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FIRST UNITED CORP/MD/

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Business Summary

First United Corporation operates as a financial holding company within the community banking industry, serving customers primarily in four Western Maryland counties and three Northeastern West Virginia counties through its principal operating subsidiary, First United Bank & Trust. The Bank operates 23 banking offices, one customer service center, and 30 Automated Teller Machines in Allegany County, Frederick County, Garrett County, and Washington County in Maryland, and in Mineral County, Berkeley County, and Monongalia County in West Virginia. The industry is characterized by intense competition from commercial banks, savings and loan associations, credit unions, consumer finance companies, and other financial services providers, with competition driven by interest rates, personalized services, technology, and convenience.

The Corporation competes with a range of institutions including Manufacturers and Traders Trust Company, Truist Bank, PNC Bank, and United Bank across its market areas. In Garrett County, Maryland, First United Bank & Trust holds a 64.60% deposit market share, the highest in that county, while in Allegany County, Maryland, it holds a 33.20% share, and in Mineral County, West Virginia, a 38.60% share. The Corporation relies on local promotional activities, personal relationships, and specialized services tailored to customer needs as its primary competitive advantages.

The Corporation generates revenue primarily through interest income earned from its loan and investment securities portfolios and fees earned from financial services provided to customers. Its primary sources of revenue are interest income from loans and investments, with net interest income being the largest source of operating revenue. The business model is centered on community banking, offering a complete range of retail and commercial banking services, including checking, savings, money market deposit accounts, certificates of deposit, business loans, personal loans, mortgage loans, lines of credit, and consumer-oriented retirement accounts. Wealth management services, including trust services and brokerage, contribute to other operating income.

The Bank's lending activities are conducted through First United Bank & Trust, with commercial loans primarily secured by real estate, commercial equipment, vehicles, or other assets. Commercial real estate loans totaled $570.8 million at December 31, 2025, acquisition and development loans were $90.3 million , commercial and industrial loans were $277.0 million , residential mortgage loans were $536.9 million , and consumer loans were $46.7 million . The Bank also provides residential real estate construction loans to builders and individuals for single family dwellings, with these loans typically having maturities of six to twelve months. The OakFirst Loan Centers have not originated any new loans since 2010 and their sole activity is servicing existing loans.

The Bank offers a full array of deposit products including checking, savings, money market accounts, regular and IRA certificates of deposit, and Health Savings accounts, as well as the CDARS and IntraFi Cash Service programs. Wealth management services include personal trust, investment agency accounts, charitable trusts, retirement accounts including IRA roll-overs, 401(k) accounts and defined benefit plans, estate administration and estate planning. At December 31, 2025, the total market value of assets under the supervision of the Bank's wealth department was approximately $1.8 billion , compared to $1.7 billion at December 31, 2024. The Bank also provides full brokerage services through a networking arrangement with Cetera Investment Services, LLC.

During the year ended December 31, 2025, the Corporation recorded a $1.3 million write-down, net of tax, on other real estate owned property, a $0.2 million loss, net of tax, on disposal of fixed assets, and a $0.1 million gain, net of tax, on sale of available-for-sale investment securities. New investment purchases in the amount of $24.6 million were made during 2025 to enhance the overall yield of the portfolio. The Corporation repaid a $25.0 million FHLB borrowing at its maturity in September 2025, and in January 2025, $50.0 million in brokered time deposits with an average interest rate of 4.24% were obtained to fund the repayment of $50.0 million in overnight borrowings outstanding on December 31, 2024.

For the year ended December 31, 2025, net income was $24.5 million compared to $20.6 million for 2024. Net interest income on a non-GAAP, fully-taxable equivalent basis increased by $8.1 million in 2025 when compared to 2024, with the net interest margin at 3.67% for 2025 versus 3.38% for 2024. The provision for credit losses on loans was $2.3 million for 2025 and $2.9 million for 2024. Net charge-offs of $1.0 million were recorded for 2025 compared to $2.2 million for 2024. Total assets at December 31, 2025 were $2.1 billion , net loans were $1.5 billion , and deposits were $1.7 billion . Shareholders' equity at December 31, 2025 was $203.6 million .

