First United Corporation Announces 2nd Quarter 2013 Earnings

         First United Corporation Announces 2nd Quarter 2013 Earnings

PR Newswire

OAKLAND, Md., Aug. 14, 2013

OAKLAND, Md., Aug. 14, 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 of
$1.4 million for the second quarter of 2013, compared to a net income
available to common shareholders of $1.2 million for the same period of 2012.
Basic and diluted net income per common share for the second quarter of 2013
were $.23, compared to basic and diluted net income per common share of $.20
for the same period of 2012. The increase in earnings for the second quarter
of 2013 compared to the second quarter of 2012 was primarily due to a $1.0
million decrease in provision expense and $.3 million decrease in operating
expenses due to a reduction in salaries and benefits, offset by a decrease of
$.8 million in net interest income. The reduction in salaries and benefits
was due to reduced health care costs and incentives. The net interest margin
for the second quarter of 2013, on a fully tax equivalent ("FTE") basis,
decreased to 3.09% from 3.34% for the second quarter of 2012. The net
interest margin for the year ended December 31, 2012, on a FTE basis, was
3.30%.

Consolidated net income available to common shareholders was $2.9 million for
the first six months of 2013, compared to a net loss attributable to common
shareholders of $1.9 million for the same period of 2012. Basic and diluted
net income per common share for the first six months of 2013 was $.47,
compared to a net loss per common share of $.30 for the same period of 2012.
The change in earnings, from a net loss for the first six months of 2012 to
net income for the first six months in 2013, was primarily due to a $8.3
million decrease in the provision for loan losses during the first six months
of 2013 when compared to the same time period of 2012. This decrease was
offset by a decrease in net gains of $.3 million due to reduced gains on sales
of investment securities, and a decrease of $.8 million in other income due to
a reduction in bank-owned life insurance ("BOLI") income driven by a one-time
death benefit of $.7 million that was received in March 2012. Total other
operating expenses increased $.1 million during the first six months of 2013
when compared to the same period of 2012. Other expenses related to other
real estate owned ("OREO") increased $.3 million in the first six months of
2013 when compared to the first six months of 2012. The net interest margin
for the first six months of 2013, on a FTE basis, decreased to 3.17% from
3.33% for the first six months of 2012. The net interest margin for the year
ended December 31, 2012, on a FTE basis, was 3.30%.

Financial Highlights Comparing the Three and Six Months Ended June 30, 2013
and 2012:

  o$8.3 million decrease in the provision for loan loss expense, primarily
    due to reduction in charge-offs from the first quarter of 2012.
  oDeclining net interest margin, on a FTE basis when comparing the second
    quarter of 2013 of 3.09% to the second quarter of 2012 of 3.34% due to
    reduced yields on earning assets.
  oAllowance for loan losses (the "ALL") to loans outstanding of 1.84% as of
    June 30, 2013 compared to 1.83% as of December 31, 2012.
  oOther operating income and expense remained stable when comparing the
    second quarter of 2013 to 2012.

According to William B. Grant, Chairman and Chief Executive Officer, "we are
pleased with the stabilization of asset quality through the first half of
2013. Although we experienced the pressure of margin compression through the
second quarter, we continue to focus our efforts on reducing expenses and
increasing core earnings."

Balance Sheet Overview

Total assets remained stable at $1.3 billion at June 30, 2013, which was the
same amount at December 31, 2012. During the first six months, cash and
interest-bearing deposits in other banks decreased $41.0 million, the
investment portfolio increased $81.3 million, and gross loans decreased $33.0
million. Total liabilities increased by approximately $9.5 million during the
first six months of 2013, reflecting a decrease in total deposits of $4.2
million offset by an increase of $11.7 million in short-term borrowings and a
$2.1 million increase in accrued interest payable and other liabilities.

Total investment securities available-for-sale increased $81.4 million since
December 31, 2012. At June 30, 2013, the securities classified as
available-for-sale included a net unrealized loss of $29.1 million, which
represents the difference between the fair value and amortized cost of
securities in the portfolio.

