FIRST UNITED CORPORATION ANNOUNCES FOURTH QUARTER 2025 FINANCIAL RESULTS

Fourth Quarter Financial Highlights:

• Net interest margin, on a non-GAAP, fully tax equivalent ("FTE") basis, was 3.75% for the fourth quarter of 2025, reflecting increased loan yields and stable funding costs.
• Strong loan production during the quarter, with $108.0 million in commercial loan originations and $25.3 million in residential mortgage originations, offset by unusually high payoffs in the commercial loan portfolio.
• Provision expense was $0.7 million in the fourth quarter resulting from increased loan growth and increased off-balance sheet loan commitments, partially offset by improved qualitative factors.
• Operating income, including net gains/(losses), for the fourth quarter decreased slightly by $0.1 million when compared to the linked quarter.
• Operating expenses for the fourth quarter increased by $1.9 million when compared to the linked quarter related to a write-down of $1.6 million on a legacy loan participation now residing in other real estate owned ("OREO").
• A cash dividend of $0.26 per share was declared in the fourth quarter.

Income Statement Overview

On a GAAP basis, net income for the fourth quarter of 2025 was $5.8 million, which was inclusive of a $1.2 million, net of tax, write-down on an OREO property and a $0.2 million, net of tax, contracted sale of a retail branch office compared to $6.9 million, which was inclusive of $0.1 million, net of tax, in net gains on sales of investment securities for the third quarter of 2025 and $6.2 million for the fourth quarter of 2024.  The write-down was attributable to a legacy participation loan, originated in 2013, that was taken into OREO several years ago.  The property is serviced by another lender and, following the cancellation of a previous contract, the Company made the decision, alongside other participants, to entertain a new letter of intent and to mark the property based on the new fair value.  Exclusive of these items, net income for the fourth quarter of 2025 was $7.2 million on a non-GAAP basis.

Fourth Quarter 2025 Compared to Fourth Quarter 2024

On a GAAP basis, the $0.4 million decrease in quarterly net income when compared to the fourth quarter of 2024 was primarily driven by increases in provision expense of $0.2 million and non-interest expense of $2.8 million, offset by a $2.3 million increase in net interest income, primarily attributable to disciplined loan and deposit pricing and repricing of adjustable-rate loans and a $0.2 million increase in non-interest income.  Interest and fees on loans increased by $1.9 million primarily due to the repricing of adjustable-rate loans and new production booked at higher rates.  Quarterly interest expense increased slightly by $0.1 million on a year-over-year basis despite strong growth in deposits.  This minimal increase was a result of our strategic focus on reducing deposit costs along with the rate cuts by the Federal Reserve as well as reduced interest expense of $0.3 million on long-term borrowings due to the repayment of a $25.0 million Federal Home Loan Bank ("FHLB") advance at its maturity in September 2025.  Other operating income increased by $0.2 million primarily driven by a $0.4 million increase in wealth management income offset by a $0.2 million increase in net losses on the contracted sale of a retail branch office.  Other operating expenses increased by $2.8 million due to a $0.7 million increase in salaries and benefit expenses, a $0.3 million increase in equipment and occupancy expenses, a $0.2 million increase in professional services, and a $1.8 million increase in OREO expenses primarily driven by the $1.6 million fair value write-down discussed above.  These increases were partially offset by reductions in investor relations and other miscellaneous expenses, such as miscellaneous loan fees and employee benefits expenses.

Fourth Quarter 2025 Compared to Third Quarter 2025

Compared to the linked quarter, net income decreased by $1.2 million. Net interest income increased by $0.6 million due to an increase in interest and fees on loans of $0.2 million, an increase in interest on Federal Funds sold of $0.2 million, and a decrease of interest expense on long-term borrowings of $0.2 million.  Provision for credit losses increased by $0.2 million due to increased loan growth and an increase in unfunded loan commitment balances quarter over quarter.  Other operating income decreased by $0.1 million as a result of increases in wealth management income of $0.2 million and debit card income of $0.2 million, offset by a $0.2 million loss on the contracted sale of a retail branch office in the fourth quarter of 2025 and a decrease in other income of $0.1 million.  Non-interest expense increased by $1.9 million when comparing the fourth quarter to the linked quarter and was driven by the $1.6 million write-down and related expenses of the OREO property discussed above, slight increases in occupancy, data processing, marketing and professional services, offset by decreased salaries and benefits.  Income tax expense decreased by $0.4 million.

