x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
For the fiscal year
ended December 31,
2008
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
For
the transition period from _____________ to
_____________
|
Maryland
|
52-1380770
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification Number)
|
|
19
South Second Street, Oakland, Maryland
|
21550-0009
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Title
of Each Class:
|
Name
of Each Exchange on Which Registered:
|
|
Common
Stock, par value $.01 per share
|
NASDAQ
Global Select
Market
|
ITEM
1.
|
Business
|
3
|
ITEM
1A.
|
Risk
Factors
|
11
|
ITEM
1B.
|
Unresolved
Staff Comments
|
17
|
ITEM
2.
|
Properties
|
17
|
ITEM
3.
|
Legal
Proceedings
|
17
|
ITEM
4.
|
Submission
of Matters to a Vote of Security Holders
|
17
|
PART
II
|
||
ITEM
5.
|
Market
for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
18
|
ITEM
6.
|
Selected
Financial Data
|
21
|
ITEM
7.
|
Management's
Discussion & Analysis of Financial Condition & Results of
Operations
|
22
|
ITEM
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
44
|
ITEM
8.
|
Financial
Statements and Supplementary Data
|
45
|
ITEM
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
76
|
ITEM
9A.
|
Controls
and Procedures
|
76
|
ITEM
9B.
|
Other
Information
|
79
|
PART
III
|
||
ITEM
10.
|
Directors,
Executive Officers and Corporate Governance
|
79
|
ITEM
11.
|
Executive
Compensation
|
79
|
ITEM
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
79
|
ITEM
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
79
|
ITEM
14.
|
Principal
Accountant Fees and Services
|
79
|
PART
IV
|
||
ITEM
15.
|
Exhibits
and Financial Statement Schedules
|
79
|
80
|
||
EXHIBITS
|
81
|
ITEM
1.
|
BUSINESS
|
Offices
(in Market)
|
Deposits (in thousands)
|
Market Share
|
||||||||||
Allegany
County, Maryland:
|
||||||||||||
Susquehanna
Bank
|
5 | $ | 224,368 | 36.72 | % | |||||||
Manufacturers
& Traders Trust Company
|
7 | 172,975 | 28.31 | % | ||||||||
First
United Bank & Trust
|
4 | 126,714 | 20.74 | % | ||||||||
PNC
Bank NA
|
3 | 51,300 | 8.39 | % | ||||||||
Standard
Bank
|
2 | 35,746 | 5.85 | % |
Frederick
County, Maryland:
|
||||||||||||
PNC
Bank NA
|
20 | 1,015,594 | 32.82 | % | ||||||||
Branch
Banking & Trust Co.
|
12 | 593,671 | 19.18 | % | ||||||||
Frederick
County Bank
|
4 | 225,184 | 7.28 | % | ||||||||
Bank
Of America NA
|
5 | 222,764 | 7.20 | % | ||||||||
Manufacturers
& Traders Trust Company
|
6 | 185,296 | 5.99 | % | ||||||||
Chevy
Chase Bank FSB
|
6 | 152,430 | 4.93 | % | ||||||||
Woodsboro
Bank
|
7 | 150,069 | 4.85 | % | ||||||||
Middletown
Valley Bank
|
4 | 131,044 | 4.23 | % | ||||||||
SunTrust
Bank
|
3 | 121,831 | 3.94 | % | ||||||||
First
United Bank & Trust
|
3 | 103,390 | 3.34 | % | ||||||||
Sandy
Spring Bank
|
4 | 65,731 | 2.12 | % | ||||||||
Provident
Bank of Maryland
|
2 | 34,602 | 1.12 | % | ||||||||
Damascus
Community Bank
|
2 | 22,152 | 0.72 | % | ||||||||
Wachovia
Bank NA
|
1 | 16,287 | 0.53 | % | ||||||||
Columbia
Bank
|
2 | 16,197 | 0.52 | % | ||||||||
Sovereign
Bank
|
3 | 15,887 | 0.51 | % | ||||||||
Graystone
Bank
|
1 | 11,591 | 0.37 | % | ||||||||
BlueRidge
Bank
|
1 | 11,166 | 0.36 | % |
Garrett
County, Maryland:
|
||||||||||||
First
United Bank & Trust
|
5 | 579,636 | 74.84 | % | ||||||||
Manufacturers
& Traders Trust Co.
|
5 | 95,043 | 12.27 | % | ||||||||
Susquehanna
Bank
|
2 | 70,569 | 9.11 | % | ||||||||
Clear
Mountain Bank
|
1 | 25,408 | 3.28 | % | ||||||||
Miners
& Merchants Bank
|
1 | 3,861 | 0.50 | % |
Washington
County, Maryland:
|
||||||||||||
Susquehanna
Bank
|
10 | 607,697 | 30.67 | % | ||||||||
Hagerstown
Trust Co.
|
11 | 398,102 | 20.09 | % | ||||||||
Manufacturers
& Traders Trust Company
|
12 | 386,594 | 19.51 | % | ||||||||
Sovereign
Bank
|
4 | 195,022 | 9.84 | % | ||||||||
PNC
Bank NA
|
6 | 153,804 | 7.76 | % | ||||||||
First
United Bank & Trust
|
3 | 68,526 | 3.46 | % | ||||||||
First
National Bank of Greencastle
|
3 | 46,069 | 2.33 | % | ||||||||
Centra
Bank
|
2 | 37,928 | 1.91 | % | ||||||||
Chevy
Chase Bank FSB
|
3 | 37,310 | 1.88 | % | ||||||||
Citizens
National Bank of Berkeley Springs
|
1 | 30,892 | 1.56 | % | ||||||||
Orrstown
Bank
|
1 | 10,706 | 0.54 | % | ||||||||
Jefferson
Security Bank
|
1 | 5,983 | 0.30 | % | ||||||||
Middletown
Valley Bank
|
1 | 2,777 | 0.14 | % |
Berkeley
County, West Virginia:
|
||||||||||||
Branch
Banking & Trust Co.
|
5 | 311,844 | 30.97 | % | ||||||||
Centra
Bank Inc.
|
3 | 217,491 | 21.60 | % | ||||||||
First
United Bank & Trust
|
5 | 118,775 | 11.80 | % | ||||||||
City
National Bank of West Virginia
|
4 | 106,957 | 10.62 | % | ||||||||
Susquehanna
Bank
|
4 | 102,314 | 10.16 | % | ||||||||
Jefferson
Security Bank
|
2 | 59,555 | 5.92 | % | ||||||||
Bank
of Charles Town
|
2 | 42,352 | 4.21 | % | ||||||||
Citizens
National Bank of Berkeley Springs
|
3 | 35,157 | 3.49 | % | ||||||||
Summit
Community Bank
|
1 | 9,117 | 0.91 | % | ||||||||
MVB
Bank Inc.
|
1 | 3,221 | 0.32 | % |
Hardy
County, West Virginia:
|
||||||||||||
Summit
Community Bank, Inc.
|
2 | 308,677 | 65.58 | % | ||||||||
Capon
Valley Bank
|
3 | 111,206 | 23.63 | % | ||||||||
Pendleton
Community Bank, Inc.
|
1 | 23,493 | 4.99 | % | ||||||||
First
United Bank & Trust
|
1 | 16,188 | 3.44 | % | ||||||||
Grant
County Bank
|
1 | 11,148 | 2.37 | % |
Mineral
County, West Virginia:
|
||||||||||||
First
United Bank & Trust
|
2 | 82,627 | 33.08 | % | ||||||||
Branch
Banking & Trust Co.
|
2 | 80,665 | 32.29 | % | ||||||||
Manufacturers
& Traders Trust Co.
|
2 | 49,596 | 19.85 | % | ||||||||
Grant
County Bank
|
1 | 36,905 | 14.77 | % |
Monongalia
County, West Virginia:
|
||||||||||||
Centra
Bank, Inc.
|
6 | 461,896 | 28.39 | % | ||||||||
Huntington
National Bank
|
5 | 389,495 | 23.94 | % | ||||||||
Branch
Banking & Trust Co.
|
5 | 342,964 | 21.08 | % | ||||||||
United
Bank
|
4 | 183,521 | 11.28 | % | ||||||||
Wesbanco
Bank, Inc.
|
5 | 85,731 | 5.27 | % | ||||||||
Clear
Mountain Bank
|
5 | 77,151 | 4.74 | % | ||||||||
First
United Bank & Trust
|
2 | 40,264 | 2.48 | % | ||||||||
First
Exchange Bank
|
2 | 23,804 | 1.46 | % | ||||||||
Citizens
Bank of Morgantown, Inc.
|
1 | 21,991 | 1.35 | % |
ITEM
1A.
|
RISK
FACTORS
|
ITEM
1B.
|
UNRESOLVED
STAFF COMMENTS
|
ITEM
2.
|
PROPERTIES
|
ITEM
3.
|
LEGAL
PROCEEDINGS
|
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
|
2008
|
High
|
Low
|
Dividends Declared
|
|||||||||
1st
Quarter
|
$ | 20.85 | $ | 17.01 | $ | .200 | ||||||
2nd
Quarter
|
19.98 | 18.04 | .200 | |||||||||
3rd
Quarter
|
20.73 | 16.01 | .200 | |||||||||
4th
Quarter
|
20.00 | 13.00 | .200 |
2007
|
High
|
Low
|
Dividends Declared
|
|||||||||
1st
Quarter
|
$ | 23.49 | $ | 21.72 | $ | .195 | ||||||
2nd
Quarter
|
24.00 | 19.26 | .195 | |||||||||
3rd
Quarter
|
21.50 | 17.95 | .195 | |||||||||
4th
Quarter
|
21.95 | 18.70 | .200 |
Period
Ending
|
||||||||||||||||||||||||
Index
|
12/31/03
|
12/31/04
|
12/31/05
|
12/31/06
|
12/31/07
|
12/31/08
|
||||||||||||||||||
First
United Corporation
|
100.00 | 87.28 | 93.37 | 99.75 | 94.56 | 66.46 | ||||||||||||||||||
NASDAQ
Composite
|
100.00 | 108.59 | 110.08 | 120.56 | 132.39 | 78.72 | ||||||||||||||||||
SNL
Bank $1B-$5B Index
|
100.00 | 123.42 | 121.31 | 140.38 | 102.26 | 84.81 |
Plan Category
|
Number of securities to
be issued upon exercise
of outstanding options,
warrants, and rights
(a)
|
Weighted-average
exercise price of
outstanding options,
warrants, and rights
(b)
|
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)(1)
|
|||||||||
Equity
compensation plans approved by security holders
|
22,257 | $ | 18.85 | 162,743 | ||||||||
Equity
compensation plans not approved by security holders
|
0 | N/A | N/A | |||||||||
Total
|
22,257 | $ | 18.85 | 162,743 |
(1)
|
In
addition to stock options and stock appreciation rights, the Omnibus Plan
permits the grant of stock awards, stock units, performance units,
dividend equivalents, and other stock-based awards. Subject to
the anti-dilution provisions of the Omnibus Plan, the maximum number of
shares for which awards may be granted to any one participant in any
calendar year is 20,000, without regard to whether an award is paid in
cash or shares.
