First United Corporation Announces Third Quarter And Year To Date 2021 Earnings

Rhea-AI Summary

First United Corporation (NASDAQ: FUNC) reported third quarter earnings, with consolidated net income of $4.4 million, down from $5.0 million a year prior. The company's total assets decreased by $24.9 million, while total loans rose by $16.5 million, largely due to a mortgage pool purchase. Although deposits fell by $11.6 million during the quarter, year-to-date deposits increased by $22.1 million. Net interest margin improved to 3.38%. However, non-interest expenses rose by 24%, primarily due to FHLB repayment penalties. The bank remains well-capitalized with a robust loan portfolio.

Positive

• Gross loans increased by $16.5 million in Q3 due to mortgage pool purchase.
• Net interest margin improved to 3.38%, up from 3.12% year-over-year.
• Net income for the nine months reached $12.2 million, a 31.2% increase from $9.3 million in 2020.
• Total deposits increased by $22.1 million year-to-date.

Negative

• Consolidated net income decreased by 12% compared to the previous year.
• Non-interest expenses rose by 24% due to $2.4 million penalties on FHLB advances.
• Total assets decreased by $24.9 million since December 31, 2020.
• Deposits declined by $11.6 million during Q3.

OAKLAND, Md., Oct. 26, 2021 /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 nine-month periods ended September 30, 2021.

Third Quarter Financial Highlights:

• Total assets at September 30, 2021 decreased by $24.9 million, or 1.4%, when compared to December 31, 2020.
• Deployed cash during the third quarter to repay $70.0 million of Federal Home Loan Bank ("FHLB") advances and purchase a $39.0 million mortgage pool
• Gross loans increased by $16.5 million in the third quarter, driven by the purchase of a $39.0 million mortgage pool to offset the decline in mortgage portfolio balances that were refinanced to lower fixed rates.  Core commercial growth of $12.7 million, offset by forgiveness of $83.7 of Paycheck Protection Program ("PPP") loans during the third quarter
• Deposits declined by $11.6 million during the third quarter; however, growth year to date was $22.1 million
• Declines in both non-interest bearing and interest bearing deposits as we allowed runoff in higher cost CDs, primarily municipalities
• The ratio of the allowance for loan losses ("ALL") to loans outstanding was 1.46% at September 30, 2021 as compared to 1.36% at September 30, 2020. The ALL to loans outstanding, excluding PPP loan balances of $30.3 million, was 1.49% at September 30, 2021, non-GAAP.
• Total provision expense was a credit of $0.6 million for the third quarter of 2021 as compared to expense of $0.2 million for the third quarter of 2020
• Lower provision expense due primarily to continued strong asset quality, stable economic factors and stabilization of modified loans that have returned to principal and interest payments
• Net interest margin, on a non-GAAP, fully tax equivalent ("FTE") basis, increased to 3.38% for the third quarter of 2021 compared to 3.12% for the third quarter of 2020 and 3.13% for the second quarter of 2021.
• Non-interest income, excluding gains, increased 14%, or $0.6 million in the third quarter of 2021 compared to the third quarter of 2020.
• Increased trust department income of 16%
• Increased debit card income of 22%
• Non-interest expense increased 24%, or $2.5 million primarily due to the $2.4 million of penalties on the repayment of $70.0 million FHLB advances.

According to Carissa Rodeheaver, President and CEO, "we experienced another strong quarter led by increased fee income from our Wealth department, other service charges, and recognition of Paycheck Protection Program fees as we continued to process forgiveness applications for our borrowers as well as reduced interest expense and operating costs.  We also acknowledged the strength of our loan portfolio, resulting in release of a portion of the allowance for loan losses that was provided in 2020 due to the uncertainties of the COVID environment and how it would impact our economy and borrowers.  The strong core income was offset by a penalty that we recognized on the prepayment of our Federal Home Loan Bank borrowings as we positioned the Bank for future interest expense savings.  The Bank remains strong, well-capitalized and poised for future growth."

COVID-19

During the first nine months of 2021, we continued to assist our business customers with the PPP loan forgiveness process and to originate additional PPP loans through the third round of funding. We remained diligent in protecting our associates and customers from the lingering effects of the pandemic, delaying opening our lobbies until April 1, 2021.  During the third quarter, we made the decision to reclose our lobbies as COVID cases increased in most of our markets and staffing was at reduced levels.  Many of our sales and support employees continue to work remotely as we have adjusted to a hybrid work environment.  We have continued to monitor our market areas, maintaining travel protocols and utilizing safety precautions while continuing to provide full banking services to our customers.

Paycheck Protection Program

The Company continues to actively participate in the PPP administered by the Small Business Administration (the "SBA").  On January 19, 2021, the SBA implemented a third round of funding for PPP loans.  

During 2020, a total of $148.5 million in PPP loans were originated under the initial round of funding, consisting of 1,174 loans with an average loan size of $162 thousand.  During 2021, a total of $66.1 million in PPP loans were originated under the third round of funding, consisting of 870 loans with an average loan size of $80 thousand.

Net fees recognized in the first nine months of 2021 were $3.2 million due to amortization and forgiveness, compared to $2.4 million in 2020.

During 2020, 290 loans, totaling $34.5 million were forgiven, resulting in 885 loans with a remaining balance of $114.0 million at December 31, 2020.   During the first nine months of 2021, an additional 1,384 loans under all three rounds, with an aggregate principal balance of $150.0 million, were forgiven, resulting in 371 loans with a total remaining balance of $30.3 million at September 30, 2021.

Of the 2,046 PPP loans originated by the Bank since the PPP's inception, 1,675 loans, totaling $184.9 million, have been forgiven through the end of third quarter 2021, representing 86% of the number of loans originated and 82% of originated principal balances.

