Group 1 - First United Corporation's Board of Directors declared a cash dividend of $0.26 per share, payable on November 3, 2025, to shareholders of record as of October 17, 2025 [1] - First United Corporation is the parent company of First United Bank & Trust, which operates as a Maryland trust company with commercial banking powers [1] - The Bank has several wholly-owned subsidiaries, including OakFirst Loan Center, Inc. and OakFirst Loan Center, LLC, which are finance companies [1] Group 2 - The Bank also owns interests in real estate entities formed for holding, servicing, and disposing of properties acquired through foreclosure [1] - First United Corporation has a 99.9% interest in Liberty Mews Limited Partnership, focused on low-income housing development in Garrett County, Maryland [1] - Additionally, the Corporation holds a 99.9% non-voting membership interest in MCC FUBT Fund, LC, aimed at low-income housing in Allegany County, Maryland [1]

First United Corporation (FUNC) could be a solid addition to your portfolio given its recent upgrade to a Zacks Rank #2 (Buy). An upward trend in earnings estimates -- one of the most powerful forces impacting stock prices -- has triggered this rating change.The sole determinant of the Zacks rating is a company's changing earnings picture. The Zacks Consensus Estimate -- the consensus of EPS estimates from the sell-side analysts covering the stock -- for the current and following years is tracked by the sys ...

Group 1 - First United Corporation (FUNC) has seen a stock increase of 22.1%, indicating positive performance for shareholders [1] - The company is based in Maryland and operates as a small bank [1] Group 2 - Crude Value Insights provides an investment service focused on oil and natural gas, emphasizing cash flow and growth potential [1] - The service includes a 50+ stock model account and in-depth cash flow analyses of exploration and production (E&P) firms [2]

PART I. [FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited consolidated financial statements and management's discussion and analysis for the interim period [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited consolidated financial statements, including statements of financial condition, operations, comprehensive income, changes in equity, and cash flows, for the periods ended June 30, 2025 and 2024 [Consolidated Statements of Financial Condition](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) The statements show growth in total assets, net loans, and deposits, reflecting increased shareholders' equity Key Financial Condition Metrics | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | | Total Assets | $2,007,471 | $1,973,022 | $34,449 | | Net Loans | $1,482,904 | $1,462,181 | $20,723 | | Total Deposits | $1,614,207 | $1,574,829 | $39,378 | | Total Liabilities | $1,816,324 | $1,793,727 | $22,597 | | Total Shareholders' Equity | $191,147 | $179,295 | $11,852 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Net income significantly increased for both three and six months ended June 30, 2025, driven by higher net interest income and reduced credit loss expense Consolidated Operations Summary (6 Months) | Metric (in thousands, except per share) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change (6 Months) | | :-------------------------------------- | :--------------------------- | :--------------------------- | :-------------------- | | Total Interest Income | $48,933 | $45,011 | $3,922 | | Total Interest Expense | $16,210 | $15,961 | $249 | | Net Interest Income | $32,723 | $29,050 | $3,673 | | Total Credit Loss Expense | $1,516 | $2,140 | $(624) | | Net Income | $11,790 | $8,612 | $3,178 | | Basic Net Income Per Share | $1.82 | $1.31 | $0.51 | | Diluted Net Income Per Share | $1.81 | $1.31 | $0.50 | | Dividends Declared Per Share | $0.44 | $0.40 | $0.04 | Consolidated Operations Summary (3 Months) | Metric (in thousands, except per share) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change (3 Months) | | :-------------------------------------- | :--------------------------- | :--------------------------- | :-------------------- | | Total Interest Income | $24,871 | $23,113 | $1,758 | | Total Interest Expense | $8,164 | $7,875 | $289 | | Net Interest Income | $16,707 | $15,238 | $1,469 | | Total Credit Loss Expense | $860 | $1,194 | $(334) | | Net Income | $5,984 | $4,914 | $1,070 | | Basic Net Income Per Share | $0.92 | $0.75 | $0.17 | | Diluted Net Income Per Share | $0.92 | $0.75 | $0.17 | | Dividends Declared Per Share | $0.22 | $0.20 | $0.02 | [Consolidated Statements of Comprehensive Income](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income substantially increased for both three and six months ended June 30, 2025, primarily due to positive other comprehensive income Consolidated Comprehensive Income (6 Months) | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change (6 Months) | | :-------------------- | :--------------------------- | :--------------------------- | :-------------------- | | Net Income | $11,790 | $8,612 | $3,178 | | Other Comprehensive Income/(Loss), net of tax | $2,271 | $(233) | $2,504 | | Comprehensive Income | $14,061 | $8,379 | $5,682 | Consolidated Comprehensive Income (3 Months) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change (3 Months) | | :-------------------- | :--------------------------- | :--------------------------- | :-------------------- | | Net Income | $5,984 | $4,914 | $1,070 | | Other Comprehensive Income/(Loss), net of tax | $2,382 | $(1,338) | $3,720 | | Comprehensive Income | $8,366 | $3,576 | $4,790 | [Consolidated Statements of Changes in Shareholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Total shareholders' equity increased significantly in 2025, driven by net income and positive other comprehensive income, contrasting with 2024 Shareholders' Equity Changes | Metric (in thousands) | June 30, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Balance at January 1 | $179,295 | $161,873 | | Net Income | $11,790 | $8,612 | | Other Comprehensive Income/(Loss) | $2,271 | $(233) | | Stock Based Compensation | $495 | $433 | | Common Stock Issued | $150 | $144 | | Common Stock Repurchase | $0 | $(4,032) | | Dividends Declared | $(2,854) | $(2,620) | | Balance at June 30 | $191,147 | $164,177 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased in 2025, while investing activities shifted to cash usage, and financing activities provided significant net cash inflow Consolidated Cash Flow Activities | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net Cash Provided by Operating Activities | $7,960 | $10,751 | | Net Cash (Used in)/Provided by Investing Activities | $(29,398) | $27,893 | | Net Cash Provided by/(Used in) Financing Activities | $22,224 | $(43,305) | | Increase/(Decrease) in Cash and Cash Equivalents | $786 | $(4,661) | | Cash and Cash Equivalents at End of Period | $79,113 | $45,092 | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed disclosures and explanations for the figures presented in the consolidated financial statements, covering various accounting and financial aspects [Note 1 – Basis of Presentation](index=11&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) Financial statements are prepared under GAAP, consolidating First United Corporation and its subsidiaries, with management estimates affecting reported amounts - The consolidated financial statements include First United Corporation, First United Bank & Trust, First United Statutory Trust I & II, OakFirst Loan Center, LLC & Inc., First OREO Trust, and FUBT OREO I, LLC. All significant inter-company accounts and transactions have been eliminated[25](index=25&type=chunk) [Note 2 – Accounting Statements Issued but Not Yet Adopted](index=11&type=section&id=Note%202%20%E2%80%93%20Accounting%20Statements%20Issued%20but%20Not%20Yet%20Adopted) The Corporation is preparing to adopt new FASB ASUs on Income Tax Disclosures and Expense Disaggregation, neither expected to significantly impact financial statements - ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," effective for annual periods beginning after December 15, 2024, will require additional categories of information in rate reconciliation tables and disaggregated income taxes paid. The Corporation will adopt this ASU in its annual report for the period ending December 31, 2025, and does not believe it will have a significant impact[27](index=27&type=chunk) - ASU No. 2024-03, "Income Statement- Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses," effective for annual periods beginning after December 15, 2026, will require disaggregated disclosure of income statement expenses in tabular format. This ASU is not expected to have a significant impact on the financial statements[28](index=28&type=chunk)[29](index=29&type=chunk) [Note 3 – Earnings Per Share](index=13&type=section&id=Note%203%20%E2%80%93%20Earnings%20Per%20Share) Basic and diluted earnings per share calculations are detailed, showing an increase year-over-year for both three and six months ended June 30, 2025 Earnings Per Share (6 Months) | Metric (in thousands, except per share) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------------- | :--------------------------- | :--------------------------- | | Net Income | $11,790 | $8,612 | | Basic Earnings Per Share | $1.82 | $1.31 | | Diluted Earnings Per Share | $1.81 | $1.31 | | Weighted Average Basic Shares Outstanding | 6,482 | 6,585 | | Weighted Average Diluted Shares Outstanding | 6,498 | 6,596 | Earnings Per Share (3 Months) | Metric (in thousands, except per share) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | | :-------------------------------------- | :--------------------------- | :--------------------------- | | Net Income | $5,984 | $4,914 | | Basic Earnings Per Share | $0.92 | $0.75 | | Diluted Earnings Per Share | $0.92 | $0.75 | | Weighted Average Basic Shares Outstanding | 6,489 | 6,527 | | Weighted Average Diluted Shares Outstanding | 6,506 | 6,537 | [Note 4 – Investments](index=14&type=section&id=Note%204%20%E2%80%93%20Investments) This note details the investment securities portfolio, distinguishing AFS and HTM categories, with an ACL of **$59 thousand** for one HTM municipal bond Investment Securities Portfolio | Investment Category (in thousands) | Amortized Cost (June 30, 2025) | Fair Value (June 30, 2025) | Gross Unrealized Losses (June 30, 2025) | | :--------------------------------- | :----------------------------- | :------------------------- | :-------------------------------------- | | **Available for Sale:** | | | | | U.S. treasuries | $3,865 | $4,014 | $0 | | U.S. government agencies | $7,000 | $6,229 | $771 | | Residential mortgage-backed agencies | $24,915 | $21,265 | $3,669 | | Commercial mortgage-backed agencies | $38,217 | $30,151 | $8,066 | | Collateralized mortgage obligations | $20,171 | $17,468 | $2,718 | | Obligations of states and political subdivisions | $8,557 | $8,303 | $254 | | Corporate bonds | $1,000 | $911 | $89 | | Collateralized debt obligations | $18,738 | $15,241 | $3,497 | | **Total Available for Sale** | **$122,463** | **$103,582** | **$19,064** | | **Held to Maturity:** | | | | | U.S. government agencies | $68,447 | $59,304 | $9,143 | | Residential mortgage-backed agencies | $33,363 | $30,392 | $3,003 | | Commercial mortgage-backed