Retained earnings 54,392 50,253
Accumulated comprehensive income 3,097 563
-----------------------------
Total Shareholders' Equity 77,749 71,076
-----------------------------
Total Liabilities and
Shareholders' Equity $916,881 $818,113
=============================
FIRST UNITED CORPORATION
Consolidated Statements Of Income
(in thousands, except per share data) Nine Months
Ended September 30,
2002 2001
-------------------
(unaudited)
Interest income
Interest and fees on loans and leases $ 36,177 $ 40,163
Interest on investment securities:
Taxable 5,142 6,435
Exempt from federal income tax 1,037 803
------------------
6,179 7,238
Interest on federal funds sold 54 359
------------------
Total interest income 42,410 47,760
Interest expense
Interest on deposits:
Savings 200 336
Interest-bearing transaction accounts 1,352 2,844
Time, $100,000 or more 3,077 5,640
Other time 8,406 11,130
Interest on Federal Home Loan Bank
borrowings and other borrowed
funds 6,018 6,189
------------------
Total interest expense 19,053 26,139
------------------
Net interest income 23,357 21,621
Provision for possible credit losses 1,261 1,856
------------------
Net interest income after provision
for possible credit losses 22,096 19,765
Other operating income
Trust Services Income 1,814 2,008
Brokerage Commission Income 468 336
Service charges on deposit accounts 1,990 1,806
Insurance premium income 892 774
Securities gains (losses) (6) 427
Other income 2,258 2,003
--------------------
Total other operating income 7,416 7,354
Other operating expenses
Salaries and employees benefits 10,364 9,331
Occupancy expense of premises 947 952
Equipment expense 1,566 1,375
Data processing expense 872 738
Deposit assessments and related fees 128 133
Other expense 5,617 4,815
--------------------
Total other operating expenses 19,494 17,344
--------------------
Income before income taxes 10,018 9,775
Applicable income taxes 2,778 2,870
--------------------
Net income $7,240 $6,905
====================
Earnings per share $1.19 $1.14
====================
Dividends per share $0.51 $ 0.50
====================
FIRST UNITED CORPORATION
Consolidated Statements Of Income
(in thousands, except per share data) Three Months
Ended September,
2002 2001
-------------------
(unaudited)
Interest income
Interest and fees on loans and leases $ 12,114 $ 13,335
Interest on investment securities:
Taxable 1,938 1,907
Exempt from federal income tax 363 299
--------------------
2,301 2,206
Interest on federal funds sold 10 64
--------------------
Total interest income 14,425 15,605
Interest expense
Interest on deposits:
Savings 70 110
Interest-bearing transaction accounts 584 681
Time, $100,000 or more 920 1,624
Other time 2,637 3,629
Interest on Federal Home Loan Bank
borrowings and other borrowed
funds 2,204 2,076
--------------------
Total interest expense 6,415 8,120
-------------------
Net interest income 8,010 7,485
Provision for probable credit losses 45 774
--------------------
Net interest income after provision
for probable credit losses 7,965 6,711
Other operating income
Trust Services income 450 640
Brokerage Commission income 201 131
Service charges on deposit accounts 755 628
Insurance premium income 342 266
Securities (losses) - 350
Other income 746 665
--------------------
Total other operating income 2,494 2,680
Other operating expenses
Salaries and employees benefits 3,549 3,176
Occupancy expense of premises 323 308
Equipment expense 513 478
Data processing expense 306 258
Deposit assessments and related fees 42 45
Other expense 2,162 1,580
--------------------
Total other operating expenses 6,895 5,845
--------------------
Income before income taxes 3,564 3,546
Applicable income taxes 1,021 942
--------------------
Net income $2,543 $2,604
====================
Earnings per share $0.42 $0.43
====================
Dividends per share $0.17 $0.165
====================
FIRST UNITED CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months
Ended September 30,
2002 2001
--------------------
(unaudited)
Operating activities
Net Income $ 7,240 $ 6,905
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible credit losses 1,261 1,856
Provision for depreciation 1,300 1,175
Net accretion and amortization of investment
security discounts and premiums (380) 23
Realized (gain) loss on sale of investment
securities 6 (427)
Increase in accrued interest and other assets 1,856 (20,147)
Increase in reserve for taxes accrued interest
and other liabilities (622) 5,302
--------------------
Net cash (used) provided by operating activities $10,661 (5,313)
Investing activities
Net decrease (increase) in interest bearing deposits (837)
Proceeds from maturities of available-for-
sale securities 50,667 211,928
Purchases of available-for-sale securities (140,738) (174,541)
Net increase in loans (23,808) (11,849)
Purchases of premises and equipment (2,041) (1,567)
--------------------
Net cash provided (used) in investing activities (116,757) 23,971
Financing activities
