First United Corp 8-K, filed Feb 8, 2022
First United Corp/Md/ (FUNC)
About this 8-K
First United Corp filed this 8-K on February 8, 2022, reporting on events of February 4, 2022.
Items reported
- Item 2.02: Financial results
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 2.02. Results of Operation and Financial Condition.
On February 4, 2022, First United Corporation (the “Corporation”) issued a press release describing its financial results for the 12- and three-month periods ended December 31, 2021. A copy of the press release is furnished herewith as Exhibit 99.1.
The information contained in this Item 2.02 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 7.01. Regulation FD Disclosure.
On February 8, 2022, the Corporation published an investor presentation that discusses certain aspects of its financial results for the 12- and three-month periods ended December 31, 2021. A copy of the presentation is furnished herewith as Exhibit 99.2.
The information contained in this Item 2.02 shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The exhibits filed or furnished with this report are listed in the following Exhibit Index:
| Exhibit No. | Description | |
| 99.1 | Press release dated February 4, 2022 (furnished herewith) | |
| 99.2 | Investor presentation dated February 8, 2022 (furnished herewith) | |
| 104 | Cover page interactive data file (embedded within the iXBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FIRST UNITED CORPORATION | ||
| Dated: February 8, 2022 | By: | /s/ Tonya K. Sturm |
| Tonya K. Sturm | ||
| Senior Vice President & CFO | ||
Exhibit 99.1
FIRST UNITED CORPORATION ANNOUNCES
FOURTH QUARTER and YEAR TO DATE 2021 EARNINGS
Earnings per share up 49.0% compared to the prior year driven by wealth management, loan origination, PPP fees and loan reserve release.
Paycheck Protection Program forgiveness of $172.6 million and origination fees of $4.0 million YTD
OAKLAND, MARYLAND—February 4, 2022: 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 12-month periods ended December 31, 2021.
Fourth Quarter Financial Highlights:
| · | Total assets at December 31, 2021 increased by $21.3 million, or 1.2%, when compared to September 30, 2021. |
| o | Deployed cash during the fourth quarter to purchase $62.0 million of investment securities and a $10.0 million student loan pool |
| o | Investment securities increased $45.5 million in the fourth quarter |
| o | Gross loans decreased $8.2 million in the fourth quarter |
| § | Core commercial growth of $6.1 million, offset by forgiveness of $22.6 million of Paycheck Protection Program (“PPP”) loans during the fourth quarter |
| § | Mortgage balances remained stable |
| § | Consumer loans increased $9.5 million related to the $10.0 million student loan pool purchase |
| o | Deposits increased $24.9 million during the fourth quarter; growth year-to-date of $47.0 million |
| § | Increases in both non-interest bearing and interest bearing deposits during the fourth quarter |
| · | The ratio of the allowance for loan losses (“ALL”) to loans outstanding was 1.38% at December 31, 2021 as compared to 1.41% at December 31, 2020. The ratio of ALL to loans outstanding, excluding PPP loan balances of $7.7 million and $114.0 million, was 1.39% at December 31, 2021 and 1.55% at December 31, 2020, non-GAAP. |
| o | Total provision expense credit of $0.9 million for the fourth quarter of 2021 as compared to expense of $0.4 million for the fourth quarter of 2020 |
| ○ | 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 3.49% for the fourth quarter of 2021 compared to 3.09% for the fourth quarter of 2020 and 3.38% for the third quarter of 2021. |
| · | Non-interest income, excluding gains, increased 45%, or $2.0 million in the fourth quarter of 2021 compared to the fourth quarter of 2020 driven by increased debit card income, insurance reimbursement and other income. |
| · | Non-interest expense increased 2%, or $0.2 million compared to the fourth quarter of 2020 driven by increased salaries and benefits of $1.0 million and contributions of $1.1 million offset by reductions of $1.0 million in professional services and a credit of $.5 million in Other Real Estate Owned (“OREO”) expenses due to a gain on sale |
According to Carissa Rodeheaver, President and CEO, “2021 was a record earnings year for First United driven by reduced interest expense, release of provision, strong production in mortgage and wealth management and our ability to manage our core operating expenses. Much of the year was spent assisting our local business owners as they navigated PPP forgiveness and returned to a more normalized operating environment. During the year, we worked to realign the balance sheet which should provide future expense savings. The Bank is well-positioned for the anticipated rising interest rates and remains well-capitalized for future growth. Our success in 2021 was attributed to the hard work of our dedicated associates. We were pleased to reward all associates with a special performance bonus to recognize their exceptional efforts.”
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 first two rounds 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 2021 were $4.0 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 2021, an additional 1,631 loans with an aggregate principal balance of $172.6 million, were forgiven, resulting in 65 loans with a remaining balance of $7.7 million at December 31, 2021.
Of the 2,044 PPP loans originated by the Bank since the PPP’s inception, 1,978 loans, totaling $207.5 million, have been forgiven through the end of fourth quarter 2021, representing 97% of the number of loans originated and 96% 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 December 31, 2021, total loan modifications were $9.4 million. This amount included 13 commercial loans related to real estate rental, food services and health care sectors. These loans are scheduled to return to contractual payment terms within the first quarter of 2022.
Income Statement Overview
Consolidated net income was $7.5 million for the fourth quarter of 2021 compared to $4.6 million for the fourth quarter of 2020. Basic and diluted net income per share for the fourth quarter of 2021 were both $1.14, a 74% increase when compared to basic and diluted net income per share of $0.66 and $0.65, respectively for the fourth quarter of 2020. The increase in earnings for the fourth quarter of 2021 was due to an increase in net interest income, a credit to provision expense, increased debit card income, the receipt of an insurance reimbursement, reduced professional fees and a credit in OREO expenses due to gains on sales. These items were offset by increased non-interest expenses, primarily salaries and employee benefits and contributions.
Consolidated net income for the year ended December 31, 2021 was $19.8 million, inclusive of litigation settlement expenses of $3.3 million, Federal Home Loan Bank (“FHLB”) prepayment penalties of $2.4 million, an insurance reimbursement income of $1.4 million and contributions of $1.0 million, compared to $13.8 million for the year ended December 31, 2020. Basic and diluted net income per share for 2021 were both $2.95, a 49.0% increase when compared to basic and diluted net income per share of $1.98 and $1.97, respectively, for 2020.
Net Interest Income and Net Interest Margin
Net interest income, on a non-GAAP, FTE basis, increased by $1.8 million (14.7%) for the fourth quarter 2021 when compared to the fourth quarter of 2020. This increase resulted from an increase in interest income of $0.6 million and a 56% decrease in interest expense of $1.2 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, increased interest on the commercial portfolio related to new loans booked throughout the year 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 lowering of deposit rates throughout 2021, the declining balances in the higher cost CD portfolio and the prepayment of the FHLB advances in the third quarter. The weighted rate on the $70.0 million FHLB long-term borrowings was 1.90%, which reduced interest expense of approximately $0.4 million in the fourth quarter. The net interest margin for the fourth quarter of 2021 was 3.49%, compared to 3.09% for the fourth quarter of 2020. The net interest margin for the fourth quarter of 2021 would have been 3.32% compared to 2.96% for the fourth quarter of 2020 after excluding the average balance of PPP loans of $16.0 million and $129.9, respectively, and interest and fees of $0.8 million and $1.5 million, respectively.
Net interest income, on a non-GAAP, FTE basis, increased by $4.0 million (8.1%) during the year ended December 31, 2021 when compared to the year ended December 31, 2020 driven by a $3.9 million (40.8%) decrease in interest expense and a slight increase in interest income of $0.1 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 net interest margin, on an FTE basis, declined to 3.28% for the year ended December 31, 2021 compared to 3.34% for 2020. The net interest margin for the year ended December 31, 2021 would have been 3.14% compared to 3.46% for 2020 after excluding the average balance of PPP loans of $79.4 million and $137.0 million, respectively, and interest and fees of $4.8 million and $3.0 million, respectively.
Comparing the linked quarter, net interest income, on a non-GAAP, FTE basis, increased by $0.3 million (2.2%) in the fourth quarter of 2021 when compared to the third quarter of 2021. This increase was driven by a $0.4 million (27.6%) decrease in interest expense offset by a slight decrease in interest income of $0.1 million. The decrease in interest expense resulted from continued efforts to reduce the cost of funds through further reductions to rates on deposit accounts early in the third quarter, the runoff of balances in the time deposits of $100,000 or more, the expiration of empowered rates on money market accounts, and the prepayment of $70.0 million of FHLB advances in the third quarter. The net interest margin, on an FTE basis, increased to 3.49% for the fourth quarter of 2021 compared to 3.38% for the third quarter of 2021.
Non-Interest Income
Other operating income, including gains, for the fourth quarter of 2021 increased by approximately $1.3 million when compared with the same period of 2020. Service charge and trust and brokerage income increased slightly during the fourth quarter of 2021 when compared to the fourth quarter of 2020. Net gains decreased $0.7 million when comparing the fourth quarter of 2021 to the fourth quarter of 2020. This decrease was due to the slowing of refinance activity in the mortgage portfolio, which resulted in fewer gains on sales in 2021 as well as losses on investment securities that were booked in the fourth quarter of 2020. During the fourth quarter of 2021, the receipt of $1.4 million for an insurance reimbursement was recorded in other non-interest income, which also attributed to the increase in the fourth quarter of 2021.
Other operating income, including net gains on sales of mortgage loans and sales of investment securities, increased $2.5 million for the year ended December 31, 2021 when compared to 2020. Gains on the sale of mortgage loans to the secondary market decreased $1.3 million due to refinancing activity occurring at a slower pace than the pace experienced in 2020. Trust and brokerage income increased $1.3 million year-over-year due to growth in new client relationships and assets under management. Debit card income increased $0.8 million for the year ended December 31, 2021, when compared to 2020 due to growth in deposit relationships and increased customer usage of our electronic services. Other income increased $0.8 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 while gains on investment securities decreased $.5 million when comparing 2021 to 2020.
On a linked quarter basis, other operating income increased $1.8 million in the fourth quarter of 2021 compared to the third quarter of 2021. This increase was attributable to the $1.4 million in insurance reimbursement, increased debit card income and an increase in other miscellaneous income. Trust income increased slightly when comparing the fourth quarter of 2021 to the third quarter of 2021.