COVID Modifications

While the COVID-19 pandemic has had an impact on most industries, some have been more affected than others.  In accordance with Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act and related regulatory pronouncements, we have not accounted for modifications of loans affected by the pandemic as troubled debt restructurings nor have we designated them as past due or nonaccrual. 

As of October 15, 2021, total loan modifications was $9.9 million.  There were eleven commercial loans related to real estate rental, food services and health care sectors and one mortgage loan.  These loans are scheduled to return to contractual payment terms within the next quarter.

Balance Sheet Overview

Total assets at September 30, 2021 decreased to $1.7 billion, representing a $24.9 million decrease since December 31, 2020.  During the first nine months of 2021, cash and interest-bearing deposits in other banks decreased by $14.5 million, the investment portfolio increased by $2.4 million and gross loans decreased by $5.9 million.  The decrease in cash was due primarily to the strategic decision to deploy $39.0 million to purchase a pool of mortgage loans for the purpose of offsetting the declining mortgage portfolio balances due to the continued refinancing activity.  Management also used $70.0 million to prepay FHLB advances.  Although the Bank recorded $2.4 million in penalties in connection with the FHLP prepayments, management anticipates that the resulting reduction in interest expense for the remainder of 2021 and in future years will offset the penalty and have a significant impact on the cost of funds.  Other Real Estate Owned ("OREO") balances decreased $2.7 million due to the sale of a parcel of real estate securing a large commercial participation loan in the first quarter of 2021 and the additional sales of undeveloped lots.  We anticipate further reduction to OREO balances over the next quarter as we consummate additional sales contracts.

Total liabilities decreased by $27.6 million when compared to liabilities at December 31, 2020.  The decrease in the first nine months of 2021 was attributable to deposit growth of $22.1 million due to stimulus programs and to growth in core relationships, increased balances in short-term borrowings related to our Treasury Management product, offset by the prepayment of $70.0 million in FHLB long-term borrowings. Total shareholders' equity increased slightly during the first nine months of 2021, as net income of $12.2 million was offset by the repurchase of $7.2 million (400,000 shares) of First United Corporation common stock.

Outstanding loans of $1.2 billion at September 30, 2021 reflected a decline of $5.9 million during the first nine months of 2021, which was primarily attributable to growth in our mortgage loan portfolio due to the purchase of a $39.0 million loan pool, offset by a decline of portfolio balances.  This loan pool consisted of individual  adjustable and fixed rate residential mortgage loans.  Core commercial loan growth was offset by PPP loan forgiveness.  Commercial real estate ("CRE") loans increased by $2.6 million, acquisition and development ("A&D") loans increased by $15.3 million and commercial and industrial ("C&I") loans decreased by $71.0 million, as growth in core portfolio loans of $12.7 million was offset by PPP loan forgiveness.  Residential mortgage loans increased $26.7 million due to the purchase of a pool of 1-4 family residential loans, offset by the continued refinancing activity. Given the current low interest rate environment, customers appear to be seeking longer-term, fixed-rate loans and we continued to use the secondary market rather than hold these longer-term fixed rate mortgage loans in the portfolio. The consumer loan portfolio increased by $20.4 million due to the purchase of a pool of consumer loans in the second quarter of 2021 as an effort to deploy excess cash into higher yielding, short-term assets. 

Commercial loan production for the first nine months of 2021 was approximately $136.6 million, with $46.7 million originated during the third quarter, exclusive of PPP loan production. PPP loan production was approximately $64.3 million for the first nine months of 2021.   At September 30, 2021, unfunded, committed commercial construction loans totaled approximately $26.6 million. Commercial amortization and payoffs were approximately $106.0 million through September 30, 2021, exclusive of PPP. 

Consumer mortgage loan production was approximately $89.6 million through September 30, 2021.  The production and pipeline mix of in-house, portfolio loans and investor loans remained strong as of September 30, 2021, with those loans totaling $20.0 million, consisting of $16.0 million in portfolio loans and $4.0 million in investor loans. At the end of the second quarter of 2021, management implemented special promotions for residential mortgage products to shift production towards portfolio loans and utilize excess cash balances.

Total deposits at September 30, 2021 increased by $22.1 million when compared to deposits at December 31, 2020.  During the first nine months of 2021, non-interest-bearing deposits increased by $71.0 million, driven by retail and commercial account growth partially attributable to government stimulus programs. Traditional savings accounts increased by $37.4 million as we continued to see significant growth in our Prime Saver product, and total demand deposits increased by $10.8 million. Total money market accounts decreased by $43.0 million due primarily to management's decision to sweep approximately $70.0 million of wealth management money market funds off balance sheet in the first quarter of 2021. These funds can be readily shifted back to in-house money market accounts should liquidity needs arise in the future.  Time deposits decreased by $54.1 million, primarily in time deposits over $100,000, due to repayment of a $10.0 million brokered CD in May 2021 and as we continued to reduce pricing on single-service relationships and municipal bids.

Book value per share of the Company's common stock was $20.22 at September 30, 2021, compared to $18.74 per share at December 31, 2020.  At September 30, 2021, there were 6,617,941 of basic outstanding shares and 6,625,014 of diluted outstanding shares of common stock. 

Income Statement Overview

Quarterly Results

Consolidated net income was $4.4 million for the third quarter of 2021 compared to $5.0 million for the third quarter of 2020.  Basic and diluted net income per share for the third quarter of 2021 were both $0.66, a 5.7% decrease when compared to basic and diluted net income per share of $0.70 for the third quarter of 2020.  The decline in earnings in the third quarter of 2021 was due to an increase in net interest income, a credit to provision expense, and increased wealth management income, offset by increased non-interest expenses, including the prepayment penalty of $2.4 million on FHLB borrowings.

