FIRST UNITED CORPORATION ANNOUNCES SECOND QUARTER 2026 FINANCIAL RESULTS

OAKLAND, Md., July 20, 2026 /PRNewswire/ -- First United Corporation (the "Corporation", "we", "us", and "our") (NASDAQ: FUNC), a bank holding company and the parent company of First United Bank & Trust (the "Bank"), today announced financial results for the three- and six-month periods ended June 30, 2026.  Consolidated net income was $5.7 million on a Generally Accepted Accounting Principles ("GAAP") basis for the second quarter of 2026, or $0.87 per diluted share, compared to $6.0 million, or $0.92 per diluted share, for the second quarter of 2025 and $6.7 million, or $1.03 per diluted share, for the first quarter of 2026.  Net income for the first six months of 2026 was $12.3 million, or $1.90 per diluted share, compared to $11.8 million, or $1.81 per diluted share, for the same period of 2025.  Non-GAAP net income was $7.3 million and $13.9 million for the three- and six-months ended June 30, 2026, respectively.  Annualized Return on Average Assets and Return on Average Equity for the six-month period ended June 30, 2026 were 1.20% and 11.92%, respectively.

According to Jason Rush, President and CEO, "We delivered solid results this quarter.  Earnings benefited from a stronger net interest margin and steady growth in income from our wealth franchise.  While we recorded a one-time consulting expense of approximately $2.2 million, we believe the investment in technology and pricing initiatives will position us for improved efficiency in future years to come.  Loan growth was steady in the second quarter and our loan pipelines remain robust going into the third quarter.  Expense control will continue to be a focus across the organization."

Second Quarter Financial Highlights:

• Net interest margin, on a non-GAAP, fully tax equivalent ("FTE") basis, was 3.98% for the second quarter of 2026, reflecting increased loan yields and reduced funding costs.
• Strong loan production during the quarter, with $66.0 million in commercial loan originations and $33.9 million in residential mortgage originations.
• Provision expense was $0.8 million in the second quarter, as a result of continued economic and political uncertainty and modest loan growth, slightly offset by improved qualitative factors.
• Operating expenses increased by $2.1 million when compared to the linked quarter driven by a one-time, non-GAAP $1.7 million, net of tax, expense related to consulting fees incurred for contract negotiations with our core processor in the second quarter of 2026.
• A cash dividend of $0.26 per share was declared in the second quarter.

Income Statement Overview

On a GAAP basis, net income for the second quarter of 2026 was $5.7 million, inclusive of a $1.7 million, net of tax, third party consulting expense incurred for core contract negotiations.  This compares to $6.7 million in the first quarter of 2026 and $6.0 million for the second quarter of 2025.  Excluding this expense item, net income was $7.3 million on a non-GAAP basis.

Second Quarter 2026 Compared to Second Quarter 2025

Consolidated net income decreased by $0.3 million for the second quarter of 2026 when compared to the second quarter of 2025.  The decrease was driven by an increase in other expense as a result of a one-time, non-GAAP $1.7 million, net of tax, consulting expense related to the core contract negotiations.  This increase was partially offset by a $1.9 million increase in net interest income, an increase of $0.3 million in non-interest income, inclusive of gains, and a $0.1 million decrease in provision for credit losses.  Comparing the second quarter of 2026 to the same period of 2025, interest and fees on loans increased by $1.5 million as a result of new loans booked at higher rates and the continued repricing of adjustable-rate loans.  Interest expense decreased by $0.6 million when comparing year-over-year quarterly expense as a result of the repayment of a $25.0 million brokered certificate of deposit in January 2026 and $65.0 million in Federal Home Loan Bank ("FHLB") borrowings in March 2026.  Other operating income increased by $0.3 million driven by an increase in trust and brokerage income of $0.3 million as a result of increased production and favorable market values on assets under management.  Other operating expenses increased by $2.8 million driven by the one-time, non-GAAP item discussed above, a $0.8 million increase in salaries and benefits as a result of filling open positions in late 2025 and 2026, normal merit increases in April 2026 and increased incentive payouts, partially offset by reduced life and health insurance expense due to reduced claims and an increase in the reduction of costs associated with loan originations related to increased loan production.