Non-Interest Expense
Other operating expenses increased slightly by $0.2 million when comparing the fourth quarter of 2021 to the fourth quarter of 2020. This increase was driven by an increase in salaries and benefits of $1.0 million related in part to a reduction in deferred loan origination costs in 2021 (primarily related to PPP activities), increased incentive pay related to year end incentives and a special performance bonus accrued for all associates. During the fourth quarter, a charitable contribution of $1.0 million was made to fund First United Community Dreams Foundation, Inc., which is intended to benefit non-profit organizations within our market areas. Occupancy, equipment and technology service expenses were stable during the fourth quarter of 2021 when compared to the fourth quarter of 2020. Professional services fees declined $1.0 million when comparing the fourth quarter of 2021 to the same period of 2020 primarily due to reduced legal fees. Other miscellaneous expenses, such as Visa processing fees, printed supplies, line rentals, contract labor, schools and seminars, dues and licenses, in-house training, trust department expense, debit card expense and miscellaneous loan fees, declined. The decreases were offset by increases in personnel related expenses, business related meals and debit card related expenses.
Other operating expenses increased $4.2 million for the year ended December 31, 2021 when compared to 2020. This increase was driven by $3.3 million of litigation settlement expenses recorded in the first quarter of 2021, a $2.4 million penalty on the repayment of $70.0 million of FHLB advances in the third quarter of 2021 and the aforementioned $1.0 million charitable contribution to First United Community Dreams Foundation, Inc. Salaries and benefits for 2021 increased $1.0 million when compared to 2020, related to a net increase of $0.7 million due to higher in salaries, incentive pay, stock compensation and 401(k) plan expense, offset by decreases in pension and life and health insurance costs and a $0.3 million offset in salary expense from deferred loan origination costs primarily attributable to PPP loans. 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 in 2021 when compared to 2020 as we began to realize cost savings from our core processor related to the new contract negotiated in the third quarter of 2020. OREO expenses were a net credit in the 2021 due to $1.3 million in net gains attributable to the sale of OREO properties. Professional services decreased $0.3 million as a result of increased accounting and audit fees of $0.3 million, offset by a reduction of $0.5 million in consulting expenses.
When comparing the fourth quarter of 2021 to the third quarter of 2021, other operating expenses decreased $1.8 million. The decrease was driven by the $2.4 million in FHLB prepayment penalties incurred in the third quarter of 2021 and a fourth quarter credit of $0.5 million in OREO expenses as a result of gains recognized on sales, offset by an increase in contributions of $1.1 million primarily related to the $1.0 million charitable contribution to First United Community Dreams Foundation, Inc. Equipment, occupancy and technology expenses remained stable as well as professional services and investor relations expenses when comparing the fourth quarter to the third quarter.
The effective income tax rates as a percentage of income for the years ended December 31, 2021 and 2020 were 24.9% and 22.2%, respectively. The increase in the tax rate for 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 a low-income housing tax credit is expected to provide tax benefits in 2022 and beyond.
Balance Sheet Overview
Total assets at December 31, 2021 decreased to $1.7 billion, representing a $3.6 million decrease since December 31, 2020. During 2021, cash and interest-bearing deposits in other banks decreased by $33.7 million, the investment portfolio increased by $47.9 million and gross loans decreased by $14.1 million. Management made strategic decisions to deploy excess cash balances in 2021. Cash was utilized to purchase a $20.0 million consumer loan pool and a $39.0 million pool of mortgage loans for the purpose of offsetting the decline in mortgage portfolio balances due to the continued utilization of the FNMA secondary market for refinancing activity. Management also used $70.0 million to prepay FHLB advances in the third quarter. Additionally, approximately $60.0 million was used to purchase investment securities and to purchase a $10.0 million student loan pool late in the fourth quarter. OREO balances decreased $4.9 million related to the sale of parcels of real estate securing a large commercial participation loan and additional sales of undeveloped lots. We anticipate further reductions to OREO balances during the first quarter of 2022 as we consummate additional sale contracts.
Total liabilities decreased by $14.4 million when compared to liabilities at December 31, 2020. The decrease in 2021 was attributable to deposit growth of $47.0 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 by $10.9 million during the year ended December 31, 2021, as net income of $19.8 million was offset by the repurchase of $7.2 million (400,000 shares) of First United Corporation common stock, the payment of $3.2 million in dividends and the improvement of $1.5 million in accumulated other comprehensive loss.
Outstanding loans of $1.2 billion at December 31, 2021 reflected a decline of $14.1 million during 2021. Core commercial loan growth was offset by PPP loan forgiveness. Commercial real estate (“CRE”) loans increased by $5.1 million, acquisition and development loans increased by $11.1 million and commercial and industrial loans decreased by $85.8 million, as growth in core portfolio loans of $20.5 million was offset by PPP loan forgiveness. Residential mortgage loans increased $25.5 million due to the purchase of a $39.0 million loan pool of 1-4 family residential loans, offset by the decline in mortgage portfolio balances due to the continued utilization of the FNMA secondary market for refinancing activity. Given the current low interest rate environment, customers were seeking longer-term, fixed-rate loans and management chose not to book these longer-term low fixed rate mortgage loans in the portfolio. The consumer loan portfolio increased by $29.9 million due to the purchase of a pool of consumer loans in the second quarter of 2021 and the purchase of a $10.0 million pool of student loans late in the fourth quarter as an effort to deploy excess cash into higher yielding, short-term assets. Management strategically purchased loan pools to complement the portfolio loans and to assist in managing interest rate risk.
Commercial loan production for the year ended December 31, 2021 was approximately $178.0 million, with $42.0 million originated during the fourth quarter, exclusive of PPP loan production. PPP loan production was approximately $64.3 million for 2021. At December 31, 2021, unfunded, committed commercial construction loans totaled approximately $25.5 million. Commercial amortization and payoffs were approximately $119.0 million through December 31, 2021, exclusive of PPP.
Consumer mortgage loan production was approximately $119.3 million through December 31, 2021. The production and pipeline mix of in-house, portfolio loans and investor loans remained strong as of December 31, 2021, with those loans totaling $15.3 million, consisting of $13.4 million in portfolio loans and $1.9 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 December 31, 2021 increased by $47.0 million when compared to deposits at December 31, 2020. During 2021, non-interest-bearing deposits increased by $81.2 million, driven by retail and commercial account growth partially attributable to government stimulus programs. Traditional savings accounts increased by $40.5 million as we continued to see significant growth in our Prime Saver product, and total demand deposits increased by $26.6 million. Total money market accounts decreased by $36.3 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 $65.0 million, primarily in time deposits over $100,000, due to the maturity 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 $21.43 at December 31, 2021, compared to $18.74 per share at December 31, 2020. At December 31, 2021, there were 6,620,955 of basic outstanding shares and 6,628,028 of diluted outstanding shares of common stock.
Asset Quality
The ALL decreased to $16.0 million at December 31, 2021 compared to $16.5 million at December 31, 2020. The provision for loan losses was a credit of $0.8 million for the year ended December 31, 2021 and an expense of $5.4 million for the year December 31, 2020. The higher provision expense recorded in 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 $0.3 million were recorded for the year ended December 31, 2021, compared to net charge offs of $1.5 million for 2020. The ratio of the ALL to loans outstanding, including PPP loan balances, was 1.38% at December 31, 2021 compared to 1.41% at December 31, 2020. The ratio of ALL to loans outstanding, excluding PPP loan balances of $7.7 million and $114.0 million, was 1.39% at December 31, 2021 and 1.55% at December 31, 2020, non-GAAP.
The ratio of net recoveries to average loans for the year ended December 31, 2021 was an annualized 0.02%, compared to net charge offs to average loans of 0.13% for 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 | ||||||||
| 12/31/2021 | 12/31/2020 | |||||||
| Loan Type | (Charge Off) / Recovery | (Charge Off) / Recovery | ||||||
| Commercial Real Estate | 0.00 | % | 0.02 | % | ||||
| Acquisition & Development | 0.07 | % | (0.97 | %) | ||||
| Commercial & Industrial | 0.23 | % | (0.04 | %) | ||||
| Residential Mortgage | (0.02 | %) | (0.03 | %) | ||||
| Consumer | (0.45 | %) | (0.48 | %) | ||||
| Total Net Recoveries/(Charge Offs) | 0.02 | % | (0.13 | %) | ||||
Non-accrual loans totaled $2.5 million at December 31, 2021 compared to $3.3 million at December 31, 2020. The decrease in non-accrual balances at December 31, 2021 was primarily related to $0.8 million of one CRE loan that paid off in the fourth quarter of 2021. Two hospitality loans, totaling approximately $4.0 million, that were moved to non-accrual status during the first quarter of 2021 returned to accrual status in the fourth quarter of 2021 after successfully paying full contractual payments for six months.