Year to Date 2025 Compared to Year to Date 2024

For the year ended December 31, 2025, net income increased by $3.9 when compared to the year ended December 31, 2024.   Net interest income increased by $8.1 million due to an $8.6 million increase in interest and fees on loans resulting from loans repricing at higher rates and new loan production booked at higher rates.  Interest expense increased by only $0.7 million despite strong deposit growth, driven by a $1.7 million increase in interest on deposits related to the strong growth in existing balances and new deposit accounts, primarily our money market product, and the purchase of a $50.0 million brokered certificate of deposit in January 2025. Interest expense on long-term borrowings increased by $0.4 million as a result of new borrowings late in the third quarter of 2024.  These increases were partially offset by a reduction in short-term borrowing costs of $1.4 million resulting from the repayment of $40.0 million in Bank Term Funding Program ("BTFP") balances late in the third quarter of 2024.  Provision for credit losses decreased by $0.2 million due primarily to strong credit quality, lower charge-offs, and lower loan growth in 2025 when compared to 2024.   Other operating income increased by $0.7 million primarily due to a $0.7 million increase in wealth management income driven by strong production.  Net gains were stable year over year, as a $0.2 million increase on gains from the sales of residential mortgages and investment securities was offset by a $0.2 million loss on the sale of a retail branch office.   These increases were partially offset by a $3.8 million increase in other operating expenses that was attributable to increases of  $1.3 million in salaries and employee benefits related to growth of our sales teams, $0.5 million in data processing expenses related to software agreements, $0.2 million in marketing expenses related to increased awareness of our 125^th Anniversary, $0.5 million in professional services expenses from increased audit fees, and $1.9 million in net OREO expenses driven by the fair value write-down of $1.6 million as discussed above.  These increases were partially offset by a $0.5 million decrease in equipment and occupancy expenses as a result of accelerated depreciation expense related to the closure of four branches early in 2024.

Net Interest Income and Net Interest Margin

Fourth Quarter 2025 Compared to Fourth Quarter 2024

Net interest income, on a non-GAAP, FTE basis, increased by $2.3 million for the fourth quarter of 2025 when compared to the fourth quarter of 2024.  This increase was driven by an increase of $2.4 million in interest income due primarily to a $1.9 million increase in interest and fees on loans that resulted from an increase of 26 basis points in the overall yield on the loan portfolio.  This increase in yield was attributable to upward repricing of adjustable-rate loans and an increase in average balances of $57.3 million.  Interest income on investment securities increased by $0.2 million due to an increase in average balances of $9.9 million and an increase in yield of 17 basis points.  The increase in the investment portfolio resulted from management's strategic decision to reinvest cashflows in the higher rate environment to increase the yield on the portfolio.  Interest income from Federal funds sold increased by $0.3 million due to an increase of $31.3 million in average balances, partially offset by a decrease of 30 basis points in average rates.  Interest expense increased by $0.1 million when compared to the fourth quarter of 2024.  Interest expense paid on deposits increased by $0.5 million related to a $107.3 million increase in average balances driven by growth in money market accounts and the purchase of a $50.0 million brokered certificate of deposit in January 2025, partially offset by a decrease of 6 basis points on the rate paid.  Interest paid on long-term borrowings decreased by $0.3 million when compared to the fourth quarter of 2024 due to a $25.0 million decrease in average balances related to the repayment of a $25.0 million FHLB advance at its maturity in the third quarter of 2025 and a decrease of 4 basis points on rates paid.

Fourth Quarter 2025 Compared to Third Quarter 2025

Comparing the fourth quarter of 2025 to the third quarter of 2025, net interest income, on a non-GAAP, FTE basis, increased by $0.6 million.  This increase was driven by a $0.4 million increase in interest income as a result of an increase in interest and fees on loans of $0.2 million, as average loan balances increased by $7.8 million and average yield increased by 1 basis point.  Interest income from Federal funds sold increased by $0.2 million due to an increase of $17.1 million in average balances and an increase of 21 basis points in average rates.  Cash balances increased during the quarter due to repayment of loans late in the year and loan closings that were anticipated to occur in the fourth quarter of 2025 but were delayed until the first quarter of 2026.  Interest expense decreased by $0.2 million when compared to the third quarter of 2025.  Interest expense paid on deposits was stable as a $38.1 million increase in average balances was partially offset by a decrease of 6 basis points on the rate paid.  Interest paid on long-term borrowings decreased by $0.2 million when compared to the third quarter of 2025 due to a $21.7 million decrease in average balances related to the repayment of a $25.0 million FHLB advance at its maturity late in the third quarter, partially offset by an increase of 8 basis points on rates paid. 

