First United Corporation Announces 3rd Quarter 2012 Earnings Of $.40 Per Common Share

   First United Corporation Announces 3rd Quarter 2012 Earnings Of $.40 Per
                                 Common Share

PR Newswire

OAKLAND, Md., Nov. 9, 2012

OAKLAND, Md., Nov. 9, 2012 /PRNewswire/ -- First United Corporation (NASDAQ:
FUNC), a financial holding company and the parent company of First United Bank
& Trust, announces consolidated net income available to common shareholders
for the third quarter of 2012 totaling $2.5 million or $.40 per common share,
compared to net income available to common shareholders of $0.3 million or
$.05 per common share for the same period of 2011. Net interest income, on a
fully tax equivalent ("FTE") basis, for the third quarter of 2012 was $10.1
million as compared to $9.8 million for third quarter of 2011, resulting in a
3.28% net interest margin as compared to 2.97% for the same periods. Other
operating income increased $.2 million during the third quarter of 2012 when
compared to the same period of 2011 primarily due to the decrease in net
losses recognized on other real estate owned ("OREO"). This was offset by the
decline in insurance commissions due to the Corporation's sale of its
insurance agency, First United Insurance Group, LLC, effective January 1,
2012. Operating expenses decreased $.2 million in the third quarter of 2012
when compared to the same period of 2011. This decrease was primarily a
result of reduced staffing and lower incentive compensation due to reduced
production in commercial lending.

According to William B. Grant, Chairman, Chief Executive Officer and
President, "Our performance in the third quarter of 2012 continues our trend
of stable core income growth supported by ongoing strength in our Trust and
Investment department and our continued attention to cost control. We are
continuing to seek opportunities to enhance lending in our communities and to
grow the Treasury Management services that we have available for our business
customers. In addition, our strategic initiatives in technology continue to
enhance our delivery systems and allow us to provide financial services to our
customers when and where they want to bank."

For the first nine months of 2012, the Corporation reported consolidated net
income available to common shareholders of $.6 million, or $.10 per common
share, compared to net income available to common shareholders of $1.6
million, or $.26 per share for the same period of 2011. The decrease in net
income for the first nine months of 2012 when compared to the first nine
months of 2011 was primarily due to a $3.3 million increase in the provision
for loan losses during the first nine months of 2012 when compared to the same
time period of 2011. The increase in provision expense was partially offset
by an increase in other operating income due to a one-time, tax free death
benefit of approximately $.7 million received under a policy of bank owned
life insurance and net gains of $1.1 million in the first nine months of 2012,
compared to $.1 million of net losses for the same time period of 2011. Net
gains for the first nine months of 2012 were driven by $.6 million in net
gains realized on sales of investment securities and $.7 million in gains on
the sale of OREO. Net interest income increased slightly during the first
nine months of 2012 when compared to the same time period of 2011. The net
interest margin for the first nine months of 2012, on a FTE basis, increased
to 3.31% from 2.89% for the first nine months of 2011. The net interest
margin for the year ended December 31, 2011, on a FTE basis, was 2.96%. The
Corporation believes that its margin should continue to improve as it
decreases cash levels, reduces non-accrual loans and continues to shift the
deposit mix toward lower cost deposits.

Financial Highlights Comparing the Three and Nine Months Ended September 30,
2012 and 2011:

  o$3.3 million increase in the provision for loan loss expense for the nine
    months ended September 30, 2012 due to the charge-off of one large loan
    relationship which occurred in the first quarter of 2012.
  o$1.3 million decrease in the provision for loan loss expense for the three
    months ended September 30, 2012 due to stabilization in the loan portfolio
    and resolution of several loan relationships with specific allocations of
    the loan loss reserve.
  oIncrease in the net interest margin, on a FTE basis, from 2.89% for the
    first nine months of 2011 to 3.31% for same period of 2012, which was
    driven primarily by the strategic plan to reduce cash levels by paying off
    certain liabilities that matured during 2011, reinvesting excess cash into
    investments and the continued emphasis on lower cost core deposits.
  o6.0% decrease in total other income for the nine months ended September
    30, 2012 driven by the sale of the assets of First United Insurance Group,
    LLC on January 1, 2012.
  o4.1% decrease in total other operating expenses for the nine months ended
    September 30, 2012 based on reduced salaries and benefits, FDIC premium
    expense and equipment expense.
  oDecline in the ratio of the allowance for loan losses to loans outstanding
    from 2.08% as of December 31, 2011 to 1.84% as of September 30, 2012,
    based on reduced delinquency, charge-offs and stabilization in the loan
    portfolio.