Non-accrual loans that have been subject to partial charge-offs totaled $0.5 million at December 31, 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 December 31, 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 increased to 0.31% compared to 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. 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 year ended December 31, 2021 and the impact that any such events have on our critical accounting assumptions and estimates made as of December 31, 2021, 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, | |||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Results of Operations: | ||||||||||||||||
| Interest income | $ | 14,848 | $ | 14,228 | $ | 58,256 | $ | 58,201 | ||||||||
| Interest expense | 930 | 2,127 | 5,714 | 9,655 | ||||||||||||
| Net interest income | 13,918 | 12,101 | 52,542 | 48,546 | ||||||||||||
| Provision for loan losses | (885 | ) | 420 | (817 | ) | 5,401 | ||||||||||
| Other operating income | 6,337 | 4,378 | 19,923 | 15,789 | ||||||||||||
| Net gains | 83 | 777 | 1,195 | 2,788 | ||||||||||||
| Other operating expense | 11,182 | 10,962 | 48,168 | 43,934 | ||||||||||||
| Income before taxes | $ | 10,041 | $ | 5,874 | $ | 26,309 | $ | 17,788 | ||||||||
| Income tax expense | 2,492 | 1,318 | 6,539 | 3,947 | ||||||||||||
| Net income | $ | 7,549 | $ | 4,556 | $ | 19,770 | $ | 13,841 | ||||||||
| Per share data: | ||||||||||||||||
| Basic net income per share | $ | 1.14 | $ | 0.66 | $ | 2.95 | $ | 1.98 | ||||||||
| Diluted net income per share | $ | 1.14 | $ | 0.65 | $ | 2.95 | $ | 1.97 | ||||||||
| Adjusted Basic/Diluted net income (1) | $ | 1.10 | $ | 0.70 | $ | 3.54 | $ | 1.98 | ||||||||
| Dividends declared per share | $ | 0.15 | $ | 0.13 | $ | 0.60 | $ | 0.52 | ||||||||
| Book value | $ | 21.43 | $ | 18.74 | ||||||||||||
| Diluted book value | $ | 21.41 | $ | 18.73 | ||||||||||||
| Tangible book value per share | $ | 19.61 | $ | 16.25 | ||||||||||||
| Diluted Tangible book value per share | $ | 19.59 | $ | 16.01 | ||||||||||||
| Closing market value | $ | 18.76 | $ | 13.34 | ||||||||||||
| Market Range: | ||||||||||||||||
| High | $ | 20.50 | $ | 15.95 | ||||||||||||
| Low | $ | 17.86 | $ | 11.00 | ||||||||||||
| Shares outstanding at period end: Basic | 6,620,955 | 6,992,911 | ||||||||||||||
| Shares outstanding at period end: Diluted | 6,628,028 | 6,997,981 | ||||||||||||||
| Performance ratios: (Year to Date Period End, annualized) | ||||||||||||||||
| Return on average assets | 1.12 | % | 0.57 | % | ||||||||||||
| Adjusted return on average assets (1) | 1.36 | % | 0.57 | % | ||||||||||||
| Return on average shareholders' equity | 14.92 | % | 6.97 | % | ||||||||||||
| Adjusted return on average shareholders' equity (1) | 17.82 | % | 6.97 | % | ||||||||||||
| Net interest margin (Non-GAAP), includes tax exempt income of $234 and $239 | 3.28 | % | 3.34 | % | ||||||||||||
| Net interest margin GAAP | 3.22 | % | 3.28 | % | ||||||||||||
| Efficiency ratio | 64.71 | % | 70.26 | % | ||||||||||||
| Adjusted efficiency ratio (1) | 56.44 | % | 70.26 | % | ||||||||||||
(1) See reconcilation of this non-GAAP financial measure provided elsewhere herein.
| December 31 | December 31, | |||||||
| 2021 | 2020 | |||||||
| Financial Condition at period end: | ||||||||
| Assets | $ | 1,729,838 | $ | 1,733,414 | ||||
| Earning assets | $ | 1,504,300 | $ | 1,473,733 | ||||
| Gross loans | $ | 1,153,687 | $ | 1,167,812 | ||||
| Commercial Real Estate | $ | 374,291 | $ | 369,176 | ||||
| Acquisition and Development | $ | 128,077 | $ | 116,961 | ||||
| Commercial and Industrial | $ | 180,977 | $ | 266,745 | ||||
| Residential Mortgage | $ | 404,685 | $ | 379,170 | ||||
| Consumer | $ | 65,657 | $ | 35,760 | ||||
| Investment securities | $ | 343,030 | $ | 295,148 | ||||
| Total deposits | $ | 1,469,374 | $ | 1,422,366 | ||||
| Noninterest bearing | $ | 501,627 | $ | 420,427 | ||||
| Interest bearing | $ | 967,747 | $ | 1,001,939 | ||||
| Shareholders' equity | $ | 141,900 | $ | 131,047 | ||||
| Capital ratios: | ||||||||
| Tier 1 to risk weighted assets | 14.64 | % | 14.83 | % | ||||
| Common Equity Tier 1 to risk weighted assets | 12.50 | % | 12.61 | % | ||||
| Tier 1 Leverage | 10.80 | % | 10.36 | % | ||||
| Total risk based capital | 15.89 | % | 16.08 | % | ||||
| Asset quality: | ||||||||
| Net charge-offs for the quarter | $ | (67 | ) | $ | (123 | ) | ||
| Nonperforming assets: (Period End) | ||||||||
| Nonaccrual loans | $ | 2,462 | $ | 3,339 | ||||
| Loans 90 days past due and accruing | 300 | 724 | ||||||
| Total nonperforming loans and 90 day past due | $ | 2,762 | $ | 4,063 | ||||
| Restructured loans | $ | 3,362 | $ | 3,958 | ||||
| Other real estate owned | $ | 4,477 | $ | 9,386 | ||||
| Allowance for loan losses to gross loans | 1.38 | % | 1.41 | % | ||||
| Allowance for loan losses to gross loans, excluding PPP loans | 1.39 | % | 1.55 | % | ||||
| Nonperforming and 90 day past due loans to total loans | 0.24 | % | 0.35 | % | ||||
| Nonperforming loans and 90 day past due loans to total assets | 0.16 | % | 0.23 | % | ||||
Oakland, MD
Stock Symbol : FUNC
Financial Highlights - Unaudited
| (Dollars in thousands, except per share data) | ||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2020 | 2020 | 2020 | 2020 | |||||||||||||||||||||||||
| Results of Operations: | ||||||||||||||||||||||||||||||||
| Interest income | $ | 14,848 | $ | 14,910 | $ | 14,436 | $ | 14,062 | 14,228 | 14,253 | 15,104 | 14,616 | ||||||||||||||||||||
| Interest expense | 930 | 1,285 | 1,673 | 1,826 | 2,127 | 2,351 | 2,448 | 2,729 | ||||||||||||||||||||||||
| Net interest income | 13,918 | 13,625 | 12,763 | 12,236 | 12,101 | 11,902 | 12,656 | 11,887 | ||||||||||||||||||||||||
| Provision for loan losses | (885 | ) | (597 | ) | 555 | 110 | 420 | 160 | 2,167 | 2,654 | ||||||||||||||||||||||
| Other operating income | 6,337 | 4,523 | 4,321 | 4,742 | 4,378 | 3,978 | 3,425 | 4,008 | ||||||||||||||||||||||||
| Net gains | 83 | 82 | 442 | 588 | 777 | 1,176 | 794 | 41 | ||||||||||||||||||||||||
| Other operating expense | 11,182 | 13,027 | 11,032 | 12,927 | 10,962 | 10,540 | 11,427 | 11,005 | ||||||||||||||||||||||||
| Income before taxes | $ | 10,041 | $ | 5,800 | $ | 5,939 | $ | 4,529 | $ | 5,874 | $ | 6,356 | $ | 3,281 | $ | 2,277 | ||||||||||||||||
| Income tax expense | 2,492 | 1,412 | 1,536 | 1,099 | 1,318 | 1,396 | 711 | 522 | ||||||||||||||||||||||||
| Net income | $ | 7,549 | $ | 4,388 | $ | 4,403 | $ | 3,430 | $ | 4,556 | $ | 4,960 | $ | 2,570 | $ | 1,755 | ||||||||||||||||
| Per share data: | ||||||||||||||||||||||||||||||||
| Basic net income per share | $ | 1.14 | $ | 0.66 | $ | 0.66 | $ | 0.49 | $ | 0.66 | $ | 0.70 | $ | 0.37 | $ | 0.25 | ||||||||||||||||
| Diluted net income per share | $ | 1.14 | $ | 0.66 | $ | 0.66 | $ | 0.49 | $ | 0.65 | $ | 0.70 | $ | 0.37 | $ | 0.25 | ||||||||||||||||
| Adjusted Basic/Diluted net income (1) | $ | 1.10 | $ | 0.93 | $ | 0.66 | $ | 0.86 | $ | 0.65 | $ | 0.70 | $ | 0.37 | $ | 0.25 | ||||||||||||||||
| Dividends declared per share | $ | 0.15 | $ | 0.15 | $ | 0.15 | $ | 0.15 | $ | 0.13 | $ | 0.13 | $ | 0.13 | $ | 0.13 | ||||||||||||||||
| Book value | $ | 21.43 | $ | 20.22 | $ | 19.74 | $ | 18.46 | $ | 18.74 | $ | 18.63 | $ | 17.82 | $ | 17.01 | ||||||||||||||||
| Diluted book value | $ | 21.41 | $ | 20.19 | $ | 19.72 | $ | 18.45 | $ | 18.73 | $ | 18.62 | $ | 17.81 | $ | 16.95 | ||||||||||||||||
| Tangible book value per share | $ | 19.61 | $ | 18.55 | $ | 18.07 | $ | 16.89 | $ | 17.17 | $ | 17.06 | $ | 16.25 | $ | 15.43 | ||||||||||||||||
| Diluted Tangible book value per share | $ | 19.59 | $ | 18.53 | $ | 18.05 | $ | 16.88 | $ | 17.15 | $ | 17.05 | $ | 16.01 | $ | 15.38 | ||||||||||||||||
| Closing market value | $ | 18.76 | $ | 18.60 | $ | 17.43 | $ | 17.62 | $ | 15.50 | $ | 11.71 | $ | 13.34 | $ | 14.29 | ||||||||||||||||
| Market Range: | ||||||||||||||||||||||||||||||||
| High | $ | 20.50 | $ | 19.45 | $ | 19.42 | $ | 20.05 | $ | 17.51 | $ | 13.88 | $ | 15.95 | $ | 24.99 | ||||||||||||||||
| Low | $ | 17.86 | $ | 16.26 | $ | 16.35 | $ | 15.30 | $ | 11.51 | $ | 10.74 | $ | 11.00 | $ | 11.09 | ||||||||||||||||
| Shares outstanding at period end: Basic | 6,620,955 | 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 | 6,628,028 | 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 | 1.12 | % | 0.92 | % | 0.88 | % | 0.79 | % | 0.86 | % | 0.79 | % | 0.57 | % | 0.49 | % | ||||||||||||||||
| Adjusted return on average assets (1) | 1.36 | % | 1.25 | % | 1.18 | % | 1.38 | % | 0.86 | % | 0.79 | % | 0.57 | % | 0.49 | % | ||||||||||||||||
| Return on average shareholders' equity | 14.92 | % | 12.45 | % | 12.21 | % | 10.58 | % | 10.89 | % | 9.87 | % | 6.97 | % | 5.62 | % | ||||||||||||||||
| Adjusted return on average shareholders' equity (1) | 17.82 | % | 16.72 | % | 15.98 | % | 18.36 | % | 10.89 | % | 9.87 | % | 6.97 | % | 5.62 | % | ||||||||||||||||
| Net interest margin (Non-GAAP), includes tax exempt income of $705 and $658 | 3.28 | % | 3.21 | % | 3.13 | % | 3.11 | % | 3.09 | % | 3.43 | % | 3.61 | % | 3.69 | % | ||||||||||||||||
| Net interest margin GAAP | 3.22 | % | 3.16 | % | 3.07 | % | 3.05 | % | 3.03 | % | 3.37 | % | 3.53 | % | 3.63 | % | ||||||||||||||||
| Efficiency ratio | 64.71 | % | 68.39 | % | 67.69 | % | 72.94 | % | 64.31 | % | 64.99 | % | 70.26 | % | 68.29 | % | ||||||||||||||||
| Adjusted efficiency ratio (1) | 56.44 | % | 57.97 | % | 58.58 | % | 54.90 | % | 64.31 | % | 64.99 | % | 70.26 | % | 68.29 | % | ||||||||||||||||
(1) See reconcilation of this non-GAAP financial measure provided elsewhere herein.