|
Period
|
Total Number of
Shares (or Units)
Purchased (1)
|
Average Price Paid
per Share (or Unit)
|
Total Number of
Shares (or Units)
Purchased as Part
of Publicly
Announced Plans
or Programs
|
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs
|
||||||||||||
October
2008
|
4,416 | 18.78 | 4,416 | 209,672 | ||||||||||||
November
2008
|
1,471 | 17.12 | 1,471 | 208,201 | ||||||||||||
December
2008
|
- | - | - | 208,201 | ||||||||||||
Total
|
5,887 | $ | 18.50 | 5,887 | 208,201 |
|
(1)
|
All
shares were purchased under First United Corporation’s repurchase plan
that was adopted effective August 15, 2007. The adoption of
this plan was publicly announced on August 21, 2007. The plan
authorizes the repurchase of up to 307,500 shares of common stock in open
market and/or private transactions at such times and in such amounts per
transaction as the Chairman and Chief Executive Officer of First United
Corporation determines to be appropriate. The repurchase plan
was suspended during the fourth quarter 2008 for the period of time that
the Corporation is participating in the Capital Purchase
Program.
|
ITEM
6.
|
SELECTED
FINANCIAL DATA
|
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
Balance
Sheet Data
|
||||||||||||||||||||
Total
Assets
|
$ | 1,639,104 | $ | 1,478,909 | $ | 1,349,317 | $ | 1,310,991 | $ | 1,233,901 | ||||||||||
Net
Loans
|
1,120,199 | 1,035,962 | 957,126 | 954,545 | 904,635 | |||||||||||||||
Investment
Securities
|
354,595 | 304,908 | 263,272 | 230,095 | 210,661 | |||||||||||||||
Deposits
|
1,222,889 | 1,126,552 | 971,381 | 955,854 | 850,661 | |||||||||||||||
Long-term
Borrowings
|
277,403 | 178,451 | 166,330 | 128,373 | 175,415 | |||||||||||||||
Shareholders’
Equity
|
72,690 | 104,665 | 96,856 | 92,039 | 86,356 | |||||||||||||||
Operating
Data
|
||||||||||||||||||||
Interest
Income
|
$ | 95,216 | $ | 93,565 | $ | 80,269 | $ | 69,756 | $ | 60,682 | ||||||||||
Interest
Expense
|
43,043 | 49,331 | 39,335 | 29,413 | 24,016 | |||||||||||||||
Net
Interest Income
|
52,173 | 44,234 | 40,934 | 40,343 | 36,666 | |||||||||||||||
Provision
for Loan Losses
|
12,925 | 2,312 | 1,165 | 1,078 | 2,534 | |||||||||||||||
Other
Operating Income
|
13,769 | 15,092 | 14,041 | 14,088 | 12,971 | |||||||||||||||
Other
Operating Expense
|
40,573 | 38,475 | 35,490 | 34,654 | 35,969 | |||||||||||||||
Income
Before Taxes
|
12,444 | 18,539 | 18,320 | 18,699 | 11,134 | |||||||||||||||
Income
Taxes
|
3,573 | 5,746 | 5,743 | 6,548 | 3,507 | |||||||||||||||
Net
Income
|
$ | 8,871 | $ | 12,793 | $ | 12,577 | $ | 12,151 | $ | 7,627 | ||||||||||
Per
Share Data
|
||||||||||||||||||||
Net
Income
|
$ | 1.45 | $ | 2.08 | $ | 2.05 | $ | 1.99 | $ | 1.25 | ||||||||||
Dividends
Paid
|
.80 | .78 | .76 | .74 | .72 | |||||||||||||||
Book
Value
|
11.89 | 17.05 | 15.77 | 15.04 | 14.17 | |||||||||||||||
Significant
Ratios
|
||||||||||||||||||||
Return
on Average Assets
|
.55 | % | .90 | % | .96 | % | .95 | % | .65 | % | ||||||||||
Return
on Average Equity
|
9.31 | % | 12.70 | % | 13.07 | % | 13.61 | % | 8.91 | % | ||||||||||
Dividend
Payout Ratio
|
55.17 | % | 37.50 | % | 37.07 | % | 37.44 | % | 58.00 | % | ||||||||||
Average
Equity to Average Assets
|
5.95 | % | 7.10 | % | 7.35 | % | 7.00 | % | 7.28 | % | ||||||||||
Total
Risk-based Capital Ratio
|
12.18 | % | 12.51 | % | 12.95 | % | 12.66 | % | 12.24 | % | ||||||||||
Tier
I Capital to Risk Weighted Assets
|
10.59 | % | 11.40 | % | 11.81 | % | 11.45 | % | 10.81 | % | ||||||||||
Tier
I Capital to Average Assets
|
8.10 | % | 8.91 | % | 9.08 | % | 8.64 | % | 8.44 | % |
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
2008
|
2007
|
2006
|
||||||||||
Interest
income
|
$ | 97,062 | $ | 95,286 | $ | 81,838 | ||||||
Interest
expense
|
43,043 | 49,331 | 39,335 | |||||||||
Net
interest income
|
$ | 54,019 | $ | 45,955 | $ | 42,503 | ||||||
Net
interest margin %
|
3.68 | % | 3.51 | % | 3.52 | % |
%
of Total Interest Income
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Interest
and fees on loans
|
78 | % | 82 | % | 85 | % | ||||||
Interest
on investment securities
|
22 | % | 18 | % | 15 | % |
For
the Years Ended December 31
|
||||||||||||||||||||||||||||||||||||
2008
|
2007
|
2006
|
||||||||||||||||||||||||||||||||||
AVERAGE
BALANCE
|
INTEREST
|
AVERAGE
YIELD/RATE
|
AVERAGE
BALANCE
|
INTEREST
|
AVERAGE
YIELD/RATE
|
AVERAGE
BALANCE
|
INTEREST
|
AVERAGE
YIELD/RATE
|
||||||||||||||||||||||||||||
Assets
|
||||||||||||||||||||||||||||||||||||
Loans
|
$ | 1,081,191 | $ | 74,415 | 6.88 | % | $ | 1,003,854 | $ | 77,158 | 7.69 | % | $ | 957,709 | $ | 69,049 | 7.21 | % | ||||||||||||||||||
Investment
Securities:
|
||||||||||||||||||||||||||||||||||||
Taxable
|
285,382 | 16,848 | 5.90 | 215,756 | 12,474 | 5.78 | 171,720 | 7,699 | 4.48 | |||||||||||||||||||||||||||
Non
taxable
|
82,844 | 5,229 | 6.31 | 73,467 | 4,847 | 6.60 | 65,902 | 4,399 | 6.67 | |||||||||||||||||||||||||||
Total
|
368,226 | 22,077 | 6.00 | 289,223 | 17,321 | 5.99 | 237,622 | 12,098 | 5.09 | |||||||||||||||||||||||||||
Federal
funds sold
|
368 | 4 | 1.09 | 285 | 11 | 3.86 | 463 | 1 | .21 | |||||||||||||||||||||||||||
Interest-bearing
deposits with other banks
|
3,691 | 77 | 2.09 | 5,135 | 241 | 4.69 | 2,811 | 165 | 5.88 | |||||||||||||||||||||||||||
Other
interest earning assets
|
13,235 | 489 | 3.69 | 9,363 | 555 | 5.93 | 9,231 | 525 | 5.68 | |||||||||||||||||||||||||||
Total
earning assets
|
1,466,711 | 97,062 | 6.62 | % | 1,307,860 | 95,286 | 7.29 | % | 1,207,836 | 81,838 | 6.78 | % | ||||||||||||||||||||||||
Allowance
for loan losses
|
(9,002 | ) | (6,584 | ) | (6,245 | ) | ||||||||||||||||||||||||||||||
Non-earning
assets
|
142,076 | 118,780 | 110,098 | |||||||||||||||||||||||||||||||||
Total
Assets
|
$ | 1,599,785 | $ | 1,420,056 | $ | 1,311,689 | ||||||||||||||||||||||||||||||
Liabilities
and Shareholders’ Equity
|
||||||||||||||||||||||||||||||||||||
Interest-bearing
demand deposits
|
$ | 414,750 | $ | 6,906 | 1.67 | % | $ | 333,443 | $ | 9,752 | 2.92 | % | $ | 285,250 | $ | 6,405 | 2.25 | % | ||||||||||||||||||
Savings
deposits
|
80,812 | 1,035 | 1.28 | 42,123 | 1,445 | 3.43 | 47,779 | 462 | .97 | |||||||||||||||||||||||||||
Time
deposits:
|
||||||||||||||||||||||||||||||||||||
Less
than $100
|
239,211 | 10,220 | 4.27 | 234,439 | 10,429 | 4.45 | 229,829 | 8,439 | 3.67 | |||||||||||||||||||||||||||
$100
or more
|
339,110 | 12,621 | 3.72 | 317,219 | 16,132 | 5.09 | 273,305 | 12,043 | 4.41 | |||||||||||||||||||||||||||
Short-term
borrowings
|
55,243 | 1,022 | 1.85 | 70,474 | 2,903 | 4.12 | 107,430 | 4,429 | 4.12 | |||||||||||||||||||||||||||
Long-term
borrowings
|
254,680 | 11,239 | 4.41 | 173,208 | 8,670 | 5.01 | 153,089 | 7,557 | 4.94 | |||||||||||||||||||||||||||
Total
interest-bearing liabilities
|
1,383,806 | 43,043 | 3.11 | % | 1,170,906 | 49,331 | 4.21 | % | 1,096,682 | 39,335 | 3.59 | % | ||||||||||||||||||||||||
Non-interest-bearing
Deposits
|
106,124 | 133,509 | 107,595 | |||||||||||||||||||||||||||||||||
Other
liabilities
|
14,595 | 14,885 | 11,189 | |||||||||||||||||||||||||||||||||
Shareholders’
Equity
|
95,260 | 100,756 | 96,223 | |||||||||||||||||||||||||||||||||
Total
Liabilities and Shareholders’ Equity
|
$ | 1,599,785 | $ | 1,420,056 | $ | 1,311,689 | ||||||||||||||||||||||||||||||
Net
interest income and Spread
|
$ | 54,019 | 3.51 | % | $ | 45,955 | 3.08 | % | $ | 42,503 | 3.19 | % | ||||||||||||||||||||||||
Net
interest margin
|
3.68 | % | 3.51 | % | 3.52 | % |
2008
Compared to 2007
|
2007
Compared to 2006
|
|||||||||||||||||||||||
Volume
|
Rate
|
Net
|
Volume
|
Rate
|
Net
|
|||||||||||||||||||
INTEREST
INCOME:
|
||||||||||||||||||||||||
Loans
|
$ | 5,323 | $ | (8,066 | ) | $ | (2,743 | ) | $ | 3,547 | $ | 4,562 | $ | 8,109 | ||||||||||
Taxable
Investments
|
4,111 | 264 | 4,375 | 2,546 | 2,229 | 4,775 | ||||||||||||||||||
Non-taxable
Investments
|
592 | (210 | ) | 382 | 499 | (51 | ) | 448 | ||||||||||||||||
Federal
funds sold
|
1 | (8 | ) | (7 | ) | (7 | ) | 17 | 10 | |||||||||||||||
Other
interest earning assets
|
140 | (370 | ) | (230 | ) | 261 | (155 | ) | 106 | |||||||||||||||
Total
interest income
|
10,167 | (8,390 | ) | 1,777 | 6,846 | 6,602 | 13,448 | |||||||||||||||||
INTEREST
EXPENSE:
|
||||||||||||||||||||||||
Interest-bearing
demand deposits
|
1,354 | (4,200 | ) | (2,846 | ) | 1,058 | 1,873 | 2,931 | ||||||||||||||||
Savings
deposits
|
495 | (905 | ) | (410 | ) | (194 | ) | 1,177 | 983 | |||||||||||||||
Time
deposits less than $100
|
204 | (413 | ) | (209 | ) | 205 | 1,785 | 1,990 | ||||||||||||||||
Time
deposits $100 or more
|
815 | (4,326 | ) | (3,511 | ) | 2,233 | 1,856 | 4,089 | ||||||||||||||||
Short-term
borrowings
|
(282 | ) | (1,598 | ) | (1,880 | ) | (1,019 | ) | (91 | ) | (1,110 | ) | ||||||||||||
Long-term
borrowings
|
3,595 | (1,026 | ) | 2,569 | 1,007 | 106 | 1,113 | |||||||||||||||||
Total
interest expense
|
6,181 | (12,468 | ) | (6,287 | ) | 3,290 | 6,706 | 9,996 | ||||||||||||||||
Net
interest income
|
$ | 3,986 | $ | 4,078 | $ | 8,064 | $ | 3,556 | $ | (104 | ) | $ | 3,452 |
|
(1)
|
The
change in interest income/expense due to both volume and rate has been
allocated to volume and rate changes in proportion to the relationship of
the absolute dollar amounts of the change in
each.