Net interest income, on a non-GAAP, FTE basis, increased by $2.0 million (16.2%) for the third quarter 2021 when compared to the third quarter of 2020.  This increase resulted from an increase in interest income of $0.7 million and a decrease in interest expense of $1.3 million.  The increase in interest income on loans was a result of increased interest on the consumer loans related to the purchase of a loan pool in the second quarter as well as an increase in the unearned fees related to the PPP forgiveness during the quarter.  The reduction of interest expense resulted from the further reduction of deposit rates early in the third quarter and the declining balances in the higher cost CD portfolio.  The prepayment of the FHLB advances should positively impact interest expense for the remainder of 2021 and future years.  The weighted rate on the $70.0 million FHLB long-term borrowings was 1.90%.  The net interest margin for the third quarter of 2021 was 3.38%, compared to 3.12% for the third quarter of 2020.  The net interest margin for the third quarter of 2021 would have been 3.12%, excluding the average balance of PPP loans of $48.5 million and interest and fees of $1.4 million.

Other operating income, including gains, for the third quarter of 2021 decreased by approximately $0.6 million when compared with the same period of 2020.  Service charge income remained stable during the third quarter of 2021 when compared to the third quarter of 2020.  Trust and brokerage income increased $0.3 million due to increased production and market values on assets under management.  Net gains decreased $1.1 million when comparing the third quarter of 2021 to the third quarter of 2020.  This decrease is due to the slowing of refinancing activity in the mortgage portfolio, which resulted in less gains on sales as well as no sales activity in the investment portfolio during the third quarter of 2021.  Bank Owned Life Insurance ("BOLI") income decreased by $0.1 million when comparing the third quarter of 2021 to the third quarter of 2020 due to the receipt of policy proceeds in the third quarter of 2020.

Other operating expenses increased by $2.5 million when comparing the third quarter of 2021 to the third quarter of 2020.  This increase was driven by an increase in salaries and benefits of $0.3 million related to a reduction in deferred loan origination costs in 2021 (primarily related to PPP activities) and the $2.4 million prepayment penalties incurred in connection with the prepayment of the FHLB advances.  As noted above, the prepayment was a strategic decision to use $70.0 million of cash for the purpose of reducing the cost of funds for the remainder of 2021 and future years.  Occupancy, equipment and technology service expenses were stable during the third quarter of 2021 when compared to the third quarter of 2020.  Investor relations and professional services costs were also stable during the third quarter of 2021 when compared to the third quarter of 2020.  Other miscellaneous expenses, such as Visa processing fees, contract labor, schools and seminars, dues and licenses, in-house training, trust department expense, debit card expense and other personnel related expenses, declined.  The decreases were offset by increases in marketing, contributions and consulting expenses. 

Year to Date Results

Consolidated net income was $12.2 million, inclusive of litigation settlement expenses of $3.3 million and FHLB prepayment penalties of $2.4 million, for the nine months ended September 30, 2021 compared to $9.3 million for the nine months ended September 30, 2020.  Basic and diluted net income per share for the first nine months of 2021 were both $1.81, a 37.1% increase when compared to basic and diluted net income per share of $1.32 for the same period of 2020.

The increase in earnings for the first nine months of 2021 was attributable to an increase in net interest income of $2.2 million, reduced provision expense of $4.9 million and an increase in other operating income, including gains of $1.3 million, consisting of gains on sales of mortgage loans and securities' gains.  These changes were partially offset by an increase in other operating expenses of $4.0 million, inclusive of the $3.3 million in litigation settlement expenses and the $2.4 million FHLB prepayment penalty.   

Net interest income, on a non-GAAP, FTE basis, increased by $2.2 million (5.9%) during the nine months ended September 30, 2021 when compared to the nine months ended September 30, 2020 driven by a $2.7 million (36.5%) decrease in interest expense, partially offset by a decrease in interest income of $0.5 million.  The decrease in interest expense resulted from proactive efforts to reduce the cost of funds by further reductions to rates on deposit accounts throughout 2021, the runoff of balances in the time deposits of $100,000 or more, including brokered deposits, and the expiration of empowered rates on money market accounts.  The prepayment of the FHLB advances in the third quarter should significantly reduce interest expense in the fourth quarter and future years.  The net interest margin, on an FTE basis, declined to 3.21% for the nine months ended September 30, 2021 compared to 3.43% for the same period of 2020.  The net interest margin for the nine months ended September 2021 would have been 3.07%, excluding the average balance of PPP loans of $100.6 million and interest and fees of $4.0 million.

Other operating income, including net gains on sales of mortgage loans and sales of investment securities, increased $1.3 million for the nine months ended September 30, 2021 when compared to the nine months ended September 30, 2020.  Gains on the sale of mortgage loans to the secondary market decreased $0.5 million due to refinancing activity occurring at a slower pace than the pace experienced in 2020. Trust and brokerage income increased $1.2 million year-over-year due to growth in new client relationships and assets under management.  Debit card income increased $0.6 million for the nine months ended September 30, 2021 when compared to the same period of 2020 due to growth in deposit relationships and increased customer usage of our electronic services. Other income increased $0.5 million, due primarily to the receipt of insurance proceeds related to litigation claims recorded in the first quarter of 2021. Service charge income remained stable when comparing the nine months of 2021 to the same time period of 2020.

