FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                   Quarterly Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                      For Quarter Ended September 30, 1996

                         Commission File Number 0-17565


                           FIRST UNITED BANCORPORATION
             (Exact name of registrant as specified in its charter)


         South Carolina                                       57-0850174
  (State or other jurisdiction                            (I. R. S. Employer
        of incorporation                                 Identification No.)



                              304 North Main Street
                         Anderson, South Carolina 29621
                         (Address of principal executive
                          offices, including zip code)

                                 (864) 224-1112
              (Registrant's telephone number, including area code)


               --------------------------------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past ninety (90) days.

                                    YES [X] NO [ ]

The number of shares outstanding of each of registrant's classes of common stock
as of October 31, 1996:

                2,464,936 shares of common stock, $1.67 Par Value









<PAGE>





                                TABLE OF CONTENTS


                                                                        PAGE

PART I ITEM 1  FINANCIAL INFORMATION

    Consolidated Balance Sheets
         September 30, 1996 (unaudited) and
         December 31, 1995...............................................1

    Consolidated Statements of Income
         Three months ended September 30, 1996
         and 1995 (unaudited)............................................2

    Consolidated Statements of Income
         Nine Months ended September 30, 1996
         and 1995 (unaudited)............................................3

    Consolidated Statement of Changes in
    Shareholders' Equity
         Nine months ended September 30, 1996
         (unaudited) and year ended December 31, 1995....................4

    Consolidated Statement of Cash Flows
         Nine months ended September 30, 1996
         and 1995 (unaudited)............................................5

    Notes to Consolidated Financial Statements
         (unaudited).....................................................6


PART I ITEM 2  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................7


PART II  OTHER INFORMATION..............................................18


SIGNATURES..............................................................19


                                        i

<PAGE>



                           FIRST UNITED BANCORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                  September 30,           December 31,
                                                                                      1996                     1995
                                                                                      ----                     ----
                                                                                             (In thousands)
ASSETS:
<S>                                                                                 <C>                     <C>
   Cash and due from banks                                                          $  7,354                $  6,353
   Federal funds sold                                                                  8,070                   5,100
   Investment securities:
     Held to maturity (Market value of $8,224 and $9,668)                              8,093                   9,481
     Available for sale (Cost of $24,666 and $19,134)                                 24,495                  19,032
   Total loans                                                                       186,120                 147,994
   Less: Allowance for loan losses                                                    (2,829)                 (2,320)
                                                                                    --------                --------
         Net loans                                                                   183,291                 145,674
                                                                                    --------                --------
   Premises, furniture and equipment (net)                                             7,031                   5,588
   Other real estate owned                                                                85                      74
   Other assets                                                                        3,834                   3,112
                                                                                    --------                --------
     TOTAL ASSETS                                                                   $242,253                $194,414
                                                                                    ========                ========
LIABILITIES:
   Demand deposits                                                                  $ 21,726                $ 20,949
   NOW accounts                                                                       24,703                  24,710
   Savings and money market deposits                                                  30,856                  25,420
   Time deposits, $100,000 and over                                                   33,735                  23,855
   Other time deposits                                                                83,537                  65,447
                                                                                    --------                --------
     TOTAL DEPOSITS                                                                  194,557                 160,381
                                                                                    --------                --------
   Securities sold under repurchase agreements                                         2,983                   3,096
   Federal Home Loan Bank Advances                                                    10,830                   2,910
   Other borrowed funds                                                               13,600                   9,470
   Obligation under capital lease                                                          -                      21
   Other liabilities                                                                   2,431                   2,129
                                                                                    --------                --------
     TOTAL LIABILITIES                                                               224,401                 178,007
                                                                                    --------                --------
SHAREHOLDERS' EQUITY:
   Common stock ($1.67 par value, 15,000,000 shares authorized;                        4,110                   3,859
     2,464,936 and 2,431,300 shares issued and outstanding,
     respectively)
   Paid-in capital                                                                    12,648                  11,269
   Retained earnings                                                                   1,202                   1,343
   Unrealized gain (loss) on securities available for sale, net of                      (108)                    (64)
                                                                                    --------                --------
     income taxes
TOTAL SHAREHOLDERS' EQUITY                                                            17,852                  16,407
                                                                                    --------                --------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY                                          $242,253                $194,414
                                                                                    ========                ========


</TABLE>


                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


<PAGE>



                           FIRST UNITED BANCORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                               THREE MONTHS ENDED
                                                                     September 30,              September 30,
                                                                           1996                       1995
                                                                           ----                       ----
                                                                        (In thousands except per share data)
INTEREST INCOME:
<S>                                                                         <C>                        <C>
   Loans                                                                    $5,649                     $4,534
   Federal funds sold                                                          151                         36
   Taxable investment securities                                               420                        375
   Non-taxable investment securities                                            65                         65
   Interest bearing accounts                                                     1                         -
                                                                            ------                     ------
   Total interest income                                                     6,286                      5,010
                                                                            ------                     ------

INTEREST EXPENSE:
   Interest on deposits                                                      2,049                      1,578
   Interest on securities sold under repurchase                                 36                         40
     agreements
   Interest on other borrowed funds                                            379                        254
                                                                            ------                     ------
   Total interest expense                                                    2,464                      1,872
                                                                            ------                     ------

   Net interest income                                                       3,822                      3,138
   Provision for loan losses                                                   468                        209
                                                                            ------                     ------
   Net interest income after provision for loan                              3,354                      2,929
                                                                            ------                     ------
     losses

OTHER INCOME:
   Service fees                                                                222                        195
   Other income                                                                270                        325
                                                                            ------                     ------
   Total other income                                                          492                        520
                                                                            ------                     ------

OTHER EXPENSES:
   Salaries, wages and benefits                                              1,646                      1,490
   Occupancy expenses                                                          204                        159
   Furniture and equipment expenses                                            149                        138
   Other operating expenses                                                    977                        728
                                                                            ------                     ------
   Total other expenses                                                      2,976                      2,515
                                                                            ------                     ------
Income before income taxes                                                     870                        934
Provision for income taxes                                                     317                        317
                                                                            ------                     ------

NET INCOME                                                                  $  553                     $  617
                                                                            ======                     ======

PER SHARE DATA:
   Primary                                                                   $0.22                      $0.24
   Fully diluted                                                             $0.22                      $0.24

AVERAGE COMMON SHARES OUTSTANDING:
   Primary                                                                   2,567                      2,573
   Fully diluted                                                             2,567                      2,581
   Cash dividends                                                           $ 0.03                     $ 0.03


</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                        2

<PAGE>



                           FIRST UNITED BANCORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                          NINE MONTHS ENDED
                                                                            September 30,              September 30,
                                                                                  1996                       1995
                                                                                  ----                       ----
                                                                                (In thousands except per share data)
INTEREST INCOME:
<S>                                                                               <C>                        <C>
   Loans                                                                          $15,809                    $12,734
   Federal funds sold                                                                 401                        144
   Taxable investment securities                                                    1,155                      1,169
   Non-taxable investment securities                                                  191                        194
   Interest bearing accounts                                                            4                          -
                                                                                  -------                    -------
   Total interest income                                                           17,560                     14,241
                                                                                  -------                    -------