|
2008 VS. 2007
|
2007 VS. 2006
|
|||||||||||||||||||
2008
|
2007
|
2006
|
% CHANGE
|
% CHANGE
|
||||||||||||||||
Service
charges on deposit accounts
|
$ | 5,835 | $ | 4,955 | $ | 4,630 | 17.8 | % | 7.0 | % | ||||||||||
Other
service charge income
|
1,639 | 1,994 | 1,637 | -17.8 | % | 21.8 | % | |||||||||||||
Trust
department income
|
3,912 | 4,076 | 3,671 | -4.0 | % | 11.0 | % | |||||||||||||
Insurance
commissions
|
2,143 | 2,529 | 1,573 | -15.3 | % | 60.8 | % | |||||||||||||
Securities
(losses)/gains
|
(1,997 | ) | (1,605 | ) | 4 | -24.4 | % | * | ||||||||||||
Bank
owned life insurance (BOLI)
|
704 | 1,114 | 848 | -36.8 | % | 31.4 | % | |||||||||||||
Brokerage
commissions
|
745 | 734 | 501 | 1.5 | % | 46.5 | % | |||||||||||||
Other
income
|
788 | 1,295 | 1,177 | -39.2 | % | 10.0 | % | |||||||||||||
Total
other operating income
|
$ | 13,769 | $ | 15,092 | $ | 14,041 | -8.8 | % | 7.5 | % |
2008 VS. 2007
|
2007 VS. 2006
|
|||||||||||||||||||
2008
|
2007
|
2006
|
% CHANGE
|
% CHANGE
|
||||||||||||||||
Salaries
and employee benefits
|
$ | 21,531 | $ | 20,628 | $ | 19,084 | 4.4 | % | 8.1 | % | ||||||||||
Other
expenses
|
11,264 | 10,563 | 9,900 | 6.6 | % | 6.7 | % | |||||||||||||
Equipment
|
3,364 | 3,224 | 3,011 | 4.3 | % | 7.1 | % | |||||||||||||
Occupancy
|
2,693 | 2,388 | 2,043 | 12.8 | % | 16.9 | % | |||||||||||||
Data
processing
|
1,721 | 1,672 | 1,452 | 2.9 | % | 15.2 | % | |||||||||||||
Total other operating
expense
|
$ | 40,573 | $ | 38,475 | $ | 35,490 | 5.5 | % | 8.4 | % |
Year End Percentage of Total Assets
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Net
loans
|
68 | % | 70 | % | 71 | % | ||||||
Investments
|
22 | % | 21 | % | 20 | % |
Year End Percentage of Total Liabilities
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Total
deposits
|
78 | % | 82 | % | 78 | % | ||||||
Total
borrowings
|
21 | % | 17 | % | 21 | % |
Loans Outstanding as of December 31
|
||||||||||||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
Commercial
|
$ | 575,962 | $ | 492,302 | $ | 408,361 | $ | 404,681 | $ | 373,893 | ||||||||||
Real
Estate – Mortgage
|
403,768 | 384,420 | 359,601 | 337,559 | 319,033 | |||||||||||||||
Consumer
Installment
|
140,234 | 153,593 | 181,574 | 193,275 | 199,862 | |||||||||||||||
Real
Estate – Construction
|
14,582 | 12,951 | 14,120 | 25,446 | 18,196 | |||||||||||||||
Lease
Financing
|
— | — | — | — | 466 | |||||||||||||||
Total Loans
|
$ | 1,134,546 | $ | 1,043,266 | $ | 963,656 | $ | 960,961 | $ | 911,450 |
Maturing
Within
One Year
|
After One
But Within
Five Years
|
Maturing
After Five
Years
|
Total
|
|||||||||||||
Commercial
|
$ | 299,951 | $ | 238,281 | $ | 37,730 | $ | 575,962 | ||||||||
Real
Estate – Mortgage
|
121,824 | 106,595 | 175,349 | 403,768 | ||||||||||||
Installment
|
6,511 | 101,428 | 32,295 | 140,234 | ||||||||||||
Real
Estate – Construction
|
— | 14,582 | — | 14,582 | ||||||||||||
Total
Loans
|
$ | 428,286 | $ | 460,886 | $ | 245,374 | $ | 1,134,546 | ||||||||
Classified
by Sensitivity to Change in Interest Rates
|
||||||||||||||||
Fixed-Interest
Rate Loans
|
$ | 39,868 | $ | 166,462 | $ | 229,440 | $ | 435,770 | ||||||||
Adjustable-Interest
Rate Loans
|
388,418 | 294,424 | 15,934 | 698,776 | ||||||||||||
Total Loans
|
$ | 428,286 | $ | 460,886 | $ | 245,374 | $ | 1,134,546 |
At December 31
|
||||||||||||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
Non-Accrual
Loans
|
$ | 24,553 | $ | 5,443 | $ | 3,190 | $ | 2,393 | $ | 3,439 | ||||||||||
Accruing
Loans Past Due 90 Days or More
|
3,476 | 3,260 | 619 | 989 | 1,105 | |||||||||||||||
Restructured
Loans
|
468 | 0 | 522 | 532 | 544 | |||||||||||||||
Other
Real Estate Owned
|
2,424 | 825 | 23 | 133 | 226 |
For the Years Ended December 31
|
||||||||||||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
Balance
at Beginning of Period
|
$ | 7,304 | $ | 6,530 | $ | 6,416 | $ | 6,814 | $ | 5,974 | ||||||||||
Loans
Charged Off:
|
||||||||||||||||||||
Commercial
|
3,936 | 540 | 359 | 557 | 808 | |||||||||||||||
Real
Estate – Mortgage
|
743 | 103 | 89 | 162 | 153 | |||||||||||||||
Installment
|
1,408 | 1,171 | 1,127 | 1,171 | 1,244 | |||||||||||||||
Deposit
Overdrafts
|
508
|
408
|
—
|
—
|
—
|
|||||||||||||||
Total
Charged Off
|
6,595 | 2,222 | 1,575 | 1,890 | 2,205 | |||||||||||||||
Recoveries
of Loans:
|
||||||||||||||||||||
Commercial
|
147 | 45 | 110 | 8 | 22 | |||||||||||||||
Real
Estate – Mortgage
|
39 | 17 | 11 | 59 | 67 | |||||||||||||||
Installment
|
375 | 380 | 403 | 347 | 422 | |||||||||||||||
Deposit
Overdrafts
|
152
|
242
|
—
|
—
|
—
|
|||||||||||||||
Total
Recoveries
|
713 | 684 | 524 | 414 | 511 | |||||||||||||||
|
|
|
|
|
||||||||||||||||
Net
Loans Charged Off
|
5,882 | 1,538 | 1,051 | 1,476 | 1,694 | |||||||||||||||
Provision
for Loan Losses
|
12,925 | 2,312 | 1,165 | 1,078 | 2,534 | |||||||||||||||
Balance
at the End of Period
|
$ | 14,347 | $ | 7,304 | $ | 6,530 | $ | 6,416 | $ | 6,814 | ||||||||||
Loans
at End of Period
|
$ | 1,134,546 | $ | 1,043,266 | $ | 963,656 | $ | 960,961 | $ | 911,450 | ||||||||||
Daily
Average Balance of Loans
|
$ | 1,081,191 | $ | 1,003,854 | $ | 957,709 | $ | 954,784 | $ | 861,255 | ||||||||||
Allowance
for Loan Losses to Loans Outstanding
|
1.26 | % | .70 | % | .68 | % | .67 | % | .75 | % | ||||||||||
Net
Charge Offs to Average Loans
Outstanding
|
.54 | % | .15 | % | .11 | % | .15 | % | .20 | % |
2008
|
% of
Total
Loans
|
2007
|
% of
Total
Loans
|
2006
|
% of
Total
Loans
|
2005
|
% of
Total
Loans
|
2004
|
% of
Total
Loans
|
|||||||||||||||||||||||||||||||
Commercial
|
$ | 9,002 | 51 | % | $ | 3,825 | 47 | % | $ | 2,983 | 42 | % | $ | 2,777 | 42 | % | $ | 3,050 | 41 | % | ||||||||||||||||||||
Real
Estate-Mortgage
|
3,326 | 37 | % | 1,716 | 38 | % | 1,512 | 39 | % | 1,504 | 38 | % | 1,454 | 37 | % | |||||||||||||||||||||||||
Consumer
Installment
|
2,015 | 12 | % | 1,763 | 15 | % | 1,934 | 19 | % | 2,060 | 20 | % | 2,246 | 22 | % | |||||||||||||||||||||||||
Lease
Financing
|
— | — | — | — | — | — | — | — | 15 | — | ||||||||||||||||||||||||||||||
Other
|
4 | — | 0 | — | 101 | — | 75 | — | 49 | — | ||||||||||||||||||||||||||||||
Total
|
$ | 14,347 | 100 | % | $ | 7,304 | 100 | % | $ | 6,530 | 100 | % | $ | 6,416 | 100 | % | $ | 6,814 | 100 | % |
December 31
|
||||||||||||||||||||||||
(fair
value)
|
||||||||||||||||||||||||
2008
|
As % of
Total
|
2007
|
As % of
Total
|
2006
|
As % of
Total
|
|||||||||||||||||||
Securities
Available-for-Sale:
|
||||||||||||||||||||||||
U.S.
government and agencies
|
$ | 113,645 | 32 | % | $ | 90,768 | 30 | % | $ | 97,490 | 37 | % | ||||||||||||
Mortgage-backed
securities
|
123,199 | 35 | % | 60,939 | 20 | % | 50,829 | 19 | % | |||||||||||||||
Obligation
of states and political subdivisions
|
93,485 | 26 | % | 85,893 | 28 | % | 68,432 | 26 | % | |||||||||||||||
Corporate
and other debt
|
24,266 | 7 | % | 67,308 | 22 | % | 46,521 | 18 | % | |||||||||||||||
Total
|
$ | 354,595 | 100 | % | $ | 304,908 | 100 | % | $ | 263,272 | 100 | % |
Within
1 Year
|
1 Year
to 5
Years
|
5 Years
to 10
Years
|
Over
10
Years
|
Total
Fair
Value
|
||||||||||||||||
Securities
Available-for-Sale:
|
||||||||||||||||||||
U.S.