agencies | $21,042 | $15,648 | $5,394 | | Collateralized mortgage obligations | $47,751 | $39,287 | $8,464 | | Obligations of states and political subdivisions | $4,407 | $3,865 | $715 | | **Total Held to Maturity** | **$175,010** | **$148,496** | **$26,719** | - At June 30, 2025 and December 31, 2024, the Corporation recorded an Allowance for Credit Losses (ACL) of approximately **$59 thousand** related to one municipal bond in its Held-to-Maturity (HTM) security portfolio[39](index=39&type=chunk) - At June 30, 2025, AFS investment securities with an aggregate fair value of **$85.2 million** and HTM investment securities with an aggregate book value of **$166.6 million** were pledged as collateral[43](index=43&type=chunk) [Note 5 – Loans and Related Allowance for Credit Losses](index=20&type=section&id=Note%205%20%E2%80%93%20Loans%20and%20Related%20Allowance%20for%20Credit%20Losses) This note provides a comprehensive overview of the Corporation's loan portfolio, its segmentation, credit quality indicators, and the methodology for calculating the Allowance for Credit Losses (ACL) [Loan Portfolio Composition and Aging](index=20&type=section&id=Loan%20Portfolio%20Composition%20and%20Aging) The loan portfolio increased to **$1.502 billion** at June 30, 2025, with decreases in non-accrual loans and accruing loans past due 30 days or more Loan Portfolio Composition | Loan Segment (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Commercial Real Estate | $550,717 | $526,364 | | Acquisition and Development | $98,937 | $95,314 | | Commercial and Industrial | $281,484 | $287,534 | | Residential Mortgage | $521,968 | $518,815 | | Consumer | $49,375 | $52,766 | | **Total Loans** | **$1,502,481**| **$1,480,793** | Loan Portfolio Aging | Loan Status (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------- | :------------ | :---------------- | | Current | $1,494,680 | $1,471,129 | | 30-59 Days Past Due | $1,507 | $1,058 | | 60-89 Days Past Due | $1,947 | $2,757 | | 90 Days+ Past Due | $535 | $918 | | Non-Accrual Loans | $3,812 | $4,931 | | **Total Loans** | **$1,502,481**| **$1,480,793** | - Accruing loans past due **30 days** or more constituted **0.27%** of the loan portfolio at June 30, 2025, a decrease from **0.32%** at December 31, 2024[45](index=45&type=chunk) [Allowance for Credit Losses (ACL) Methodology and Activity](index=21&type=section&id=Allowance%20for%20Credit%20Losses%20(ACL)%20Methodology%20and%20Activity) The ACL increased to **$19.044 million** at June 30, 2025, calculated using systematic methodology, specific analysis, and quantitative analysis with economic forecasts - The Corporation's ACL methodology includes segmentation by homogeneous loan types, specific analysis for individually evaluated loans (generally based on collateral value or discounted cash flows), and quantitative analysis using discounted cash flows with economic forecasts (e.g., unemployment, CPI, Housing Affordability Index, Gross State Product)[59](index=59&type=chunk)[60](index=60&type=chunk) Allowance for Credit Losses by Segment | ACL Segment (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------- | :------------ | :---------------- | | Commercial Real Estate | $6,166 | $5,272 | | Acquisition and Development | $1,043 | $909 | | Commercial and Industrial | $4,226 | $4,205 | | Residential Mortgage | $6,902 | $7,010 | | Consumer | $707 | $774 | | **Total ACL** | **$19,044** | **$18,170** | Allowance for Credit Losses Activity | ACL Activity (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | | Beginning Balance | $18,170 | $17,480 | | Loan Charge-offs | $(778) | $(2,099) | | Recoveries Collected | $267 | $330 | | Credit Loss Expense | $1,385 | $2,212 | | **Ending Balance** | **$19,044** | **$17,923** | [Credit Quality Indicators and Loan Modifications](index=27&type=section&id=Credit%20Quality%20Indicators%20and%20Loan%20Modifications) The Corporation uses internal credit risk grading and monitors loan modifications, with **$898 thousand** in loans modified in H1 2025, all post-modification payments made - The Corporation's internal credit risk grading system includes 'Pass' (high quality, performing), 'Special Mention' (potential weaknesses), 'Substandard' (inadequately protected, jeopardized liquidation), 'Doubtful' (highly questionable collection), and 'Loss' (worthless asset)[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) Loan Modifications by Type | Loan Type (in thousands) | 6 Months Ended June 30, 2025 (Term Extension) | Percentage of Total Loan Type | | :----------------------- | :-------------------------------------------- | :---------------------------- | | Owner-occupied commercial real estate | $874 | 0.38% | | Commercial and industrial | $24 | 0.01% | | **Total** | **$898** | | - Borrowers for whom loan modifications were made in the six-month period ended June 30, 2025, have made all contractual payments[80](index=80&type=chunk) [Note 6 – Fair Value of Financial Instruments](index=37&type=section&id=Note%206%20%E2%80%93%20Fair%20Value%20of%20Financial%20Instruments) This note outlines fair value measurements using a three-level hierarchy, with most recurring investment securities classified as Level 2, and CDOs, equity, OREO as Level 3 - The fair value hierarchy consists of Level 1 (unadjusted quoted prices in active markets for identical assets/liabilities), Level 2 (quoted prices not active, or observable inputs directly or indirectly), and Level 3 (unobservable inputs significant to valuation assumptions)[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) Fair Value Measurements | Asset Category (in thousands) | Fair Value (June 30, 2025) | Level 1 | Level 2 | Level 3 | | :---------------------------- | :------------------------- | :------ | :------ | :------ | | **Recurring:** | | | | | | U.S. treasuries | $4,014 | | $4,014 | | | U.S. government agencies | $6,229 | | $6,229 | | | Residential mortgage-backed agencies | $21,265 | | $21,265 | | | Commercial mortgage-backed agencies | $30,151 | | $30,151 | | | Collateralized mortgage obligations | $17,468 | | $17,468 | | | Obligations of states and political subdivisions | $8,303 | | $8,303 | | | Corporate bonds | $911 | | $911 | | | Collateralized debt obligations | $15,241 | | | $15,241 | | Equity investments not held for trading with readily determinable fair values | $1,008 | $1,008 | | | | Financial derivatives | $266 | | $266 | | | **Non-recurring:** | | | | | | Equity investment | $4,088 | | | $4,088 | | Other real estate owned | $176 | | | $176 | - There were no transfers of assets between any of the fair value hierarchy levels for the six- or three-month periods ended June 30, 2025 or 2024[95](index=95&type=chunk) [Note 7 – Accumulated Other Comprehensive Loss](index=44&type=section&id=Note%207%20%E2%80%93%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated OCL decreased significantly to **$(27.977 million)** at June 30, 2025, driven by positive other comprehensive income from AFS securities and pension adjustments Accumulated Other Comprehensive Loss Components | Component (in thousands) | Balance - January 1, 2025 | Balance - June 30, 2025 | Change | | :----------------------- | :------------------------ | :---------------------- | :----- | | Investment securities with credit related impairment AFS | $(2,592) | $(2,295) | $297 | | Investment securities- all other AFS | $(13,792) | $(12,079) | $1,713 | | Investment securities- HTM | $(4,696) | $(4,463) | $233 | | Cash Flow Hedge | $372 | $223 | $(149) | | Pension Plan | $(9,723) | $(9,546) | $177 | | SERP | $183 | $183 | $0 | | **Total Accumulated OCL** | **$(30,248)** | **$(27,977)** | **$2,271** | Other Comprehensive Income/(Loss) by Component | Component of OCI (in thousands) | 6 Months Ended June 30, 2025 (Net of Tax) | 6 Months Ended June 30, 2024 (Net of Tax) | | :------------------------------ | :---------------------------------------- | :---------------------------------------- | | AFS securities with credit related impairment | $297 | $(542) | | AFS securities – all other | $1,713 | $(987) | | HTM securities | $233 | $236 | | Cash flow hedges | $(149) | $3 | | Pension Plan | $177 | $999 | | SERP | $0 | $58 | | **Total Other Comprehensive Income/(Loss)** | **$2,271** | **$(233)** | [Note 8 – Equity Compensation Plan Information](index=50&type=section&id=Note%208%20%E2%80%93%20Equity%20Compensation%20Plan%20Information) This note details equity compensation plans, including stock awards and RSUs, providing recognized compensation expense and unrecognized expense for unvested RSUs - The First United Corporation **2018** Equity Compensation Plan authorizes the issuance of up to **325,000** shares of common stock[105](index=105&type=chunk) Equity Compensation Expense | Compensation Type (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------- | :--------------------------- | :--------------------------- | | Director Stock Compensation | $166 | $135 | | Employee Stock Compensation | $19 | $6 | | RSU Compensation Expense (2022 grant) | $26 | $55 | | RSU Compensation Expense (2023 grant) | $55 | $55 | | RSU Compensation Expense (2024 grant) | $57 | $9 | | RSU Compensation Expense (2025 grant) | $45 | $0 | - Unrecognized compensation expense related to RSUs that have not vested was **$82.755 thousand** (2023 grant), **$217.074 thousand** (2024 grant), and **$361.176 thousand** (2025 grant) as of June 30, 2025[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) [Note 9 – Derivative Financial Instruments](index=52&type=section&id=Note%209%20%E2%80%93%20Derivative%20Financial%20Instruments) The Corporation uses interest rate swaps as cash flow hedges, with **$15.0 million** notional amount remaining, creating an effective fixed rate of **4.66%** on junior subordinated debt - The Corporation uses interest rate swap agreements as cash flow hedges to modify the repricing characteristics of certain interest-bearing liabilities[119](index=119&type=chunk) - As of June 30, 2025, **$15.0 million** notional amount of interest rate swap contracts remain, creating an effective fixed interest rate of **4.66%** on junior subordinated debt until March 2026[120](index=120&type=chunk) Fair Value of Interest Rate Swap Contracts | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Fair Value of Interest Rate Swap Contracts | $266 | $455 | [Note 10 – Regulatory Capital Requirements](index=55&type=section&id=Note%2010%20%E2%80%93%20Regulatory%20Capital%20Requirements) The Bank remains 'well capitalized' at June 30, 2025, with all capital ratios exceeding required thresholds for capital adequacy and well-capitalized status Regulatory Capital Ratios | Capital Ratio | June 30, 2025 | December 31, 2024 | Required for Capital Adequacy | Required to be Well Capitalized | | :----------------------------------- | :------------ | :---------------- | :---------------------------- | :------------------------------ | | Total Capital (to risk-weighted assets) | 14.99 % | 14.59 % | 8.00 % | 10.00 % | | Tier 1 Capital (to risk-weighted assets) | 13.74 % | 13.35 % | 6.00 % | 8.00 % | | Common Equity Tier 1 Capital (to risk-weighted assets) | 13.74 % | 13.35 % | 4.50 % | 6.50 % | | Tier 1 Capital (to average assets) | 10.87 % | 10.70 % | 4.00 % | 5.00 % | - As of June 30, 2025, the Bank was considered "well capitalized" under the regulatory framework for prompt corrective