UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

OR

Commission file number 0-14237

FIRST UNITED CORPORATION
(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (301) 334-9471

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_|

        Indicate by check mark if disclosures of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |_|

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes |X| No |_|

        The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2003: $127,836,093.

        The number of shares of the registrant’s common stock outstanding as of February 27, 2004: 6,087,287

Documents Incorporated by Reference

        Portions of the registrant’s definitive proxy statement for the 2004 Annual Shareholders Meeting to be filed with the SEC in March of 2004 pursuant to Regulation 14A are incorporated by reference into Part III of this Annual Report on Form 10-K.

First United Corporation
Table of Contents

2

Forward-Looking Statements

        This Annual Report of First United Corporation (the “Corporation”) filed on Form 10-K may contain forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Readers of this report 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 Exhibit 99.1 “Risk Factors.” Except as required by applicable laws, the Corporation does not intend to publish updates or revisions of forward-looking statements it makes to reflect new information, future events or otherwise.

PART I

General

        The Corporation is a Maryland corporation chartered in 1985 and a financial holding company and a bank holding company registered under the federal Bank Holding Company Act of 1956, as amended (the “BHC Act”). The Corporation and its consolidated subsidiaries are sometimes referred to as “we”, “us”, “our”, or “Registrant” in this annual report.

        The Corporation’s primary business is serving as the parent company to its five direct subsidiaries, First United Bank & Trust, a Maryland trust company (the “Bank”), OakFirst Loan Center, Inc., a West Virginia finance company, OakFirst Loan Center, LLC, a Maryland finance company, Oakfirst Life Insurance Corporation, an Arizona reinsurance company (“Oakfirst Life”), and First United Capital Trust, a Delaware statutory business trust (the “Capital Trust”). OakFirst Loan Center, Inc. has one subsidiary, First United Insurance Agency, Inc., which is a Maryland insurance agency. In addition, the Bank has four direct subsidiaries, Gonder Insurance Agency, Inc., a Maryland full service insurance agency (“Gonder”), First United Securities, Inc., a Delaware corporation that holds and manages approximately 19% of the Corporation’s investment portfolio (“FUSI”), First United Auto Finance, LLC, an inactive indirect automobile leasing limited liability company, and First United Capital Investment, Inc., a Delaware corporation (“FUCI”). FUCI has one subsidiary, First United Investment Trust, which is a Maryland real estate investment trust that invests in mortgage loans (the “Investment Trust”).

        The Corporation will liquidate FUCI and FUSI in 2004, and the Investment Trust will thereafter be a direct subsidiary of the Bank. For additional information about these liquidations, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Recent Developments.”

        As of December 31, 2003, the Corporation had assets of approximately $1,108 million, net loans of approximately $786 million, and deposits of approximately $750 million. Shareholders’ equity at December 31, 2003 was approximately $84 million.

        The Corporation maintains an Internet site at www.mybankfirstunited.com on which it makes available, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to the foregoing on its Internet site as soon as reasonably practicable after these reports are electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”).

Banking Products and Services

        The Bank operates 23 banking offices, one call center and 34 Automated Teller Machines (“ATM’s”) in the following Maryland Counties: Garrett, Allegany, Washington and Frederick; and in the following West Virginia Counties: Mineral, Hampshire, Berkeley and Hardy. The Bank is an independent community bank providing a complete range of retail and commercial banking services to businesses and individuals in its market area. Services offered are essentially the same as those offered by larger regional institutions that compete with the Bank. The services provided by the Bank include checking, savings, and Money Market deposit accounts, business loans, personal loans, mortgage loans, lines of credit, and consumer-oriented financial services including IRA and KEOGH accounts. In addition, the Bank provides full brokerage services through a networking arrangement with PrimeVest Financial Services, Inc., a full service broker-dealer. The Bank also provides safe deposit and night depository facilities, and a complete line of insurance products and trust services. As of December 31, 2003, the total market value of assets under the supervision of the Bank’s trust department was approximately $364 million. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”).

3

        On July 25, 2003, the Bank acquired four banking offices and a commercial banking center located in Berkeley County, West Virginia, from Huntington Bancshares Incorporated and its bank subsidiary, the Huntington National Bank. As a result of this acquisition, which was accounted for under the purchase method of accounting, approximately $131 million in deposits and $49 million in loans were purchased, and approximately $66 million in cash was received. (See Note 1 of the Notes to Consolidated Financial Statements.)

Lending Activities

        The majority of the Corporation’s lending activities are conducted through the Bank.

        The Bank originates primarily secured loans for business purposes. It is typical for commercial loans to be secured by real estate, commercial equipment, vehicles or other assets of the business. Repayment is often dependent on the successful operation of the business and may be affected by adverse conditions in the local economy or real estate market. The financial condition and cash flow of commercial borrowers is therefore carefully analyzed during the loan approval process, and continues to be monitored by obtaining business financial statements, personal financial statements and income tax returns. The frequency of this ongoing analysis depends upon the size and complexity of the credit and collateral that secures the loan. It is also the Bank’s general policy to obtain personal guarantees from the principals of the commercial loan borrowers.

        Commercial real estate loans are primarily those secured by land for residential and commercial development, agricultural purpose properties, service industry buildings such as restaurants and motels, retail buildings and general purpose business space. Low loan to value ratio standards, as well as the thorough financial analysis performed and the Bank’s knowledge of the local economy in which it lends, can reduce the risk associated with these loans.

        The risk of loss associated with commercial real estate construction lending is controlled through conservative underwriting procedures such as loan to value ratios of 75% or less, obtaining additional collateral when prudent, and closely monitoring construction projects to control disbursement of funds on loans.

        The Bank originates primarily variable rate residential mortgage loans. Although the Bank may also originate fixed rate residential mortgage loans, the Bank is generally acting in a brokering capacity on behalf of other financial institutions, for which it receives a fee. As with any consumer loan, repayment is dependent on the borrower’s continuing financial stability, which can be adversely impacted by job loss, divorce, illness, or personal bankruptcy. Residential mortgage loans exceeding an internal loan-to-value ratio require private mortgage insurance. Title insurance protecting the Bank’s lien priority, as well as fire and casualty insurance, is required.

