First · NASDAQ:FUNC
First — First United — Shareholder Meeting (May 2010)
74 slides from First's shareholder meeting presentation, May 13, 2010
Slide 1: First United Corporation Annual Shareholders Meeting May 2010
Bank | I oNireD First United Corporation Annual Shareholders Meeting May 2010
Slide 2: Bill Grant, President, CEO & Chairman
Bill Grant President, Chief Executive Officer & Chairman of the Board
Slide 3: Forward-looking statements
Forward-looking statements in this presentation relating to First United Corporation’s plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The information contained
Slide 4: First United Bank & Trust founded in 1900
* First United Bank & Trust founded in 1900 + Headquartered in Oakland, Garrett County, Maryland * Total assets of $1.7 billion at December 31, 2009 * Banking operations in Maryland and West Virginia — 28 banking offices, 33 ATMs and | call center * Non-banking services include insurance, trust and
Slide 5: The Difference
The Difference We continue to: * Provide the products of our larger competitors with the service only seen in community banks —Responsiveness and flexibility from knowing the markets * Focus on growing and maintaining relations with our customers for the long term —We take the time to know our custo
Slide 6: Emphasizes
Emphasizes: * Strong Relationship Building Programs ° Effective Attraction of New Customers * Exceptional Customer Retention ° Robust Multi-Product Utilization ° Extraordinary Community Involvement
Slide 7: Carissa Rodeheaver, EVP & CFO
Carissa Rodeheaver Executive Vice President & Chief Financial Officer
Slide 8: The United States entered into a recession
* The United States entered into a recession in December 2007 ~ Weakened U.S. economy Consumer fear and low confidence ~ Stock and bond markets plunged ~ Low interest rates * Federal Reserve Chairman Ben Bernanke indicates recovery began in late 2009
Slide 9: By-products of Recession
* By-products of Recession * High Liquidity Levels * FDIC Premiums * Credit Quality + Loan Portfolio + Investment Portfolio * Capital Adequacy * Core Bank Performance
Slide 10: By-products of Recession
¢ By-products of Recession * High Liquidity Levels ¢ FDIC Premiums * Credit Quality * Loan Portfolio ¢ Investment Portfolio * Capital Adequacy * Core Bank Performance
Slide 11: Balance Sheet - Asset Growth
Balance Sheet - Asset Growth $1,900 $1,700 $1,500 $1,300 $1,100 $900 $700 $500 $300 2005 2006 2007 2008 2009 eet FIRST ihre
Slide 12: Balance Sheet - Asset Mix
Balance Sheet - Asset Mix 2008 2009 am 1% 22% 9% 11% 16% 68% 63% hand cash equivalents "Investment securities and FHLB stock Loans mOther assets
Slide 13: Stable Funding Sources
Stable Funding Sources | 2009 3% 23% 17% 57% = Core Deposits "Certificates of deposit > $100,000 Short term borrowings "Long term borrowings FIRST ihre
Slide 14: By-products of Recession
¢ By-products of Recession ¢ High Liquidity Levels « FDIC Premiums * Credit Quality * Loan Portfolio ¢ Investment Portfolio * Capital Adequacy * Core Bank Performance
Slide 15: Steve Lantz, Senior Lending Officer
Steve Lantz Senior Vice President & Senior Lending Officer
Slide 16: Loan Growth
Loan Growth $1,200 ies $1,135 $1,122 $1,100 $1,000 $900 $800 : $700 = s600 $500 $400 $300 2005 2006 2007 2008 2009 f i Mw ettate
Slide 17: Loan Portfolio Composition
Loan Portfolio Composition December 2003 2% " 26% oo December 2009 10% 1% 33% a a = Commercial ; "Residential Mortgage 2 ee ace ~ Consumer Installment ea ee a ic Ol . - ial C / ” nyBen FIRST ihre
Slide 18: Commercial Real Estate Loans
