FIRST UNITED CORPORATION ANNOUNCES FOURTH QUARTER 2023 EARNINGS

Rhea-AI Summary

First United Corporation (FUNC) reported a consolidated net income of $15.1 million for the year ended December 31, 2023, compared to $25.0 million in 2022. The bank experienced a decrease in total assets, cash balances, and investment securities, along with an increase in gross loans and a decrease in deposits. Despite industry challenges, the company achieved strong loan growth and maintained strong asset quality. However, the strategic balance sheet restructuring and branch network consolidation impacted the earnings. The net interest margin decreased, and non-interest expenses fluctuated. Overall, the company's net income decreased by $9.9 million year-over-year.

Positive

• None.

Negative

• Net income decreased by $9.9 million year-over-year
• Strategic balance sheet restructuring and branch network consolidation impacted earnings
• Net interest margin decreased
• Non-interest expenses fluctuated

Insights

Financial Analyst

The earnings report from First United Corporation reflects a mixed financial picture, with a notable year-over-year decline in net income from $25.0 million to $15.1 million. This decline is significant as it represents a 39.6% decrease, which is a substantial deviation from the industry norm where single-digit fluctuations are more common. The reported earnings per share (EPS) also saw a decrease from $3.77 to $2.25 on a basic level, which could influence investor sentiment and stock valuation.

From an investment perspective, the reduction in earnings, coupled with the balance sheet restructuring and branch network consolidation, indicates a strategic shift aimed at improving efficiency. However, the immediate impact of these strategies, including a $3.3 million loss from the sale of securities, has contributed to the lowered earnings. This loss and the net interest margin compression from 3.56% to 3.26% year-over-year suggests a challenging rate environment and competitive deposit landscape. The bank's ability to navigate these headwinds and leverage its loan growth amid industry-wide margin pressures will be crucial for its financial health going forward.

Market Research Analyst

First United Corporation's strategic decisions, such as the balance sheet restructuring and branch consolidation, reflect broader industry trends towards digitalization and efficiency. The bank's strong loan growth, particularly in commercial and residential mortgage balances, aligns with the industry shift towards higher-yielding assets amidst a rising interest rate environment. However, the decrease in cash balances and investment securities could indicate a reallocation of funds towards loans, which may affect liquidity positions.

Additionally, the decline in deposits and the shift from non-interest-bearing to interest-bearing accounts suggest a competitive market for customer deposits. This shift is likely a response to the increased rate environment, where customers seek higher yields on their deposits. The 23.6% total shareholder return reported for 2023, despite the decreased net income, highlights the bank's ability to deliver value to shareholders in a turbulent market. The long-term success of the bank's strategic adjustments will depend on their ability to balance growth, risk management and shareholder returns in a persistently volatile financial landscape.

Economist

The financial results of First United Corporation provide insights into the economic pressures faced by regional banks. The rapidly increased rate environment has led to a more expensive cost of funds, evidenced by the $5.8 million increase in interest expense year-over-year. The bank's net interest margin's contraction is indicative of the challenges in passing these higher costs onto borrowers, a common issue across the banking sector.

The provision for credit losses, which increased to $0.4 million for the fourth quarter, reflects a cautious approach to potential future loan defaults. This conservative stance is prudent given the current economic uncertainty. The bank's reported strong asset quality and the decision to restructure its balance sheet suggest a focus on long-term financial stability rather than short-term gains. Observing how these factors play out in the broader context of economic cycles will be essential for understanding the bank's resilience to potential downturns.

OAKLAND, Md., Feb. 5, 2024 /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 twelve-month periods ended December 31, 2023.  For the year ended December 31, 2023, consolidated net income was $15.1 million, or $2.25 per basic share and $2.24 per diluted share, compared to $25.0 million, or $3.77 per basic share and $3.76 per diluted share, for the year ended December 31, 2022.

According to Carissa Rodeheaver, Chairman, President and CEO, "2023 was a challenging year as we experienced industry turmoil, the impact of the rapidly increased rate environment and strong deposit competition.  Despite these challenges, we were able to limit the impact to our margin, achieve strong loan growth, maintain strong asset quality and execute several strategic items. In the fourth quarter, we accomplished a balance sheet restructuring and announced the consolidation of our branch network.  While these strategies had a short-term impact on our fourth quarter and year-to-date earnings, they position us well for greater efficiency and more positive ongoing future earnings.  I am proud of our associates and their continued commitment to providing customized financial solutions to our clients resulting in a strong 2023 total shareholder return of 23.6%." Our team has successfully assisted our customers in navigating this volatile and unpredictable financial environment."

Fourth Quarter Financial Highlights:

• Total assets at December 31, 2023 decreased by $22.3 million, or 1.2%, when compared to September 30, 2023 and increased by $57.7 million, or 3.1%, when compared to December 31, 2022. Significant changes during the fourth quarter included:
  
  
  • Cash balances decreased by $30.9 million when compared to September 30, 2023 and by $24.6 million when compared to December 31, 2022.
  • Investment securities decreased by $18.6 million when compared to September 30, 2023, and by $50.1 million when compared to December 31, 2022. During the fourth quarter of 2023, the Bank made a strategic decision to restructure its balance sheet and sold available-for-sale ("AFS") investment securities totaling $20.4 million with a book value of $24.6 million, resulting in pretax loss of $4.2 million and an after-tax loss of $3.2 million.
  • Gross loans increased by $26.6 million when compared to September 30, 2023 and by $127.2 million when compared to December 31, 2022, as:
    • commercial balances increased by $19.6 million during the fourth quarter and by $70.5 million when compared to December 31, 2022;
    • residential mortgage balances increased by $8.2 million during the fourth quarter and by $55.5 million when compared to December 31, 2022; and
    • consumer loans decreased by $1.2 million during the fourth quarter and increased by $1.2 million when compared to December 31, 2022.
  • Deposits decreased by $24.1 million when compared to September 30, 2023 and by $19.8 million when compared to December 31, 2022. The Corporation had brokered deposits of $30.0 million as of December 31, 2023 compared to $60.7 million as of September 30, 2023. There were no brokered deposits at December 31, 2022.
  • Short-term borrowings decreased by $7.9 million when compared to September 30, 2023 and by $19.1 million when compared to December 31, 2022. The decrease in quarterly balances was due primarily to seasonal fluctuations of municipal customer balances in overnight investment sweep products. The decrease from December 31, 2022 was primarily related to one large municipal customer moving approximately $12.0 million in funds from an overnight investment sweep product to a non-interest-bearing deposit product as well as regular fluctuations in other municipal customer balances.

• For the fourth quarter of 2023, consolidated net income, on a non-GAAP basis was $1.8 million, inclusive of a $3.3 million, net of tax, securities loss and $0.5 million, net of tax, of accelerated depreciation and lease termination expenses related to the announcement of the closure of four branches in February 2024.
  
  
  • Net interest margin, on a non-GAAP, fully tax equivalent ("FTE") basis, was 3.26% for the year ended December 31, 2023, compared to 3.56% for year ended December 31, 2022.
  • Net interest margin, on a non-GAAP, FTE basis, was 3.13% for the fourth quarter of 2023 compared to 3.12% for the third quarter of 2023 and 3.63% for the fourth quarter of 2022.
  • Non-interest income, excluding net gains and losses, remained stable in the fourth quarter of 2023 when compared to the third quarter of 2023 and increased by $0.3 million when compared to the fourth quarter of 2022 due to increases in wealth management income and debit card proceeds.
  • Non-interest expense decreased by $0.5 million when compared to the third quarter of 2023. This decrease was a result of a decrease of $0.5 million in net other real estate owned ("OREO") expenses due to gains on sales of properties during the quarter, and a decrease of $0.6 million in salaries and benefits, related to reduced health insurance costs and reversal of accrued executive performance-based incentives. These reductions were offset by a $0.6 million increase in occupancy and equipment costs related to the acceleration of depreciation expense and lease termination expenses associated with the branch closures. When compared to the fourth quarter of 2022, non-interest expenses increased by $0.7 million. This increase was primarily due to the $0.6 million increase in occupancy and equipment costs related to the branch closures, a $0.2 million increase in salaries and benefits as a result of increased salary expense related to new hires during 2023, increased health insurance costs offset by reductions in executive incentives, a $0.3 million increase in employee benefit plan expense, and a $0.2 million increase in marketing expenses. These increases were partially offset by a decrease of $0.6 million in net OREO expenses due to the recognition of gains on sales of properties during the fourth quarter of 2023.