Other operating expenses increased $4.0 million for the nine months ended September 30, 2021 when compared to the same period of 2020.  This increase was driven by $3.3 million of litigation settlement expenses recorded in the first quarter of 2021 and a $2.4 million penalty on the repayment of $70.0 million FHLB advances in the third quarter of 2021.  Salaries and benefits remained stable when compared to the first nine months of 2020, as increases in salaries, incentive pay and stock compensation were offset by decreases in pension and life and health insurance costs, a $0.3 million offset in salary expense from deferred loan origination costs primarily attributable to PPP loans and $0.1 million of reduced executive equity compensation due to a timing difference in long-term incentive grants.  Federal Deposit Insurance Corporation premiums increased slightly by $0.2 million due to credits received on quarterly assessments in 2020. Equipment, occupancy and technology expenses decreased $0.9 million when compared to the first nine months of 2020 as we began to realize cost savings from our core processor related to a new contract negotiated in the fourth quarter of 2020. OREO expenses were a net credit in the first nine months of 2021 due to $0.8 million in gains attributable to the sale of OREO properties.  Professional services increased $0.8 million as a result of increased legal and professional fees related to shareholder litigation early in 2021, partially offset by decreased investor relations expenses.

The effective income tax rates as a percentage of income for the nine-month periods ended September 30, 2021 and 2020 were 24.9% and 22.1%, respectively.  The increase in the tax rate for the first nine months of 2021 was primarily due to the reduction in tax exempt income as well as the reduction in tax credits related to the expiration of a low-income housing tax credit in June 2021.  A new 2021 investment in low-income housing is expected to provide tax benefits in 2022 and beyond.

Asset Quality

The ALL increased to $16.9 million at September 30, 2021 compared to $16.5 million at December 31, 2020.  The provision for loan losses was $0.1 million for the nine months ended September 30, 2021 and $5.0 million for the nine months ended September 30, 2020.  The higher provision expense recorded in the first nine months of 2020 was driven by an increase in the qualitative factors reflecting the uncertainty of the economic environment related to the COVID-19 pandemic. Net recoveries of $0.4 million were recorded for the nine months ended September 30, 2021, compared to net charge offs of $0.3 million for the same period of 2020. The ratio of the ALL to loans outstanding, including PPP loan balances, was 1.46% at September 30, 2021 compared to 1.36% at September 30, 2020 and 1.41% at December 31, 2020.  The ALL to loans outstanding, excluding PPP loan balances of $30.3 million and $148.9 million, was 1.49% at September 30, 2021 and 1.55% at September 30, 2020 and December 31, 2020, non-GAAP.

The ratio of net recoveries to average loans for the nine months ended September 30, 2021 was an annualized 0.04%, compared to net charge offs to average loans of 0.16% for the nine months ended September 30, 2020.  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
	09/30/2021	09/30/2020
Loan Type	(Charge Off) / Recovery	(Charge Off) / Recovery
Commercial Real Estate	0.00%	0.03%
Acquisition & Development	0.09%	(1.21%)
Commercial & Industrial	0.29%	(0.06%)
Residential Mortgage	(0.03%)	(0.01%)
Consumer	(0.45%)	(0.59%)
Total Net Recoveries/(Charge Offs)	0.04%	(0.16%)

Non-accrual loans totaled $7.4 million at September 30, 2021 compared to $3.3 million at December 31, 2020.  The increase in non-accrual balances at September 30, 2021 was due to the movement of two hospitality loans, totaling approximately $4.0 million, to non-accrual status during the first quarter of 2021.  These loans suffered reduced cash flows due to the impact of the COVID-19 pandemic, received modifications and were classified as substandard at December 31, 2020.  These loans have returned to their contractual payment terms but will remain on non-accrual status until they pay full contractual payments for six months.

Non-accrual loans that have been subject to partial charge-offs totaled $0.5 million at September 30, 2021 and $0.4 million at December 31, 2020.  Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $0.2 million at September 30, 2021 and $0.4 million at December 31, 2020.  Foreclosure and repossession activities were temporarily suspended as a result of COVID-19 but resumed during the third quarter 2021. Management continues to conform to federal and state mandates relative to the foreclosure processes for both Federal Backed and Non-Federal Backed mortgages.  As a percentage of the loan portfolio, accruing loans past due 30 days or more decreased to 0.20%, including PPP loans, or 0.21% excluding PPP loans, compared to 0.73% at September 30, 2020 and 0.20% at December 31, 2020. 

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," including among many others the risk factor set forth in First United's Annual Report on Form 10-K, as amended, for the year ended December 31, 2020 entitled, "The outbreak of the recent coronavirus ('COVID-19'), or an outbreak of another highly infectious or contagious disease, could adversely affect the Corporation's business, financial condition and results of operations." and any updates thereto that might be contained in subsequent reports filed by First United.  The risks and uncertainties associated with the COVID-19 pandemic and its impact on First United will depend on, among other things, the length of time that the pandemic continues; the duration of the potential imposition of further restrictions on travel in the future; the effect of the pandemic on the global, national, and local economies and on the businesses of our borrowers and their ability to make payments on their obligations; the remedial actions and stimulus measures adopted by federal, state, and local governments; and the inability of employees to work due to illness, quarantine, or government mandates.