Increase in Federal Home Loan Bank borrowings
and other borrowed money 79,716 12,109
Net (decrease) increase in demand deposits,
NOW accounts and savings accounts 52,898 (15,290)
Net (decrease) increase in certificates of deposits (39,897) (23,407)
Cash dividends paid or declared (3,105) (3,015)
Acquisition and retirement of Common Stock - -
--------------------
Net cash (used) provided by financing activities 89,612 (29,603)
Cash and cash equivalents at beginning of the year 32,702 26,921
Increase in cash and cash equivalents (16,484) (10,945)
--------------------
Cash and cash equivalents at end of period $16,218 $15,976
====================
FIRST UNITED CORPORATION
Note to Unaudited Consolidated Financial Statements
September 30, 2002
Note A -- Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly, they
do not include all the information and footnotes required for complete financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation, consisting of normal recurring items have been
included. Operating results for the three and nine month period ended September
30, 2002, are not necessarily indicative of the results that may be expected for
the year ending December 31, 2002. The enclosed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 2001.
Earnings per share are based on the weighted average number of shares
outstanding of 6,080,589 for the three and nine months ended September 30, 2002
and 2001.
Note B - Accumulated Comprehensive Income
Accumulated comprehensive income represents the unrealized gains and losses
on the company's available-for-sale securities, net of income taxes. During the
first nine months of 2002 and 2001, total comprehensive income, net income plus
the change in unrealized gains (losses) on available-for-sale securities,
amounted to $7.24 million and $6.91 million, net of income taxes, respectively.
Note C - Accounting Pronouncement
In September 2001, Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("Statement No. 142"), was issued. In
accordance with Statement No. 142, goodwill and intangible assets determined to
have indefinite lives will no longer be amortized, but will be subject to an
annual impairment test. Other intangible assets will continue to be amortized
over their estimated useful lives. The effective date for Statement No. 142 is
for fiscal years beginning after December 15, 2001. Through a transitional
evaluation completed prior to September 30, 2002, the Corporation has determined
that none of the goodwill carried on its books as of January 1, 2002 was subject
to impairment.
Part I. Financial Information
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
This Quarterly Report of First United Corporation (the "Corporation") filed
on Form 10-Q may contain forward-looking statements within the meaning of The
Private Securities Litigation Reform Act of 1995. Readers of this report should
be aware of the speculative nature of "forward-looking statements." Statements
that are not historical in nature, including those that include the words
"anticipate," "estimate," "should," expect," "believe," "intend," and similar
expressions, are based on current expectations, estimates and projections about,
among other things, the industry and the markets in which the Corporation
operates, and they are not guarantees of future performance. Whether actual
results will conform to expectations and predictions is subject to known and
unknown risks and uncertainties, including risks and uncertainties discussed in
this report; general economic, market, or business conditions; changes in
interest rates, deposit flow, the cost of funds, and demand for loan products
and financial services; changes in the Corporation's competitive position or
competitive actions by other companies; changes in the quality or composition of
loan and investment portfolios; the ability to manage growth; changes in laws or
regulations or policies of federal and state regulators and agencies; and other
circumstances beyond the Corporation's control. Consequently, all of the
forward-looking statements made in this document are qualified by these
cautionary statements, and there can be no assurance that the actual results
anticipated will be realized, or if substantially realized, will have the
expected consequences on the Corporation's business or operations. For a more
complete discussion of these risk factors, see "Risk Factors" in Part I, Item 1
of the Corporation's Annual Report on Form 10-K for the year ended December 31,
2001. Except as required by applicable laws, the Corporation does not intend to
publish updates or revisions of any forward-looking statements it makes to
reflect new information, future events or otherwise
FINANCIAL CONDITION
The Corporation's total assets were $916.88 million at September 30, 2002,
compared to $818.11 million at December 31, 2001, increasing $98.77 million or
12.07%. Earning assets increased $108.44 million or 14.48% to $857.51 million at
September 30, 2002, from $749.07 million at December 31, 2001.
