"The significant increase in income was due to adjustments made to the reserve for probable loan and lease losses during the second quarter of 2003. The regulatory methodology that is used in the calculation for this reserve indicated that First United Corporation had a higher level of reserve than what was required for the current credit quality of the loan and lease portfolios," stated William B. Grant, Chairman of the Board and Chief Executive Officer. "Additionally, a re-evaluation of the collateral for a large commercial loan, currently in non-accrual status, proved that First United is in a secure collateral position relative to the loan balance, with no loss anticipated, resulting in a special allocation for that loan facility being removed from the reserve. The total adjustment to the reserve was $.71 million," continued Mr. Grant. Both of these items contributed to a negative provision for probable loan and lease losses of $.32 million for the second quarter of 2003. The provision for loan and lease losses was $.34 million for the first six months of 2003 as compared to $1.22 million one year ago.

Book value per share was $13.74 as of June 30, 2003, as compared to $12.34 as of June 30, 2002. Returns on average assets for the six months ended June 30, 2003 and 2002 were 1.19 % and 1.17% respectively. Returns on average shareholders' equity were 14.36% and 12.98% for the six months ended June 30, 2003 and 2002 respectively. The efficiency ratio, a ratio that measures the percent of revenue supporting overhead expenses, was 61.11% as of June 30, 2003, which is higher than the 60.92% reported as of June 2002.

First United's risk based capital ratio at June 30, 2003 was 14.66%, which is well above the regulatory minimum of 8.00%, and the regulatory level to be considered well capitalized of 10.00%. This ratio was 15.98% at June 30, 2002.

Balance Sheet Review
Comparing June 30, 2003 balances with June 30, 2002, total assets were $1.00 billion as compared to $822.69 million, a 22.11% increase. Gross loans and leases increased $95.51 million to a total of $712.43 million, or 15.48%. Total deposits increased $99.91 million or 16.36% to a total of $710.58 million. During the same 12-month period, core deposits grew $41.91 million with the balance in brokered deposit growth. Shareholder's equity was $83.61 million at June 30, 2003 as compared to $75.00 million at June 30, 2002. The $83.61 million represents 8.32% of assets.

During the second quarter of 2003, gross loans and leases increased $26.52 million or 3.87%. The growth during the second quarter was due primarily to growth of $19.96 million within the commercial lending portfolio. The residential mortgage portfolio grew $6.33 million during the second quarter of 2003. During the second quarter of 2003 total deposits grew $13.87 million. Brokered deposits grew $10.00 million during the second quarter of 2003.

Investment securities decreased $8.22 million during the second quarter of 2003. "First United Corporation decided to sell two specific issues of FreddieMac securities that were initially written down to market value in December 2002 under an interpretation of the other-than-temporary impairment rules. At the time of the sale, these securities had a book value of $4.29 million," stated Mr.Grant. He continued, "After much research through a variety of venues, we determined that in the interest of our shareholders, the best decision was to divest ourselves of these holdings." The sale of the two securities resulted in a capital loss of $.34 million during the second quarter.

Net Interest Income
Net interest income was $8.62 million for the second quarter of 2003. This is an increase of $.89 million or 11.45% as compared to the same time period of 2002. Interest income increased $.49 million or 3.50% when comparing the quarter periods ending June 30, 2003 and June 30, 2002. Interest expense for the quarter was $5.85 million or $.40 million less than for the same time period one-year ago. This equates to a percentage decrease of 6.35%. In comparing June 30, 2003 ratios with June 30, 2002, the yield on average earnings assets was 6.40% as compared to 7.58%, and the average cost of funds was 2.63% as compared to 3.38%. First United's net interest margin has decreased from 4.20% to 3.77% during this same 12-month period.

Operating Income
For the second quarter of 2003 total operating income totaled $2.51 million as compared to $2.39 million for the same time period of 2002. This is an increase of $.12 million or 5.18%. Included in this category were net losses on the sale of securities of $.19 million, a gain on the sale of a bank property of $.23 million, and secondary market fees of $.12 million. "Although our residential mortgage portfolio is not growing dramatically, our mortgage division has recognized an opportunity in the market to service those customers interested in refinancing their mortgages in this historically low interest rate environment. This effort has resulted in increased secondary market fee income for the Corporation," commented Mr. Grant.

Operating Expense
Total operating expense was $6.80 million for the second quarter of 2003, as compared to $6.26 million for the same time period in 2002. The largest item in this category, salaries and employee benefits increased $.48 million or 14.62% during the second quarter of 2003 as compared to the same time period in 2002. Increased incentive payments related to employee performance and normal salary increases contributed to this change.

Asset Quality
First United's asset quality continues to be high. The loan delinquency ratio at June 30, 2003 was .90%, as compared to 1.13% at June 30, 2002. Non- accrual loans totaled $1.87 million as of June 30, 2003 as compared to a total of $1.68 million at June 30, 2002. Total non-performing loans were $3.00 million at June 30, 2003 as compared to $2.39 million at March 31, 2002. The reserve for probable loan and lease losses as a percentage of gross loans equaled .81% as of June 30, 2003 as compared to 1.00% as of June 30, 2002.

First United Corporation offers full-service banking through its banking subsidiary, First United Bank & Trust, and consumer finance products through its subsidiaries, OakFirst Loan Center, Inc. and OakFirst Loan Center, LLC. These subsidiaries operate a network of offices throughout Garrett, Allegany, Washington, and Frederick counties in Maryland, as well as Mineral, Hardy, Hampshire, and Berkeley counties in West Virginia. First United's website can be located at www.mybankfirstunited.com. As of June 30, 2003 the Corporation posted assets of $1.00 billion and had 6,087,433 shares outstanding.

This earnings release of First United Corporation (the "Corporation") may contain forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Readers of this release should be aware of the speculative nature of "forward-looking statements." Statements that are not historical in nature, including those that include the words "anticipate," "estimate," "should," "expect," "believe," "intend," and similar expressions, are based on current expectations, estimates and projections about, among other things, the industry and the markets in which the Corporation operates, and they are not guarantees of future performance. Whether actual results will conform to expectations and predictions is subject to known and unknown risks and uncertainties, including risks and uncertainties discussed in this report; general economic, market, or business conditions; changes in interest rates, deposit flow, the cost of funds, and demand for loan products and financial services; changes in the Corporation's competitive position or competitive actions by other companies; changes in the quality or composition of loan and investment portfolios; the ability to manage growth; changes in laws or regulations or policies of federal and state regulators and agencies; and other circumstances beyond the Corporation's control. Consequently, all of the forward-looking statements made in this document are qualified by these cautionary statements, and there can be no assurance that the actual results anticipated will be realized, or if substantially realized, will have the expected consequences on the Corporation's business or operations. For a more complete discussion of these risk factors, see "Risk Factors" in Part I, Item 1 of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2002. Except as required by applicable laws, the Corporation does not intend to publish updates or revisions of any forward-looking statements it makes to reflect new information, future events or otherwise.