action[125](index=125&type=chunk) [Note 11 – Deposits](index=55&type=section&id=Note%2011%20%E2%80%93%20Deposits) Total deposits increased by **$39.4 million** to **$1.614 billion** at June 30, 2025, driven by brokered time deposits and money market accounts Deposit Composition | Deposit Type (in thousands) | June 30, 2025 (Balance) | June 30, 2025 (Percent) | December 31, 2024 (Balance) | December 31, 2024 (Percent) | | :-------------------------- | :---------------------- | :---------------------- | :-------------------------- | :-------------------------- | | Non-Interest-bearing deposits | $425,784 | 26% | $426,737 | 27% | | Interest-bearing deposits: | | | | | | Demand | $347,752 | 22% | $386,803 | 25% | | Money market-retail | $476,917 | 30% | $447,149 | 28% | | Money market-brokered | $6 | 0% | $1 | 0% | | Savings deposits | $166,637 | 10% | $170,972 | 11% | | Time deposits-retail | $147,111 | 9% | $143,167 | 9% | | Time deposits-brokered | $50,000 | 3% | $0 | 0% | | **Total Deposits** | **$1,614,207** | **100%** | **$1,574,829** | **100%** | - In January 2025, **$50.0 million** in brokered time deposits were obtained to fund the repayment of overnight borrowings[204](index=204&type=chunk) [Note 12 – Borrowed Funds](index=55&type=section&id=Note%2012%20%E2%80%93%20Borrowed%20Funds) Total borrowings decreased by **$14.455 million** to **$171.883 million** at June 30, 2025, primarily due to reduced overnight borrowings Borrowed Funds Outstanding | Borrowing Type (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | **Short-term borrowings:** | | | | Securities sold under agreements to repurchase | $21,812 | $15,409 | | Overnight borrowings | $29,142 | $50,000 | | **Total Short-term Borrowings** | **$50,954** | **$65,409** | | **Long-term borrowings:** | | | | FHLB advances | $90,000 | $90,000 | | Junior subordinated debt | $30,929 | $30,929 | | **Total Long-term Borrowings**| **$120,929** | **$120,929** | | **Total Borrowings Outstanding**| **$171,883** | **$186,338** | - At June 30, 2025, repurchase agreements were secured by **$28.3 million** in investment securities issued by government-related agencies[129](index=129&type=chunk) [Note 13 – Segment Reporting](index=56&type=section&id=Note%2013%20%E2%80%93%20Segment%20Reporting) The Corporation operates in Community Banking and Wealth Management segments, both showing increased net income for the six months ended June 30, 2025 - The Corporation's two primary operating segments are Community Banking and Wealth Management[130](index=130&type=chunk) Segment Net Income (6 Months) | Segment (in thousands) | Net Income (6 Months Ended June 30, 2025) | Net Income (6 Months Ended June 30, 2024) | | :--------------------- | :---------------------------------------- | :---------------------------------------- | | Community Banking | $9,612 | $6,513 | | Wealth Management | $2,178 | $2,099 | | **Total** | **$11,790** | **$8,612** | Segment Net Income (3 Months) | Segment (in thousands) | Net Income (3 Months Ended June 30, 2025) | Net Income (3 Months Ended June 30, 2024) | | :--------------------- | :---------------------------------------- | :---------------------------------------- | | Community Banking | $4,919 | $3,915 | | Wealth Management | $1,065 | $999 | | **Total** | **$5,984** | **$4,914** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=63&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial performance and condition, highlighting key drivers, trends, and balance sheet analysis [Introduction](index=63&type=section&id=Introduction) This introduction sets the context for Management's Discussion and Analysis, reviewing material changes and significant factors affecting financial condition and results - The discussion and analysis reviews material changes and significant factors affecting the financial condition and results of operations of First United Corporation and its consolidated subsidiaries[147](index=147&type=chunk) [Forward-Looking Statements](index=63&type=section&id=Forward-Looking%20Statements) This section clarifies that the report contains forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements about management's beliefs, plans, and objectives, which are not guarantees of future performance and involve risks and uncertainties[149](index=149&type=chunk) [First United Corporation (Company Overview)](index=63&type=section&id=First%20United%20Corporation) First United Corporation, a Maryland financial holding company, reported total assets of **$2.0 billion**, net loans of **$1.5 billion**, and deposits of **$1.6 billion** at June 30, 2025 - First United Corporation is a Maryland financial holding company, parent to First United Bank & Trust and other subsidiaries[150](index=150&type=chunk) Key Financial Metrics | Metric (in billions) | June 30, 2025 | | :------------------- | :------------ | | Total Assets | $2.0 | | Net Loans | $1.5 | | Deposits | $1.6 | | Shareholders' Equity | $0.1911 | [Results of Operations](index=64&type=section&id=Results%20of%20Operations) Net income significantly increased for Q2 and H1 2025, driven by higher net interest income and reduced credit loss expense, partially offset by rising operating expenses [Overview](index=64&type=section&id=Overview) Consolidated net income increased to **$6.0 million** for Q2 2025 and **$11.8 million** for H1 2025, primarily due to increased net interest income and decreased credit loss expense Consolidated Net Income and EPS (Q2) | Metric (in millions, except per share) | Q2 2025 | Q2 2024 | YoY Change (Q2) | | :------------------------------------- | :------ | :------ | :-------------- | | Net Income | $6.0 | $4.9 | $1.1 | | Basic EPS | $0.92 | $0.75 | $0.17 | | Diluted EPS | $0.92 | $0.75 | $0.17 | Consolidated Net Income and EPS (6 Months) | Metric (in millions, except per share) | 6 Months 2025 | 6 Months 2024 | YoY Change (6 Months) | | :------------------------------------- | :------------ | :------------ | :-------------------- | | Net Income | $11.8 | $8.6 | $3.2 | | Basic EPS | $1.82 | $1.31 | $0.51 | | Diluted EPS | $1.81 | $1.31 | $0.50 | - The **$1.1 million** increase in quarterly net income was primarily driven by a **$1.5 million** increase in net interest income, a **$0.3 million** decrease in provision for credit loss, and a **$0.2 million** increase in non-interest income, partially offset by increases in non-interest expense of **$0.6 million** and income tax expense of **$0.4 million**[154](index=154&type=chunk) [Net Interest Income](index=66&type=section&id=Net%20Interest%20Income) Net interest income increased by **$1.5 million** for Q2 2025 and **$3.7 million** for H1 2025 (FTE basis), driven by loan growth and repricing, with net interest margin at **3.61%** for H1 2025 Net Interest Income and Margin (6 Months, FTE) | Metric (in thousands, FTE basis) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :------------------------------- | :--------------------------- | :--------------------------- | :--------- | | Interest Income | $49,036 | $45,126 | $3,910 | | Interest Expense | $16,210 | $15,961 | $249 | | Net Interest Income | $32,826 | $29,165 | $3,661 | | Net Interest Margin % | 3.61 % | 3.31 % | 0.30 % | Net Interest Income and Margin (3 Months, FTE) | Metric (in thousands, FTE basis) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change | | :------------------------------- | :--------------------------- | :--------------------------- | :--------- | | Interest Income | $24,925 | $23,171 | $1,754 | | Interest Expense | $8,164 | $7,875 | $289 | | Net Interest Income | $16,761 | $15,296 | $1,465 | | Net Interest Margin % | 3.65 % | 3.49 % | 0.16 % | - Interest and fees on loans increased by **$2.1 million** in Q2 2025 compared to Q2 2024, driven by repricing of adjustable-rate loans and **$74.1 million** growth in average loan balances[168](index=168&type=chunk) [Provision for Credit Losses](index=73&type=section&id=Provision%20for%20Credit%20Losses) Net provision expense for credit losses decreased to **$1.5 million** for H1 2025 and **$0.9 million** for Q2 2025, primarily due to prior year charge-offs Net Provision Expense for Credit Losses (6 Months) | Metric (in millions) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------- | :--------------------------- | :--------------------------- | | Net Provision Expense | $1.5 | $2.1 | | **YoY Change** | **$(0.6)** | | Net Provision Expense for Credit Losses (Q2) | Metric (in millions) | Q2 2025 | Q2 2024 | | :------------------- | :------ | :------ | | Net Provision Expense | $0.9 | $1.2 | | **YoY Change** | **$(0.3)**| | - The decreased provision expense in the first six months of 2025 was primarily related to **$1.1 million** in charge-offs on a non-accrual commercial loan relationship that occurred in 2024[173](index=173&type=chunk) [Other Income](index=74&type=section&id=Other%20Income) Other operating income increased by **$0.2 million** in Q2 2025 and **$0.3 million** for H1 2025, driven by higher wealth management income and gains on residential mortgage sales Other Operating Income (6 Months) | Other Income Category (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------- | | Service charges on deposit accounts | $1,124 | $1,112 | $12 | | Trust department | $4,709 | $4,443 | $266 | | Debit card income | $1,904 | $1,931 | $(27) | | Bank owned life insurance | $690 | $660 | $30 | | Brokerage commissions | $791 | $857 | $(66) | | **Total Other Income** | **$9,762** | **$9,575** | **$187** | Other Operating Income (3 Months) | Other Income Category (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------- | | Service charges on deposit accounts | $577 | $556 | $21 | | Trust department | $2,386 | $2,255 | $131 | | Debit card income | $983 | $999 | $(16) | | Bank owned life insurance | $349 | $334 | $15 | | Brokerage commissions | $370 | $362 | $8 | | **Total Other Income** | **$4,940** | **$4,782** | **$158** | - The increase in other operating income was driven by a **$0.1 million** increase in wealth management income (Q2) and **$0.2 million** (6 months) reflecting higher market valuations and expanded client relationships, and a **$0.1 million** increase in gains on sales of residential mortgages[156](index=156&type=chunk)[157](index=157&type=chunk) [Other Operating Expenses](index=74&type=section&id=Other%20Operating%20Expenses) Total other operating expenses increased by **$0.6 million** in Q2 2025 and **$0.3 million** for H1 2025, driven by OREO expenses, data processing, and professional services Other Operating Expenses (6 Months) | Expense Category (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :------------------------------ | :--------------------------- | :--------------------------- | :--------- | | Salaries and employee benefits | $14,650 | $14,413 | $237 | | Equipment expense | $1,143 | $1,558 | $(415) | | Occupancy expense of premises | $1,364 | $1,606 | $(242) | | Data processing expense | $3,103 | $2,740 | $363 | | Other real estate owned expense, net | $300 | $100 | $200 | | **Total Other Operating Expenses** | **$25,550** | **$25,245** | **$305** | Other Operating Expenses (3 Months) | Expense Category (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change | | :------------------------------ | :--------------------------- | :--------------------------- | :--------- | | Salaries and employee benefits | $7,319 | $7,256 | $63 | | Equipment expense | $565 | $635 | $(70) | | Occupancy expense of premises | $675 | $652 | $23 | | Data processing expense | $1,600 | $1,422 | $178 | | Other real estate owned expense, net | $208 | $14 | $194 | | **Total Other Operating Expenses** | **$12,974** | **$12,364** | **$610** | - For the six months ended June 30, 2025, non-interest expense increased by **$0.3 million**, partially offset by a **$0.7 million** decrease in occupancy and equipment expenses related to accelerated depreciation expense recognized in Q1 2024 due to branch closures[159](index=159&type=chunk) [Provision for Income Taxes](index=74&type=section&id=Provision%20for%20Income%20Taxes) The provision for income taxes is based on the estimated effective tax rate, which was **24.7%** for the six-month period ended June 30, 2025 - The effective income tax rates as a percentage of income for the six-month periods ended June 30, 2025 and June 30, 2024 were **24.7%** and **24.3%**, respectively[178](index=178&type=chunk) [GAAP and Non-GAAP Financial Measures](index=76&type=section&id=GAAP%20and%20Non-GAAP%20Financial%20Measures) This section presents GAAP and non-GAAP financial measures, with non-GAAP adjustments primarily related to accelerated depreciation expenses in 2024 Selected GAAP and Non-GAAP Financial Measures (6 Months) | Metric (in thousands, except per share) | 6 Months Ended June 30, 2025 (GAAP) | 6 Months Ended June 30, 2024 (GAAP) | 6 Months Ended June 30, 2024 (Non-GAAP) | | :-------------------------------------- | :---------------------------------- | :---------------------------------- | :------------------------------------ | | Net Income | $11,790 | $8,612 | $9,037 | | Diluted EPS | $1.81 | $1.31 | $1.37 | | Return on Average Assets | 1.20% | 0.89% | 0.98% | | Return on Average Equity | 12.78% | 10.51% | 11.55% | - Non-GAAP adjustments for **2024** primarily relate to accelerated depreciation expenses and their income tax effect, which increased adjusted net income and diluted EPS compared to GAAP figures[180](index=180&type=chunk) [Financial Condition](index=78&type=section&id=Financial%20Condition) This section analyzes the balance sheet, loan and investment portfolios, deposits, borrowings, liquidity, market risk, and capital resources, showing overall growth and strong capital [Balance Sheet Overview](index=78&type=section&id=Balance%20Sheet%20Overview) Total assets increased by **$34.4 million** to **$2.0 billion** at June 30, 2025, driven by gross loans and investment portfolio growth, with increased deposits and decreased short-term borrowings Balance Sheet Summary | Metric (in millions) | June 30, 2025 | December 31, 2024 | Change | | :------------------- | :------------ | :---------------- | :----- | | Total Assets | $2.0 | $1.97 | $0.034 | | Gross Loans | $1.502 | $1.481 | $0.021 | | Investment Portfolio | $0.278 | $0.270 | $0.008 | | Total Liabilities | $1.816 | $1.794 | $0.022 | | Total Deposits | $1.614 | $1.575 | $0.039 | | Short-term Borrowings | $0.051 | $0.065 | $(0.014) | - Total assets increased by **$34.4 million** to **$2.0 billion** at June 30, 2025, from December 31, 2024, primarily due to a **$21.7 million** increase in gross loans and a **$9.6 million** increase in the investment portfolio[181](index=181&type=chunk)[182](index=182&type=chunk) [Loan Portfolio](index=78&type=section&id=Loan%20Portfolio) The total loan portfolio increased by **$21.7 million** to **$1.502 billion** at June 30, 2025, with growth in commercial real estate and residential mortgages, and decreased non-accrual loans Loan Portfolio Composition and Changes | Loan Type (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :----------------------- | :------------ | :---------------- | :----- | | Commercial real estate | $550,717 | $526,364 | $24,353| | Acquisition and development | $98,937 | $95,314 | $3,623 | | Commercial and industrial | $281,484 | $287,534 | $(6,050)| | Residential mortgage | $521,968 | $518,815 | $3,153 | | Consumer | $49,375 | $52,766 | $(3,391)| | **Total Loans** | **$1,502,481**| **$1,480,793** | **$21,698**| - New commercial loan production for Q2 2025 was approximately **$65.1 million**, with a pipeline of **$32.3 million** and unfunded commitments of **$47.0 million**[184](index=184&type=chunk) - Non-accrual loans totaled **$3.8 million** at June 30, 2025, a decrease from **$4.9 million** at December 31, 2024, primarily due to principal reductions and a payoff of a residential mortgage loan[186](index=186&type=chunk) [Risk Elements of Loan Portfolio](index=81&type=section&id=Risk%20Elements%20of%20Loan%20Portfolio) Risk elements show decreased non-accrual loans and improved ACL coverage ratios at June 30, 2025, indicating stronger credit quality Loan Portfolio Risk Elements | Risk Element (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Total non-accrual loans | $3,812 | $4,931 | | Accruing Loans Past Due 90 days or more | $535 | $918 | | Total non-accrual and accruing loans past due 90 days or more | $4,347 | $5,849 | | Total non-performing assets | $10,184 | $11,713 | | Non-accrual loans to total loans (%) | 0.25% | 0.33% | | Non-performing loans to total loans (%) | 0.29% | 0.39% | | Allowance for credit losses to non-accrual loans (%) | 499.58% | 368.49% | | Allowance for credit losses to non-performing assets (%) | 187.00% | 155.13% | [Allowance for Credit Losses](index=82&type=section&id=Allowance%20for%20Credit%20Losses) The ACL increased to **$19.044 million** at June 30, 2025, reflecting credit loss expense partially offset by net charge-offs, with stress testing providing a range of outcomes Allowance for Credit Losses Activity and Ratios | ACL Activity (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | | Balance, January 1 | $18,170 | $17,480 | | Total charge-offs | $(778) | $(2,099) | | Total recoveries | $267 | $330 | | Net losses | $(511) | $(1,769) | | Credit loss expense | $1,385 | $2,212 | | **Balance at end of period**| **$19,044** | **$17,923** | | ACL to gross loans outstanding (%) | 1.27 % | 1.26 % | - The ACL "base case" model is derived from economic forecasts and stress-tested to develop a range of potential outcomes, which for the period ended June 30, 2025, would produce a **15%** reduction or a **58%** increase in reserves based on best-case and worst-case scenarios, respectively[194](index=194&type=chunk) [Investment Securities](index=83&type=section&id=Investment%20Securities) AFS investment securities fair value increased by **$9.1 million** to **$103.6 million** at June 30, 2025, with a net unrealized loss of **$18.9 million** in the AFS portfolio Investment Securities Portfolio Summary | Investment Category (in thousands) | Amortized Cost (June 30, 2025) | Fair Value (June 30, 2025) | Amortized Cost (Dec 31, 2024) | Fair Value (Dec 31, 2024) | | :--------------------------------- | :----------------------------- | :------------------------- | :---------------------------- | :------------------------ | | **Available for Sale:** | | | | | | Total available for sale | $122,463 | $103,582 | $116,114 | $94,494 | | **Held to Maturity:** | | | | | | Total held to maturity | $175,010 | $148,496 | $175,556 | $144,760 | - At June 30, 2025, the securities classified as available-for-sale included a net unrealized loss of **$18.9 million**[199](index=199&type=chunk) - Approximately **$88.3 million** of the available-for-sale portfolio was valued using Level 2 pricing, and **$15.2 million** (collateralized debt obligations) was valued using Level 3 inputs, with **$3.5 million** in net unrealized losses[203](index=203&type=chunk) [Deposits](index=85&type=section&id=Deposits) Total deposits increased by **$39.4 million** to **$1.614 billion** at June 30, 2025, driven by brokered time deposits and money market accounts, with **76%** insured Deposit Composition by Type | Deposit Type (in thousands) | June 30, 2025 (Balance) | June 30, 2025 (Percent) | December 31, 2024 (Balance) | December 31, 2024 (Percent) | | :-------------------------- | :---------------------- | :---------------------- | :-------------------------- | :-------------------------- | | Non-Interest-bearing deposits | $425,784 | 26% | $426,737 | 27% | | Interest-bearing deposits: | | | | | | Demand | $347,752 | 22% | $386,803 | 25% | | Money market-retail | $476,917 | 30% | $447,149 | 28% | | Money market-brokered | $6 | 0% | $1 | 0% | | Savings deposits | $166,637 | 10% | $170,972 | 11% | | Time deposits-retail | $147,111 | 9% | $143,167 | 9% | | Time deposits-brokered | $50,000 | 3% | $0 | 0% | | **Total Deposits** | **$1,614,207** | **100%** | **$1,574,829** | **100%** | - In January 2025, **$50.0 million** in brokered time deposits were obtained to fund the repayment of overnight borrowings[204](index=204&type=chunk) Deposit Insurance Coverage | Deposit Category (in thousands) | June 30, 2025 (Balance) | June 30, 2025 (Percent) | | :------------------------------ | :---------------------- | :---------------------- | | Insured deposits | $1,232,329 | 76% | | Uninsured and fully collateralized deposits | $77,317 | 5% | | Uninsured and uncollateralized deposits | $304,561 | 19% | | Retail deposits | $796,108 | 49% | | Business deposits | $818,099 | 51% | [Borrowed Funds](index=86&type=section&id=Borrowed%20Funds) Total short-term borrowings decreased by **$14.5 million** to **$50.954 million** at June 30, 2025, primarily due to reduced overnight borrowings Borrowed Funds Composition | Borrowing Type (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Overnight borrowings from Federal Reserve Discount Window | $0 | $50,000 | | Overnight borrowings from Zions Bank | $29,142 | $0 | | Securities sold under agreements to repurchase | $21,812 | $15,409 | | **Total Short-term Borrowings** | **$50,954** | **$65,409** | | FHLB advances | $90,000 | $90,000 | | Junior subordinated debt | $30,929 | $30,929 | | **Total Long-term Borrowings**| **$120,929** | **$120,929** | [Liquidity Management](index=86&type=section&id=Liquidity%20Management) The Corporation manages liquidity to meet demands, with **$653.3 million** in available sources and **$527.3 million** net availability at June 30, 2025 - The Corporation's liquidity management policy aims to fully satisfy liquidity needs through normal Bank operations, minimizing unplanned asset sales or emergency borrowings[211](index=211&type=chunk) Available Liquidity Sources | Liquidity Source (in thousands) | Total Availability | Amount Used | Net Availability | | :------------------------------ | :----------------- | :---------- | :--------------- | | **Internal Sources:** | | | | | Excess cash | $51,753 | $0 | $51,753 | | Unpledged securities | $30,804 | $0 | $30,804 | | **External Sources:** | | | | | Federal Reserve (discount window) | $88,378 | $0 | $88,378 | | Correspondent unsecured lines of credit | $140,000 | $29,142 | $110,858 | | FHLB | $342,381 | $96,921 | $245,460 | | **Total** | **$653,316** | **$126,063**| **$527,253** | [Market Risk and Interest Sensitivity](index=87&type=section&id=Market%20Risk%20and%20Interest%20Sensitivity) The Corporation is asset sensitive, meaning rising interest rates would generally increase net interest income, with NII simulation showing potential increases with rising rates - The Corporation's primary market risk is interest rate fluctuation, managed through interest sensitivity