Income Statement Overview

On a GAAP basis, net income was $1.8 million, inclusive of a $3.3 million, net of tax, loss on the sale of securities and $0.5 million, net of tax, accelerated depreciation and lease termination expenses related to the branch closures, for the fourth quarter of 2023 compared to $7.0 million for the fourth quarter of 2022 and $4.5 million for the third quarter of 2023. Basic and diluted net income was $0.82 per share, non-GAAP, and $0.26 per share, GAAP, for the fourth quarter of 2023, compared to basic net income of $1.05 per share and diluted net income of $1.04 per share for the fourth quarter of 2022 and $0.67 per share for the third quarter of 2023.  Exclusive of these items, net income was $5.5 million on a non-GAAP basis.

The decrease in quarterly net income, year-over-year, was primarily driven by a restructuring of the investment portfolio leading to the recognition of a $3.3 million, net of tax, loss in the fourth quarter of 2023 and $0.5 million, net of tax, accelerated depreciation and lease termination expenses related to the branch closures.   Additionally, net interest income decreased by $1.0 million year-over-year as a result of the lower net interest margin.   Interest expense increased by $5.8 million year-over-year, which was partially offset by an increase in interest income of $4.8 million.  The provision for credit losses was $0.4 million for the fourth quarter of 2023 compared to a credit to the provision of $0.7 million for the fourth quarter of 2022.  Salaries and employee benefits increased by $0.2 million due to an increase of $0.1 million in health insurance costs, as well as increased salary expense for new hires, merit increases effective April 1, 2023, partially offset by decreases in executive incentives and stock compensation.  Occupancy and equipment expenses increased by $0.6 million primarily related to the increased expenses recognized in conjunction with the announced branch closures.  Data processing expenses increased by $0.1 million, FDIC premiums increased by $0.1 million and miscellaneous expenses increased by $0.2 million primarily attributable to increased employee benefit plan expense.

When compared to the third quarter of 2023, net income decreased by $2.8 million due primarily to $3.3 million, net of tax, in recognized losses from the restructuring of the investment portfolio during the fourth quarter, as previously discussed.  Net interest income for the three months ended December 31, 2023 increased by $0.2 million driven by an increase in interest income of $1.0 million, partially offset by an increase of $0.8 million in interest expense.  Provision for credit losses increased by $0.2 million due to the continued strong loan growth, which was partially offset by the continued strong credit quality of our loan portfolio and decreased historical loss factors.  Gains on the sale of residential mortgages decreased by $0.1 million in the fourth quarter as we experienced a seasonal decline in the mortgage pipeline. Other operating income, including debit card income and trust and brokerage fees, increased by $0.1 million quarter-over-quarter.  Operating expenses decreased by $0.5 million.  Net OREO expenses decreased by $0.5 million due to gains on sales of OREO properties recognized in the fourth quarter of 2023.  Salaries and employee benefits decreased by $0.6 million primarily due to decreases in incentive compensation and health insurance costs during the quarter.  These decreases were partially offset by an increase in occupancy and equipment expenses of $0.6 million due to increased expenses recognized in conjunction with the announced branch closures as discussed earlier.

For the year ended December 31, 2023, net income was $15.1 million on a GAAP basis, inclusive of a $3.3 million, net of tax, loss on the sale of securities and $0.5 million, net of tax, in increased expenses related to the branch closures, and $18.8 million on a non-GAAP basis compared to GAAP and non-GAAP basis income of $25.0 million in 2022.  The year-over-year $9.9 million decrease in GAAP net income was driven by an increase in total operating expenses of $7.1 million.  Salaries and employee benefits increased by $3.4 due primarily to increased salary expense of $2.0 million related to new hires, the competitive environment for labor and merit increases effective April 1, 2023, increased health insurance costs of $1.0 million associated with unusually high claims and decreases of $0.4 in deferred loan costs. Occupancy and equipment expense increased by $0.7 million due primarily to accelerated depreciation and lease termination expenses associated with the announced branch closures, data processing expense increased by $0.5 million due to the implementation of new technology, and FDIC assessments increased by $0.4 million.  Other miscellaneous expenses, such as loan service fees, dues and licenses, check fraud expenses, employee benefit plan expense, and miscellaneous expenses increased by $2.0 million and professional fees increased by $0.6 million due to the $0.8 million cash receipt related to reimbursement of litigation expenses that was credited to expenses in 2022.  Provision for credit losses increased by $2.2 million when compared to prior year due to increased loan growth during 2023 and qualitative factors with the implementation of Accounting Standards Update 2016-13:  Financial Instruments- Credit Losses ("CECL").  Net losses on AFS securities increased by $4.2 million when compared to prior year due to the sale of securities in the fourth quarter of 2023.  Net interest income decreased by $0.8 million due to compression of the net interest margin as experienced industry-wide during 2023.  These increases were partially offset by increases in gains on sales of mortgages of $0.3 million, service charges on deposit accounts of $0.2 million, and $0.1 million increase in debit card income.  Income taxes were down by $3.7 million when comparing the two periods due primarily to reductions in pre-tax income.

Net Interest Income and Net Interest Margin

Net interest income, on a non-GAAP, FTE basis, decreased by $1.2 million for the fourth quarter of 2023 when compared to the fourth quarter of 2022.  This decrease was driven by an increase of $5.8 million in interest expense due to an increase of 160 basis points on interest paid on deposit accounts as well as an increase of $85.6 million in average balances of interest-bearing deposit accounts when compared to the same period of 2022.  Increased deposit pricing resulted from the continued pressure on deposits as well as a shift in the deposit portfolio mix from non-interest-bearing deposits to interest-bearing accounts including the Insured Cash Sweep ("ICS") product to ensure full FDIC insurance coverage.   Interest income increased by $4.7 million.   Interest income on loans increased by $4.2 million due to the increase of 80 basis points in overall yield on the loan portfolio as new loans were booked at higher rates as well as adjustable-rate loans repricing in correlation to the rising rate environment and an increase in average balances of $116.4 million.   Investment income decreased by $0.3 million primarily due to a decrease of $22.5 million in average balances as the Corporation made the strategic decision to reinvest cash proceeds from the investment restructure and other principal  paydowns of its investments in higher yielding loans.  The net interest margin for the three months ended December 31, 2023 was 3.13% compared to 3.63% for the three months ended December 31, 2022. 

Comparing the fourth quarter of 2023 to the third quarter of 2023, net interest income, on a non-GAAP, FTE basis, increased by $0.2 million   This increase was driven by an increase of $1.0 million in interest income offset by a $0.8 million increase in interest expense.  Interest income on loans increased by $1.2 million related to an overall increase of 22 basis points in yield as well as an increase of $34.6 million in average loan balances.  Interest expense on deposits increased by $0.8 million due to an increase of 21 basis points in the average rate paid and an increase in average deposit balances of $39.3 million during the quarter.  The increase in deposits was primarily driven by the increase of $47.9 million in money market accounts, which was partially offset by a $12.3 million decrease in savings accounts as customers moved deposit balances into a higher-yielding money market products.  Additionally, brokered deposits decreased by an average balance of $12.8 million quarter-over-quarter, as $30.1 million of brokered deposits matured in December 2023. 