government and agencies
|
$ | 1,731 | $ | 46,527 | $ | 18,633 | $ | 46,754 | $ | 113,645 | ||||||||||
Mortgage-backed
securities
|
806 | 122,393 | — | — | 123,199 | |||||||||||||||
Obligations
of states and political subdivisions
|
2,462 | 6,548 | 12,047 | 72,428 | 93,485 | |||||||||||||||
Corporate
and other debt
|
— | — | — | 24,266 | 24,266 | |||||||||||||||
Total
|
$ | 4,999 | $ | 175,468 | $ | 30,680 | $ | 143,448 | $ | 354,595 | ||||||||||
Percentage
of total
|
1.41 | % | 49.48 | % | 8.65 | % | 40.46 | % | 100.00 | % | ||||||||||
Weighted average yield
|
5.85 | % | 5.47 | % | 5.82 | % | 5.78 | % | 5.63 | % |
2008
|
2007
|
2006
|
||||||||||||||||||||||
Average
Balance
|
Average
Yield
|
Average
Balance
|
Average
Yield
|
Average
Balance
|
Average
Yield
|
|||||||||||||||||||
Non-interest-bearing
demand deposits
|
$ | 106,124 | — | $ | 133,509 | — | $ | 107,595 | — | |||||||||||||||
Interest-bearing
demand deposits
|
414,750 | 1.67 | % | 333,443 | 2.92 | % | 285,250 | 2.25 | % | |||||||||||||||
Savings
deposits
|
80,812 | 1.28 | % | 42,123 | 3.43 | % | 47,779 | .97 | % | |||||||||||||||
Time
deposits less than $100K
|
239,211 | 4.27 | % | 234,439 | 4.45 | % | 229,829 | 3.67 | % | |||||||||||||||
Time
deposits $100K or more
|
339,110 | 3.72 | % | 317,219 | 5.09 | % | 273,305 | 4.41 | % | |||||||||||||||
Total
|
$ | 1,180,007 | $ | 1,060,733 | $ | 943,758 |
December 31, 2008
|
||||
Maturities
|
||||
3
Months or Less
|
$ | 205,725 | ||
3-6
Months
|
39,970 | |||
6-12
Months
|
50,573 | |||
Over
1 Year
|
38,147 | |||
Total
|
$ | 334,415 |
2008
|
2007
|
2006
|
||||||||||
Securities
sold under agreements to repurchase
|
$ | 41,995 | $ | 34,112 | $ | 74,879 | ||||||
Short-term
FHLB advances
|
8,500 | 21,000 | 24,500 | |||||||||
Total
short-term borrowings
|
50,495 | 55,112 | 99,379 | |||||||||
Long-term
FHLB advances
|
241,474 | 142,522 | 130,401 | |||||||||
Junior
subordinated debentures
|
35,929 | 35,929 | 35,929 | |||||||||
Total
long-term borrowings
|
277,403 | 178,451 | 166,330 | |||||||||
Total
borrowings
|
$ | 327,898 | $ | 233,563 | $ | 265,709 | ||||||
Average
balance (from Table 1)
|
$ | 309,923 | $ | 243,682 | $ | 260,519 |
(Dollars in thousands)
|
||||||||
2008
|
2007
|
|||||||
+200
basis point increase
|
$ | (1,272 | ) | $ | (3,337 | ) | ||
+100
basis point increase
|
$ | (257 | ) | $ | (1,693 | ) | ||
-100
basis point decrease
|
$ | 551 | $ | 640 |
Payments Due by Period
|
||||||||||||||||||||||||
Contractual Obligations
(in millions)
|
Note
Reference
|
Total
|
Less than
1 Year
|
1-3
Years
|
3-5
Years
|
More
than
5 Years
|
||||||||||||||||||
Long
term debt
|
8 | |||||||||||||||||||||||
FHLB
Advances
|
$ | 241.5 | $ | 14.0 | $ | 82.0 | $ | 44.25 | $ | 101.25 | ||||||||||||||
Junior
subordinated debt
|
35.9 | — | — | — | 35.9 | |||||||||||||||||||
Operating
leases
|
5 | 2.8 | .7 | 1.1 | 1.0 | — | ||||||||||||||||||
Data
processing and telecommunications services
|
5 | 7.8 | 2.2 | 2.9 | 2.7 | — | ||||||||||||||||||
Time
Deposits
|
7 | 576.6 | 449.0 | 120.0 | 7.5 | .1 | ||||||||||||||||||
Pension/SERP
|
11 | 10.4 | .6 | 1.3 | 1.6 | 6.9 |
Commitment Expiration by Period
|
||||||||||||||||||||||||
Commitments
(in millions)
|
Note
Reference
|
Total
|
Less than
1 Year
|
1-3
Years
|
3-5
Years
|
More
than
5 Years
|
||||||||||||||||||
Loan
commitments
|
4 | $ | 142.3 | $ | 10.0 | $ | 16.7 | $ | 16.8 | $ | 98.8 | |||||||||||||
Letters
of credit
|
4 | 5.9 | 5.9 | — | — | — |
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Item
8.
|
Financial
Statements and Supplementary Data
|
December 31
|
||||||||
2008
|
2007
|
|||||||
Assets
|
||||||||
Cash
and due from banks
|
$ | 18,423 | $ | 24,316 | ||||
Interest
bearing deposits in banks
|
882 | 1,486 | ||||||
Investment
securities available-for-sale (at fair value)
|
354,595 | 304,908 | ||||||
Federal
Home Loan Bank stock, at cost
|
13,933 | 9,863 | ||||||
Loans
|
1,134,546 | 1,043,266 | ||||||
Allowance
for loan losses
|
(14,347 | ) | (7,304 | ) | ||||
Net
loans
|
1,120,199 | 1,035,962 | ||||||
Premises
and equipment, net
|
31,124 | 31,407 | ||||||
Goodwill
and other intangible assets, net
|
16,322 | 14,560 | ||||||
Bank
owned life insurance
|
29,743 | 29,039 | ||||||
Deferred
tax on investments
|
22,460 | 1,712 | ||||||
Accrued
interest receivable and other assets
|
31,423 | 25,656 | ||||||
Total
Assets
|
$ | 1,639,104 | $ | 1,478,909 | ||||
Liabilities
and Shareholders’ Equity
|
||||||||
Liabilities:
|
||||||||
Non-interest
bearing deposits
|
$ | 107,749 | $ | 97,976 | ||||
Interest
bearing deposits
|
1,115,140 | 1,028,576 | ||||||
Total
deposits
|
1,222,889 | 1,126,552 | ||||||
Short-term
borrowings
|
50,495 | 55,112 | ||||||
Long-term
borrowings
|
277,403 | 178,451 | ||||||
Accrued
interest payable and other liabilities
|
14,529 | 12,895 | ||||||
Dividends
payable
|
1,098 | 1,234 | ||||||
Total
Liabilities
|
1,566,414 | 1,374,244 | ||||||
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 6,113 in 2008 and 6,138 in 2007
|
61 | 61 | ||||||
Surplus
|
20,520 | 21,400 | ||||||
Retained
earnings
|
93,092 | 88,859 | ||||||
Accumulated
other comprehensive loss
|
(40,983 | ) | (5,655 | ) | ||||
Total
Shareholders’ Equity
|
72,690 | 104,665 | ||||||
Total
Liabilities and Shareholders’ Equity
|
$ | 1,639,104 | $ | 1,478,909 |
Year ended December 31
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Interest
income
|
||||||||||||
Interest
and fees on loans
|
$ | 74,398 | $ | 77,132 | $ | 69,019 | ||||||
Interest
on investment securities:
|
||||||||||||
Taxable
|
16,848 | 12,474 | 7,699 | |||||||||
Exempt
from federal income taxes
|
3,400 | 3,152 | 2,860 | |||||||||
20,248 | 15,626 | 10,559 | ||||||||||
Other
|
570 | 807 | 691 | |||||||||
Total
interest income
|
95,216 | 93,565 | 80,269 | |||||||||
Interest
expense
|
||||||||||||
Interest
on deposits
|
30,782 | 37,759 | 27,349 | |||||||||
Interest
on short-term borrowings
|
1,022 | 2,902 | 4,429 | |||||||||
Interest
on long-term borrowings
|
11,239 | 8,670 | 7,557 | |||||||||
Total
interest expense
|
43,043 | 49,331 | 39,335 | |||||||||
Net
interest income
|
52,173 | 44,234 | 40,934 | |||||||||
Provision
for loan losses
|
12,925 | 2,312 | 1,165 | |||||||||
Net
interest income after provision for loan losses
|
39,248 | 41,922 | 39,769 | |||||||||
Other
operating income
|
||||||||||||
Service
charges
|
7,474 | 6,949 | 6,267 | |||||||||
Trust
department
|
3,912 | 4,076 | 3,671 | |||||||||
Insurance
commissions
|
2,143 | 2,529 | 1,573 | |||||||||
Net
securities (losses)/gains
|
(1,997 | ) | (1,605 | ) | 4 | |||||||
Debit
card income
|
1,215 | 1,111 | 899 | |||||||||
Bank
owned life insurance
|
704 | 1,114 | 848 | |||||||||
Other
|
318 | 918 | 779 | |||||||||
Total
other operating income
|
13,769 | 15,092 | 14,041 | |||||||||
Other
operating expense
|
||||||||||||
Salaries
and employee benefits
|
21,531 | 20,628 | 19,084 | |||||||||
Equipment
|
3,364 | 3,224 | 3,011 | |||||||||
Occupancy
|
2,693 | 2,388 | 2,043 | |||||||||
Data
processing
|
1,721 | 1,672 | 1,452 | |||||||||
Other
|
11,264 | 10,563 | 9,900 | |||||||||
Total
other operating expenses
|
40,573 | 38,475 | 35,490 | |||||||||
Income
before income taxes
|
12,444 | 18,539 | 18,320 | |||||||||
Applicable
income taxes
|
3,573 | 5,746 | 5,743 | |||||||||
Net
Income
|
$ | 8,871 | $ | 12,793 | $ | 12,577 | ||||||
Earnings
per share
|
$ | 1.45 | $ | 2.08 | $ | 2.05 | ||||||
Weighted
average common shares outstanding
|
6,112,808 | 6,149,125 | 6,129,612 |
Capital
Stock
|
Surplus
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Loss
|
Total
Shareholders’
Equity
|
||||||||||||||||
Balance
at January 1, 2006
|
$ | 61 | $ | 20,946 | $ | 73,012 | $ | (1,980 | ) | $ | 92,039 | |||||||||
Comprehensive
income:
|
||||||||||||||||||||
Net
income for the year
|
12,577 | 12,577 | ||||||||||||||||||
Unrealized
gain on securities available-for sale, net of income taxes of
$682
|
1,265 | 1,265 | ||||||||||||||||||
Adjustment
to initially adopt SFAS No. 158 net of income taxes of
$2,619
|
(4,865 | ) | (4,865 | ) | ||||||||||||||||
Comprehensive
Income
|
8,977 | |||||||||||||||||||
Issuance
of 23,241 shares of common stock under dividend reinvestment
plan
|
502 | 502 | ||||||||||||||||||
Cash
dividends-$.76 per share
|
(4,662 | ) | (4,662 | ) | ||||||||||||||||
Balance
at December 31, 2006
|
61 | 21,448 | 80,927 | (5,580 | ) | 96,856 | ||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||
Net
income for the year
|
12,793 | 12,793 | ||||||||||||||||||
Unrealized
loss on securities available-for sale, net of income taxes of
$1,228
|
(1,815 | ) | (1,815 | ) | ||||||||||||||||
Change
in accumulated unrealized losses for pension and SERP obligations, net of
income taxes of $1,178
|
1,740 | 1,740 | ||||||||||||||||||
Comprehensive
income
|
12,718 | |||||||||||||||||||
Issuance
of 22,824 shares of common stock under dividend reinvestment
plan
|
476 | 476 | ||||||||||||||||||
Repurchase
of common stock
|
(524 | ) | (524 | ) | ||||||||||||||||
Cash
dividends-$.78 per share
|
(4,861 | ) | (4,861 | ) | ||||||||||||||||
Balance
at December 31, 2007
|