For the nine-month period ended September 30, 2012, the Corporation's
annualized returns on average assets and on average shareholders' equity were
.18% and 2.57%, respectively, compared to .25% and 3.80%, respectively, for
the same period of 2011.

Balance Sheet Overview

Total assets were $1.4 billion at September 30, 2012, a decrease of $31.5
million since December 31, 2011. During this time period, cash and
interest-bearing deposits in other banks increased $23.4 million, the
investment portfolio decreased $5.7 million, and gross loans decreased $48.7
million. Total liabilities decreased by approximately $33.3 million during
the first nine months of 2012, reflecting a decrease in total deposits of
$24.4 million and a $24.3 million decrease in long-term borrowings due to
paybacks and principal amortization on our FHLB advances. These decreases
were offset by a $15.5 million increase in short-term borrowings.
Shareholders' equity increased $1.8 million from December 31, 2011 to
September 30, 2012 as a result of the net income recognized during the first
nine months of 2012.

Outstanding loans decreased by $48.7 million (5.2%) when comparing loans at
September 30, 2012 to loans at December 31, 2011. Commercial real estate
("CRE") loans decreased $28.8 million as a result of the payoff of several
large loans, charge-offs of loan balances and ongoing scheduled principal
payments. Acquisition and development ("A&D") loans decreased $4.4 million.
Commercial and industrial loans decreased $14.1 million primarily as a result
of the $9.0 million charge-off on a shared national credit for an ethanol
plant during the first quarter of 2012. Residential mortgages decreased by
$.3 million, which was attributable to regularly scheduled principal payments
on existing loans and management's continued use of the secondary market
outlets such as Fannie Mae for the majority of new, longer-term, fixed-rate
residential loan originations. The consumer portfolio decreased $1.1 million
due primarily to repayment activity in the indirect auto portfolio slightly
offsetting new production. At September 30, 2012, approximately 60% of the
commercial loan portfolio was collateralized by real estate, compared to
approximately 64% at December 31, 2011.

Total deposits decreased $24.4 million during the first nine months of 2012
when compared to deposits at December 31, 2011. Non-interest bearing deposits
increased $19.5 million. Traditional savings accounts increased $6.9 million
due to continued growth in our Prime Saver product. Total demand deposits
increased $20.3 million and total money market accounts decreased $7.8 million
due primarily to a shift of the Corporation's investment sweep accounts to an
in-house demand product. Time deposits less than $100,000 declined $22.5
million and time deposits greater than $100,000 decreased $40.8 million. The
decrease in time deposits greater than $100,000 was a result of repayment of
approximately $20 million in brokered certificates of deposit and our strategy
to reduce higher cost funding to municipalities and single service certificate
of deposit customers. The Corporation's internal treasury team continues to
promote the strategy of increasing the net interest margin by changing the mix
of the Corporation's deposit base and focusing on customers with full banking
relationships.

Comparing September 30, 2012 to December 31, 2011, shareholders' equity
increased from $96.7 million to $98.5 million. The $1.8 million increase was
attributable to the net income recorded in the first nine months of 2012. The
book value of the Corporation's common stock increased from $10.80 per share
at December 31, 2011 to $11.07 per share at September 30, 2012.

