May 19, 2024

Housing Finance Development

It's Your Housing Finance Development

2022-07-25 | NDAQ:FUNC | Press Release

OAKLAND, Md., July 25, 2022 /PRNewswire/ — First United Corporation (NASDAQ: FUNC), a bank holding company and the parent company of First United Bank & Trust (the “Bank”), today announced earnings results for the three- and six-month periods ended June 30, 2022. Consolidated net income was $5.4 million for the second quarter of 2022, or $0.82 per diluted share, compared to $4.4 million, or $0.66 per diluted share, for the second quarter of 2021 and $5.7 million, or $0.86 per diluted share, for the first quarter of 2022. Year to date income was $11.1 million as of June 30, 2022, or $1.68 per diluted share, compared to $7.8 million, or $1.15 per diluted share for the same period of 2021.

According to Carissa Rodeheaver, President and CEO, “the rising interest rate environment has been the catalyst to our increasing net interest margin as we have seen rising loan yields and have maintained our deposit pricing. Income from our wealth department has declined, despite strong production, resulting from lower asset values related to the declining stock market and lower bond values. Our efficiency ratio continues to positively reflect our utilization of technology and our intense focus on expenses. We also increased our provision expense this quarter given our strong loan growth and the volatile economy. Overall, we continue to be pleased with our strong financial results and attribute that to the dedication and hard work of our employees.”

Second Quarter Financial Highlights:

  • Total assets at June 30, 2022 decreased by $7.9 million, or 0.5%, when compared to March 31, 2022 and increased by $22.6 million, or 1.3%, when compared to December 31, 2021. Significant changes during the second quarter included:
    • Cash balances decreased by $54.5 million when compared to first quarter of 2022 and $94.1 million when compared to December 31, 2021, as loan balances grew
    • Investment securities decreased $11.8 million when compared to first quarter of 2022 and increased $30.4 million when compared to December 31, 2021
    • Gross loans increased $52.2 million when compared to first quarter of 2022 and $79.9 million when compared to December 31, 2021
      • Commercial growth of $44.6 million and $80.4 million
      • Mortgage balances increased $6.6 million and $1.6 million
      • Consumer loans increased $1.0 million and decreased $2.0 million
    • Deposits decreased $23.2 million when compared to first quarter of 2022 and increased $15.0 million when compared to December 31, 2021
      • Decline in interest bearing deposits driven by reductions in time deposits and municipal money market balances
  • The ratio of the allowance for loan losses (“ALL”) to loans outstanding was 1.28% at June 30, 2022 as compared to 1.29% at March 31, 2022 and 1.38% at December 31, 2021
    • Total provision expense of $0.6 million for both the second quarters of 2022 and 2021 as compared to a credit of $0.4 million for the first quarter of 2022
    • Continued strong asset quality, stabilization of modified loans that have returned to principal and interest payments, low delinquency offset by increased qualitative factors due to the unstable economy related to interest rate increases, inflation, an uncertain supply chain
  • Consolidated net income was $5.4 million for the second quarter of 2022
    • Net interest margin, on a non-GAAP, fully tax equivalent (“FTE”) basis, was 3.52% for the second quarter of 2022 compared to 3.40% for the first quarter of 2022 and 3.15% for the second quarter of 2021
    • Core, non-interest income, on a non-GAAP basis, was stable in the second quarter of 2022 when compared to the first quarter of 2022. Comparing the second quarter of 2022 to the second quarter of 2021, core non-interest income, on a non-GAAP basis, decreased, which was driven primarily by reduced gains on sales of mortgage loans and sales of investment securities during the second quarter of 2021. These reductions were partially offset by increases in service charge income and debit card income in the second quarter of 2022
    • Core, non-interest expense, on a non-GAAP basis, remained stable when comparing the second quarter of 2022 to the first quarter of 2022. When comparing the second quarter of 2022 to the second quarter of 2021, operating expenses decreased relating to reduced salaries and benefits, professional services, telephone, and investor relations expenses offset by increases in equipment and occupancy expenses, OREO expenses and other miscellaneous expenses

Income Statement Overview

Consolidated net income was $5.4 million for the second quarter of 2022 compared to $4.4 million for the second quarter of 2021 and $5.7 million for the first quarter of 2022. Basic and diluted net income per share for the second quarter of 2022 were both $0.82, compared to basic and diluted net income per share of $0.66 for the second quarter of 2021 and $0.86 for the first quarter of 2022.

The increase in net income year over year was driven by an increase in net interest income of $1.2 million and reduced operating expenses of $0.4 million, offset by an increase in provision expense of $0.1 million, reduced other operating income, and a decrease of $0.3 million in gains from sales of mortgages. Additionally, we experienced a decrease in gains from sales of available for sale investments and recognized an expense of $0.2 million in OREO related expenses in the second quarter 2022 compared to a gain on sale of OREO of $0.2 million in the second quarter of 2021. The OREO expenses were attributable to one development project as we continue to work with the participation group to market and sell the commercial parcels.

Compared to the linked quarter of 2022, net interest income increased by $0.6 million. This increase was offset by a $0.6 million provision for loan loss in the second quarter compared to a $0.4 million credit in the first quarter. The increase in provision expense was due primarily to loan growth and changes in qualitative factors applied to the allowance for loan loss calculation during the second quarter of 2022, particularly related to the current economic outlook.

Year to date income for the first six months of 2022 was $11.1 million compared to $7.8 million for the same period in 2021. The year over year increase was primarily driven by a $2.3 million increase in net interest income; of which, $1.9 million resulted from the decrease in interest expense as costs of funds fell by approximately 55%. Additionally, comparative year-to-date income increased due to the $3.3 million in litigation settlement expense recognized in 2021.