INTEREST EXPENSE:
   Interest on deposits                                                             5,663                      4,194
   Interest on securities sold under repurchase                                       117                        128
     agreements
   Interest on other borrowed funds                                                   925                        724
                                                                                  -------                    -------
   Total interest expense                                                           6,705                      5,046
                                                                                  -------                    -------
   Net interest income                                                             10,855                      9,195
   Provision for loan losses                                                        1,253                        420
                                                                                  -------                    -------
   Net interest income after provision for loan losses                              9,602                      8,775
                                                                                  -------                    -------

OTHER INCOME:
   Service fees                                                                       647                        580
   Other income                                                                       845                        747
                                                                                  -------                    -------
   Total other income                                                               1,492                      1,327
                                                                                  -------                    -------

OTHER EXPENSES:
   Salaries, wages and benefits                                                     5,017                      4,253
   Occupancy expenses                                                                 559                        475
   Furniture and equipment expenses                                                   408                        459
   Other operating expenses                                                         2,755                      2,157
                                                                                  -------                    -------
   Total other expenses                                                             8,739                      7,344
                                                                                  -------                    -------
Income before income taxes                                                          2,355                      2,758
Provision for income taxes                                                            824                        961
                                                                                  -------                    -------

NET INCOME                                                                        $ 1,531                    $ 1,797
                                                                                  =======                    =======

PER SHARE DATA:
   Primary                                                                          $0.59                      $0.71
   Fully diluted                                                                    $0.59                      $0.70

AVERAGE COMMON SHARES OUTSTANDING:
   Primary                                                                          2,583                      2,545
   Fully diluted                                                                    2,583                      2,557
   Cash dividends                                                                   $0.09                      $0.09

</TABLE>


                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                        3

<PAGE>



                           FIRST UNITED BANCORPORATION
                  STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
              FOR YEAR ENDED DECEMBER 31, 1995 AND THE NINE MONTHS
                             ENDED SEPTEMBER 30,1996

                                   (Unaudited)

                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                                Unrealized Net
                                              Number of                                         Gain (Loss) on      Share-
                                               Shares       Common     Paid-In    Retained        Securities        Holders'
                                             Outstanding     Stock     Capital    Earnings    Available For Sale    Equity

<S>                                               <C>       <C>       <C>         <C>                <C>            <C>
Balance at December 31, 1994                      2,083     $3,471    $ 8,309     $2,452             $(641)         $13,591
                                                                                                                
Issuance of 104,155 shares of common                104        174      1,194     (1,371)                -               (3)
stock relating to 5% stock dividend                                                                             
                                                                                                                
Issuance of 110,201 shares of common                110        184       1698     (1,887)                -               (5)
stock relating to 5% stock dividend                                                                             
                                                                                                                
Cash dividends declared                               -          -          -       (264)                -             (264)
                                                                                                                
Employee stock options exercised                     18         30         68          -                 -               98
                                                                                                                
Net income                                            -          -          -      2,413                 -            2,413
                                                                                                                
Change in unrealized net gain/loss on                 -          -          -          -               577              577
                                                  -----     ------    -------     ------             -----          -------
securities available for sale                                                                                   
                                                                                                                
Balance at December 31, 1995                      2,315      3,859     11,269      1,343               (64)          16,407
                                                                                                                
Issuance of 116,418 shares of common                116        195      1,260     (1,458)                                (3)
stock relating to 5% stock dividend                                                                             
                                                                                                                
Cash dividends declared                               -          -          -       (214)                -             (214)
                                                                                                                
Employee stock options exercised                     34         56        119          -                 -              175
                                                                                                                
Net income                                            -          -          -      1,531                 -            1,531
                                                                                                                
Changed in unrealized net gain/loss on                -          -          -          -               (44)             (44)
                                                  -----     ------    -------     ------             -----          -------
securities available for sale                                                                                   
Balance at September 30, 1996                     2,465     $4,110    $12,648     $1,202             $(108)         $17,852
                                                  =====     ======    =======     ======             =====          =======
                                                                                                              
</TABLE>













                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       4

<PAGE>




                           FIRST UNITED BANCORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                          NINE MONTHS ENDED
                                                                                September 30,             September  30,
                                                                                     1996                       1995
                                                                                 ------------               --------
                                                                                             (In thousands)
Cash flows from operating activities :
<S>                                                                                    <C>                      <C>
   Net income                                                                         $ 1,531                  $ 1,797
   Adjustments  needed to  reconcile  net  income to net cash used by  operating
     activities :
     Provision for loan losses                                                          1,253                      420
     Depreciation and amortization                                                        528                      475
     Increase in other assets                                                            (796)                    (413)
     Increase in other liabilities                                                        302                      280
                                                                                      -------                  -------
         Net cash provided by operating activities                                      2,818                    2,559
                                                                                      -------                  -------

Cash flows from investing activities :
   Purchases of investment securities held to maturity                                   (459)                    (680)
   Proceeds from maturities of investment securities held to                            1,412                      752
     maturity
   Purchase of investment securities available for sale                                (9,580)                  (1,952)
   Proceeds from sale of investment securities available for sale                           -                      896
   Proceeds from maturities of investment securities available for                      4,483                    4,226
     sale
   Net increase in loans                                                              (38,870)                 (21,724)
   Net additions to premises and equipment                                             (1,883)                  (1,767)
                                                                                      -------                  -------
         Net cash used by investing activities                                        (44,897)                 (20,249)
                                                                                      -------                  -------

Cash flows from financing activities :
   Net increase in deposits                                                            34,176                   14,243
   Proceeds from other borrowed funds                                                  44,735                   28,905
   Principal repayment of other borrowed funds                                        (32,706)                 (26,993)
   Net increase (decrease) in securities sold under repurchase                           (113)                     421
     agreements
   Proceeds from issuance of common stock                                                 175                       93
   Cash dividends                                                                        (217)                    (198)
                                                                                      -------                  -------
      Net cash provided by financing activities                                        46,050                   16,471
                                                                                      -------                  -------
Net increase in cash and cash equivalents                                               3,971                   (1,219)

Cash and cash equivalents, beginning of period                                         11,453                    9,166
                                                                                      -------                  -------
Cash and cash equivalents, end of period                                              $15,424                  $ 7,947
                                                                                      =======                  =======

</TABLE>


                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                        5

<PAGE>



                  FIRST UNITED BANCORPORATION AND SUBSIDIARIES

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(1)  BASIS OF PRESENTATION

     The interim consolidated financial statements include the accounts of First
United  Bancorporation  (the "Company") and its four wholly owned  subsidiaries;
Anderson  National  Bank,  Spartanburg  National  Bank,  The  Community  Bank of
Greenville, National Association and Quick Credit Corporation.