FIRST UNITED CORPORATION
Oakland, MD
Stock Symbol :  FUNC
Financial Highlights - Unaudited
(Dollars in thousands, except per share data)
		Three Months Ended					Nine Months Ended
			September 30,		September 30,		September 30,		September 30,
			2021		2020		2021		2020
Results of Operations:
	Interest income		$                14,910		$                14,253		$                43,408		$                43,973
	Interest expense		1,285		2,351		4,784		7,528
	Net interest income		13,625		11,902		38,624		36,445
	Provision for loan losses		(597)		160		68		4,981
	Other operating income		4,523		3,978		13,586		11,411
	Net gains		82		1,176		1,112		2,011
	Other operating expense		13,027		10,540		36,986		32,972
	Income before taxes		$                   5,800		$                   6,356		$                16,268		$                11,914
	Income tax expense		1,412		1,396		4,047		2,629
	Net income		$                   4,388		$                   4,960		$                12,221		$                   9,285
Per share data:
	Basic/ Diluted net income		$                     0.66		$                     0.70		$                     1.81		$                     1.32
	Adjusted Basic/Diluted net income (1)		$                     0.93		$                     0.70		$                     2.45		$                     1.32
	Dividends declared per share		$                     0.15		$                     0.13		$                     0.45		$                     0.39
	Book value		$                   20.22		$                   17.82
	Diluted book value		$                   20.19		$                   17.81
	Tangible book value per share		$                   18.55		$                   16.25
	Diluted Tangible book value per share		$                   18.53		$                   16.01
	Closing market value		$                   18.60		$                   13.34
	Market Range:
	High		$                   19.45		$                   15.95
	Low		$                   16.26		$                   11.00
Shares outstanding at period end: Basic			6,617,941		6,983,523
Shares outstanding at period end: Diluted			6,625,014		6,988,593
Performance ratios: (Year to Date Period End, annualized)
Return on average assets			0.92%		0.57%
Adjusted return on average assets (1)			1.26%		0.57%
Return on average shareholders' equity			12.45%		6.97%
Adjusted return on average shareholders' equity (1)			16.72%		6.97%
Net interest margin (Non-GAAP), includes tax exempt income of $705 and $678			3.21%		3.43%
Net interest margin GAAP			3.16%		3.37%
Efficiency ratio			68.39%		70.26%
Adjusted efficiency ratio (1)			57.97%		70.26%
(1) See reconcilation of this non-GAAP financial measure provided elsewhere herein.
			September 30,		December 31,
			2021		2020
Financial Condition at period end:
Assets			$           1,708,556		$           1,733,414
Earning assets			$           1,466,664		$           1,473,733
Gross loans			$           1,161,868		$           1,167,812
	Commercial Real Estate		$              371,785		$              369,176
	Acquisition and Development		$              132,256		$              116,961
	Commercial and Industrial		$              195,758		$              266,745
	Residential Mortgage		$              405,885		$              379,170
	Consumer		$                56,184		$                35,760
Investment securities			$              297,543		$              295,148
Total deposits			$           1,444,494		$           1,422,366
	Noninterest bearing		$              491,441		$              420,427
	Interest bearing		$              953,053		$           1,001,939
Shareholders' equity			$              133,787		$              131,047
Capital ratios:
	Tier 1 to risk weighted assets		14.26%		14.83%
	Common Equity Tier 1 to risk weighted assets		12.15%		12.61%
	Tier 1 Leverage		10.33%		10.36%
	Total risk based capital		15.51%		16.08%
Asset quality:
Net recoveries/(charge-offs) for the quarter			$                      435		$                    (123)
Nonperforming assets: (Period End)
	Nonaccrual loans		$                   7,441		$                   3,339
	Loans 90 days past due and accruing		189		724
	Total nonperforming loans and 90 day past due		$                   7,630		$                   4,063
	Restructured loans		$                   4,031		$                   3,958
	Other real estate owned		$                   6,663		$                   9,386
Allowance for loan losses to gross loans			1.46%		1.41%
Allowance for loan losses to gross loans, excluding PPP loans			1.50%		1.55%
Nonperforming and 90 day past due loans to total loans			0.66%		0.35%
Nonperforming loans and 90 day past due loans to total assets			0.45%		0.23%

 

		Nine Months Ended
		September 30,
		2021								2020
		Average						Average		Average						Average
(dollars in thousands)		Balance			Interest			Yield/Rate		Balance			Interest			Yield/Rate
Assets
Loans		$	1,179,205		$	39,562		4.49	%	$	1,136,473		$	39,231		4.61	%
Investment Securities:
Taxable			267,899			2,864		1.43	%		197,186			3,612		2.45	%
Non taxable			25,487			1,448		7.60	%		26,335			1,448		7.34	%
Total			293,386			4,312		1.96	%		223,521			5,060		3.02	%
Federal funds sold			156,504			128		0.11	%		79,228			182		0.31	%
Interest-bearing deposits with other banks			3,419			1		0.06	%		889			9		1.37	%
Other interest earning assets			3,622			110		4.07	%		4,451			169		5.06	%
Total earning assets			1,636,136			44,113		3.60	%		1,444,562			44,651		4.13	%
Allowance for loan losses			(16,924)								(15,049)
Non-earning assets			154,464								146,213
Total Assets		$	1,773,676							$	1,575,726
Liabilities and Shareholders' Equity
Interest-bearing demand deposits		$	211,005		$	460		0.29	%	$	177,848		$	531		0.40	%
Interest-bearing money markets			340,322			367		0.14	%		305,714			1,207		0.53	%
Savings deposits			218,605			63		0.04	%		172,735			136		0.10	%
Time deposits:
Less than $100k			100,777			979		1.30	%		111,757			1,310		1.57	%
$100k or more			108,195			1,008		1.25	%		129,290			1,813		1.87	%
Short-term borrowings			55,151			67		0.16	%		43,895			68		0.21	%
Long-term borrowings			92,980			1,840		2.65	%		100,929			2,463		3.26	%
Total interest-bearing liabilities			1,127,035			4,784		0.57	%		1,042,168			7,528		0.96	%
Non-interest-bearing deposits			488,870								362,547
Other liabilities			26,850								45,572
Shareholders' Equity			130,921								125,439
Total Liabilities and Shareholders' Equity		$	1,773,676							$	1,575,726
Net interest income and spread					$	39,329		3.03	%				$	37,123		3.17	%
Net interest margin								3.21	%							3.43	%

 