| December 31, | September 30, | June 30, | March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2020 | 2020 | 2020 | 2020 | |||||||||||||||||||||||||
| Financial Condition at period end: | ||||||||||||||||||||||||||||||||
| Assets | $ | 1,729,838 | $ | 1,708,556 | $ | 1,763,806 | 1,781,833 | 1,733,414 | 1,685,907 | 1,639,636 | 1,461,513 | |||||||||||||||||||||
| Earning assets | $ | 1,504,300 | $ | 1,466,664 | $ | 1,461,613 | $ | 1,481,045 | $ | 1,473,733 | $ | 1,422,341 | $ | 1,420,433 | $ | 1,267,718 | ||||||||||||||||
| Gross loans | $ | 1,153,687 | $ | 1,161,868 | $ | 1,145,343 | $ | 1,199,325 | $ | 1,167,812 | $ | 1,192,345 | $ | 1,186,940 | # | $ | 1,053,732 | |||||||||||||||
| Commercial Real Estate | $ | 374,291 | $ | 371,785 | $ | 361,941 | $ | 365,731 | $ | 369,176 | $ | 353,272 | $ | 340,314 | $ | 337,688 | ||||||||||||||||
| Acquisition and Development | $ | 128,077 | $ | 132,256 | $ | 131,630 | $ | 123,625 | $ | 116,961 | $ | 127,299 | $ | 126,338 | $ | 121,333 | ||||||||||||||||
| Commercial and Industrial | $ | 180,977 | $ | 195,758 | $ | 229,852 | $ | 299,178 | $ | 266,745 | $ | 277,723 | $ | 272,186 | $ | 123,509 | ||||||||||||||||
| Residential Mortgage | $ | 404,685 | $ | 405,885 | $ | 364,408 | $ | 374,327 | $ | 379,170 | $ | 398,709 | $ | 412,478 | $ | 434,969 | ||||||||||||||||
| Consumer | $ | 65,657 | $ | 56,184 | $ | 57,512 | $ | 36,464 | $ | 35,760 | $ | 35,342 | $ | 35,624 | $ | 36,233 | ||||||||||||||||
| Investment securities | $ | 343,030 | $ | 297,543 | $ | 307,696 | $ | 273,363 | $ | 295,148 | $ | 222,382 | $ | 220,165 | $ | 222,191 | ||||||||||||||||
| Total deposits | $ | 1,469,374 | $ | 1,444,494 | $ | 1,456,111 | $ | 1,468,263 | $ | 1,422,366 | $ | 1,377,284 | $ | 1,351,568 | $ | 1,172,394 | ||||||||||||||||
| Noninterest bearing | $ | 501,627 | $ | 491,441 | $ | 497,736 | $ | 485,311 | $ | 420,427 | $ | 419,935 | $ | 425,274 | $ | 299,961 | ||||||||||||||||
| Interest bearing | $ | 967,747 | $ | 953,053 | $ | 958,375 | $ | 982,952 | $ | 1,001,939 | $ | 957,349 | $ | 926,294 | # | $ | 872,433 | |||||||||||||||
| Shareholders' equity | $ | 141,900 | $ | 133,787 | $ | 130,556 | $ | 129,189 | $ | 131,047 | $ | 130,237 | $ | 124,453 | $ | 118,549 | ||||||||||||||||
| Capital ratios: | ||||||||||||||||||||||||||||||||
| Tier 1 to risk weighted assets | 14.64 | % | 14.26 | % | 14.55 | % | 14.99 | % | 14.83 | % | 14.89 | % | 14.62 | % | 14.76 | % | ||||||||||||||||
| Common Equity Tier 1 to risk weighted assets | 12.50 | % | 12.15 | % | 12.37 | % | 12.76 | % | 12.61 | % | 12.59 | % | 12.33 | % | 12.43 | % | ||||||||||||||||
| Tier 1 Leverage | 10.80 | % | 10.33 | % | 9.94 | % | 10.22 | % | 10.36 | % | 10.37 | % | 10.46 | % | 11.52 | % | ||||||||||||||||
| Total risk based capital | 15.89 | % | 15.51 | % | 15.80 | % | 16.24 | % | 16.08 | % | 16.14 | % | 15.87 | % | 16.01 | % | ||||||||||||||||
| Asset quality: | ||||||||||||||||||||||||||||||||
| Net (charge-offs)/recoveries for the quarter | $ | (67 | ) | $ | 435 | $ | (41 | ) | $ | (42 | ) | $ | (123 | ) | $ | (985 | ) | $ | 164 | $ | 178 | |||||||||||
| Nonperforming assets: (Period End) | ||||||||||||||||||||||||||||||||
| Nonaccrual loans | $ | 2,462 | $ | 7,441 | $ | 7,285 | $ | 7,891 | $ | 3,339 | $ | 10,344 | $ | 11,081 | $ | 11,012 | ||||||||||||||||
| Loans 90 days past due and accruing | $ | 300 | 189 | 273 | 6 | 724 | 813 | $ | 297 | 623 | ||||||||||||||||||||||
| 0 | 0 | 0 | ||||||||||||||||||||||||||||||
| Total nonperforming loans and 90 day past due | $ | 2,762 | $ | 7,630 | $ | 7,558 | $ | 7,897 | $ | 4,063 | $ | 11,157 | $ | 11,378 | $ | 11,635 | ||||||||||||||||
| Restructured loans | $ | 3,362 | $ | 4,031 | $ | 3,825 | $ | 3,892 | $ | 3,958 | $ | 4,008 | $ | 4,039 | $ | 4,581 | ||||||||||||||||
| Other real estate owned | $ | 4,477 | $ | 6,663 | $ | 6,756 | $ | 7,533 | $ | 9,386 | $ | 3,787 | $ | 3,926 | $ | 4,040 | ||||||||||||||||
| Allowance for loan losses to gross loans | 1.38 | % | 1.46 | % | 1.49 | % | 1.38 | % | 1.41 | % | 1.36 | % | 1.43 | % | 1.42 | % | ||||||||||||||||
| Allowance for loan losses to gross loans, excluding PPP loans | 1.39 | % | 1.50 | % | 1.60 | % | 1.57 | % | 1.55 | % | 1.55 | % | 1.62 | % | 1.42 | % | ||||||||||||||||
| Nonperforming and 90 day past due loans to total loans | 0.24 | % | 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 | 0.16 | % | 0.45 | % | 0.43 | % | 0.44 | % | 0.23 | % | 0.66 | % | 0.69 | % | 0.80 | % | ||||||||||||||||
| (Dollars in thousands - Unaudited) | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | |||||||||||||||
| Assets | ||||||||||||||||||||
| Cash and due from banks | $ | 109,823 | $ | 129,062 | $ | 190,949 | $ | 189,744 | $ | 146,673 | ||||||||||
| Interest bearing deposits in banks | 5,897 | 5,876 | 3,473 | 3,273 | 2,759 | |||||||||||||||
| Cash and cash equivalents | 115,720 | 134,938 | 194,422 | 193,017 | 149,432 | |||||||||||||||
| Investment securities – available for sale (at fair value) | 286,771 | 235,564 | 242,013 | 204,006 | 226,885 | |||||||||||||||
| Investment securities – held to maturity (at cost) | 56,259 | 61,979 | 65,683 | 69,357 | 68,263 | |||||||||||||||
| Restricted investment in bank stock, at cost | 1,029 | 1,029 | 3,658 | 3,654 | 4,468 | |||||||||||||||
| Loans held for sale | 67 | 348 | 1,443 | 1,430 | 3,546 | |||||||||||||||
| Loans | 1,153,687 | 1,161,868 | 1,145,343 | 1,199,325 | 1,167,812 | |||||||||||||||
| Unearned fees | (292 | ) | (1,171 | ) | (2,458 | ) | (3,330 | ) | (1,730 | ) | ||||||||||
| Allowance for loan losses | (15,955 | ) | (16,906 | ) | (17,068 | ) | (16,554 | ) | (16,486 | ) | ||||||||||
| Net loans | 1,137,440 | 1,143,791 | 1,125,817 | 1,179,441 | 1,149,596 | |||||||||||||||
| Premises and equipment, net | 34,697 | 35,213 | 35,988 | 36,279 | 36,863 | |||||||||||||||
| Goodwill and other intangible assets | 12,052 | 11,004 | 11,004 | 11,004 | 11,004 | |||||||||||||||
| Bank owned life insurance | 45,150 | 44,851 | 44,553 | 44,260 | 43,974 | |||||||||||||||
| Deferred tax assets | 6,857 | 7,946 | 7,849 | 9,580 | 7,972 | |||||||||||||||
| Other real estate owned, net | 4,477 | 6,663 | 6,756 | 7,533 | 9,386 | |||||||||||||||
| Operating lease asset | 2,247 | 2,331 | 2,414 | 2,495 | 2,408 | |||||||||||||||
| Accrued interest receivable and other assets | 27,072 | 22,899 | 22,206 | 19,777 | 19,617 | |||||||||||||||
| Total Assets | $ | 1,729,838 | $ | 1,708,556 | $ | 1,763,806 | $ | 1,781,833 | $ | 1,733,414 | ||||||||||
| Liabilities and Shareholders’ Equity | ||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Non-interest bearing deposits | $ | 501,627 | $ | 491,441 | $ | 497,736 | $ | 485,311 | $ | 420,427 | ||||||||||
| Interest bearing deposits | 967,747 | 953,053 | 958,375 | 982,952 | 1,001,939 | |||||||||||||||
| Total deposits | 1,469,374 | 1,444,494 | 1,456,111 | 1,468,263 | 1,422,366 | |||||||||||||||
| Short-term borrowings | 57,699 | 72,396 | 49,406 | 51,454 | 49,160 | |||||||||||||||
| Long-term borrowings | 30,929 | 30,929 | 100,929 | 100,929 | 100,929 | |||||||||||||||
| Operating lease liability | 2,761 | 2,854 | 2,945 | 3,035 | 2,958 | |||||||||||||||
