FIRST UNITED CORPORATION ANNOUNCES THIRD QUARTER 2026 FINANCIAL RESULTS

OAKLAND, Md., Oct. 19, 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 nine-month periods ended September 30, 2026.  Consolidated net income was $7.2 million on a Generally Accepted Accounting Principles ("GAAP") basis for the third quarter of 2026, or $1.11 per diluted share, compared to $6.9 million, or $1.07 per diluted share, for the third quarter of 2025 and $5.7 million, or $0.88 per diluted share, for the second quarter of 2026.  Net income for the first nine months of 2026 was $19.5 million, or $3.01 per diluted share, compared to $18.7 million, or $2.88 per diluted share, for the same period of 2025.  Non-GAAP net income was $7.2 million and $21.1 million for the three- and nine-months ended September 30, 2026, respectively.  Annualized Return on Average Assets and Return on Average Equity for the nine-month period ended September 30, 2026 were 1.26% and 12.37%, respectively.

According to Jason Rush, Chairman of the Board, President and CEO, "We delivered another solid quarter, benefiting from an improved net interest margin, continued growth in wealth management income, and steady loan growth. Our loan pipelines remain robust heading into the fourth quarter, providing positive momentum as we close out the year.  Credit quality remains strong. However, given continued inflationary pressures and uncertainty surrounding interest rates, we believe it is prudent to maintain a disciplined approach to reserves.  We also remain focused on expense management and are continuing to identify opportunities to improve efficiency across the organization."

Third Quarter Financial Highlights:

• Net interest margin, on a non-GAAP, fully tax equivalent ("FTE") basis, was 4.05% for the third quarter of 2026, reflecting increased loan yields and reduced funding costs.
• Strong loan production during the quarter, with $115.0 million in commercial loan originations and $34.7 million in residential mortgage originations.
• Provision expense was $1.9 million in the third quarter, primarily due to solid growth in loans and unfunded commitments, and the continued economic and political uncertainty.
• Operating expenses decreased by $2.0 million when compared to the linked quarter driven by a one-time, $1.7 million, net of tax, expense related to consulting fees incurred for contract negotiations with our core processor recorded in the second quarter of 2026.
• A cash dividend of $0.28 per share was declared in the third quarter.

Income Statement Overview

On a GAAP basis, net income for the third quarter of 2026 was $7.2 million, compared to $5.7 million for the second quarter of 2026, inclusive of a $1.7 million, net of tax, third-party consulting expense incurred for core contract negotiations, and $6.9 million for the third quarter of 2025. 

Third Quarter 2026 Compared to Third Quarter 2025

Consolidated net income increased by $0.2 million for the third quarter of 2026 when compared to the third quarter of 2025.  The increase was driven by an increase of $2.2 million in net interest income, and an increase of $0.3 million in non-interest income, inclusive of gains, offset by a $1.4 million increase in provision for credit losses as a result of solid growth in loans and unfunded commitments and a $0.8 million increase in other operating expenses.  Comparing the third quarter of 2026 to the same period of 2025, interest and fees on loans increased by $1.8 million driven by solid loan growth and the continued repricing of adjustable-rate loans.  Interest expense decreased by $1.0 million when comparing year-over-year quarterly expenses.  The decrease was attributable to the repayment of $50.0 million in brokered certificates of deposit in January and July 2026 at their maturities and $65.0 million in Federal Home Loan Bank ("FHLB") borrowings in March 2026.  Other operating income increased slightly 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 $0.8 million, driven by a $0.5 million increase in salaries and benefits attributable to new hires to complete the build out of talent in our West and East regions, normal merit increases in April 2026 and increased life and health insurance costs due to increased claims. Equipment, occupancy and data processing expenses increased by $0.3 million  as a result of the implementation of new loan origination software in late 2025.  Other expenses, such as marketing and contract labor, increased slightly and were offset by decreases in professional services and other real estate owned ("OREO") expenses and contributions.

Third Quarter 2026 Compared to Second Quarter 2026

Compared to the linked quarter, net income increased by $1.5 million driven by an increase in net interest income of $1.0 million as a result of increased yields on loans and reduced funding costs and an increase of $0.2 million in other operating income, inclusive of net gains.  The increase in net gains was due to gains on sales of mortgages to the secondary market and the receipt of funds related to a branch sale in late 2025.   Other miscellaneous income increased as a result of a one-time cash receipt of incentives related to check fees and the increased other expenses in the second quarter as a result of the one-time third-party expense incurred for core contract negotiations.  An increase of $1.2 million in the provision for credit losses was recognized due to the growth in loans and unfunded commitments experienced in the third quarter as well as the continued economic and political uncertainty. 