Second Quarter 2026 Compared to First Quarter 2026

Compared to the linked quarter, net income decreased by $1.0 million driven by the increased other expenses as a result of the one-time expense discussed above, partially offset by an increase in net interest income of $0.5 million and a $0.1 million decrease in provision expense.  Non-interest income was stable when comparing the second quarter of 2026 to the first quarter of 2026. 

Year to date 2026 compared to Year to date 2025

Net income for the six months ended June 30, 2026 was $12.3 million on a GAAP basis, inclusive of a $1.7 million, net of tax, consulting fee incurred on core contract negotiations completed in the second quarter, and $13.9 million on a non-GAAP basis compared to GAAP and non-GAAP basis income of $11.8 million for the six months ended June 30, 2025.  The year-over-year increase of $0.5 million was attributable to a $3.9 million increase in net interest income an increase in other non-interest income of $0.7 million, inclusive of net gains, as a result of increased trust and brokerage income of $0.5 million, increased bank owned life insurance ("BOLI") income of $0.2 million related to a one-time death benefit received in the first quarter of 2026, partially offset by an increase in other operating expenses of $3.9 million driven by the aforementioned consulting fee, increased salaries and benefits of $1.7 million and an increase in data processing expenses of $0.3 million.  Salaries and benefits increased due to increased salaries as a result of new hires and annual merit increases in April 2026 and increased incentive payouts, partially offset by an increase in the reduction of costs associated with loan originations related to increased loan production.

Net Interest Income and Net Interest Margin

Second Quarter 2026 Compared to Second Quarter 2025

Net interest income, on a non-GAAP, FTE basis, increased by $1.9 million for the second quarter of 2026 when compared to the second quarter of 2025.  This increase was driven by an increase of $1.3 million in interest income.  Interest income on loans increased by $1.5 million due to the increase of 15 basis points in overall yield on the loan portfolio as new loans were booked at higher rates during 2025 and 2026 as well as the upward repricing of adjustable-rate loans.  Investment income remained stable as management continued to reinvest cashflows back into the portfolio resulting in an increase in yield of 12 basis points. Interest income on federal funds sold decreased by $0.3 million due to a decrease of $22.2 million in average cash balances held at the Federal Reserve Bank as a result of loan growth in the second quarter of 2026.  Interest expense decreased by $0.6 million in the second quarter of 2026 when compared to the second quarter of 2025.  Interest on deposits increased slightly by $0.2 million despite an $84.4 million increase in average deposit balances, primarily in interest bearing demand and money market deposits. Long-term borrowing interest expense decreased $0.8 million due to a decrease of average balances of $90.0 million for the second quarter of 2026 when compared to the same period of 2025 primarily related to the repayment of $65.0 million and $25.0 million of FHLB advances at their maturities in March of 2026 and September of 2025, respectively.

Second Quarter 2026 Compared to First Quarter 2026

Comparing the second quarter of 2026 to the first quarter of 2026, net interest income, on a non-GAAP, FTE basis, increased by $0.5 million.  Interest income increased by $0.5 million driven by an increase in average loan balances of $66.1 million in the second quarter of 2026.  Interest expense was stable when comparing the second quarter of 2026 to the first quarter of 2026.  Long-term borrowing expense decreased by $0.5 million due to the repayment of $65.0 million in maturing FHLB advances in March of 2026.  Management's strategic focus on margin management during the second quarter of 2026 resulted in a 15 basis point increase in the net interest margin to 3.98% compared to 3.83% for the first quarter of 2026.