Comparing the year ended December 31, 2023 to the year ended December 31, 2022, net interest income, on a non-GAAP, FTE basis, decreased by $1.1 million.  Interest expense on deposits increased by $16.0 million due to an increase in balances of $120.3 million and an increase in yield of 141 basis points.  Interest expense on long-term borrowings increased $3.5 million related to $80.0 million in Federal Home Loan Bank ("FHLB") borrowings obtained during the first quarter of 2023 and an increase in interest rates on variable rate trust preferred borrowings.  The increased interest expense resulted in an overall increase of 151 basis points on interest bearing liabilities.   This increase was partially offset by an increase of $18.4 million in interest income.   The yield on earning assets increased 78 basis points to 4.63% in 2023 compared to 3.85% in 2022 in correlation with the rising interest rate environment, new loans booked at higher rates as well as adjustable rate loans repricing.  The net margin was 3.26% in 2023 compared to 3.56% in 2022.

Non-Interest Income

Other operating income, including net (losses)/gains, for the fourth quarter of 2023 decreased by $3.9 million when compared to the same period of 2022.  The Corporation recognized $4.2 million in losses related to the sale of AFS securities in the fourth quarter of 2023.  Management executed the balance sheet restructuring to reinvest lower-yielding securities to fund its strong loan demand which is expected to increase the yield on earning assets in future quarters.  These losses were partially offset by increases in service charges, wealth management income, and gains on sales of mortgages.

On a linked quarter basis, other operating income, including net (losses)/gains, decreased by $4.3 million due primarily to the $4.2 million in losses related to the sale of AFS securities as discussed above.   In addition, gains on sales of residential mortgages decreased $0.1 million compared to the prior quarter.  These decreases were partially offset by an increase of $0.1 million in wealth management income and an increase of $0.1 million in debit card income.

Other operating income for the year ended December 31, 2023 decreased by $3.6 million when compared to 2022.  The $4.2 million loss related to the sale of AFS securities in 2023 was partially offset by a $0.2 million increase in service charges on deposit accounts, $0.1 million increase in wealth management income, and $0.3 million increase in gains on sales of residential mortgages.

Non-Interest Expense

Operating expenses increased by $0.7 million when comparing the fourth quarter of 2023 to the fourth quarter of 2022.  Occupancy and equipment expenses increased by $0.6 million related to depreciation and lease termination expenses recognized in conjunction with announced branch closures.  Salaries and employee benefits increased by $0.2 million, marketing expenses increased by $0.2 million, FDIC premiums increased by $0.1 million, data processing expenses increased by $0.1 million, and miscellaneous expenses increased by $0.2 million.   These increases were partially offset by a $0.6 million decrease in net OREO expenses due to gains from sales of OREO recognized during 2023.

Comparing the fourth quarter of 2023 to the third quarter of 2023, operating expenses decreased by $0.5 million.  This decrease was primarily attributable to a $0.5 million decrease in net OREO expenses due to gains recognized in the sale of OREO properties during the fourth quarter of 2023 and a $0.6 million decrease in salaries and employee benefits due to decreased incentive compensation and health insurance costs.   These decreases were partially offset by a $0.5 million increase in occupancy and equipment expense primarily related to depreciation and lease termination expenses recognized in conjunction with the announced branch closures.

For the year ended December 31, 2023, non-interest expenses increased by $7.1 million when compared to the year ended December 31, 2022.  Salaries and employee benefits increased by $3.4 due primarily to increased salary expense of $2.0 million related to new hires, the competitive environment for labor and merit increases effective April 1, 2023, increased health insurance costs of $1.0 million associated with unusually high claims and decreases of $0.4 in deferred loan costs. Occupancy and equipment expense increased by $0.7 million due to the expenses related to the branch closures, data processing expense increased by $0.5 million as a result of the implementation of a new sales management system, and FDIC assessments increased by $0.4 million.  Professional fees increased by $0.6 million related to increased audit expenses in correlation to the new CECL implementation and increased legal and professional expenses due to the receipt of an $0.8 million in proceeds credited to expense in 2022. Other miscellaneous expenses increased by $2.0 million primarily driven by increased check fraud related expenses of $0.5 million, increased employee benefit costs of $1.1 million, increased escrow account fees due to the rising rate environment, miscellaneous loan fees and an increase of $0.2 million in fees associated with the ICS product.

The effective income tax rates as a percentage of income for the years ended December 31, 2023 and December 31, 2022 were 22.7% and 24.5%, respectively.  The decrease in the tax rate for the 2023 period was primarily related to a new low-income housing tax credit investment in 2022 that began generating tax credits during the fourth quarter of 2022.  This tax credit will continue through 2032.

Balance Sheet Overview

Total assets at December 31, 2023 were $1.9 billion, representing a $57.7 million increase since December 31, 2022.   During 2023, cash and interest-bearing deposits in other banks decreased by $24.6 million.  In the first quarter of 2023, management made the strategic decision to obtain $61.1 million in brokered certificates of deposit and $80.0 million in FHLB borrowings to strengthen on-balance sheet liquidity in light of the disruption in the banking industry.  $30.0 million of the brokered deposits were repaid in September 2023 and during the third quarter, in anticipation of increasing rates, management pre-funded the $30.7 million of brokered deposits set to mature and be repaid in the fourth quarter of 2023 at the same rate in order to maintain cash balances and control interest expense.  Total brokered deposits outstanding at December 31, 2023 were $30.0 million. 

The investment portfolio decreased by $50.1 million since December 31, 2022 driven by management's strategic decision to restructure the balance sheet in the fourth quarter by selling $20.4 million of AFS securities and investing the proceeds into higher yielding loans for future earnings growth.  Also in the third quarter of 2023, management opted to redeem a $17.8 million tax increment bond ("TIF") at par to boost liquidity. Loans increased by $127.2 million since December 31, 2022 due primarily to growth in the commercial and residential mortgage portfolios.   Premises and equipment decreased by $3.5 million primarily due to accelerated depreciation related to announced branch closures.  Other assets, including bank owned life insurance ("BOLI") and deferred tax assets, increased by $7.0 million during 2023, as pension assets increased by $3.2 million, deferred tax assets increased by $1.3 million, and BOLI increased by $1.3 million.

Total liabilities at December 31, 2023 were $1.7 billion, representing a $47.6 million increase since December 31, 2022.   Total deposits decreased by $19.8 million since December 31, 2022.    Interest-bearing demand deposits and money market accounts increased by $23.2 million and $20.5 million, respectively, due to a shift in the deposit portfolio mix from non-interest-bearing deposits to interest-bearing accounts including the ICS product to ensure full FDIC insurance coverage, where balances grew by approximately $104.0 million.  These increases were offset by decreases in non-interest-bearing deposits of $78.9 million and savings accounts of $59.5 million as we saw businesses and consumers utilizing cash due to the rising rate and inflationary environment.  Total certificates of deposit increased by $75.0 million primarily due to an increase of $30.0 million in brokered certificates of deposits and $45.0 million in retail certificates of deposit.  Short-term borrowings decreased by $19.1 million since December 31, 2022 primarily due to one municipal customer moving funds from an overnight investment product to a non-interest bearing deposit product in 2023 as well as regular fluctuations in municipal deposit balances.  Long-term borrowings increased by $80.0 million in 2023 when compared to December 31, 2022 due to the acquisition of $80.0 million in FHLB borrowings in the first quarter of 2023. 