Commercial Real Estate Loans ‘Collateral: 23% = Construction and other land = Commercial land development ~ Other commercial construction = Multifamily Non-residen ™ Owner occupied non-residential al Locatio 25% 9% = MD: Garrett "= MD: Washington . Frederick » MD: Allegany = WV: Hardy, Hampshire, Mi
Slide 19: Significant Industry Concentrations
Significant Industry Concentrations *: *Developers 13% *Commercial rentals 12% *Hotels and lodging 12% *Contractors 8% *Real estate holders 8% *Residential rentals TM% +s 0 86 of total commercial loans
Slide 20: Carissa Rodeheaver, EVP & CFO
Carissa Rodeheaver Executive Vice President & Chief Financial Officer
Slide 21: By-products of Recession
¢ By-products of Recession ¢ High Liquidity Levels ¢ FDIC Premiums * Credit Quality * Loan Portfolio ¢ Investment Portfolio * Capital Adequacy * Core Bank Performance
Slide 22: Providing for Loan Losses
Providing for Loan Losses = Provision "Net Charge-offs A
Slide 23: Providing for Loan Losses — Net Charge-Offs as % of Average Loans
Providing for Loan Losses — Net Charge-Offs as % of Average Loans 1.00% 7 0.80% + 2005
Slide 24: CRE Development Concentration
| CRE Development Concentration i ‘ SUUOr] JO % st BuqULLO}.190-0N fe cage 2008 oo Q209 @s0 409 2004 3108 2006. 2007 2003 pes § EE SNE % WORE }UIIU0D Year A
Slide 25: Reserves vs. Non-Performing Loans
Reserves vs. Non-Performing Loans ALLLas % of Gross Loans Non-performingas % of Loans A
Slide 26: By-products of Recession
¢ By-products of Recession ¢ High Liquidity Levels ¢ FDIC Premiums * Credit Quality * Loan Portfolio ¢ Investment Portfolio * Capital Adequacy * Core Bank Performance
Slide 27: Collateralized Debt Obligation Sector
Collateralized Debt Obligation Sector Original cost $ 73.8 Cumulative losses through earnings (29.4) Cumulative losses through capital (14.1) Fair value at December 2009 $ 44.4 2007 Percentage of Investment Portfolio 24% 2009 Percentage of Investment Portfolio 14% $ inmillions
Slide 28: By-products of Recession
¢ By-products of Recession ¢ High Liquidity Levels ¢ FDIC Premiums * Credit Quality * Loan Portfolio ¢ Investment Portfolio * Capital Adequacy * Core Bank Performance
Slide 29: Well-capitalized on all regulatory capital ratios
Well-capitalized on all regulatory capital ratios
Slide 30: Regulatory Capital — as % of Risk Weighted Assets
Regulatory Capital — as % of Risk Weighted Assets Well-Capitalized 40.0% 400s 4007 4c08- 1009-2009 3009409 =Common Equity "ALLR sTrust Preferred Sec = TARP CPP » feet 5, ihre
Slide 31: Components of Total Capital Ratio
Components of Total Capital Ratio Common Equity and Allowance for Loan Loss Reserves (“ALLR”) Components 4o0s 4007-408.) 1009 20093009409 =Common Equity #ALLR. ent uf hii
Slide 32: Components of Total Capital Ratio
Components of Total Capital Ratio Common Equity, ALLR and Trust Preferred Cum ponents 400s 4007 4c08- 1009-2009 3009409 = Common Equity #ALLR = Trust Preferred Sec = TARP CPP heey ihre
Slide 33: Regulatory Capital — as % of Risk Weighted Assets
Regulatory Capital — as % of Risk Weighted Assets Well-Capitalized 40.0% 400s 4007 4c08- 1009-2009 3009409 =Common Equity "ALLR sTrust Preferred Sec = TARP CPP / 3 ee is 5, ihre
Slide 34: Net Income
Net Income $18 1] si22 3126 Millions M wee,
Slide 35: Pre-tax Earnings/(Loss) as reported vs non-cyclical earnings
Pre-tax 2009 2008 Earnings/(Loss) —as reported ($19.8) $12.4 Impact of: FDIC premiums 4.0 0.5 Securities impairment 26.7 p.7/ Provision for loan losses 15.6 12.9 “Non-cyclical” earnings $26.5 $28.5
Slide 36: By-products of Recession
¢ By-products of Recession ¢ High Liquidity Levels ¢ FDIC Premiums * Credit Quality * Loan Portfolio ¢ Investment Portfolio * Capital Adequacy ¢ Core Bank Performance