| Accrued interest payable and other liabilities | 26,182 | 23,103 | 22,867 | 27,914 | 26,044 | |||||||||||||||
| Dividends payable | 993 | 993 | 992 | 1,049 | 910 | |||||||||||||||
| Total Liabilities | 1,587,938 | 1,574,769 | 1,633,250 | 1,652,644 | 1,602,367 | |||||||||||||||
| Shareholders’ Equity: | ||||||||||||||||||||
| Common Stock – par value $0.01 per share; Authorized 25,000,000 shares; issued and outstanding 6,620,955 shares at December 31, 2021 and 6,992,911 at December 31, 2020 | 66 | 66 | 66 | 70 | 70 | |||||||||||||||
| Surplus | 23,661 | 23,522 | 23,422 | 30,245 | 30,149 | |||||||||||||||
| Retained earnings | 145,487 | 138,931 | 135,536 | 132,072 | 129,691 | |||||||||||||||
| Accumulated other comprehensive loss | (27,314 | ) | (28,732 | ) | (28,468 | ) | (33,198 | ) | (28,863 | ) | ||||||||||
| Total Shareholders’ Equity | 141,900 | 133,787 | 130,556 | 129,189 | 131,047 | |||||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 1,729,838 | $ | 1,708,556 | $ | 1,763,806 | $ | 1,781,833 | $ | 1,733,414 | ||||||||||
Historical Income Statement
| Three Months Ended | ||||||||||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||||||||||
| Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||||||
| In thousands | (Unaudited) | |||||||||||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||||||||
| Interest and fees on loans | $ | 13,456 | $ | 13,667 | $ | 13,097 | $ | 12,732 | $ | 12,963 | $ | 12,940 | $ | 13,413 | $ | 12,839 | ||||||||||||||||
| Interest on investment securities | ||||||||||||||||||||||||||||||||
| Taxable | 1,048 | 880 | 994 | 990 | 914 | 960 | 1,344 | 1,308 | ||||||||||||||||||||||||
| Exempt from federal income tax | 268 | 266 | 268 | 275 | 275 | 276 | 273 | 260 | ||||||||||||||||||||||||
| Total investment income | 1,316 | 1,146 | 1,262 | 1,265 | 1,189 | 1,236 | 1,617 | 1,568 | ||||||||||||||||||||||||
| Other | 76 | 97 | 77 | 65 | 76 | 77 | 74 | 209 | ||||||||||||||||||||||||
| Total interest income | 14,848 | 14,910 | 14,436 | 14,062 | 14,228 | 14,253 | 15,104 | 14,616 | ||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||||||||
| Interest on deposits | 596 | 732 | 999 | 1,146 | 1,359 | 1,515 | 1,612 | 1,870 | ||||||||||||||||||||||||
| Interest on short-term borrowings | 19 | 17 | 26 | 24 | 26 | 19 | 21 | 28 | ||||||||||||||||||||||||
| Interest on long-term borrowings | 315 | 536 | 648 | 656 | 742 | 817 | 815 | 831 | ||||||||||||||||||||||||
| Total interest expense | 930 | 1,285 | 1,673 | 1,826 | 2,127 | 2,351 | 2,448 | 2,729 | ||||||||||||||||||||||||
| Net interest income | 13,918 | 13,625 | 12,763 | 12,236 | 12,101 | 11,902 | 12,656 | 11,887 | ||||||||||||||||||||||||
| Provision for loan losses | (885 | ) | (597 | ) | 555 | 110 | 420 | 160 | 2,167 | 2,654 | ||||||||||||||||||||||
| Net interest income after provision for loan losses | 14,803 | 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 | — | |||||||||||||||||||||||
| Losses on equity investment | (35 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||
| Gains on sale of residential mortgage loans | 119 | 82 | 272 | 588 | 923 | 734 | 687 | 59 | ||||||||||||||||||||||||
| Gains/(losses) on disposal of fixed assets | (1 | ) | — | 16 | — | 1 | (133 | ) | — | (18 | ) | |||||||||||||||||||||
| Net gains | 83 | 82 | 442 | 588 | 777 | 1,176 | 794 | 41 | ||||||||||||||||||||||||
| Other Income | ||||||||||||||||||||||||||||||||
| Service charges on deposit accounts | 479 | 475 | 412 | 405 | 490 | 447 | 377 | 615 | ||||||||||||||||||||||||
| Other service charges | 245 | 232 | 221 | 211 | 182 | 195 | 32 | 290 | ||||||||||||||||||||||||
| Trust department | 2,209 | 2,166 | 2,034 | 2,241 | 2,091 | 1,871 | 1,731 | 1,753 | ||||||||||||||||||||||||
| Debit card income | 1,021 | 900 | 913 | 810 | 850 | 738 | 680 | 634 | ||||||||||||||||||||||||
| Bank owned life insurance | 299 | 298 | 293 | 286 | 292 | 373 | 285 | 303 | ||||||||||||||||||||||||
| Brokerage commissions | 228 | 229 | 357 | 268 | 291 | 234 | 202 | 277 | ||||||||||||||||||||||||
| Insurance reimbursement | 1,375 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Other | 481 | 223 | 91 | 521 | 182 | 120 | 118 | 136 | ||||||||||||||||||||||||
| Total other income | 6,337 | 4,523 | 4,321 | 4,742 | 4,378 | 3,978 | 3,425 | 4,008 | ||||||||||||||||||||||||
| Total other operating income | 6,420 | 4,605 | 4,763 | 5,330 | 5,155 | 5,154 | 4,219 | 4,049 | ||||||||||||||||||||||||
| Other operating expenses | ||||||||||||||||||||||||||||||||
| Salaries and employee benefits | 5,847 | 5,719 | 5,507 | 4,988 | 4,835 | 5,378 | 4,943 | 5,923 | ||||||||||||||||||||||||
| FDIC premiums | 197 | 209 | 183 | 183 | 207 | 201 | 160 | 43 | ||||||||||||||||||||||||
| Equipment | 1,061 | 1,032 | 954 | 851 | 1,033 | 978 | 967 | 926 | ||||||||||||||||||||||||
| Occupancy | 673 | 684 | 693 | 725 | 660 | 707 | 746 | 747 | ||||||||||||||||||||||||
| Data processing | 784 | 819 | 875 | 726 | 826 | 1,130 | 973 | 1,052 | ||||||||||||||||||||||||
| Marketing | 127 | 129 | 133 | 146 | 168 | 122 | 153 | 130 | ||||||||||||||||||||||||
| Professional services | 656 | 615 | 1,491 | 1,170 | 1,698 | 602 | 1,181 | 723 | ||||||||||||||||||||||||
| Contract labor | 152 | 153 | 185 | 148 | 161 | 180 | 149 | 151 | ||||||||||||||||||||||||
| Line rentals | 131 | 123 | 268 | 215 | 210 | 216 | 221 | 217 | ||||||||||||||||||||||||
| Other real estate owned | (485 | ) | 150 | (198 | ) | (412 | ) | 8 | 6 | (3 | ) | — | ||||||||||||||||||||
| Investor relations | 130 | 116 | 306 | 124 | 117 | 54 | 1,013 | 93 | ||||||||||||||||||||||||
| Settlement expense | — | — | — | 3,300 | — | — | — | — | ||||||||||||||||||||||||
| FHLB prepayment penalty | — | 2,368 | — | — | — | — | — | — | ||||||||||||||||||||||||
| Contributions | 1,115 | 55 | 27 | 23 | 37 | 27 | 25 | 38 | ||||||||||||||||||||||||
| Other | 794 | 855 | 608 | 740 | 1,002 | 939 | 899 | 962 | ||||||||||||||||||||||||
| Total other operating expenses | 11,182 | 13,027 | 11,032 | 12,927 | 10,962 | 10,540 | 11,427 | 11,005 | ||||||||||||||||||||||||
| Income before income tax expense | 10,041 | 5,800 | 5,939 | 4,529 | 5,874 | 6,356 | 3,281 | 2,277 | ||||||||||||||||||||||||
| Provision for income tax expense | 2,492 | 1,412 | 1,536 | 1,099 | 1,318 | 1,396 | 711 | 522 | ||||||||||||||||||||||||
| Net Income | $ | 7,549 | $ | 4,388 | $ | 4,403 | $ | 3,430 | $ | 4,556 | $ | 4,960 | $ | 2,570 | $ | 1,755 | ||||||||||||||||
| Basic net income per common share | $ | 1.14 | $ | 0.66 | $ | 0.66 | $ | 0.49 | $ | 0.66 | $ | 0.70 | $ | 0.37 | $ | 0.25 | ||||||||||||||||
| Diluted net income per common share | $ | 1.14 | $ | 0.66 | $ | 0.66 | $ | 0.49 | $ | 0.65 | $ | 0.70 | $ | 0.37 | $ | 0.25 | ||||||||||||||||
| Weighted average number of basic shares outstanding | 6,620 | 6,617 | 6,609 | 6,996 | 7,004 | 6,988 | 6,974 | 7,063 | ||||||||||||||||||||||||
| Weighted average number of diluted shares outstanding | 6,627 | 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 | $ | 0.15 | $ | 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, FHLB prepayment penalty, insurance reimbursement and charitable contribution.