Year to Date 2025 Compared to Year to Date 2024

Comparing the year ended December 31, 2025, to the year ended December 31, 2024, net interest income, on a non-GAAP, FTE basis, increased by $8.1 million.  Interest income increased by $8.8 million driven by an increase of $8.6 million on interest and fees on loans, as average loan balances increased by $68.8 million and the overall yield increased by 31 basis points in correlation with upward repricing of adjustable-rate loans.  Interest income on the investment portfolio increased by $0.5 million as a result of reinvesting the cashflow back into the portfolio in an effort to increase the overall yield in the current rate environment.  The overall yield on the investment portfolio increased 17 basis points.  Interest expense increased by $0.7 million as a result of a $1.7 million increase in interest on deposits, as the average deposit balances increased by $90.0 million, driven by a $70.9 million increase in retail money market average balances and $30.9 million increase in average brokered time deposits, partially offset by decreases in average savings balances of $14.8 million.  The overall rate paid on deposits decreased 3 basis points.  Interest expense on short-term borrowings decreased by $1.4 million due to the Bank's utilization of the BTFP program in 2024 and subsequent repayment of the balances due under that program late in the third quarter of 2024. Long-term borrowing costs increased by $0.4 million as a result of an increase of $21.6 million in FHLB average balances due to borrowings obtained in the third quarter of 2024 and subsequent repayment of a $25.0 million advance at its maturity in September 2025, partially offset by a decrease in rate paid of 60 basis points. The net interest margin was 3.67% and 3.38% for the years ending December 31, 2025, and 2024, respectively.  Management continues to place a strong focus on margin management as we move into 2026.  Higher cash levels at December 31, 2025, should allow us to repay outstanding debt and brokered deposits at their maturities.  In January 2026, a $25.0 million brokered certificate of deposit was repaid at its maturity.

Non-Interest Income

Fourth Quarter 2025 Compared to Fourth Quarter 2024

Other operating income, including net gains, for the fourth quarter of 2025 increased by $0.2 million when compared to the same period of 2024.  This increase was driven by a $0.4 million increase in wealth management income, reflecting higher market valuations and expanded relationships with both new and existing clients.   This was partially offset by a $0.2 million increase in net losses related to the sale of a retail branch office due to the relocation to a more convenient site in Morgantown, WV, to better serve our customers. 

Fourth Quarter 2025 Compared to Third Quarter 2025

On a linked quarter basis, other operating income, including net gains, decreased by $0.1 million.   A $0.2 million loss on the sale of the retail branch office was recognized in the fourth quarter of 2025, and net gains on sales of investment securities decreased by $0.1 million due to a gain on sales of available-for-sale securities recognized in the third quarter of 2025.  Wealth management income increased by $0.2 million and debit card income increased by $0.2 million due primarily to the receipt of an annual VISA cash incentive in the fourth quarter of 2025. 

Year to Date 2025 Compared to Year to Date 2024

Other operating income for the year ended December 31, 2025 increased by $0.7 million when compared to the same period of 2024.  This increase was attributable to a $0.7 million increase in wealth management income, driven by improving market conditions, increased annuity sales, and growth in new and existing customer relationships. Net gains were stable year over year, as a $0.2 million increase in gains from the sales of residential mortgages and investment securities was offset by a $0.2 million loss on the sale of a retail office.  Service charge and debit card income were both stable when comparing the year ended December 31, 2025 to the same period of 2024.

Non-Interest Expense

Fourth Quarter 2025 Compared to Fourth Quarter 2024

Operating expenses increased by $2.8 million in the fourth quarter of 2025 when compared to the fourth quarter of 2024.  Net OREO expenses increased by $1.8 million as a result of the $1.6 million fair value write-down discussed above and an additional expense of $0.2 million associated with the same OREO property in 2025.  Salaries and employee benefits increased by $0.6 million due to a $0.4 million increase in salary expense related to normal merit increases effective April 1, 2025 and increased staffing levels, as we enhanced our sales presence in Morgantown, WV, and a $0.1 million increase in incentive expense, partially offset by decreases in employee life and health insurance expense due to decreased claims.  Additionally, occupancy and equipment expenses increased by $0.3 million and professional services increased by $0.2 million.    