		Three Months Ended
		September 30,
		2021								2020
(dollars in thousands)		Average Balance			Interest			Average Yield/Rate		Average Balance			Interest			Average Yield/Rate
Assets
Loans		$	1,162,374		$	13,689		4.67	%	$	1,198,888		$	12,950		4.30	%
Investment Securities:
Taxable			274,648			880		1.27	%		194,722			960		1.96	%
Non taxable			25,073			476		7.54	%		27,049			494		7.26	%
Total			299,721			1,356		1.79	%		221,771			1,454		2.61	%
Federal funds sold			159,444			65		0.16	%		119,039			28		0.09	%
Interest-bearing deposits with other banks			4,283			—		—	%		1,157			2		0.73	%
Other interest earning assets			2,772			32		4.64	%		4,468			47		4.15	%
Total earning assets			1,628,594			15,142		3.69	%		1,545,323			14,481		3.73	%
Allowance for loan losses			(17,597)								(17,252)
Non-earning assets			157,806								153,846
Total Assets		$	1,768,803							$	1,681,917
Liabilities and Shareholders' Equity
Interest-bearing demand deposits		$	215,085		$	113		0.21	%	$	195,363		$	190		0.39	%
Interest-bearing money markets			332,889			79		0.09	%		332,012			330		0.40	%
Savings deposits			230,925			17		0.03	%		182,733			35		0.08	%
Time deposits:
Less than $100k			89,723			253		1.12	%		111,647			435		1.55	%
$100k or more			94,770			270		1.13	%		121,986			525		1.71	%
Short-term borrowings			63,968			17		0.11	%		45,719			19		0.17	%
Long-term borrowings			77,342			536		2.75	%		100,929			817		3.22	%
Total interest-bearing liabilities			1,104,702			1,285		0.46	%		1,090,389			2,351		0.86	%
Non-interest-bearing deposits			503,006								407,334
Other liabilities			27,143								56,091
Shareholders' Equity			133,952								128,103
Total Liabilities and Shareholders' Equity		$	1,768,803							$	1,681,917
Net interest income and spread					$	13,857		3.23	%				$	12,130		2.87	%
Net interest margin								3.38	%							3.12	%

 