Growth in net loans for the first nine months of 2002 was $22.55 million or
3.75% to a total of $623.93 million. Commercial loans, including mortgages,
installments, and lines of credit increased $19.77 million during the first nine
months of 2002. Consumer installment loans and home equity loans, which include
both open-end credit and closed-end credit, increased $5.88 million and $5.65
million, respectively, during the first nine months of 2002. These increases
were off-set by a decrease in consumer mortgage loans of $8.75 million for the
same time period. Net loan growth during the third quarter of 2002 was $11.94
million. This growth was attributable primarily to growth in commercial loans
which more than off-set decreases in the residential mortgage lending portfolio
and the indirect auto lending portfolio.
The investment portfolio that consists of available for sale securities
increased $91.92 million during the first nine months of 2002. This increase was
due to purchases of both state and municipal securities and mortgage backed
securities. The Corporation adopted a leverage growth strategy program and
policy that was implemented during the third quarter of 2002. In July of 2002,
the Corporation borrowed $40.00 million in structured borrowings from the
Federal Home Loan Bank of Atlanta and reinvested these funds in mortgage backed
securities. In August of 2002, a second leverage strategy was executed in the
amount of $40.00 million. It is anticipated that the Corporation will earn a
favorable spread between the rate earned on the securities and the cost of the
borrowings. Because interest rate risk is inherent in leveraging, the
Corporation mitigated its risk through the matching of the maturities of the
investments with the borrowings. Management is committed to leverage growth
strategies that will limit security purchases to those that it believes will
minimize credit risk and will help to meet the objectives of the Corporation's
investment and asset/liability management policies.
Deposits totaled $629.77 million at September 30, 2002. This is an increase
of $13.00 million from the December 31, 2001 total of $616.77 million. Demand
deposits and regular savings accounts grew $48.07 and $4.72 million,
respectively, during the first nine months 2002. This growth was off-set by
decreases in certificates of deposit during the same time period of 2002 of
$40.11 million as consumers chose to invest in more liquid bank products or
investments outside of the Bank. Also included within the decrease in the
category of certificates of deposit, the Corporation chose not to renew $4.50
million of brokered certificate of deposit money that matured in the first
quarter of 2002. Deposit growth during the third quarter of 2002 was $18.35
million. This growth is attributed to the introduction of the My Easy Access CD,
a demand deposit product.
MARKET RISK MANAGEMENT
The Corporation's principal market risk exposure is to interest rates. The
Corporation intends to effectively manage the adverse effects of changing
interest rates on earnings, long-term shareholder value, and liquidity through
the use of a simulation model. The simulation model captures optionality factors
such as call features and interest rate caps and floors imbedded in investment
and loan portfolio contractual obligations. As of September 30, 2002, the
simulation analysis shows that net interest income would decline by 7.40% or
$2.49 million over a twelve-month period given an interest rate decrease of 100
basis points. The Corporation's policy states that a net interest income change
of 5.00% or less requires no action. For a net interest income change of greater
than 5.00% but less than 10.00%, the Asset/Liability Committee must be informed
at the next regularly scheduled quarterly meeting. An increase in interest rates
impacts the Corporation's net interest income favorably. In terms of the
economic value of equity given the same shift in interest rates, the fair value
of the Corporation's capital would decrease 13.10% or $18.71 million as compared
to a policy limit of 10.00%. A change in the fair value of equity of greater
than 10.00% but less than 20.00% requires that the Asset/Liability Committee be
informed at the next regularly scheduled quarterly meeting. An increase in
interest rates would increase the fair value of the Corporation's capital.