Slide 37: Growth and Composition of Revenue
Growth and Composition of Revenue Millions 2008 2007 2008 2008 2006 PeXchicing) "Net Interest Income = Noninterest Income (*) tc
Slide 38: Net Interest Income
Net Interest Income Interest Income: + Loans Trends in Net + Investments in Securities Interest Income ' . (iamillions) Less Interest Expense: Panel ana * Savings 2008 $52.2 * Transaction Accounts 2007 $44.2 + Time Deposits 2006 $40.9 + Short Term Borrowings 2005 $40.3 + Long Term Borrowings Equals
Slide 39: Net Interest Margin
Net Interest Margin 4.00% 3.68% 3.49% 2S 3.50% 3.51% 3.00% 2005, 2006 2007 2008 2009
Slide 40: Non Interest Income (Fee Income)
Non Interest Income (Fee Income) * ye 58% 2009 vs. 2008 3.2% Growth Rates (% ar % of Total Revenue 2008 % 2005 28% 2005 2006 2007 *Exeluding (Bank! Marine, gains/losses 40
Slide 41: Diversified Fee Income
Diversified Fee Income (excluding gains/osses) 2009 iia = Service charges = Trust | Insurance ther i . income ‘ing fees Bank owned life insurance teat FIRST ihre
Slide 42: By-products of Recession
¢ By-products of Recession ¢ High Liquidity Levels ¢ FDIC Premiums * Credit Quality * Loan Portfolio ¢ Investment Portfolio * Capital Adequacy ¢ Core Bank Performance
Slide 43: Robin Murray, Director of Retail Banking
Robin Murray Senior Vice President & Director of Retail Banking
Slide 44: Deposit market share by county
# % Change in $ Maryland Counties: Offices Share 2008-2009 Rank Garrett 5 72.2% $19.8 is! Allegany 4 19.2 0.8 3rd Washington (*) 3 43 15.4 Gy Frederick (*) 4 3.8 24.9 sth West Virginia Counties: Mineral 2 31.8 (4.3) 2nd Berkeley (*) 5 12.2 8.9 Bi Hardy 1 2.9 (1.5) 4th Monongalia (*) EB) 2.6 6.2 7th
Slide 45: Deposit Growth
Deposit Growth $1,500 $1,300 $1,100 $900 $700 $500 $300 $4,228 $1,304 2005 $o74 2006 $1,093 2007 2008 2009 fot Marine,
Slide 46: Composition of Core Deposits
Composition of Core Deposits 2009 37% 48% 3% 12% = Interest bearing demand "Non interest bearing demand Savings "Certificates of deposit < $100,000 fot Marine,
Slide 47: Eugene Helbig, Jr., Senior Trust Officer
Eugene Helbig, Jr. Senior Vice President & Senior Trust Officer
Slide 48: WHAT MATTERS MOST - Trust
¢* WHAT MATTERS MOST - Trust ¢ WHAT MATTERS MOST — Your Future * WHAT MATTERS MOST - Planning * WHAT MATTERS MOST - Your Retirement
Slide 49: Trust Department Market Value
Millions Trust Department Market Value $560 $540 $520 2005 2006 2007 “WHAT MATTERS MOST” ist. 2008 $543.6 million
Slide 50: Trust Department Income
Thousands Trust Department Income $4.500 $4,000 $3,500 - $3.000 $2,500 $2,000 $1.500 $1,000 $500 $- $3.7 million 2008
Slide 51: Model portfolio returns, 5-year average
5 Years Ended 2009 (5 Year Average) Tax Free 3.60% 4.43% -0.83% Bond Income 537% 257% 2.80% Fixed Income 4.66% 2.58% 2.08% Growth/Income 5.04% 2.88% 247% Balance 5.50% 3.15% 2.35%, Growth 5.76% 3.28% 2.48% Aggressive Growth 6.07% 3.42% 2.74% Avg. All 1.97% Models sa 500 313% Avg. BeBond 236% inc. Do
Slide 52: Growth of $1,000,000
Growth of $1,000,000 '$1,500,000 iS sap ‘$1,000,000 '$500,000 2000 2001 2002 2003 2004 ©2005-2006 2007 2008 2009 10 Years Ending 12/31/09 (From Beginning of Last Major Bear Market) uh
Slide 53: New Business Development meets 114.4% of goal
* New Business Development meets 114.4% of goal * Regular communication — Economic Conference Calls can be found at www.trustandinvestments.com * Customer Service retains customer accounts oc
Slide 54: Val Teagarden, First United Insurance Group
Val Teagarden First United Insurance Group President and CEO
Slide 55: Non Interest Income — First United Insurance Group