Business Outlook

Management continues to place a strong focus on margin management as the Corporation moves into 2026, with higher cash levels at December 31, 2025 expected to allow the Corporation to repay outstanding debt and brokered deposits at their maturities. The Corporation's core growth strategy is focused around organic growth, though it may from time to time consider acquisition and expansion opportunities involving a bank or other entity operating in the financial services industry. New commercial loan production for the year ended December 31, 2025 was approximately $247.0 million , which compares to $189.5 million for the year ended December 31, 2024, and the commercial pipeline continued to be strong at December 31, 2025 at $61.0 million , with unfunded commercial construction loans totaling approximately $46.5 million . New residential mortgage loan production for the year ended December 31, 2025 was approximately $76.7 million , with the pipeline of in-house portfolio loans at $4.5 million and unfunded commitments related to residential construction loans totaling $14.5 million at December 31, 2025.

The Corporation's wealth management income increased by $0.7 million in 2025 compared to 2024, driven by improving market conditions, increased annuity sales, and growth in new and existing customer relationships. The Corporation is focused on expanding its presence in Morgantown, West Virginia, where it enhanced its sales team during 2025, as reflected in increased salary expense from increased staffing levels.

Salaries and employee benefits increased by $1.3 million in 2025 compared to 2024, related to normal merit increases effective April 1, 2025, increased salary expense from increased staffing levels in Morgantown, WV, increases in incentives, and 401(k) expenses, offset by reduced life and health insurance costs related to reduced claims in 2025. Data processing expenses increased by $0.5 million due primarily to increased software agreements, and professional services expenses increased by $0.5 million driven by increased audit fees. Occupancy and equipment expenses decreased by $0.5 million related to accelerated depreciation expense from branch closures recognized in the first quarter of 2024.

The Corporation employs an in-depth, layered, defensive cybersecurity strategy that embraces a 'never trust, always verify' philosophy when designing new products, services, and technology. The Corporation engages in regular assessments of its infrastructure, software systems, and network architecture, using internal cybersecurity experts, external penetration testers, and third-party specialists. The Corporation also maintains a third-party risk management program designed to identify, assess, and manage risks, including cybersecurity risks, associated with external service providers and its supply chain.

The Corporation's capital policy establishes guidelines meeting regulatory requirements and takes into consideration current or anticipated risks as well as potential future growth opportunities. The Corporation's Board of Directors periodically evaluates the Corporation's dividend policy, both internally and in consultation with the FRB. Cash dividends are typically declared on a quarterly basis, and when paid, dividends to shareholders are dependent on the ability of the Corporation's subsidiaries, especially the Bank, to declare dividends to the Corporation.

The Corporation faces structural headwinds from the impact of changes in interest rates and changes in economic conditions in the markets where it operates, with increases in interest rates and/or weakening economic conditions potentially adversely impacting the ability of borrowers to repay outstanding loans or the value of collateral securing these loans. Current economic conditions are being heavily impacted by recent inflationary conditions and higher interest rates, the effects of which may impact profitability by negatively impacting fixed costs and expenses. The Corporation's business is concentrated in Maryland and West Virginia, much of which involves real estate lending, so a decline in the real estate and credit markets could materially and adversely impact financial condition and results of operations.

The Corporation is subject to significant regulatory constraints, including capital standards under the Basel III Capital Rules that may materially limit its ability to use capital resources and/or could require it to raise additional capital by issuing additional shares of Common Stock or other equity securities. The Corporation's ability to pay dividends on the common stock is subject to the terms of the outstanding TPS Debentures, which prohibit the Corporation from paying dividends during an interest deferral period. In March 2004, the Corporation issued approximately $30.9 million in aggregate of junior subordinated debentures to the Trusts in connection with the Trusts' sales to third party investors of $30.0 million in aggregate in mandatorily redeemable preferred capital securities.