FIRST UNITED CORPORATION
Oakland, MD
Stock Symbol :  FUNC
Financial Highlights - Unaudited
(Dollars in thousands, except per share data)
		Three Months Ended
		September 30,	June 30,	March 31,		December 31,		September 30,		June 30,		March 31,
		2021	2021	2021		2020		2020		2020		2020
Results of Operations:
	Interest income	$                  14,910	$       14,436	$         14,062		14,228		14,253		15,104		14,616
	Interest expense	1,285	1,673	1,826		2,127		2,351		2,448		2,729
	Net interest income	13,625	12,763	12,236		12,101		11,902		12,656		11,887
	Provision for loan losses	(597)	555	110		420		160		2,167		2,654
	Other operating income	4,523	4,321	4,742		4,378		3,978		3,425		4,008
	Net gains	82	442	588		777		1,176		794		41
	Other operating expense	13,027	11,032	12,927		10,395		10,540		11,427		11,005
	Income before taxes	$                    5,800	$         5,939	$           4,529		$                    6,441		$                      6,356		$         3,281		$           2,277
	Income tax expense	1,412	1,536	1,099		1,469		1,396		711		522
	Net income	$                    4,388	$         4,403	$           3,430		$                    4,972		$                      4,960		$         2,570		$           1,755
Per share data:
	Basic/ Diluted net income	$                      0.66	$           0.66	$             0.49		$                      0.72		$                        0.70		$           0.37		$             0.25
	Adjusted Basic/Diluted net income (1)	$                      0.93	$           0.66	$             0.86		$                      0.72		$                        0.70		$           0.37		$             0.25
	Dividends declared per share	$                      0.15	$           0.15	$             0.15		$                      0.13		$                        0.13		$           0.13		$             0.13
	Book value	$                    20.22	$         19.74	$           18.46		$                    18.83		$                      18.63		$         17.82		$           17.01
	Diluted book value	$                    20.19	$         19.72	$           18.45		$                    18.73		$                      18.62		$         17.81		$           16.95
	Tangible book value per share	$                    18.55	$         18.07	$           16.89		$                    17.26		$                      17.06		$         16.25		$           15.43
	Diluted Tangible book value per share	$                    18.53	$         18.05	$           16.88		$                    17.15		$                      17.05		$         16.01		$           15.38
	Closing market value	$                    18.60	$         17.43	$           17.62		$                    15.50		$                      11.71		$         13.34		$           14.29
	Market Range:
	High	$                    19.45	$         19.42	$           20.05		$                    17.51		$                      13.88		$         15.95		$           24.99
	Low	$                    16.26	$         16.35	$           15.30		$                    11.51		$                      10.74		$         11.00		$           11.09
Shares outstanding at period end: Basic		6,617,941	6,614,604	6,998,617		6,992,911		6,988,998		6,983,523		6,966,898
Shares outstanding at period end: Diluted		6,625,014	6,621,677	7,001,997		6,997,981		6,994,068		6,988,593		6,991,902
Performance ratios: (Year to Date Period End, annualized)
Return on average assets		0.92%	0.88%	0.79%		0.88%		0.79%		0.57%		0.49%
Adjusted return on average assets (1)		1.25%	1.18%	1.38%		0.88%		0.79%		0.57%		0.49%
Return on average shareholders' equity		12.45%	12.21%	10.58%		11.21%		9.87%		6.97%		5.62%
Adjusted return on average shareholders' equity (1)		16.72%	15.98%	18.36%		11.21%		9.87%		6.97%		5.62%
Net interest margin (Non-GAAP), includes tax exempt income of $705 and $658		3.21%	3.13%	3.11%		3.09%		3.43%		3.61%		3.69%
Net interest margin GAAP		3.16%	3.07%	3.05%		3.03%		3.37%		3.53%		3.63%
Efficiency ratio		68.39%	67.69%	72.94%		63.47%		64.99%		70.26%		68.29%
Adjusted efficiency ratio (1)		57.97%	58.58%	54.90%		63.47%		64.99%		70.26%		68.29%
(1) See reconcilation of this non-GAAP financial measure provided elsewhere herein.
		September 30,	June 30,	March 31,		December 31,		September 30,		June 30,		March 31,
		2021	2021	2021		2020		2020		2020		2020
Financial Condition at period end:
Assets		$             1,708,556	$  1,763,806	1,781,833		1,733,414		1,685,907		1,639,636		1,461,513
Earning assets		$             1,466,664	$  1,461,613	$    1,481,045		$             1,473,733		$               1,422,341		$  1,420,433		$    1,267,718
Gross loans		$             1,161,868	$  1,145,343	$    1,199,325		$             1,167,812		$               1,192,345		$  1,186,940	#	$    1,053,732
	Commercial Real Estate	$                371,785	$     361,941	$       365,731		$                369,176		$                  353,272		$     340,314		$       337,688
	Acquisition and Development	$                132,256	$     131,630	$       123,625		$                116,961		$                  127,299		$     126,338		$       121,333
	Commercial and Industrial	$                195,758	$     229,852	$       299,178		$                266,745		$                  277,723		$     272,186		$       123,509
	Residential Mortgage	$                405,885	$     364,408	$       374,327		$                379,170		$                  398,709		$     412,478		$       434,969
	Consumer	$                  56,184	$       57,512	$         36,464		$                  35,760		$                    35,342		$       35,624		$         36,233
Investment securities		$                297,543	$     307,696	$       273,363		$                295,148		$                  222,382		$     220,165		$       222,191
Total deposits		$             1,444,494	$  1,456,111	$    1,468,263		$             1,422,366		$               1,377,284		$  1,351,568		$    1,172,394
	Noninterest bearing	$                491,441	$     497,736	$       485,311		$                420,427		$                  419,935		$     425,274		$       299,961
	Interest bearing	$                953,053	$     958,375	$       982,952		$             1,001,939		$                  957,349		$     926,294	#	$       872,433
Shareholders' equity		$                133,787	$     130,556	$       129,189		$                131,047		$                  130,237		$     124,453		$       118,549
Capital ratios:
	Tier 1 to risk weighted assets	14.26%	14.55%	14.99%		14.83%		14.89%		14.62%		14.76%
	Common Equity Tier 1 to risk weighted assets	12.15%	12.37%	12.76%		12.61%		12.59%		12.33%		12.43%
	Tier 1 Leverage	10.33%	9.94%	10.22%		10.36%		10.37%		10.46%		11.52%
	Total risk based capital	15.51%	15.80%	16.24%		16.08%		16.14%		15.87%		16.01%
Asset quality:
Net (charge-offs)/recoveries for the quarter		$                       435	$             (41)	$              (42)		$                      (123)		$                       (985)		$            164		$              178
Nonperforming assets: (Period End)
	Nonaccrual loans	$                    7,441	$         7,285	$           7,891		$                    3,339		$                    10,344		$       11,081		$         11,012
	Loans 90 days past due and accruing	189	273	6		724		813		$            297		623
		0	0
	Total nonperforming loans and 90 day past due	$                    7,630	$         7,558	$           7,897		$                    4,063		$                    11,157		$       11,378		$         11,635
	Restructured loans	$                    4,031	$         3,825	$           3,892		$                    3,958		$                      4,008		$         4,039		$           4,581
	Other real estate owned	$                    6,663	$         6,756	$           7,533		$                    9,386		$                      3,787		$         3,926		$           4,040
Allowance for loan losses to gross loans		1.46%	1.49%	1.38%		1.41%		1.36%		1.43%		1.42%
Allowance for loan losses to gross loans, excluding PPP loans		1.50%	1.60%	1.57%		1.55%		1.55%		1.62%		1.42%
Nonperforming and 90 day past due loans to total loans		0.66%	0.66%	0.66%		0.35%		0.94%		0.96%		1.10%
Nonperforming loans and 90 day past due loans to total assets		0.45%	0.43%	0.44%		0.23%		0.66%		0.69%		0.80%

 