Year to date 2026 compared to Year to date 2025

Net income for the nine months ended September 30, 2026 was $19.5 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 $21.1 million on a non-GAAP basis compared to GAAP and non-GAAP basis income of $18.7 million for the nine months ended September 30, 2025.  The year-over-year increase of $0.8 million was attributable to a $6.1 million increase in net interest income driven by the continued increase on the yield on earning assets and overall decrease in funding costs, an increase in other non-interest income of $1.0 million, inclusive of net gains, as a result of increased trust and brokerage income of $0.8 million, and increased bank owned life insurance ("BOLI") income of $0.3 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 $4.7 million driven by the aforementioned consulting fee, increased salaries and benefits of $2.2 million and an increase in equipment, occupancy and data processing expenses of $0.6 million, primarily due to the implementation of a new loan origination software in late 2025.  The increase in salaries and benefits was the result of new hires to complete the build out of talent in our West and East regions, annual merit increases in April 2026, increased incentives related to the accruals for projected annual payouts, and increased life and health insurance costs due to higher claims, partially offset by the reduction of costs associated with loan originations.

Net Interest Income and Net Interest Margin

Third Quarter 2026 Compared to Third Quarter 2025

Net interest income, on a non-GAAP, FTE basis, increased by $2.2 million for the third quarter of 2026 when compared to the third quarter of 2025.  This increase was driven by an increase of $1.2 million in interest income.  Interest income on loans increased by $1.8 million due to the increase of 16 basis points in overall yield on the loan portfolio as a result of growth in average balances of $78.8 million and the continued upward repricing of adjustable-rate loans.  Investment income remained stable year over year.  Interest income on federal funds sold decreased by $0.5 million due to a decrease of $18.5 million in average cash balances held at the Federal Reserve Bank as a result of funding the loan growth in the third quarter of 2026.  Interest expense decreased by $1.0 million in the third quarter of 2026 when compared to the third quarter of 2025.  Interest on deposits decreased by $0.2 million despite a $65.1 million increase in average deposit balances, primarily in interest bearing demand and money market deposits, primarily in our value money market product as customers desire to maintain liquid funding. Interest expense on long-term borrowings decreased $0.8 million due to an $86.7 million decrease in average balances for the third quarter of 2026 when compared to the same period of 2025, primarily related to the repayment of $25.0 million and $65.0 million of FHLB advances at their maturities in September 2025 and March 2026, respectively.

Third Quarter 2026 Compared to Second Quarter 2026

Comparing the third quarter of 2026 to the second quarter of 2026, net interest income, on a non-GAAP, FTE basis, increased by $1.0 million.  Interest income increased by $0.8 million driven by an increase in average loan balances of $31.3 million in the third quarter of 2026 and a 9 basis point increase in yield.  Interest expense decreased by $0.2 million when comparing the third quarter of 2026 to the second quarter of 2026.  While we saw an increase in average deposit balances of $2.6 million, we continue to be focused on funding costs and recognized a decrease of 9 basis points.  Management's strategic focus on margin management during the third quarter of 2026 resulted in a 7 basis point increase in the net interest margin to 4.05% compared to 3.98% for the second quarter of 2026.

Year to date 2026 compared to Year to date 2025

Comparing the nine months ended September 30, 2026 to the nine months ended September 30, 2025, net interest income, on a non-GAAP, FTE basis, increased by $6.2 million.  Interest income increased by $4.2 million, primarily driven by an increase of $4.1 million on interest and fees on loans, as average loan balances increased by $53.0 million and the yield increased by 15 basis points.  Interest expense on interest-bearing liabilities decreased by $2.0 million despite an increase in average deposit balances of $79.6 million driven by increases of $28.7 million in demand deposit accounts and $84.1 million in retail money market balances, partially offset by decreases in savings balances of $9.4 million and brokered time deposits of $24.7 million.  Interest expense on short-term borrowings remained stable and interest expense on long-term borrowings decreased by $2.0 million as a result of a decrease in average balances of $70.3 million,  due to the repayment of $65.0 million of FHLB advances at their maturities in March 2026.  The net interest margin for the nine months ended September 30, 2026 was 3.94% compared to 3.64% for the nine months ended September 30, 2025.

Non-Interest Income

Third Quarter 2026 Compared to Third Quarter 2025

Other operating income, inclusive of net gains, increased by $0.3 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 is more favorable to book to our in-house portfolio as compared to selling to secondary market outlets. Debit card income, service charge income and BOLI income were stable when comparing the quarters.