At September 30, 2012, there were approximately 6,199,283 outstanding shares
of First United Corporation common stock, an immediately exercisable warrant
to purchase 326,323 shares of the Corporation's common stock was outstanding,
and there were 30,000 outstanding shares of the Corporation's Fixed Rate
Cumulative Perpetual Preferred Stock, Series A.

Asset Quality

The ratio of non-performing and 90 days past-due loans to total loans at
September 30, 2012 was 3.93%, compared to 4.26% at December 31, 2011 and 4.17%
at September 30, 2011. The ratio of non-performing and 90 days past-due loans
to total assets at September 30, 2012 was 2.57%, compared to 2.67% at
September 30, 2011 and 2.87% at December 31, 2011. Performing loans
considered to be impaired (including performing troubled debt restructurings,
or TDRs), as defined and identified by management, amounted to $30.3 million
at September 30, 2012 and $23.6 million at December 31, 2011. Loans are
identified as impaired when, based on current information and events,
management determines that the Corporation will be unable to collect all
amounts due according to contractual terms. These loans consist primarily of
A&D loans and CRE loans. The fair values are generally determined based upon
independent third party appraisals of the collateral or discounted cash flows
based upon the expected proceeds. Specific allocations have been made where
management believes there is insufficient collateral to repay the loan balance
if liquidated and there is no secondary source of repayment available.

Non-accrual loans totaled $29.1 million as of September 30, 2012, compared to
$37.5 million as of September 30, 2011 and $38.2 million as of December 31,
2011. Non-accrual loans, which have been subject to a partial charge-off,
totaled $9.6 million as of September 30, 2012, compared to $13.4 million as of
December 31, 2011.

The allowance for loan losses ("ALL") decreased to $16.3 million at September
30, 2012, compared to $19.5 million at December 31, 2011 and $20.1 million at
September 30, 2011. The provision for loan losses for the first nine months
of 2012 increased to $9.3 million from $5.9 million for the same period in
2011. Net charge-offs rose to $12.4 million for the nine months ended
September 30, 2012, compared to $7.9 million for the nine months ended
September 30, 2011. Included in the net charge-offs for the nine months ended
September 30, 2012 was the aforementioned $9.0 million charge-off on a shared
national credit for an ethanol plant, a $1.1 million charge-off for a
participation loan, and a $.9 million charge-off for a non owner-occupied
commercial real estate loan. The increased provision expense was primarily
due to these three large charge-offs. The ratio of the allowance for loan
losses to loans outstanding as of September 30, 2012 was 1.84%, which was
lower than the 2.19% for the same period last year due to charging off
specific allocations as necessitated by changing circumstances and due to
lower loan balances.

Net- Interest Income (Tax-Equivalent Basis)

Net interest income on a FTE basis increased $.8 million during the first nine
months of 2012 over the same period in 2011 due to a $6.0 million (35.5%)
decrease in interest expense, which was partially offset by a $5.2 million
(11.2%) decrease in interest income. The increase in net interest income was
primarily due to the reduction in the average balances of interest-bearing
deposits and average debt outstanding as well as the reduction in the average
rate paid on interest-bearing liabilities. The slightly lower yield on both
loans and investment securities, as funds were reinvested, contributed to the
decline in interest income when comparing the two periods. The reduction in
the average rates on interest-bearing liabilities was the primary driver of
the increase in the net interest margin of 42 basis points, as it increased to
3.31% for the nine months ended September 30, 2012 from 2.89% for the same
period of 2011. The net interest margin was 2.96% for the year ended December
31, 2011.

There was an overall $146.4 million decrease in average interest earning
assets, driven by the $45.8 million reduction in loans and the $87.0 million
reduction in other interest earning assets, primarily cash. The reduction in
cash contributed to the relatively stable yield on our average earning
assets.