LIQUIDITY AND CAPITAL MANAGEMENT
The Corporation derives liquidity through increased customer deposits,
maturities in the investment portfolio, loan repayments and income from earning
assets. To the extent that deposits are not adequate to fund customer loan
demand, liquidity needs can be met in the short term funds markets through
arrangements with the Corporation's correspondent banks. The Corporation's bank
subsidiary, First United Bank (the "Bank"), is also a member of the Federal Home
Loan Bank of Atlanta, which provides another source of liquidity. There are no
known trends or demands, commitments, events or uncertainties of which
management is aware that will materially affect the Corporation's ability to
maintain liquidity at satisfactory levels.
The Corporation recorded a total risk-based capital ratio of 15.85% at
September 30, 2002 as compared to 15.54% at December 31, 2001. The Tier 1
risk-based capital ratio was 12.46% at September 30, 2002 as compared to 11.22%
at December 31, 2001. Capital adequacy was well-above regulatory requirements.
The regulatory requirements for total risk-based capital and Tier 1 capital are
8.00% and 4.00%, respectively, to maintain capital adequacy. Shareholder's
equity at September 30, 2002 was $77.75 million as compared to $71.08 million at
December 31, 2001.
The Corporation paid a cash dividend of $.17 on August 1, 2002. On
September 18, 2002, the Corporation declared another dividend of an equal
amount, to be paid November 1, 2002, to shareholders of record at October 18,
2002.
RESULTS OF OPERATIONS
Consolidated net income for the nine months ended September 30, 2002
totaled $7.24 million, which is $.34 million more than the $6.90 million that
was recorded for the nine months ended September 30, 2001. This translates into
$1.19 per share for the current nine month period. For the same period of 2001,
each share earned $1.14. These operating results were driven primarily by an
increase in the net interest margin from 3.81% in 2001 to 4.10% in 2002. Net
income for the three months ended September 30, 2002 was $2.54 million, or $.42
per share compared to $2.60 million or $.43 per share for the same period of
2001.
The Corporation's performance ratios remain stable. Annualized Returns on
Average Equity ("ROAE") were 13.04% and 13.51% for the nine-month periods ending
September 30, 2002 and September 30, 2001, respectively. The ROAE for the year
ended December 31, 2001 was 13.26%. Annualized Returns on Average Assets
("ROAA") were 1.16% and 1.11% for the first nine months of 2002 and 2001,
respectively. This ratio was 1.11% for the year ended December 31, 2001. The
efficiency ratio is a key measuring tool for profitability and operating
efficiency. A lower ratio equals higher profitability and operating
efficiencies. The Corporation's efficiency ratio was 62.08% for the period ended
September 30, 2002. This represents a decline in efficiency from year-end 2001
when the ratio was 58.58%. This decline can be attributed to an increase in
other operating expenses as noted below.
Despite decreasing rates in the market, the Corporation's net interest
income year to date was $23.36 million, an increase of $1.74 million over the
$21.62 million reported in 2001 for the same time period. Average earning assets
totaled $777.49 million and $781.66 million at September 30, 2002 and September
30,2001, respectively. The yield on earning assets for those same time periods
was 7.38%, and 8.30%, respectively. The average cost of funds for the period
ending September 30, 2002 was 3.28% as compared to 4.49% at September 30, 2001.
Net interest income for the three months ended September 30, 2002 was $8.01
million as compared to $7.49 million for the same time period in 2001.
For the nine months ended September 30, 2002, the provision for probable
credit losses was $1.26 million as compared to $1.86 million for the same period
in 2001. The provision for probable credit losses for the third quarter of 2002
was $.05 million as compared to $.77 million for the same time period of 2001.
