2018
Our doors are always open.
We believe in our communities. We believe in the
people, families and businesses that live and serve
here. It’s not just that we’re locally owned with a
team that lives and works in the places you call
home, it’s that we’re dedicated to helping you. It’s
why we’re investing here. It’s why we’re renovating
our offices and opening new locations, like our office
in Bridgeport, West Virginia and Emerald Square in
Hagerstown, Maryland. While other banks are closing
their doors, we’re expanding our presence to serve
more people and businesses. While other banks are
scaling back, we’re using technology to ensure our
customers always have access to their finances. Our
doors truly are always open.
Table of Contents
02 Shareholder Letter
05 Summary of Selected
Financial Data
06 Innovation
08 Technology
12 Experience
14 Community
16 Directors and Officers
Shareholder
Letter
Dear Shareholders, Associates, Customers and
Community,
We believe in our communities. We believe in
the people, families and businesses that live
and serve our communities. It’s why we are
renovating offices and opening new locations
like our office in Bridgeport, West Virginia and
Emerald Square
in Hagerstown, Maryland.
While other banks are closing their doors, we’re
expanding our presence to serve. Our doors are
open and we welcome you to come on in and let
us assist you with your financial needs!
Throughout this report, you will see that we are
open to innovation, open to the use of technology,
open to creating a unique and inviting banking
experience and open to our community. Put
simply, we are passionate about helping our
customers and providing unique financial
solutions. We are trusted advisors interacting
with our community and our customers.
Our branch transformations have resulted in
functional, convenient and
technologically
innovative locations. Our mobile and internet
banking and enhanced ATM network allow us
to open the doors to our customers with 24/7
access to their accounts and our wide array of
financial products and services. Our investment
in technology provides a safe and sound platform
for our customers. As Bill Streets, editor of The
Financial Brand, points out in a recent edition,
while the fundamentals of location, function
and product are necessary, the key to branch
relevance is keeping our bankers relevant. That
is why our strategic plan places a significant
focus on hiring the right people, providing
them education and development opportunities
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and empowering them to make decisions. Our ability to deliver a more personalized
customer experience will translate to a deeper, sustainable and more profitable customer
relationship. We encourage our associates to engage in our local communities – because
that is what community bankers do. We engage. We invest our time and money. We
believe in the prosperity of our hometowns and the financial future of our community
oriented business owners, friends and neighbors.
This continued focus on delivering on our vision of an uncommon commitment to service
and solutions served you well in 2018 as we delivered improved core earnings, a higher
net interest margin, and we enhanced earnings per common share. Net income available
to common shareholders in 2018 was $10.7 million or $1.51 per common share, compared
Our ability to
deliver a more
personalized
customer
experience
will translate
to a deeper,
sustainable and
more profitable
customer
relationship.
to $4.1 million or $.58 per common share for 2017.
2017 earnings were negatively impacted by a one-
time tax expense of $3.2 million, or approximately
$.49 per share, due to the enactment of the Tax
Cuts and Jobs Act which was signed into law by
the President of the United States on December 22,
2017. Excluding the 2017 one-time expense, 2018
net income improved by 47% and earnings per
common share improved by 49% over 2017. This
improvement was primarily due to reduction in tax
expense, elimination of the dividend on preferred
stock, reduced provision expense, increased net
interest income and wealth management income
offset by increases in operating expenses.
2018 core earnings continued to improve, driven by
increased net interest income and rising fee income.
Our loan balances grew in 2018, spurred by loan
production and reduced payoffs as compared to
2017. The growth in loan balances, increased yield
on the loan portfolio and our ability to manage our
overall cost of funds resulted in higher net interest income. 2018 provision expense was
lower due to good asset quality and continued improvement in our local economies.
Wealth management income improved due to new relationships and expansion of existing
relationships despite a decline in market values at year-end which had a negative impact
on fees generated. Expenses for 2018 as compared to 2017 increased primarily due to
higher salaries and benefits, data processing and equipment and occupancy expenses.
The increases in salaries and benefits were attributable to incentives paid for growth and
production, annual merit raises and the higher cost of healthcare benefits. Data processing
reflected new digital banking services for our customers and equipment and occupancy
expenses increased due to depreciation from our branch transformation initiatives.
Our stock was volatile in 2018, as we started the year from a strong $17.40 at December
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31, 2017, peaked at $24.10 in mid-June and ended the year at $15.92 on December 31, 2018,
reflecting a 9% decrease. We believe that the peak in June resulted from news of First United
Corporation stock entering the Russell 3000 index. Following the news, the stock price
traded at normal values before dipping with the market during the last quarter of 2018. Since
year-end, we have recovered much of that decline, closing at $17.30 on February 28, 2019.