| Twelve months ended December 31, | Three months ended December 31, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| (in thousands, except for per share amount) | ||||||||||||||||
| Net income - as reported | $ | 19,770 | $ | 13,841 | $ | 7,549 | $ | 4,556 | ||||||||
| Adjustments: | ||||||||||||||||
| Insurance Reimbursement | (1,375 | ) | — | (1,375 | ) | — | ||||||||||
| Settlement Expense | 3,300 | — | — | — | ||||||||||||
| FHLB Penalty | 2,368 | — | — | — | ||||||||||||
| Foundation Contribution | 1,000 | — | 1,000 | — | ||||||||||||
| Income tax effect of adjustments | (1,227 | ) | — | 86 | — | |||||||||||
| Adjusted net income (non-GAAP) | $ | 23,836 | $ | 13,841 | $ | 7,260 | $ | 4,556 | ||||||||
| Basic and Diluted earnings per share - as reported | $ | 2.95 | $ | 1.98 | $ | 1.14 | $ | 0.70 | ||||||||
| Adjustments: | ||||||||||||||||
| Insurance Reimbursement | (0.20 | ) | — | (0.20 | ) | — | ||||||||||
| Settlement Expense | 0.47 | — | — | — | ||||||||||||
| FHLB Penalty | 0.35 | — | — | — | ||||||||||||
| Foundation Contribution | 0.15 | — | 0.15 | — | ||||||||||||
| Income tax effect of adjustments | (0.18 | ) | — | 0.01 | — | |||||||||||
| Adjusted basic and diluted earnings per share (non-GAAP) | $ | 3.54 | $ | 1.98 | $ | 1.10 | $ | 0.70 | ||||||||
| As of or for the twelve months ended | ||||||||||||||||
| December 31, | ||||||||||||||||
| (in thousands, except per share data) | 2021 | 2020 | ||||||||||||||
| Per Share Data | ||||||||||||||||
| Basic net income per share (1) - as reported | $ | 2.95 | $ | 1.98 | ||||||||||||
| Basic net income per share (1) - non-GAAP | 3.54 | 1.98 | ||||||||||||||
| Diluted net income per share (1) - as reported | $ | 2.95 | $ | 1.98 | ||||||||||||
| Diluted net income per share (1) - non-GAAP | 3.54 | 1.98 | ||||||||||||||
| Basic book value per share | $ | 20.22 | $ | 18.63 | ||||||||||||
| Diluted book value per share | $ | 20.19 | $ | 18.62 | ||||||||||||
| Significant Ratios: | ||||||||||||||||
| Return on Average Assets (1) - as reported | 1.12 | % | 0.79 | % | ||||||||||||
| Settlement, FHLB and contribution expenses, and insurance reimbursement income, net of income tax effect | 0.23 | % | — | |||||||||||||
| Adjusted Return on Average Assets (1) (non-GAAP) | 1.35 | % | 0.79 | % | ||||||||||||
| Return on Average Equity (1) - as reported | 14.92 | % | 9.87 | % | ||||||||||||
| Settlement, FHLB and contribution expenses, and insurance reimbursement income, net of income tax effect | 2.90 | % | — | |||||||||||||
| Adjusted Return on Average Equity (1) (non-GAAP) | 17.82 | % | 9.87 | % | ||||||||||||
(1) See reconcilation of this non-GAAP financial measure provided elsewhere herein.
| Three Months Ended | ||||||||||||||||||||||||
| December 31, | ||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||
| (dollars in thousands) | Average Balance | Interest | Average Yield/Rate | Average Balance | Interest | Average Yield/Rate | ||||||||||||||||||
| Assets | ||||||||||||||||||||||||
| Loans | $ | 1,158,421 | $ | 13,478 | 4.62 | % | $ | 1,181,815 | $ | 12,984 | 4.37 | % | ||||||||||||
| Investment Securities: | ||||||||||||||||||||||||
| Taxable | 285,524 | 1,048 | 1.46 | % | 225,416 | 914 | 1.61 | % | ||||||||||||||||
| Non taxable | 25,392 | 480 | 7.50 | % | 26,096 | 493 | 7.51 | % | ||||||||||||||||
| Total | 310,916 | 1,528 | 1.95 | % | 251,512 | 1,407 | 2.22 | % | ||||||||||||||||
| Federal funds sold | 132,906 | 50 | 0.15 | % | 147,612 | 33 | 0.09 | % | ||||||||||||||||
| Interest-bearing deposits with other banks | 5,884 | 1 | 0.07 | % | 953 | — | — | % | ||||||||||||||||
| Other interest earning assets | 1,029 | 25 | 9.64 | % | 4,468 | 43 | 3.85 | % | ||||||||||||||||
| Total earning assets | 1,609,156 | 15,082 | 3.72 | % | 1,586,360 | 14,467 | 3.63 | % | ||||||||||||||||
| Allowance for loan losses | (16,530 | ) | (16,292 | ) | ||||||||||||||||||||
| Non-earning assets | 157,988 | 156,800 | ||||||||||||||||||||||
| Total Assets | $ | 1,750,614 | $ | 1,726,868 | ||||||||||||||||||||
| Liabilities and Shareholders’ Equity | ||||||||||||||||||||||||
| Interest-bearing demand deposits | $ | 224,911 | $ | 93 | 0.16 | % | $ | 197,370 | $ | 193 | 0.39 | % | ||||||||||||
| Interest-bearing money markets | 345,697 | 69 | 0.08 | % | 344,318 | 236 | 0.27 | % | ||||||||||||||||
| Savings deposits | 236,494 | 18 | 0.03 | % | 187,808 | 30 | 0.06 | % | ||||||||||||||||
| Time deposits: | ||||||||||||||||||||||||
| Less than $100k | 81,133 | 195 | 0.95 | % | 110,407 | 402 | 1.45 | % | ||||||||||||||||
| $100k or more | 85,418 | 221 | 1.03 | % | 121,719 | 498 | 1.63 | % | ||||||||||||||||
| Short-term borrowings | 65,252 | 19 | 0.12 | % | 54,334 | 26 | 0.19 | % | ||||||||||||||||
| Long-term borrowings | 30,929 | 315 | 4.04 | % | 100,929 | 742 | 2.92 | % | ||||||||||||||||
| Total interest-bearing liabilities | 1,069,834 | 930 | 0.34 | % | 1,116,885 | 2,127 | 0.76 | % | ||||||||||||||||
| Non-interest-bearing deposits | 501,259 | 404,809 | ||||||||||||||||||||||
| Other liabilities | 42,085 | 71,852 | ||||||||||||||||||||||
| Shareholders’ Equity | 137,436 | 132,225 | ||||||||||||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 1,750,614 | $ | 1,725,771 | ||||||||||||||||||||
| Net interest income and spread | $ | 14,152 | 3.38 | % | $ | 12,340 | 2.87 | % | ||||||||||||||||
| Net interest margin | 3.49 | % | 3.09 | % | ||||||||||||||||||||
| Twelve Months Ended | ||||||||||||||||||||||||
| December 31, | ||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||
| (dollars in thousands) | Average Balance | Interest | Average Yield/ Rate | Average Balance | Interest | Average Yield/ Rate | ||||||||||||||||||
| Assets | ||||||||||||||||||||||||
| Loans | $ | 1,173,966 | $ | 53,040 | 4.52 | % | $ | 1,147,870 | $ | 52,215 | 4.55 | % | ||||||||||||
| Investment Securities: | ||||||||||||||||||||||||
| Taxable | 272,305 | 3,912 | 1.44 | % | 204,243 | 4,526 | 2.22 | % | ||||||||||||||||
| Non taxable | 25,463 | 1,928 | 7.57 | % | 26,275 | 1,941 | 7.39 | % | ||||||||||||||||
| Total | 297,768 | 5,840 | 1.96 | % | 230,518 | 6,467 | 2.81 | % | ||||||||||||||||
| Federal funds sold | 150,556 | 178 | 0.12 | % | 96,417 | 215 | 0.22 | % | ||||||||||||||||
| Interest-bearing deposits with other banks | 4,040 | 2 | 0.05 | % | 905 | 9 | 0.99 | % | ||||||||||||||||
| Other interest earning assets | 2,969 | 135 | 4.55 | % | 4,455 | 212 | 4.76 | % | ||||||||||||||||
| Total earning assets | 1,629,299 | 59,195 | 3.63 | % | 1,480,165 | 59,118 | 3.99 | % | ||||||||||||||||
| Allowance for loan losses | (16,825 | ) | (15,362 | ) | ||||||||||||||||||||
| Non-earning assets | 152,674 | 148,818 | ||||||||||||||||||||||
| Total Assets | $ | 1,765,148 | $ | 1,613,621 | ||||||||||||||||||||
| Liabilities and Shareholders’ Equity | ||||||||||||||||||||||||
| Interest-bearing demand deposits | $ | 214,510 | $ | 553 | 0.26 | % | $ | 182,767 | $ | 724 | 0.40 | % | ||||||||||||
| Interest-bearing money markets | 341,677 | 436 | 0.13 | % | 313,852 | 1,443 | 0.46 | % | ||||||||||||||||
| Savings deposits | 223,114 | 81 | 0.04 | % | 176,524 | 166 | 0.09 | % | ||||||||||||||||
| Time deposits: | ||||||||||||||||||||||||
| Less than $100k | 95,779 | 1,174 | 1.23 | % | 111,408 | 1,712 | 1.54 | % | ||||||||||||||||
| $100k or more | 102,501 | 1,229 | 1.20 | % | 127,397 | 2,311 | 1.81 | % | ||||||||||||||||
| Short-term borrowings | 57,697 | 86 | 0.15 | % | 46,519 | 94 | 0.20 | % | ||||||||||||||||
| Long-term borrowings | 77,340 | 2,155 | 2.79 | % | 100,929 | 3,205 | 3.18 | % | ||||||||||||||||
| Total interest-bearing liabilities | 1,112,618 | 5,714 | 0.51 | % | 1,059,396 | 9,655 | 0.91 | % | ||||||||||||||||
| Non-interest-bearing deposits | 491,967 | 372,392 | ||||||||||||||||||||||
| Other liabilities | 28,013 | 54,732 | ||||||||||||||||||||||
| Shareholders’ Equity | 132,550 | 127,101 | ||||||||||||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 1,765,148 | $ | 1,613,621 | ||||||||||||||||||||
| Net interest income and spread | $ | 53,481 | 3.12 | % | $ | 49,463 | 3.08 | % | ||||||||||||||||
| Net interest margin | 3.28 | % | 3.34 | % | ||||||||||||||||||||
Exhibit 99.2
Investor Presentation Fourth Quarter 2021 February 8, 2022
2 2 Forward looking statements This presentation 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. Whether actual results will conform to expectations and predictions is subject to known and unknown risks and uncertainties. Actual results could be materially different from management’s expectations. This presentation should be read in conjunction with our Annual Report on Form 10 - K, as amended, for the year ended December 31, 2020, including the sections of the report entitled “Risk Factors”, as well as the reports and other documents that we subsequently file with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website at www.sec.gov or at our website at www.mybank.com . Except as required by law, we do not intend to publish updates or revisions of any forward - looking statements we make to reflect new information, future events or otherwise.