$ | 61 | $ | 21,400 | $ | 88,859 | $ | (5,655 | ) | $ | 104,665 | |||||||||
Comprehensive
loss:
|
||||||||||||||||||||
Net
income for the year
|
8,871 | 8,871 | ||||||||||||||||||
Unrealized
loss on securities available-for sale, net of income taxes of
$20,748
|
(30,660 | ) | (30,660 | ) | ||||||||||||||||
Change
in accumulated unrealized losses for pension and SERP obligations, net of
income taxes of $2,784
|
(4,668 | ) | (4,668 | ) | ||||||||||||||||
Comprehensive
loss
|
(26,457 | ) | ||||||||||||||||||
Issuance
of 25,814 shares of common stock under dividend reinvestment
plan
|
362 | 362 | ||||||||||||||||||
Repurchase
of common stock
|
(1,391 | ) | (1,391 | ) | ||||||||||||||||
Stock
based compensation
|
149 | 149 | ||||||||||||||||||
Cash
dividends-$.80 per share
|
(4,638 | ) | (4,638 | ) | ||||||||||||||||
Balance
at December 31, 2008
|
$ | 61 | $ | 20,520 | $ | 93,092 | $ | (40,983 | ) | $ | 72,690 |
Year ended December 31
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Operating
activities
|
||||||||||||
Net
Income
|
$ | 8,871 | $ | 12,793 | $ | 12,577 | ||||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||
Provision
for loan losses
|
12,925 | 2,312 | 1,165 | |||||||||
Depreciation
|
2,834 | 2,581 | 2,486 | |||||||||
Stock
Compensation
|
149 | — | — | |||||||||
Amortization
of intangible assets
|
684 | 656 | 504 | |||||||||
Net
accretion and amortization of investment security discounts and
premiums
|
(514 | ) | 145 | 175 | ||||||||
Loss
(gain) on sale of investment securities
|
1,997 | 1,605 | (4 | ) | ||||||||
Deferred
Income Taxes
|
(3,147 | ) | 557 | (530 | ) | |||||||
(Increase)
decrease in accrued interest receivable and other assets
|
(7,287 | ) | (3,744 | ) | (1,987 | ) | ||||||
Increase
(decrease) in accrued interest payable and other
liabilities
|
1,634 | (1,307 | ) | (443 | ) | |||||||
Earnings
on bank owned life insurance
|
(704 | ) | (1,114 | ) | (848 | ) | ||||||
Net
cash provided by operating activities
|
17,442 | 14,484 | 13,095 | |||||||||
Investing
activities
|
||||||||||||
Net
decrease in interest bearing deposits in banks
|
604 | 977 | 2,538 | |||||||||
Proceeds
from maturities of investment securities
available-for-sale
|
78,223 | 45,190 | 56,196 | |||||||||
Proceeds
from maturities of investment securities held-to-maturity
|
9,000 | — | — | |||||||||
Proceeds
from sales of investment securities available-for-sale
|
43,008 | — | 548 | |||||||||
Purchases
of investment securities available-for-sale
|
(224,110 | ) | (163,246 | ) | (88,004 | ) | ||||||
Purchases
of investment securities held-to-maturity
|
(8,700 | ) | — | — | ||||||||
Proceeds
from sales of investment securities held for trading
|
— | 71,611 | — | |||||||||
Net
increase in loans
|
(97,162 | ) | (56,193 | ) | (2,726 | ) | ||||||
Purchase
of mortgage loans
|
— | (24,955 | ) | — | ||||||||
Net
increase in FHLB stock
|
(4,070 | ) | (243 | ) | (1,570 | ) | ||||||
Acquisition
of insurance business
|
(2,446 | ) | (680 | ) | — | |||||||
Purchase
of premises and equipment
|
(2,551 | ) | (4,135 | ) | (5,287 | ) | ||||||
Purchase
of bank owned life insurance
|
— | — | (2,839 | ) | ||||||||
Net
cash used in investing activities
|
(208,204 | ) | (131,674 | ) | (41,144 | ) | ||||||
Financing
activities
|
||||||||||||
Net
increase in deposits
|
96,337 | 155,171 | 15,527 | |||||||||
Net
decrease in short-term borrowings
|
(4,617 | ) | (44,267 | ) | (22,560 | ) | ||||||
Proceeds
from long-term borrowings
|
115,000 | 73,500 | 55,000 | |||||||||
Payments
on long-term borrowings
|
(16,048 | ) | (61,379 | ) | (17,043 | ) | ||||||
Cash
dividends paid
|
(4,774 | ) | (4,796 | ) | (4,662 | ) | ||||||
Proceeds
from issuance of common stock
|
362 | 476 | 502 | |||||||||
Stock
repurchase
|
(1,391 | ) | (524 | ) | — | |||||||
Net
cash provided by financing activities
|
184,869 | 118,181 | 26,764 | |||||||||
(Decrease)
increase in cash and cash equivalents
|
(5,893 | ) | 991 | (1,285 | ) | |||||||
|
||||||||||||
Cash
and cash equivalents at beginning of year
|
24,316 | 23,325 | 24,610 | |||||||||
|
||||||||||||
Cash
and cash equivalents at end of year
|
$ | 18,423 | $ | 24,316 | $ | 23,325 | ||||||
Supplemental
information
|
||||||||||||
Interest
paid
|
$ | 44,399 | $ | 48,790 | $ | 38,363 | ||||||
Income
taxes paid
|
7,280 | 5,620 | 7,860 |
1.
|
Summary
of Significant Accounting Policies
|
2.
|
Regulatory
Capital Requirements
|
Actual
|
For Capital
Adequacy Purposes
|
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
|
||||||||||||||||||||||
(Dollars in thousands)
|
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
||||||||||||||||||
December
31, 2008
|
||||||||||||||||||||||||
Total
Capital (to Risk Weighted Assets)
|
||||||||||||||||||||||||
Consolidated
|
$ | 148,464 | 12.18 | % | $ | 97,541 | 8.00 | % | N/A | N/A | ||||||||||||||
First
United Bank
|
131,572 | 10.91 | % | 96,521 | 8.00 | % | 120,652 | 10.00 | % | |||||||||||||||
Tier
1 Capital (to Risk Weighted Assets)
|
||||||||||||||||||||||||
Consolidated
|
129,117 | 10.59 | % | 48,771 | 4.00 | % | N/A | N/A | ||||||||||||||||
First
United Bank
|
117,398 | 9.73 | % | 48,260 | 4.00 | % | 72,391 | 6.00 | % | |||||||||||||||
Tier
1 Capital (to Average Assets)
|
||||||||||||||||||||||||
Consolidated
|
129,117 | 8.10 | % | 63,751 | 4.00 | % | N/A | N/A | ||||||||||||||||
First
United Bank
|
117,398 | 7.43 | % | 63,205 | 4.00 | % | 79,007 | 5.00 | % |
Actual
|
For Capital
Adequacy Purposes
|
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
|
||||||||||||||||||||||
(Dollars in thousands)
|
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
||||||||||||||||||
December
31, 2007
|
||||||||||||||||||||||||
Total
Capital (to Risk Weighted Assets)
|
||||||||||||||||||||||||
Consolidated
|
$ | 138,993 | 12.51 | % | $ | 88,900 | 8.00 | % | N/A | N/A | ||||||||||||||
First
United Bank
|
120,974 | 11.01 | % | 87,877 | 8.00 | % | 109,900 | 10.00 | % | |||||||||||||||
Tier
1 Capital (to Risk Weighted Assets)
|
||||||||||||||||||||||||
Consolidated
|
126,689 | 11.40 | % | 44,450 | 4.00 | % | N/A | N/A | ||||||||||||||||
First
United Bank
|
113,851 | 10.36 | % | 43,938 | 4.00 | % | 65,940 | 6.00 | % | |||||||||||||||
Tier
1 Capital (to Average Assets)
|
||||||||||||||||||||||||
Consolidated
|
126,689 | 8.91 | % | 56,846 | 4.00 | % | N/A | N/A | ||||||||||||||||
First
United Bank
|
113,851 | 8.08 | % | 56,341 | 4.00 | % | 70,427 | 5.00 | % |
3.
|
Investment
Securities
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
|||||||||||||
December
31, 2008
|
||||||||||||||||
U.S.
government and agencies
|
$ | 111,938 | $ | 1,885 | $ | 178 | $ | 113,645 | ||||||||
Mortgage-backed
securities
|
132,107 | 2,222 | 11,130 | 123,199 | ||||||||||||
Obligations
of states and political subdivisions
|
95,876 | 705 | 3,096 | 93,485 | ||||||||||||
Corporate
and other debt securities
|
70,324 | — | 46,058 | 24,266 | ||||||||||||
Totals
|
$ | 410,245 | $ | 4,812 | $ | 60,462 | $ | 354,595 | ||||||||
December
31, 2007
|
||||||||||||||||
U.S.
government and agencies
|
$ | 89,211 | $ | 1,557 | $ | — | $ | 90,768 | ||||||||
Mortgage-backed
securities
|
60,505 | 450 | 16 | 60,939 | ||||||||||||
Obligations
of states and political subdivisions
|
85,896 | 691 | 694 | 85,893 | ||||||||||||
Corporate
and other debt securities
|
73,537 | 48 | 6,277 | 67,308 | ||||||||||||
Totals
|
$ | 309,149 | $ | 2,746 | $ | 6,987 | $ | 304,908 |
2008
|
2007
|
2006
|
||||||||||
Proceeds
|
$ | 43,008 | $ | 71,611 | $ | 548 | ||||||
Realized
gains
|
727 | 10 | 4 | |||||||||
Realized
losses1
|
(2,724 | ) | (1,615 | ) | — |
December 31, 2008
|
||||||||||||||||
Less than 12 months
|
12 months or more
|
|||||||||||||||
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
|||||||||||||
U.S.
government and agencies
|
$ | 19,822 | $ | (178 | ) | $ | — | $ | — | |||||||
Mortgage-backed
securities
|
38,229 | (9,942 | ) | 3,216 | (1,188 | ) | ||||||||||
Obligations
of states and political subdivisions
|
66,735 | (2,781 | ) | 3,632 | (315 | ) | ||||||||||
Corporate
securities
|
2,159 | (5,393 | ) | 21,724 | (40,665 | ) | ||||||||||
$ | 126,945 | $ | (18,294 | ) | $ | 28,572 | $ | (42,168 | ) |
December 31, 2007
|
||||||||||||||||
Less than 12 months
|
12 months or more
|
|||||||||||||||
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
|||||||||||||
Mortgage-backed
securities
|
$ | 1,251 | $ | (2 | ) | $ | 889 | $ | (14 | ) | ||||||
Obligations
of states and political subdivisions
|
24,103 | (337 | ) | 22,681 | (357 | ) | ||||||||||
Corporate
securities
|
36,679 | (4,192 | ) | 23,035 | (2,085 | ) | ||||||||||
$ | 62,033 | $ | (4,531 | ) | $ | 46,605 | $ | (2,456 | ) |
(in thousands)
|
||||||||
Contractual Maturity
|
Amortized
Cost
|
Fair
Value
|
||||||
Due
in one year or less
|
$ | 4,087 | $ | 4,193 | ||||
Due
after one year through five years
|
51,888 | 53,075 | ||||||
Due
after five years through ten years
|
30,193 | 30,680 | ||||||
Due
after ten years
|
191,969 | 143,448 | ||||||
278,137 | 231,396 | |||||||
Mortgage-backed
securities
|
132,107 | 123,199 | ||||||
$ | 410,244 | $ | 354,595 |
4.
