First United Corporation is the Oakland, Maryland holding company for First United Bank & Trust, which runs 23 banking offices in western Maryland and northern West Virginia. It makes commercial real estate, business, mortgage and consumer loans funded by local deposits, and runs a trust and brokerage business with $1.93B of assets under management.

The case is that the bank earns more on its money every quarter and the price still sits close to book. The tax-equivalent net interest margin has risen in each of the last eight quarters, to 4.05% in the September quarter from 3.69% a year earlier. Net interest income rose 13% to $19.6M, and interest expense fell after the bank repaid $65M of Federal Home Loan Bank advances and $50M of brokered deposits this year. Earnings before credit costs were $11.4M in the quarter, against $9.7M a year earlier.

Book value keeps building. Tangible book value per share was $31.41 at the end of September, up 8.8% from $28.87 a year earlier, and nonperforming plus 90-day past-due loans were 0.23% of loans. The quarterly dividend goes to $0.28 from $0.26, and a buyback of up to 1,000,000 shares had 929,400 left at the end of June. At the 19 October close the shares traded at 1.39 times tangible book and about 11 times the last four quarters' earnings.

The risk is that profit growth is slow: net income rose only 3.4% in the quarter because the loss provision jumped to $1.9M from $0.5M, and loans 30 or more days past due rose to 0.45% from 0.26%, mostly one large commercial real estate loan. Commercial real estate and construction loans are about 46% of the book. There is no insider buying, and three insiders sold about $0.5M of stock in July.

Not investment advice.