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First United Corporation Announces 3rd Quarter 2013 Earnings

         First United Corporation Announces 3rd Quarter 2013 Earnings

PR Newswire

OAKLAND, Md., Nov. 8, 2013

OAKLAND, Md., Nov. 8, 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
was $4.3 million for the first nine months of 2013, compared to net income
available to common shareholders of $.6 million for the same period of 2012.
Basic and diluted net income per common share for the first nine months of
2013 was $.69, compared to basic and diluted net income per common share of
$.10 for the same period of 2012. The increase in earnings was primarily due
to a $9.4 million decrease in the provision for loan losses during the first
nine months of 2013 when compared to the same time period of 2012. This
decrease was offset by a $.4 million decrease in net gains due to reduced
gains on sales of investment securities, and a $.6 million decrease in other
income due to a reduction in bank-owned life insurance ("BOLI") income driven
by a one-time death benefit of $.7 million received in March 2012. Total
other operating expenses increased $2.9 million during the first nine months
of 2013 when compared to the same period of 2012. OREO expenses increased
$2.5 million in the first nine months of 2013 when compared to the first nine
months of 2012 due primarily to increased write-downs on OREO properties.
Other expenses increased $.4 million in the first nine months of 2013 when
compared to the first nine months of 2012 due to increases in miscellaneous
expenses such as legal, professional and recruitment expenses. The net
interest margin for the first nine months of 2013, on a FTE basis, increased
to 3.37% from 3.31% for the first nine months of 2012.

According to William B. Grant, Chairman and Chief Executive Officer, "The
Board, management and employees of First United are excited to report
continued earnings for 2013. We have re-focused our activity on lending,
gathering core deposits and serving our trust and investment clients. All the
while, we continue to work to improve our asset quality. It is gratifying to
see the hard work of our team reflected in our earnings."

Consolidated net income available to common shareholders of $1.4 million, or
$.22 per common share, for the third quarter of 2013 compared to net income
available to common shareholders of $2.5 million, or $.40 per common share,
for the same period of 2012. The decrease in earnings for the third quarter
of 2013 when compared to the third quarter of 2012 was primarily due to a $2.2
million increase in expenses related to direct write-downs on other real
estate owned ("OREO") properties, offset by an increase of $.9 million in
interest income. The net interest margin for the third quarter of 2013, on a
fully tax equivalent ("FTE") basis, increased to 3.77% from 3.28% for the
third quarter of 2012. The net interest margin for the year ended December
31, 2012, on a FTE basis, was 3.30%.

Mr. Grant added, "during the third quarter, we received payoffs of two large
non-accrual loans. These payoffs were the primary contributing factor to the
provision credit booked for the quarter and they provided increased interest
on loans. We offset this additional income with price reductions on our other
real estate owned portfolio in order to promote quicker retail sales and
improved asset quality."

Financial Highlights Comparing the Three and Nine Months Ended September 30,
2013 and 2012:

  oProvision for loan loss expense decreased by $9.4 million, primarily due
    to a reduction in charge-offs from the first quarter of 2012.
  oNet interest margin, on an FTE basis, increased to 3.77% for the third
    quarter of 2013 compared to 3.28% for the third quarter of 2012 due to the
    collection of approximately $1.7 million of interest on payoffs of
    non-accrual loans.
  oRatio of allowance for loan losses ("ALL") to loans outstanding increased
    to 1.81% as of September 30, 2013 compared to 1.83% as of December 31,
    2012.
  oOther operating income remained stable when comparing the third quarters
    of 2013 and 2012.
  oOther operating expense increased when comparing the third quarters of
    2013 and 2012 due to increased write-downs on OREO properties.

Balance Sheet Overview

Total assets remained stable at $1.3 billion at September 30, 2013 and
December 31, 2012. During the first nine months of 2013, cash and
interest-bearing deposits in other banks decreased $11.5 million, the
investment portfolio increased $73.6 million, and gross loans decreased $38.6
million. Total liabilities increased by approximately $20.7 million during
the first nine months of 2013 due to an increase of $19.8 million in
short-term borrowings and an increase of $3.4 million in accrued interest
payable and other liabilities. These increases were offset by a $2.5 million
decrease in deposits.Shareholders' equity increased $.6 million from $98.9
million at December 31, 2012 to $99.5 million at September 30, 2013 due to
increased earnings of $4.3 million, offset by an increase of $3.8 million in
accumulated other comprehensive loss.