Risk Factors

The Corporation faces material credit risk from its concentration of real estate loans, with commercial real estate loans of $570.8 million and residential mortgage loans of $536.9 million representing a substantial portion of the $1.5 billion loan portfolio, and fluctuations in real estate collateral values could result in under-collateralized loans and increased credit losses. The Corporation is exposed to significant interest rate risk, as net interest income depends on the spread between yields on interest-earning assets and costs on interest-bearing liabilities, and a rapid increase or decrease in interest rates could adversely affect results of operations. The Corporation's business is geographically concentrated in Maryland and West Virginia, with most loans made to borrowers in those states, making it more vulnerable to local economic downturns than geographically diversified institutions. The Corporation faces liquidity risk if its funding sources, including customer deposits of $1.7 billion , FHLB advances of approximately $261.6 million , and unsecured lines of credit of approximately $140.0 million , become insufficient to replace deposits and support growth. The Corporation is subject to regulatory capital requirements, and as of December 31, 2025, the Bank was 'well capitalized' based on applicable ratios, but future regulatory changes could require higher capital levels and limit the ability to pay dividends or repurchase stock.

Management Priorities

Management's message emphasizes the Corporation's strong focus on margin management as it moves into 2026, with higher cash levels at December 31, 2025 expected to allow the Corporation to repay outstanding debt and brokered deposits at their maturities. Management highlights that net income was $24.5 million for 2025 compared to $20.6 million for 2024, and that net interest income on a non-GAAP FTE basis increased by $8.1 million with the net interest margin expanding to 3.67% from 3.38% . The strategic priorities emphasized include managing the net interest margin, growing the loan portfolio with new commercial loan production of approximately $247.0 million and a strong commercial pipeline of $61.0 million , and expanding wealth management income which increased by $0.7 million driven by improving market conditions and growth in customer relationships.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 7, MD&A — Loan Portfolio
  2. [2] Item 7, MD&A — Loan Portfolio
  3. [3] Item 7, MD&A — Loan Portfolio
  4. [4] Item 7, MD&A — Loan Portfolio
  5. [5] Item 7, MD&A — Loan Portfolio
  6. [6] Item 1, Business — Wealth Management
  7. [7] Item 1, Business — Wealth Management
  8. [8] Item 7, MD&A — Overview
  9. [9] Item 7, MD&A — Overview
  10. [10] Item 7, MD&A — Overview
  11. [11] Item 7, MD&A — Investment Securities
  12. [12] Item 7, MD&A — Consolidated Balance Sheet Review
  13. [13] Item 7, MD&A — Overview
  14. [14] Item 7, MD&A — Overview
  15. [15] Item 7, MD&A — Overview
  16. [16] Item 7, MD&A — Overview
  17. [17] Item 7, MD&A — Overview
  18. [18] Item 7, MD&A — Net Interest Income
  19. [19] Item 7, MD&A — Net Interest Income
  20. [20] Item 7, MD&A — Net Interest Income
  21. [21] Item 7, MD&A — Provision for Credit Losses
  22. [22] Item 7, MD&A — Provision for Credit Losses