Net Interest Income and Net Interest Margin

Net interest income, on a non-GAAP, FTE basis, increased by $1.2 million for the second quarter 2022 when compared to the second quarter of 2021. This increase was driven by an increase of $0.3 million in interest income related to an overall increase of 15 basis points on interest earning assets despite a decline in average balances of $33.8 million. Interest income on loans decreased $0.2 million due primarily to a reduction of fees related to Paycheck Protection Program loan forgiveness recognized during 2021. Investment income increased $0.6 million due to an increase in average balances related to the deployment of excess cash balances to purchase investment securities late in the fourth quarter of 2021 and early in the first quarter of 2022. The reduction of $1.1 million in interest expense resulted from the lowering of deposit rates throughout 2021, the decline of $73.3 million of average balances in the higher cost CD portfolio and the prepayment of $70.0 million of Federal Home Loan Bank (“FHLB”) advances in 2021. The net interest margin for the second quarter of 2022 was 3.52%, compared to 3.15% for the second quarter of 2021.

Comparing the second quarter of 2022 to the first quarter of 2022, net interest income, on a non-GAAP, FTE basis, increased by $0.6 million. This increase was driven by a $0.6 million increase in interest income, resulting in an increase in the yield on earning assets of 11 basis points while maintaining stable average balances. Interest income on loans increased $0.4 million related to an increase in average balances of $31.8 million, driven by strong commercial loan growth. Interest expense remained stable while average balances declined $4.4 million when comparing the second quarter of 2022 to the first quarter of 2022. Comparing the second quarter of 2022 to the first quarter of 2022, net interest margin increased to 3.52% for the second quarter compared to 3.40% in the first quarter.

Comparing the six months ended June 30, 2022 to the six months ended June 30, 2021, net interest income, on a non-GAAP, FTE basis, increased by $2.3 million. Interest income increased by $0.4 million and interest expense decreased by $1.9 million. 2021 interest income included $2.0 in fees related to PPP loan forgiveness recognized during the first half of 2021. The yield on earning assets increased 10 basis points to 3.66% in 2022 compared to 3.56% in 2021 in correlation with the rising interest rate environment and new loans booked at higher rates. Interest expense on deposits decreased $1.3 million while the average balances decreased $10.2 million and interest on long-term borrowings decreased $0.7 million relating to the prepayment of $70.0 million of FHLB advances in the third quarter of 2021. The decreased interest expense resulted in an overall decrease of 32 basis points on interest bearing liabilities. To date, we have not experienced significant pressure on deposit pricing, but we expect to experience increasing rates the remainder of this year given the recent moves by the Federal Reserve. The net interest margin for the six months ended June 30, 2022 was 3.46% compared to 3.13% for the six months ended June 30, 2021.

Non-Interest Income

Other operating income, including gains, for the second quarter of 2022 decreased by approximately $0.3 million when compared with the same period of 2021. Gains on sales of mortgage loans decreased by approximately $0.3 million related to the diminished refinance activity due to the rising interest rate environment and management’s strategic decision to book new mortgage loans at higher rates to our in-house portfolio. Net gains on sales of investments decreased by approximately $0.2 million, which was partially offset by the increase of service charges on deposit accounts by approximately $0.1 million.

On a linked quarter basis, other operating income remained stable. Slight increases in service charges and brokerage commissions were offset by decreases in gains on sales of residential mortgage loans and other miscellaneous income.

Non-interest income for the six months ended June 30, 2022 decreased by approximately $0.8 million when compared to the same period of 2021. This decrease was primarily due to the decrease in net gains on sales of residential mortgage loans of $0.8 million as refinance activity has slowed considerably in correlation with rising mortgage interest rates and due to management’s strategic decision to book new mortgage loans at higher rates to our in-house portfolio.

Non-Interest Expense

Core operating expenses decreased by $0.4 million when comparing the second quarter of 2022 to the second quarter of 2021. This decrease was driven by a decrease in legal and professional fees of approximately $0.9 million and investor relations expense of approximately $0.2 million, which were partially offset by an increase in salaries and employee benefits of approximately $0.3 million and net OREO expenses of approximately $0.4 million. The increase in OREO expenses was driven by expenses attributable to one development project as we continue to work with the participation group to market and sell the commercial parcels and gains on sales of properties in 2021 that resulted in a net credit.

Comparing the second quarter of 2022 to the linked first quarter of 2022, operating expenses remained stable. Salaries and employee benefits decreased by approximately $0.2 million primarily due to a larger portion of salaries being recorded as deferred loan fees resulting from increased loan production during the second quarter of 2022. This decrease was offset by increases in OREO expenses of $0.1 million and miscellaneous expenses of $0.1 million.

For the six months ended June 30, 2022, non-interest expenses decreased by $2.3 million in 2022 compared to the six months ended June 30, 2021. This decrease was attributable to the one-time litigation settlement expense of $3.3 million, and $1.2 million in legal expenses that were recognized in 2021 along with a $0.2 million reduction in telephone expense and a $0.2 million decline in investor relations costs. These decreases were partially offset by year-over-year increases in salaries and employee benefits of $1.2 million, which is partially related to the reduction of employee wages associated with deferred loan costs and increases of $0.3 million in equipment expenses, $0.9 million in OREO expenses and $0.2 million in miscellaneous other expenses.

The effective income tax rates as a percentage of income for the six months ended June 30, 2022 and June 30, 2021 were 24.5% and 25.2%, respectively. The reduced tax rate for the six months ended June 30, 2022 when compared to the six months ended June 30, 2021 was related to an increased benefit at the holding company related to the fair value costs associated with the executive long term incentive plan payouts, and state tax treatment of the litigation settlement expenses. The new low-income housing tax credit investment in 2021 is expected to begin generating tax credits in 2022 and should provide increased tax credits beginning in 2023 and beyond for the term of the tax credit.

Balance Sheet Overview

Total assets at June 30, 2022 were $1.8 billion, representing a $7.9 million decrease since March 31, 2022 and a $22.6 million increase since December 31, 2021. During the second quarter of 2022, cash and interest-bearing deposits in other banks decreased by $54.5 million, the investment portfolio decreased by $11.8 million and gross loans increased by $52.2 million. Other assets including deferred taxes, premises and equipment and accrued interest receivable also increased collectively by $6.6 million.