Total AFS and held-to-maturity ("HTM") securities totaled $311.5 million at December 31, 2023, representing a $50.1 million decrease compared to December 31, 2022.   In the third quarter of 2023, management elected to redeem $17.8 million from a non-rated municipal TIF bond at par. During December of 2023, management made a strategic decision to restructure the balance sheet by selling sold available-for-sale ("AFS") investment securities totaling $20.4 million with a book value of $24.6 million, resulting in an after-tax loss of $3.2 million.  The securities had a weighted average book yield of approximately 1.3% and a weighted average life of approximately 6.65 years.   The proceeds from the sale will be used to fund loans with a conservative approximate average rate of 7.85%.  The Bank projects that the earn-back period will be approximately 3.3 years.  Additional decreases in the investment portfolio were primarily related to normal principal amortization.   Proceeds from sales and principal amortization during 2023 were used primarily to enhance on-balance sheet liquidity and to fund loan growth throughout the year.

Outstanding loans of $1.4 billion at December 31, 2023 reflected growth of $127.2 million in 2023.  Since December 31, 2022, commercial real estate loans increased by $34.9 million, acquisition and development loans increased by $6.5 million and commercial and industrial loans increased by $29.2 million.  Growth in the commercial portfolios was driven by increased activity with existing clients as well as cultivating new business relationships.  Residential mortgage loans increased $55.5 million related to management's strategic decision to book new mortgage loans at higher rates to our in-house portfolio. The consumer loan portfolio increased slightly by $1.2 million.  

New commercial loan production for the three months ended December 31, 2023 was approximately $36.3 million.  The pipeline of commercial loans as of December 31, 2023 was approximately $22.0 million.  At December 31, 2023, unfunded, committed commercial construction loans totaled approximately $29.6 million. Commercial amortization and payoffs were approximately $151.6 million through December 31, 2023 due primarily to pay-offs of short-term commercial loans as well as normal amortizations of the commercial loan portfolio.

New residential mortgage loan production for the fourth quarter of 2023 was approximately $17.8 million, with most of this production comprised of in-house loans.  The pipeline of in-house, portfolio loans as of December 31, 2023 was $7.0 million.  The residential mortgage production level declined in the fourth quarter of 2023 due to the increasing interest rates and seasonality of this line of business.  Unfunded commitments related to residential construction loans totaled $17.6 million on December 31, 2023.  Beginning in the second quarter of 2023, management began shifting more activity towards the secondary market.

Total deposits at December 31, 2023 decreased by $19.8 million when compared to December 31, 2022.  In March 2023, the Corporation obtained $61.1 million in new brokered deposits.  In August 2023, the Corporation obtained $30.0 million of brokered deposits to pre-fund the maturity of a $30.4 million brokered certificate of deposit that matured in September 2023.  In December 2023, $30.6 million in brokered deposits matured and were repaid.  In addition, retail certificates of deposit increased by $45.0 million due primarily to a promotional nine-month certificate of deposit product offered in 2023.  Interest-bearing demand deposits increased by $23.2 million and money market accounts increased by $20.5 million due to a shift in the deposit portfolio mix from non-interest-bearing accounts to interest-bearing accounts including the ICS product to ensure full FDIC insurance.  These increases were offset by decreases in non-interest-bearing deposits of $78.9 million and savings accounts of $59.5 million due to the shift to interest-bearing demand deposit accounts, two relationships having large, planned deposit withdrawals totaling $39.5 million during 2023 to fund business activity, the effects of consumer and commercial spending and the competitive market for deposits. 

The book value of the Corporation's common stock was $24.38 per share at December 31, 2023 compared to $22.77 per share at December 31, 2022.  At December 31, 2023, there were 6,639,888 of basic outstanding shares and 6,653,200 of diluted outstanding shares of common stock.  The increase in the book value at December 31, 2023 was due to the undistributed net income of $9.6 million during 2023, which was partially offset by a decrease in shareholders' equity of $2.2 million, net of tax, due to the adoption of CECL (Accounting Standards Codification Topic 326). Accumulated other comprehensive income increased by $3.2 million due primarily to changes in the increased fair values of the Corporation's available for sale investment securities, the reduction of the Corporation's investment portfolio from the sale of investments in the fourth quarter and pension assets during the year.  In 2023, the Corporation purchased and retired 82,098 shares of the Corporation's common stock at an average price of $16.79 per share pursuant to the previously announced stock repurchase program.   The program, the term of which expires on August 18, 2024 unless sooner terminated or extended by the Corporation's Board of Directors, may be further utilized as the Board and management deem appropriate.

Asset Quality

On January 1, 2023, the Corporation adopted CECL, which replaced the incurred loss impairment model with an expected loss model.  As a result of the CECL adoption, the Corporation recorded a transition adjustment of $2.2 million, net of $0.7 million in tax, to retained earnings as of January 1, 2023 for the cumulative effect of the adoption of CECL.  The Corporation recorded a $2.0 million increase to the ACL related to loans and a $0.9 million increase to the allowance for credit losses (the "ACL") on off balance sheet exposures.

For periods prior to the adoption of CECL, the Corporation recognized credit losses for loans that were collectively evaluated for impairment based on an incurred loss approach, which limited our measurement of credit losses to credit events that were estimated to have already occurred.  The allowance for loan losses (the "ALL") under the incurred model was a valuation allowance for probable incurred losses inherent in the loan portfolio.  Management made the determination by taking into consideration historical loan loss experience, diversification of the loan portfolio, amount of secured and unsecured loans, banking industry standards and averages, and general economic conditions.  Credit losses were charged against the ALL when the loan balance was confirmed uncollectible.  Subsequent recoveries, if any, were credited to the ALL.  Ultimate losses varied from current estimates.  The estimates were reviewed periodically and as adjustments became necessary, they were reported in earnings in the periods in which they become reasonably estimable.

The ACL was $17.5 million at December 31, 2023 compared to an ALL of $14.6 million at December 31, 2022.  The provision for credit losses was $0.4 million for the quarter ended December 31, 2023, compared to a credit to provision of $0.7 million for the quarter ended December 31, 2022.  The provision expense recorded in the fourth quarter of 2023 was primarily related to strong loan growth and increases in qualitative risk factors related to the uncertainty of the economy, inflation levels, and rising interest rates, which was partially offset by the reduction of historical loss factors related to the strength of our overall portfolio.  Net charge-offs of $0.2 million were recorded for the quarters ended December 31, 2023 and 2022.  The ratio of the ACL to loans outstanding was 1.24% at December 30, 2023 and September 30, 2023 and 1.14% at December 31, 2022. 

The ratio of year-to-date net charge offs to average loans for the year ending December 31, 2023 was an annualized 0.07%, compared to net charge offs to average loans of 0.06% for 2022.  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 (Charge Offs)/Recoveries to Average Loans
	12/31/2023	12/31/2022
Loan Type	(Charge Off) / Recovery	(Charge Off) / Recovery
Commercial Real Estate	(0.02 %)	0.00 %
Acquisition & Development	0.01 %	0.00 %
Commercial & Industrial	(0.09 %)	(0.02 %)
Residential Mortgage	0.00 %	0.03 %
Consumer	(1.04 %)	(1.23 %)
Total Net (Charge Offs)/Recoveries	(0.07 %)	(0.06 %)

Non-accrual loans totaled $4.0 million at December 31, 2023 and $3.5 million at December 31, 2022.  OREO balances decreased by $0.2 million to $4.5 million since December 31, 2022 due to sales of OREO properties in the fourth quarter of 2023, which was partially offset by the addition of a new OREO property during the second quarter of 2023.  OREO is comprised primarily of $4.0 for one property which has been marked to market and is currently under contract with a targeted settlement in the second quarter of 2024.

Non-accrual loans that have been subject to partial charge-offs totaled $0.1 million at December 31, 2023 and $0.2 million at December 31, 2022.  Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $1.8 million at December 31, 2023.  There were no loans subject to foreclosure at December 31, 2022.   As a percentage of the loan portfolio, accruing loans past due 30 days or more were 0.24% at December 31, 2023 compared to 0.27% at September 30, 2023 and 0.16% at December 31, 2022. 