	Three Months Ended
	2021						2020
	Q3		Q2		Q1			Q4	Q3		Q2		Q1
	(Unaudited)
Interest income
Interest and fees on loans	$	13,667	$	13,097	$	12,732	$	12,963	$	12,940	$	13,413	$	12,839
Interest on investment securities
Taxable		880		994		990		914		960		1,344		1,308
Exempt from federal income tax		266		268		275		275		276		273		260
Total investment income		1,146		1,262		1,265		1,189		1,236		1,617		1,568
Other		97		77		65		76		77		74		209
Total interest income		14,910		14,436		14,062		14,228		14,253		15,104		14,616
Interest expense
Interest on deposits		732		999		1,146		1,359		1,515		1,612		1,870
Interest on short-term borrowings		17		26		24		26		19		21		28
Interest on long-term borrowings		536		648		656		742		817		815		831
Total interest expense		1,285		1,673		1,826		2,127		2,351		2,448		2,729
Net interest income		13,625		12,763		12,236		12,101		11,902		12,656		11,887
Provision for loan losses		(597)		555		110		420		160		2,167		2,654
Net interest income after provision for loan losses		14,222		12,208		12,126		11,681		11,742		10,489		9,233
Other operating income
Net gains on investments, available for sale		—		154		—		10		575		47		—
Net (losses)/gains on investments, held to maturity		—		—		—		(157)		—		60		—
Gains on sale of residential mortgage loans		82		272		588		923		734		687		59
Gains/(losses) on disposal of fixed assets		—		16		—		1		(133)		—		(18)
Net gains		82		442		588		777		1,176		794		41
Other Income
Service charges on deposit accounts		475		412		405		490		447		377		615
Other service charges		232		221		211		182		195		32		290
Trust department		2,166		2,034		2,241		2,091		1,871		1,731		1,753
Debit card income		900		913		810		850		738		680		634
Bank owned life insurance		298		293		286		292		373		285		303
Brokerage commissions		229		357		268		291		234		202		277
Other		223		91		521		182		120		118		136
Total other income		4,523		4,321		4,742		4,378		3,978		3,425		4,008
Total other operating income		4,605		4,763		5,330		5,155		5,154		4,219		4,049
Other operating expenses
Salaries and employee benefits		5,719		5,507		4,988		4,835		5,378		4,943		5,923
FDIC premiums		209		183		183		207		201		160		43
Equipment		1,032		954		851		1,033		978		967		926
Occupancy		684		693		725		660		707		746		747
Data processing		819		875		726		826		1,130		973		1,052
Marketing		129		133		146		168		122		153		130
Professional services		615		1,491		1,170		1,698		602		1,181		723
Contract labor		153		185		148		161		180		149		151
Line rentals		123		268		215		210		216		221		217
Other real estate owned		150		(198)		(412)		8		6		(3)		—
Investor relations		116		306		124		117		54		1,013		93
Settlement expense		—		—		3,300		—		—		—		—
FHLB prepayment penalty		2,368		—		—		—		—		—		—
Other		910		635		763		1,039		966		924		1,000
Total other operating expenses		13,027		11,032		12,927		10,962		10,540		11,427		11,005
Income before income tax expense		5,800		5,939		4,529		5,874		6,356		3,281		2,277
Provision for income tax expense		1,412		1,536		1,099		1,318		1,396		711		522
Net Income	$	4,388	$	4,403	$	3,430	$	4,556	$	4,960	$	2,570	$	1,755
Basic net income per common share	$	0.66	$	0.66	$	0.49	$	0.66	$	0.70	$	0.37	$	0.25
Diluted net income per common share	$	0.66	$	0.66	$	0.49	$	0.65	$	0.70	$	0.37	$	0.25
Weighted average number of basic shares outstanding		6,617		6,609		6,996		7,004		6,988		6,974		7,063
Weighted average number of diluted shares outstanding		6,624		6,615		7,000		7,013		6,993		6,992		7,071
Dividends declared per common share	$	0.15	$	0.15	$	0.15	$	0.13	$	0.13	$	0.13	$	0.13

 

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 exclude settlement charges associated with the settlement with Driver Management and FHLB prepayment penalty.
		Nine months ended September 30,						Three months ended September 30,
		2021			2020			2021			2020
(in thousands, except for per share amount)
Net income - as reported		$	12,221		$	9,285		$	4,388		$	4,960
Adjustments:
Settlement Expense			3,300			—			—			—
FHLB Penalty			2,368			—			2,368			—
Income tax effect of adjustments			(1,313)			—			(578)			—
Adjusted net income (non-GAAP)		$	16,576		$	9,285		$	6,178		$	4,960
Basic and Diluted earnings per share - as reported		$	1.81		$	1.32		$	0.66		$	0.70
Adjustments:
Settlement Expense			0.47			—			—			—
FHLB Penalty			0.35						0.35
Income tax effect of adjustments			(0.18)			—			(0.08)			—
Adjusted basic and diluted earnings per share (non-GAAP)		$	2.45		$	1.32		$	0.93		$	0.70
		As of or for the nine months ended
		September 30,
(in thousands, except per share data)		2021			2020
Per Share Data
Basic net income per common share (1) - as reported		$	1.81		$	1.32
Basic net income per common share (1) - non-GAAP			2.45			1.32
Diluted net income per common share (1) - as reported		$	1.81		$	1.32
Diluted net income per common share (1) - non-GAAP			2.45			1.32
Basic book value per common share		$	20.22		$	18.63
Diluted book value per common share		$	20.19		$	18.62
Significant Ratios:
Return on Average Assets (1) - as reported			0.92%			0.79%
Settlement and FHLB expenses, net of income tax effect			0.33%			—
Adjusted Return on Average Assets (1) (non-GAAP)			1.25%			0.79%
Return on Average Equity (1) - as reported			12.45%			9.87%
Settlement and FHLB expenses, net of income tax effect			4.43%			—
Adjusted Return on Average Equity (1) (non-GAAP)			16.88%			9.87%
Average Equity to Average Assets			10.70%			10.61%
(1) See reconcilation of this non-GAAP financial measure provided elsewhere herein.

 

View original content:https://www.prnewswire.com/news-releases/first-united-corporation-announces-third-quarter-and-year-to-date-2021-earnings-301409167.html

SOURCE First United Corporation

FAQ

What were the earnings results for FUNC in Q3 2021?

First United Corporation reported a net income of $4.4 million for Q3 2021, down from $5.0 million in Q3 2020.

What is the current state of FUNC's loan portfolio?

Gross loans increased by $16.5 million in Q3 2021, largely due to a mortgage pool purchase, despite forgiveness of $83.7 million in PPP loans.

How much did FUNC's total assets change in 2021?

Total assets decreased by $24.9 million from December 31, 2020, totaling $1.7 billion as of September 30, 2021.

What is FUNC's net interest margin for Q3 2021?

The net interest margin for Q3 2021 improved to 3.38%, compared to 3.12% for the same period in 2020.