Total liabilities at June 30, 2022 were $1.6 billion, representing a $3.7 million decrease since March 31, 2022 and a $31.6 million increase since December 31, 2021. Total deposits decreased by $23.2 million since March 31, 2022 and increased by $15.0 million since December 31, 2021. The decline in deposits during the second quarter is primarily attributable to reduced money market balances associated with one local municipality. Short term borrowings increased $12.2 million since December 31, 2021, driven by $18.9 million in overnight borrowings, which were offset by a decrease in other short-term borrowings of $7.9 million during the quarter. The increase in overnight borrowings at June 30, 2022 was primarily driven by the strong loan growth coupled with the decline in deposit balances during the second quarter and the timing difference associated with an expected loan pay-off. Management plans to bring approximately $50.0 million in trust department money market accounts which had been placed off-balance sheet in 2021, back on-balance sheet in the third quarter.

Outstanding gross loans of $1.2 billion at June 30, 2022 reflected growth of $79.9 million for the first six months of 2022 and growth of $52.2 million for the second quarter of 2022. Since December 31, 2021, commercial real estate loans increased by $47.7 million, acquisition and development loans decreased by $12.0 million and commercial and industrial loans increased by $44.6 million year-to-date. The growth in the commercial real estate and commercial and industrial portfolios is a result of expansion of relationships with existing clients as well as new commercial clients. Residential mortgage loans increased $1.6 million related to the diminished refinance activity due to the rising interest rate environment and management’s strategic decision to book new mortgage loans at higher rates to our in-house portfolio. The consumer loan portfolio decreased by $2.0 million due to amortization of the existing portfolio offsetting new production.

New commercial loan production for the three months ended June 30, 2022 was approximately $103.4 million. At June 30, 2022, unfunded, committed commercial construction loans totaled approximately $34.9 million. Commercial amortization and payoffs were approximately $47.7 million through June 30, 2022.

New consumer mortgage loan production for the second quarter of 2022 was approximately $15.1 million with most of this production being comprised of in-house mortgages. The pipeline in-house, portfolio loans as of June 30, 2022 consisted of $13.5 million. Production levels have slowed for residential mortgages as compared to the second quarter of 2021 because of the increasing interest rates for the first six months of 2022.

Total deposits at June 30, 2022 increased $15.0 million when compared to deposits at December 31, 2021. Non-interest-bearing deposits increased $26.1 million primarily related to the new commercial business gained during 2022. Interest bearing demand deposits increased $71.4 million. Traditional savings accounts increased $15.6 million. Money market balances decreased $69.8 million driven by one local municipality opting to move their funds to a state-sponsored deposit account that offers a higher yield as well as a movement of balances to the trust department for higher rates, while maintaining the customer relationship. Time deposits decreased $28.3 million related to maturing time deposits moving into other deposit products.

Book value per share of the Company’s common stock was $19.97 at June 30, 2022, compared to $20.65 per share at March 31, 2022. At June 30, 2022, there were 6,656,395 of basic outstanding shares and 6,666,790 of diluted outstanding shares of common stock. The decrease in the book value at June 30, 2022 was due to the decline in common equity driven by the increase in accumulated other comprehensive loss from March to June as well as the increase in outstanding shares of common stock related to the director grant issued in the second quarter of 2022.

Asset Quality

The ALL decreased to $15.7 million at June 30, 2022 compared to $16.0 million at December 31, 2021. The provision for loan losses was an expense of $0.6 million for the quarter ended June 30, 2022 compared to an expense of $0.6 million for the quarter ended June 30, 2021. The expense to provision expense recorded in the second quarter of 2022 was attributable primarily to loan portfolio growth during the quarter and changes in the qualitative factors, particularly related to the current economic outlook. Net charge-offs of $179,000 were recorded for the quarter ended June 30, 2022, compared to net charge offs of $67,000 for 2021. The ratio of the ALL to loans outstanding was 1.28% at June 30, 2022, compared to 1.29% at March 31, 2022 and 1.38% at December 31, 2021.

The ratio of year-to-date net charge offs to average loans for the six months ending June 30, 2022 was an annualized 0.07%, compared to net charge offs to average loans of 0.01% for 2021. Details of the ratio, by loan type are shown below. Our special assets team continues to effectively collect on charged-off loans, resulting in ongoing overall low net charge-off ratios.

Ratio of Net Recoveries/ (Charge Offs) to Average Loans

06/30/2022

06/30/2021

Loan Type

(Charge Off) / Recovery

(Charge Off) / Recovery

Commercial Real Estate

0.00 %

0.00 %

Acquisition & Development

0.03 %

0.05 %

Commercial & Industrial

(0.04 %)

0.03 %

Residential Mortgage

0.03 %

(0.03 %)

Consumer

(1.45 %)

(0.42 %)

Total Net Charge Offs

(0.07 %)

(0.01 %)

Non-accrual loans totaled $2.1 million at June 30, 2022 compared to $2.5 million at December 31, 2021. The decrease in non-accrual balances at June 30, 2022 was primarily related to $0.2 million of principal pay-downs of residential mortgage and home equity loans.

Non-accrual loans that have been subject to partial charge-offs totaled $1.3 million at June 30, 2022 and $0.5 million at December 31, 2021. Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $0.1 million at June 30, 2022 and $0.2 million at December 31, 2021. As a percentage of the loan portfolio, accruing loans past due 30 days or more increased to 0.37% compared to 0.19% at March 31, 2022 and 0.31% as of December 31, 2022.