ABOUT FIRST UNITED CORPORATION

First United Corporation is a Maryland corporation chartered in 1985 and a financial holding company registered with the Board of Governors of the Federal Reserve System (the "FRB") under the Bank Holding Company Act of 1956, as amended, that elected financial holding company status in 2021.  The Corporation's primary business is serving as the parent company of First United Bank & Trust, a Maryland trust company (the "Bank"), First United Statutory Trust I ("Trust I") and First United Statutory Trust II ("Trust II" and together with Trust I, "the Trusts"), both Connecticut statutory business trusts.  The Trusts were formed for the purpose of selling trust preferred securities that qualified as Tier 1 capital.  The Bank has two consumer finance company subsidiaries- Oak First Loan Center, Inc., a West Virginia corporation, and OakFirst Loan Center, LLC, a Maryland limited liability company – and two subsidiaries that it uses to hold real estate acquired through foreclosure or by deed in lieu of foreclosure – First OREO Trust, a Maryland statutory trust, and FUBT OREO I, LLC, a Maryland limited liability company.  In addition, the Bank owns 99.9% of the limited partnership interests in Liberty Mews Limited Partnership, a Maryland limited partnership formed for the purpose of acquiring, developing and operating low-income housing units in Garrett County, Maryland ("Limited Mews"), and a 99.9% non-voting membership interest in MCC FUBT Fund, LLC, an Ohio limited liability company formed for the purpose of acquiring, developing and operating low-income housing units in Allegany County, Maryland (the "MCC Fund").   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 Annual Report on Form 10-K for the quarter ended December 31, 2023 and the impact that any such events have on our critical accounting assumptions and estimates made as of December 31, 2023, 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				Twelve Months Ended
			December 31,		December 31,		December 31,		December 31,
			2023		2022		2023		2022
Results of Operations:
Interest income			$                 22,191		$                 17,359		$                 81,156		$                  62,422
Interest expense			7,997		2,179		24,286		4,789
Net interest income			14,194		15,180		56,870		57,633
Provision/(credit) for credit/loan losses			419		(736)		1,620		(627)
Other operating income			4,793		4,479		18,331		17,878
Net (losses)/gains			(4,184)		11		(3,862)		172
Other operating expense			12,309		11,590		50,243		43,129
Income before taxes			$                   2,075		$                   8,816		$                 19,476		$                  33,181
Income tax expense			317		1,847		4,416		8,133
Net income			$                   1,758		$                   6,969		$                 15,060		$                  25,048
Per share data:
Basic net income per share			$                     0.26		$                     1.05		$                     2.25		$                      3.77
Diluted net income per share			$                     0.26		$                     1.04		$                     2.24		$                      3.76
Dividends declared per share			$                     0.20		$                     0.18		$                     0.80		$                      0.63
Book value			$                   24.38		$                   22.77
Diluted book value			$                   24.33		$                   22.68
Tangible book value per share			$                   22.56		$                   20.91
Diluted Tangible book value per share			$                   22.51		$                   20.87
Closing market value			$                   23.51		$                   19.65
Market Range:
High			$                   23.51		$                   20.56
Low			$                   16.12		$                   16.74
Shares outstanding at period end: Basic			6,639,888		6,666,428
Shares outstanding at period end: Diluted			6,653,200		6,692,039
Performance ratios: (Year to Date Period End, annualized)
Return on average assets			0.78 %		1.39 %
Return on average shareholders' equity			9.68 %		18.19 %
Net interest margin (Non-GAAP), includes tax exempt income of $792 and $942			3.26 %		3.56 %
Net interest margin GAAP			3.22 %		3.50 %
Efficiency ratio - non-GAAP (1)			65.12 %		56.27 %
(1) 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.			December 31,		December 31
			2023		2022
Financial Condition at period end:
Assets			$           1,905,860		$           1,848,169
Earning assets			$           1,725,236		$           1,643,964
Gross loans			$           1,406,667		$           1,279,494
Commercial Real Estate			$              493,703		$              458,831
Acquisition and Development			$                77,060		$                70,596
Commercial and Industrial			$              274,604		$              245,396
Residential Mortgage			$              499,871		$              444,411
Consumer			$                61,429		$                60,260
Investment securities			$              311,466		$              361,548
Total deposits			$           1,550,977		$           1,570,733
Noninterest bearing			$              427,670		$              506,613
Interest bearing			$           1,123,307		$           1,064,120
Shareholders' equity			$              161,873		$              151,793
			.
Capital ratios:
Tier 1 to risk weighted assets			14.42 %		15.06 %
Common Equity Tier 1 to risk weighted assets			12.44 %		12.95 %
Tier 1 Leverage			11.30 %		11.46 %
Total risk based capital			15.64 %		16.12 %
Asset quality:
Net charge-offs for the quarter			$                    (195)		$                    (164)
Nonperforming assets: (Period End)
Nonaccrual loans			$                  3,956		$                  3,495
Loans 90 days past due and accruing			543		307
Total nonperforming loans and 90 day past due			$                  4,499		$                  3,802
Modified/Restructured loans			$                          -		$                  3,028
Other real estate owned			$                  4,493		$                  4,733
Allowance for credit losses to gross loans			1.24 %		1.14 %
Allowance for credit losses to non-accrual loans			441.86 %		418.77 %
Allowance for credit losses to non-performing assets			194.40 %		171.48 %
Non-performing and 90 day past due loans to total loans			0.32 %		0.30 %
Non-performing loans and 90 day past due loans to total assets			0.24 %		0.21 %
Non-accrual loans to total loans			0.28 %		0.27 %
Non-performing assets to total assets			0.47 %		0.46 %

 