        Home equity lines of credit, included within the residential mortgage portfolio, are secured by the borrower’s home and can be drawn on at the discretion of the borrower. These lines of credit are at variable interest rates.

        The Bank provides residential real estate construction loans to builders and individuals for single family dwellings. Residential construction loans are usually granted based upon “as completed” appraisals and are secured by the property under construction. Site inspections are performed to determine pre-specified stages of completion before loan proceeds are disbursed. These loans typically have maturities of six to twelve months and may be fixed or variable rate. Permanent financing for individuals offered by the Bank includes fixed and variable rate loans with three, five or seven year adjustable rate mortgages.

        A variety of consumer loans are offered to customers, including indirect and direct auto loans, and other secured and unsecured lines of credit and term loans. Careful analysis of an applicant’s creditworthiness is performed before granting credit, and on-going monitoring of loans outstanding is performed in an effort to minimize risk of loss by identifying problem loans early.

        Additionally, the Corporation meets the lending needs of under-served customer groups within its market areas in part through OakFirst Loan Center, Inc., located in Martinsburg, West Virginia, and OakFirst Loan Center, LLC, located in Hagerstown, Maryland (collectively “OakFirst Loan Centers”).

Insurance Activities

        The Corporation offers a full range of insurance products and services to customers in its market areas through Gonder and First United Insurance Agency, Inc. Oakfirst Life reinsures credit life and credit accident and health insurance written by American General Assurance Company on consumer loans made by the Bank.

4

Trust Services

        The Bank’s Trust Department offers a full range of trust services, including personal trust, investment agency accounts, charitable trusts, retirement accounts including IRA roll-overs and 401(k) accounts, estate administration and estate planning.

First United Capital Trust

        The Capital Trust was organized for the purpose of offering preferred securities to investors and issued $23.0 million of aggregate liquidation amount of 9.375% Preferred Securities in August of 1999. Further information about the Capital Trust may be found in Note 8 of the Notes to Consolidated Financial Statements included in this annual report.

COMPETITION

        The banking business, in all of its phases, is highly competitive. Within their market areas, the Corporation and its affiliates compete with commercial banks, (including local banks and branches or affiliates of other larger banks), savings and loan associations and credit unions for loans and deposits, with consumer finance companies for loans, with insurance companies for insurance products, and with other financial institutions for various types of products and services. There is also competition for commercial and retail banking business from banks and financial institutions located outside our market areas.

        The primary factors in competing for deposits are interest rates, personalized services, the quality and range of financial services, convenience of office locations and office hours. The primary factors in competing for loans are interest rates, loan origination fees, the quality and range of lending services and personalized services.

        To compete with other financial services providers, the Corporation relies principally upon local promotional activities, personal relationships established by officers, directors and employees with its customers and specialized services tailored to meet its customers’ needs. In those instances in which the Corporation is unable to accommodate a customer’s needs, it will arrange for those services to be provided by other financial services providers with which it has a relationship.

        Current banking laws facilitate interstate branching and merger activity among banks. Since September 1995, certain bank holding companies are authorized to acquire banks throughout the United States. In addition, since June 1, 1997, certain banks are permitted to merge with banks organized under the laws of different states. As a result, interstate banking is now an accepted element of competition in the banking industry and the Corporation may be brought into competition with institutions with which it does not presently compete.

CAPITAL REQUIREMENTS

        The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) established a system of prompt corrective action to resolve the problems of undercapitalized institutions. Under this system the federal banking regulators are required to rate supervised institutions on the basis of five capital categories: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized;” and to take certain mandatory actions, and are authorized to take other discretionary actions, with respect to institutions in the three undercapitalized categories. The severity of the actions will depend upon the category in which the institution is placed. A depository institution is “well capitalized” if it has a total risk based capital ratio of 10% or greater, a Tier 1 risk based capital ratio of 6% or greater, and a leverage ratio of 5% or greater and is not subject to any order, regulatory agreement, or written directive to meet and maintain a specific capital level for any capital measure. An “adequately capitalized” institution is defined as one that has a total risk based capital ratio of 8% or greater, a Tier 1 risk based capital ratio of 4% or greater and a leverage ratio of 4% or greater (or 3% or greater in the case of a bank with a composite CAMEL rating of 1).

        FDICIA generally prohibits a depository institution from making any capital distribution, including the payment of cash dividends, or paying a management fee to its holding company if the depository institution would thereafter be undercapitalized. Undercapitalized depository institutions are subject to growth limitations and are required to submit capital restoration plans. For a capital restoration plan to be acceptable, the depository institution’s parent holding company must guarantee (subject to certain limitations) that the institution will comply with such capital restoration plan.

        Significantly undercapitalized depository institutions may be subject to a number of other requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized and requirements to reduce total assets and stop accepting deposits from correspondent banks. Critically undercapitalized depository institutions are subject to the appointment of a receiver or conservator, generally within 90 days of the date such institution is determined to be critically undercapitalized.

5

        Information about the Corporation’s capital resources may be found in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Capital Resources”. Information about the capital ratios of the Corporation and of the Bank as of December 31, 2003 may be found in Note 2 of the Notes to Consolidated Financial Statements included in this annual report.

SUPERVISION AND REGULATION

        The following is a summary of the material regulations and policies applicable to the Corporation and its subsidiaries and is not intended to be a comprehensive discussion. Changes in applicable laws and regulations may have a material effect on the business of the Corporation and Bank.

General

        The Corporation is a bank holding company and a financial holding company registered with the Board of Governors of the Federal Reserve System (the “FRB”) under the Bank Holding Company Act of 1956, as amended (“the BHC Act”) and as such is subject to the supervision, examination and reporting requirements of the BHC Act and the regulations of the FRB.