ABOUT FIRST UNITED CORPORATION

First United Corporation is the parent company of First United Bank & Trust, a Maryland trust company with commercial banking powers, and two statutory trusts that were used as financing vehicles. The Bank has four wholly-owned subsidiaries: OakFirst Loan Center, Inc., a West Virginia finance company; OakFirst Loan Center, LLC, a Maryland finance company; First OREO Trust, a Maryland statutory trust that holds and services real estate acquired by the Bank through foreclosure or by deed in lieu of foreclosure; and FUBT OREO I, LLC, a Maryland company that likewise holds and services real estate acquired by the Bank through foreclosure or by deed in lieu of foreclosure. The Bank also owns 99.9% of the limited partnership interests in Liberty Mews Limited Partnership, a Maryland limited partnership, and a 99.9% non-voting interest in MCC FUBT Fund, LLC, an Ohio limited liability company, both of which were formed for the purpose of acquiring, developing and operating low-income housing units. The Corporation’s website is www.mybank.com.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not represent historical facts, but are statements about management’s beliefs, plans and objectives about the future, as well as its assumptions and judgments concerning such beliefs, plans and objectives. These statements are evidenced by terms such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. The beliefs, plans and objectives on which forward-looking statements are based involve risks and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports that First United Corporation files with the Securities and Exchange Commission entitled “Risk Factors”. In addition, investors should understand that the Corporation is required under generally accepted accounting principles to evaluate subsequent events through the filing of the consolidated financial statements included in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 and the impact that any such events have on our critical accounting assumptions and estimates made as of June 30, 2022, which could require us to make adjustments to the amounts reflected in this press release.

FIRST UNITED CORPORATION

Oakland, MD

Stock Symbol : FUNC

Financial Highlights – Unaudited

(Dollars in thousands, except per share data)

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

2022

2021

2022

2021

Results of Operations:

Interest income

$ 14,731

$ 14,436

$ 28,878

$ 28,498

Interest expense

760

1,673

1,566

3,499

Net interest income

13,971

12,763

27,312

24,999

Provision for loan losses

624

555

205

665

Other operating income

4,413

4,321

8,795

8,659

Net gains

13

442

65

1,030

Other operating expense

10,637

11,032

21,215

23,555

Income before taxes

$ 7,136

$ 5,939

$ 14,752

$ 10,468

Income tax expense

1,708

1,536

3,609

2,635

Net income

$ 5,428

$ 4,403

$ 11,143

$ 7,833

Per share data:

Basic net income per share

$ 0.82

$ 0.66

$ 1.68

$ 1.15

Diluted net income per share

$ 0.82

$ 0.66

$ 1.68

$ 1.15

Adjusted basic/diluted net income (1)

$ 0.82

$ 0.66

$ 1.68

$ 1.52

Dividends declared per share

$ 0.15

$ 0.15

$ 0.30

$ 0.30

Book value

$ 19.97

$ 19.74

Diluted book value

$ 19.93

$ 19.72

Tangible book value per share

$ 18.17

$ 18.07

Diluted Tangible book value per share

$ 18.14

$ 18.05

Closing market value

$ 18.76

$ 17.43

Market Range:

High

$ 23.80

$ 19.42

Low

$ 17.50

$ 16.35

Shares outstanding at period end: Basic

6,656,395

6,614,604

Shares outstanding at period end: Diluted

6,666,790

6,621,677

Performance ratios: (Year to Date Period End, annualized)

Return on average assets

1.26 %

0.88 %

Adjusted return on average assets (1)

1.26 %

1.18 %

Return on average shareholders’ equity

16.25 %

12.21 %

Adjusted return on average shareholders’ equity (1)

16.25 %

15.98 %

Net interest margin (Non-GAAP), includes tax exempt income of $444 and $429

3.46 %

3.13 %

Net interest margin GAAP

3.40 %

3.07 %

Efficiency ratio – non-GAAP (2)

57.11 %

67.69 %

(1) See reconcilation of this non-GAAP financial measure provided elsewhere herein.

(2) Efficiency ratio is a non-GAAP measure calculated by dividing total operating expenses by the sum of tax equivalent net interest income and other operating income, less gains/(losses) on sales of securities and/or fixed assets.

June 30,

December 31

2022

2021

Financial Condition at period end:

Assets

$ 1,752,455

$ 1,729,838

Earning assets

$ 1,608,094

$ 1,504,300

Gross loans

$ 1,233,613

$ 1,153,687

Commercial Real Estate

$ 421,942

$ 374,291

Acquisition and Development

$ 116,115

$ 128,077

Commercial and Industrial

$ 225,640

$ 180,977

Residential Mortgage

$ 406,293

$ 404,685

Consumer

$ 63,623

$ 65,657

Investment securities

$ 373,455

$ 343,030

Total deposits

$ 1,484,354

$ 1,469,374

Noninterest bearing

$ 527,761

$ 501,627

Interest bearing

$ 956,593

$ 967,747

Shareholders’ equity

$ 132,892

$ 141,900

Capital ratios:

Tier 1 to risk weighted assets

14.31 %

14.64 %

Common Equity Tier 1 to risk weighted assets

12.27 %

12.50 %

Tier 1 Leverage

11.23 %

10.80 %

Total risk based capital

15.46 %

15.89 %

Asset quality:

Net charge-offs for the quarter

$ (179)

$ (67)

Nonperforming assets: (Period End)

Nonaccrual loans

$ 2,149

$ 2,462

Loans 90 days past due and accruing

325

300

Total nonperforming loans and 90 day past due

$ 2,474

$ 2,762

Restructured loans

$ 3,226

$ 3,297

Other real estate owned

$ 4,517

$ 4,477

Allowance for loan losses to gross loans

1.28 %

1.38 %

Allowance for loan losses to gross loans, excluding PPP loans

1.28 %

1.39 %

Allowance for loan losses to non-accrual loans

732.29 %

648.05 %

Allowance for loan losses to non-performing assets

225.10 %

220.40 %

Non-performing and 90 day past due loans to total loans

0.20 %

0.24 %

Non-performing loans and 90 day past due loans to total assets

0.14 %

0.16 %

Non-accrual loans to total loans

0.17 %

0.21 %

Non-performing assets to total assets

0.40 %

0.42 %

FIRST UNITED CORPORATION

Oakland, MD

Stock Symbol : FUNC

Financial Highlights – Unaudited

Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

March 31,

(Dollars in thousands, except per share data)