Total investment securities available-for-sale increased $73.7 million since
December 31, 2012. At September 30, 2013, the amount of securities classified
as available-for-sale included a net unrealized loss of $29.4 million, which
represents the difference between the fair value and the amortized cost of
securities in the portfolio.

Comparing September 30, 2013 to December 31, 2012, outstanding loans decreased
by $38.6 million (4.4%). Commercial Real Estate ("CRE") loans decreased $15.7
million as a result of the payoff of several large loans and ongoing scheduled
principal payments. Acquisition and development ("A&D") loans decreased $13.3
million due to the movement of $2.1 million from construction to permanent
financing and $5.0 million of payoffs. Commercial and industrial ("C&I")
loans decreased $9.0 million due to $2.8 million of payoffs and scheduled
principal payments. Residential mortgages increased by $5.3 million due to
increased production of loans primarily in our 10/1 adjustable rate mortgage
program. The Bank continues to use Fannie Mae for the majority of new,
longer-term, fixed-rate residential loan originations, although production for
these loans slowed during the third quarter of 2013. The consumer portfolio
decreased $6.0 million due primarily to repayment activity in the indirect
auto portfolio offsetting new production. At September 30, 2013, approximately
58% of the commercial loan portfolio was collateralized by real estate
compared to 60% at December 31, 2012.

Total deposits decreased $2.5 million during the first nine months of 2013
when compared to deposits at December 31, 2012. We have seen an increase in
core deposits and a reduction in certificates of deposit as a result of our
retail staff's continued focus on changing the mix of the deposit portfolio.
Non-interest bearing deposits increased $20.6 million. Traditional savings
accounts increased $2.3 million due to continued growth in our Prime Saver
product. Total demand deposits increased $5.1 million and total money market
accounts increased $9.3 million. Time deposits less than $100,000 declined
$12.7 million and time deposits greater than $100,000 decreased $27.1 million
due to the repayment of a $20.0 million brokered certificate of deposit at its
maturity in January 2013.

The book value of the Corporation's common stock was $11.18 per share at
September 30, 2013, compared to $11.14 per share at December 31, 2012.

At September 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 an FTE basis decreased $.2 million during the first
nine months of 2013 over the same period in 2012 due to a $2.2 million (5.3%)
decrease in interest income, which was partially offset by a $2.0 million
(18.5%) decrease in interest expense. The decrease in interest income was
primarily due to the $64.6 million reduction in the average balance of loans
when comparing the first nine months of 2013 to the same period of 2012. The
lower yields 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. The net interest margin
increased slightly to 3.37% for the first nine months of 2013 compared to
3.30% for the year ended December 31, 2012 and 3.31% for the first nine months
of 2012.

There was an overall $25.8 million decrease in average interest-earning
assets, driven by a $64.6 million reduction in loans, offset by increases of
$39.2 million in investment securities.

Interest expense decreased during the first nine months of 2013 when compared
to the same period of 2012 due primarily to an overall reduction in average
interest-bearing liabilities of $63.9 million. This reduction was due to the
repayments of $40.0 in brokered deposits and $21.1 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 1.32% for the nine
months ended September 30, 2012 to 1.13% for the same period of 2013.

Net interest income on an FTE basis increased $1.2 million during the third
quarter of 2013 over the same period in 2012 due to a $.8 million (6.2%)
increase in interest income and a decrease of $.4 million (12.2%) in interest
expense. The increase in interest income was primarily due to the increase in
yield on average earning assets of 35 basis points and the collection of
approximately $1.7 million of interest from payoffs on non-accrual loans when
comparing the third quarter of 2013 to the same period of 2012. The net
interest margin increased to 3.77% for the third quarter of 2013 compared to
3.28% for the third quarter of 2012.

Interest expense decreased during the third quarter of 2013 when compared to
the same period of 2012 due primarily to an overall reduction in average
interest-bearing liabilities of $38.2 million. Average interest-bearing
liabilities decreased due to decreases of $33.1 million in interest bearing
deposits and $15.3 million in long-term borrowings, offset by a $10.2 million
increase in short-term borrowings. The overall effect was an 11 basis point
decrease in the average rate paid on our average interest-bearing liabilities,
from 1.22% for the three months ended September 30, 2012 to 1.11% for the same
period of 2013.