Comparing June 30, 2013 to December 31, 2012, outstanding loans decreased by
$33.0 million (3.8%). Commercial Real Estate ("CRE") loans decreased $12.9
million as a result of the payoff of several large loans and ongoing scheduled
principal payments. Acquisition and development ("A&D") loans decreased $10.0
million due to the movement of $2.1 million from construction to permanent
financing and $2.2 million of payoffs. Commercial and industrial ("C&I")
loans decreased $5.2 million due to scheduled principal payments. Residential
mortgages decreased by $.3 million. The decrease in the residential mortgage
portfolio was attributable to the purchase of a pool of loans of approximately
$8.4 million in January 2013 offset by refinancings and regularly scheduled
principal payments on existing loans. Management continues to use Fannie Mae
for the majority of new, longer-term, fixed-rate residential loan
originations. The consumer portfolio decreased $4.6 million due primarily to
repayment activity in the indirect auto portfolio offsetting new production.
At June 30, 2013, approximately 59% of the commercial loan portfolio was
collateralized by real estate compared to 60% at December 31, 2012.

Total deposits decreased $4.2 million during the first six months of 2013 when
compared to deposits at December 31, 2012. Non-interest bearing deposits
increased $1.2 million. Traditional savings accounts increased $4.6 million
due to continued growth in our Prime Saver product. Total demand deposits
increased $9.7 million and total money market accounts increased $3.2
million. Time deposits less than $100,000 declined $7.3 million and time
deposits greater than $100,000 decreased $15.6 million due to the repayment of
a $20.0 million brokered certificate of deposit at its maturity in January
2013.

Comparing June 30, 2013 to December 31, 2012, shareholders' equity decreased
from $98.9 million to $97.8 million. The decrease resulted from an increase
of $4.1 million in accumulated other comprehensive loss, offset by increased
earnings of $2.9 million.

The book value of the Corporation's common stock was $10.94 per share at June
30, 2013, compared to $11.14 per share at December 31, 2012.

At June 30, 2013, there were approximately 6,210,587 outstanding shares of the
Corporation's common stock, an outstanding immediately exercisable warrant to
purchase 326,323 shares of the Corporation's common stock, and 30,000
outstanding shares of the Corporation's Fixed Rate Cumulative Perpetual
Preferred Stock, Series A.

Net- Interest Income (Tax-Equivalent Basis)

Net interest income on a FTE basis decreased $1.4 million during the first six
months of 2013 over the same period in 2012 due to a $3.0 million (10.8%)
decrease in interest income, which was partially offset by a $1.6 million
(21.3%) decrease in interest expense. The decrease in interest income was
primarily due to the $62.5 million reduction in the average balance of loans
when comparing the first six months of 2013 to the same period of 2012. The
slightly lower yield on both loans and investment securities, as funds were
reinvested, also contributed to the decline in interest income when comparing
the two periods. The decline in interest income was partially offset by a
decline in interest expense due to the reduction in average balances in
interest-bearing deposits and long-term borrowings. We saw a slight decline
in the net interest margin in the first six months of 2013 to 3.17% when
compared to 3.30% for the year ended December 31, 2012 and 3.33% for the first
six months of 2012.

There was an overall $26.2 million decrease in average interest-earning
assets, driven by a $62.5 million reduction in loans, offset by increases of
$23.9 million in investment securities and $12.4 million in other interest
earning assets, primarily cash.

Interest expense decreased during the first six months of 2013 when compared
to the same period of 2012 due primarily to an overall reduction in average
interest-bearing liabilities of $92.2 million. This reduction was due to the
repayments of $40.0 in brokered deposits and $23.5 million in long-term
borrowings. The overall effect was a 19 basis point decrease in the average
rate paid on our average interest-bearing liabilities, from 1.34% for the six
months ended June 30, 2012 to 1.15% for the same period of 2013.

Net interest income on a FTE basis decreased $.8 million during the second
quarter of 2013 over the same period in 2012 due to a $1.5 million (10.6%)
decrease in interest income, which was partially offset by a $.7 million
(18.5%) decrease in interest expense. The decrease in interest income was
primarily due to the $61.0 million reduction in the average balance of loans
when comparing the second quarter of 2013 to the same period of 2012. The
slightly lower yield on both loans and investment securities, as funds were
reinvested, also contributed to the decline in interest income when comparing
the two periods. The decline in interest income was partially offset by a
decline in interest expense due to the reduction in average balances in
interest-bearing deposits and long-term borrowings. We saw a decline in the
net interest margin in the second quarter of 2013 to 3.09% when compared to
3.34% for the three months ended June 30, 2012.

Interest expense decreased during the second quarter of 2013 when compared to
the same period of 2012 due primarily to an overall reduction in average
interest-bearing liabilities of $52.0 million. This reduction was due to the
repayments of $40.0 in brokered deposits and $23.5 million in long-term
borrowings. The overall effect was a 20 basis point decrease in the average
rate paid on our average interest-bearing liabilities, from 1.31% for the
three months ended June 30, 2012 to 1.11% for the same period of 2013.