2022

2022

2021

2021

2021

2021

Results of Operations:

Interest income

$ 14,731

$ 14,147

14,848

14,910

14,436

14,062

Interest expense

760

806

930

1,285

1,673

1,826

Net interest income

13,971

13,341

13,918

13,625

12,763

12,236

Provision for loan losses

624

(419)

(885)

(597)

555

110

Other operating income

4,413

4,382

6,337

4,523

4,321

4,338

Net gains

13

52

83

82

442

588

Other operating expense

10,637

10,578

11,182

13,027

11,032

12,523

Income before taxes

$ 7,136

$ 7,616

$ 10,041

$ 5,800

$ 5,939

$ 4,529

Income tax expense

1,708

1,901

2,492

1,412

1,536

1,099

Net income

$ 5,428

$ 5,715

$ 7,549

$ 4,388

$ 4,403

$ 3,430

Per share data:

Basic net income per share

$ 0.82

$ 0.86

$ 1.14

$ 0.66

$ 0.66

$ 0.49

Diluted net income per share

$ 0.82

$ 0.86

$ 1.14

$ 0.66

$ 0.66

$ 0.49

Adjusted basic/diluted net income (1)

$ 0.82

$ 0.86

$ 1.10

$ 0.93

$ 0.66

$ 0.86

Dividends declared per share

$ 0.15

$ 0.15

$ 0.15

$ 0.15

$ 0.15

$ 0.15

Book value

$ 19.97

$ 20.65

$ 21.43

$ 20.22

$ 19.74

$ 18.46

Diluted book value

$ 19.93

$ 20.63

$ 21.41

$ 20.19

$ 19.72

$ 18.45

Tangible book value per share

$ 18.17

$ 18.83

$ 19.61

$ 18.55

$ 18.07

$ 16.89

Diluted Tangible book value per share

$ 18.14

$ 18.82

$ 19.59

$ 18.53

$ 18.05

$ 16.88

Closing market value

$ 18.76

$ 22.53

$ 18.76

$ 18.60

$ 17.43

$ 17.62

Market Range:

High

$ 23.80

$ 24.50

$ 20.50

$ 19.45

$ 19.42

$ 20.05

Low

$ 17.50

$ 18.81

$ 17.86

$ 16.26

$ 16.35

$ 15.30

Shares outstanding at period end: Basic

6,656,395

6,637,979

6,620,955

6,617,941

6,614,604

6,998,617

Shares outstanding at period end: Diluted

6,666,790

6,649,604

6,628,028

6,625,014

6,621,677

7,001,997

Performance ratios: (Year to Date Period End, annualized)

Return on average assets

1.26 %

1.31 %

1.12 %

0.92 %

0.88 %

0.79 %

Adjusted return on average assets (1)

1.26 %

1.31 %

1.36 %

1.25 %

1.18 %

1.38 %

Return on average shareholders’ equity

16.25 %

16.49 %

14.92 %

12.45 %

12.21 %

10.58 %

Adjusted return on average shareholders’ equity (1)

16.25 %

16.49 %

17.82 %

16.72 %

15.98 %

18.36 %

Net interest margin (Non-GAAP), includes tax exempt income of $241 and $239

3.46 %

3.40 %

3.28 %

3.21 %

3.13 %

3.11 %

Net interest margin GAAP

3.40 %

3.34 %

3.22 %

3.16 %

3.07 %

3.05 %

Efficiency ratio – non-GAAP (2)

57.11 %

58.81 %

52.94 %

57.57 %

62.72 %

53.00 %

(1) See reconcilation of this non-GAAP financial measure provided elsewhere herein.

(2) Efficiency ratio is a non-GAAP measure calculated by dividing total operating expenses by the sum of tax equivalent net interest income and other operating income, less gains/(losses) on sales of securities and/or fixed assets.

June 30,

March 31,

December 31,

September 30,

June 30,

March 31,

2022

2022

2021

2021

2021

2021

Financial Condition at period end:

Assets

$ 1,752,455

$ 1,760,325

$ 1,729,838

$ 1,708,556

$ 1,763,806

$ 1,781,833

Earning assets

$ 1,608,094

$ 1,572,737

$ 1,504,300

$ 1,466,664

$ 1,461,613

$ 1,481,045

Gross loans

$ 1,233,613

$ 1,181,401

$ 1,153,687

$ 1,161,868

$ 1,145,343

$ 1,199,325

Commercial Real Estate

$ 421,942

$ 391,136

$ 374,291

$ 371,785

$ 361,941

$ 365,731

Acquisition and Development

$ 116,115

$ 133,031

$ 128,077

$ 132,256

$ 131,630

$ 123,625

Commercial and Industrial

$ 225,640

$ 194,914

$ 180,977

$ 195,758

$ 229,852

$ 299,178

Residential Mortgage

$ 406,293

$ 399,704

$ 404,685

$ 405,885

$ 364,408

$ 374,327

Consumer

$ 63,623

$ 62,616

$ 65,657

$ 56,184

$ 57,512

$ 36,464

Investment securities

$ 373,455

$ 385,265

$ 343,030

$ 297,543

$ 307,696

$ 273,363

Total deposits

$ 1,484,354

$ 1,507,555

$ 1,469,374

$ 1,444,494

$ 1,456,111

$ 1,468,263

Noninterest bearing

$ 527,761

$ 530,901

$ 501,627

$ 491,441

$ 497,736

$ 485,311

Interest bearing

$ 956,593

$ 976,654

$ 967,747

$ 953,053

$ 958,375

$ 982,952

Shareholders’ equity

$ 132,892

$ 137,038

$ 141,900

$ 133,787

$ 130,556

$ 129,189

Capital ratios:

Tier 1 to risk weighted assets

14.31 %

14.55 %

14.64 %

14.26 %

14.55 %

14.99 %

Common Equity Tier 1 to risk weighted assets

12.27 %

12.45 %

12.50 %

12.15 %

12.37 %

12.76 %

Tier 1 Leverage

11.23 %

10.94 %

10.80 %

10.33 %

9.94 %

10.22 %

Total risk based capital

15.46 %

15.71 %

15.89 %

15.51 %

15.80 %

16.24 %

Asset quality:

Net (charge-offs)/recoveries for the quarter

$ (179)

$ (244)

$ (67)

$ 435

$ (41)

$ (42)

Nonperforming assets: (Period End)

Nonaccrual loans

$ 2,149

$ 2,332

$ 2,462

$ 7,441

$ 7,285

$ 7,891

Loans 90 days past due and accruing

325

37

300

189

$ 273

6

0

0

0

Total nonperforming loans and 90 day past due

$ 2,474

$ 2,369

$ 2,762

$ 7,630

$ 7,558

$ 7,897

Restructured loans

$ 3,226

$ 3,228

$ 3,297

$ 3,759

$ 3,825

$ 3,892

Other real estate owned

$ 4,517

$ 4,477

$ 4,477

$ 6,663

$ 6,756

$ 7,533

Allowance for loan losses to gross loans

1.28 %

1.29 %

1.38 %

1.46 %

1.49 %

1.38 %

Allowance for loan losses to gross loans, excluding PPP loans

1.28 %

1.30 %

1.39 %

1.50 %

1.60 %

1.57 %

Allowance for loan losses to non-accrual loans

732.29 %

655.75 %

648.05 %

227.20 %

234.29 %

209.78 %

Allowance for loan losses to non-performing assets

225.10 %

223.37 %

220.40 %

118.28 %

119.24 %

107.28 %

Non-performing and 90 day past due loans to total loans

0.20 %

0.20 %

0.24 %

0.66 %

0.66 %

0.66 %

Non-performing loans and 90 day past due loans to total assets

0.14 %

0.13 %

0.16 %

0.45 %

0.43 %

0.44 %

Non-accrual loans to total loans

0.17 %

0.20 %

0.21 %

0.64 %

0.64 %

0.66 %

Non-performing assets to total assets

0.40 %

0.39 %

0.42 %

0.84 %

0.81 %

0.87 %

Consolidated Statement of Condition

(Dollars in thousands – Unaudited)

June 30, 2022

March 31, 2022

December 31,

2021

Assets

Cash and due from banks

$

20,108

$

71,211

$

109,823

Interest bearing deposits in banks

1,543

4,905

5,897

Cash and cash equivalents

21,651

76,116

115,720

Investment securities – available for sale (at fair value)

132,867

143,609

286,771

Investment securities – held to maturity (at cost)

240,588

241,656

56,259

Restricted investment in bank stock, at cost

1,026

1,026

1,029

Loans held for sale

140

67

Loans

1,233,613

1,181,401

1,153,687

Unearned fees

(104)

(107)

(292)

Allowance for loan losses

(15,737)

(15,292)

(15,955)

Net loans

1,217,772

1,166,002

1,137,440

Premises and equipment, net

35,305

34,001

34,697

Goodwill and other intangible assets

11,947

12,000

12,052

Bank owned life insurance

45,739

45,442

45,150

Deferred tax assets

13,653

10,361

6,857

Other real estate owned, net

4,517

4,477

4,477

Operating lease asset

2,075

2,161

2,247

Accrued interest receivable and other assets

25,315

23,334

27,072

Total Assets

$

1,752,455

$

1,760,325

$

1,729,838

Liabilities and Shareholders’ Equity

Liabilities:

Non-interest bearing deposits

$

527,761

$

530,901

$

501,627

Interest bearing deposits

956,593

976,654

967,747

Total deposits

1,484,354

1,507,555

1,469,374

Short-term borrowings

69,914

58,902

57,699

Long-term borrowings

30,929

30,929

30,929

Operating lease liability

2,570

2,666

2,761

Accrued interest payable and other liabilities

30,798

22,200

26,182

Dividends payable

998

995

993

Total Liabilities

1,619,563

1,623,247

1,587,938

Shareholders’ Equity:

Common Stock – par value $0.01 per share; Authorized 25,000,000 shares;

issued and outstanding 6,656,395 shares at June 30, 2022 and 6,620,955 at

December 31, 2021

67

66

66

Surplus

24,105

23,712

23,661

Retained earnings

154,636

150,207

145,487

Accumulated other comprehensive loss

(45,916)

(36,907)

(27,314)

Total Shareholders’ Equity

132,892

137,078

141,900

Total Liabilities and Shareholders’ Equity

$

1,752,455

$

1,760,325

$

1,729,838

Historical Income Statement

Three Months Ended

2022

2021

Q2

Q1

Q4

Q3

Q2

Q1

In thousands

(Unaudited)

Interest income

Interest and fees on loans

$

12,861

$

12,432

$

13,456

$

13,667

$

13,097

$

12,732

Interest on investment securities

Taxable

1,540

1,406

1,048

880

994

990

Exempt from federal income tax

279

282

268

266

268

275

Total investment income

1,819

1,688

1,316

1,146

1,262

1,265

Other

51

27

76

97

77

65

Total interest income

14,731

14,147

14,848

14,910

14,436

14,062

Interest expense

Interest on deposits

401

475

596

732

999

1,146

Interest on short-term borrowings

21

18

19

17

26

24

Interest on long-term borrowings

338

313

315

536

648

656

Total interest expense

760

806

930

1,285

1,673

1,826

Net interest income

13,971

13,341

13,918

13,625

12,763

12,236

Provision for loan losses

624

(419)

(885)

(597)

555

110

Net interest income after provision for

loan losses

13,347

13,760

14,803

14,222

12,208

12,126

Other operating income

Net gains on investments, available for sale

3

154

Losses on equity investment

(35)