FIRST UNITED CORPORATION
Oakland, MD
Stock Symbol :  FUNC
Financial Highlights - Unaudited
			December 31,	September 30,	June 30,	March 31,		December 31,	September 30,	June 30,	March 31,
(Dollars in thousands, except per share data)			2023	2023	2023	2023		2022	2022	2022	2022
Results of Operations:
Interest income			$             22,191	$                 21,164	$         19,972	$         17,829		$                17,359	$               16,185	$            14,731	$            14,147
Interest expense			7,997	7,180	5,798	3,311		2,179	1,044	760	806
Net interest income			14,194	13,984	14,174	14,518		15,180	15,141	13,971	13,341
Provision/(credit) for credit/loan losses			419	263	395	543		(736)	(101)	631	(421)
Other operating income			4,793	4,716	4,483	4,339		4,479	4,604	4,413	4,382
Net gains			(4,184)	182	86	54		11	96	13	52
Other operating expense			12,309	12,785	12,511	12,638		11,590	10,329	10,630	10,580
Income before taxes			$                2,075	$                   5,834	$            5,837	$           5,730		$                 8,816	$                 9,613	$              7,136	$              7,616
Income tax expense			317	1,321	1,423	1,355		1,847	2,677	1,708	1,901
Net income			$                1,758	$                   4,513	$            4,414	$           4,375		$                 6,969	$                 6,936	$              5,428	$              5,715
Per share data:
Basic net income per share			$                   0.26	$                      0.67	$               0.66	$              0.66		$                    1.05	$                   1.04	$                 0.82	$                 0.86
Diluted net income per share			$                   0.26	$                      0.67	$               0.66	$              0.65		$                    1.04	$                   1.04	$                 0.82	$                 0.86
Dividends declared per share			$                   0.20	$                      0.20	$               0.20	$              0.20		$                    0.18	$                   0.15	$                 0.15	$                 0.15
Book value			$                 24.38	$                    23.08	$             23.12	$            22.85		$                  22.77	$                 19.83	$               19.97	$               20.65
Diluted book value			$                 24.33	$                    23.03	$             23.07	$            22.81		$                  22.68	$                 19.80	$               19.93	$               20.63
Tangible book value per share			$                 22.56	$                    21.27	$             21.29	$            21.01		$                  20.91	$                 18.03	$               18.17	$               18.83
Diluted Tangible book value per share			$                 22.51	$                    21.22	$             21.25	$            20.96		$                  20.87	$                 18.00	$               18.14	$               18.82
Closing market value			$                 23.51	$                    16.23	$             14.26	$            16.89		$                  19.65	$                 16.55	$               18.76	$               22.53
Market Range:
High			$                 23.51	$                    17.34	$             17.01	$            20.41		$                  20.56	$                 19.27	$               23.80	$               24.50
Low			$                 16.12	$                    13.70	$             12.56	$            16.75		$                  16.74	$                 16.18	$               17.50	$               18.81
Shares outstanding at period end: Basic			6,639,888	6,715,170	6,711,422	6,688,710		6,666,428	6,659,390	6,656,395	6,637,979
Shares outstanding at period end: Diluted			6,653,200	6,728,482	6,724,734	6,703,252		6,692,039	6,669,785	6,666,790	6,649,604
Performance ratios: (Year to Date Period End, annualized)
Return on average assets			0.78 %	0.93 %	0.95 %	0.94 %		1.39 %	1.35 %	1.26 %	1.31 %
Return on average shareholders' equity			9.68 %	11.44 %	11.43 %	11.87 %		18.19 %	17.66 %	16.25 %	16.49 %
Net interest margin (Non-GAAP), includes tax exempt income of $76 and $241			3.26 %	3.30 %	3.39 %	3.53 %		3.56 %	3.53 %	3.46 %	3.40 %
Net interest margin GAAP			3.22 %	3.25 %	3.34 %	3.48 %		3.50 %	3.47 %	3.40 %	3.34 %
Efficiency ratio - non-GAAP (1)			65.12 %	66.41 %	66.00 %	67.02 %		56.27 %	51.49 %	57.11 %	58.81 %
(1) 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.			December 31,	September 30,	June 30,	March 31,		December 31,	September 30,	June 30,	March 31,
			2023	2023	2023	2023		2022	2022	2022	2022
Financial Condition at period end:
Assets			$          1,905,860	$             1,928,201	$      1,928,393	$     1,937,442		$           1,848,169	$          1,803,642	$        1,752,455	$        1,760,325
Earning assets			$          1,725,236	$             1,717,244	$      1,707,522	$     1,652,688		$           1,643,964	$          1,647,303	$        1,608,094	$        1,572,737
Gross loans			$          1,406,667	$             1,380,019	$      1,350,038	$     1,289,080		$           1,279,494	$          1,277,924	$        1,233,613	$        1,181,401
Commercial Real Estate			$             493,703	$                491,284	$         483,485	$        453,356		$              458,831	$             437,973	$           421,942	$           391,136
Acquisition and Development			$               77,060	$                  79,796	$           79,003	$          76,980		$                70,596	$               83,107	$           116,115	$           133,031
Commercial and Industrial			$             274,604	$                254,650	$         249,683	$        241,959		$              245,396	$             269,004	$           225,640	$           194,914
Residential Mortgage			$             499,871	$                491,686	$         475,540	$        456,198		$              444,411	$             427,093	$           406,293	$           399,704
Consumer			$               61,429	$                  62,603	$           62,327	$          60,587		$                60,260	$               60,747	$             63,623	$             62,616
Investment securities			$             311,466	$                330,053	$         350,844	$        357,061		$              361,548	$             366,484	$           373,455	$           385,265
Total deposits			$          1,550,977	$             1,575,069	$      1,579,959	$     1,591,285		$           1,570,733	$          1,511,118	$        1,484,354	$        1,507,555
Noninterest bearing			$             427,670	$                429,691	$         466,628	$        468,554		$              506,613	$             474,444	$           527,761	$           530,901
Interest bearing			$          1,123,307	$             1,145,378	$      1,113,331	$     1,122,731		$           1,064,120	$          1,036,674	$           956,593	$           976,654
Shareholders' equity			$             161,873	$                154,990	$         155,156	$        152,868		$              151,793	$             132,044	$           132,892	$           137,038
Capital ratios:
Tier 1 to risk weighted assets			14.42 %	14.60 %	14.40 %	14.90 %		15.06 %	14.40 %	14.31 %	14.55 %
Common Equity Tier 1 to risk weighted assets			12.44 %	12.60 %	12.40 %	12.82 %		12.95 %	12.36 %	12.27 %	12.45 %
Tier 1 Leverage			11.30 %	11.25 %	11.25 %	11.47 %		11.46 %	11.23 %	11.23 %	10.94 %
Total risk based capital			15.64 %	15.81 %	15.60 %	16.15 %		16.12 %	15.50 %	15.46 %	15.71 %
Asset quality:
Net (charge-offs)/recoveries for the quarter			$                  (195)	$                       (83)	$              (398)	$             (245)		$                   (164)	$                    (89)	$                (179)	$                 (244)
Nonperforming assets: (Period End)
Nonaccrual loans			$                3,956	$                   3,479	$            2,972	$           3,258		$                 3,495	$                1,943	$              2,149	$               2,332
Loans 90 days past due and accruing			543	145	160	87		307	569	$                 325	37
								0
Total nonperforming loans and 90 day past due			$                 4,499	$                    3,624	$             3,132	$           3,345		$                 3,802	$                2,512	$              2,474	$               2,369
Modified/restructured loans			$                         -	$                            -	$                     -	$                   -		$                 3,028	$                3,354	$              3,226	$               3,228
Other real estate owned			$                 4,493	$                    4,878	$             4,482	$           4,598		$                 4,733	$                4,733	$              4,517	$               4,477
Allowance for credit losses to gross loans			1.24 %	1.24 %	1.25 %	1.31 %		1.14 %	1.22 %	1.28 %	1.29 %
Allowance for credit losses to non-accrual loans			441.86 %	492.84 %	568.81 %	517.83 %		418.77 %	799.85 %	732.29 %	655.75 %
Allowance for credit losses to non-performing assets			194.40 %	473.12 %	539.79 %	212.40 %		171.48 %	214.51 %	225.10 %	223.37 %
Non-performing and 90 day past due loans to total loans			0.32 %	0.26 %	0.23 %	0.26 %		0.30 %	0.20 %	0.20 %	0.20 %
Non-performing loans and 90 day past due loans to total assets			0.24 %	0.19 %	0.16 %	0.17 %		0.21 %	0.14 %	0.14 %	0.13 %
Non-accrual loans to total loans			0.28 %	0.25 %	0.22 %	0.25 %		0.27 %	0.15 %	0.17 %	0.20 %
Non-performing assets to total assets			0.47 %	0.44 %	0.39 %	0.41 %		0.46 %	0.40 %	0.40 %	0.39 %

 