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     A summary of the Company's  significant  accounting policies is included in
the 1995 Annual Report to Shareholders.

(3)      COMMON STOCK, EARNINGS PER SHARE, AND STOCK DIVIDENDS

     On October  22,  1995 and June 17, 1996 the  Company's  Board of  Directors
declared five percent stock dividends. Accordingly, outstanding shares of common
stock  were  increased  and a transfer  representing  the fair  market  value of
additional  shares issued was made from retained earnings to common stock at par
value,  cash for  payment of  fractional  shares and the  balance to  additional
paid-in-capital.  Per share  data for the 1995  periods  have been  restated  to
reflect  these  dividends  as if they had  occurred  prior  to the 1995  periods
presented.

     During the nine month period ended  September 30, 1996,  the Company issued
33,636  shares of its common  stock at an  average  price of $ 5.19 per share in
connection  with the exercise of stock options  under its employee  stock option
plans.

     The Company  calculates its earnings per share by dividing net earnings for
the periods  presented by the weighted  average  equivalent  shares  outstanding
using the treasury stock method. Common stock equivalents include options issued
under the Company's Employee Stock Option Plans. These options were dilutive for
the periods presented.

(4)      MANAGEMENT'S OPINION

     In  the  opinion  of  management,  the  accompanying  interim  consolidated
financial  statements  reflect all  adjustments,  consisting of normal recurring
accruals,  necessary for a fair  presentation  of the financial  position of the
Company  and its  subsidiaries  at  September  30,  1996,  the  results of their
operations for the quarters and  year-to-date  periods ended  September 30, 1996
and 1995,  and the  statements  of their  cash flows for the nine  months  ended
September 30, 1996 and 1995.


                                        6

<PAGE>



                                     PART I
                                     ITEM 2


           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS


DISCUSSION OF CHANGES IN FINANCIAL CONDITION

     Total assets increased $47,839,000, or 24.6%, from $194,414,000 at December
31, 1995 to $242,253,000 at September 30, 1996.

     Total loans, the largest single category of assets,  increased $38,126,000,
or 25.8%,  to  $186,120,000 at September 30, 1996, as a result of an increase in
the amount of outstanding loans at the Company's three bank subsidiaries.  Total
loans  outstanding at September 30, 1996 for Spartanburg  National Bank amounted
to $85,179,000, a $11,490,000,  or 15.6% increase, over the $73,689,000 reported
at December 31, 1995. Total  outstanding  loans, net of inter-company  loans, at
Anderson  National  Bank at  September  30,  1996  amounted to  $78,494,000,  an
increase  of  $15,360,000,  or  24.3%,  over  total  outstanding  loans,  net of
inter-company  loans, of $63,134,000 at December 31, 1995. The Community Bank of
Greenville,  National  Association  ("The Community Bank of Greenville"),  which
officially opened for business on April 17, 1996, reported  outstanding loans of
$12,889,000 at September 30, 1996.

     While the Company's bank subsidiaries  experienced  significant loan growth
during the first nine months of 1996, the Company's consumer finance subsidiary,
Quick  Credit  Corporation,  experienced  a  decrease  in  outstanding  loans of
$1,614,000,  or 14.5%.  Total loans  outstanding at September 30, 1996 for Quick
Credit  Corporation  amounted to $9,557,000  compared to $11,171,000 at December
31, 1995. The decrease in Quick Credit Corporation's  outstanding loans resulted
from a seasonal  decrease  and an  increase  in the  amount of loan  charge-offs
during the period.

     Premises,  furniture and equipment increased  $1,443,000,  or 25.8%, during
the period ended  September 30, 1996.  This increase is attributable to building
and equipment costs associated with the Company's  newest bank  subsidiary,  The
Community Bank of Greenville,  which officially opened for business on April 17,
1996, and to building and equipment costs  associated with a new branch facility
for Spartanburg  National Bank which officially opened for business on September
16, 1996.

     The  Company's  securities  portfolios,  collectively,  at amortized  cost,
increased  $4,144,000,  or  14.5%,  from  year-end  1995  levels  as a result of
securities  purchased by The Community Bank of Greenville  during the nine-month
period ended September 30, 1996.  Cash and due from banks increased  $1,001,000,
or 15.8%,  to  $7,354,000  at September  30, 1996.  This increase is largely the
result  of  additional  uncollected  funds in  correspondent  bank  accounts  at
quarter-end  resulting  from a larger  deposit base at September  30, 1996.  The
amount of Federal  funds sold at September  30, 1996 was  $2,970,000,  or 58.2%,
higher than the amount sold at December  31, 1995 largely as a result of amounts
sold by The Community Bank of Greenville.

     Other real estate owned  amounted to $85,000 at September 30, 1996 compared
to $74,000 at December 31, 1995. Management is pursuing liquidation of these two
pieces of property.


                                        7

<PAGE>



     Other  assets  increased  $722,000,  or  23.2%,  during  the  period  ended
September  30, 1996 largely as a result of increases in tax benefits  associated
with year-to-date losses  attributable to The Community Bank of Greenville,  and
to an increase in interest  receivable on loans  resulting from a larger base of
outstanding loans at September 30, 1996.

     Total liabilities increased $46,394,000, or 26.1%, largely as a result of a
$34,176,000,  or  21.3%,  increase  in  total  deposits  at the  Company's  bank
subsidiaries.  Of the $34,176,000  increase in total deposits,  $22,862,000,  or
66.9%,  is  attributable  to new  deposits  generated by the  Community  Bank of
Greenville since opening on April 17, 1996.

     The  largest  dollar  increase  in a single  category  of  deposits  was in
certificates of deposits of $100,000 or less,  which increased  $18,090,000,  or
27.6%  during the period  ended  September  30,  1996.  The  largest  percentage
increase  in a single  category of deposits  was in  certificates  of deposit of
$100,000 or more, which increased 41.4%, or $9,880,000,  during the period.  The
increases in these two categories of deposits are largely the result of deposits
generated by The Community Bank of Greenville. During the period ended September
30, 1996,  the Company also  experienced an increase in savings and money market
deposits of  $5,436,000,  or 21.4% which  resulted  largely  from a single money
market account at Spartanburg National Bank. The Company also experienced modest
growth in non-interest bearing demand deposits during the period while the level
of NOW accounts remained relatively unchanged from year-end.