Asset Quality

The ALL decreased to $15.5 million at June 30, 2013, from $16.0 million at
December 31, 2012 and $16.8 million at June 30, 2012. The provision for loan
losses for the first six months of 2013 decreased to $.9 million from $9.2
million for the same period in 2012. Net charge-offs declined to $1.5
million for the six months ended June 30, 2013, compared to $11.9 million for
the six months ended June 30, 2012. Included in the net charge-offs for the
six months ended June 30, 2013 was a $.8 million charge-off for a C&I loan.
The lower provision expense was due to the significantly lower level of net
charge-offs as well as the lower level of loan balances. The ratio of the ALL
to loans outstanding as of June 30, 2013 was 1.84%, which was slightly lower
than the 1.85% for the same period last year.

The ratio of net charge-offs to average loans for the six months ended June
30, 2013 was an annualized .34%, compared to an annualized 2.59% for the same
period in 2012 and 1.41% for the year ended December 31, 2012. Relative to
December 31, 2012, the C&I, residential mortgage and consumer segments of
loans showed improvement. The CRE portfolio had an annualized net charge-off
rate as of June 30, 2013 of 1.04% compared to an annualized net charge-off
rate of .67% as of December 31, 2012. The annualized net charge-off rate for
A&D loans as of June 30, 2013 was .39% compared to an annualized net
charge-off rate of .29% as of December 31, 2012. The ratios for C&I loans
were 2.87% and 12.10% for June 30, 2013 and December 31, 2012, respectively.
The residential mortgage ratios were .08% and .33% for June 30, 2013 and
December 31, 2012, respectively, and the consumer loan ratios were .57% and
.69% for June 30, 2013 and December 31, 2012, respectively.

Accruing loans past due 30 days or more declined to .75% of the loan portfolio
at June 30, 2013, compared to 2.39% at December 31, 2012. The decrease for
the first six months of 2013 was primarily due to a decrease of $11.2 million
in past-due accruing residential mortgage loans and a $1.9 million decrease in
past-due accruing CRE loans. Other improvements in the levels of past-due
loans were attributable to a combination of a slowly improving economy and
vigorous collection efforts by the Bank.

Comparing the six-month periods ended June 30, 2013 and June 30, 2012, total
non-accrual loan balances have declined. Non-accrual loans totaled $19.4
million as of June 30, 2013, compared to $19.9 million as of December 31, 2012
and $27.0 million as of June 30, 2012. Non-accrual loans which have been
subject to a partial charge-off totaled $7.4 million as of June 30, 2013,
compared to $6.7 million as of December 31, 2012.

Non-Interest Income and Non-Interest Expense

Other operating income, exclusive of gains, decreased $.8 million during the
first six months of 2013 when compared to the same period of 2012. The
decrease was due to the reduction in BOLI income due to the one-time death
benefit of $.7 million received in March 2012.

Net gains of $.4 million were reported through other income in the first six
months of 2013, compared to net gains of $.7 million during the same period of
2012. The reduction in net gains during the first six months of 2013 when
compared to the same period of 2012 was due to reduced gains on sales of
investment securities.

Other operating income, exclusive of gains, remained consistent during the
second quarter of 2013 when compared to the same period of 2012.

Other operating expenses increased slightly for the first six months of 2013
when compared to the first six months of 2012. The increase was due to an
increase of $.5 million in other expense due to reduced gains on sales of
other real estate owned offset by a $.3 million reduction in salaries and
benefits related to a decrease in health insurance costs and a reduction in
incentives.

Operating expenses decreased $.3 million (3.3%) for the second quarter of 2013
when compared to the same period of 2012. The decrease was due primarily to a
reduction in salaries and benefits related to reduced health insurance costs
and a reduction in incentives.