Consolidated Statement of Condition
(Dollars in thousands - Unaudited)		December 31, 2023		September 30, 2023		June 30,  2023		March 31, 2023	December 31, 2022
Assets
Cash and due from banks	$	48,343	$	78,939	$	86,901	$	154,022	$	72,420
Interest bearing deposits in banks		1,410		1,713		1,650		1,873		1,895
Cash and cash equivalents		49,753		80,652		88,551		155,895		74,315
Investment securities – available for sale (at fair value)		97,169		114,370		120,085		123,978		125,889
Investment securities – held to maturity (at cost)		214,297		215,683		230,759		233,083		235,659
Restricted investment in bank stock, at cost		5,250		5,251		4,490		4,490		1,027
Loans held for sale		443		208		500		184		—
Loans		1,406,667		1,380,019		1,350,038		1,289,080		1,279,494
Unearned fees		(340)		(371)		(327)		(257)		(174)
Allowance for credit losses		(17,480)		(17,146)		(16,905)		(16,871)		(14,636)
Net loans		1,388,847		1,362,502		1,332,806		1,271,952		1,264,684
Premises and equipment, net		31,459		32,766		33,532		34,207		34,948
Goodwill and other intangible assets		12,103		12,185		12,268		12,350		12,433
Bank owned life insurance		47,607		47,282		46,963		46,652		46,346
Deferred tax assets		11,948		13,020		11,771		11,356		10,605
Other real estate owned, net		4,493		4,878		4,842		4,598		4,733
Operating lease asset		1,367		1,905		1,990		2,072		1,898
Accrued interest receivable and other assets		41,124		37,499		39,836		36,625		35,632
Total Assets	$	1,905,860	$	1,928,201	$	1,928,393	$	1,937,442	$	1,848,169
Liabilities and Shareholders' Equity
Liabilities:
Non-interest bearing deposits	$	427,670	$	429,691	$	466,628	$	468,554	$	506,613
Interest bearing deposits		1,123,307		1,145,378		1,113,331		1,122,731		1,064,120
Total deposits		1,550,977		1,575,069		1,579,959		1,591,285		1,570,733
Short-term borrowings		45,418		53,330		50,078		52,030		64,565
Long-term borrowings		110,929		110,929		110,929		110,929		30,929
Operating lease liability		1,556		2,347		2,443		2,536		2,373
Allowance for credit loss on off balance sheet exposures		873		985		1,089		1,128		133
Accrued interest payable and other liabilities		32,904		29,207		27,397		25,332		26,444
Dividends payable		1,330		1,344		1,342		1,334		1,199
Total Liabilities		1,743,987		1,773,211		1,773,237		1,784,574		1,696,376
Shareholders' Equity:
Common Stock – par value $0.01 per share; Authorized 25,000,000 shares; issued and outstanding 6,715,170 shares at September 30, 2023 and 6,666,428 at December 31, 2022		66		67		67		67		67
Surplus		23,734		25,029		24,901		24,529		24,409
Retained earnings		173,900		173,467		170,298		167,229		166,343
Accumulated other comprehensive loss		(35,827)		(43,573)		(40,110)		(38,957)		(39,026)
Total Shareholders' Equity		161,873		154,990		155,156		152,868		151,793
Total Liabilities and Shareholders' Equity	$	1,905,860	$	1,928,201	$	1,928,393	$	1,937,442	$	1,848,169

 

Historical Income Statement
		2023									2022
		Year to Date		Q4		Q3	Q2		Q1			Year to Date		Q4	Q3		Q2		Q1
In thousands	(Unaudited)
Interest income
Interest and fees on loans	$	69,569	$	19,290	$	18,055	$	16,780	$	15,444	$	54,448	$	15,097	$	14,058	$	12,861	$	12,432
Interest on investment securities
Taxable		7,173		1,834		1,792		1,779		1,768		6,252		1,719		1,587		1,540		1,406
Exempt from federal income tax		714		53		123		268		270		1,106		272		273		279		282
Total investment income		7,887		1,887		1,915		2,047		2,038		7,358		1,991		1,860		1,819		1,688
Other		3,700		1,014		1,194		1,145		347		616		271		267		51		27
Total interest income		81,156		22,191		21,164		19,972		17,829		62,422		17,359		16,185		14,731		14,147
Interest expense
Interest on deposits		19,198		6,498		5,672		4,350		2,678		3,226		1,729		621		401		475
Interest on short-term borrowings		147		54		33		29		31		112		26		47		21		18
Interest on long-term borrowings		4,941		1,445		1,475		1,419		602		1,451		424		376		338		313
Total interest expense		24,286		7,997		7,180		5,798		3,311		4,789		2,179		1,044		760		806
Net interest income		56,870		14,194		13,984		14,174		14,518		57,633		15,180		15,141		13,971		13,341
Credit loss expense
Loans		1,700		530		322		434		414		(643)		(740)		(108)		624		(419)
Debt securities held to maturity		45		—		45		—		—		—		—		—		—		—
Off balance sheet credit exposures		(125)		(111)		(104)		(39)		129		16		4		7		7		(2)
Provision/(credit) for credit/loan losses		1,620		419		263		395		543		(627)		(736)		(101)		631		(421)
Net interest income after provision for loan losses		55,250		13,775		13,721		13,779		13,975		58,260		15,916		15,242		13,340		13,762
Other operating income
Net (losses)/gains on investments, available for sale		(4,214)		(4,214)		—		—		—		3		—		—		—		3
Net (losses)/gains on investments, held to maturity		—		—		—		—		—		91		(2)		93		—		—
Gains on sale of residential mortgage loans		381		59		182		86		54		45		14		3		7		21
Gains/(losses) on disposal of fixed assets		(29)		(29)		—		—		—		33		(1)		—		6		28
Net gains		(3,862)		(4,184)		182		86		54		172		11		96		13		52
Other Income
Service charges on deposit accounts		2,198		567		569		546		516		1,981		530		523		463		465
Other service charges		929		223		230		244		232		925		239		241		232		213
Trust department		8,282		2,148		2,139		2,025		1,970		8,244		2,006		2,005		2,044		2,189
Debit card income		4,101		1,120		995		1,031		955		3,958		1,036		1,053		983		886
Bank owned life insurance		1,261		325		320		311		305		1,196		305		302		297		292
Brokerage commissions		1,160		360		245		258		297		1,049		244		272		313		220
Other		400		50		218		68		64		525		119		208		81		117
Total other income		18,331		4,793		4,716		4,483		4,339		17,878		4,479		4,604		4,413		4,382
Total other operating income		14,469		609		4,898		4,569		4,393		18,050		4,490		4,700		4,426		4,434
Other operating expenses
Salaries and employee benefits		27,503		6,391		6,957		6,865		7,290		24,130		6,239		6,130		5,793		5,968
FDIC premiums		992		268		254		277		193		636		157		150		155		174
Equipment		4,356		1,188		1,029		1,047		1,092		4,163		1,053		1,037		1,029		1,044
Occupancy		3,445		1,171		747		743		784		2,906		734		734		711		727
Data processing		3,980		1,054		1,011		946		969		3,444		928		890		805		821
Marketing		762		288		220		137		117		543		134		152		151		106
Professional services		2,160		630		490		522		518		1,538		665		(211)		564		520
Contract labor		643		172		173		159		139		618		136		159		158		165
Telephone		466		125		115		116		110		482		117		112		139		114
Other real estate owned		(89)		(370)		139		18		124		590		215		128		152		95
Investor relations		345		73		83		132		57		300		42		39		123		96
Contributions		229		12		74		79		64		288		104		121		42		21
Other		5,451		1,307		1,493		1,470		1,181		3,491		1,066		888		808		729
Total other operating expenses		50,243		12,309		12,785		12,511		12,638		43,129		11,590		10,329		10,630		10,580
Income before income tax expense		19,476		2,075		5,834		5,837		5,730		33,181		8,816		9,613		7,136		7,616
Provision for income tax expense		4,416		317		1,321		1,423		1,355		8,133		1,847		2,677		1,708		1,901
Net Income	$	15,060	$	1,758	$	4,513	$	4,414	$	4,375	$	25,048	$	6,969	$	6,936	$	5,428	$	5,715
Basic net income per common share	$	2.25	$	0.26	$	0.67	$	0.66	$	0.66	$	3.77	$	1.05	$	1.04	$	0.82	$	0.86
Diluted net income per common share	$	2.24	$	0.26	$	0.67	$	0.66	$	0.65	$	3.76	$	1.04	$	1.04	$	0.82	$	0.86
Weighted average number of basic shares outstanding		6,649		6,649		6,714		6,704		6,675		6,666		6,666		6,658		6,650		6,628
Weighted average number of diluted shares outstanding		6,663		6,663		6,728		6,718		6,697		6,692		6,692		6,669		6,661		6,636
Dividends declared per common share	$	0.80	$	0.20	$	0.20	$	0.20	$	0.20	$	0.63	$	0.18	$	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 exclude losses on the sale of Available for Sale securities and accelerated depreciation and lease termination expenses related to the branch closures.
		Twelve months ended December 31,						Three months ended December 31,
		2023			2022			2023			2022
(in thousands, except for per share amount)
Net income - as reported		$	15,060		$	25,048		$	1,758		$	6,969
Adjustments:
Loss on sale of securities			4,214			—			4,214			—
Accelerated depreciation and lease termination expenses			623			—			623			—
Income tax effect of adjustments			(1,097)			—			(1,097)			—
Adjusted net income (non-GAAP)		$	18,800		$	25,048		$	5,498		$	6,969
Diluted earnings per share - as reported		$	2.24		$	3.76		$	0.26		$	1.04
Adjustments:
Loss on sale of securities			0.63			—			0.63			—
Accelerated depreciation and lease termination expenses			0.09			—			0.09			—
Income tax effect of adjustments			(0.16)			—			(0.16)			—
Adjusted basic and diluted earnings per share (non-GAAP)		$	2.80		$	3.76		$	0.82		$	1.04
		As of or for the twelve months ended
		December 31,
(in thousands, except per share data)		2023			2022
Per Share Data
Basic net income per share (1) - as reported		$	2.25		$	3.77
Basic net income per share (1) - non-GAAP			2.81			3.77
Diluted net income per share (1) - as reported		$	2.24		$	3.76
Diluted net income per share (1) - non-GAAP			2.80			3.76
Basic book value per share		$	24.38		$	22.77
Diluted book value per share		$	24.33		$	22.68
Significant Ratios:
Return on Average Assets (1) - as reported			0.78 %			1.39 %
Loss on sale of securities			0.22 %			—
Accelerated depreciation and lease termination expenses			0.03 %			—
Income tax effect of adjustments			(0.06 %)			—
Adjusted Return on Average Assets (1) (non-GAAP)			0.97 %			1.39 %
Return on Average Equity (1) - as reported			9.68 %			18.19 %
Loss on sale of securities			2.71 %			—
Accelerated depreciation and lease termination expenses			0.40 %			—
Income tax effect of adjustments			(0.71 %)			—
Adjusted Return on Average Equity (1) (non-GAAP)			12.08 %			18.19 %
(1) See reconcilation of this non-GAAP financial measure provided elsewhere herein.