3 3 Table of Contents I. Executive Summary Pg. 4 II. Operating and Financial Performance Pg. 12 III. Our Commitment To ESG Pg. 27 IV. Appendix Pg. 31
4 4 I. Executive Summary
5 5 Executive Summary Robust enterprise risk management protocol Execution of our strategy is producing steady profitable growth Our board and management continue to strengthen First United’s ESG practices ▪ Disciplined credit culture and strong allowance for loan loss ratio of 1.39% (excluding PPP balances) ▪ Capital and liquidity remain strong ▪ Well - positioned for rising rate environment with an asset - sensitive balance sheet ▪ Highly rated fraud monitoring and information technology programs ▪ Ongoing board refreshment, including formal adoption of diversity and inclusion policies ▪ Declassified board of directors to be fully phased - in by the 2024 annual meeting of shareholders ▪ Named an internal Director of Diversity and Engagement to increase focus on diversity, equity and inclusion for associates and customers ▪ Enhanced shareholder engagement and communication ▪ Year over year growth in earnings per share of 49% (GAAP) ▪ Year - end pre - provision net revenue (1) adjusted for one - time expenses/reimbursements increased 33% over 2020 ▪ Pre - provision net revenue (1) for 4Q21 increased 40% compared to 4Q20 ▪ Net interest margin increased to 3.49% from 3.38% in linked quarter ▪ Dividend on common stock increased to $0.15 per share; a 15% increase (1) See Appendix for a reconciliation of this non - GAAP financial measure
6 6 Mission Statement To enrich the lives of our customers, our employees and our shareholders through uncommon commitment to service and effective financial solutions Company Overview Founded: 1900 Headquarters: Oakland, Maryland Locations: 25 branches + 1 Advisory Center Business Lines: Commercial & Retail Banking, Trust Services, Wealth Management Ticker: FUNC (Nasdaq) Website: www.mybank.com Financial Highlights (as of or for the year ended December 31, 2021) Assets: $1.73 billion Loans: $1.15 billion Deposits: $1.47 billion AUM: $1.48 billion Efficiency Ratio (1) : 56.4 % TCE Ratio (1) : 7.56% Dividends Declared Per Share : $0.60 Tangible Book Value Per Share (1) : $19.61 Diluted EPS - GAAP: $2.95 Diluted EPS - non - GAAP (1) : $3.54 NIM: 3.28% NPAs/Total Assets: .60% Net Recoveries/Avg. Loans: 0.02% West Virginia Maryland Star denotes Oakland, Maryland Headquarters Franchise Overview (1) See Appendix for a reconciliation of these non - GAAP financial measures
7 7 4Q 2021 Highlights Highlights • Core pre - provision net revenue (1) of $8.8 million in 4Q21 compared to $7.6 million in linked quarter • Core non - interest income of $4.6 (1) million driven by strong wealth management revenue as assets under management grew to $1.5 billion at December 31, 2021 • Acquired a $30.0 million wealth book of business on December 31, 2021 • Mortgage production totaled $29.7 million in 4Q21 compared to $31.8 million on a linked quarter basis • Net interest margin positively impacted by Paycheck Protection Plan (“PPP”) deferred loan fees; negatively impacted by low interest environment and high cash balances • PPP deferred loan fees of $0.8 million; and average loan balance of $16.0 million; 17 bp net positive impact • Loans refinanced at lower rates and mortgage loans refinanced to secondary market • New commercial loans booked at average yield of approximately 4.34% spurred by small business (< $0.5 million) production • Other operating expenses decreased $0.9 (1) million compared to linked quarter *4Q21 annualized $7.3 million Adj. Net Income (1) $1.10 Adj. Diluted EPS (1) 1.66%* ROAA (1) 22.97* ROATCE (1) 3.49% NIM Key Facts (1) See Appendix for a reconciliation of these non - GAAP financial measures
8 8 2021 Highlights Highlights • Increased core pre - provision net revenue (1) to $30.8 million in 2021 from $23.2 million in 2020 • Core non - interest income of $19.3 (1) million driven by strong wealth management revenue and robust interchange income • PPP 2020 and 2021 production of $214.6 million, with $207.5 million forgiven for both programs at the end of December 2021 • Organic mortgage production totaled $119.3 million in 2021 compared to $144.6 million in 2020, primarily in loans sold to the secondary market, leading to strong net gains of $1.1 million in 2021 o Mortgage pool purchase of $39.0 million in 3Q21 • Allowance for Loan Losses to gross loans of 1.38% • Net interest margin impacted by PPP loans, low interest rate environment and excess liquidity • Opened a new Advisory Center at Cheat Lake, Monongalia County, WV $23.8 million Adj. Net Income (1) $3.54 Adj. Diluted EPS (1) 1.35% ROAA (1) 19.61% ROATCE (1) 3.28% NIM Key Facts (1) See Appendix for a reconciliation of these non - GAAP financial measures
9 9 Our Core Markets (as of December 31, 2021) Note: Out of market loans represent $113 million and are not reflected in the above table (1) Source: FDIC Market Share Data, most current. Deposit market share for each region includes the following counties liste d b elow: West: Harrison, WV; Monongalia, WV Central: Garrett, MD; Allegany, MD; Mineral, WV East: Washington, MD; Frederick, MD; Berkeley, WV (2) Includes 1 Advisory Center opened in the West Region in 1Q21 West Region Central Region East Region Loans (000s) $261,909 $347,155 $424,833 Deposits (000s) $144,686 $793,837 $525,370 Deposit Market Share (1) (at June 30, 2021) 2% 45% 4% Branches / Advisory Centers (2) 5 10 11
10 10 Our Core Strengths Engaged and Diverse Board & Management • Our diverse and experienced Board has the skills to oversee key business risks, strategic initiatives and governance best practices • Ongoing Board succession strategy – 60% change over 7 years Core Deposit Franchise Diversified Revenue Stream Forward - Thinking Approach Robust Enterprise Risk Management Expense Structure • Reflects stable legacy markets, produces steady low - cost funding • Growing via utilization of technology and deepening of business relationships • Diversified revenue stream (non - interest income 27% of operating revenue) driven by trust and brokerage fee income provides protection during times of low interest rates • Innovative and dynamic approach to attracting and retaining clients, leading to future growth and efficiencies • Enhanced underwriting guidelines and risk management framework • Focus on risk mitigation and managing loan concentrations • Well established operational infrastructure will support future growth • Cost cutting initiatives underway and hybrid work environment and technology adoption are providing new opportunities for savings Community Engagement • Supporting local businesses, schools and non - profits with financial education, participation in stimulus programs and ongoing consultation • Knowledgeable associates committed to helping clients and the communities we serve
11 11 Transitioning to Post - COVID Environment • Customization of Experience • Blend of technology and in - person service and solutions • Delivery of updated technology to our clients through enhanced delivery channels, including virtual closing options, mobile deposits, ATMs, cash recyclers • Enhanced communication and outreach to shareholders , clients and associates • Community Focused • Helped local business owners through 2,044 PPP loans totaling $215 million and 665 COVID loan modifications totaling $270 million • Supported our communities through continued support of non - profit groups and special banking accommodations • More Efficient and Flexible Employer • Assisted our associates with work - at - home accommodations, pandemic pay policies, Financial First Responder bonuses, and flexible schedules. • Continued a hybrid environment and best practices which empower our workforce and make First United an attractive place to build a career • Better Prepared for Future Business Disruption • State of the art Business Continuity Plan protecting shareholders, clients and associates
12 12 II. Operating and Financial Performance
13 13 Key Initiatives and Strategic Priorities Optimize shareholder return through a focus on future growth, profitability, efficiencies, the client experience, and a reimagined future Create Exceptional Client Experience • Provide seamless client experience across all business lines using integrated relationship teams • Educate clients on digital banking and technology utilizing high - tech branch network • Customize financial solutions to grow client relationships and loyalty • Develop focused marketing plans utilizing data analytics to increase relationship and product profitability Grow Strategically • Amplify consumer and small business relationships utilizing community relationship managers and universal relationship advisors • Opportunistically identify and hire banking talent to capitalize on market disruption and client acquisition • Expand into new markets utilizing Financial Center model and mortgage originations • Pursue wealth management M&A and strategic bank partnerships Optimize Profitability and Enhance Efficiency • Fine tune regional/line of business financial goals and incentive plans to achieve improved operating leverage • Utilize profitability metrics to focus and align client engagement efforts • Capitalize on existing infrastructure to build stronger revenue streams • Implement next stages of operational restructure and consolidation initiative • Leverage technology to streamline processes and procedures Underlying all initiatives is a commitment to strong risk management, monitoring and mitigation. Reimagine the Future • Develop hybrid work environment to capture efficiencies and attract/ retain talent • Explore real estate partnerships and physical space alternatives • Further promote diversity, equity and inclusion in workforce and client base • Establish Fintech partnerships to capitalize on digital financial offerings
14 14 Strong Risk Management, Monitoring and Mitigation Underlies all strategic priorities Asset Quality • Low net charge - offs and strong asset quality as a result of conservative and proactive credit culture • Strong reserves - ALL level of 1.39%, excluding PPP loans; future provisioning based on loan growth and asset quality changes • Diversified commercial loan portfolio and geographic footprint • Disciplined loan growth strategy, concentration management, stress testing and exception tracking and monitoring • Well - defined loan approval levels • CECL implementation January 2023 Liquidity Management • Loan to deposit ratio of 79% • Liquidity contingency plan in place • Liquidity stress testing performed quarterly with strong liquidity under various scenarios • Available borrowing capacity of $469.0 million through correspondent lines of credit and FHLB • Strong, stable low - cost core deposit franchise of 90% of average total interest - earning assets Capital • Strong capital levels well above regulatory “well - capitalized” definition • Conservative dividend payout policy to improve TCE • Capital stress tests indicate Bank is well positioned to absorb potential losses Cyber - Security and Fraud Monitoring • Board regularly briefed on cyber - security matters • Robust information security training programs for associates and Board • Regular third - party review and testing of information security and compliance processes and cybersecurity controls • No security breaches to - date • Adaptive fraud detection and management Interest Rate Sensitivity • Maintaining an asset sensitive balance sheet • Limiting longer - term loan and investment exposure • Capturing core, low - cost deposits • Monitoring dynamic and static rate ramp scenarios