  23. [23] Item 7, MD&A — Provision for Credit Losses
  24. [24] Item 7, MD&A — Provision for Credit Losses
  25. [25] Item 1, Business — General
  26. [26] Item 1, Business — General
  27. [27] Item 1, Business — General
  28. [28] Item 1, Business — General
  29. [29] Item 7, MD&A — Loan Portfolio
  30. [30] Item 7, MD&A — Loan Portfolio
  31. [31] Item 7, MD&A — Loan Portfolio
  32. [32] Item 7, MD&A — Loan Portfolio
  33. [33] Item 7, MD&A — Loan Portfolio
  34. [34] Item 7, MD&A — Loan Portfolio
  35. [35] Item 7, MD&A — Loan Portfolio
  36. [36] Item 7, MD&A — Other Operating Income
  37. [37] Item 7, MD&A — Other Operating Expense
  38. [38] Item 7, MD&A — Other Operating Expense
  39. [39] Item 7, MD&A — Other Operating Expense
  40. [40] Item 7, MD&A — Other Operating Expense
  41. [41] Item 1A, Risk Factors — Risks Relating to First United Corporation's Securities
  42. [42] Item 1A, Risk Factors — Risks Relating to First United Corporation's Securities
  43. [43] Item 7, MD&A — Loan Portfolio
  44. [44] Item 7, MD&A — Loan Portfolio
  45. [45] Item 1, Business — General
  46. [46] Item 1, Business — General
  47. [47] Item 7, MD&A — Liquidity Sources
  48. [48] Item 7, MD&A — Liquidity Sources
  49. [49] Item 7, MD&A — Overview
  50. [50] Item 7, MD&A — Overview
  51. [51] Item 7, MD&A — Net Interest Income
  52. [52] Item 7, MD&A — Net Interest Income
  53. [53] Item 7, MD&A — Net Interest Income
  54. [54] Item 7, MD&A — Loan Portfolio
  55. [55] Item 7, MD&A — Loan Portfolio
  56. [56] Item 7, MD&A — Other Operating Income
  57. [57] Item 7, MD&A — Net Interest Income
  58. [58] Item 7, MD&A — Net Interest Income
  59. [59] Item 7, MD&A — Net Interest Income
  60. [60] Item 7, MD&A — Net Interest Income
  61. [61] Item 7, MD&A — Overview
  62. [62] Item 7, MD&A — Overview
  63. [63] Item 7, MD&A — GAAP and Non-GAAP Measures
  64. [64] Item 7, MD&A — GAAP and Non-GAAP Measures
  65. [65] Item 7, MD&A — Provision for Credit Losses
  66. [66] Item 7, MD&A — Provision for Credit Losses
  67. [67] Item 7, MD&A — Net Interest Income
  68. [68] Item 7, MD&A — Net Interest Income
  69. [69] Item 7, MD&A — GAAP and Non-GAAP Measures
  70. [70] Item 7, MD&A — GAAP and Non-GAAP Measures
  71. [71] Item 7, MD&A — GAAP and Non-GAAP Measures
  72. [72] Item 7, MD&A — GAAP and Non-GAAP Measures
  73. [73] Item 7, MD&A — Allowance for Credit Losses
  74. [74] Item 7, MD&A — Allowance for Credit Losses
  75. [75] Item 7, MD&A — Allowance for Credit Losses
  76. [76] Item 7, MD&A — Allowance for Credit Losses
  77. [77] Item 7, MD&A — Allowance for Credit Losses
  78. [78] Item 7, MD&A — Allowance for Credit Losses
  79. [79] Item 7, MD&A — Applicable Income Taxes
  80. [80] Item 7, MD&A — Applicable Income Taxes
  81. [81] Item 7, MD&A — GAAP and Non-GAAP Measures
  82. [82] Item 7, MD&A — GAAP and Non-GAAP Measures
  83. [83] Item 7, MD&A — GAAP and Non-GAAP Measures
  84. [84] Item 7, MD&A — GAAP and Non-GAAP Measures
  85. [85] Item 7, MD&A — GAAP and Non-GAAP Measures
  86. [86] Item 7, MD&A — GAAP and Non-GAAP Measures
  87. [87] Item 7, MD&A — GAAP and Non-GAAP Measures
  88. [88] Item 7, MD&A — GAAP and Non-GAAP Measures
  89. [89] Item 7, MD&A — Other Operating Income
  90. [90] Item 7, MD&A — Other Operating Income
  91. [91] Item 7, MD&A — Other Operating Income

Analysis on 6/21/2026