Third Quarter 2026 Compared to Second Quarter 2026

On a linked quarter basis, other operating income, inclusive of net gains, increased by $0.2 million.  Net gains increased by $0.1 million as a result of the receipt of proceeds on the previously recorded branch office sale as well as an increase in gains on sale of mortgages. Check fees increased by $0.1 million when comparing the third quarter of 2026 to the linked quarter as a result of a one-time cash incentive received during the third quarter.

Year to date 2026 compared to Year to date 2025

Comparing the nine months ended September 30, 2026 to the same period of 2025, other operating income, inclusive of net gains, increased by $1.0 million. The increase was primarily driven by an increase in trust and brokerage income of $0.8 million as a result of increased production of new business as well as favorable market values in assets under management, a $0.1 million increase in debit card income, and an increase in BOLI income of $0.3 million as previously mentioned, partially offset by a reduction in net gains as new production of residential mortgage loans were booked in house rather than selling them to the secondary market.

Non-Interest Expense

Third Quarter 2026 Compared to Third Quarter 2025

Other operating expenses increased by $0.8 million driven by a $0.5 million increase in salaries and benefits as a result of new hires to complete the build out of our West and East regions, normal merit increases in April 2026 and increased life and health insurance costs due to increased claims in the third quarter of 2026, partially offset by the reduction of costs associated with loan originations.  Equipment, occupancy and data processing expenses increased $0.3 million as a result of the implementation of a new loan origination software in late 2025.  These increases were partially offset by reductions in professional services and  OREO expenses and contributions.

Third Quarter 2026 Compared to Second Quarter 2026

Other operating expenses decreased by $2.0 million driven by the one-time, $1.7 million, net of tax, consulting fee incurred with core contract negotiations in the second quarter. All other expenses were stable when comparing the third quarter of 2026 to the second quarter of 2026 as we continue a strategic focus on expense control.

Year to date 2026 compared to Year to date 2025

Comparing the nine months ended September 30, 2026 to the same period of 2025, other operating expenses increased by $4.7 million primarily driven by the one-time, third-party consulting expense incurred for core contract negotiations discussed above, a $2.2 million increase in salaries and benefits as a result of new hires to complete the build out of talent in our West and East regions, normal merit increases in April 2026, increased incentives related to the accrual for projected annual payouts, increased life and health insurance costs due to higher claims, partially offset by the reductions of costs associated with loan originations, and an increase in equipment, occupancy and data processing expenses of $0.6 million, primarily due to a new loan origination software implementation in late 2025. 

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

Balance Sheet Overview

Total assets at September 30, 2026 were $2.1 billion, representing a $10.6 million increase since December 31, 2025.  During the first nine months of 2026, gross loans increased by $83.7 million and the pension assets increased $2.3 million due to increased market values.  These increases were partially offset by a $56.7 million decrease in cash and interest-bearing deposits in other banks, a decrease in the investment portfolio of $8.3 million related to principal and interest cashflows, and a decrease in the investments in bank stock related to the reduction in FHLB stock that resulted from the full repayment of borrowings in March 2026.

Total liabilities at September 30, 2026 were $1.9 billion, representing a $0.2 million increase since December 31, 2025.  Total deposits increased by $52.6 million when compared to December 31, 2025.  Non-interest-bearing demand deposits slightly increased by $2.1 million, savings and money market accounts increased by $45.0 million due primarily to the expansion of current and new relationships throughout the first nine months of 2026 and interest-bearing demand deposits increased $61.0 million, primarily related to municipality accounts. A total of $50.0 million in brokered certificates of deposit were fully repaid in January 2026 and July 2026 at their maturities. Retail time deposits decreased by $5.5 million since December 31, 2025.  Short-term borrowings increased by $15.2 million at September 30, 2026 when compared to December 31, 2025 as a result of overnight borrowings in anticipation of loan funding.  These borrowings were subsequently fully repaid in October 2026.

Outstanding loans of $1.6 billion at September 30, 2026 reflected an $83.7 million increase since December 31, 2025.

Since December 31, 2025, commercial real estate loans increased by $45.7 million as a result of new business relationships as well as additional growth in existing relationships; acquisition and development loans increased by $34.1 million; commercial and industrial loans decreased by $40.7 million as a result of payoffs related to approximately $15.0 million due to competitive pricing, approximately $7.3 million related to sales of businesses, approximately $18.0 million due to a loan refinancing with another institution, and the payoff of a floorplan line of credit.  Residential mortgage loans increased by $27.2 million as a result of robust mortgage production booked in house as opposed to selling to the secondary market outlets, offset slightly by normal amortization.  Consumer loans increased by $17.4 million related to the purchases of approximately $18.0 million in consumer loan pools in the second and third quarters of 2026, offset by normal paydowns.