Fourth Quarter 2025 Compared to Third Quarter 2025

Compared to the linked quarter, operating expenses increased by $1.9 million.  Net OREO expenses increased by $1.8 million related to the $1.6 million fair value write-down and an additional expense of $0.2 million associated with the same OREO property in the fourth quarter.  Equipment and occupancy expense increased by $0.2 million.  These increases were partially offset by a $0.5 reduction in salaries and employee benefits due primarily to reduced incentive expense and reduced health insurance costs on account of decreased claims.

Year to Date 2025 Compared to Year to Date 2024

For the year ended December 31, 2025, non-interest expense increased by $3.8 million when compared to the year ended December 31, 2024.  Salaries and employee benefits increased by $1.3 million related to normal merit increases effective April 1, 2025, increased salary expense as a result of increased staffing levels as we enhanced our sales presence in Morgantown, WV, increases in incentives, and 401(k) expenses, offset by reduced life and health insurance costs related to reduced claims in 2025. Net OREO expenses increased by $2.0 million due to the previously mentioned fair value write-down and expenses recorded in the fourth quarter of 2025.  Data processing expenses increased by $0.5 million due primarily to increased software agreements, and professional services expenses increased by $0.5 million driven by increased audit fees.   These increases were partially offset by a $0.5 million decrease in occupancy and equipment expenses related to accelerated depreciation expense related to branch closures that were recognized in the first quarter of 2024.

The effective income tax rates as a percentage of income for the years ended December 31, 2025 and December 31, 2024 remained stable at 24.6% and 24.5%, respectively. 

Balance Sheet Overview

Total assets at December 31, 2025 were $2.1 billion, representing a $114.4 million increase since December 31, 2024.  During the year, the investment portfolio increased by $9.5 million as bonds were purchased to lock in yield in anticipation of potential declines in long-term rates. Gross loans increased by $40.9 million as new production during the year was mitigated by amortization and unusually high payoffs in the commercial portfolio.  These payoffs were a result of sales of businesses of approximately $10.5 million and approximately $33.5 million related to refinancings and balance sheet restructurings.  Other assets, including deferred taxes, premises and equipment, bank owned life insurance, pension assets, accrued trust income receivable, and accrued interest receivable, increased by $13.6 million.

Total liabilities at December 31, 2025 were $1.9 billion, representing a $90.1 million increase since December 31, 2024.  Total deposits increased by $160.3 million when compared to December 31, 2024.   Brokered time deposits increased by $50.0 million as new brokered time deposits were obtained in January 2025 to fund the repayment of the $50.0 million in overnight borrowings outstanding at December 31, 2024. In addition, savings and money market accounts increased by $70.2 million, retail time deposits increased by $7.8 million, and non-interest-bearing deposits increased by $26.3 million.  Interest-bearing demand deposits, primarily our IntraFi Cash Service product, increased by $6.0 million due primarily to seasonal fluctuations in municipal deposit accounts.  Short-term borrowings decreased by $47.7 million due to the purchase of the brokered time deposit mentioned above, which was partially offset by increases in the overnight investment sweep product.  Long-term borrowings decreased by $25.0 million due to the full repayment of a matured $25.0 million FHLB borrowing in September 2025.

Outstanding loans of $1.5 billion at December 31, 2025 reflected a $40.9 million increase since December 31, 2024.

Since December 31, 2024, commercial real estate loans increased by $44.4 million, acquisition and development loans decreased by $5.0 million as construction projects were completed and rolled into permanent financing, commercial and industrial loans decreased by $10.5 million, residential mortgage loans increased by $18.1 million, and consumer loans decreased by $6.1 million as production continued to be outpaced by amortization. Commercial growth was offset during 2025 by unusually high payoffs as a result of clients utilizing cash to repay or consolidate debt.

New commercial loan production for the fourth quarter of 2025 was approximately $108.0 million. Commercial production for the year ended December 31, 2025 was approximately $247.0 million, which compares to $189.5 million for the year ended December 31, 2024.  The commercial pipeline continued to be strong at December 31, 2025 at $61.0 million, and unfunded, commercial construction loans totaled approximately $46.5 million.  Commercial amortization and payoffs were approximately $79.1 million for the three months ended December 31, 2025.