Non Interest Income — First United Insurance Group Revenue by Line of Business 16% 0% 14% _ 70% 3% 57% 14% 27% 2000 2009 = Personal Lines = Commercial Lines ~ Individual Life and Health Group Benefits
Slide 56: Income
Income First United Group - C Thousands 2005 2006 2007 2008 2009
Slide 57: Insurance Group — New Business Revenue
Insurance Group — New Business Revenue $350 $199 Thousands e $134 2006 2007 2008 2009 zh
Slide 58: Insurance Group — Increase in Clients
Insurance Group — Increase in Clients 11,555 12,000 2 10,000 8,143 5 eset © 8,000 42% Increase a Zz 6,000 3,792 26% Increase S 10% Increase = 4000 = > 2,000 PS 720082008 =S«2007=S 2008 =S(2008 (Bank! ss Marine,
Slide 59: Insurance Group - Commission Income as % of Other Operating Income
Insurance Group - Commission Income as % of Other Operating Income 19.0% 17.0% 15.0% 13.0% 11.0% 9.0% 7.0% % of Other Operating Income 5.0% 2005 2006 2007 2008 2009
Slide 60: Jeannette Fitzwater, Director of Corporate Services
Jeannette Fitzwater Senior Vice President & Director of Corporate Services
Slide 61: Operating Expenses — Branch Network Expansion
Operating Expenses — Branch Network Expansion 4 z E Lal 2 5 z Cumulat Growth Rates (4) Expen: Syear 5% 2008,s.2008 15% Syear 47% 2009 vs.2008 22% A
Slide 62: Operating Expense — Human Capital Efficiency Metrics
Operating Expense — Human Capital Efficiency Metrics Goal: Maintain 2008 Full Time Equivalent Level (FTE) Result: o 400 418 0 so 2008 2009 * Includes addition of 2 offices and an insurancs J Ue ito a
Slide 63: Operating Expense — Human Capital Efficiency Metrics
Operating Expense — Human Capital Efficiency Metrics Goal: Reduce overtime hours by 66% over 2008 level Result: S000 ‘Overtime Hours ts Ey er 82%!
Slide 64: Operating Expense - Composition
Operating Expense - Composition 2008 27% ® Salaries and employee benefits ™ Occupancy, equipment and data sin proce ~ FDIC and state assessments @All other 2009 24%, 8% 19% ® Salaries and employee benefits ‘= Occupancy, equipment and data processing _ FDIC and state assessments BAll other foot] Mari
Slide 65: Goal: Maximize Return on Investment while decreasing expense
Goal: Maximize Return on Investment (ROI) while decreasing expense by 40% Tactics: — Word of Mouth — Web-based — Targeted Blitzes — Public Relations —New and Existing Touch points
Slide 66: Jason Rush, Chief Risk Officer
Jason Rush Senior Vice President, Chief Risk Officer and Director of Operations
Slide 67: Lean Fundamentals tools
‘Many useful tools are built upon the Lean Fundamentals: The most commonly used Lean Tools are: Standard Work 5S/ Visual Mgmt. Pull Systems Setup Reduction Cellular Production Total Productive
Slide 68: Delivery Channel Usage
Delivery Channel Usage Phone: 2% Teller: 13% ACH: 18% Point of Sale: 29% Checks: 28% Wires:5% ATM:5% FIRST ihre
Slide 69: Disaster Management; Regulatory Reform
* Disaster Management * Regulatory Reform
Slide 70: Bill Grant, President, CEO & Chairman
Bill Grant President, Chief Executive Officer & Chairman of the Board
Slide 71: Strategic Objectives
Strategic Objectives « Improve asset quality and concentrations of credit « Improve capital « Enhance core earnings * Profitably expand customer relationships n
Slide 72: Delay branch expansion and insurance agency acquisitions
* Delay branch expansion and insurance agency acquisitions * Evaluate longer term human resource plans * Develop and execute 5-year capital plan based on expected capital needs, including the possible repayment of CPP funds
Slide 73: Frequently Asked Questions
Frequently Asked Questions
Slide 74: Thank you!
Thank you!