        The Bank is a Maryland trust company subject to the banking laws of Maryland and to regulation by the Commissioner of Financial Regulation of Maryland, who is required by statute to make at least one examination in each calendar year (or at 18-month intervals if the Commissioner determines that an examination is unnecessary in a particular calendar year). The Bank is a member of the FDIC, so it is also subject to certain provisions of federal law and regulations and examination by the FDIC. The Bank is also subject to numerous state and federal statutes and regulations that affect the business of banking in its market areas, including the provision of trust services.

        All nonbank affiliates of the Corporation are subject to examination by the FRB, and, as affiliates of the Bank, are subject to examination by the FDIC and the Commissioner of Financial Regulation of Maryland. In addition, OakFirst Loan Center, Inc. is subject to licensing and regulation by the West Virginia Division of Banking, OakFirst Loan Center, LLC is subject to licensing and regulation by the Commissioner of Financial Regulation of Maryland, and Gonder and First United Insurance Agency, Inc. are each subject to licensing and regulation by state insurance authorities. Retail sales of insurance products by these insurance affiliates are also subject to the requirements of the Interagency Statement on Retail Sales of Nondeposit Investment Products promulgated in 1994 by the FDIC, the FRB, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision.

Regulation of Financial Holding Companies

        In November 1999, the federal Gramm-Leach-Bliley Act (the “GLBA”) was signed into law. Effective in pertinent part on March 11, 2000, GLBA revises the BHC Act and repeals the affiliation provisions of the Glass-Steagall Act of 1933, which, taken together, limited the securities, insurance and other non-banking activities of any company that controls an FDIC insured financial institution. Under GLBA, a bank holding company can elect, subject to certain qualifications, to become a “financial holding company.” GLBA provides that a financial holding company may engage in a full range of financial activities, including insurance and securities sales and underwriting activities, and real estate development, with new expedited notice procedures. Maryland law generally permits Maryland State chartered banks, including the Bank, to engage in the same activities, directly or through an affiliate, as national banking associations. GLBA permits certain qualified national banking associations to form financial subsidiaries, which have broad authority to engage in all financial activities except insurance underwriting, insurance investments, real estate investment or development, or merchant banking. Thus, GLBA has the effect of broadening the permitted activities of the Corporation and the Bank.

        The Corporation and its affiliates are subject to the provisions of Section 23A and Section 23B of the Federal Reserve Act. Section 23A limits the amount of loans or extensions of credit to, and investments in, the Corporation and its nonbank affiliates by the Bank. Section 23B requires that transactions between the Bank and the Corporation and its nonbank affiliates be on terms and under circumstances that are substantially the same as with non-affiliates.

        Under FRB policy, the Corporation is expected to act as a source of strength to its subsidiary banks, and the FRB may charge the Corporation with engaging in unsafe and unsound practices for failure to commit resources to a subsidiary bank when required. In addition, under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”), depository institutions insured by the FDIC can be held liable for any losses incurred by, or reasonably anticipated to be incurred by, the FDIC in connection with (i) the default of a commonly controlled FDIC-insured depository institution or (ii) any assistance provided by the FDIC to a commonly controlled FDIC-insured depository institution in danger of default. Accordingly, in the event that any insured subsidiary of the Corporation causes a loss to the FDIC, other insured subsidiaries of the Corporation could be required to compensate the FDIC by reimbursing it for the estimated amount of such loss. Such cross guaranty liabilities generally are superior in priority to obligations of a financial institution to its shareholders and obligations to other affiliates.

6

Federal Banking Regulation

        Federal banking regulators, such as the FRB and the FDIC, may prohibit the institutions over which they have supervisory authority from engaging in activities or investments that the agencies believe are unsafe or unsound banking practices. Federal banking regulators have extensive enforcement authority over the institutions they regulate to prohibit or correct activities that violate law, regulation or a regulatory agreement or which are deemed to be unsafe or unsound practices. Enforcement actions may include the appointment of a conservator or receiver, the issuance of a cease and desist order, the termination of deposit insurance, the imposition of civil money penalties on the institution, its directors, officers, employees and institution-affiliated parties, the issuance of directives to increase capital, the issuance of formal and informal agreements, the removal of or restrictions on directors, officers, employees and institution-affiliated parties, and the enforcement of any such mechanisms through restraining orders or other court actions.

        The Bank is subject to certain restrictions on extensions of credit to executive officers, directors, and principal shareholders or any related interest of such persons, which generally require that such credit extensions be made on substantially the same terms as are available to third parties dealing with the Bank and not involve more than the normal risk of repayment. Other laws tie the maximum amount that may be loaned to any one customer and its related interests to capital levels.

        As part of FDICIA, each federal banking regulator adopted non-capital safety and soundness standards for institutions under its authority. These standards include internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, and compensation, fees and benefits. An institution that fails to meet those standards may be required by the agency to develop a plan acceptable to meet the standards. Failure to submit or implement such a plan may subject the institution to regulatory sanctions. The Corporation, on behalf of the Bank, believes that the Bank meets substantially all standards that have been adopted. FDICIA also imposes new capital standards on insured depository institutions.

        The Community Reinvestment Act (“CRA”) requires that, in connection with the examination of financial institutions within their jurisdictions, the FDIC evaluate the record of the financial institution in meeting the credit needs of their communities including low and moderate income neighborhoods, consistent with the safe and sound operation of those banks. These factors are also considered by all regulatory agencies in evaluating mergers, acquisitions and applications to open a branch or facility. As of the date of its most recent examination report, the Bank has a CRA rating of “Satisfactory.”

        As a FDIC member institution, the Bank’s deposits are insured to a maximum of $100,000 per depositor through the Bank Insurance Fund (“BIF”), administered by the FDIC, and the Bank is required to pay semi-annual deposit insurance premium assessments to the FDIC. The BIF assessment rates are based upon a matrix that takes into account a bank’s capital level and supervisory rating. The Bank paid $.2 million of FDIC premiums in 2003.