 

		Three Months Ended
		December 31,
		2023								2022
(dollars in thousands)		Average Balance			Interest			Average Yield/Rate		Average Balance			Interest			Average Yield/Rate
Assets
Loans		$	1,398,393		$	19,308		5.48	%	$	1,281,958		$	15,114		4.68	%
Investment Securities:
Taxable			332,545			1,834		2.19	%		336,727			1,719		2.03	%
Non taxable			8,107			96		4.70	%		26,457			487		7.30	%
Total			340,652			1,930		2.25	%		363,184			2,206		2.41	%
Federal funds sold			60,400			907		5.96	%		35,403			247		2.77	%
Interest-bearing deposits with other banks			1,867			22		4.68	%		1,568			12		3.04	%
Other interest earning assets			5,251			85		6.42	%		1,027			12		4.64	%
Total earning assets			1,806,563			22,252		4.89	%		1,683,140			17,591		4.15	%
Allowance for loan losses			(17,304)								(15,446)
Non-earning assets			194,309								177,581
Total Assets		$	1,983,568							$	1,845,275
Liabilities and Shareholders' Equity
Interest-bearing demand deposits		$	366,450		$	1,440		1.56	%	$	316,361		$	486		0.61	%
Interest-bearing money markets			365,439			3,135		3.40	%		367,866			909		0.98	%
Savings deposits			196,777			51		0.10	%		253,674			84		0.13	%
Time deposits - retail			163,253			1,122		2.73	%		124,417			250		0.80	%
Time deposits - brokered			56,006			751		5.32	%		—			—		—	%
Short-term borrowings			43,693			55		0.50	%		66,399			26		0.16	%
Long-term borrowings			110,929			1,445		5.17	%		30,929			424		5.44	%
Total interest-bearing liabilities			1,302,547			7,999		2.44	%		1,159,646			2,179		0.75	%
Non-interest-bearing deposits			487,012								508,906
Other liabilities			35,957								36,499
Shareholders' Equity			158,052								140,224
Total Liabilities and Shareholders' Equity		$	1,983,568							$	1,845,275
Net interest income and spread					$	14,253		2.44	%				$	15,412		3.40	%
Net interest margin								3.13	%							3.63	%

 

		Twelve Months Ended
		December 31,
		2023								2022
(dollars in thousands)		Average Balance			Interest			Average Yield/ Rate		Average Balance			Interest			Average Yield/ Rate
Assets
Loans		$	1,340,118		$	69,631		5.20	%	$	1,223,388		$	54,513		4.46	%
Investment Securities:
Taxable			335,888			7,173		2.14	%		348,516			6,252		1.79	%
Non taxable			18,471			1,279		6.92	%		26,952			1,981		7.35	%
Total			354,359			8,452		2.39	%		375,468			8,233		2.19	%
Federal funds sold			65,131			3,409		5.23	%		44,207			555		1.26	%
Interest-bearing deposits with other banks			2,585			92		3.56	%		3,061			24		0.78	%
Other interest earning assets			4,048	#		198		4.89	%		1,027			37		3.60	%
Total earning assets			1,766,241			81,782		4.63	%		1,647,151			63,362		3.85	%
Allowance for loan losses			(16,561)								(15,568)
Non-earning assets			199,474								170,128
Total Assets		$	1,949,154							$	1,801,711
Liabilities and Shareholders' Equity
Interest-bearing demand deposits		$	362,070		$	4,815		1.30	%	$	301,183		$	855		0.28	%
Interest-bearing money markets			333,274			8,672		2.60	%		312,978			1,256		0.40	%
Savings deposits			219,516			240		0.11	%		250,624			154		0.06	%
Time deposits - retail			141,921			2,872		2.02	%		138,865			961		0.69	%
Time deposits - brokered			49,209			2,600		5.28	%		—			—		—	%
Short-term borrowings			47,968			147		0.31	%		63,182			112		0.18	%
Long-term borrowings			94,271			4,941		5.24	%		30,929			1,451		4.69	%
Total interest-bearing liabilities			1,248,229			24,287		1.95	%		1,097,761			4,789		0.44	%
Non-interest-bearing deposits			512,496								533,096
Other liabilities			32,320								33,169
Shareholders' Equity			156,109								137,685
Total Liabilities and Shareholders' Equity		$	1,949,154							$	1,801,711
Net interest income and spread					$	57,495		2.68	%				$	58,573		3.41	%
Net interest margin								3.26	%							3.56	%

 

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SOURCE First United Corporation

FAQ

What was First United Corporation's consolidated net income for the year ended December 31, 2023?

First United Corporation reported a consolidated net income of $15.1 million for the year ended December 31, 2023.

What was the net income for the year ended December 31, 2022?

The net income for the year ended December 31, 2022, was $25.0 million.

What were the significant changes in the fourth quarter of 2023 for First United Corporation?

In the fourth quarter of 2023, First United Corporation experienced a decrease in total assets, cash balances, and investment securities, along with an increase in gross loans and a decrease in deposits.

What factors contributed to the decrease in net income for First United Corporation?

The decrease in net income was primarily driven by a restructuring of the investment portfolio leading to the recognition of a $3.3 million loss in the fourth quarter of 2023 and $0.5 million in accelerated depreciation and lease termination expenses related to the branch closures. Additionally, net interest income decreased, and non-interest expenses fluctuated.

How did the net interest margin change for First United Corporation?

The net interest margin decreased from 3.56% in 2022 to 3.26% in 2023.

How did non-interest expenses fluctuate for First United Corporation?

Non-interest expenses fluctuated, with increases in occupancy and equipment expenses, salaries and employee benefits, marketing expenses, FDIC premiums, data processing expenses, and miscellaneous expenses, partially offset by a decrease in net OREO expenses.