     Securities  Sold  Under  Agreements  to  Repurchase,  comprised  largely of
overnight  repurchase  agreements,  decreased  slightly  during  the period as a
result of a decrease in temporary  quarter-end  investment of funds by customers
of the Company's bank  subsidiaries.  Federal Home Loan Bank advances  increased
$7,920,000,  or 272.2%,  to $10,830,000 at September 30, 1996.  These additional
advances  were  utilized to help fund the loan growth at Anderson  National Bank
and Spartanburg National Bank. Other borrowed funds,  comprised of Federal funds
purchased,   various  types  of  borrowings  by  Quick  Credit  Corporation  and
borrowings by the parent company,  increased  $4,130,000,  or 43.6%,  during the
period.  During the period ended  September  30, 1996,  the Company  borrowed an
additional $3,850,000 under an existing line of credit with a third party lender
to fully capitalize The Community Bank of Greenville,  Spartanburg National Bank
borrowed  $2,000,000  in the form of  Federal  funds  purchased  for  additional
liquidity purposes while Quick Credit  Corporation  reduced its outstanding debt
by $1,720,000.  During the period ended September 30, 1996 the Company satisfied
all lease obligations associated with previous capitalized leases.

     Shareholders'  equity  increased  $1,445,000  from  December  31,  1995  to
September 30, 1996 as a result of net earnings for the period of $1,531,000  and
the exercise of stock options under the Company's Employee Stock Option Plans in
the amount of $175,000.  These additions to shareholders'  equity were partially
offset by $217,000 relating to the declaration and payment of cash dividends and
cash in lieu of fractional  shares associated with the 5% stock dividend paid in
the third quarter of 1996 and an increase in the amount of net unrealized losses
on the Company's "available for sale" securities portfolio of $44,000 during the
period.



                                        8

<PAGE>



RESULTS OF OPERATIONS

Year-to-date  period  ended  September  30, 1996 vs.  Year-to-date  period ended
September 30, 1995

Earnings Review

     The consolidated  Company's  operations for the nine months ended September
30,  1996  resulted  in net  income of  $1,531,000,  a 14.8%  decrease  from the
$1,797,000 in net income recorded for the comparable 1995 nine-month period. The
decrease in consolidated earnings for the 1996 period is largely attributable to
an $833,000,  or 198.3%,  increase in the  provision  for loan losses,  of which
$725,000 of the  increase  is  attributable  to Quick  Credit  Corporation,  and
pre-tax start up expenses and early operating losses of $557,000 incurred in the
1996 period  associated  with the Company's new bank  subsidiary,  The Community
Bank of Greenville,  which officially  commenced banking operations on April 17,
1996.  During the 1996 period,  the Company also  incurred  additional  interest
expense of $163,000  associated with borrowings used to capitalize The Community
Bank of Greenville and $152,000 in consulting fees associated with the Company's
re-engineering of its banking operations.

     Anderson  National  Bank  recorded  net  earnings  of  $1,084,000  for  the
nine-month  period ended  September 30, 1996, a 50.1% increase over the $722,000
recorded for the  nine-month  period ended  September 30, 1995.  The increase in
earnings for this subsidiary resulted primarily from an increase in net interest
income of $651,000, or 21.4%.

     Spartanburg  National  Bank  recorded  net  earnings  of  $798,000  for the
nine-month  period ended  September 30, 1996, a 26.3% increase over the $632,000
recorded for the  nine-month  period ended  September 30, 1995.  The increase in
earnings for this subsidiary,  like that of Anderson  National Bank's,  resulted
largely from an increase in net interest income of $466,000, or 16.6%.

     The Community Bank of Greenville,  which  commenced  banking  operations on
April 17, 1996,  recorded net losses for the nine-month  period ended  September
30, 1996 of $371,000.  Of the $371,000 in losses  recorded,  $57,000,  or 15.4%,
were incurred prior to commencing banking operations.

     Quick  Credit  Corporation  recorded  net  earnings  of  $155,000  for  the
nine-month  period ended  September 30, 1996, a 71.3% decrease from the $539,000
recorded for the nine-month  period ended  September 30, 1995.  The  significant
decrease in earnings for this  subsidiary  resulted  primarily  from higher loan
charge-offs  which  required a  significant  increase in the  provision for loan
losses for the 1996 period and an increase in other operating expenses.

Interest Income, Interest Expense and Net Interest Income

     Net interest income,  the major component of the Company's  income,  is the
amount  by which  interest  and fees on  interest  earning  assets  exceeds  the
interest paid on interest bearing deposits and other interest bearing funds. The
Company's net interest income increased $1,660,000, or 18.1%, to $10,855,000 for
the  nine-month  period ended  September 30, 1996 compared to $9,195,000 for the
nine-month period ended September 30, 1995. The increase is largely attributable
to an increase in interest income on loans at the Company's banking subsidiaries
resulting  from an  increase  in the  volume of  outstanding  loans for the 1996
period when compared to the 1995 period.


                                        9

<PAGE>



     The Company's  total interest  income  increased  $3,319,000,  or 23.3%, to
$17,560,000 for the 1996 period compared to $14,241,000 for the 1995 period. The
increase is largely  attributable  to a  $3,075,000,  or 24.2%  increase in loan
interest income resulting from a $34,017,000,  or 26.3%,  increase in the volume
of average outstanding loans for the 1996 period. The average yield on loans for
the September 30, 1996 year-to-date period was 12.89% compared to 13.10% for the
September 30, 1995 year-to-date period.

     Average  balances  on  securities  and federal  funds  sold,  collectively,
increased by $6,622,000,  or 20.0%, in the 1996 period when compared to the 1995
period.  Largely  as a  result  of  this  increase,  interest  income  on  these
categories of earning assets, collectively, increased $244,000, or 16.2%.

     Interest expense on deposits increased $1,469,000,  or 35.0%, to $5,663,000
for the  nine-month  period ended  September 30, 1996 compared to $4,194,000 for
the nine-month  period ended September 30, 1995. The increase is attributable to
an increase of $33,985,000,  or 27.5%, in the volume of average interest-bearing
deposits for the 1996 period when  compared to the 1995 period,  coupled with an
increase in the Company's  costs of  interest-bearing  deposits  resulting  from
increases in the rates paid for those  deposits.  The  weighted  average cost of
interest-bearing  deposits for the first nine months of 1996 was 4.80%  compared
to 4.53% for the first nine months of 1995.

     Interest  expense on Securities Sold Under Repurchase  Agreements  declined
slightly  in the 1996 period as a result of a decline in the rates paid on these
short-term funds in the 1996 period.  Interest expense incurred by the Company's
banking  subsidiaries on average  borrowings of $4,770,000 from the Federal Home
Loan Bank of Atlanta for the 1996 period amounted to $203,000,  a 55.0% increase
over the  $148,000  incurred in the 1995  period and  resulted  largely  from an
increase in the average amount borrowed during the 1996 period. Interest expense
on the various categories of other interest-bearing liabilities,  which includes
Capitalized  Leases,  Subordinated  Debt,  Federal  Funds  Purchased  and  Other
Borrowed Funds,  collectively,  increased $146,000, or 25.4%, in the 1996 period
when compared to the 1995 period.  The increase in interest  expense  associated
with these other  interest-bearing  liabilities is primarily  attributable to an
increase in interest expense at the parent company level on borrowings  utilized
to capitalize The Community Bank of Greenville.