gap analysis and simulation models[215](index=215&type=chunk) - At June 30, 2025, the Corporation was asset sensitive, indicating that rising interest rates would generally increase net interest income[216](index=216&type=chunk) Estimated Change in Net Interest Income (Interest Rate Sensitivity) | Interest Rate Change (basis points) | Estimated Change in Net Interest Income (June 30, 2025, in thousands) | | :---------------------------------- | :-------------------------------------------------------------------- | | +400 | $5,917 | | +300 | $5,508 | | +200 | $4,401 | | +100 | $2,468 | | -100 | $(2,974) | | -200 | $(5,475) | | -300 | $(8,341) | | -400 | $(11,738) | [Capital Resources](index=91&type=section&id=Capital%20Resources) The Bank remains 'well capitalized' at June 30, 2025, with all capital ratios exceeding required thresholds, including Total Capital at **14.99%** and Tier 1 Capital at **10.87%** Regulatory Capital Ratios | Capital Ratio | June 30, 2025 | December 31, 2024 | Required for Capital Adequacy | Required to be Well Capitalized | | :----------------------------------- | :------------ | :---------------- | :---------------------------- | :------------------------------ | | Total Capital (to risk-weighted assets) | 14.99 % | 14.59 % | 8.00 % | 10.00 % | | Tier 1 Capital (to risk-weighted assets) | 13.74 % | 13.35 % | 6.00 % | 8.00 % | | Common Equity Tier 1 Capital (to risk-weighted assets) | 13.74 % | 13.35 % | 4.50 % | 6.50 % | | Tier 1 Capital (to average assets) | 10.87 % | 10.70 % | 4.00 % | 5.00 % | - As of June 30, 2025, the Bank was considered "well capitalized" under the regulatory framework for prompt corrective action[230](index=230&type=chunk) [Contractual Obligations, Commitments and Off-Balance Sheet Arrangements](index=91&type=section&id=Contractual%20Obligations,%20Commitments%20and%20Off-Balance%20Sheet%20Arrangements) Commitments to extend credit increased by **$19.4 million** to **$287.3 million** at June 30, 2025, driven by new commercial loan commitments, with **$131 thousand** net credit loss expense for off-balance sheet exposures Commitments to Extend Credit | Commitment Type (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------ | :---------------- | | Residential mortgage - home equity | $72,219 | $70,894 | | Residential mortgage - construction | $9,970 | $13,138 | | Commercial | $184,571 | $163,079 | | Consumer - personal credit lines | $4,276 | $4,224 | | Standby letters of credit | $16,261 | $16,522 | | **Total** | **$287,297** | **$267,857** | - The increase of **$19.4 million** in commitments at June 30, 2025, was due to new commercial loan commitments, including unfunded commercial real estate construction commitments (**$11.5 million**) and unfunded revolving commercial and industrial commitments (**$10.6 million**)[233](index=233&type=chunk) - Net credit loss expense for off-balance sheet exposures was approximately **$131 thousand** for the six-month period ended June 30, 2025, compared to a credit of **$(72 thousand)** in the prior year[233](index=233&ty

Group 1: Earnings Performance - First United Corporation (FUNC) reported quarterly earnings of $0.92 per share, exceeding the Zacks Consensus Estimate of $0.84 per share, and up from $0.75 per share a year ago, representing an earnings surprise of +9.52% [1] - The company has surpassed consensus EPS estimates in all four of the last quarters [2] - First United's revenues for the quarter ended June 2025 were $21.85 million, surpassing the Zacks Consensus Estimate by 2.76%, and up from $20.08 million year-over-year [2] Group 2: Stock Performance and Outlook - First United shares have increased by approximately 3.3% since the beginning of the year, compared to the S&P 500's gain of 7.1% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the upcoming quarter is $0.86 on revenues of $21.73 million, and for the current fiscal year, it is $3.50 on revenues of $86.08 million [7] Group 3: Industry Context - The Zacks Industry Rank indicates that the Banks - Northeast industry is currently in the top 30% of over 250 Zacks industries, suggesting a favorable environment for stock performance [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5] - The estimate revisions trend for First United was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6]

[Executive Summary & Q2 2025 Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Q2%202025%20Highlights) First United Corporation achieved strong Q2 and H1 2025 financial results, marked by significant net income growth and improved net interest margin [Second Quarter 2025 Performance Overview](index=1&type=section&id=1.1%20Second%20Quarter%202025%20Performance%20Overview) Q2 2025 net income increased to **$6.0 million** ($0.92 diluted EPS), driven by an increasing net interest margin and controlled funding costs Consolidated Net Income and Diluted EPS | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :----------------------------- | :------ | :------ | :------ | | Net Income, GAAP (millions) | $6.0 | $5.8 | $4.9 | | Diluted net income per share | $0.92 | $0.89 | $0.75 | - The **$1.1 million** increase in quarterly net income (YoY) was primarily due to a **$1.5 million** increase in net interest income, a **$0.3 million** decrease in provision for credit loss, and a **$0.2 million** increase in non-interest income, partially offset by higher non-interest and income tax expenses[6](index=6&type=chunk) - The CEO highlighted the strong second quarter, driven by increasing net interest margin, successful control of funding costs, and favorable loan portfolio interest income, with increased loan production and team expansion[3](index=3&type=chunk) [Key Financial Highlights (Q2 2025 vs Q1 2025 & Q2 2024)](index=1&type=section&id=1.2%20Key%20Financial%20Highlights%20(Q2%202025%20vs%20Q1%202025%20%26%20Q2%202024)) Q2 2025 net interest margin was **3.65%** (FTE), reflecting increased loan yields and stable funding costs, with strong loan production - Net interest margin (non-GAAP, FTE basis) was **3.65%** for Q2 2025, driven by increased loan yields and stable funding costs[7](index=7&type=chunk) Q2 2025 Loan Originations | Loan Originations (Q2 2025) | Amount (millions) | | :---------------------------- | :---------------- | | Commercial Loans | $65.1 | | Residential Mortgages | $19.2 | Q2 2025 Provision Expense and Cash Dividend | Metric (Q2 2025) | Amount (millions) | | :--------------- | :---------------- | | Provision expense | $0.9 | | Cash dividend | $0.22 per share | - Compared to the linked quarter (Q1 2025), net income increased slightly due to higher net interest income and other operating income, partially offset by increased provision for credit losses and operating expenses[8](index=8&type=chunk) [Six-Month Period 2025 Performance Overview](index=1&type=section&id=1.3%20Six-Month%20Period%202025%20Performance%20Overview) H1 2025 net income significantly increased to **$11.8 million** ($1.81 diluted EPS), driven by higher net interest income and lower provision for credit losses Six-Month Period Net Income and Performance Ratios | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------- | :--------------------------- | :--------------------------- | | Net Income (millions) | $11.8 | $8.6 | | Diluted net income per share | $1.81 | $1.31 | | Return on Average Assets | 1.20% | 0.89% | | Return on Average Equity | 12.78% | 10.48% | - The increase in net income for the first six months of 2025 was driven by a **$3.7 million** increase in net interest income and a **$0.6 million** decrease in provision for credit losses (due to a **$1.1 million** charge-off in 2024)[9](index=9&type=chunk) - Other operating income increased by **$0.3 million**, mainly from gains on residential mortgage sales and wealth management income, partially offset by a **$0.3 million** increase in operating expenses[9](index=9&type=chunk) [Detailed Income Statement Analysis](index=2&type=section&id=Detailed%20Income%20Statement%20Analysis) This section provides an in-depth analysis of First United Corporation's income statement components, including net interest income, non-interest income, non-interest expense, and income tax expense [Net Interest Income and Net Interest Margin](index=2&type=section&id=2.1%20Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Net interest income grew significantly across all periods, driven by increased loan interest income from repricing and portfolio growth, with mixed interest expense management Net Interest Income and Loan Portfolio Growth (FTE Basis) | Metric (FTE Basis) | Q2 2025 vs Q2 2024 | Q2 2025 vs Q1 2025 | 6M 2025 vs 6M 2024 | | :----------------- | :----------------- | :----------------- | :----------------- | | Net Interest Income | +$1.5 million | +$0.7 million | +$3.7 million | | Loan Interest Income | +$2.1 million | +$0.5 million | +$4.6 million | | Average Loan Balances | +$74.1 million | +$6.3 million | +$74.7 million | | Overall Loan Yield | +26 bps | +6 bps | +36 bps | - Interest expense increased by **$0.3 million** YoY for Q2 2025, with deposit interest up **$0.4 million** (due to higher balances, despite lower rates) and long-term borrowings up **$0.4 million**, partially offset by a **$0.5 million** decrease in short-term borrowings due to BTFP repayment[10](index=10&type=chunk) Net Interest Margin (FTE Basis) for Six-Month Periods | Net Interest Margin (FTE Basis) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------ | :--------------------------- | :--------------------------- | | Net Interest Margin | 3.61% | 3.31% | [Non-Interest Income](index=3&type=section&id=2.2%20Non-Interest%20Income) Non-interest income consistently grew across all periods, primarily driven by increased wealth management income and residential mortgage sales gains Other Operating Income Trends | Metric (Other Operating Income, including net gains) | Q2 2025 vs Q2 2024 | Q2 2025 vs Q1 2025 | 6M 2025 vs 6M 2024 | | :------------------------------------------------- | :----------------- | :----------------- | :----------------- | | Total Increase | +$0.2 million | +$0.2 million | +$0.3 million | | Wealth Management Income | +$0.1 million | Stable | +$0.2 million | | Gains on Sales of Residential Mortgages | +$0.1 million | +$0.1 million | +$0.1 million | | Debit Card Income | Stable | +$0.1 million | Stable | - Wealth management income growth was attributed to higher market valuations, expanded client relationships, and increased annuity sales[13](index=13&type=chunk)[15](index=15&type=chunk) - Gains on sales of residential mortgages increased due to higher production volumes year-over-year and quarter-over-quarter[13](index=13&type=chunk)[14](index=14&type=chunk) [Non-Interest Expense](index=3&type=section&id=2.3%20Non-Interest%20Expense) Operating expenses increased across all periods, driven by higher OREO expenses, data processing, professional services, and salaries, partially offset by lower occupancy costs Operating Expense Trends | Metric (Operating Expenses) | Q2 2025 vs Q2 2024 | Q2 2025 vs Q1 2025 | 6M 2025 vs 6M 2024 | | :-------------------------- | :----------------- | :----------------- | :----------------- | | Total Increase | +$0.6 million | +$0.4 million | +$0.3 million | | Net OREO Expenses | +$0.2 million | +$0.1 million | +$0.2 million | | Data Processing Fees | +$0.2 million | +$0.1 million | +$0.9 million | | Professional Services | +$0.1 million | +$0.1 million | +$0.1 million | | Salaries & Employee Benefits | +$0.1 million | N/A | +$0.2 million | - Net OREO expenses increased due to a gain on sale in Q2 2024 not recurring and increased costs associated with one OREO property in Q2 2025[16](index=16&type=chunk)[17](index=17&type=chunk) - Salaries and employee benefits increased due to normal merit increases and higher stock compensation/401K expenses, partially offset by reduced life and health insurance costs[16](index=16&type=chunk)[18](index=18&type=chunk) - Occupancy and equipment expenses decreased by **$0.7 million** for the six-month period due to accelerated depreciation from branch closures in Q1 2024[18](index=18&type=chunk) [Income Tax Expense](index=3&type=section&id=2.4%20Income%20Tax%20Expense) The effective income tax rate for the first six months of 2025 remained stable with a slight increase compared to the prior year Effective Income Tax Rate | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | | Effective Income Tax Rate | 24.7% | 24.3% | [Balance Sheet Analysis](index=3&type=section&id=Balance%20Sheet%20Analysis) This section analyzes First United Corporation's balance sheet, detailing changes in total assets, liabilities, deposits, loan portfolio, and shareholders' equity [Total Assets](index=3&type=section&id=3.1%20Total%20Assets) Total assets grew to **$2.0 billion** at June 30, 2025, reflecting increases in the investment portfolio and gross loans, with stronger loan growth anticipated Total Assets and Portfolio Changes | Metric | June 30, 2025 (billions) | December 31, 2024 (billions) | Change (millions) | | :------------- | :----------------------- | :--------------------------- | :---------------- | | Total Assets | $2.0 | $1.973 | +$34.4 | | Investment Portfolio | N/A | N/A | +$9.6 | | Gross Loans | N/A | N/A | +$21.7 | - The investment portfolio increased as bonds were purchased to gain yield in anticipation of potential declines in long-term rates[20](index=20&type=chunk) - Management expects stronger loan growth in the second half of the year due to robust loan pipelines[20](index=20&type=chunk) [Total Liabilities and Deposits](index=4&type=section&id=3.2%20Total%20Liabilities%20and%20Deposits) Total liabilities increased due to higher total deposits, including brokered deposits, with shifts in deposit composition towards savings, money market, and retail time deposits Total Liabilities and Deposit Composition | Metric | June 30, 2025 (billions) | December 31, 2024 (billions) | Change (millions) | | :-------------------- | :----------------------- | :--------------------------- | :---------------- | | Total Liabilities | $1.8 | $1.777 | +$22.6 | | Total Deposits | N/A | N/A | +$39.4 | | Brokered Deposits | N/A | N/A | +$50.0 | | Savings & Money Market | N/A | N/A | +$25.5 | | Retail Time Deposits | N/A | N/A | +$3.9 | | Interest-Bearing Demand | N/A | N/A | -$39.1 | - The **$50.0 million** in new brokered deposits (average rate **4.24%**) obtained in January 2025 were used to repay **$50.0 million** in overnight borrowings outstanding at December 31, 2024[21](index=21&type=chunk)[26](index=26&type=chunk) - Decreases in interest-bearing demand deposits were primarily due to seasonal fluctuations in municipal accounts, and non-interest-bearing deposits decreased due to increased spending related to inflation[21](index=21&type=chunk)[26](index=26&type=chunk) [Loan Portfolio](index=4&type=section&id=3.3%20Loan%20Portfolio) Gross loan portfolio expanded by **$21.7 million** since December 31, 2024, driven by commercial real estate and acquisition loans, despite decreases in other loan types, with strong Q2 production Loan Portfolio Changes by Type | Loan Type (in millions) | Change since March 31, 2025 | Change since December 31, 2024 | | :---------------------- | :-------------------------- | :----------------------------- | | Commercial | +$21.9 | +$21.9 | | 1 to 4 Family Mortgages | +$1.9 | +$3.2 | | Consumer | -$1.2 | -$3.4 | | Gross Loans | +$22.6 | +$21.7 | - Commercial real estate loans increased by **$24.4 million** and acquisition and development loans by **$3.6 million** since December 31, 2024[23](index=23&type=chunk) Q2 2025 Loan Production and Pipeline | Loan Production (Q2 2025) | Amount (millions) | | :------------------------ | :---------------- | | New Commercial Loans | $65.1 | | Commercial Loan Pipeline | $32.3 | | Unfunded Commercial Construction | $47.0 | | New Consumer Mortgage Loans | $19.2 | | In-house Portfolio Loan Pipeline | $11.4 | | Unfunded Residential Construction | $10.0 | [Shareholders' Equity](index=5&type=section&id=3.4%20Shareholders'%20Equity) Shareholders' equity increased, raising book value per common share, primarily due to undistributed net income for the first half of 2025 Shareholders' Equity and Book Value Per Share | Metric | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Book value per share | $29.43 | $27.71 | | Diluted book value per share | $29.38 | $27.65 | | Basic outstanding shares | 6,494,611 | 6,471,096 | | Diluted outstanding shares | 6,506,493 | 6,485,119 | - The increase in book value was attributed to **$8.9 million** in undistributed net income for the first six months of 2025[27](index=27&type=chunk) [Asset Quality](index=5&type=section&id=Asset%20Quality) This section evaluates First United Corporation's asset quality, focusing on the Allowance for Credit Losses, provision expense, non-performing assets, and charge-offs [Allowance for Credit Losses and Provision Expense](index=5&type=section&id=4.1%20Allowance%20for%20Credit%20Losses%20and%20Provision%20Expense) ACL increased due to loan growth and unfunded commitments; provision for credit losses decreased YoY but increased QoQ due to unfunded commitments Allowance for Credit Losses | Metric | June 30, 2025 (millions) | June 30, 2024 (millions) | December 31, 2024 (millions) | | :-------------------- | :----------------------- | :----------------------- | :--------------------------- | | Allowance for Credit Losses | $19.0 | $17.9 | $18.2 | Provision for Credit Losses | Metric | Q2 2025 (millions) | Q2 2024 (millions) | Q1 2025 (millions) | | :-------------------- | :----------------- | :----------------- | :----------------- | | Provision for Credit Losses | $0.9 | $1.2 | $0.7 | - The decreased provision expense YoY was primarily due to **$1.1 million** in charge-offs related to one non-accrual commercial loan relationship in 2024. The increased provision QoQ was due to a **$22.6 million** increase in unfunded loan commitments[28](index=28&type=chunk) ACL to Loans Outstanding Ratio | Ratio | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------- | :------------ | | ACL to loans outstanding | 1.27% | 1.25% | 1.26% | [Non-Performing Assets and Charge-Offs](index=5&type=section&id=4.2%20Non-Performing%20Assets%20and%20Charge-Offs) Asset quality remained strong with decreased non-accrual loans and a low net charge-off ratio, showing significant improvements in commercial and consumer loan charge-off rates Non-Accrual Loans and Loans in Foreclosure | Metric | June 30, 2025 (millions) | December 31, 2024 (millions) | | :-------------------- | :----------------------- | :--------------------------- | | Non-accrual loans | $3.8 | $4.9 | | Loans in foreclosure | $0.1 | $1.6 | Net Charge-Offs/Recoveries to Average Loans by Type | Ratio of Net (Charge Offs)/Recoveries to Average Loans (6 Months Ended) | 6/30/2025 | 6/30/2024 | | :------------------------------------------------------ | :-------- | :-------- | | Commercial Real Estate | 0.00% | 0.01% | | Acquisition & Development | 0.13% | 0.01% | | Commercial & Industrial | (0.25%) | (0.89%) | | Residential Mortgage | 0.01% | (0.01%) | | Consumer | (0.96%) | (2.02%) | | Total Net (Charge Offs)/Recoveries | (0.07%) | (0.25%) | - The decrease in non-accrual balances was related to principal reductions. Accruing loans past due 30 days or more decreased to **0.27%** of the loan portfolio at June 30, 2025, from **0.32%** at December 31, 2024[30](index=30&type=chunk)[31](index=31&type=chunk) [Company Information](index=6&type=section&id=Company%20Information) This section provides background on First United Corporation's structure and business, along with important disclosures regarding forward-looking statements [About First United Corporation](index=6&type=section&id=5.1%20About%20First%20United%20Corporation) First United Corporation is a Maryland-chartered financial holding company, serving as the parent of First United Bank & Trust and its subsidiaries, including finance and real estate entities - First United Corporation is a Maryland corporation (chartered 1985) and a financial holding company registered with the Federal Reserve System[32](index=32&type=chunk) - Its primary business is being the parent company of First United Bank & Trust, First United Statutory Trust I & II, two consumer finance company subsidiaries (Oak First Loan Center, Inc. and OakFirst Loan Center, LLC), and two real estate holding subsidiaries (First OREO Trust and FUBT OREO I, LLC)[32](index=32&type=chunk) - The Bank also holds interests in partnerships for acquiring, developing, and operating low-income housing units in Garrett County and Allegany County, Maryland[32](index=32&type=chunk) [Forward-Looking Statements](index=6&type=section&id=5.2%20Forward-Looking%20Statements) Forward-looking statements are based on management's beliefs and objectives, subject to risks and uncertainties that could cause actual results to differ materially; investors should review SEC filings - Forward-looking statements are identified by terms such as 'anticipate,' 'estimate,' 'should,' 'expect,' 'believe,' and 'intend,' and represent management's beliefs and projections about the future[33](index=33&type=chunk) - These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially[33](index=33&type=chunk) - Investors should refer to the 'Risk Factors' section in the Corporation's periodic reports filed with the SEC for a discussion of these risks[33](index=33&type=chunk) [Financial Statements and Supplementary Data](index=7&type=section&id=Financial%20Statements%20and%20Supplementary%20Data) This section provides comprehensive unaudited financial statements and supplementary data, including income statements, balance sheets, quarterly trends, and non-GAAP reconciliations [Unaudited Financial Highlights (Income Statement & Per Share Data)](index=7&type=section&id=6.1%20Unaudited%20Financial%20Highlights%20(Income%20Statement%20%26%20Per%20Share%20Data)) This section summarizes unaudited consolidated results of operations for the three and six months ended June 30, 2025 and 2024, including key income statement figures and per share data Consolidated Income Statement Highlights (in thousands) | (Dollars in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest income | $24,871 | $23,113 | $48,933 | $45,011 | | Interest expense | $8,164 | $7,875 | $16,210 | $15,961 | | Net interest income | $16,707 | $15,238 | $32,723 | $29,050 | | Provision for credit losses | $860 | $1,194 | $1,516 | $2,140 | | Other operating income | $4,940 | $4,782 | $9,762 | $9,575 | | Net gains | $146 | $59 | $238 | $141 | | Other operating expense | $12,974 | $12,364 | $25,550 | $25,245 | | Income before taxes | $7,959 | $6,521 | $15,657 | $11,381 | | Income tax expense | $1,975 | $1,607 | $3,867 | $2,769 | | Net income | $5,984 | $4,914 | $11,790 | $8,612 | | Diluted net income per share | $0.92 | $0.75 | $1.81 | $1.31 | | Dividends declared per share | $0.22 | $0.20 | $0.44 | $0.40 | Key Performance Ratios (Year-to-Date) | Performance Ratios (Year to Date Period End, annualized) | June 30, 2025 | June 30, 2024 | | :------------------------------------------------------- | :------------ | :------------ | | Return on average assets | 1.20% | 0.89% | | Return on average shareholders' equity | 12.78% | 10.48% | | Net interest margin (Non-GAAP, FTE) | 3.61% | 3.31% | | Efficiency ratio - non-GAAP | 59.66% | 63.48% | [Unaudited Financial Highlights (Balance Sheet & Capital Ratios)](index=7&type=section&id=6.2%20Unaudited%20Financial%20Highlights%20(Balance%20Sheet%20%26%20Capital%20Ratios)) This section provides unaudited financial condition at period end, including key balance sheet items, capital ratios, and asset quality metrics for June 30, 2025, compared to December 31, 2024 Consolidated Balance Sheet Highlights (in thousands) | Financial Condition at period end (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------------------- | :------------ | :---------------- | | Assets | $2,007,471 | $1,973,022 | | Earning assets | $1,789,747 | $1,758,665 | | Gross loans | $1,502,481 | $1,480,793 | | Investment securities | $279,541 | $269,991 | | Total deposits | $1,614,207 | $1,574,829 | | Shareholders' equity | $191,147 | $179,295 | Capital Ratios | Capital Ratios | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------ | :---------------- | | Tier 1 to risk weighted assets | 15.22% | 14.70% | | Common Equity Tier 1 to risk weighted assets | 13.32% | 12.79% | | Tier 1 Leverage | 12.08% | 11.88% | | Total risk based capital | 16.47% | 15.92% | Asset Quality Metrics | Asset Quality (Period End) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Net charge-offs for the quarter | $(151) | $(362) | | Nonaccrual loans | $3,813 | $4,931 | | Total nonperforming loans and 90 day past due | $4,348 | $5,849 | | Allowance for credit losses to gross loans | 1.27% | 1.23% | | Non-performing assets to total assets | 0.51% | 0.59% | [Quarterly Financial Trends (Income Statement & Per Share Data)](index=9&type=section&id=6.3%20Quarterly%20Financial%20Trends%20(Income%20Statement%20%26%20Per%20Share%20Data)) This table presents historical quarterly income statement items and per share data from Q1 2024 to Q2 2025, illustrating trends in revenue, expenses, net income, and profitability Quarterly Income Statement and Per Share Trends (in thousands) | (Dollars in thousands, except per share data) | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | | :-------------------------------------------- | :------ | :------ | :------ | :------ | :------ | :------ | | Interest income | $24,871 | $24,062 | $23,725 | $23,257 | $23,113 | $21,898 | | Net interest income | $16,707 | $16,016 | $15,700 | $15,228 | $15,238 | $13,812 | | Net income | $5,984 | $5,806 | $6,186 | $5,771 | $4,914 | $3,698 | | Diluted net income per share | $0.92 | $0.89 | $0.95 | $0.89 | $0.75 | $0.56 | | Dividends declared per share | $0.22 | $0.22 | $0.22 | $0.22 | $0.22 | $0.20 | | Return on average assets | 1.20% | 1.19% | 1.06% | 0.99% | 0.89% | 0.76% | | Net interest margin (Non-GAAP, FTE) | 3.61% | 3.56% | 3.38% | 3.34% | 3.31% | 3.12% | | Efficiency ratio - non-GAAP | 59.66% | 59.95% | 61.31% | 62.46% | 63.48% | 65.71% | [Quarterly Financial Trends (Balance Sheet & Asset Quality)](index=10&type=section&id=6.4%20Quarterly%20Financial%20Trends%20(Balance%20Sheet%20%26%20Asset%20Quality)) This table presents historical quarterly balance sheet items, capital ratios, and asset quality metrics from Q1 2024 to Q2 2025, highlighting trends in financial condition and risk management Quarterly Balance Sheet and Asset Quality Trends (in thousands) | Financial Condition at period end (Dollars in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | March 31, 2024 | | :------------------------------------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | :------------- | | Assets | $2,007,471 | $1,979,753 | $1,973,022 | $1,916,126 | $1,868,599 | $1,912,953 | | Gross loans | $1,502,481 | $1,479,869 | $1,480,793 | $1,447,883 | $1,422,975 | $1,412,327 | | Total deposits | $1,614,207 | $1,623,574 | $1,574,829 | $1,540,395 | $1,537,071 | $1,563,453 | | Shareholders' equity | $191,147 | $183,694 | $179,295 | $173,979 | $164,177 | $165,481 | | Tier 1 to risk weighted assets | 15.22% | 14.87% | 14.70% | 14.61% | 14.51% | 14.58% | | Nonaccrual loans | $3,813 | $4,026 | $4,931 | $8,073 | $9,438 | $16,007 | | Total nonperforming loans and 90 day past due | $4,348 | $4,259 | $5,849 | $8,611 | $9,964 | $16,127 | | Allowance for credit losses to gross loans | 1.27% | 1.25% | 1.23% | 1.24% | 1.26% | 1.27% | | Non-performing assets to total assets | 0.51% | 0.51% | 0.59% | 0.60% | 0.69% | 1.07% | [Consolidated Statement of Condition](index=11&type=section&id=6.5%20Consolidated%20Statement%20of%20Condition) This table presents the unaudited consolidated statement of condition for First United Corporation as of June 30, 2025, March 31, 2025, and December 31, 2024, detailing assets, liabilities, and shareholders' equity Consolidated Statement of Condition (in thousands) | (Dollars in thousands - Unaudited) | June 30, 2025 | March 31, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------- | :---------------- | | Total Assets | $2,007,471 | $1,979,753 | $1,973,022 | | Net loans | $1,482,904 | $1,460,945 | $1,462,181 | | Total deposits | $1,614,207 | $1,623,574 | $1,574,829 | | Total Liabilities | $1,816,324 | $1,796,059 | $1,793,727 | | Total Shareholders' Equity | $191,147 | $183,694 | $179,295 | [Non-GAAP Financial Measures Reconciliation](index=14&type=section&id=6.6%20Non-GAAP%20Financial%20Measures%20Reconciliation) This section reconciles GAAP to non-GAAP financial measures, adjusting for accelerated depreciation from branch closures to provide a clearer view of underlying operational performance - Management believes non-GAAP financial measures provide investors with a greater understanding of the Company's operating results, but should not be viewed as a substitute for GAAP results[45](index=45&type=chunk) Reconciliation of Net Income and EPS (Non-GAAP) | (in thousands, except for per share amount) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income - as reported | $5,984 | $4,914 | $11,790 | $8,612 | | Accelerated depreciation expenses | — | — | — | $562 | | Income tax effect of adjustments | — | — | — | $(137) | | Adjusted net income (non-GAAP) | $5,984 | $4,914 | $11,790 | $9,037 | | Diluted earnings per share - as reported | $0.92 | $0.75 | $1.81 | $1.31 | | Adjusted diluted earnings per share (non-GAAP) | $0.92 | $0.75 | $1.81 | $1.37 | Reconciliation of Performance Ratios (Non-GAAP) | Significant Ratios (As of or for the six months ended June 30) | 2025 | 2024 | | :------------------------------------------------------------- | :------ | :------ | | Return on Average Assets - as reported | 1.20% | 0.89% | | Adjusted Return on Average Assets (non-GAAP) | 1.20% | 0.98% | | Return on Average Equity - as reported | 12.78% | 10.48% | | Adjusted Return on Average Equity (non-GAAP) | 12.78% | 11.52% | [Average Balances, Interest Income/Expense, and Rates (Q2 2025 vs Q2 2024)](index=15&type=section&id=6.7%20Average%20Balances%2C%20Interest%20Income%2FExpense%2C%20and%20Rates%20(Q2%202025%20vs%20Q2%202024)) This table details average balances, interest income/expense, and rates for earning assets and interest-bearing liabilities for Q2 2025 vs Q2 2024, illustrating net interest income and margin drivers Average Balances, Interest Income/Expense, and Rates (Q2 Comparison, in thousands) | (dollars in thousands) | Q2 2025 Average Balance | Q2 2025 Interest | Q2 2025 Average Yield/Rate | Q2 2024 Average Balance | Q2 2024 Interest | Q2 2024 Average Yield/Rate | | :--------------------- | :---------------------- | :--------------- | :------------------------- | :---------------------- | :--------------- | :------------------------- | | Loans | $1,489,485 | $22,304 | 6.01% | $1,415,353 | $20,237 | 5.75% | | Total earning assets | $1,841,112 | $24,925 | 5.43% | $1,763,917 | $23,171 | 5.28% | | Total deposits | $1,197,770 | $6,788 | 2.27% | $1,124,497 | $6,398 | 2.29% | | Total interest-bearing liabilities | $1,338,510 | $8,164 | 2.45% | $1,267,326 | $7,875 | 2.50% | | Net interest income and spread | | $16,761 | 2.98% | | $15,296 | 2.78% | | Net interest margin | | | 3.65% | | | 3.49% | [Average Balances, Interest Income/Expense, and Rates (YTD Q2 2025 vs YTD Q2 2024)](index=16&type=section&id=6.8%20Average%20Balances%2C%20Interest%20Income%2FExpense%2C%20and%20Rates%20(YTD%20Q2%202025%20vs%20YTD%20Q2%202024)) This table provides average balances, interest income/expense, and rates for earning assets and interest-bearing liabilities for YTD Q2 2025 vs YTD Q2 2024, highlighting year-to-date performance Average Balances, Interest Income/Expense, and Rates (YTD Comparison, in thousands) | (dollars in thousands) | 6M 2025 Average Balance | 6M 2025 Interest | 6M 2025 Average Yield/Rate | 6M 2024 Average Balance | 6M 2024 Interest | 6M 2024 Average Yield/Rate | | :--------------------- | :---------------------- | :--------------- | :------------------------- | :---------------------- | :--------------- | :------------------------- | | Loans | $1,486,334 | $44,072 | 5.98% | $1,411,619 | $39,471 | 5.62% | | Total earning assets | $1,833,105 | $49,036 | 5.39% | $1,771,797 | $45,126 | 5.12% | | Total deposits | $1,194,439 | $13,471 | 2.27% | $1,119,104 | $12,663 | 2.28% | | Total interest-bearing liabilities | $1,336,791 | $16,210 | 2.45% | $1,278,703 | $15,960 | 2.51% | | Net interest income and spread | | $32,826 | 2.94% | | $29,166 | 2.61% | | Net interest margin | | | 3.61% | | | 3.31% |

Financial Performance - Consolidated net income for Q2 2025 was $6.0 million, or $0.92 per diluted share, compared to $4.9 million, or $0.75 per diluted share, in Q2 2024, and $5.8 million, or $0.89 per diluted share, in Q1 2025 [1][3][4] - Net income for the first six months of 2025 was $11.8 million, or $1.81 per diluted share, compared to $8.6 million, or $1.31 per diluted share, for the same period in 2024 [1][6] - Annualized Return on Average Assets and Return on Average Equity for the six-month period ended June 30, 2025, were 1.20% and 12.78%, respectively [1][34] Revenue Drivers - The increase in quarterly net income compared to Q2 2024 was primarily driven by a $1.5 million increase in net interest income and a $0.3 million decrease in provision for credit loss [4][6] - Interest and fees on loans increased by $2.1 million due to the repricing of adjustable-rate loans and growth in the loan portfolio [4][7] - Net interest income on a non-GAAP, FTE basis increased by $1.5 million for Q2 2025 compared to Q2 2024, driven by an increase of $1.8 million in interest income [7][8] Operating Expenses - Operating expenses increased by $0.6 million in Q2 2025 compared to Q2 2024, primarily due to increases in net OREO expenses, data processing fees, and professional services expenses [15][17] - For the first six months of 2025, non-interest expense increased by $0.3 million compared to the same period in 2024, with salaries and employee benefits being a significant contributor [17] Balance Sheet Overview - Total assets at June 30, 2025, were $2.0 billion, reflecting a $34.4 million increase since December 31, 2024 [19] - Total liabilities at June 30, 2025, were $1.8 billion, representing a $22.6 million increase since December 31, 2024 [20] - Outstanding loans increased by $21.7 million since December 31, 2024, totaling $1.5 billion [21][22] Asset Quality - The allowance for credit losses was $19.0 million at June 30, 2025, compared to $17.9 million at June 30, 2024 [27] - Net charge-offs for Q2 2025 were $0.2 million, a decrease from $1.3 million in Q2 2024 [28][29] - Non-accrual loans totaled $3.8 million at June 30, 2025, down from $4.9 million at December 31, 2024 [30][31] Market Position and Strategy - The company is optimistic about growth potential in the Morgantown market and plans to continue adding talent and focusing on technology to improve efficiencies [2] - Strong loan production was noted, with $65.1 million in commercial loan originations and $19.2 million in residential mortgage originations for Q2 2025 [13][24]