|
Loans
|
December 31, 2008
|
December 31, 2007
|
|||||||||||||||
Loans
|
Loan
Commitments
|
Loans
|
Loan
Commitments
|
|||||||||||||
Commercial
|
$ | 575,962 | $ | 88,640 | $ | 492,302 | $ | 92,301 | ||||||||
Real
Estate – Mortgage
|
403,768 | 44,304 | 384,420 | 42,819 | ||||||||||||
Consumer
Installment
|
140,234 | 3,897 | 153,593 | 66 | ||||||||||||
Real
Estate – Construction
|
14,582 | 5,441 | 12,951 | 8,645 | ||||||||||||
Commercial
letters of credit
|
— | 5,943 | — | 7,488 | ||||||||||||
Total
|
$ | 1,134,546 | $ | 148,225 | $ | 1,043,266 | $ | 151,319 |
2008
|
||||
Balance
at January 1
|
$ | 28,417 | ||
Loans
or advances
|
3,655 | |||
Repayments¹
|
(17,846 | ) | ||
Balance
at December 31
|
$ | 14,226 |
2008
|
2007
|
2006
|
||||||||||
Balance
at January 1
|
$ | 7,304 | $ | 6,530 | $ | 6,416 | ||||||
Gross
credit losses
|
(6,595 | ) | (2,222 | ) | (1,575 | ) | ||||||
Recoveries
|
713 | 684 | 524 | |||||||||
Net
credit losses
|
(5,882 | ) | (1,538 | ) | (1,051 | ) | ||||||
Provision
for loan losses
|
12,925 | 2,312 | 1,165 | |||||||||
Balance
at December 31
|
$ | 14,347 | $ | 7,304 | $ | 6,530 |
Years Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Impaired
loans without a valuation allowance
|
$ | 66,816 | $ | 6,814 | $ | - | ||||||
Impaired
loans with a valuation allowance
|
16,519 | 176 | 127 | |||||||||
Total
impaired loans
|
$ | 83,335 | $ | 6,990 | $ | 127 | ||||||
Valuation
allowance related to impaired loans
|
$ | 4,759 | $ | 176 | $ | 127 | ||||||
Average
investment in impaired loans
|
$ | 28,180 | $ | 1,472 | $ | 166 | ||||||
Interest
income recognized on an accrual basis on impaired loans
|
$ | 4,658 | $ | 225 | $ | - | ||||||
Interest
income recognized on a cash basis on impaired loans
|
$ | 410 | $ | 162 | $ | 178 |
2008
|
2007
|
|||||||
Land
|
$ | 8,910 | $ | 8,910 | ||||
Land
Improvements
|
322 | 316 | ||||||
Premises
|
23,058 | 22,340 | ||||||
Furniture
and Equipment
|
21,071 | 29,475 | ||||||
53,361 | 61,041 | |||||||
Less
accumulated depreciation
|
(22,237 | ) | (29,634 | ) | ||||
Total
|
$ | 31,124 | $ | 31,407 |
2008
|
2007
|
|||||||||||||||||||||||||||||||
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Carrying
Amount
|
Weighted
Average
Remaining
Life
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Carrying
Amount
|
Weighted
Average
Remaining
Life
|
|||||||||||||||||||||||||
Goodwill
|
$ | 11,900 | $ | — | $ | 11,900 | $ | 11,900 | $ | — | $ | 11,900 | ||||||||||||||||||||
Core
deposit intangible
assets
|
4,040 | (3,023 | ) | 1,017 | 1.8 | 4,040 | (2,465 | ) | 1,575 | 2.8 | ||||||||||||||||||||||
Insurance
agency book of businesses
|
3,651 | (246 | ) | 3,405 | 9.1 | 1,205 | (120 | ) | 1,085 | 7.8 | ||||||||||||||||||||||
Total
|
$ | 19,591 | $ | (3,269 | ) | $ | 16,322 | $ | 17,145 | $ | (2,585 | ) | $ | 14,560 |
Year
|
Annual
Amortization
|
|||
2009
|
$ | 835 | ||
2010
|
737 | |||
2011
|
277 | |||
2012
|
277 | |||
2013
|
272 |
2009
|
$ | 449,026 | ||
2010
|
44,713 | |||
2011
|
75,300 | |||
2012
|
3,251 | |||
2013
|
4,235 | |||
Thereafter
|
49 |
2008
|
2007
|
2006
|
||||||||||
Short-term
FHLB advance,
Daily
borrowings, interest rate of .46% (at December 31, 2008)
|
$ | 8,500 | $ | 21,000 | $ | 4,500 | ||||||
Short-term
FHLB advance,
Interest
rate of 5.44% (at December 31, 2006) matured in May 2007
|
— | — | 20,000 | |||||||||
Securities
sold under agreements to repurchase:
|
||||||||||||
Outstanding
at end of year
|
$ | 41,995 | $ | 34,112 | $ | 74,879 | ||||||
Weighted
average interest rate at year end
|
1.33 | % | 5.99 | % | 3.96 | % | ||||||
Maximum
amount outstanding as of any
month end
|
$ | 47,811 | $ | 70,746 | $ | 84,380 | ||||||
Average
amount outstanding
|
38,128 | 55,140 | 78,032 | |||||||||
Approximate
weighted average rate during
the year
|
1.46 | % | 3.71 | % | 3.80 | % |
2008
|
2007
|
|||||||
FHLB
advances, bearing interest at rates ranging from
2.46% to 4.98% at December 31, 2008
|
$ | 241,474 | $ | 142,522 | ||||
Junior
subordinated debt, bearing interest at rates ranging
from 4.62% to 6.02% at December 31, 2008
|
35,929 | 35,929 | ||||||
$ | 277,403 | $ | 178,451 |
December 31
|
||||||||||||||||
2008
|
2007
|
|||||||||||||||
Fixed
Rate
|
Floating
Rate
|
Total
|
Total
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Due
in 2008
|
— | — | — | 1,000 | ||||||||||||
Due
in 2009
|
14,000 | — | 14,000 | 14,000 | ||||||||||||
Due
in 2010
|
31,000 | — | 31,000 | 31,000 | ||||||||||||
Due
in 2011
|
51,000 | — | 51,000 | 51,000 | ||||||||||||
Due
in 2012
|
44,250 | — | 44,250 | 44,250 | ||||||||||||
Due
in 2013
|
— | — | — | — | ||||||||||||
Thereafter
|
126,843 | 10,310 | 137,153 | 37,201 | ||||||||||||
Total
long-term debt
|
$ | 267,093 | $ | 10,310 | $ | 277,403 | $ | 178,451 |
1-4
family mortgage loans
|
$ | 134,451 | ||
Commercial
loans
|
14,441 | |||
Multi-family
loans
|
2,541 | |||
Home
equity loans
|
11,746 | |||
Investment
securities
|
95,624 | |||
$ | 258,803 |
For the Year Ended December 31
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Accumulated
unrealized losses on securities available for sale at January 1, net of
tax
|
$ | (2,530 | ) | $ | (715 | ) | $ | (1,980 | ) | |||
Net
unrealized (losses)/gains for the period, net of tax
|
(31,851 | ) | (2,771 | ) | 1,268 | |||||||
Reclassification
of losses/(gains) occurring during the period, net of tax
|
1,191 | 956 | (3 | ) | ||||||||
Effect
on other comprehensive (loss) income for the period
|
(30,660 | ) | (1,815 | ) | 1,265 | |||||||
Accumulated
unrealized losses on securities available for sale at December 31, net of
tax ($22,460) in 2008, ($1,712) in 2007 and ($468) in 2006
|
$ | (33,190 | ) | $ | (2,530 | ) | $ | (715 | ) | |||
Accumulated
unrealized losses for pension obligation at January 1, net of
tax
|
$ | (2,750 | ) | $ | (2,901 | ) | $ | - | ||||
Cumulative
effect of change in accounting for pension obligation – adoption of SFAS
No. 158, net of tax
|
- | - | (2,901 | ) | ||||||||
Change
in accumulated unrealized losses for pension obligation, net of
tax
|
(4,636 | ) | 151 | - | ||||||||
Accumulated
unrealized losses for Pension obligation at December 31, net of tax of
($3,137) in 2008, ($1,859) in 2007 and ($1,562) in 2006
|
$ | (7,386 | ) | $ | (2,750 | ) | $ | (2,901 | ) | |||
Accumulated
unrealized losses for SERP obligation at January 1, net of
tax
|
$ | (375 | ) | (1,964 | ) | - | ||||||
Cumulative
effect of change in accounting for SERP obligation – adoption of SFAS No.