Interest expense decreased during the first nine months of 2012 when compared
to the same period of 2011 due to an overall reduction in interest rates on
deposit products driven by the Corporation's net-interest margin strategy
implemented during 2011 and continuing into 2012, its decision to only
increase special rates on time deposits for full relationship customers, the
reduction in the average balance of total interest-bearing liabilities and the
shorter duration of the portfolio. The average balance of interest-bearing
liabilities decreased by $186.1 million as management implemented a strategy
to right-size the balance sheet by using cash to repay brokered deposits and
wholesale long-term borrowings during 2011. The overall effect was a 43 basis
point decrease in the average rate paid on the Corporation's average
interest-bearing liabilities, from 1.75% for the nine months ended September
30, 2011 to 1.32% for the same period of 2012.

Net interest income on a FTE basis increased $.3 million during the third
quarter of 2012 over the same period in 2011 due to a $1.7 million (34.0%)
decrease in interest expense, which was partially offset by a $1.4 million
(9.7%) decrease in interest income. The increase in net interest income was
primarily due to the reduction in the average balances of interest-bearing
deposits and average debt outstanding as well as the reduction in the average
rate paid on interest-bearing liabilities. The slightly lower yield on both
loans and investment securities, as funds were reinvested, as well as the
lower average balances outstanding, contributed to the decline in interest
income when comparing the two periods. The reduction in the average rates on
interest-bearing liabilities was the primary driver of the increase in the net
interest margin of 31 basis points, as it increased to 3.28% for the three
months ended September 30, 2012 from 2.97% for the same period of 2011.

Non-Interest Income and Non-Interest Expense

Other operating income, exclusive of gains, decreased $.7 million during the
first nine months of 2012 when compared to the same period of 2011. Service
charge income and debit card income both remained stable when comparing the
first nine months of 2012 and 2011. Bank owned life insurance income
increased due to the $.7 million one-time, tax free death benefit that accrued
in March 2012. Insurance commissions decreased $1.9 million due to the sale
of the assets of First United Insurance Group, LLC effective January 1, 2012.
The sale did not have a material impact on the Corporation's financial
condition or results of operations. The Corporation also realized an increase
of approximately $.5 million in other income primarily due to increased rental
income on OREO. Trust department income increased $.2 million when comparing
the first nine months of 2012 to the same period of 2011. Trust assets under
management were $630 million at September 30, 2012 and $582 at September 30,
2011.

Net gains of $1.1 million were reported through other income in the first nine
months of 2012, compared to net losses of $.1 million during the same period
of 2011. The change from net losses to net gains in the first nine months of
2012 was a result of $.6 million in net gains realized on the sale of
investment securities and $.4 million in net gains realized on the sales of
OREO. There were no non-cash other-than-temporary impairment ("OTTI") charges
on the investment portfolio for the first nine months of 2012, compared to
$19,000 in OTTI charges during the first nine months of 2011. The reduction in
OTTI charges throughout 2011 and the first nine months of 2012 resulted from
improvements in the financial industry, as the collateralized debt obligation
portfolio is made up primarily of securities issued by financial institutions.

Other operating income, exclusive of gains, decreased $.3 million during the
third quarter of 2012 when compared to the same period of 2011. Service
charge income and debit card income both remained stable when comparing the
third quarters of 2012 and 2011. Insurance commissions decreased $.6 million
due to the sale of the assets of First United Insurance Group, LLC on January
1, 2012. This decrease was offset by an increase of $.3 million in other
miscellaneous income during the third quarter of 2012 when compared to the
same time period of 2011.

Net losses of $.3 million were reported through other income in the third
quarter of 2012, compared to net losses of $.8 million during the same period
of 2011. The decrease in the net losses in the third quarter of 2012 was
primarily the result of the decrease in losses on OREO. There were no
non-cash OTTI charges on the investment portfolio for the third quarters of
2012 or 2011.

Other operating expenses decreased $1.3 million (4.1%) for the first nine
months of 2012 when compared to the first nine months of 2011. The decrease
was due to a decline of $.4 million in salaries and benefits resulting
primarily from a reduction of full-time equivalent employees through attrition
within the Corporation throughout 2011 and the sale of the assets of the
insurance company. A decline of $.3 million in FDIC premiums attributable to
the repayment of brokered deposits also impacted the reduced expenses. A
decrease of $.3 million in equipment expense is the result of normal
depreciation during the nine months of 2012 when compared to the same period
of 2011. Other miscellaneous expenses, such as legal and professional,
marketing, consulting and postage, were also reduced when comparing the first
nine months of 2012 to the same time period of 2011.