Year to date 2026 compared to Year to date 2025

Comparing the six months ended June 30, 2026 to the six months ended June 30, 2025, net interest income, on a non-GAAP, FTE basis, increased by $4.0 million.  Interest income increased by $3.0 million, primarily driven by an increase of $2.3 million on interest and fees on loans as average loan balances increased by $39.9 million and an increase in yield by 14 basis points.  Interest expense on deposits increased slightly by $0.2 million despite an increase in average deposit balances of $89.7 million driven by increases of $26.5 million in demand deposit accounts, $86.2 million in retail money market balances, partially offset by decreases in savings balances of $10.8 million and $15.0 million in brokered time deposits.  Interest expense on short-term borrowings remained stable and interest expense on long-term borrowings decreased by $1.2 million as a result of a decrease in average balances of $62.0 million, primarily due to the repayment of $65.0 million of FHLB advances at their maturities in March 2026.  The net interest margin for the six months ended June 30, 2026 was 3.89% compared to 3.61% for the six months ended June 30, 2025.

Non-Interest Income

Second Quarter 2026 Compared to Second Quarter 2025

Other operating income increased by $0.4 million driven by an increase in trust and brokerage income of $0.3 million as a result of increased production of new accounts as well as favorable market values in assets under management.  Net gains decreased by $0.1 million as new residential mortgage production was booked in house as compared to selling to secondary market outlets.

Second Quarter 2026 Compared to First Quarter 2026

On a linked quarter basis, other operating income, including net gains, remained flat.  Net gains decreased by $0.1 million related to the gain on the sale of a branch office recognized in the first quarter of 2026.  BOLI income decreased by $0.2 million and was attributable to the receipt of a one-time death benefit received in the first quarter of 2026.  These decreases were offset by an increase in debit card income of $0.1 million due to normal fluctuations and an increase in trust and brokerage income of $0.1 million. 

Year to date 2026 compared to Year to date 2025

Comparing the six months ended June 30, 2026 to the same period of 2025, other operating income, inclusive of net gains, increased by $0.7 million, driven by an increase in trust and brokerage income of $0.5 million as a result of increased production of new business as well as favorable market values in assets under management, as well as an increase in BOLI  income of $0.2 million as previously mentioned.

Non-Interest Expense

Second Quarter 2026 Compared to Second Quarter 2025

Other operating expenses increased by $2.8 million driven by a $0.8 million increase in salaries and benefits as a result of filling open positions throughout 2025, normal merit increases in April 2026 and increased incentive payouts, partially offset by reduced life and health insurance expense due to reduced claims and increased reductions in costs associated with loan originations.  Professional services expenses increased by $2.1 million due to the $1.7 million, net of tax, third party consulting fee discussed above.  These increases were partially offset by reductions in check fraud-related expenses and OREO expenses.

Second Quarter 2026 Compared to First Quarter 2026

Other operating expenses increased by $2.1 million driven by the one-time, non-GAAP $1.7 million, net of tax, consulting fee  incurred with core contract negotiations. All other expenses were stable when comparing the second quarter of 2026 to the first quarter of 2026 as we continue a strategic focus on expense control.

Year to date 2026 compared to Year to date 2025

Comparing the six months ended June 30, 2026 to the same period of 2025, other operating expenses increased by $3.9 million driven by the one-time, non-GAAP expense previously discussed, a $1.7 million increase in salaries and benefits as a result of new hires late in 2025 and early 2026, normal merit increases in April 2026 and increased incentive payouts, partially offset by reduced life and health insurance expense due to reduced claims and increased reductions in costs associated with loan originations and a $0.3 million increase in equipment, occupancy and data processing expenses as a result of new software implementation.  These increases were partially offset by reductions in OREO expenses and other miscellaneous expenses such as check fraud expenses, employee benefits expenses and miscellaneous expense related to share repurchase tax recorded in the second quarter of 2025.

The effective income tax rates, as a percentage of income, for the six-month periods ended June 30, 2026 and 2025 were 24.1% and 24.7%, respectively. 

Balance Sheet Overview

Total assets at June 30, 2026 were $2.1 billion, representing a $5.4 million decrease since December 31, 2025.  During the six months of 2026, cash and interest-bearing deposits in other banks decreased by $46.4 million.  The investment portfolio decreased by $0.2 million. The decreases were partially offset by increases in gross loans of $50.4 million as well as an increase in pension assets of $3.2 million due to increased market values. 

