First United Corporation Announces 2012 Fourth Quarter and Year End Earnings

 First United Corporation Announces 2012 Fourth Quarter and Year End Earnings

PR Newswire

OAKLAND, Md., March 6, 2013

OAKLAND, Md., March 6, 2013 /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 fourth quarter of 2012 totaling $2.4 million and basic and diluted net
income per common share of $.38, compared to net income available to common
shareholders of $.4 million and basic and diluted net income per common share
of $.07 for the fourth quarter of 2011. Provision expense for the fourth
quarter of 2012 was $.1 million compared to $3.2 million for the fourth
quarter of 2011.

For the year ended December 31, 2012, the Corporation reported consolidated
net income available to common shareholders of $3.0 million, compared to net
income available to common shareholders of $2.0 million for the year ended
December 31, 2011. Basic and diluted net income per common share for the year
ended December 31, 2012 were $.48, compared to basic and diluted net income
per common share of $.33 for the year ended December 31, 2011. The increase in
net income for 2012 when compared to 2011 was attributable to a $.6 million
increase in net interest income after provision for loan losses and a
reduction of $3.9 million in other operating expenses due primarily to
reductions in salaries and benefits, equipment expense and FDIC premiums.
These increases were offset by a decrease in other operating income of $1.3
million primarily attributable to the sale of the Corporation's insurance
agency subsidiary, First United Insurance Group, LLC (the "Insurance Agency"),
effective January 1, 2012, a decline in net gains of $.6 million, and an
increase in tax expense of $1.6 million.

Net gains for 2012 were driven by net gains realized on sales of investment
securities of $1.5 million, gains on the sale of consumer mortgage loans of
$.2 million and a gain of $.1 million from the sale of the assets of the
Insurance Agency. The net interest margin for the year ended December 31,
2012, on a fully tax equivalent ("FTE") basis, increased to 3.30% from 2.96%
for the year ended December 31, 2011.

According to William B. Grant, Chairman, Chief Executive Officer, "2012
presented a challenge to our management team and employees as we started the
year with the full charge-off of a $9.0 million shared national credit for an
ethanol plant. I am pleased to report that we rose to the challenge, ending
the year with increased income over 2011 despite the large charge-off."

Financial Highlights Comparing the Three and Twelve Months Ended December 31,
2012 and 2011:

  o$3.1 million decrease in the provision for loan loss expense for the three
    months ended December 31, 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 3.21% for the
    fourth quarter of 2011 to 3.27% for the same period of 2012. Comparing
    2011 to 2012, the net interest margin increased from 2.96% for 2011 to
    3.30% for 2012, which was driven primarily by the strategic plan to reduce
    cash levels by paying off certain liabilities that matured during 2012,
    reinvesting excess cash into investments and the continued emphasis on
    lower cost core deposits.

  o13.0% decrease in total other income for the fourth quarter of 2012 when
    compared to the fourth quarter of 2011 primarily due to the sale of the
    insurance agency effective January 1, 2012.

  oTotal other operating expenses decreased $3.9 million during 2012 when
    compared to 2011. This decrease was due primarily to a $.4 million
    decline in FDIC premiums attributable to the repayment of brokered
    deposits and a $.7 million decline in salary expense due to the sale of
    the assets of the Insurance Agency. Equipment expense declined by $.4
    million in 2012 when compared to 2011 primarily due to reduced
    depreciation expense. Other real estate expenses decreased $1.5 million
    in 2012 when compared to 2011 primarily due to a $.5 million decrease in
    write-downs, an increase of $.7 in gains on sales of properties and an
    increase in other real estate owned ("OREO") rental income of $.3
    million. Professional services declined by $.3 million and other expenses
    decreased by $.4 million in 2012 when compared to 2011.

  oDecline in the ratio of the allowance for loan losses to loans outstanding
    from 2.08% as of December 31, 2011 to 1.83% as of December 31, 2012, based
    on reduced delinquency, charge-offs and stabilization in the loan
    portfolio.

Balance Sheet Overview

Total assets were $1.32 billion at December 31, 2012, representing a decrease
of $70.1 million (5.0%) from assets at December 31, 2011. The decrease
resulted from a reduction in loan balances due to paybacks, charge-offs,
scheduled principal amortization, and a strategic decision to continue to
deploy excess cash to repay wholesale borrowings and brokered certificates of
deposit and to invest in investment securities during 2012.