        For a discussion of the regulatory capital requirements and related restrictions to which the Corporation and the Bank are subject, see “Capital Requirements” above.

USA PATRIOT Act

        Congress adopted the USA PATRIOT Act (the “Patriot Act”) on October 26, 2001 in response to the terrorist attacks that occurred on September 11, 2001. Under the Patriot Act, certain financial institutions, including banks, are required to maintain and prepare additional records and reports that are designed to assist the government’s efforts to combat terrorism. The Patriot Act includes sweeping anti-money laundering and financial transparency laws and required additional regulations, including, among other things, standards for verifying client identification when opening an account and roles to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering.

Federal Securities Law

        The Corporation’s common stock is registered with the SEC under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Corporation is subject to information reporting, proxy solicitation, insider trading restrictions and other requirements of the Exchange Act.

7

Governmental Monetary and Credit Policies and Economic Controls

        The earnings and growth of the banking industry and ultimately of the Bank are affected by the monetary and credit policies of governmental authorities, including the FRB. An important function of the FRB is to regulate the national supply of bank credit in order to control recessionary and inflationary pressures. Among the instruments of monetary policy used by the FRB to implement these objectives are open market operations in U.S. Government securities, changes in the federal funds rate, changes in the discount rate of member bank borrowings, and changes in reserve requirements against member bank deposits. These means are used in varying combinations to influence overall growth of bank loans, investments and deposits and may also affect interest rates charged on loans or paid on deposits. The monetary policies of the FRB authorities have had a significant effect on the operating results of commercial banks in the past and are expected to continue to have such an effect in the future. In view of changing conditions in the national economy and in the money markets, as well as the effect of actions by monetary and fiscal authorities, including the FRB, no prediction can be made as to possible future changes in interest rates, deposit levels, loan demand or their effect on the business and earnings of the Corporation and its subsidiaries.

Employees

        At December 31, 2003, the Corporation and its subsidiaries employed approximately 460 individuals, of whom 312 were full-time employees, and 148 part-time employees.

        Information about the Corporation’s executive officers is set forth below. All officers are elected annually by the Board of Directors and hold office at its pleasure.

        William B. Grant, age 50, Chairman of the Board and Chief Executive Officer. Mr. Grant has been Chairman of the Board and Chief Executive Officer since 1996. Previously, he had been Secretary of the Corporation since 1990 and Executive Vice-President of the Corporation since 1988.

        Robert W. Kurtz, age 57, President, Chief Financial Officer, Secretary/Treasurer. Mr. Kurtz has been President of the Corporation since 1996 and Chief Financial Officer, Secretary, and Treasurer since 1997. Previously, he had been Chief Operating Officer of the Corporation since 1996, Treasurer of the Corporation since 1990 and Executive Vice-President of the Corporation since 1988.

        Jeannette R. Fitzwater, age 43, Senior Vice President and Director of Human Resources. Mrs. Fitzwater was appointed Senior Vice President and Director of Human Resources in 1997. She had been First Vice President, Director of Marketing and Regional Sales Manager of the Bank since 1994.

        Philip D. Frantz, age 43, Senior Vice President and Director of Operations & Support. Mr. Frantz was appointed Senior Vice President in 1993 and previously had been the Controller of the Corporation since 1988. He was appointed Director of Operations & Support of the Corporation in 1997.

        Steven M. Lantz, age 47, Senior Vice President and Director of Lending. Mr. Lantz was appointed Senior Vice President and Director of Lending of the Corporation in 1997. He had been First Vice President and Commercial Services Manager of the Bank since 1993.

        Eugene D. Helbig, Jr., age 51, Senior Vice President and Senior Trust Officer. Mr. Helbig was appointed Senior Vice President in 1997 and Senior Trust Officer in 1993. He had been a First Vice President of the Bank since 1993.

        Frederick A. Thayer, IV, age 45, Senior Vice President, Director of Sales and CRA Officer. Mr. Thayer was appointed Senior Vice President and Director of Sales in 1997. Previously, he had been First Vice President, Regional Executive Officer and Regional Sales Manager of the Bank since 1993.

        Robin M. Murray, age 45, Senior Vice President and Director of Marketing. Mrs. Murray was appointed Senior Vice President and Director of Marketing in 2003. Previously she had been Vice President & Director of Marketing and Retail Sales and Marketing Retail Service Manager since 1997.

        The main office of the Corporation and the Bank occupies approximately 29,000 square feet at 19 South Second Street, Oakland, Maryland. These premises are owned by the Corporation. The Corporation owns sixteen of its bank offices and leases seven bank offices and three non-bank subsidiary offices. Total rent expense on the leased offices was $.3 million in 2003.

8

        The Corporation and its affiliates are at times, in the ordinary course of business, subject to legal actions. However, to the knowledge of management, the Corporation is not currently subject to any such legal action.

        None.

PART II

        Shares of the Corporation’s common stock are listed on the Nasdaq Stock Market under the symbol “FUNC”. As of February 27, 2004, the Corporation had 2,254 stockholders of record. The high and low sales prices for, and the cash dividends declared on, the shares of the Corporation’s common stock for each quarterly period of 2003 and 2002 are set forth below. These over-the-counter quotations reflect inter-dealer prices and may not include retail mark-up, mark-down or commissions, and they may not represent actual transactions.

        Cash dividends are typically declared on a quarterly basis and are at the discretion of the Corporation’s Board of Directors. Dividends to stockholders are generally dependent on the ability of the Corporation’s subsidiaries to declare dividends to the Corporation. The ability of these entities to declare dividends are limited by federal and state banking laws and/or state corporate laws. Further information about these limitations may be found in Note 12 to the Notes to the Consolidated Financial Statements and Exhibit 99.1 “Risk Factors”. Accordingly, there is no guarantee that dividends will be declared in any fiscal quarter.