Other operating expenses decreased $.2 million for the third quarter of 2012
when compared to the same period of 2011. The decrease was due to a decrease
of $.2 million in salary expense attributable to reduced head count and lower
incentive pay due to reduced production in commercial lending.

ABOUT FIRST UNITED CORPORATION

First United Corporation is the parent company of First United Bank & Trust, a
Maryland trust company (the "Bank"), and three statutory trusts that were used
as financing vehicles. The Bank has three wholly-owned subsidiaries:
OakFirst Loan Center, Inc., a West Virginia finance company; OakFirst Loan
Center, LLC, a Maryland finance company (collectively, the "OakFirst Loan
Centers"), and First OREO Trust, a Maryland statutory trust formed for the
purposes of servicing and disposing of the real estate that the Bank acquires
through foreclosure or by deed in lieu of foreclosure. The Bank owns a
majority interest in Cumberland Liquidation Trust, a Maryland statutory trust
formed for the purposes of servicing and disposing of real estate that secured
a loan made by another bank and in which the Bank held a participation
interest. The Bank also owns 99.9% of the limited partnership interests in
Liberty Mews Limited Partnership, a Maryland limited partnership formed for
the purpose of acquiring, developing and operating low-income housing units in
Garrett County, Maryland. The Corporation's website is www.mybank4.com.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements as defined by the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
do not represent historical facts, but are statements about management's
beliefs, plans and objectives about the future, as well as its assumptions and
judgments concerning such beliefs, plans and objectives. These statements are
evidenced by terms such as "anticipate," "estimate," "should," "expect,"
"believe," "intend," and similar expressions. Although these statements
reflect management's good faith beliefs and projections, they are not
guarantees of future performance and they may not prove true. These
projections involve risk and uncertainties that could cause actual results to
differ materially from those addressed in the forward-looking statements. For
a discussion of these risks and uncertainties, see the section of the periodic
reports that First United Corporation files with the Securities and Exchange
Commission entitled "Risk Factors".



FIRST UNITED CORPORATION
Oakland, MD
Stock Symbol : FUNC
(Dollars in thousands, except per share data)
                   Three Months Ended                           Nine Months
                                                                Ended
                   unaudited                                    unaudited
                   30-Sep     30-Sep     30-Jun     31-Mar      30-Sep 30-Sep
                   2012       2011       2012       2012        2012   2011
EARNINGS SUMMARY
Interest income   $        $        $        $          $      $  
                   13,119    14,483    13,501    13,768     40,388 45,232
Interest expense  $       $       $       $         $      $  
                   3,340     5,058     3,603     3,885      10,828 16,789
Net interest       $       $       $       $         $      $  
income             9,779     9,425     9,898     9,883      29,560 28,443
Provision for      $      $       $       $         $     $   
loan losses          40     1,334     1,112     8,124      9,276  5,939
Other Income       $       $       $       $         $      $  
                   3,328     3,618     3,146     4,052      10,526 11,198
Net Securities     $      $      $      $       $    $   
Impairment Losses     -      -      -     -           
                                                                -      (19)
Net                $      $      $      $         $     $   
Gains/(losses) -   (300)      (793)        36     1,326      1,062   (144)
other
Other Operating    $       $        $        $         $      $  
Expense            9,936     10,151    10,186    9,763      29,885 31,154
Income/(loss)      $       $      $       $          $     $   
before taxes       2,831      765      1,782     (2,626)    1,987  2,404
Income tax         $      $      $      $       $    $   
(benefit)/expense   (44)       79      133       39        128    (372)
Net income/(loss)  $       $      $       $          $     $   
                   2,875      686      1,649     (2,665)    1,859  2,776
Accumulated
preferred stock
dividends and
     discount      $      $      $      $       $     $   
     accretion      415       404       431      415         1,261  1,198
Net income
available/(loss