Comparing December 31, 2012 to December 31, 2011, outstanding loans decreased
by $63.9 million (6.8%). Commercial Real Estate ("CRE") loans decreased $37.4
million as a result of payoffs of several large loans, charge-offs of loan
balances and ongoing scheduled principal payments. Commercial and industrial
("C&I") loans decreased $9.7 million, primarily due to a $9.0 million
charge-off on a shared national credit during the first quarter, and
residential mortgages declined $.3 million. The decrease in the residential
mortgage portfolio was attributable to regularly scheduled principal payments
on existing loans and management's decision to use secondary market outlets
such as Fannie Mae for the majority of new, longer-term, fixed-rate
residential loan originations. Acquisition and development ("A&D") loans
decreased $14.5 million due to principal repayments and charge-offs. The
consumer loan portfolio declined $2.0 million due to repayment activity in the
indirect auto portfolio which exceeded new production due to special financing
offered by the automotive manufacturers, credit unions and certain large
regional banks. At December 31, 2012, approximately 60% of the commercial
loan portfolio was collateralized by real estate, compared to approximately
64% at December 31, 2011.

Total deposits decreased $50.9 million during 2012 when compared to deposits
at December 31, 2011. The decline in deposits was due to a strategic decision
to continue to use excess cash to repay wholesale deposits and FHLB advances
at their stated maturities and to allow certificates of deposit for
non-relationship customers to run off. Time deposits less than $100,000
declined $28.0 million while time deposits greater than $100,000 decreased
$42.7 million. Retail money markets also declined by $16.8 million during
2012. These decreases were offset by increases of $7.2 million in traditional
savings accounts, $17.8 million in interest-bearing demand deposits and $11.6
million in non-interest bearing demand deposits.

Comparing December 31, 2012 to December 31, 2011, shareholders' equity
increased from $96.7 million to $98.9 million. The $2.2 million increase was
attributable to the net income recorded in 2012. The book value of the
Corporation's common stock increased from $10.80 per share at December 31,
2011 to $11.14 per share at December 31, 2012.

At December 31, 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 net charge-offs to average loans for the year ended December 31,
2012 was 1.41%, compared to 1.24% for the year ended December 31, 2011.
Relative to December 31, 2011, all segments of loans, with the exception of
C&I and residential mortgage loans, showed improvement. The net charge-off
ratio for CRE loans as of December 31, 2012 was .67%, compared to 2.02% as of
December 31, 2011. The net charge-off ratio for A&D loans as of December 31,
2012 was .29%, compared to 1.91% as of December 31, 2011. The ratios for C&I
loans were 12.1% and .99% for December 31, 2012 and December 31, 2011,
respectively, as a result of the $9.0 million full charge-off described
above. The residential mortgage ratios were .33% and .32% for December 31,
2012 and December 31, 2011, respectively, and the consumer loan ratios were
.69% and 1.17% for December 31, 2012 and December 31, 2011, respectively.
Without the $9.0 million C&I charge-off, the ratio of net charge-offs to
average loans in 2012 would have been .41% and the Corporation would have
recorded a net recovery rate of .18% for C&I loans.

Non-accrual loans totaled $19.9 million as of December 31, 2012, compared to
$38.2 million as of December 31, 2011. The $18.3 million decline in
non-accrual loans was due primarily to the $9.0 million C&I charge-off as well
as the payoff of one $4.4 million CRE loan and payoffs/pay downs of $7.4
million on three A&D loans during 2012. Non-accrual loans which have been
subject to a partial charge-offs totaled $6.7 million as of December 31, 2012,
compared to $13.4 million as of December 31, 2011.

The allowance for loan losses (the "ALL") decreased to $16.0 million at
December 31, 2012, compared to $19.5 million at December 31, 2011. The
provision for loan losses for the year ended December 31, 2012 increased to
$9.4 million from $9.2 million for the year ended December 31, 2011. Net
charge-offs rose to $12.8 million for the year ended December 31, 2012,
compared to $11.8 million for the year ended December 31, 2011. Included in
the net charge-offs for the year ended December 31, 2012 were 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 ALL to loans outstanding as of December 31,
2012 was 1.83%, which was lower than the 2.08% at December 31, 2011 due to the
charge-off of specific allocations as a result of changing circumstances.