During 2018, the Corporation returned to paying dividends as shareholders were paid $.27
per common share in total, or $.09 per common share per quarter starting in May 2018. This
reflects a dividend yield of approximately 1.4% using the 2018 average stock price of $18.98.
Our strategic focus in 2019 will be productivity. We
are implementing plans to improve efficiencies and to
eliminate redundancy in our processes. We are holding
each other accountable for high levels of performance
and execution of our strategic action items. We are
engaging in measurements of profitability of products,
customer relationships, community offices and regions.
We are continuing to focus on our associates and our
hiring, development and retention of the best in the
industry. We are engaging with our communities to
educate, serve and to provide safe, innovative ways
to bank. Our doors are more open than ever as we
provide innovative and resourceful bankers, the perfect
blend of personal service and technology and unique
financial solutions. We are trusted advisors interacting
with our community and our customers.
We are holding
each other
accountable for
high levels of
performance and
execution of our
strategic action
items.
Throughout 2019, we will continue to create value for
our customers and for you, our shareholders, as we strive to be a high-performing community
bank. Our point of difference is, and will continue to be, our associates. They do make the
difference and I thank each one for their dedication, passion and uncommon commitment to
provide customized financial solutions that will result in every customer saying, “this is my
bank – my helpful, trusted partner for life.”
Come on in! We welcome you to stop by one of our community offices and let us help create
a financial plan to serve you today, tomorrow and at every stage of life. Let us show you how
to use banking technology when and where it suits you the best. Let us serve your financial
needs in our unique and inviting atmosphere. The doors to this community bank are open!
Thank you for your confidence in First United Corporation!
Carissa L. Rodeheaver
Chairman of the Board, President &
Chief Executive Officer
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Summary of Selected Financial Data
(Dollars in thousands, except per share data)
2018
2017
% Change
Results of Operations:
Tax-equivalent interest income
Interest expense
Tax-equivalent net interest income
Tax-equivalent adjustment
Provision for loan losses
Net interest income after provision for loan losses
Non-interest income
Operating non-interest income
Non-operating non-interest income:
Net gains-other
Non-interest expenses
Income before income taxes
Income tax expense
(2017 includes $3,226 from tax reform impact)
Net Income
Preferred stock dividends
Net income available to common shareholders
Common dividends paid
Net income per FTE (Pre-tax)
Per Share Data:
Basic and diluted net income per common share
Common dividends paid
Book value (at year end)
Tangible book value (at year end)
Financial Condition (at year end):
Assets
Deposits
Net loans
Investment securities
Shareholders’ equity
Performance Ratios (for the year):
Return on average equity
Return on average assets
Dividend payout ratio
Yield on average interest-earning assets
Rate on average interest-bearing liabilities
Net interest spread
Net interest margin
Efficiency ratio
Capital and Credit Quality Ratios:
Average equity to average assets
Total risk-based capital ratio
Tier 1 to risk weighted assets
Tier 1 to average assets (leverage)
Common equity tier 1 to risk weighted assets
Allowance for loan losses to gross loans
Nonperforming loans and 90 days past
due loans to total assets
Net charge-offs to average loans
$53,090
8,112
44,978
796
2,111
42,071
15,168
15,041
$127
43,808
13,431
2,764
10,667
0
10,667
1,911
$40,575
$1.51
0.27
16.52
15.34
$47,586
7,371
40,215
637
2,534
37,044
14,340
14,311
$29
39,170
12,214
6,945
5,269
(1,215)
4,054
0
$37,011
$0.58
0
15.34
14.34
$1,384,516
1,067,527
996,667
231,651
117,066
$1,336,470
1,039,390
882,546
240,102
108,390
9.39%
0.81
17.88
4.41
0.86
3.55
3.74
71.20
8.66%
15.91
14.87
11.47
12.45
1.10
0.39
0.11
4.52%
0.40
0
3.99
0.78
3.21
3.37
72.40
8.82%
15.98
14.97
11.00
12.54
1.12
0.58
0.28
11.57%
10.05%
11.84%
24.96%
-16.69%
13.57%
5.77%
5.10%
337.93%
11.84%
9.96%
-60.20%
102.45%
-100.00%
163.12%
100.00%
9.63%
160.34%
100.00%
7.69%
6.97%
3.59%
2.71%
12.93%
-3.52%
8.00%
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We’re open to
Innovation
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To us, innovation is only effective if it helps improve the way our partners bank and
live. Every decision we make reflects our desire to accomplish this mission. Check
out our interactive branch design. Ask us about our universal banker approach. Since
we first opened our doors in 1900, we have seen the needs of our customers change.
It is our conviction that banking must evolve to meet and exceed those needs. Our
inventive spirit and ambitious nature mean we always have our eye on the future. It’s
how we lead our community forward.