attributable) to   $       $      $       $          $    $   
common             2,460      282      1,218     (3,080)    598   1,578
shareholders
Cash dividends     $      $      $      $       $    $   
paid                 -      -      -     -             
                                                                -      -
                   Three Months Ended
                   unaudited
                   30-Sep     30-Sep     30-Jun     31-Mar
                   2012       2011       2012       2012
PER COMMON SHARE
Basic/ Diluted     $      $      $      $  
Net Income/(loss)  0.40      0.05      0.20      (0.50)
Per Common Share
Book value         $       $       $       $  
                   11.07     11.08     10.54     10.32
Closing market     $      $      $      $   
value              6.30      3.66      4.31      6.00
Market Range:
 High           $      $      $      $   
                   6.80      5.29      8.40      6.00
 Low            $      $      $      $   
                   4.52      3.38      4.05      3.20
Common shares
     outstanding   6,199,283  6,182,757  6,199,283  6,182,757
     at period end
PERFORMANCE RATIOS
(Period End,
annualized)
Return on average  0.18%      0.25%      -0.15%     -0.77%
assets
Return on average
shareholders'
     equity        2.57%      3.80%      -2.12%     -11.05%
Net interest       3.31%      2.89%      3.33%      3.30%
margin
Efficiency ratio   72.60%     77.85%     70.40%     64.00%
PERIOD END         30-Sep     31-Dec     30-Sep
BALANCES
                   2012       2011       2011
Assets             $          $          $
                   1,359,397  1,390,865  1,434,104
Earning assets     $          $          $
                   1,131,996  1,188,021  1,228,821
Gross loans        $         $         $ 
                   889,990   938,694   919,023
     Commercial    $         $         $ 
     Real Estate   307,447   336,234   321,352
     Acquisition   $         $         $ 
     and           138,513   142,871   147,580
     Development
     Commercial    $        $        $  
     and           64,616    78,697    70,541
     Industrial
     Residential   $         $         $ 
     Mortgage      346,879   347,220   345,525
     Consumer      $        $        $  
                   32,535    33,672    34,025
Investment         $         $         $ 
securities         239,371   245,023   277,819
Total deposits     $          $          $
                   1,003,393  1,027,784  1,066,220
     Noninterest   $         $         $ 
     bearing       169,371   149,888   150,756
     Interest      $         $         $ 
     bearing       834,022   877,896   915,464
Shareholders'      $        $        $  
equity             98,479    96,656    98,328
CAPITAL RATIOS     30-Sep     31-Dec     30-Sep
Period end capital 2012       2011       2011
to risk-
     weighted
     assets:
     Tier 1        11.93%     11.30%     11.25%
     Total         13.58%     13.05%     13.01%
ASSET QUALITY
Net charge-offs    $      $       $   
for the quarter     461      3,873     2,200
Nonperforming
assets: (Period
End)
     Nonaccrual    $        $        $  
     loans         29,081    38,188    37,459
     Restructured  $        $        $  
     loans         20,852    18,042    19,683
     Loans 90 days
     past due
     and accruing  $       $       $    
                   5,921     1,779      827
     Other real    $        $        $  
     estate owned  20,631    16,676    17,508
     Total
     nonperforming
     assets
     and past due  $        $        $  
     loans         35,002    39,967    38,286
Allowance for
credit losses
     to gross
     loans, at     1.84%      2.08%      2.19%
     period end
Nonperforming and
90 day past-due
loans
     to total
     loans, at     3.93%      4.26%      4.17%
     period end
Nonperforming
loans and 90 day
past-due
     loans to
     total assets, 2.57%      2.87%      2.67%
     at period end



SOURCE First United Corporation

Website: http://www.mybank4.com
Contact: Carissa Rodeheaver, +1-301-533-2362 (phone), +1-301-334-1421 (fax)