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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

R   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

        For quarterly period ended March 31, 2021

£    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

        For the transition period from _______________ to ________________

Commission file number 0-14237

First United Corporation

(Exact name of registrant as specified in its charter)

Maryland

52-1380770

(State or other jurisdiction of
incorporation or organization)

(I. R. S. Employer Identification No.)

 

19 South Second Street, Oakland, Maryland

21550-0009

(Address of principal executive offices)

(Zip Code)

(800) 470-4356

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbols

Name of each exchange on which registered

Common Stock

FUNC

Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes R   No £

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes R   No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated filer £

Accelerated Filer £

Non-Accelerated filer R

Smaller Reporting Company R

Emerging Growth Company £

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act. £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £   No R

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 6,598,617 shares of common stock, par value $.01 per share, as of April 30, 2021.


INDEX TO QUARTERLY REPORT

FIRST UNITED CORPORATION

Page

PART I. FINANCIAL INFORMATION

3

Item 1.

Financial Statements (unaudited)

3

Consolidated Statement of Financial Condition – March 31, 2021 and December 31, 2020

3

Consolidated Statement of Operations – for the three months ended March 31, 2021 and 2020

4

Consolidated Statement of Comprehensive Loss – for the three months ended March 31, 2021 and 2020

5

Consolidated Statement of Changes in Shareholders’ Equity – for three months ended March 31, 2021 and 2020

6

Consolidated Statement of Cash Flows – for the three months ended March 31, 2021 and 2020

8

Notes to Consolidated Financial Statements

9

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

34

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

54

Item 4.

Controls and Procedures

54

PART II. OTHER INFORMATION

55

Item 1.

Legal Proceedings

55

Item 1A.  

Risk Factors

55

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

55

Item 3.

Defaults upon Senior Securities

55

Item 4.

Mine Safety Disclosures

55

Item 5.

Other Information

55

Item 6.

Exhibits

56

SIGNATURES

57


2


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

First United Corporation and Subsidiaries

Consolidated Statement of Financial Condition

(In thousands, except share data)

March 31,
2021

December 31,
2020

(Unaudited)

Assets

Cash and due from banks

$

189,744

$

146,673

Interest bearing deposits in banks

3,273

2,759

Cash and cash equivalents

193,017

149,432

Investment securities – available for sale (at fair value)

204,006

226,885

Investment securities – held to maturity (fair value $77,571 at March 31, 2021 and $77,612 at December 31, 2020)

69,357

68,263

Restricted investment in bank stock, at cost

3,654

4,468

Loans held for sale

1,430

3,546

Loans

1,199,325

1,167,812

Unearned fees

(3,330)

(1,730)

Allowance for loan losses

(16,554)

(16,486)

Net loans

1,179,441

1,149,596

Premises and equipment, net

36,279

36,863

Goodwill

11,004

11,004

Bank owned life insurance

44,260

43,974

Deferred tax assets

9,580

7,972

Other real estate owned, net

7,533

9,386

Operating lease asset

2,495

2,408

Accrued interest receivable and other assets

19,777

19,617

Total Assets

$

1,781,833

$

1,733,414

Liabilities and Shareholders’ Equity

Liabilities:

Non-interest bearing deposits

$

485,311

$

420,427

Interest bearing deposits

982,952

1,001,939

Total deposits

1,468,263

1,422,366

Short-term borrowings

51,454

49,160

Long-term borrowings

100,929

100,929

Operating lease liability

3,035

2,958

Accrued interest payable and other liabilities

27,914

26,044

Dividends payable

1,049

910

Total Liabilities

1,652,644

1,602,367

Shareholders’ Equity:

Common Stock – par value $0.01 per share;
Authorized 25,000,000 shares; issued and outstanding
6,998,617 shares at March 31, 2021 and 6,992,911 at December 31, 2020

70

70

Surplus

30,245

30,149

Retained earnings

132,072

129,691

Accumulated other comprehensive loss

(33,198)

(28,863)

Total Shareholders’ Equity

129,189

131,047

Total Liabilities and Shareholders’ Equity

$

1,781,833

$

1,733,414

See accompanying notes to the consolidated financial statements


3


First United Corporation and Subsidiaries

Consolidated Statement of Operations

(In thousands, except per share data)

Three Months Ended

March 31,

2021

2020

(Unaudited)

Interest income

Interest and fees on loans

$

12,732

$

12,839

Interest on investment securities

Taxable

990

1,308

Exempt from federal income tax

275

260

Total investment income

1,265

1,568

Other

65

209

Total interest income

14,062

14,616

Interest expense

Interest on deposits

1,146

1,870

Interest on short-term borrowings

24

28

Interest on long-term borrowings

656

831

Total interest expense

1,826

2,729

Net interest income

12,236

11,887

Provision for loan losses

110

2,654

Net interest income after provision for loan losses

12,126

9,233

Other operating income

Net gains

588

41

Other Income

Service charges on deposit accounts

405

615

Other service charges

211

290

Trust department

2,241

1,753

Debit card income

810

634

Bank owned life insurance

286

303

Brokerage commissions

268

277

Other

521

136

Total other income

4,742

4,008

Total other operating income

5,330

4,049

Other operating expenses

Salaries and employee benefits

4,988

5,923

FDIC premiums

183

43

Equipment

851

926

Occupancy

725

747

Data processing

726

1,052

Marketing

146

130

Professional services

1,170

723

Contract labor

148

151

Line rentals

215

217

Other real estate owned

(412)

Investor relations

124

93

Settlement expense

3,300

Other

763

1,000

Total other operating expenses

12,927

11,005

Income before income tax expense

4,529

2,277

Provision for income tax expense

1,099

522

Net Income

$

3,430

$

1,755

Basic net income per share

$

0.49

$

0.25

Diluted net income per share

$

0.49

$

0.25

Weighted average number of basic shares outstanding

6,996

7,063

Weighted average number of diluted shares outstanding

7,000

7,071

Dividends declared per common share

$

0.15

$

0.13

See accompanying notes to the consolidated financial statements

4


First United Corporation and Subsidiaries

Consolidated Statement of Comprehensive Loss

(In thousands)

Three Months Ended

March 31,

2021

2020

Comprehensive Loss

(Unaudited)

Net Income

$

3,430

$

1,755

Other comprehensive loss, net of tax and reclassification adjustments:

Net unrealized gains/(losses) on investments with OTTI

229

(1,225)

Net unrealized (losses)/gains on all other AFS securities

(5,202)

1,384

Net unrealized gains on HTM securities

45

53

Net unrealized gains/(losses) on cash flow hedges

405

(963)

Net unrealized gains/(losses) on pension

133

(4,915)

Net unrealized gains on SERP

55

34

Other comprehensive loss, net of tax

(4,335)

(5,632)

Comprehensive loss

$

(905)

$

(3,877)

See accompanying notes to the consolidated financial statements


5


First United Corporation and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity

(In thousands, except per share data)

Common
Stock

Surplus

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Total
Shareholders'
Equity

Balance at January 1, 2021

$

70

$

30,149

$

129,691

$

(28,863)

$

131,047

Net income

3,430

3,430

Other comprehensive loss

(4,335)

(4,335)

Stock based compensation

50

50

Common stock issued - 2,956 shares

46

46

Common stock dividend declared -
$0.15 per share

(1,049)

(1,049)

Balance at March 31, 2021

$

70

$

30,245

$

132,072

$

(33,198)

$

129,189

See accompanying notes to the consolidated financial statements


6


First United Corporation and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity

(In thousands, except per share data)

Common
Stock

Surplus

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Total
Shareholders'
Equity