As we move through the balance of the recession, the Company is working diligently with many of our loan customers – both commercial and consumer – to do what we can to help them through the difficult times. Unfortunately, we are constrained in our ability to assist some borrowers by both prudent banking practices and regulatory mandates. In many instances, we have been required to increase our reserves, take specific charges, stop accruing interest, or any combination of those.

As a result of the losses we have recognized in our loan and investment portfolios, lower other operating income and increased FDIC premiums; we have seen a degree of erosion in our capital. We remain well capitalized, as required by our regulators, through both our participation in the Federal Capital Purchase Program, a program established by the U.S. Treasury to provide capital to healthy banks at an attractive interest rate, and through our own privately-placed trust preferred securities offering. The Capital Purchase Program added $30 million to capital, and our private offering provided us with over $10 million in capital from investors in our local communities. To further preserve capital, the Company recently announced its decision to decrease the quarterly dividend to $0.01 per share. While regrettable, this decision allows our Bank to preserve approximately $2.3 million in capital per year, which we believe most shareholders would view as prudent during these uncertain times.

During 2009, we also experienced a decrease in our other operating income as a result of the lower stock markets and the low interest rate environment, which resulted in lower trust and investment income. Additionally, as a result of consumer uncertainty and slowed spending, we experienced significant declines in service charge income. On the expense side, FDIC premiums increased by over $3.4 million in 2009 as the FDIC dramatically increased its assessments in order to re-build the bank insurance fund.

Looking beyond the losses associated with other-than-temporary impairment charges and loan loss provisions, there is strength in the core operations of First United. In fact, were it not for the impairment charge, the Company would have earned in excess of $6 million last year, inclusive of all loan related charges. Beyond that, consumer driven deposits grew by nearly $80 million last year. While our loan balances declined slightly, we saw an increase in our net interest income of more than $1 million. Our net interest margin remained stable at 3.56%, a modest decline from 3.68% in 2008.

Without question, our Company was not immune to this great recession, and we anticipate that there may still be some additional bumps in the road as we move through 2010. This has been a difficult recession, and while many experts assert that it is technically over, we believe it will be a slow recovery. We are heartened by the underlying strength in the core operations. As we continue to focus on the financial needs of our community oriented business owners, our consumers and our towns, and as the difficulties of the recession begin to lift, First United, together with its customers, should return to profitability and strength.