        Market makers for the Corporation’s common stock are:

Equity Compensation Plan Information

        At December 31, 2003, the Corporation had no equity compensation plan or arrangement in effect under which shares of common stock may be issued to its directors or officers.

9

        The following table sets forth certain selected financial data for the five years ended December 31, 2003 and is qualified in its entirety by the detailed information and financial statements, including notes thereto, included elsewhere or incorporated by reference in this annual report. This data should be read in conjunction with the financial statements and related notes thereto included elsewhere in this annual report and in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.

        This discussion and analysis should be read in conjunction with the financial statements which appear elsewhere in this report.

10

Executive Overview

        The Corporation is a financial holding company which, through its bank and nonbank subsidiaries, provides a broad array of financial products and services primarily to customers in four Western Maryland counties and four Northeastern West Virginia counties. Its principal operating subsidiary is the Bank, which has developed a community banking network of 23 banking offices throughout its market area. The Corporation’s primary source of revenue is interest income earned from its loan and investment securities portfolios and fees from financial services provided to customers.

        The following presents an overview of the Corporation’s operating performance during 2003:

        Solid Earnings Growth: The Corporation posted record net earnings for 2003 of $10.7 million, which is an 11% increase over the $9.7 million reported for 2002. Returns on average equity improved to 13.10% in 2003 from 12.75% in 2002. In addition, earnings per share increased to $1.77 in 2003 from $1.59 in 2002.

        Strategic Branch Acquisition: On July 25, 2003, the Corporation acquired four banking offices and a commercial banking center in Berkeley County, West Virginia from Huntington Bancshares Incorporated. Approximately $131 million in deposits and $49 million in loans were purchased, and $66 million in cash was received. This purchase was accounted for as a purchase and as such, it was included in our results of operations from the date of acquisition.

        Strong Loan and Deposit Growth: Loans and deposits grew $126 million (19%) and $140 million (23%), respectively, during 2003. While the Huntington branch acquisition accounted for approximately one-third of this loan growth, organic growth primarily in our core markets represented the majority of this strong performance. Almost all of the deposit growth is attributed to the acquisition.

        Shift in Mix of Fixed/Adjustable Rate Loans: During this period of historically record low interest rates, the Corporation sought to grow its loan portfolio with adjustable rate loans. As a result, the percentage of fixed rate loans to total loans decreased from 57% in 2002 to 52% in 2003.

        Continued Excellent Loan Quality: The December 31, 2003 allowance for loan losses of $6.0 million is almost five times the amount of net loan charge offs during 2003, and more than twice the amount of year end non-accrual loans. The allowance as a percentage of period end loans was .75%, while net charge offs to average loans outstanding was only .17%. Non-accrual loans were .35% of period end loans, compared to .27% and .52% at December 31, 2002 and 2001, respectively.

        As we look ahead to 2004 and beyond, the Corporation envisions the following:

        Disciplined Growth in Banking Offices: We anticipate that the Bank will increase the number of banking offices on a de novo basis over the next three years in or adjacent to counties that comprise its core geographic market. The pace of this growth will be balanced with the desire to maintain strong financial performance. Although there are no specific plans to grow the Bank network with additional acquisitions, we will continue to be opportunistic in this regard.

        Continued Loan Growth in Our Core Markets and Loan Quality: The Corporation’s core market area continues to be vibrant. Accordingly, we believe that the Corporation will continue to experience growth in its loan portfolio, while continuing to maintain its loan quality. However, loan growth is dependent on a number of factors, including a continuation of a favorable local business climate fueling demand for loan products and rational pricing of loan products by the Corporation’s competitors.

        Negligible Impact of Rising Interest Rates: With interest rates at historically low levels, expectations are that rates will rise, albeit perhaps well into 2004. The Corporation closely monitors its interest rate sensitivity, and at December 31, 2003, it was asset sensitive over the next year. Accordingly, modest increases in interest rates would generally have a positive, but relatively insignificant, impact on the Corporation’s net interest income.

        Risks and Challenges: The risks and challenges that the Corporation will continue to face include changes in local economic conditions in its concentrated core markets, potential yield compression on loan and deposit products by existing competitors and potential new market entrants, dramatic changes in interest rates, and changes to existing federal and state legislation and regulations over banks and financial holding companies. For a more complete discussion of these risk factors, see Exhibit 99.1 “Risk Factors.”

11

Critical Accounting Policies and Estimates

        This discussion and analysis of the Corporation’s financial condition and results of operations is based upon the Corporation’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. (See Note 1 of the Notes to Consolidated Financial Statements.) On an on-going basis, management evaluates estimates, including those related to loan losses and intangible assets. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the consolidated financial statements.

Allowance for Loan Losses

        The most critical accounting policy applied by the Corporation is that related to the valuation of the loan portfolio. A variety of estimates impact carrying value of the loan portfolio, including the calculation of the allowance for loan losses, valuation of underlying collateral, the timing of loan charge-offs and placing loans on non-accrual status. The allowance is established and maintained at a level that management believes is adequate to cover losses resulting from the inability of borrowers to make required payment on loans. Estimates for loan losses are arrived at by analyzing risks associated with the specific loans and the loan portfolio, current and historical trends in delinquencies and charge-offs, the views of the Bank’s regulators and, changes in the size and composition of the loan portfolio. The analysis also requires consideration of the economic climate and direction, change in lending rates, political conditions, legislation impacting the banking industry and economic conditions specific to Western Maryland and Northeastern West Virginia. Because the calculation of the allowance for loan losses relies on management’s estimates and judgments relating to inherently uncertain events, actual results may differ from management’s estimates.

        The allowance for loan losses is also discussed in “Allowance and Provision for Loan Losses” of this Management’s Discussion and Analysis and in Note 4 of Notes to Consolidated Financial Statements.

Goodwill and Other Intangible Assets

        Statement of Financial Accounting Standards (SFAS) No. 142, Accounting for Goodwill and Other Intangible Assets, establishes standards for the amortization of acquired intangible assets and the non-amortization and impairment assessment of goodwill. The Corporation has $4.0 million of core deposit intangible assets subject to amortization and $11.7 million in goodwill primarily related to the Huntington branch acquisition, which is not subject to periodic amortization.