(54)

Gains on sale of residential mortgage loans

7

21

119

136

272

588

Gains/(losses) on disposal of fixed assets

6

28

(1)

16

Net gains

13

52

83

82

442

588

Other Income

Service charges on deposit accounts

463

465

479

475

412

405

Other service charges

232

213

245

232

221

211

Trust department

2,044

2,189

2,209

2,166

2,034

2,241

Debit card income

983

886

1,021

900

913

810

Bank owned life insurance

297

292

299

298

293

286

Brokerage commissions

313

220

228

229

357

268

Insurance reimbursement

1,375

Other

81

117

481

223

91

117

Total other income

4,413

4,382

6,337

4,523

4,321

4,338

Total other operating income

4,426

4,434

6,420

4,605

4,763

4,926

Other operating expenses

Salaries and employee benefits

5,793

5,968

5,847

5,719

5,507

4,988

FDIC premiums

155

174

197

209

183

183

Equipment

1,029

1,044

1,061

1,032

954

851

Occupancy

711

727

673

684

693

725

Data processing

805

821

784

819

875

726

Marketing

151

106

127

129

133

146

Professional services

564

520

656

615

1,491

766

Contract labor

158

165

152

153

185

148

Telephone

139

114

131

123

268

215

Other real estate owned

152

95

(485)

150

(198)

(412)

Investor relations

123

96

130

116

306

124

Settlement expense

3,300

FHLB prepayment penalty

2,368

Contributions

42

21

1,115

55

27

23

Other

815

727

794

855

608

740

Total other operating expenses

10,637

10,578

11,182

13,027

11,032

12,523

Income before income tax expense

7,136

7,616

10,041

5,800

5,939

4,529

Provision for income tax expense

1,708

1,901

2,492

1,412

1,536

1,099

Net Income

$

5,428

$

5,715

$

7,549

$

4,388

$

4,403

$

3,430

Basic net income per common share

$

0.82

$

0.86

$

1.14

$

0.66

$

0.66

$

0.49

Diluted net income per common share

$

0.82

$

0.86

$

1.14

$

0.66

$

0.66

$

0.49

Weighted average number of basic shares

outstanding

6,650

6,628

6,620

6,617

6,609

6,996

Weighted average number of diluted shares

outstanding

6,661

6,636

6,627

6,624

6,615

7,000

Dividends declared per common share

$

0.15

$

0.15

$

0.15

$

0.15

$

0.15

$

0.15

Non-GAAP Financial Measures (unaudited)

Reconciliation of as reported (GAAP) and non-GAAP financial measures

The following tables below provide a reconciliation of certain financial measures calculated under generally accepted accounting principles (“GAAP”) (as reported) and non-GAAP. A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed in the most directly comparable measure calculated and presented in accordance with GAAP in the United States. The Company’s management believes the presentation of non-GAAP financial measures provide investors with a greater understanding of the Company’s operating results in addition to the results measured in accordance with GAAP. While management uses these non-GAAP measures in its analysis of the Company’s performance, this information should not be viewed as a substitute for financial results determined in accordance with GAAP or considered to be more important than financial results determined in accordance with GAAP.

The following non-GAAP financial measures for 2021 results exclude settlement charges associated with the settlement with Driver Management, FHLB penalty expense, insurance reimbursement and contributions for each period indicated below.

Three months ended

June 30,

2022

March 31,

2022

December

31, 2021

September

30, 2021

June 30,

2021

March 31,

2021

(in thousands, except for per share amount)

Net income – as reported

$

5,428

$

5,715

$

7,549

$

4,388

$

4,403

$

3,430

Adjustments:

Settlement Expense

3,300

FHLB Penalty

2,368

Insurance Reimbursement

(1,375)

Foundation Contribution

1,000

Income tax effect of adjustments

86

(578)

(735)

Adjusted net income (non-GAAP)

$

5,428

$

5,715

$

7,260

$

6,178

$

4,403

$

5,995

Basic and Diluted earnings per share – as reported

$

0.82

$

0.86

$

1.14

$

0.66

$

0.66

$

0.49

Adjustments:

Settlement Expense

0.47

FHLB Penalty

0.35

Insurance Reimbursement

(0.20)

Foundation Contribution

0.15

Income tax effect of adjustments

0.01

(0.08)

(0.10)

Adjusted basic and diluted earnings per share (non-

GAAP)

$

0.82

$

0.86

$

1.10

$

0.93

$

0.66

$

0.86

As of or for the three month period ended

(in thousands, except per share data)

June 30,

2022

March 31,

2022

December

31, 2021

September

30, 2021

June 30,

2021

March 31,

2021

Per Share Data

Basic net income per share (1) – as reported

$

0.82

$

0.86

$

$1.14

$

0.66

$

0.66

$

0.49

Basic net income per share (1) – non-GAAP

$

0.82

$

0.86

$

$1.10

$

0.93

$

0.66

$

0.86

Diluted net income per share (1) – as reported

$

0.82

$

0.86

$

$1.14

$

0.66

$

0.66

$

0.49

Diluted net income per share (1) – non-GAAP

$

0.82

$

0.86

$

$1.10

$

0.93

$

0.66

$

0.86

Basic book value per share

$

19.97

$

20.65

$

$21.43

$

20.22

$

19.74

$

18.46

Diluted book value per share

$

19.93

$

20.63

$

$21.41

$

20.19

$

19.72

$

18.45

Significant Ratios:

Return on Average Assets (1) – as reported

1.26 %

1.31 %

1.12 %

0.92 %

0.88 %

0.79 %

Settlement, FHLB and contribution expenses, and

insurance reimbursement income, net of income tax

effect

0.23 %

0.33 %

0.30 %

0.59 %

Adjusted Return on Average Assets (1) (non-GAAP)