Asset Quality

The ALL decreased to $15.2 million at September 30, 2013, from $16.0 million
at December 31, 2012 and $16.3 million at September 30, 2012. The provision
for loan losses for the first nine months of 2013 decreased to $(.2) million
from $9.3 million for the same period in 2012. Net charge-offs declined to
$.7 million for the nine months ended September 30, 2013, compared to $12.4
million for the nine months ended September 30, 2012. Included in the net
charge-offs for the nine months ended September 30, 2013 was an $.8 million
charge-off for a C&I loan. The lower provision expense was due to the
significantly lower level of net charge-offs due to a recovery of $.8 million
on a large commercial real estate credit and the lower level of loan
balances. The ratio of the ALL to loans outstanding as of September 30, 2013
was 1.81%, which was slightly lower than the 1.84% for the same period last
year.

The ratio of net charge-offs to average loans for the nine months ended
September 30, 2013 was an annualized .12%, compared to an annualized 1.83% for
the same period in 2012 and 1.41% for the year ended December 31, 2012.
Relative to December 31, 2012, all segments of loans showed improvement. The
CRE portfolio had an annualized net recovery rate as of September 30, 2013 of
.35% 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 September 30,
2013 was .27% compared to an annualized net charge-off rate of .29% as of
December 31, 2012. The ratios for C&I loans were 2.03% and 12.10% for
September 30, 2013 and December 31, 2012, respectively. The residential
mortgage ratios were .06% and .33% for September 30, 2013 and December 31,
2012, respectively, and the consumer loan ratios were .54% and .69% for
September 30, 2013 and December 31, 2012, respectively.

Accruing loans past due 30 days or more declined to 1.58% of the loan
portfolio at September 30, 2013, compared to 2.39% at December 31, 2012. The
decrease for the first nine months of 2013 was primarily due to a decrease of
$10.6 million in past-due accruing residential mortgage term 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 nine-month periods ended September 30, 2013 and September 30,
2012, total non-accrual loan balances have declined. Non-accrual loans
totaled $14.8 million as of September 30, 2013, compared to $19.9 million as
of December 31, 2012 and $29.1 million as of September 30, 2012. Non-accrual
loans which have been subject to a partial charge-off totaled $2.5 million as
of September 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 $.6 million during the
first nine 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 $.3 million were reported through other income in the first nine
months of 2013, compared to net gains of $.7 million during the same period of
2012. This reduction was due to reduced gains on sales of investment
securities when comparing the first nine months of 2013 and 2012.

Other operating income, exclusive of gains, increased slightly during the
third quarter of 2013 when compared to the same period of 2012 due to
increased Trust department income.

Net losses of $.1 million were reported through other income in the third
quarter of 2013, compared to net losses of $8 thousand during the same period
of 2012.

Operating expenses increased $2.9 million in the first nine months of 2013
when compared to the same period of 2012 due to an increase of $2.5 million in
write-downs on OREO. Other expenses increased $.4 million in the first nine
months of 2013 when compared to the first nine months of 2012 due to increases
in miscellaneous expenses such as legal, professional and recruitment
expenses.

Operating expenses increased $2.8 million in the third quarter of 2013 when
compared to the same period of 2012. This increase was primarily due to
increases of $2.2 million in write-downs on OREO properties, $.2 million in
salaries and employee benefits and $.4 million in other miscellaneous
expenses.