Provision and Allowance for Loan Losses, Loan Loss Experience

     The purpose of the  Company's  allowance  for loan losses is to absorb loan
losses  that  occur  in the  loan  portfolio.  The  allowance  for  loan  losses
represents  management's  estimate of an amount adequate in relation to the risk
of  future  losses  inherent  in  the  loan  portfolio  and  also  reflects  the
consideration of the amount of high rate/higher risk loans held by the Company's
consumer finance subsidiary, Quick Credit Corporation.

     While it is the Company's  policy to charge off in the current period loans
in which a loss is considered  probable,  there are  additional  risks of future
losses which cannot be quantified precisely or attributed to particular loans or
classes of loans. Because these risks include the state of the economy, industry
trends and conditions affecting individual  borrowers,  management's judgment of
the allowance is  necessarily  approximate  and  imprecise.  The Company is also
subject to regulatory examinations and determinations as to adequacy,  which may
take  into  account  such  factors  as the  methodology  used to  calculate  the
allowance  for loan  losses  and the size of the  allowance  for loan  losses in
comparison to a group of peer companies identified by the regulatory agencies.


                                                        10

<PAGE>



     Management determines the adequacy of the allowance quarterly and considers
a variety of factors in  establishing  the level of the allowance for losses and
the related provision, which is charged to expense. In assessing the adequacy of
the allowance, management relies predominantly on its ongoing review of the loan
portfolio,  which is  undertaken  both to ascertain  whether  there are probable
losses which must be charged off and to assess the risk  characteristics  of the
portfolio in the aggregate. The review considers the judgments of management and
also those of bank regulatory agencies that review the loan portfolio as part of
their regular examination process.  The Comptroller of the Currency,  as part of
its routine  examination  process of various national banks,  including Anderson
National Bank,  Spartanburg  National Bank and The Community Bank of Greenville,
may require  additions to the allowance  for loan losses based upon  information
available to them at the time of their examination.

     Management  considers  the  allowance  for loan  losses  adequate to absorb
possible losses on loans outstanding at September 30, 1996 and in the opinion of
management,  there are no material risks or significant loan  concentrations  in
the present portfolio.

     The allowance for loan losses was $2,829,000 at September 30, 1996 compared
to  $2,140,000  at September  30, 1995 and  $2,320,000  at December 31, 1995. At
September 30, 1996,  September 30, 1995 and December 31, 1995, the allowance for
loan losses as a percentage  of  outstanding  loans was 1.52%,  1.51% and 1.57%,
respectively.   During  the  period  ended   September  30,  1996,  the  Company
experienced net charge-offs of $744,000, or 0.45%, of average loans, compared to
net  charge-offs of $231,000,  or 0.18% of average loans during the period ended
September 30, 1995.  The Company made  provisions  for loan losses of $1,253,000
during the nine-month  period ended  September 30, 1996 compared to $420,000 for
the nine-month period ended September 30, 1995, a 198.3% increase.  The increase
in net charge-offs  and resulting  increase in the provision for loan losses for
the 1996 period is attributable to Quick Credit Corporation.

     Anderson  National Bank made no provisions for loan losses in either of the
two comparable periods. For the nine-month period ended September 30, 1996, this
subsidiary  recorded net  charge-offs  of $23,000  compared to net recoveries of
$74,000 for the 1995 period.

     Spartanburg  National Bank recorded a provision for loan losses of $145,000
for the nine-month  period ended September 30, 1996 compared to $155,000 for the
1995 period. For the nine-month period ended September 30, 1996, this subsidiary
recorded net  charge-offs of $41,000  compared to net charge-offs of $15,000 for
the 1995 period.

     The  Community  Bank of  Greenville  began to build its  allowance for loan
losses  during the period and  recorded a provision  for loan losses of $118,000
for the nine-month period ended September 30, 1996.

     Quick Credit  Corporation  recorded a provision for loan losses of $990,000
for the nine-month  period ended September 30, 1996 compared to $265,000 for the
1995 period and to $728,000 for fiscal 1995.  The increase in this  subsidiary's
provision for the 1996 period resulted from an increase in the number and volume
of loans  charged off and  management's  decision to increase the  allowance for
loan  losses as a result of a  continued  increase  in the number and amounts of
delinquent  accounts.  For the nine-month  period ended September 30, 1996, this
subsidiary recorded net charge offs of $680,000, or 6.91% of average outstanding
loans, compared to net charge offs of $290,000, or 3.26%, of average outstanding
loans for the 1995  nine-month  period  and to  $499,000,  or 5.39%,  of average
outstanding  loans  for  fiscal  1995.   Management  continues  to  believe  the
significant increase in net charge offs and delinquency rate is an industry-wide
trend. Quick Credit Corporation's customers are generally in the low-to-moderate

                                       11

<PAGE>



income  group of  borrowers.  Over  the  past  several  years  there  has been a
proliferation of small consumer loan companies and other consumer debt providers
competing  for pieces of this  segment of the consumer  debt  market.  It is not
unusual for customers of Quick Credit  Corporation  simultaneously to have loans
outstanding  as several small loan  companies  which  results in some  customers
incurring more debt than they can service.  As a result of increased charge offs
experienced  during the latter half of 1995 and during the first three  quarters
of 1996, Quick Credit Corporation has increased its allowance for loan losses as
a  percentage  of  outstanding  loans,  net of  unearned  income,  from 3.61% at
September  30, 1995 to 9.54% at  September  30,  1996.  Management  expects this
subsidiary to  experience  similar  levels of defaults in the fourth  quarter of
1996 as those experienced in the previous three quarters of 1996.

     At September 30, 1996 the Company had $414,000 in non-accrual  loans, which
are  considered  impaired,  $652,000 in loans past due 90 days or more and still
accruing  interest  and $85,000 in OREO,  compared to  $106,000,  $311,000,  and
$74,000,  respectively,  at September  30, 1995 and to $241,000,  $271,000,  and
$74,000,  respectively at December 31, 1995. At September 30, 1996 and 1995, and
December 31, 1995,  the Company did not have a material  amount of  restructured
loans.

     In the cases of all loans considered as non-performing loans, management of
the Company has reviewed the carrying  value of any  underlying  collateral.  In
those cases where the  collateral  value may be less than the carrying  value of
the loan the Company  has taken  specific  write downs to the loan,  even though
such loan may still be performing. Management of the Company does not believe it
has any  non-accrual  loan  which,  individually,  could  materially  impact the
allowance for loan losses or long term future operating results of the Company.

Other Income

     Total  consolidated  other income increased  $165,000 or 12.4%,  during the
nine-month  period ended September 30, 1996. The increase  resulted largely from
an $87,000, or 44.0%, increase in fee income generated,  collectively,  from the
sale of alternative  investment  products and mortgage lending activities and an
increase in service  charge income on deposit  accounts of $67,000,  or 11.6% at
the  Company's  banking  subsidiaries.  As a result of an  increase  in mortgage
lending  activity  during the first  nine  months of 1996,  fee income  from the
Company's mortgage lending activities  increased $26,000,  or 19.4%, to $162,000
in the 1996 period compared to $136,000 for the 1995 period. Simultaneously, fee
income generated from the sale of alternative  investment products (mutual funds
and annuities), which amounted to $63,000 in the 1995 period, increased $61,000,
or 96.8%,  to $124,000  for the 1996  period.  This  increase was a result of an
increase in the volume of sales of these type products during the 1996 period.