Net-Interest Income (Tax-Equivalent Basis)

Net interest income on a FTE basis decreased $.3 for the fourth quarter of
2012 over the fourth quarter of 2011. Net interest income on a FTE basis
increased $.5 million for the year ended December 31, 2012 over the year ended
December 31, 2011 due to a $7.2 million (34.1%) decrease in interest expense,
which was partially offset by a $6.8 million (11.1%) 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 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 and the reduction in loan balances, 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 34 basis point increase in the net interest margin, as it increased to
3.30% for the year ended December 31, 2012 from 2.96% for the year ended
December 31, 2011.

There was an overall $124.6 million decrease in average interest-earning
assets, driven by the $45.6 million reduction in loans and the $61.5 million
reduction in other interest earning assets, primarily cash, when comparing
2012 to 2011. The reduction in cash contributed to the relatively stable
yield on our average earning assets.

Interest expense decreased for the year ended December 31, 2012 when compared
to the year ended December 31,2011 due to an overall reduction in interest
rates on deposit products driven by our net-interest margin strategy
implemented during 2011 and continuing through 2012, which included our
decision to only increase special rates on time deposits for full relationship
customers. Management also strategically focused on shifting the mix of our
deposits from higher cost certificates of deposit to core deposit products.
The average balance of interest-bearing liabilities decreased by $158.3
million as management continued its strategy to deploy excess cash to repay
brokered deposits and wholesale long-term borrowings at their stated
maturities during 2012. The overall effect of the strategy was a 42 basis
point decrease in the average rate paid on our average interest-bearing
liabilities, from 1.71% for the year ended December 31, 2011 to 1.29% for the
year ended December 31,2012.

Non-Interest Income and Non-Interest Expense

Other operating income, exclusive of gains, decreased $1.3 million during 2012
when compared to 2011. Service charge income and debit card income both
remained stable when comparing 2012 and 2011. Bank owned life insurance
income increased due to the $.7 million one-time, tax free death benefit that
occurred in March 2012. Insurance commissions decreased $2.4 million due to
the sale of the assets of the Insurance Agency effective January 1, 2012. The
sale did not have a material impact on our financial condition or results of
operations as the reduction in income was offset by the decrease in associated
expense. Other income increased $.3 million in 2012 when compared to 2011,
offset by a slight decline of $.1 million in debit card income. Trust
department income increased $.2 million when comparing 2012 to 2011. Trust
assets under management were $637 million at December 31, 2012 and $595
million at December 31, 2011.

Net gains of $1.7 million were reported through other income during 2012,
compared to net gains of $2.3 million during 2011. The decrease in net gains
in 2012 was primarily attributable to an increase of $.7 million in net gains
on sales of investment securities offset by the $1.4 million gain on the sale
of indirect auto loans in 2011.

Other operating expenses decreased $3.9 million (9.0%) for the year ended
December 31, 2012 when compared to the year ended December 31, 2011. The
decrease was due to a decline of $.7 million in salaries and benefits
resulting primarily from a reduction of full-time equivalent employees through
attrition within the Corporation and the sale of the assets of the Insurance
Agency. A decline of $.4 million in FDIC premiums attributable to the
repayment of brokered deposits also impacted the reduced expenses. A decrease
of $.4 million in equipment expense was the result of reduced depreciation
during 2012 when compared to 2011. Other real estate expenses decreased $1.5
million in 2012 when compared to 2011 primarily due to a $.5 million decrease
in write-downs, an increase of $.7 in gains on sales of properties and an
increase in OREO rental income of $.3 million. Other miscellaneous expenses,
such as legal and professional, marketing, consulting and postage, were also
reduced when comparing 2012 to 2011.