ABOUT FIRST UNITED CORPORATION

First United Corporation is the parent company of First United Bank & Trust, a
Maryland trust company, 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, 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                           Nine Months
                                                                      Ended
                         unaudited                                    unaudited
                         30-Sep     30-Sep     30-Jun     31-Mar      30-Sep 30-Sep
                         2013       2012       2013       2013        2013   2012
EARNINGS SUMMARY
Interest income         $        $        $        $          $      $  
                         13,979    13,119    12,079    12,288     38,346 40,388
Interest expense        $       $       $       $         $     $  
                         2,933     3,340     2,936     2,955      8,824  10,828
Net interest income      $        $       $       $         $      $  
                         11,046    9,779     9,143     9,333      29,522 29,560
Provision for loan       $        $      $      $       $     $   
losses                   (1,107)     40       81     865         (161) 9,276
Other Income             $       $       $       $         $     $  
                         3,437     3,274     3,102     3,327      9,754  10,346
Net Securities           $      $      $      $       $    $   
Impairment Losses           -      -      -     -             
                                                                      -      -
Net (losses)/gains -     $      $      $      $       $    $   
other                    (102)        (8)      27     329         254     672
Other Operating Expense  $        $        $       $         $      $  
                         12,974    10,174    9,742     9,634      32,238 29,315
Income before taxes      $       $       $       $         $     $   
                         2,514     2,831     2,449     2,490      7,453  1,987
Income tax               $      $      $      $       $     $   
expense/(benefit)         678       (44)      607      568         1,853    128
Net income               $       $       $       $         $     $   
                         1,836     2,875     1,842     1,922      5,600  1,859
Accumulated preferred
stock dividends          $      $      $      $       $     $   
anddiscount accretion    448       415       441      437         1,326  1,261
Net income available to  $       $       $       $         $     $   
common shareholders      1,388     2,460     1,401     1,485      4,274    598
                         $      $      $      $       $    $   
Cash dividends paid        -      -      -     -             
                                                                      -      -
                         Three Months Ended
                         unaudited
                         30-Sep     30-Sep     30-Jun     31-Mar
                         2013       2012       2013       2013
PER COMMON SHARE
Basic/ Diluted Net       $      $      $      0.24
Income Per Common Share  0.22      0.40      0.23
Book value               $       $       $       $  
                         11.18     11.07     10.94     11.50
Closing market value     $      $      $      $   
                         8.21      6.30      7.60      8.29
Market Range:
 High                 $      $      $      $   
                         9.35      6.80      8.91      9.00
 Low                  $      $      $      $   
                         7.05      4.52      7.33      6.68
Common shares
outstanding at period    6,210,587  6,199,283  6,210,587  6,199,283
end
PERFORMANCE RATIOS
(Period End, annualized)
Return on average assets 0.56%      0.18%      0.57%      0.59%
Return on average
shareholders' equity     7.52%      2.57%      7.58%      7.81%
Net interest margin      3.37%      3.31%      3.17%      3.26%
Efficiency ratio         78.90%     72.60%     75.40%     72.80%
PERIOD END BALANCES      30-Sep     31-Dec     30-Sep
                         2013       2012       2012
Assets                   $          $          $
                         1,342,088  1,320,783  1,359,397
Earning assets           $          $          $
                         1,143,225  1,106,222  1,131,996
Gross loans              $         $         $ 
                         836,208   874,829   889,990
     Commercial Real     $         $         $ 
     Estate              283,166   298,851   307,447
     Acquisition and     $         $         $ 
     Development         115,132   128,391   138,513
     Commercial and      $        $        $  
     Industrial          59,986    69,013    64,616
     Residential         $         $         $ 
     Mortgage            352,227   346,919   346,879
     Consumer            $        $        $  
                         25,697    31,655    32,535
Investment securities    $         $         $ 
                         300,910   227,313   239,371
Total deposits           $         $         $
                         974,393   976,884   1,003,393
     Noninterest bearing $         $         $ 
                         182,052   161,500   169,371
     Interest bearing    $         $         $ 
                         792,341   815,384   834,022
Shareholders' equity     $        $        $  
                         99,496    98,905    98,479
CAPITAL RATIOS           30-Sep     31-Dec     30-Sep
Period end capital to    2013       2012       2012
risk-
     weighted assets:
     Tier 1              13.52%     12.54%     11.93%
     Total               15.18%     14.13%     13.58%
ASSET QUALITY
Net                      $      $      $    
charge-offs/(recoveries) (736)       416       461
for the quarter
Nonperforming assets:
(Period End)
     Nonaccrual loans    $        $        $  
                         14,847    19,915    29,081
     Restructured loans  $        $        $  
                         16,495    17,674    20,852
     Loans 90 days past  $      $       $   
     dueand accruing     910      2,146     5,921
     Other real estate   $        $        $  
     owned               16,982    17,513    20,631
     Total nonperforming
     assets and past due $        $        $  
     loans               15,757    22,061    35,002
Allowance for credit
losses to gross loans,   1.81%      1.83%      1.84%
at period end
Nonperforming and 90 day
past-due loans to total  1.88%      2.52%      3.93%
loans, at period end
Nonperforming loans and
90 day past-due loans to
total assets, at period  1.17%      1.67%      2.57%
end



SOURCE First United Corporation

Website: http://www.mybankfirstunited.com
Contact: Carissa Rodeheaver, 301-533-2362 (office) 301-334-1421 (fax)
 
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