158, net of tax
|
- | - | (1,964 | ) | ||||||||
Change
in accumulated unrealized losses for SERP obligation, net of
tax
|
(32 | ) | 1,589 | - | ||||||||
Accumulated
unrealized losses for SERP obligation at December 31, net of tax of ($22)
in 2008, ($255) in 2007 and ($1,052) in 2006
|
$ | (407 | ) | $ | (375 | ) | $ | (1,964 | ) | |||
Total
accumulated other comprehensive loss at December 31, net of tax of
($25,619) at 2008, ($3,826) at 2007 and ($3,082) at 2006
|
$ | (40,983 | ) | $ | (5,655 | ) | $ | (5,580 | ) |
2008
|
2007
|
2006
|
||||||||||
Current
Tax Provision:
|
||||||||||||
Federal
|
$ | 5,337 | $ | 4,275 | $ | 5,179 | ||||||
State
|
1,383 | 914 | 1,094 | |||||||||
$ | 6,720 | $ | 5,189 | $ | 6,273 | |||||||
Deferred
taxes (benefit) :
|
||||||||||||
Federal
|
$ | (2,699 | ) | $ | 455 | $ | (469 | ) | ||||
State
|
(448 | ) | 102 | (61 | ) | |||||||
$ | (3,147 | ) | $ | 557 | $ | (530 | ) | |||||
Income
tax expense for the year
|
$ | 3,573 | $ | 5,746 | $ | 5,743 |
2008
|
2007
|
2006
|
||||||||||
Federal
statutory rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||
Tax-exempt
income on securities and loans
|
(9.0 | ) | (5.9 | ) | (5.6 | ) | ||||||
Tax-exempt
BOLI income
|
(2.0 | ) | (2.1 | ) | (1.6 | ) | ||||||
State
income tax, net of federal tax benefit
|
4.7 | 4.0 | 3.5 | |||||||||
28.7 | % | 31.0 | % | 31.3 | % |
2008
|
2007
|
|||||||
Deferred
tax assets:
|
||||||||
Allowance
for loan losses
|
$ | 5,790 | $ | 2,948 | ||||
Deferred
loan fees
|
271 | 198 | ||||||
Deferred
compensation
|
613 | 491 | ||||||
State
tax loss carry forwards
|
1,001 | 916 | ||||||
Unrealized
loss on investment securities available-for-sale
|
22,460 | 1,712 | ||||||
Pension/SERP
|
428 | — | ||||||
Other
than temporary impairment on investment securities
|
1,100 | — | ||||||
Other
real estate owned
|
518 | — | ||||||
Other
|
113 | 685 | ||||||
Total
deferred tax assets
|
32,294 | 6,950 | ||||||
Valuation
allowance
|
(1,001 | ) | (916 | ) | ||||
Total
deferred tax assets less valuation allowance
|
31,293 | 6,034 | ||||||
Deferred
tax liabilities:
|
||||||||
Amortization
of goodwill and core deposit intangible
|
(837 | ) | (688 | ) | ||||
Pension/SERP
|
— | (1,833 | ) | |||||
Depreciation
|
(820 | ) | (741 | ) | ||||
Other
|
(70 | ) | (239 | ) | ||||
Total
deferred tax liabilities
|
(1,727 | ) | (3,501 | ) | ||||
Net
deferred tax assets
|
$ | 29,566 | $ | 2,533 |
Pension
|
SERP
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Change
in Benefit Obligation
|
||||||||||||||||
Obligation
at the beginning of the year
|
$ | 20,922 | $ | 19,181 | $ | 3,036 | $ | 4,696 | ||||||||
Service
cost
|
923 | 809 | 106 | 179 | ||||||||||||
Interest
cost
|
1,263 | 1,155 | 181 | 256 | ||||||||||||
Change
in assumptions
|
(2,336 | ) | — | — | — | |||||||||||
Actuarial
losses/(gains)
|
400 | 331 | 149 | (2,069 | ) | |||||||||||
Benefits
paid
|
(629 | ) | (554 | ) | (26 | ) | (26 | ) | ||||||||
Obligation
at the end of the year
|
20,543 | 20,922 | 3,446 | 3,036 | ||||||||||||
Change
in Plan Assets
|
||||||||||||||||
Fair
value at the beginning of the year
|
27,856 | 21,474 | — | — | ||||||||||||
Actual
return on plan assets
|
(7,482 | ) | 1,936 | — | — | |||||||||||
Employer
contribution
|
2,500 | 5,000 | 26 | 26 | ||||||||||||
Benefits
paid
|
(629 | ) | (554 | ) | (26 | ) | (26 | ) | ||||||||
Fair
value at the end of the year
|
22,245 | 27,856 | — | — | ||||||||||||
Funded
Status
|
$ | 1,702 | $ | 6,934 | $ | (3,446 | ) | $ | (3,036 | ) |
Pension
|
SERP
|
|||||||||||||||||||||||
2008
|
2007
|
2006
|
2008
|
2007
|
2006
|
|||||||||||||||||||
Components
of Net Pension Cost
|
||||||||||||||||||||||||
Service
cost
|
$ | 923 | $ | 809 | $ | 809 | $ | 106 | $ | 179 | $ | 138 | ||||||||||||
Interest
cost
|
1,263 | 1,155 | 1,048 | 181 | 256 | 200 | ||||||||||||||||||
Expected
return on assets
|
(2,340 | ) | (1,891 | ) | (1,586 | ) | — | — | — | |||||||||||||||
Amortization
of transition asset
|
(39 | ) | (39 | ) | (39 | ) | — | — | — | |||||||||||||||
Amortization
of recognized loss
|
142 | 169 | 220 | 0 | 203 | 121 | ||||||||||||||||||
Amortization
of prior service cost
|
10 | 10 | 10 | 113 | 113 | 113 | ||||||||||||||||||
Net
pension (income)/expense in employee benefits
|
$ | (41 | ) | $ | 213 | $ | 462 | $ | 400 | $ | 751 | $ | 572 | |||||||||||
Weighted
Average Assumptions used to determine
benefit obligations:
|
||||||||||||||||||||||||
Discount
rate for benefit obligations
|
6.00 | % | 6.00 | % | 6.00 | % | 6.00 | % | 6.00 | % | 5.50 | % | ||||||||||||
Discount
rate for net pension cost
|
6.00 | % | 6.00 | % | 6.15 | % | — | — | — | |||||||||||||||
Expected
long-term return on assets
|
7.75 | % | 8.00 | % | 8.00 | % | — | — | — | |||||||||||||||
Rate
of compensation increase
|
4.00 | % | 3.00 | % | 3.00 | % | 4.00 | % | 4.00 | % | 4.00 | % |
Percentage
of
Plan
Assets
|
||||||||
2008
|
2007
|
|||||||
ASSET
CATEGORY
|
||||||||
Equity
securities
|
50 | % | 62 | % | ||||
Debt
securities
|
45 | 32 | ||||||
Cash
and cash equivalents
|
5 | 6 | ||||||
Total
|
100 | % | 100 | % |
2008
|
2007
|
|||||||
Number
of shares held
|
3,000 | 3,000 | ||||||
Number
of shares purchased
|
0 | 0 | ||||||
Number
of shares sold
|
0 | 0 | ||||||
Fair
value
|
$ | 40 | $ | 60 | ||||
Dividends
paid
|
$ | 2 | $ | 2 | ||||
Percentage
of total plan assets
|
.18 | % | .21 | % |
Pension
Plan
|
SERP
|
|||||||
2009
|
$ | 583 | $ | 48 | ||||
2010
|
593 | 48 | ||||||
2011
|
623 | 48 | ||||||
2012
|
640 | 86 | ||||||
2013
|
710 | 133 | ||||||
2014-2018
|
5,810 | 1,136 | ||||||
$ | 8,959 | $ | 1,499 |
2008
|
2007
|
|||||||||||||||
Pension
|
SERP
|
Pension
|
SERP
|
|||||||||||||
Unrecognized
net actuarial loss
|
$ | 7,470 | $ | 104 | $ | 2,851 | $ | 14 | ||||||||
Unrecognized
prior service costs
|
67 | 303 | 73 | 361 | ||||||||||||
Net
transition asset
|
(151 | ) | — | (174 | ) | — | ||||||||||
$ | 7,386 | $ | 407 | $ | 2,750 | $ | 375 |
Defined
Benefit Pension Plan
|
||||
Amortization
of prior service costs
|
$ | (10 | ) | |
Amortization
of transition asset
|
39 | |||
Amortization
of unrecognized loss
|
(142 | ) | ||
$ | (113 | ) | ||
Supplemental
Executive Retirement Plan
|
||||
Net
actuarial loss during the period
|
$ | 149 | ||
Amortization
of prior service costs
|
(113 | ) | ||
$ | 36 | |||
$ | (77 | ) | ||
Tax
effect
|
31 | |||
Amount
included in other comprehensive income, net of tax
|
$ | (46 | ) |
Pension
|
SERP
|
|||||||
Prior
service costs
|
$ | 10 | $ | 113 | ||||
Net
transition asset
|
(39 | ) | — | |||||
Net
actuarial loss
|
142 | — | ||||||
$ | 113 | $ | 113 |
2008
|
2007
|
|||||||||||||||
Carrying
Amount
|
Fair
Value
|
Carrying
Amount
|
Fair
Value
|
|||||||||||||
Financial
Assets:
|
||||||||||||||||
Cash
and cash equivalents
|
$ | 18,423 | $ | 18,423 | $ | 24,316 | $ | 24,316 | ||||||||
Interest
bearing deposits in banks
|
882 | 882 | 1,486 | 1,486 | ||||||||||||
Investment
securities
|
354,595 | 354,595 | 304,908 | 304,908 | ||||||||||||
Federal
Home Loan Bank stock
|
13,933 | 13,933 | 9,863 | 9,863 | ||||||||||||
Loans,
net
|
1,120,199 | 1,125,029 | 1,035,962 | 1,037,567 | ||||||||||||
Accrued
interest receivable
|
7,713 | 7,713 | 7,478 | 7,478 | ||||||||||||
Financial
Liabilities:
|
||||||||||||||||
Deposits
|
1,222,889 | 1,229,834 | 1,126,552 | 1,127,172 | ||||||||||||
Borrowed
funds
|
327,898 | 346,110 | 233,563 | 237,428 | ||||||||||||
Accrued
interest payable
|
4,295 | 4,295 | 5,651 | 5,651 | ||||||||||||
Off
Balance Sheet Financial Instruments
|
— | — | — | — |
Fair
Value Measurements at
December
31, 2008 Using
(Dollars
in Thousands)
|
||||||||||||||||
Description
|
Assets
Measured
at
Fair
Value
12/31/08
|
Quoted
Prices
in
Active
Markets
for
Identical
Assets
(Level
1)
|
Significant
Other
Observable
Inputs
(Level
2)
|
Significant
Unobservable
Inputs
(Level
3)
|
||||||||||||
Investment
securities available-for-sale
|
$ | 354,595 | $ | — | $ | 330,329 | $ | 24,266 | ||||||||
Impaired
loans¹
|
$ | 11,760 | $ | 11,760 | ||||||||||||
Foreclosed
Real Estate
|
$ | 2,424 | $ | 2,424 |
Fair Value Measurements Using Significant
Unobservable Inputs
(Dollars
in Thousands)
|
||||||||||||
Investments
Securities
Available for Sale
|
Impaired
Loans
|
Foreclosed Real
Estate
|
||||||||||
Beginning
balance January 1, 2008
|
$ | 67,308 | $ | 6,814 | $ | 825 | ||||||
Total
gains/(losses) realized/unrealized:
|
||||||||||||
Included
in other comprehensive loss
|
(43,042 | ) | — | — | ||||||||
Sales
|
— | — | (425 | ) | ||||||||
Payments/maturities/credits
|
— | (6,321 | ) | — | ||||||||
Properties/loans
added
|
— | 11,267 | 2,024 | |||||||||
Ending
balance December 31, 2008
|
$ | 24,266 | $ | 11,760 | $ | 2,424 |
December
31
|
||||||||
2008
|
2007
|
|||||||
Assets
|
||||||||
Cash
|
$ | 482 | $ | 1,486 | ||||
Investment
securities
|
1,236 | 1,216 | ||||||
Investment
in bank subsidiary
|
88,346 | 121,632 | ||||||
Investment
in non-bank subsidiaries
|
13,247 | 11,923 | ||||||
Other
assets
|
7,586 | 6,919 | ||||||
Total
Assets
|
$ | 110,897 | $ | 143,176 | ||||
Liabilities
and Shareholder’s Equity
|
||||||||
Accrued
interest and other liabilities
|
$ | 1,180 | $ | 1,348 | ||||
Dividends
payable
|
1,098 | 1,234 | ||||||
Junior
subordinated debt
|
35,929 | 35,929 | ||||||
Shareholders’
equity
|
72,690 | 104,665 | ||||||
Total
Liabilities and Shareholder’s Equity
|
$ | 110,897 | $ | 143,176 |
Year
Ended December 31
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Income:
|
||||||||||||
Dividend
income from bank subsidiary
|
$ | 8,192 | $ | 7,912 | $ | 5,819 | ||||||
Other
income
|
(34 | ) | 299 | 284 | ||||||||
Total
Income
|
8,158 | 8,211 | 6,103 | |||||||||
Expenses:
|
||||||||||||
Interest
expense
|
2,175 | 2,384 | 2,355 | |||||||||
Other
expenses
|
(10 | ) | 169 | 142 | ||||||||
Total
Expenses
|
2,165 | 2,553 | 2,497 | |||||||||
Income
before income taxes and equity in undistributed net income of
subsidiaries
|
5,993 | 5,658 | 3,606 | |||||||||
Equity
in undistributed net income of subsidiaries:
|
||||||||||||
Bank
|