Other Expenses

     Total other expenses  increased  $1,395,000,  or 19.0%,  in the 1996 period
over the 1995  comparable  period.  Salaries,  wages  and  benefits  ("personnel
expense"), the largest category of other operating expenses, increased $764,000,
or 18.0%,  in the 1996 period over the 1995  period.  The  increase in personnel
expense  resulted  from  additions  to the  staff  of Quick  Credit  Corporation
associated  with four  additional  offices  opened during the last six months of
1995, personnel expenses associated with the Company's new bank subsidiary,  The
Community  Bank of  Greenville,  and  increases  in  personnel  expenses  at the
Company's two other bank subsidiaries.

     Occupancy expense increased $84,000,  or 17.9%, during the 1996 period as a
result of additional  expenses  associated  with the new offices of Quick Credit
Corporation opened during the second half of

                                       12

<PAGE>



1995 and expenses  associated  with  opening The  Community  Bank of  Greenville
during the second quarter of 1996.  Furniture and equipment  expenses  decreased
$51,000,  or 11.1%,  in the 1996 period as a result of a decline in depreciation
expense  associated with the Company's data processing  equipment which was sold
during the second  quarter of 1995 due to the  outsourcing of the Company's data
processing function.

     Other operating  expenses,  the second largest  category of other expenses,
increased  $598,000,  or 27.7%,  during the 1996  period  largely as a result of
additional  expenses associated with the new offices of Quick Credit Corporation
opened during the second half of 1996,  additional  expenses associated with the
opening of The Community  Bank of Greenville  during the second quarter of 1996,
$157,000 in consulting fees associated with the Company's re-engineering project
and data processing  expense  associated  with the Company's  outsourcing of its
data processing function.

Income Taxes

     As a result of a  decrease  in income  before  income  taxes,  the  Company
incurred  income tax  expense of  $824,000  for the  year-to-date  period  ended
September  30, 1996  compared  to income tax expense of $961,000  for the period
ended September 30, 1995.

Quarter ended September 30, 1996 vs. Quarter ended September 30, 1995

Earnings Review

     The Company's operations for the quarter ended September 30, 1996, resulted
in net income of  $553,000,  a $64,000,  or 10.4%,  decrease  from the  $617,000
reported for the  comparable  1995  quarter.  The decrease in 1996 third quarter
profits resulted primarily from a $259,000, or 123.9%, increase in the Company's
provision  for  loan  losses,  which is  largely  attributable  to Quick  Credit
Corporation,  $232,000 in pre-tax early  operating  losses  associated  with The
Community Bank of Greenville,  which commenced  banking  operations on April 17,
1996 and to $95,000 in consulting fees incurred during the third quarter of 1996
associated with the Company's re-engineering project.

     Anderson  National  Bank,   Spartanburg  National  Bank  and  Quick  Credit
Corporation,  the Company's  three  seasoned  subsidiaries,  recorded 1996 third
quarter net earnings of $421,000, $284,000 and $67,000,  respectively,  compared
to $245,000, $250,000 and $157,000, respectively, for the third quarter of 1995.
The Company's newest bank subsidiary, The Community Bank of Greenville, recorded
1996 third quarter net losses of $158,000.

Interest Income, Interest Expense and Net Interest Income

     The Company's net interest income increased $684,000,  or 21.8%, during the
third  quarter  of  1996  over  the  third  quarter  of 1995  and was  primarily
attributable to a $1,115,000,  or 24.6%,  increase in loan interest income.  The
increase  in loan  interest  income  resulted  from a  larger  base  of  average
outstanding loans for the 1996 period. Total loans averaged $177,221,000 for the
1996 quarter  compared to $137,676,000  for the 1995 quarter,  a 28.7% increase.
The  average  yield on the  Company's  loan  portfolios  was 12.76% for the 1996
quarter compared to 13.17% for the 1995 quarter.

     Interest expense increased $592,000, or 31.6%, in the 1996 period. Interest
on deposit accounts,  the largest category of total interest expense,  increased
$471,000, or 29.9%, during the 1996 period as a

                                       13

<PAGE>



result of an increase in the volume of interest-bearing deposits during the 1996
period.  The average  rate paid on  interest-bearing  deposits was 4.83% for the
1996 quarter  compared to 4.90% for the 1995  quarter.  Interest  expense on the
other  categories  of  interest-bearing  liabilities,   collectively,  increased
$121,000,  or 41.2%,  largely as a result of  interest  expense  incurred on the
borrowings  used to  capitalize  The Community  Bank of Greenville  and interest
expense  associated with a larger volume of Federal Home Loan Bank borrowings by
Anderson National Bank and Spartanburg National Bank.

Provision and Allowance for Loan Losses

     The provision for loan losses was $468,000 for the quarter ended  September
30, 1996, a $259,000,  or 123.9%,  increase over the $209,000 provision made for
the 1995  quarter.  The increase for the 1996 period is a result of increases in
the  provisions  made by Quick  Credit  Corporation  due to a larger  volume  of
charge-offs during the 1996 period and to The Community Bank of Greenville as it
began to build its  allowance for loan losses.  For the quarter ended  September
30, 1996 the Company  recorded net loan  charge-offs of $263,000,  or 0.15%,  of
average outstanding loans compared to $110,000, or 0.08%, of average outstanding
loans for the 1995 quarter.

     Quick Credit  Corporation  made  provisions of $345,000 in the 1996 quarter
compared to $147,000 for the 1995 quarter. During the 1996 quarter, Quick Credit
Corporation  recorded net loan  charge-offs  of $210,000,  or 2.19%,  of average
outstanding loans compared to $110,000,  or 1.20%, of average  outstanding loans
for the 1995 quarter.

     The Community Bank of Greenville  made provisions  totaling  $73,000 during
the 1996 quarter.

     Spartanburg  National  Bank made  provisions of $50,000 for the 1996 period
compared to $62,000 for the 1995 period and  recorded  net loan  charge-offs  of
$15,000 in the 1996 period  compared to net loan  charge-offs  of $6,000 for the
1995 period.

     Anderson  National  Bank made no  provisions  in the 1996 and 1995 periods.
During the 1996 period Anderson  National Bank recorded net loan  charge-offs of
$38,000 compared to net loan recoveries of $7,000 for the 1995 period.