Net charge-offs for the nine-month period ended September 30, 2002 were $1.03
million as compared to $1.76 million for the same time period in 2001. In
comparing the three months ended September 30, 2002 with September 30, 2001, net
charge offs were $.19 million and $.69 million, respectively. The over 30-day
delinquency ratio was 1.00% at September 30, 2002 as compared to 1.22% for the
period ending September 30, 2001. This same ratio was 1.30% at December 31,
2001. Non-performing loans were .39% of gross loans as of September 30, 2002,
and the Corporation's loan loss reserve was .96% of gross loans representing
243.53% of non-performing loans. Non-performing loans were .73% of gross loans
as of December 31, 2001, and the Corporation's loan loss reserve was .94% of
gross loans representing 129.96% of non-performing loans. At September 30, 2001,
non-performing loans were .49% of gross loans. The loan loss reserve was .84% of
gross loans equating to 171.68% of non-performing loans at September 30, 2001.
For the nine months ended September 30, 2002, other operating income was
$7.42 million, compared to $7.35 million for the same time period in 2001. Other
operating income for the quarter ending September 30, 2002 was $2.49 million as
compared to $2.68 million for the third quarter of 2001. During the third
quarter of 2001, a security gain of $.35 million was recognized. There were no
security gains recognized during the third quarter of 2002. As a part of other
operating income, trust services income of $1.81 million during the first nine
months of 2002 was down from the $2.01 million as of September 30, 2001. For the
quarter ending September 30, 2002, trust services income was $.45 million as
compared to $.64 million one year ago. The performance of the equity and bond
markets continue to affect trust financial performance because the majority of
trust account fees are calculated based on the market value of the assets under
management. The decline in market rates have also negatively impacted revenue.
The Bank's trust department managed accounts whose market values were $293.23
million at September 30, 2002 as compared to $299.30 at June 30, 2002 and
$290.07 at September 30, 2001. Despite the market conditions, the trust
department has seen excellent growth in new trust business and increased
management fees.
Other operating expense for the nine-month period ended September 30, 2002
totaled $19.49 million. Other operating expense for the first nine months of
2001 was $17.34 million. Comparing the third quarter of 2002 with the same
period of 2001, other operating expense was $6.89 million and $5.84 million,
respectively. This increase is attributable to increases in salaries and
benefits, equipment expenses, and data processing expenses.
Income tax expense decreased $.10 million for the first nine months of 2002
as compared to the same time period in 2001. In comparing the third quarter of
2002 with the third quarter of 2001, income tax expense increased $.08 million.
Summary of Loan Loss Experience
ANALYSIS OF THE RESERVE FOR PROBABLE CREDIT LOSSES
Nine Months Ended
September 30, 2002
------------------
Balance, January 1 $5,752
Charge-offs:
Domestic:
Commercial, financial and agricultural 197
Real estate - mortgage 92
Installment loans to individuals 1,232
------------------
1,521
------------------
Recoveries:
Domestics:
Commercial, financial and agricultural 171
Real estate - mortgage 7
Installment loans to individuals 312
------------------
490
------------------
Net Charge-offs 1,031
------------------
Provision for Probable Credit Losses 1,261
------------------
Balance at end of period $5,982
==================
Ratio of net charge-offs during the period to average
loans outstanding during the period, annualized .22%
==================
Risk Elements of Loan Portfolio
The following table provides a comparison of the Risk Elements of the Loan
Portfolio in the format prescribed by Item III-C of Industry Guide 3. The Bank
has no foreign loans. The Bank has a single commercial loan defined as a
troubled debt restructuring with an outstanding balance of $.57 million. The
status of the restructured debt at September 30, 2002 is current. Management
believes that because the restructured debt is fully collateralized, there will
be no loss on the loan. Further, the Bank has no knowledge of any potential
problem loans other than those in the table below. As of September 30, 2002, the
Corporation's non-accrual loans decreased $1.60 million from the year end total
of $3.20 million. This decrease is due to the resolution of a single commercial
loan that resulted in no loss to the Bank, and the restructured debt as listed
above.