Total liabilities at June 30, 2026 were $1.9 billion, representing a $14.1 million decrease since December 31, 2025.  Total deposits increased by $0.4 million when compared to December 31, 2025.  In January 2026, a $25.0 million brokered certificate of deposit with an interest rate of 4.23% matured and was repaid.  Savings and money market accounts increased by $27.6 million due primarily to the expansion of current and new relationships throughout the first six months of 2026.  Non-interest-bearing demand deposits decreased by $11.6 million and interest-bearing demand deposits increased by $13.3 million.  Retail time deposits decreased by $3.9 million since December 31, 2025.  Short-term borrowings increased by $50.0 million at June 30, 2026 compared to December 31, 2025 as a result of overnight borrowings in anticipation of loan funding.  These borrowings were subsequently fully repaid in July.

Outstanding loans of $1.6 billion at June 30, 2026 reflected a $50.4 million increase since December 31, 2025.

Since December 31, 2025, commercial real estate loans increased by $55.0 million as a result of new business relationships as well as additional growth in existing relationships; acquisition and development loans increased by $11.9 million; commercial and industrial loans decreased by $35.0 million as a result of payoffs related to approximately $15.0 million due to competitive pricing, approximately $5.3 million related to sales of businesses, approximately $8.0 million as a result of a refinance to another institution, and the payoff of a floorplan line of credit.  Residential mortgage loans increased by $10.2 million as a result of robust mortgage production booked in house as opposed to the selling to the secondary market outlets, offset slightly by normal amortization; and consumer loans increased by $8.3 million related to the purchase of a consumer loan pool in the second quarter of 2026.

New commercial loan production for the second quarter of 2026 was approximately $66.0 million.  The pipeline of commercial loans as of June 30, 2026 was robust, and unfunded committed commercial construction loans totaled approximately $42.0 million.  Commercial amortization and payoffs were approximately $71.6 million through June 30, 2026, due primarily to pay-offs of short-term commercial loans as well as normal amortizations of the commercial loan portfolio.

New consumer mortgage loan production for the second quarter of 2026 was approximately $33.9 million, with most of this production comprised of in-house mortgages.  The pipeline of in-house, portfolio loans as of June 30, 2026 was $20.0 million.  Unfunded commitments related to residential construction loans totaled $20.7 million at June 30, 2026.  

Total deposits of $1.7 billion at June 30, 2026 remained flat when compared to December 31, 2025.

In January 2026, a $25.0 million brokered certificate of deposit, with an interest rate of 4.23%, was repaid at its maturity.  Savings and money market accounts increased by $27.6 million due primarily to the expansion of current and new relationships throughout the first six months of 2026.  Non-interest-bearing demand deposits decreased by $11.6 million, offset by an increase in interest-bearing demand deposits of $13.3 million, primarily related to municipality accounts.  Retail time deposits decreased by $3.9 million since December 31, 2025. 

The book value of the Corporation's common stock was $32.91 per share at June 30, 2026 compared to $31.33 per share at December 31, 2025.  At June 30, 2026, there were 6,453,836 basic outstanding shares and 6,462,604 diluted outstanding shares of common stock.  The increase in the book value at June 30, 2026 was due to the undistributed net income of $9.0 million for the first six months of 2026.

Asset Quality

The allowance for credit losses ("ACL") was $20.6 million at June 30, 2026 compared to $19.0 million at June 30, 2025 and $19.5 million at December 31, 2025.  The provision for credit losses was $0.8 million for the quarter ended June 30, 2026 compared to $0.9 million for both the quarters ended March 31, 2026 and June 30, 2025.  Provision for credit losses was $1.7 million and $1.5 million for the first six months of 2026 and 2025, respectively.  Asset quality remained strong during the first six months of 2026.  Net charge-offs of $0.1 million were recorded for the quarter ended June 30, 2026 compared to net charge-offs of $0.2 million for both the quarter ended June 30, 2025 and the quarter ended March 31, 2026. The ratio of the ACL to loans outstanding was 1.31% at June 30, 2026 compared to 1.28% at December 31, 2025 and 1.27% at June 30, 2025. 