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. Until March 27, 2013,
the Bank also owned 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, but this entity was dissolved on such date.
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                  Six Months Ended
                         unaudited                           unaudited
                         30-Jun     30-Jun     31-Mar        30-Jun  30-Jun
                         2013       2012       2013          2013    2012
EARNINGS SUMMARY
Interest income         $        $        $           $       $  
                         12,079    13,501    12,288       24,367  27,269
Interest expense        $       $       $          $      $   
                         2,936     3,603     2,955        5,891   7,488
Net interest income      $       $       $          $       $  
                         9,143     9,898     9,333        18,476  19,781
Provision for loan       $      $       $         $     $   
losses                     81     1,112      865         946    9,236
Other Operating Income   $       $       $          $      $   
                         3,102     3,089     3,327        6,317   7,072
Net Securities           $      $      $         $    $    
Impairment Losses           -      -      -        -      -
Net Gains/(losses) -     $      $      $         $     $    
other                      27      (23)      329         356     680
Other Operating Expense  $       $        $          $       $  
                         9,742     10,070    9,634        19,264  19,141
Income/(Loss) before     $       $       $          $      $    
taxes                    2,449     1,782     2,490        4,939   (844)
Income tax expense       $      $      $         $      $    
                          607       133       568         1,175    172
Net income/(loss)        $       $       $          $      $  
                         1,842     1,649     1,922        3,764   (1,016)
Accumulated preferred
stock dividends and
      discount           $      $      $         $     $    
      accretion           441       431       437         878     846
Net income
available/(loss
 attributable) to    $       $       $          $      $  
common shareholders      1,401     1,218     1,485        2,886   (1,862)
Cash dividends paid     $      $      $         $    $    
                            -      -      -        -      -
                         Three Months Ended
                         unaudited
                         30-Jun     30-Jun     31-Mar
                         2013       2012       2013
PER COMMON SHARE
Basic/ Diluted Net       $      $      $    
Income/(loss) Per        0.23      0.20      0.24
Common Share
Book value               $       $       $   
                         10.94     10.54     11.50
Closing market value     $      $      $    
                         7.60      4.31      8.29
Market Range:
 High                 $      $      $    
                         8.91      8.40      9.00
 Low                  $      $      $    
                         7.33      4.05      6.68
Common shares
      outstanding at     6,210,587  6,199,283  6,199,283
      period end
PERFORMANCE RATIOS
(Period End, annualized)
Return on average assets 0.57%      -0.15%     0.59%
Return on average
shareholders'
      equity             7.58%      -2.12%     7.81%
Net interest margin      3.17%      3.33%      3.26%
Efficiency ratio         75.40%     70.40%     72.80%
PERIOD END BALANCES      30-Jun     31-Dec     30-Jun
                         2013       2012       2012
Assets                   $          $          $
                         1,329,206  1,320,783  1,348,439
Earning assets           $          $          $
                         1,172,193  1,106,222  1,145,736
Gross loans              $         $         $ 
                         841,850   874,829   907,909
      Commercial Real    $         $         $ 
      Estate             285,984   298,851   318,073
      Acquisition and    $         $         $ 
      Development        118,356   128,391   138,825
      Commercial and     $        $        $  
      Industrial         63,844    69,013    66,626
      Residential        $         $         $ 
      Mortgage           346,636   346,919   350,983
      Consumer           $        $        $  
                         27,030    31,655    33,402
Investment securities    $         $         $ 
                         308,581   227,313   231,284
Total deposits           $         $         $ 
                         972,659   976,884   996,340
      Noninterest        $         $         $ 
      bearing            162,671   161,500   157,324
      Interest bearing   $         $         $ 
                         809,988   815,384   839,016
Shareholders' equity     $        $        $  
                         97,783    98,905    95,103
CAPITAL RATIOS           30-Jun     31-Dec     30-Jun
Period end capital to    2013       2012       2012
risk-
      weighted assets:
      Tier 1             13.15%     12.54%     11.68%
      Total              14.84%     14.13%     13.40%
ASSET QUALITY
Net charge-offs for the  $      $      $   
quarter                   584       416      1,555
Nonperforming assets:
(Period End)
      Nonaccrual loans   $        $        $  
                         19,377    19,915    27,017
      Restructured loans $        $        $  
                         16,605    17,674    18,157
      Loans 90 days past
      due
      and accruing       $      $       $   
                          647      2,146     1,748
      Other real estate  $        $        $  
      owned              19,344    17,513    19,828
      Total
      nonperforming
      assets
      and past due loans $        $        $  
                         20,024    22,061    28,765
Allowance for credit
losses
      to gross loans, at 1.84%      1.83%      1.85%
      period end
Nonperforming and 90 day
past-due loans
      to total loans, at 2.38%      2.52%      3.17%
      period end
Nonperforming loans and
90 day past-due
      loans to total
      assets, at period  1.51%      1.67%      2.13%
      end



SOURCE First United Corporation

Website: https://www.mybank4.com
Contact: Carissa Rodeaver, 301-533-2362 (Office) 301-334-1421( Fax)
 
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