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8
We’re open to
Technology
We use the very best in technology to make banking faster, easier, safer
and more convenient. Each of our branches are equipped with tablets for
quick personal banking, and experienced staff to help with more in-depth
transactions, with the goal of guarding both your time and your privacy.
At First United, technology is a part of our commitment to being forward-
thinking, but more importantly, it is a part of our commitment to provide
the best service to our customers. We take extra measures to protect your
information and to be there for you wherever you are, whenever you need.
Want to stay up-to-date?
Sign up for shareholder
communications at
MyBank.com/shareholder
9
10
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12
We’re open to
Experience
For more than a century, we’ve been uniting our strengths under
a shared mission to serve. It’s how we’re able to anticipate your
challenges, help you realize more opportunities and provide a banking
experience like no other. We believe that gathering a diverse group of
talented individuals, passionate about helping people, will better our
bank and our community. Collectively, we have the knowledge and the
tools necessary to improve the way people experience banking.
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We’re open to this
Community
We’re passionate about partnering with you and guiding you during some of the most
important financial decisions you’ll ever make. Because, at First United, we believe that our
communities flourish when we work together. The goal behind each new service line and
each new branch is to better assist our friends and neighbors. We don’t just work here,
we live here and we serve here. Our staff is committed to the well-being of our customers
and our communities; from expert financial guidance to compassionate community service.
This is our home, and we want the best for it—and for you.
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Directors and Officers
Board of Directors
John F. Barr
Owner, Ellsworth Electric, Inc.
Brian R. Boal
Principal, Boal & Associates, PC
M. Kathryn Burkey
Certified Public Accountant,
Owner, M. Kathryn Burkey, CPA
Robert W. Kurtz
Retired, Former President, Chief Risk Officer,
Secretary and Treasurer of First United Corporation
and First United Bank & Trust
John W. McCullough
Certified Public Accountant, Retired as Partner of
Ernst & Young, LLP
Elaine L. McDonald
Owner, Elaine L. McDonald, PC
Officers
Carissa L. Rodeheaver
Chairman of the Board, President &
Chief Executive Officer
R.L. Fisher
Senior Vice President & Chief Revenue Officer
Carissa L. Rodeheaver
Chairman of the Board, President &
Chief Executive Officer of First United
Corporation and First United Bank & Trust
Gary R. Ruddell
President, Total Biz Fulfillment, Inc.
I. Robert Rudy
President, I.R. Rudy’s, Inc.
Marisa A. Shockley
Owner, Shockley, Inc.
Robert G. Stuck
Realtor, Taylor-Made; Retired,
Former Vice President, Oakview Motors, Inc.
H. Andrew Walls, III
President, Morgantown Printing & Binding;
Member, MEGBA, LLC
Beverly A. Sines
Senior Vice President & Chief Credit Officer
Tonya K. Sturm
Senior Vice President & Chief Financial Officer,
Corporate Secretary & Treasurer
Jason B. Rush
Senior Vice President & Chief Operating Officer
Karen L. Malecki
Vice President & Director of Strategic Initiatives
Keith R. Sanders
Senior Vice President & Senior Trust Officer
Market Presidents
Gordon M. Cooley
Market President
Frederick County, MD
Kimberly R. Moyers
Market President
Monongalia County, WV
Harrison County, WV
Alan D. Mullendore
Market President
Washington County, MD
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Denise D. Phelps
Market President
Berkeley County, WV
Philip L. Rodeheaver
Market President
Garrett County, MD
Allegany County, MD
Mineral County, WV
If you need assistance in any of the following areas:
• Change in registration
• Reporting lost certificates
• Non-receipt or loss of dividend checks
•
Information on dividend reinvestment plan
Please contact our transfer agent at:
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
www.computershare.com/investor
First United - Direct Line: 1-866-298-7858
TDD for Hearing Impaired: 1-800-952-9245
Foreign Shareowners: 1-781-575-2622
TDD for Hearing Impaired: 1-781-575-2692
Shareholders’ Meeting
The Annual Shareholders’ Meeting will be held on:
Thursday, May 16, 2019, 10:00 a.m.
The Wisp Hotel – Crawford Room
290 Marsh Hill Road
McHenry, MD 21541
S.E.C. Form 10-K
The Corporation files an annual report on Form 10-K with the Securities and
Exchange Commission. This statement can be found on our investor relations
website at http://investors.MyBank.com or you may request to receive a copy
by calling us at 1-888-692-2654. A statement may also be requested by mail,
without charge, to any shareholder who requests it in writing to:
Tonya K. Sturm
Corporate Secretary
First United Corporation
c/o First United Bank & Trust
19 South Second Street
Oakland, MD 21550
Want to stay up-to-date? Sign up for shareholder communications at MyBank.com/shareholder
17
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