Group 1: First United Corporation (FUNC) - FUNC shares ended the last trading session 6.1% higher at $31.01, with a higher-than-average trading volume, contrasting with a 2.8% loss over the past four weeks [1] - The bank became part of the Russell 2500 Index, indicating market cap growth and compliance with index criteria, which boosted short-term liquidity and trading volume [2] - The upcoming quarterly earnings are expected to be $0.84 per share, reflecting a year-over-year increase of 12%, with revenues projected at $21.26 million, up 5.9% from the previous year [3] Group 2: Earnings Estimates and Market Position - The consensus EPS estimate for FUNC has remained unchanged over the last 30 days, suggesting that stock price movements may not sustain without earnings estimate revisions [4] - FUNC currently holds a Zacks Rank of 3 (Hold), indicating a neutral outlook in the market [4] - In comparison, Flagstar Financial (FLG) has a consensus EPS estimate of -$0.12, which is a change of +88.6% from the previous year, also holding a Zacks Rank of 3 (Hold) [5]

Group 1 - First United Corporation's Board of Directors declared a cash dividend of $0.22 per share, payable on August 1, 2025, to shareholders of record as of July 18, 2025 [1] Group 2 - First United Corporation is the parent company of First United Bank & Trust, which operates as a Maryland trust company with commercial banking powers [2] - The Bank has several wholly-owned subsidiaries, including OakFirst Loan Center, Inc. and OakFirst Loan Center, LLC, which are finance companies [2] - The Bank also owns interests in partnerships focused on low-income housing development in Maryland [2]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited consolidated financial statements for Q1 2025 and 2024, detailing financial condition, operations, cash flows, and accounting policies [Consolidated Statements of Financial Condition](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) Total assets grew to **$1.98 billion**, with shareholders' equity increasing to **$183.7 million** from retained earnings Consolidated Statements of Financial Condition (in thousands) | Account | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | **Total Assets** | **$1,979,753** | **$1,973,022** | | Net loans | $1,460,945 | $1,462,181 | | Total investment securities (AFS & HTM) | $274,142 | $269,991 | | Cash and cash equivalents | $84,431 | $78,327 | | **Total Liabilities** | **$1,796,059** | **$1,793,727** | | Total deposits | $1,623,574 | $1,574,829 | | Total borrowings (Short & Long-term) | $141,271 | $186,338 | | **Total Shareholders' Equity** | **$183,694** | **$179,295** | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 2025 net income rose to **$5.8 million**, driven by **16% higher net interest income** and reduced credit loss expense Quarterly Performance Summary (in thousands, except per share data) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $16,016 | $13,812 | +16.0% | | Total Credit Loss Expense | $656 | $946 | -30.7% | | Total Other Operating Income | $4,914 | $4,875 | +0.8% | | Total Other Operating Expenses | $12,576 | $12,881 | -2.4% | | **Net Income** | **$5,806** | **$3,698** | **+57.0%** | | **Diluted EPS** | **$0.89** | **$0.56** | **+58.9%** | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow nearly doubled to **$7.0 million**, with investing activities using **$3.2 million**, resulting in a **$6.1 million** cash increase Cash Flow Summary (in thousands) | Activity | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,965 | $3,588 | | Net cash (used in)/provided by investing activities | ($3,190) | $28,292 | | Net cash provided by financing activities | $2,329 | $5,299 | | **Increase in cash and cash equivalents** | **$6,104** | **$37,179** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed disclosures on investment and loan portfolios, ACL, fair value, regulatory capital, and segment reporting - The loan portfolio is segmented into commercial real estate, acquisition and development, commercial and industrial, residential mortgage, and consumer loans for risk management and ACL calculation[41](index=41&type=chunk)[42](index=42&type=chunk) Loan Portfolio Composition (in thousands) | Loan Segment | March 31, 2025 (in thousands) | Dec 31, 2024 (in thousands) | | :--- | :--- | :--- | | Commercial Real Estate | $532,764 | $526,364 | | Acquisition and Development | $94,063 | $95,314 | | Commercial and Industrial | $282,370 | $287,534 | | Residential Mortgage | $520,072 | $518,815 | | Consumer | $50,600 | $52,766 | | **Total Loans** | **$1,479,869** | **$1,480,793** | Allowance for Credit Losses (ACL) Activity (in thousands) | ACL Activity | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Beginning Balance | $18,170 | $17,480 | | Loan charge-offs | ($542) | ($618) | | Recoveries collected | $182 | $159 | | Credit loss expense | $657 | $961 | | **Ending Balance** | **$18,467** | **$17,982** | Bank Capital Ratios | Ratio | March 31, 2025 | Required to be Well Capitalized | | :--- | :--- | :--- | | Total Capital (to risk-weighted assets) | 14.83% | 10.00% | | Tier 1 Capital (to risk-weighted assets) | 13.58% | 8.00% | | Common Equity Tier 1 Capital | 13.58% | 6.50% | | Tier 1 Capital (to average assets) | 10.76% | 5.00% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=54&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 performance, noting a **$2.1 million** net income increase, strong liquidity, and managed interest rate risk [Results of Operations](index=56&type=section&id=Results%20of%20Operations) Q1 2025 net income rose to **$5.8 million**, driven by a **$2.2 million** increase in net interest income and lower credit loss provisions - The **$2.1 million** increase in quarterly net income was driven by a **$2.2 million** rise in net interest income and a **$0.3 million** decrease in credit loss provisions[151](index=151&type=chunk) Net Interest Income and Margin (Non-GAAP, FTE) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Net Interest Income | $16,065 | $13,869 | | Net Interest Margin % | 3.56% | 3.12% | - The provision for credit losses decreased to **$0.7 million** in Q1 2025, primarily due to prior year's provisions for **$12.1 million** in non-accrual commercial loans[162](index=162&type=chunk) [Financial Condition](index=65&type=section&id=Financial%20Condition) Total assets reached **$2.0 billion**, with deposits growing by **$48.7 million** and non-accrual loans decreasing to **$4.0 million** - Total assets increased by **$6.7 million** to **$2.0 billion**, driven by a **$48.7 million** rise in deposits used to repay short-term borrowings[169](index=169&type=chunk)[170](index=170&type=chunk) - Non-accrual loans decreased from **$4.9 million** to **$4.0 million** due to principal reductions[173](index=173&type=chunk) Risk Elements of Loan Portfolio (in thousands) | Metric | March 31, 2025 (in thousands) | Dec 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total non-accrual loans | $4,026 | $4,931 | | Total Non-performing assets | $10,123 | $11,713 | | Non-performing assets to total assets | 0.51% | 0.59% | | Allowance for credit losses to non-accrual loans | 458.69% | 368.49% | [Liquidity Management, Market Risk, and Capital Resources](index=73&type=section&id=Liquidity%20Management%2C%20Market%20Risk%2C%20and%20Capital%20Resources) The company maintains strong liquidity with **$558.6 million** in available funding and robust capital, exceeding regulatory thresholds Sources of Liquidity (in thousands) | Source | Total Availability (in thousands) | Amount Used (in thousands) | Net Availability (in thousands) | | :--- | :--- | :--- | :--- | | Internal Sources | $93,458 | $0 | $93,458 | | External Sources | $561,375 | $96,214 | $465,161 | | **Total** | **$654,833** | **$96,214** | **$558,619** | - The company is asset sensitive, expecting net interest income to increase by **$3.5 million** over the next year with a **+100 basis point** rate shock[206](index=206&type=chunk)[215](index=215&type=chunk) - The Bank's capital ratios, including **14.83% Total Capital** and **13.58% Tier 1 Capital**, significantly exceed 'well capitalized' regulatory thresholds[221](index=221&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=79&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a 'smaller reporting company', the company is exempt from providing detailed quantitative and qualitative market risk disclosures - As a 'smaller reporting company' under SEC rules, First United Corporation is not required to include information for this item[226](index=226&type=chunk) [Item 4. Controls and Procedures](index=80&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls are effective, with no material changes to internal control over financial reporting in Q1 2025 - Management, including PEO and PFO, concluded that disclosure controls and procedures are effective at a reasonable assurance level as of March 31, 2025[228](index=228&type=chunk) - No material changes to internal control over financial reporting occurred during Q1 2025[229](index=229&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=81&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings during the period - There are no legal proceedings to report[232](index=232&type=chunk) [Item 1A. Risk Factors](index=81&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors have occurred since the prior disclosure in the 2024 Form 10-K - Management believes no material changes in risk factors have occurred since the 2024 Form 10-K disclosure[233](index=233&type=chunk) [Item 5. Other Information](index=81&type=section&id=Item%205.%20Other%20Information) Officer Julie Peterson terminated a non-Rule 10b5-1 trading arrangement for monthly stock purchases during Q1 2025 - Company officer Julie Peterson terminated a 'non-Rule 10b5-1 trading arrangement' for monthly stock purchases during the quarter[237](index=237&type=chunk) [Item 6. Exhibits](index=82&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the report, including PEO/PFO certifications and Inline XBRL data files - Exhibits include Sarbanes-Oxley Act certifications (Exhibits 31.1, 31.2, 32) and Inline XBRL documents (Exhibit 101 series)[241](index=241&type=chunk)