The ratio of net charge offs to average loans was 0.04% and 0.07% for the six-month periods ended June 30, 2026 and 2025, respectively.  The commercial and industrial portfolio had net charge offs of (0.10%) and (0.25%) for the six-month periods ended June 30, 2026 and 2025, respectively.  Net charge offs in consumer loans decreased in the first six months of 2026 when compared to the first six months of 2025 from (0.96%) to (0.86%).  The decrease was primarily driven by charge-offs in unsecured consumer loans in 2025.  Details of the ratios, by loan type, are shown below.  Our special assets team continues to actively collect on charged-off loans, resulting in overall low net charge-off ratios.

Non-accrual loans totaled $4.5 million at June 30, 2026 compared to $4.2 million at December 31, 2025.  The slight increase in non-accrual balances at June 30, 2026 was related to one commercial loan moving to non-accrual status in the first quarter. 

Non-accrual loans that have been subject to partial charge-offs totaled $0.1 million at June 30, 2026 and $0.2 million at December 31, 2025.  Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $1.2 million at June 30, 2026 and $0.5 million at December 31, 2025.  The increase was due to one mortgage loan of approximately $1.1 million that moved in the second quarter.  As a percentage of the loan portfolio, accruing loans past due 30 days or more increased to 0.50% at June 30, 2026 compared to 0.32% at December 31, 2025 and 0.27% as of June 30, 2025.  This increase was attributable to one large commercial loan.

ABOUT FIRST UNITED CORPORATION

First United Corporation is a Maryland corporation chartered in 1985 and a financial holding company registered with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended, that elected financial holding company status in 2021.  The Corporation's primary business is serving as the parent company of the Bank, First United Statutory Trust I ("Trust I") and First United Statutory Trust II ("Trust II" and together with Trust I, "the Trusts"), both Connecticut statutory business trusts.  The Trusts were formed for the purpose of selling trust-preferred securities that qualified as Tier 1 capital.  The Bank has two consumer finance company subsidiaries- Oak First Loan Center, Inc., a West Virginia corporation, and OakFirst Loan Center, LLC, a Maryland limited liability company – and one subsidiary that it uses to hold real estate acquired through foreclosure or by deed in lieu of foreclosure – First OREO Trust, a Maryland statutory trust.  In addition, the Bank owns 99.9% of the limited partnership interests in Liberty Mews Limited Partnership, a Maryland limited partnership formed for the purpose of acquiring, developing and operating low-income housing units in Garrett County, Maryland, and a 99.9% non-voting membership interest in MCC FUBT Fund, LLC, an Ohio limited liability company formed for the purpose of acquiring, developing and operating low-income housing units in Allegany County, Maryland and Mineral County, West Virginia.  The Corporation's website is www.mybank.com

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995.  Forward-looking statements do not represent historical facts, but are statements about management's beliefs, plans and objectives about the future, as well as its assumptions and judgments concerning such beliefs, plans and objectives.  These statements are evidenced by terms such as "anticipate," "estimate," "should," "expect," "believe," "intend," and similar expressions.  Although these statements reflect management's good faith beliefs and projections, they are not guarantees of future performance and they may not prove true.  The beliefs, plans and objectives on which forward-looking statements are based involve risks and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements.  For a discussion of these risks and uncertainties, see the section of the periodic reports that First United Corporation files with the Securities and Exchange Commission entitled "Risk Factors". In addition, investors should understand that the Corporation is required under generally accepted accounting principles to evaluate subsequent events through the filing of the consolidated financial statements included in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 and the impact that any such events have on our critical accounting assumptions and estimates made as of June 30, 2026, which could require us to make adjustments to the amounts reflected in this press release.