Other Income

     The Company's total other income decreased $28,000, or 5.4% during the 1996
quarter.  The decrease in other income is largely  attributable to a decrease in
the  amount  of gains  realized  on the sale of SBA  loans  and OREO in the 1996
quarter when compared to the 1995  quarter.  The Company  recorded  gains on the
sale of SBA loans of $34,000 in the 1996 quarter compared to $50,000 in the 1995
quarter.  The Company recorded a gain on the sale of OREO of $25,000 in the 1995
quarter  and had no  gains in the  1996  quarter.  The  decreases  in these  two
categories of other income items were partially offset by an increase in service
charge income on deposit  accounts  resulting  from a larger base of deposits in
the 1996 quarter.

Other Expenses

     Total other expenses increased $461,000, or 18.3%, in the 1996 quarter when
compared to the 1995 quarter.  Personnel expense,  the largest category of total
other expenses,  increased $156,000,  or 10.5%, in the 1996 period. The increase
in personnel expense is attributable to additional personnel

                                       14

<PAGE>



expense  associated  with the staffing of The Community Bank of Greenville,  the
Company's newest subsidiary which was non-existent in the third quarter of 1995,
and to increases  in  personnel  expense at the  Company's  other  subsidiaries.
Occupancy  expense,  and furniture and equipment expense increased  $45,000,  or
28.3%, and $11,000,  or 8.0%,  respectively,  in the 1996 quarter primarily as a
result of expenses  associated  with The  Community  Bank of  Greenville.  Other
operating  expenses,  the  second  largest  category  of total  other  expenses,
increased $249,000, or 34.2%, in the 1996 period.  Increases in this category of
expenses are largely  attributable  to additional  expenses  associated with The
Community Bank of  Greenville,  $95,000 in consulting  fees incurred  during the
1996 quarter associated with the Company's  re-engineering project and increases
in the various categories of other expense items as a result of growth and price
increases.

Income Taxes

     The Company  incurred income tax expense of $317,000 for the quarters ended
September 30, 1996 and September 30, 1995.

LIQUIDITY

     Liquidity  management  involves  meeting the cash flow  requirements of the
Company.  The Company's  liquidity position is primarily dependent upon its need
to respond to  short-term  demand for funds caused by  withdrawals  from deposit
accounts and upon the liquidity of its assets.  The Company's  primary liquidity
sources  include  cash and due from banks,  federal  funds sold and  "securities
available for sale". In addition,  the Company (through  Anderson National Bank,
Spartanburg National Bank and The Community Bank of Greenville) has the ability,
on a short-term  basis,  to borrow funds from the Federal  Reserve System and to
purchase federal funds from other financial  institutions.  Spartanburg National
Bank and Anderson  National  Bank are also members of the Federal Home Loan Bank
System  and have the  ability to borrow  both  short and longer  term funds on a
secured  basis.  At September  30, 1996  Anderson  National Bank had $280,000 in
long-term  borrowings and $7,000,000 in short-term  borrowings  from the Federal
Home Loan Bank of Atlanta.  At September 30, 1996 Spartanburg  National Bank had
$550,000 in long-term  borrowings from the Federal Home Loan Bank of Atlanta and
$3,000,000 in short-term borrowings. At September 30, 1996, Spartanburg National
Bank also had overnight borrowings in the form of federal funds purchased in the
amount of $2,000,000.

     First  United  Bancorporation,  the parent  holding  company,  has  limited
liquidity  needs.  First  United  requires  liquidity  to pay limited  operating
expenses and dividends,  and to service its debt. In addition,  First United has
two lines of credit  with third  party  lenders  totaling  $6,100,000,  of which
$1,600,000  was  available  at  September  30,  1996.  One of  these  lines is a
$6,000,000 line of credit with an unaffiliated third party lender to be used for
general  corporate  purposes  and allows for  interest to be paid on a quarterly
basis for a period of up to five (5) years if certain  criteria  are met. At the
end of five (5) years, or sooner if the Company desires,  the line of credit can
be  converted  to a term  loan  with  quarterly  interest  payments  and  annual
principal  reductions  required  over a period  of five (5)  years.  The line of
credit bears interest at a variable rate. On April 15,1996 the Company  utilized
$4,500,000 of this line to  capitalize  its new bank  subsidiary,  The Community
Bank of Greenville,  National Association,  Greenville,  South Carolina. Further
sources of liquidity for First United include  management fees which are paid by
all of its subsidiaries and dividends from its subsidiaries.

     At September  30,1996,  the Company's  consumer finance  subsidiary,  Quick
Credit Corporation, had debt outstanding of $800,000 in the form of subordinated
debt and $6,300,000 outstanding under an

                                       15

<PAGE>



$18,0000  line of credit  with a third  party  lender  secured  by Quick  Credit
Corporation's  loans receivable.  Management  believes its liquidity sources are
adequate to meet its operating needs and does not know of any trends, other than
those  previously  discussed,   that  may  result  in  the  Company's  liquidity
materially increasing or decreasing.

CAPITAL ADEQUACY AND RESOURCES

     The capital  needs of the Company  have been met through the  retention  of
earnings.

     For bank holding  companies  with total  assets of more than $150  million,
such as the  Company,  capital  adequacy is generally  evaluated  based upon the
capital of its banking  subsidiaries.  Generally,  the Board of Governors of the
Federal  Reserve  System (the  "Federal  Reserve  Board")  expects  bank holding
companies to operate above minimum capital levels. The Office of the Comptroller
of the  Currency  ("Comptroller")  regulations  establish  the minimum  leverage
capital  ratio  requirement  for national  banks at 3% in the case of a national
bank that has the highest regulatory examination rating and is not contemplating
significant  growth or  expansion.  All other  national  banks are  expected  to
maintain a ratio of at least 1% to 2% above the stated minimum. Furthermore, the
Comptroller  reserves the right to require  higher  capital ratios in individual
banks on a case by case  basis  when,  in its  judgment,  additional  capital is
warranted by a deterioration of financial  condition or when high levels of risk
otherwise exist. The Company's subsidiary banks have not been notified that they
must maintain capital levels above regulatory  minimums.  The Company's leverage
capital  ratio was 7.35% at September  30, 1996  compared to 8.23%  December 31,
1995.  The leverage  capital ratios for Anderson  National Bank and  Spartanburg
National Bank were 7.68% and 7.15%, respectively at September 30, 1996, compared
to 7.86% and 7.01%,  respectively,  at December 31, 1995.  The leverage  capital
ratio for The Community Bank of Greenville was 14.79% at September 30, 1996. The
decrease in the leverage  capital  ratio for Anderson  National  Bank during the
period  ending  September  30,  1996  resulted  from the  payment of $325,000 in
dividends to the Company and growth  experienced  since  December 31, 1995.  The
decrease in the leverage capital ratio for the Company is attributable to growth
experienced since December 31, 1995.