New commercial loan production for the third quarter of 2026 was approximately $115.0 million.  The pipeline of commercial loans as of September 30, 2026 was $138.0 million and unfunded committed commercial construction loans totaled approximately $37.0 million.  Commercial amortization and payoffs were approximately $137.0 million through September 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 third quarter of 2026 was approximately $34.7 million, with most of that production comprised of in-house mortgages.  The pipeline of in-house, portfolio loans as of September 30, 2026 was $29.8 million.  Unfunded commitments related to residential construction loans totaled $26.0 million at September 30, 2026.  

Total deposits of $1.8 billion at September 30, 2026, representing an increase of $52.6 million when compared to December 31, 2025.

Non-interest-bearing demand deposits increased by $2.1 million, savings and money market accounts increased by $45.0 million due primarily to the expansion of current and new relationships throughout the first nine months of 2026 primarily in our value money market product as customers continue to desire liquid funds and interest-bearing demand deposits increased $61.0 million, primarily related to municipality accounts.  Brokered certificates of deposit were fully repaid at their maturities in January and July 2026.  Retail time deposits decreased by $5.5 million since December 31, 2025. 

The book value of the Corporation's common stock was $33.15 per share at September 30, 2026 compared to $31.33 per share at December 31, 2025.  At September 30, 2026, there were 6,456,055 basic outstanding shares and 6,464,823 diluted outstanding shares of common stock.  The increase in the book value at September 30, 2026 was due to the undistributed net income of $14.4 million for the first nine months of 2026.

Asset Quality

The allowance for credit losses ("ACL") was $21.8 million at September 30, 2026 compared to $19.1 million at September 30, 2025 and $19.5 million at December 31, 2025.  The provision for credit losses was $1.9 million for the quarter ended September 30, 2026 compared to $0.8 million for the quarter ended June 30, 2026 and $0.5 million for the quarter ended September 30, 2025.  Provision for credit losses was $3.6 million and $2.0 million for the first nine months of 2026 and 2025, respectively.  The increase in the provision for credit losses in the third quarter of 2026 was primarily attributable to solid loan growth as well as growth in the unfunded commitments of approximately $39.0 million during the quarter, and the continued economic and political uncertainty.  Asset quality remained strong during the first nine months of 2026.  Net charge-offs of $0.1 million were recorded for the quarter ended September 30, 2026 compared to net charge-offs of $0.4 million for the quarter ended September 30, 2025 and $0.1 million for the quarter ended June 30, 2026. The ratio of the ACL to loans outstanding was 1.36% at September 30, 2026 compared to 1.28% at December 31, 2025 and 1.28% at September 30, 2025. 

The ratio of net charge offs to average loans was 0.04% and 0.08% for the nine-month periods ended September 30, 2026 and 2025, respectively.  The commercial and industrial portfolio had net charge offs of 0.06% and 0.41% for the nine-month periods ended September 30, 2026 and 2025, respectively.  The acquisition and development portfolio had net recoveries of 0.02% and 0.42% for the nine-month periods ended September 30, 2026 and 2025, respectively.  The decrease in net recoveries was due primarily to recoveries recognized in 2025 related to one relationship previously charged off in 2016.  Net charge offs in consumer loans decreased in the first nine months of 2026 when compared to the first nine months of 2025 from 1.06% to 0.91%.  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 $3.2 million at September 30, 2026 compared to $4.2 million at December 31, 2025.  The decrease in non-accrual balances at September 30, 2026 was related to a large paydown on one commercial and industrial loan. 

Non-accrual loans that have been subject to partial charge-offs totaled $41,000 at September 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 $1.3 million at September 30, 2026 and $0.5 million at December 31, 2025.  The increase was primarily related to one residential mortgage loan of approximately $1.1 million.  As a percentage of the loan portfolio, accruing loans past due 30 days or more increased to 0.45% at September 30, 2026 compared to 0.32% at December 31, 2025 and 0.26% as of September 30, 2025.  This increase was attributable to one large non-owner occupied commercial real estate loan.

Loans that have been modified in accordance with ASU 2022-02 increased from $1.2 million at December 31, 2025 to $6.9 million at September 30, 2026.  The increase was due to one large commercial and industrial loan of $5.9 million that had a term extension accommodation completed in the third quarter of 2026.

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- OakFirst 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 September 30, 2026 and the impact that any such events have on our critical accounting assumptions and estimates made as of September 30, 2026, which could require us to make adjustments to the amounts reflected in this press release.