        Goodwill arising from business combinations represents the value attributable to unidentifiable intangible elements in the business acquired. The Corporation’s goodwill relates to value inherent in the banking business and the value is dependent upon the Corporation’s ability to provide quality, cost effective services in a highly competitive local market. This ability relies upon continuing investments in processing systems, the development of value-added service features and the ease of use of the Corporation’s services. As such, goodwill value is supported ultimately by revenue that is driven by the volume of business transacted. A decline in earnings as a result of a lack of growth or the inability to deliver cost effective services over sustained periods can lead to impairment of goodwill which could adversely impact earnings in future periods. SFAS No. 142 requires an annual evaluation of goodwill for impairment. The determination of whether or not these assets are impaired involves significant judgments. The Corporation has concluded that the recorded value of goodwill was not impaired as a result of the evaluation. However, future changes in strategy and/or market conditions could significantly impact these judgments and require adjustments to recorded asset balances.

12

Recent Developments

        As reported on March 2, 2004, the Corporation will make two internal structural changes in 2004. During the first quarter of 2004, FUCI will be liquidated. After the liquidation, the Investment Trust will be owned directly by the Bank. In addition, FUSI will cease its investment activities and will be wound up during 2004. Management presently intends to make all future securities investments directly through the Bank. These changes are being implemented to minimize the risks associated with positions that may be adopted in the future by taxing authorities with respect to the taxation of income generated by certain subsidiaries.

        Although it is difficult to predict the actual impact that these changes will have on the Corporation on a going-forward basis, management believes that these changes, had they been implemented in 2003, and assuming no other changes, would have resulted in an effective tax rate of approximately 34%, rather than approximately 30%. Many factors and strategies, however, affect the Corporation’s tax obligations, and the impact for 2004 and for future periods is uncertain.

Net Interest Income

        Net interest income is the largest source of operating revenue. Net interest income is the difference between the interest earned on earning assets and the interest expense paid on interest-bearing liabilities. For analytical and discussion purposes, net interest income is adjusted to a taxable equivalent basis to facilitate performance comparisons between taxable and tax-exempt assets by increasing tax-exempt income by an amount equal to the federal income taxes that would have been paid if this income were taxable at the statutorily applicable rate.

        Net interest income increased $2.2 million (7%) in 2003 due primarily to a reduction in interest expense. Interest income was virtually unchanged as the increase in average interest-earning assets of $174 million (22%) in 2003 was offset by a 129 basis point decline in yield on such earning assets. Although interest-bearing liabilities increased $166 million (23%) in 2003, a 26% decrease in the effective rate of these interest-bearing liabilities of 94 basis points resulted in a net decrease in interest expense of $2.1 million.

        During 2002, net interest income increased $2.1 million (7%), resulting in a net interest margin of 4.08%, a 15 basis point increase from 2001. As average interest-earning assets and interest-bearing liabilities increased only 3% and 2%, respectively, the net interest income growth resulted from a declining interest rate environment. Total interest expense decreased $7.7 million as the effective rate decreased 118 basis points. This outpaced the decrease in total interest income of $5.5 million, which experienced a 92 basis point yield compression.

        The mix of interest income was relatively constant throughout the past three years, as interest on loans and investments remained approximately 84% and 15%, respectively, of total interest income on earning assets.

        Table 1 sets forth the average balances, net interest income and expense and average yields and rates for the Corporation’s interest-earning assets and interest-bearing liabilities for 2003, 2002 and 2001. Table 2 sets forth an analysis of volume and rate changes in interest income and interest expense of the Corporation’s average interest-earning assets and average interest-bearing liabilities for 2003, 2002 and 2001. This table distinguishes between the changes related to average outstanding balances (changes in volume holding the interest rate constant) and the changes related to average interest rates (changes in average rate holding the outstanding balance constant).

13

Distribution of Assets, Liabilities and Shareholders’ Equity
Interest Rates and Interest Differential—Tax Equivalent Basis
(Dollars in thousands)

Table 1

Notes:

—The above table reflects the average rates earned or paid stated on a tax equivalent basis assuming a tax rate of 35% for 2003 and 34% for 2002 and 2001. The fully taxable equivalent adjustments for the years ended December 31, 2003, 2002, and 2001 were $855, $841, and $749, respectively.

—The average balances of non-accrual loans for the years ended December 31, 2003, 2002, and 2001, which were reported in the average loan balances for these years, were $2,240, $1,906, and $1,719, respectively.

—Net interest margin is calculated as net interest income divided by average earning assets.

14

Interest Variance Analysis (1)
(In thousands and tax equivalent)

Table 2

Other Operating Income

        2003 other operating income increased $2.9 million (32%) over 2002. This compares to a slight decrease of $.3 million (3%) in 2002 from 2001. The following shows the major components of other operating income for the past three years (in thousands):

        Service charges on deposit accounts increased $.5 million (17%) in 2003 and $.3 million (12%) in 2002. These increases are primarily attributable to increases in return check charges correlating to increases in average non-interest bearing deposits of 16% and 15% in 2003 and 2002, respectively, and fees associated with an overdraft protection product introduced in 2002.

        Trust and fiduciary activity income is directly affected by the performance of the equity and bond markets and the amount of assets under management. 2003 income rebounded back to 2001 levels, aided by solid sales and an improved investment market. 2002 income was impacted by adverse investment market conditions. The average market value of assets under management was $332, $300 and $298 million for 2003, 2002 and 2001, respectively.

15

        Securities gains (losses) are the most variable component of other operating income. Securities gains for 2003 include gross gains of $1.7 million, offset by securities losses of $.7 million. Gains for 2003 resulted from the decision to sell certain mortgage-backed securities that were exhibiting accelerated paybacks due to the historically low interest rate environment, as well as the sale of corporate and other debt securities to utilize certain capital loss carryforwards. The gross securities losses in 2003 resulted primarily from the write-down and ultimate sale of Freddie Mac Preferred equity securities exhibiting other-than-temporary impairment. These preferred securities initially exhibited other-than-temporary impairment in 2002, which resulted in a $.4 million write down that year.