     The Federal  Reserve  Board has  adopted a  risk-based  capital  rule which
requires  bank holding  companies to have  qualifying  capital to  risk-weighted
assets  of at least  8.00%,  with at least 4%  being  "Tier 1"  capital.  Tier 1
capital  consists  principally  of common  stockholders'  equity,  noncumulative
preferred stock, qualifying perpetual preferred stock, and minority interests in
equity  accounts of consolidated  subsidiaries,  less goodwill and certain other
intangible assets. "Tier 2" (or supplementary)  capital consists of general loan
loss reserves (subject to certain limitations), certain types of preferred stock
and  subordinated  debt, and certain hybrid capital  instruments  and other debt
securities such as equity commitment notes. A bank holding company's  qualifying
capital base for purposes of its risk-based capital ratio consists of the sum of
its Tier 1 and Tier 2 capital  components,  provided that the maximum  amount of
Tier 2 capital that may be treated as  qualifying  capital is limited to 100% of
Tier 1 capital.  The Comptroller  imposes a similar  standard on national banks.
The regulatory  agencies  expect  national  banks and bank holding  companies to
operate above  minimum  risk-based  capital  levels.  The  Company's  risk-based
capital  ratio was 11.10% and its Tier 1 capital to risk  weighted  assets ratio
was 9.71% at September 30, 1996, compared to 12.73% and 11.48%, respectively, at
December 31, 1995. The risk- based capital ratios for Anderson National Bank and
Spartanburg National Bank were 11.29% and 10.33%, respectively, at September 30,
1996 compared to 12.72% and 11.09%,  respectively,  at December 31, 1995.  Their
Tier  1  capital  to  risk  weighted   assets  ratios  were  10.13%  and  9.20%,
respectively,  at September 30, 1996 compared to 11.47% and 9.88%, respectively,
at December 31, 1995. At September 30, 1996,  the  risk-based  capital ratio for
The Community Bank of Greenville was 26.94% and the Tier 1 capital to risk

                                       16

<PAGE>



weighted  assets  ratio was  26.17%.  The decline in  Anderson  National  Bank's
risk-based and Tier 1 capital to risk weighted  assets ratios from year-end 1995
levels  resulted from the payment of $325,000 in dividends to the Company during
the period ending September 30, 1996 and from growth  experienced since December
31,  1995.  The  decrease  in the  Company's  and  Spartanburg  National  Bank's
risk-based and Tier 1 capital to risk weighted  assets ratios from year-end 1995
levels is a result of growth experienced during 1996.

     The Company opened a new bank subsidiary, The Community Bank of Greenville,
National  Association,  in the city of  Greenville,  South Carolina on April 17,
1996.  The Company  capitalized  this new bank  subsidiary  with $4.5 million of
capital. The capital required to open this new bank came from proceeds available
to the Company under a line of credit with an  unaffiliated  third-party  lender
which had committed to lend the Company up to $6 million.

     During the third quarter of 1996,  the Company  entered into a contract for
the purchase and  installation of a wide area network (WAN).  When installed and
operative,  this system will link together the data communications of all of the
Company's  subsidiaries.  The  Company  expects  to incur  fixed  asset  cost of
approximately  $600,000  associated  with the WAN during  the fourth  quarter of
1996.

     During the third quarter of 1996,  the Company  entered into a contract for
the purchase and  installation of three ATMs. The Company expects to incur fixed
asset cost of approximately  $125,000 associated with the ATMs during the fourth
quarter of 1996.

EFFECT OF INFLATION AND CHANGING PRICES

     The consolidated financial statements have been prepared in accordance with
generally  accepted  accounting  principles  which  require the  measurement  of
financial  position and results of operations  in terms of  historical  dollars,
without  consideration of changes in the relative purchasing power over time due
to  inflation.  Unlike most other  industries,  virtually  all of the assets and
liabilities  of a financial  institution  are  monetary in nature.  As a result,
interest  rates  generally  have  a  more  significant  effect  on  a  financial
institution's  performance than does the effect of inflation.  Interest rates do
not  necessarily  change  in the same  magnitude  as the  prices  of  goods  and
services.

     While the effect of inflation on banks is normally not as significant as is
its  influence on those  businesses  which have large  investments  in plant and
inventories, it does have an effect. During periods of high inflation, there are
normally  corresponding  increases in the money supply,  and banks will normally
experience  above average growth in assets,  loans and deposits.  Also,  general
increases in the prices of goods and services will result in increased operating
expenses.

ACCOUNTING AND REPORTING MATTERS

     In October 1995, the Financial  Accounting  Standards Board ("FASB") issued
Statement of Financial  Accounting  Standards ("SFAS") No. 123,  "Accounting for
Stock-Based  Compensation".  SFAS No. 123 establishes a new method of accounting
for  stock-based  arrangements  by measuring  the value of a stock  compensation
award by the fair value method versus the intrinsic  method as currently is used
under the  provisions  of Opinion  25. If  entities  do not adopt the fair value
method of  accounting  for stock- based  compensation,  they will be required to
disclose  in  the  footnotes  pro  forma  net  income  and  earnings  per  share
information  as if the fair value based method had been adopted.  The disclosure
requirements  of SFAS No. 123 are effective for the 1996  financial  statements.
The Company will continue to use the

                                       17

<PAGE>



intrinsic value method for recording stock-based compensation and will therefore
have expanded disclosure requirements.

In June 1996,  the FASB issued  SFAS No.  125,  "Accounting  for  Transfers  and
Servicing of Financial Assets and Extinguishment of Liabilities".  The Statement
uses a "financial  components" approach that focuses on control to determine the
proper  accounting for financial  asset  transfers.  Under that approach,  after
financial assets are transferred, an entity would recognize on the balance sheet
all assets it controls and liabilities it has incurred. It would remove from the
balance  sheet  those  assets  it no  longer  controls  and  liabilities  it has
satisfied.  The  statement is effective for transfers and servicing of financial
assets and  extinguishment of liabilities  occurring after December 31, 1996 and
is to be applied prospectively. The Company does not anticipate that adoption of
this  Statement  will  have  a  material  effect  on  the  Company's   financial
statements.

                                     PART II
                                OTHER INFORMATION

Item 1.  Legal Proceedings.

         The Company is from time to time involved in various legal  proceedings
         arising out of the ordinary  course of business,  primarily  related to
         the  collection  of loans  receivable.  Based upon current  information
         available,   management   believes  there  are  no  legal   proceedings
         threatened  or pending  against  the  Company  that  could  result in a
         materially adverse change in the business or financial condition of the
         Company.

Item 2.  Changes in Securities.

         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

         27.   Financial Data Schedule

         (b)   No reports on Form 8-K were filed  during the  quarter  for which
               this report is filed.



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                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                               FIRST UNITED BANCORPORATION

                                               Mason Y. Garrett
Dated: November 4, 1996                        ----------------------------
                                               Mason Y. Garrett, President
                                               and Chief Executive Officer

                                               William B. West, Sr.
                                               ----------------------------
                                               William   B.   West,   Sr.   Vice
                                               President and Chief Financial and
                                               Accounting   Officer   (Principal
                                               Financial and Accounting Officer)




                                       19

<PAGE>


                                 EXHIBIT INDEX

Exhibit No.                   Description
-----------                   -----------

   27                         Financial Data Schedule