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                                     Twelve Months
                                                                           Ended
                    unaudited                                              unaudited
                    31-Dec     31-Dec     30-Sep     30-Jun     31-Mar     31-Dec  31-Dec
                    2012       2011       2012       2012       2012       2012    2011
EARNINGS SUMMARY
Interest income    $        $        $         $         $      $       $  
                    12,723    14,323    13,119    13,501    13,768     53,111 59,496
Interest expense   $       $       $        $        $      $       $  
                    3,137     4,417     3,340     3,603      3,885    13,965 21,206
Net interest        $       $       $        $        $      $       $  
income              9,586     9,906     9,779     9,898      9,883    39,146 38,290
Provision for loan  $      $       $      $        $      $      $   
losses               114      3,218      40       1,112      8,124    9,390  9,157
Other Operating     $       $       $        $        $      $       $  
Income              3,283     3,773     3,275     3,089      3,983    13,630 14,966
Net Securities      $      $      $      $      $      $    $   
Impairment Losses      -      -     -       -             -   
                                                                -                  (19)
Net Gains/(losses)  $       $      $      $      $      $      $   
- other             1,036      326       (8)      (23)         703   1,708  2,321
Other Operating     $        $        $         $         $      $       $  
Expense             10,202    10,200    10,175    10,070     9,071    39,518 43,410
Income/(loss)       $       $      $        $        $      $      $   
before taxes        3,589      587      2,831     1,782     (2,626)    5,576  2,991
Income tax          $      $      $      $      $      $    $   
expense/(benefit)    785      (263)      (44)       133           39  913      (635)
Net income/(loss)   $       $      $        $        $      $      $   
                    2,804      850      2,875     1,649     (2,665)    4,663  3,626
Accumulated
preferred stock     $      $      $      $      $      $      $   
dividends and        430       411      415        431          415   1,691  1,609
 
discount accretion
Net income
available/(loss
                    $       $      $        $        $      $      $   
 attributable)  2,374      439      2,460     1,218     (3,080)    2,972  2,017
to common
shareholders
Cash dividends      $      $      $      $      $      $    $   
paid                  -      -     -       -             -     
                                                                -                  -
                    Three Months Ended
                    unaudited
                    31-Dec     31-Dec     30-Sep     30-Jun     31-Mar
                    2012       2011       2012       2012       2012
PER COMMON SHARE
Basic/ Diluted Net  $      $      $       $       $    
Income/(loss) Per   0.38      0.07      0.40      0.20       (0.50)
Common Share
Book value          $       $       $        $        $    
                    11.14     10.80     11.07     10.54      10.32
Closing market      $      $      $       $       $    
value               7.17      3.16      6.30      4.31        6.00
Market Range:
 High            $      $      $       $       $    
                    7.80      4.81      7.25      8.60        6.48
 Low             $      $      $       $       $    
                    6.02      2.93      4.31      4.05        3.16
Common shares
      outstanding   6,199,283  6,182,757  6,199,283  6,199,283  6,182,757
      at period end
PERFORMANCE RATIOS
(Period End,
annualized)
Return on average   0.34%      0.24%      0.18%      -0.15%     -0.77%
assets
Return on average
shareholders'
      equity        4.79%      3.71%      2.57%      -2.12%     -11.05%
Net interest        3.30%      2.96%      3.31%      3.33%      3.30%
margin
Efficiency ratio    72.50%     77.85%     72.60%     70.40%     64.00%
PERIOD END          31-Dec     31-Dec
BALANCES
                    2012       2011
Assets              $          $
                    1,320,783  1,390,865
Earning assets      $          $
                    1,106,222  1,188,021
Gross loans         $         $ 
                    874,829   938,694
      Commercial    $         $ 
      Real Estate   298,851   336,234
      Acquisition   $         $ 
      and           128,391   142,871
      Development
      Commercial    $        $  
      and           69,013    78,697
      Industrial
      Residential   $         $ 
      Mortgage      346,919   347,220
      Consumer      $        $  
                    31,655    33,672
Investment          $         $ 
securities          227,313   245,023
Total deposits      $         $
                    976,884   1,027,784
      Noninterest   $         $ 
      bearing       161,500   149,888
      Interest      $         $ 
      bearing       815,384   877,896
Shareholders'       $        $  
equity              98,905    96,656
CAPITAL RATIOS      31-Dec     31-Dec
Period end capital  2012       2011
to risk-
      weighted
      assets:
      Tier 1        12.54%     11.30%
      Total         14.13%     13.05%
ASSET QUALITY
Net charge-offs for $      $   
the quarter          416      3,873
Nonperforming
assets: (Period
End)
      Nonaccrual    $        $  
      loans         19,915    38,188
      Restructured  $        $  
      loans         17,674    18,042
      Loans 90 days
      past due
      and accruing  $       $   
                    2,146     1,779
      Other real    $        $  
      estate owned  17,513    16,676
      Total
      nonperforming
      assets
      and past due  $        $  
      loans         22,061    39,967
Allowance for
credit losses
      to gross
      loans, at     1.83%      2.08%
      period end
Nonperforming loans
and 90 day past-due
loans
      to gross
      loans, at     2.52%      4.26%
      period end
Nonperforming loans
and 90 day past-due
      loans to
      total assets, 1.67%      2.87%
      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)
 
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