Other Operating Expense

        2003 other operating expenses increased $3.8 million (15%) over 2002, which increased $2.7 million (11%) over 2001. The following shows the major components of other operating income for the past three years (in thousands):

        Salaries and employee benefits represent slightly more than half of total other operating expenses. These increased $2.1 million (15%) in 2003 and $1.4 million (11%) in 2002. These increases are attributable to increases in headcount to support the Corporation’s growth objectives, increased incentive plan expenses as growth and profitability targets were met, as well as increasing health insurance costs. In addition, $.5 million of the increase in 2003 was directly attributed to additional personnel associated with the Huntington branch acquisition.

        Other expenses increased $1.3 million in 2003 (17%) and $.8 million (13%) in 2002. These increases are generally attributable to increases in professional fees, outside service providers, insurance costs and, in 2003, $.2 million relating to the amortization of core deposit intangibles associated with the Huntington branch acquisition.

Applicable Income Taxes

        Income tax expense amounted to $4.6 million in 2003, compared to $3.7 million in both 2002 and 2001. The resulting effective tax rates were 30%, 28% and 29% for 2003, 2002 and 2001, respectively. The principal items which lowered the Corporation’s effective tax rates from the federal statutory rate are tax-exempt income from securities and loans, and tax-exempt BOLI income.

Balance Sheet Overview

        The Corporation’s total assets reached $1,108 million at December 31, 2003, representing an increase of $154 million (16%) from year end 2002. The Huntington branch acquisition accounted for approximately one-third of the $126 million loan growth and 90% of the $140 million deposit growth during 2003.

        Year end asset mix was relatively consistent, as total net loans and investment securities represented 71% and 20% of total assets at year end 2003, as compared to 69% and 22% at year end 2002. Similarly, the liability mix was also relatively consistent, as total deposits and borrowings represented 73% and 26%, respectively, of total liabilities at year end 2003, as compared to 70% and 29%, respectively, at year end 2002.

Loan Portfolio

        The Corporation, through the Bank and the OakFirst Loan Centers, is actively engaged in originating loans to customers primarily in Garrett, Allegany, Washington, and Frederick Counties in Maryland; Mineral, Hardy, Berkeley, Hampshire Counties in West Virginia; and the surrounding regions of West Virginia and Pennsylvania. The Corporation has policies and procedures designed to mitigate credit risk and to maintain the quality of its loan portfolio. These policies include underwriting standards for new credits and the continuous monitoring and reporting of asset quality and the adequacy of the allowance for loan losses. These policies, coupled with ongoing training efforts, have provided an effective check and balance for the risk associated with the lending process. Lending authority is based on the size and type of the loan, and the experience of the lending officer.

16

        Commercial loans are collateralized primarily by real estate, and to lesser extent, by commercial equipment and vehicles. Unsecured commercial loans represent an insignificant portion of total commercial loans. Residential mortgage loans are collateralized by the related property. Any residential mortgage loan exceeding an internal loan-to-value ratio requires private mortgage insurance. Installment loans are typically collateralized, with loan-to-value ratios which are established based on the financial condition of the borrower. The Corporation will also make unsecured consumer loans to qualified borrowers meeting the underwriting standards of the Corporation.

        Table 3 sets forth the composition of the Corporation’s loan portfolio. It has been the historical policy of the Corporation to make the majority of its loan commitments in the market area it serves. The Corporation had no foreign loans in its portfolio as of December 31, for all periods presented.

Summary of Loan Portfolio
(Dollars in thousands)

Table 3

        During 2003, gross loans increased $126 million (19%) over 2002 to $792 million. Loans increased $56 million (9%) in 2002 from 2001. Approximately two-thirds of this loan growth was organic, and the remaining one-third was attributable to the Huntington branch acquisition. The key contributors to this strong loan growth in 2003 were commercial ($65 million), residential-mortgage ($31 million) and installment ($28 million).

        The commercial portfolio grew 27% in 2003, on top of a 28% increase in 2002. Approximately one-half of this growth in 2003 resulted from the Huntington branch acquisition. The other one-half, as well as the growth in the commercial loan portfolio in 2002, is primarily attributable to additional business with existing customer relationships and a more aggressive pricing strategy, while maintaining strong credit worthiness standards. At year end 2003, approximately 85% of the commercial loan portfolio was collateralized by real estate.

        Residential-mortgage grew 13% in 2003 as opposed to a 2% decrease in 2002. Approximately one-third of the growth in 2003 resulted from the Huntington branch acquisition. The remaining two-thirds is attributable to a combination of an aggressive marketing campaign to solicit and retain existing mortgage customers, as well as offering a competitive adjustable rate mortgage as an alternative to the fixed rates offered in the secondary market. During 2002, the slight runoff of fixed rate residential mortgages was partially offset by a $7 million increase in home equity loans.

        Consumer installment loans grew 16% in 2003 on top of a 6% increase in 2002. This increase relates primarily to an increase in the indirect automobile portfolio resulting from an expansion of the Corporation’s dealer network within its market area and a more aggressive pricing strategy. At year end 2003, the indirect automobile portfolio represented approximately 76% of the installment loan portfolio.