1.26 %

1.31 %

1.35 %

1.25 %

1.18 %

1.38 %

Return on Average Equity (1) – as reported

16.25 %

16.49 %

14.92 %

12.45 %

12.21 %

10.58 %

Settlement, FHLB and contribution expenses, and

insurance reimbursement income, net of income tax

effect

2.90 %

4.43 %

3.77 %

7.78 %

Adjusted Return on Average Equity (1) (non-GAAP)

16.25 %

16.49 %

17.82 %

16.88 %

15.98 %

18.36 %

Efficiency Ratio – non-GAAP

Non-interest expense

$

10,637

$

10,578

$

11,182

$

13,027

$

11,032

$

12,523

Less: non-GAAP adjustments:

Foundation Contribution

(1,000)

Settlement expense

(3,300)

FHLB Penalty

(2,368)

Non-interest expense – as adjusted

$

10,637

$

10,578

$

10,182

$

10,659

$

11,032

$

9,223

Net interest income plus non-interest income

$

18,397

$

17,775

$

20,338

$

18,230

$

17,526

$

17,162

Plus: non-GAAP adjustments:

Tax-equivalent income

236

242

233

232

233

239

Less non-GAAP adjustment:

Insurance reimbursement

(1,375)

Fixed asset (gains)/losses

1

(16)

Investment securities (gains)/losses

(6)

(31)

35

54

(154)

Net interest income plus non-interest income – as adjusted

$

18,627

$

17,986

$

19,232

$

18,516

$

17,589

$

17,401

Efficiency Ratio (1)

57.11 %

58.81 %

52.94 %

57.57 %

62.72 %

53.00 %

(1) See reconcilation of this non-GAAP financial measure provided elsewhere herein.

Three Months Ended

June 30,

2022

2021

(dollars in thousands)

Average

Balance

Interest

Average

Yield/Rate

Average

Balance

Interest

Average

Yield/Rate

Assets

Loans

$

1,200,651

$

12,876

4.30

%

$

1,173,007

$

13,119

4.49

%

Investment Securities:

Taxable

350,602

1,540

1.76

%

273,196

994

1.46

%

Non taxable

26,879

500

7.46

%

25,325

480

7.60

%

Total

377,481

2,040

2.17

%

298,521

1,474

1.98

%

Federal funds sold

36,151

39

0.43

%

174,346

39

0.09

%

Interest-bearing deposits with other banks

3,728

4

0.43

%

3,288

0.00

%

Other interest earning assets

1,026

8

3.13

%

3,654

38

4.17

%

Total earning assets

1,619,037

14,967

3.71

%

1,652,816

14,670

3.56

%

Allowance for loan losses

(15,221)

(16,758)

Non-earning assets

166,785

147,763

Total Assets

$

1,770,601

$

1,783,821

Liabilities and Shareholders’ Equity

Interest-bearing demand deposits

$

298,571

$

93

0.12

%

$

214,310

$

172

0.33

%

Interest-bearing money markets

282,083

74

0.11

%

328,100

170

0.14

%

Savings deposits

251,187

18

0.03

%

221,614

25

0.04

%

Time deposits

142,013

216

0.61

%

215,349

779

1.29

%

Short-term borrowings

60,727

21

0.14

%

51,035

24

0.20

%

Long-term borrowings

30,929

338

4.38

%

100,929

656

2.57

%

Total interest-bearing liabilities

1,065,510

760

0.29

%

1,131,337

1,826

0.59

%

Non-interest-bearing deposits

539,488

498,130

Other liabilities

30,564

27,085

Shareholders’ Equity

136,039

127,269

Total Liabilities and Shareholders’ Equity

$

1,771,601

$

1,783,821

Net interest income and spread

$

14,207

3.42

%

$

12,997

2.97

%

Net interest margin

3.52

%

3.15

%

Six Months Ended

June 30,

2022

2021

(dollars in thousands)

Average

Balance

Interest

Average

Yield/

Rate

Average

Balance

Interest

Average

Yield/

Rate

Assets

Loans

$

1,184,804

$

25,326

4.31

%

$

1,187,760

$

25,873

4.39

%

Investment Securities:

Taxable

356,878

2,946

1.66

%

264,525

1,984

1.51

%

Non taxable

27,447

1,005

7.38

%

25,698

972

7.63

%

Total

384,325

3,951

2.07

%

290,223

2,956

2.05

%

Federal funds sold

44,689

57

0.26

%

155,009

63

0.08

%

Interest-bearing deposits with other banks

4,487

5

0.22

%

2,980

1

0.05

%

Other interest earning assets

1,028

16

3.14

%

4,054

78

3.88

%

Total earning assets

1,619,333

29,355

3.66

%

1,640,026

28,971

3.56

%

Allowance for loan losses

(15,558)

(16,582)

Non-earning assets

172,839

152,853

Total Assets

$

1,776,614

$

1,776,297

Liabilities and Shareholders’ Equity

Interest-bearing demand deposits

$

291,220

$

182

0.13

%

$

208,930

$

347

0.33

%

Interest-bearing money markets

289,377

137

0.10

%

344,100

288

0.17

%

Savings deposits

247,573

36

0.03

%

212,342

46

0.04

%

Time deposits

148,377

521

0.71

%

221,414

1,464

1.33

%

Short-term borrowings

60,144

39

0.13

%

50,670

50

0.20

%

Long-term borrowings

30,929

651

4.24

%

100,929

1,304

2.61

%

Total interest-bearing liabilities

1,067,620

1,566

0.30

%

1,138,385

3,499

0.62

%

Non-interest-bearing deposits

541,992

481,803

Other liabilities

29,337

26,704

Shareholders’ Equity

137,665

129,405

Total Liabilities and Shareholders’ Equity

$

1,776,614

$

1,776,297

Net interest income and spread

$

27,789

3.36

%

$

25,472

2.94

%

Net interest margin

3.46

%

3.13

%

Cision View original content:https://www.prnewswire.com/news-releases/first-united-corporation-announces-second-quarter-2022-earnings-301592030.html

SOURCE First United Corporation

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