September 30 December 31
2002 2001
----------------------
Non-accrual loans $1,597 $3,196
Accruing loans past due 90 days or more 871 1,230
Information with respect to non-accrual loans at September 30, 2002 and December
31, 2001, are as follows:
Non-accrual Loans $1,597 $3,196
Interest income that would have been
recorded under original terms 24 48
Interest income recorded during the period 1 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is discussed under "Market Risk
Management" in Part I, Item 2 "Management's Discussion and Analysis of Financial
Condition and Results of Operation."
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as those terms
are defined in Exchange Act Rules 240.13a-14(c) and 15d-14(c)) that are designed
to ensure that material information about the Company is accumulated and timely
communicated to the chief executive officer and the chief financial officer of
the Company so that such information may be recorded, processed, summarized, and
reported as required under the Securities Exchange Act of 1934. The chief
executive officer and the chief financial officer have each reviewed and
evaluated the effectiveness of the Company's current internal controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report and have each concluded that such disclosure controls and
procedures are effective.
(b) Changes in Internal Controls
There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect such controls subsequent to
the date of the evaluations by the chief executive officer and the chief
financial officer. Neither the chief executive officer nor the chief financial
officer is aware of any significant deficiencies or material weaknesses in the
Company's internal controls, so no corrective actions have been taken with
respect to such internal controls.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Amended and Restated Articles of Incorporation incorporated by
reference to Exhibit 3.1 of the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1998)
3.2 Amended and Restated By-Laws (incorporated by reference to Exhibit
3(ii) of the Company's Annual Report on Form 10-K for the year ended
December 31, 1997)
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST UNITED CORPORATION
Date: November 14, 2002 /s/ William B. Grant
----------------------------------------
William B. Grant, Chairman of the Board
and Chief Executive Officer
Date: November 14, 2002 /s/ Robert W. Kurtz
----------------------------------------
Robert W Kurtz, President and Chief
Financial Officer
CERTIFICATIONS
I, William B. Grant, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q (this "Report") of First
United Corporation (the "Company");
2. Based on my knowledge, this Report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Company as of,
and for, the periods presented in this Report;
4. The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Company and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period
in which this report is being prepared;
b) evaluated the effectiveness of the Company's disclosure controls and
procedures as of the date within 90 days prior to the filing date of this report
(the "Evaluation Date"); and
c) presented in this Report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
5. The Company's other certifying officers and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the audit committee of
Company's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls that could adversely affect the Company's ability to record, process,
summarize and report financial data and have identified for the Company's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal controls; and
6. The Company's other certifying officers and I have indicated in this Report
whether or not there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weakness.
Date: November 14, 2002 /s/ William B. Grant
--------------------------------
By: William B. Grant
Title: Chairman of the Board/CEO
I, Robert W. Kurtz, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q (this "Report") of First
United Corporation (the "Company");
2. Based on my knowledge, this Report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Company as of,
and for, the periods presented in this Report;
4. The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Company and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period
in which this report is being prepared;
b) evaluated the effectiveness of the Company's disclosure controls and
procedures as of the date within 90 days prior to the filing date of this report
(the "Evaluation Date"); and
c) presented in this Report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
5. The Company's other certifying officers and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the audit committee of
Company's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls that could adversely affect the Company's ability to record, process,
summarize and report financial data and have identified for the Company's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal controls; and
6. The Company's other certifying officers and I have indicated in this Report
whether or not there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weakness.
Date: November 14, 2002 /s/ Robert W. Kurtz
-----------------------------
By: Robert W. Kurtz
Title: President/Chief Financial
Officer
EXHIBIT INDEX
3.1 Amended and Restated Articles of Incorporation incorporated by reference to
Exhibit 3.1 of the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1998)
3.2 Amended and Restated By-Laws (incorporated by reference to Exhibit 3(ii) of
the Company's Annual Report on Form 10-K for the year ended December 31,
1997)