New consumer mortgage loan production for the fourth quarter of 2025 was approximately $25.3 million, most of which was comprised of in-house mortgages booked to our portfolio.  The pipeline of in-house, portfolio loans at December 31, 2025 was $4.5 million.  Unfunded commitments related to residential construction loans totaled $15.3 million at December 31, 2025.  

Total deposits at December 31, 2025 increased by $160.3 million when compared to December 31, 2024.

In January 2025, $50.0 million in brokered time deposits with an average interest rate of 4.24% were obtained to fund the repayment of $50.0 million in overnight borrowings that were outstanding on December 31, 2024.  Savings and money market accounts increased by $70.2 million due primarily to the expansion of current and new relationships throughout 2025.  Non-interest-bearing checking deposits increased by $26.3 million due primarily to seasonal fluctuations of deposit balances of two commercial customers in the healthcare sector, and interest-bearing checking deposits increased by $6.0 million as we experienced seasonal fluctuations in municipal and commercial account balances.  Retail time deposits increased by $7.8 million since December 31, 2024.  Subsequently in January 2026, a $25.0 million brokered certificate of deposit was fully repaid at its maturity.

The book value of the Corporation's common stock was $31.33 per share at December 31, 2025 compared to $27.71 per share at December 31, 2024. At December 31, 2025, there were 6,499,476 basic outstanding shares of common stock and 6,511,358 diluted outstanding shares of common stock.  The increase in the book value at December 31, 2025 was primarily due to the undistributed net income of $18.3 million.  The Board of Directors of the Corporation increased the quarterly dividend to $0.26 per share in the third quarter of 2025.

Asset Quality

The allowance for credit losses ("ACL") was $19.5 million at December 31, 2025 compared to $18.2 million at December 31, 2024.  The provision for credit losses was $0.7 million for the quarter ended December 31, 2025 compared to $0.5 million for both of the quarters ended December 31, 2024 and September 30, 2025.  Provision for credit losses was $2.7 million for the year ended December 31, 2025 and $2.9 million for the year ended December 31, 2024.  The decreased provision expense in 2025 was primarily related to charge-offs in our commercial and consumer loan portfolios during 2024, partially offset by growth in our loan portfolio and an increase of $18.7 million in unfunded loan commitments during 2025.  Asset quality remained strong during the fourth quarter of 2025.  The ratio of the ACL to loans outstanding remained stable at 1.28% at both December 31, 2025 and September 30, 2025 and 1.23% at December 31, 2024.

The ratio of net charge offs to average loans was 0.07% for the year ended December 31, 2025 and 0.16% for the year ended December 31, 2024.  The commercial and industrial portfolio had net charge offs of 0.33% and 0.50% for the years ended December 31, 2025 and 2024, respectively, due primarily to charge offs on one non-accrual commercial relationship.  The acquisition and development portfolio had net recoveries of 0.33% and 0.06% for the years ended December 31, 2025 and 2024, respectively.  This shift was due primarily to recoveries recognized in 2025 related to one relationship previously charged off in 2016 as additional collateral was brought into OREO in the third quarter of 2025.  The decrease in net charge offs in consumer loans in 2025 was primarily driven by approximately $0.3 million in charge offs of demand deposit balances during the first quarter of 2024.  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 $4.2 million at December 31, 2025 compared to $4.9 million at December 31, 2024.  The decrease in non-accrual balances at December 31, 2025 was due to principal paydowns and the charge-off of $0.6 million related to a non-accrual commercial and industrial relationship that was recorded during the second half of 2025. 

Non-accrual loans that have been subject to partial charge-offs totaled $0.2 million and $0.7 million at December 31, 2025 and December 31, 2024, respectively.  Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $0.5 million and $1.6 million at December 31, 2025 and December 31, 2024, respectively.  As a percentage of the loan portfolio, accruing loans past due 30 days or more were 0.32% at both December 31, 2025 and 2024. 

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 Annual Report on Form 10-K for the year ended December 31, 2025 and the impact that any such events have on our critical accounting assumptions and estimates made as of December 31, 2025, which could require us to make adjustments to the amounts reflected in this press release.