17

        The following table sets forth remaining maturities, based upon contractual dates, for selected loan categories as of December 31, 2003 (in thousands):

Maturities of Loan Portfolio at December 31, 2003

Table 4

        It is the policy of the Corporation to place a loan in non-accrual status, except for consumer loans, whenever there is substantial doubt about the ability of a borrower to pay principal or interest on the outstanding credit. Management considers such factors as payment history, the nature of the collateral securing the loan, and the overall economic situation of the borrower when making a non-accrual decision. Management closely monitors non-accrual loans. A non-accruing loan is restored to accrual status when principal and interest payments have been brought current, it becomes well secured, or is in the process of collection and the prospects of future contractual payments are no longer in doubt. Generally, consumer installment loans are not placed on non-accrual status, but are charged off after they are 120 days contractually past due. Table 5 sets forth the historical activity of non-accrual loans (in thousands):

Risk Elements of Loan Portfolio

Table 5

        Had the non-accrual loans been current and in accordance with their original terms, additional interest income would have amounted to less than $.1 million in 2003.

Allowance and Provision for Loan Losses

        The allowance for loan losses is based on management’s continuing evaluation of the quality of the loan and lease portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans and leases.

        The Corporation utilizes the methodology outlined in FDIC Statement of Policy on Allowance for Loan and Lease Losses. The starting point for this methodology is to segregate the loan portfolio into two pools, non-homogeneous (i.e., commercial) and homogeneous (i.e., consumer) loans. Each loan pool is analyzed with general allowances and specific allocations being made as appropriate. For general allowances, the previous eight quarters of loss activity are used in the estimation of losses in the current portfolio. These historical loss amounts are modified by the following qualitative factors: levels of and trends in delinquency and non-accruals; trends in volumes and terms of loans; effects of changes in lending policies; experience, ability, and depth of management; national and local economic trends and conditions; and concentrations of credit in the determination of the general allowance. The qualitative factors are updated each quarter by the gathering of information from internal, regulatory, and governmental sources. Specific allocations are made for those loans on the Watchlist in which the collateral value is less than the outstanding loan balance with the allocation being the dollar difference between the two. The Watchlist represents loans, identified and closely monitored by management, which possess certain qualities or characteristics that may lead to collection and loss issues. Allocations are not made for loans that are cash secured or for the Small Business Administration and Farm Service Agency guaranteed portion of loans.

18

        The allowance for loan losses is based on estimates, and ultimate losses will vary from current estimates. These estimates are reviewed quarterly, and as adjustments, either positive or negative, become necessary, a corresponding increase or decrease is made in the provision for loan losses. The methodology used to determine the adequacy of the allowance for loan losses is consistent with prior years.

        Although the balance of total loans increased $126 million in 2003, including $49 million associated with the Huntington branch acquisition (with an adjustment to the allowance for these loans of $.3 million), the Corporation’s overall net charge off experience relative to total average loans outstanding has declined to .17% in 2003 from .19% in 2002. Net charge offs relating to the installment loan portfolio represent approximately 92% and 95% of total net charge offs for 2003 and 2002, respectively. Generally, installment loans are charged off after they are 120 days contractually past due. The allowance allocated to the installment loan portfolio at December 31, 2003 remains more than twice the current year’s net charge offs. Additionally, based upon its periodic reevaluation of the collateral for a large commercial loan that was in non-accrual status, the Corporation determined that it was in a secure position relative to the loan balance, resulting in a $.3 million specific allocation for that loan facility being removed from the allowance.

        As a result of management’s evaluation of the loan portfolio using the factors and methodology described above, the allowance for loan losses remained stable at $6.0 million at December 31, 2003, compared to $6.1 million at December 31, 2002.

        The provision for loan losses was $.8 million for 2003, as compared to $1.5 million in 2002 and $2.9 million in 2001.

        Table 6 presents the activity in the allowance for loan losses by major loan category for the past five years. Table 7 presents management’s allocation of the allowance for loan losses by major loan category. Specific allocations in any particular category may be reallocated in the future to reflect current conditions. Accordingly, the entire allowance is considered available to absorb losses in any category.

Activity in the Allowance for Loan Losses
(In thousands)

Table 6

19

Allocation of the Allowance for Loan Losses
(In thousands)

Table 7

Investment Securities

        The Corporation’s entire security portfolio is categorized as available-for-sale. Investment securities classified as available-for-sale are held for an indefinite period of time and may be sold in response to changing market and interest rate conditions or for liquidity purposes as part of the asset/liability management strategy. Available-for-sale securities are carried at market value, with unrealized gains and losses excluded from earnings and reported as a separate component of other comprehensive income included in shareholders’ equity, net of income taxes. The Corporation does not currently follow a strategy of making security purchases with a view of near-term resales and therefore, does not own trading securities. For additional information, see Notes 1 and 3 of the Notes to Consolidated Financial Statements.

        The following sets forth the composition of the Corporation’s securities portfolio by major category as of the indicated dates (in thousands):

        Total investment securities increased only $8 million in 2003 (4%) on top of an $85 million (65%) increase in 2002. The most significant shift in asset mix in 2003 was a $63 million increase in U.S. government and agencies securities and a $34 million decrease in mortgage-backed securities. The Corporation sold a portion of its mortgage-backed securities that were exhibiting accelerated payback due to the historically low mortgage interest rates and reinvested the proceeds into fixed-term agency securities. Additionally, a portion of the $66 million received in connection with the Huntington branch acquisition was also invested into agency securities.

        The $85 million increase in 2002 was primarily the result of a leverage growth strategy program whereby the Corporation borrowed $80 million in structured borrowings from the Federal Home Loan Bank of Atlanta (“FHLB”) during the year and reinvested these funds into mortgage-backed securities at favorable spreads.

        The Corporation manages its investment portfolios utilizing policies which seek to achieve desired levels of liquidity, manage interest rate sensitivity, meet earnings objectives, and provide required collateral support for deposit activities and cash management overnight investment products. Excluding the U.S. Government sponsored agencies, the Corporation had no concentration of investment securities from any single issues that exceeded 10% of shareholders’ equity.

        Table 8 sets forth the contractual or estimated maturities of the components of the Corporation’s securities portfolio as of December 31, 2003 and the weighted average yields on a tax-equivalent basis. Certain securities that have no maturity are shown in the longest maturity category.

20

Investment Security Maturities, Yields, and Market Values at December 31, 2003
(Dollars in thousands)

Table 8