Book value per share was $13.14 as of March 31, 2003, as compared to $11.87 as of March 31, 2002. Returns on average assets for the three months ended March 31, 2003 and 2002 were 1.03% and 1.17%, respectively. Returns on average shareholders' equity were 12.44% and 13.06% for the three months ended March 31, 2003 and 2002, respectively. The efficiency ratio, a ratio that measures the percent of revenue supporting overhead expenses, was 62.39% as of March 31, 2003, which is higher than the 61.31% reported as of March 31, 2002.

First United's risk based capital ratio at March 31, 2003 was 14.84%, 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 16.11% at March 31, 2002.

Balance Sheet Review

Comparing March 31, 2003 balances with March 31, 2002, total assets were $984.98 million as compared to $804.44 million, a 22.44% increase. Gross loans and leases increased $89.92 million to a total of $685.91 million, or 15.09%. Total deposits increased $94.57 million or 15.71% to a total of $696.71 million. Shareholders' equity increased $7.7 million or 10.76% during the same 12-month period.

During the first quarter of 2003, gross loans and leases increased $20.08 million or 3.02% to a total of $685.91 million. The growth during the first quarter was due primarily to growth of $18.58 million within the commercial lending portfolio. "The historically high refinancings that occurred in 2002 in the consumer mortgage portfolio continued throughout the first quarter of 2003 causing residential mortgage loans to decrease $5.02 million during the first quarter of 2003," stated Mr. Grant. Consumer installment loans increased $4.90 million for the same time period.

During the first quarter of 2003 deposits grew $46.85 million. This growth was attributed to growth in brokered deposits of $35.00 million and $11.85 million in core deposits.

Net Interest Income

Net interest income was $8.09 million for the first quarter of 2003. This is an increase of $.28 million as compared to the same time period of 2002. Although interest income remained flat when compared to the first quarter of 2003, interest expense decreased 3.85% when comparing the same time periods. In comparing March 31, 2003 ratios with March 31, 2002, the yield on average earnings assets was 6.46% as compared to 7.72%, and the average cost of funds was 2.73% as compared to 3.46%. First United's net interest margin has decreased from 4.26% to 3.71% during this same 12-month period.

Operating Income

For the first quarter of 2003 total operating income totaled $3.07 million as compared to $2.33 million for the same time period of 2002. This is an increase of $.74 million or 31.56%. Items affecting this increase were net securities gains as well as increases in service charges on deposit accounts.

The net securities gains included gains on the sale of securities of $.88 million and $.35 million in write-downs on two securities exhibiting other-than-temporary impairment. In this historically low interest rate environment, First United chose to sell several mortgage-backed securities that were exhibiting accelerated payback thus resulting in reduced yield for the Corporation. The proceeds from these sales were reinvested in securities in which the underlying collateral is consumer mortgage loans originated at lower interest rates; therefore, being less likely to experience accelerated payback. "These securities sales were executed to better position the Corporation during what appears to be a longer than originally anticipated period of low interest rates. First United accepted a slightly lower coupon on the securities and extended the average life of the investments to slightly greater than four years as compared to the average life of one year for the original investment," stated William B. Grant and Chairman of the Board. Unrelated to the sale of securities was a write-down on two securities under an interpretation of the other-than-temporary impairment rules. Mr. Grant continued, "These were the same securities that were adjusted at year-end 2002. The adjustment on the securities was caused by the continued record low-rate environment, and the impact it has on securities such as these. While we believe there is no credit risk associated with the securities, their value has been adversely impacted by low interest rates. It is expected that the market value of the securities will increase with a rise in interest rates."

Operating Expense

Total operating expense was $7.11 million for the first quarter of 2003, as compared to $6.34 million for the same time period in 2002. The largest item in this category, salaries and employee benefits increased $.54 million or 15.40% in 2003 as compared to the same time period in 2002. Increased incentive payments related to employee performance and increased pension costs contributed to this increase.

Asset Quality

First United's asset quality continues to be high. The provision for probable credit losses was $.66 million for the first quarter of 2003. The provision for probable credit losses for the first quarter of 2002 was $.66 million as well. The loan delinquency ratio at March 31, 2003 was .83%, as compared to .98% at March 31, 2002. Non-accrual loans totaled $2.10 million as of March 31, 2003 as compared to a total of $1.73 million at March 31, 2002. "Of the $2.10 million in non-accrual loans, there is one credit totaling $1.46 million. This credit is well-secured, and no loss is anticipated," stated Mr. Grant. Total non-performing loans were $7.67 million at March 31, 2003 as compared to $7.50 million at March 31, 2002. The reserve for loan and lease losses as a percentage of gross loans equaled .92% as of March 31, 2003 as compared to .99% as of March 31, 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. As of March 31, 2003 the Corporation posted assets of $984.98 million and had 6,087,433 shares outstanding.

First United Corporation has made certain "forward-looking" statements with respect to this earnings release. Such statements should not be construed as guarantees of future performance. Actual results may differ from "forward-looking" information as a result of any number of unforeseeable factors, which include, but are not limited to, the effect of prevailing economic conditions, the overall direction of government policies, unforeseeable changes in the general interest rate environment, competitive factors in the marketplace, business risk associated with credit extensions and trust activities, and other risk factors. These and other factors could lead to actual results, which differ, materially from management's statements regarding actual performance.