2,054 | 5,790 | 8,124 | |||||||||
Non-bank
|
824 | 1,345 | 847 | |||||||||
Net
Income
|
$ | 8,871 | $ | 12,793 | $ | 12,577 |
Year
Ended December 31
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Operating
Activities
|
||||||||||||
Net
Income
|
$ | 8,871 | $ | 12,793 | $ | 12,577 | ||||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||
Equity
in undistributed net income of subsidiaries
|
(2,878 | ) | (7,135 | ) | (8,971 | ) | ||||||
Decrease
(increase) in other assets
|
(667 | ) | 124 | 1,208 | ||||||||
Increase
(decrease) in accrued interest payable and other
liabilities
|
(168 | ) | (122 | ) | 138 | |||||||
Stock
Compensation
|
149 | - | - | |||||||||
Increase
(decrease) in dividends payable
|
(136 | ) | 65 | 6 | ||||||||
|
||||||||||||
Net
cash provided by operating activities
|
5,171 | 5,725 | 4,958 | |||||||||
Investing
Activities
|
||||||||||||
Proceeds
from investment maturities
|
(20 | ) | — | 9 | ||||||||
Net
investment in subsidiaries
|
(352 | ) | (988 | ) | (1,281 | ) | ||||||
|
||||||||||||
Net
cash used in investing activities
|
(372 | ) | (988 | ) | (1,272 | ) | ||||||
Financing
Activities
|
||||||||||||
Cash
dividends
|
(4,774 | ) | (4,796 | ) | (4,662 | ) | ||||||
Proceeds
from issuance of common stock
|
362 | 476 | 502 | |||||||||
Repurchase
of Common Stock
|
(1,391 | ) | (524 | ) | — | |||||||
Net
cash provided by (used in) financing activities
|
(5,803 | ) | (4,844 | ) | (4,160 | ) | ||||||
Decrease
in cash and cash equivalents
|
(1,004 | ) | (107 | ) | (474 | ) | ||||||
Cash
and cash equivalents at beginning of year
|
1,486 | 1,593 | 2,067 | |||||||||
Cash
and cash equivalents at end of year
|
$ | 482 | $ | 1,486 | $ | 1,593 |
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
|||||||||||||
2008
|
||||||||||||||||
Interest
income
|
$ | 23,858 | $ | 23,851 | $ | 23,777 | $ | 23,730 | ||||||||
Interest
expense
|
11,829 | 10,627 | 10,576 | 10,011 | ||||||||||||
Net
interest income
|
12,029 | 13,224 | 13,201 | 13,719 | ||||||||||||
Provision
for loan losses
|
1,387 | 966 | 4,217 | 6,355 | ||||||||||||
Other
income
|
3,941 | 4,493 | 3,778 | 3,554 | ||||||||||||
Gains
(losses) on securities
|
399 | 77 | - | (2,473 | ) | |||||||||||
Other
expenses
|
10,354 | 10,651 | 9,976 | 9,592 | ||||||||||||
Income
(loss) before income taxes
|
4,628 | 6,177 | 2,786 | (1,147 | ) | |||||||||||
Applicable
income taxes
|
1,493 | 2,063 | 921 | (904 | ) | |||||||||||
Net
income (loss)
|
$ | 3,135 | $ | 4,114 | $ | 1,865 | $ | (243 | ) | |||||||
Earnings
(loss) per share
|
$ | .51 | $ | .68 | $ | .30 | $ | (.04 | ) |
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
|||||||||||||
2007
|
||||||||||||||||
Interest
income
|
$ | 21,418 | $ | 22,841 | $ | 24,262 | $ | 25,044 | ||||||||
Interest
expense
|
11,353 | 11,947 | 13,021 | 13,010 | ||||||||||||
Net
interest income
|
10,065 | 10,894 | 11,241 | 12,034 | ||||||||||||
Provision
for loan losses
|
163 | 367 | 790 | 992 | ||||||||||||
Other
income
|
3,872 | 4,117 | 4,063 | 4,645 | ||||||||||||
Gains
(losses) on securities
|
(1,511 | ) | (99 | ) | 0 | 5 | ||||||||||
Other
expenses
|
9,243 | 9,836 | 9,626 | 9,770 | ||||||||||||
Income
before income taxes
|
3,020 | 4,709 | 4,888 | 5,922 | ||||||||||||
Applicable
income taxes
|
959 | 1,504 | 1,333 | 1,950 | ||||||||||||
Net
income
|
$ | 2,061 | $ | 3,205 | $ | 3,555 | $ | 3,972 | ||||||||
Earnings
per share
|
$ | .34 | $ | .52 | $ | .58 | $ | .64 |
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
ITEM
9A.
|
CONTROLS
AND PROCEDURES
|
/s/ William B. Grant
|
/s/ Carissa L.
Rodeheaver
|
|
William
B. Grant, Esq., CFP
|
Carissa
L. Rodeheaver, CPA, CFP
|
|
Chairman
of the Board and
|
Executive
Vice President and
|
|
Chief
Executive Officer
|
Chief
Financial Officer
|
/s/
Beard Miller Company LLP
|
ITEM
9B.
|
OTHER
INFORMATION
|
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
|
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
ITEM
14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
ITEM
15.
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
|
FIRST
UNITED CORPORATION
|
||
Dated: March
2, 2009
|
By:
|
/s/ William B. Grant
|
William
B. Grant, Esq., CFP
|
||
Chairman
of the Board and Chief Executive
Officer
|
/s/ William B. Grant
|
/s/ David J. Beachy
|
|
(William
B. Grant) Director, Chief Executive Officer
|
(David
J. Beachy) Director—March 2, 2009
|
|
March
2, 2009
|
||
/s/ M. Kathryn Burkey
|
/s/ Faye E. Cannon
|
|
(M.
Kathryn Burkey) Director—March 2, 2009
|
(Faye
E. Cannon) Director—March 2, 2009
|
|
/s/ Paul Cox, Jr.
|
/s/ Raymond F. Hinkle
|
|
(Paul
Cox, Jr.) Director—March 2, 2009
|
(Raymond
F. Hinkle) Director—March 2, 2009
|
|
/s/ Robert W. Kurtz
|
/s/ John W. McCullough
|
|
(Robert
W. Kurtz) Director, President and Chief
|
(John
W. McCullough) Director—March 2, 2009
|
|
Risk
Officer—March 2, 2009
|
||
/s/ Elaine L. McDonald
|
/s/ Donald E. Moran
|
|
(Elaine
L. McDonald) Director—March 2, 2009
|
(Donald
E. Moran) Director—March 2, 2009
|
|
/s/ Carissa L. Rodeheaver
|
/s/ Gary R. Ruddell
|
|
(Carissa
L. Rodeheaver) EVP & Chief Financial Officer-
|
(Gary
R. Ruddell) Director—March 2, 2009
|
|
March
2, 2009
|
||
/s/ I. Robert Rudy
|
/s/
Richard G. Stanton
|
|
(I.
Robert Rudy) Director—March 2, 2009
|
(Richard
G. Stanton) Director – March 2, 2009
|
|
/s/ Robert G. Stuck
|
/s/ H. Andrew Walls, III
|
|
(Robert
G. Stuck) Director—March 2, 2009
|
(H.
Andrew Walls, III) Director—March 2,
2009
|
Exhibit
|
Description
|
3.1
|
Amended
and Restated Articles of Incorporation (incorporated by reference to
Exhibit 3.1 of the Corporation's Quarterly Report on Form 10-Q for the
period ended June 30, 1998)
|
3.2(i)
|
Amended
and Restated By-Laws (filed herewith)
|
3.2(ii)
|
First
Amendment to Amended and Restated Bylaws (filed
herewith)
|
3.2(iii)
|
Second
Amendment to Amended and Restated Bylaws (filed
herewith)
|
4.1
|
Letter
Agreement, including the related Securities Purchase Agreement – Standard
Terms, dated January 30, 2009 by and between the Corporation and the U.S.
Department of Treasury (incorporated by reference to Exhibit 10.1 of the
Corporation’s Form 8-K filed on February 2, 2009)
|
4.2
|
Certificate
of Notice, including the Certificate of Designations incorporated therein,
relating to the Fixed Rate Cumulative Perpetual Preferred Stock, Series A
(incorporated by reference Exhibit 4.1 of the Corporation’s Form 8-K filed
on February 2, 2009)
|
4.3
|
Sample
Stock Certificate for Series A Preferred Stock for the Series A Preferred
Stock (incorporated by reference Exhibit 4.3 of the Corporation’s Form 8-K
filed on February 2, 2009)
|
4.4
|
Common
Stock Purchase Warrant dated January 30, 2009 issued to the U.S.
Department of Treasury (incorporated by reference to Exhibit 4.2 of the
Corporation’s Form 8-K filed on February 2, 2009)
|
10.1
|
First
United Bank & Trust Amended and Restated Supplemental Executive
Retirement Plan (“SERP”) (incorporated by reference to Exhibit 10.4 of the
Corporation’s Current Report on Form 8-K filed on February 21,
2007)
|
10.2
|
Amended
and Restated SERP Agreement with William B. Grant (incorporated by
reference to Exhibit 10.5 of the Corporation’s Current Report on Form 8-K
filed on February 21, 2007)
|
10.3
|
Form
of Amended and Restated SERP Agreement with executive officers other than
William B. Grant (incorporated by reference to Exhibit 10.6 of the
Corporation’s Current Report on Form 8-K filed on February 21,
2007)
|
10.4
|
Form
of Endorsement Split Dollar Agreement between the Bank and each of William
B. Grant, Robert W. Kurtz, Jeannette R. Fitzwater, Phillip D. Frantz,
Eugene D. Helbig, Jr., Steven M. Lantz, Robin M. Murray, Carissa L.
Rodeheaver, and Frederick A. Thayer, IV (incorporated by reference to
Exhibit 10.3 of the Corporation’s Quarterly Report on Form 10-Q for the
period ended September 30, 2003)
|
10.5
|
Amended
and Restated First United Corporation Executive and Director Deferred
Compensation Plan (incorporated by reference to Exhibit 10.1 of the
Corporation’s Current Report on Form 8-K filed on November 24,
2008)
|
10.6
|
Amended
and Restated First United Corporation Change in Control Severance Plan
(incorporated by reference to Exhibit 10.5 of the Corporation’s Current
Report on Form 8-K filed on June 23, 2008)
|
10.7
|
Form
of Change in Control Severance Plan Agreement with executive officers
other than William B. Grant (incorporated by reference to Exhibit 10.3 of
the Corporation’s Current Report on Form 8-K filed on February 21,
2007)
|
10.8
|
First
United Corporation Omnibus Equity Compensation Plan (incorporated by
reference to Appendix B to the Corporation’s 2007 definitive proxy
statement filed on March 23, 2007)
|
10.9
|
First
United Corporation Long-Term Incentive Plan (incorporated by reference to
Exhibit 10.1 of the Corporation’s Current Report on Form 8-K filed on June
23, 2008)
|
10.10
|
Restricted
Stock Agreement for William B. Grant (incorporated by reference to Exhibit
10.2 of the Corporation’s Current Report on Form 8-K filed on June 23,
2008)
|
10.11
|
Form
of Restricted Stock Agreement for Executive Officers other than the Chief
Executive Officer (incorporated by reference to Exhibit 10.3 of the
Corporation’s Current Report on Form 8-K filed on June 23,
2008)
|
10.12
|
First
United Corporation Executive Pay for Performance Plan (incorporated by
reference to Exhibit 10.4 of the Corporation’s Current Report on Form 8-K
filed on June 23, 2008)
|
21
|
Subsidiaries
of the Corporation, incorporated by reference to the list of subsidiaries
in the discussion entitled “General” in Item 1 of Part I of this Annual
Report on Form 10-K.
|
23.1
|
Consent
of Beard Miller Company LLP (filed herewith)
|
31.1
|
Certifications
of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act (filed
herewith)
|
31.2
|
Certifications
of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act (filed
herewith)
|
32.1
|
Certifications
pursuant to Section 906 of the Sarbanes-Oxley Act (furnished
herewith)
|