15 15 $14.7 $15.5 $17.8 $23.2 $30.8 2017 2018 2019 2020 2021 $1,039 $1,068 $1,142 $1,422 $1,469 2017 2018 2019 2020 2021 $882 $996 $1,039 $1,168 $1,154 2017 2018 2019 2020 2021 $1,146 Our Strategic Plan is Generating Reliable Growth… Pre - Provision Net Revenue ($ in millions) (1) Diluted Earnings per Share (1) Total Deposits ($ in millions) Total Gross Loans, including PPP ($ in millions) First United is delivering consistent growth, increasing profits and earnings per share to drive long - term shareholder return $1.05 $1.51 $1.85 $1.97 $3.54 2017 2018 2019 2020 2021 +32.8% YoY +79.7% YOY - 1.20% YOY +3.3% YOY $8 PPP $114 (1) See Appendix for a reconciliation of these non - GAAP financial measures
16 16 7.64% 10.39% 11.44% 11.92% 19.61% 2017 2018 2019 2020 2021 0.55% 0.81% 0.93% 0.86% 1.35% 2017 2018 2019 2020 2021 …As Well As Solid Profitability • First United has consistently improved return on assets and return on average equity enabling us to fund the dividend and invest in future growth • Strategic initiatives underway to enhance growth and lower expenses, allowing us to continue improving profitability Core ROATCE (non - GAAP (1) ) Core ROAA (non - GAAP (1) ) Strategic Target 1.0% - 1.25% Strategic Target 14% - 15% (1) See Appendix for a reconciliation of these non - GAAP financial measures
17 17 Proactive Loan Portfolio Management • Diverse portfolio loan types and industries reduce Commercial portfolio risk • Focus on risk mitigation and managing of concentrations – CRE / Total Capital: 227% – ADC / Total Capital: 94% Loan Portfolio Mix (12/31/21) Commercial Loan Mix, excl PPP (12/31/21) Industry Balance (MMs) Average Balance (MMs) % RE/Rental/Leasing - NOO $133 $1.4 19% RE/Rental/Leasing – OO, C&I 137 .3 20% Construction - Developers 45 2.1 6% Accommodations 72 2.1 11% Services 49 .2 7% RE/Rental/Leasing - Multifamily 40 .4 6% Health Care / Social Assistance 27 .3 4% Trade 28 .1 4% RE/Rental/Leasing – Developers 28 .7 4% Construction – All Other 22 .1 3% All Other 107 .2 16% Type Balance (MMs) Average Balance (MMs) % Total 1 - 4 Family $405 $.11 35% CRE – OO 132 .45 11% CRE – NOO 192 1.56 16% Multi - family 42 .55 4% C&D 128 .30 11% C&I 181 .12 16% Consumer 66 .01 6% PPP 8 .12 1%
18 18 Asset Quality NPAs / Total Assets Nonaccrual Loans / Total Loans 1.37% 0.95% 1.40% 0.35% 0.21% 2017 2018 2019 2020 2021 Underwriting and Monitoring • Appraisal policy requires 18 - month updates for impaired or special assets • Proactive, ongoing client engagement and experienced work - out teams • Quarterly Criticized Asset Reviews • Centralized risk rating, and monitoring of risk rating migration and delinquency trends • Decreased maximum HE LTV to 80% • Robust annual third - party loan review 1.68% 1.17% 1.30% 0.99% 0.60% 2017 2018 2019 2020 2021
19 19 Loan Loss Allowance (“ALL”) ALL Trends ALL % by Segment (excluding PPP loans) 0.28% 0.11% - 0.02% 0.13% - 0.02% 2017 2018 2019 2020 2021 Net Charge - Offs (Recoveries) / Average Loans • In 2020, due to the unknown impact of the COVID pandemic on credit quality, we increased the provision expense by $4.1 million primarily through qualitative factor adjustments, resulting in an increase in the ALL from 1.19% in 2019 to 1.56% (excluding guaranteed PPP loans) in 2020. • Negative provision in 2021 due primarily to strong asset quality, low delinquency, improving economic conditions and successful performance of modified loans. Excluding PPP loans, which are guaranteed ALL = 1.39% Excluding PPP loans, which are guaranteed ALL = 1.56% 1.12% 1.10% 1.19% 1.41% 1.38% 2017 2018 2019 2020 2021
20 20 Industry Leading Deposit Franchise • Stable legacy markets and growing portfolio of commercial deposit accounts • Noninterest bearing deposits have grown from 8% of portfolio in 2009 to 34% as of December 31, 2021 Deposit Composition (12/31/21) Deposit Type Balance (MMs) % NIB Demand $501.6 34% IB Demand $228.2 16% MMA & Savings $576.3 39% CDs < $100K $70.2 5% CDs > $100K $93.0 6% Brokered CDs $0.0 0% Core deposits comprise 89% of deposits CD Maturities (MMs) (12/31/21) $44 $66 $47 $6 3 Mos. or Less 3-12 Months 1-3 Years Over 3 Year
21 21 Net Interest Margin • Disciplined loan and deposit pricing has produced a strong margin that is in line with our peers • Margin expansion in the latter half of 2021 primarily due to new loan volume pricing at higher rates, the recognition of deferred PPP loan fees related to forgiveness and reduced cost of interest - bearing liabilities • Net interest income was aided by lower cost of funds on interest - bearing deposits and the reduced interest expense related to the prepayment of FHLB long - term borrowings • Our team approach to full client relationships, our focus on community - oriented business owners and our high - tech branch network provide continued access to low - cost deposits, treasury management and commercial loans Components (1) (1) See Appendix for a reconciliation of this non - GAAP financial measure 3.99% 4.41% 4.57% 3.99% 3.56% 3.57% 3.69% 3.72% 3.63% 0.78% 0.86% 1.18% 0.91% 0.65% 0.59% 0.46% 0.34% 0.51% 3.37% 3.74% 3.68% 3.34% 3.11% 3.16% 3.38% 3.49% 3.28% 0.32% 0.42% 0.70% 0.49% 0.32% 0.27% 0.20% 0.16% 0.24% -0.5% 0.5% 1.5% 2.5% 3.5% 4.5% 2017 2018 2019 2020 1Q21 2Q21 3Q21 4Q21 2021 Yield on Earning Assets Cost of Interest-bearing Liabilities Net Interest Margin Cost of Deposits
22 22 $50 $117 $149 $194 $135 $116 Dec-19 Jun-20 Dec-20 Jun-21 Sep-21 21-Dec Excess Cash Balances Impact Margin and Loan/Deposits • Purchased consumer and residential mortgage portfolios to diversify more quickly (high quality, individual loan reviews) • Relationship management - blending new loan balances with existing balances to retain current clients • Adding high quality, short to moderate duration securities to the investment portfolio • Investing in tax advantaged investments, loans, and tax credits • Allowing non - relationship high - cost deposits to run off • Shifted Wealth money market off - balance sheet • Repaid $70 million FHLB debt (Aug - 21) • Utilizing one - way sales for select customer deposits Employing Strategies to Profitably Deploy Excess Cash Cash Balances (MMs) Excess Cash due to volatility of economy: • Government stimulus funds • Conservative savings rates • PPP forgiveness funds • New core customers • Existing mortgage portfolio customers re - financing through the secondary market 85.8% 94.3% 92.1% 82.1% 78.5% 2017 2018 2019 2020 2021 Loans / Deposits
23 23 Diversified Fee Income an Advantage to First United • First United’s non - interest income (1) comprised 27% of operating revenue for 2021 • Fee - based business provides stable growth and a diversified revenue stream not directly tied to interest rates, as well as opportunities to build client relationships • First United’s diverse array of products provides opportunities to fully engage with customers and produce stable increases to earnings • Wealth acquisition strategy in place to grow assets under management Trust and Brokerage Assets Under Management (MMs) Non - Interest Income Mix – 2021 75% $1,104 $1,084 $1,212 $1,377 $1,482 2017 2018 2019 2020 2021 Composition Trust and Brokerage 47% Service Charges 13% Net Gain on Loan Sales 5% Debit Card Income 17% Bank - owned Life Insurance 6% Other Noninterest Income 12%
24 24 71.8% 72.8% 70.9% 64.6% 56.4% 2017 2018 2019 2020 2021 Expense Discipline Significant portion of earnings improvement can be attributed to expense reductions • Our investment in the wealth management business line generates additional expenses; even so, efficiency ratio has decreased ~15 points since 2017 • Implemented several initiatives to reduce expenses and to be more competitive versus our peers – Successful contract negotiation with core processor resulting in savings of $0.9 million in 2021 and $0.5 million ongoing ann ual ly; inclusive of over 30 new products and services – Restructuring and consolidation of regional operating structure – Existing operational infrastructure and technology investments positioned for continued growth – Enhanced implementation of technology resulting in on - going efficiencies and savings ( Docusign , virtual meetings, digital account openings and loan documentation, reduced printing, hybrid remote work options, etc.) • Future expense savings initiatives – Exploring outsourcing options for operational functions (internal audit outsourced 1Q21) – Analyzing real estate partnerships and physical space alternatives – Reviewing benefits structure and tax - saving strategies Efficiency Ratio (1) Strategic Target 58% - 63% (1) See Appendix for a reconciliation of this non - GAAP financial measure Operating Leverage Ratio, excluding settlement, FHLB penalty, insurance reimbursement and contribution (1) 3.1% - 1.6% 2.9% 9.5% 13.4% 2017 2018 2019 2020 2021
25 25 Prudent Capital Management $13.78 $14.97 $16.17 $17.17 $19.61 2017 2018 2019 2020 2021 Tangible Book Value / Share • Management has consistently grown tangible book value per share (9.2% CAGR) while simultaneously taking decisive action to benefit shareholders • Increasing dividend has improved shareholders’ return • History of opportunistic share repurchases has benefited EPS • Regulatory capital ratios significantly above regulatory requirements • Actively exploring other investments of capital Regulatory Capital 4% 6% 8% 10% 12% 14% 16% 18% Dec-17 Dec-20 Dec-21 Leverage CET1 Tier 1 Total Regulatory Well - Capitalized Regulatory Minimum plus fully phased - in Capital Conservation Buffer Total 10.5% Tier1 RB 8.5% CET1 7.0% Leverage 5.0%
26 26 Strategic Targets Post - COVID - 19 Metric Actual 12/31/2021 Non - GAAP 12/31/2021 Long Term Strategic Target Range Strong Shareholder Return EPS Growth (YoY) 49% 79% (1) 8% - 15% Dividend Payout Ratio 19.7% 16.3% 20% - 25% ROAA 1.12% 1.35% (1) 1.00% - 1.25% ROATCE 16.27% 19.61% (1) 14% - 15% TCE Ratio 7.56% 7.56% 8% - 10% High Quality, Diversified Revenue Stream Revenue Growth (YoY) 42.8% 72.2% (1) 2% - 7% Non - Int Inc / Revenue 28.3% 26.9% (1) 24% - 28% N IM 3.28% 3.28% 3.3% - 3.7% Balance Sheet Growth % Loan Growth - 1.2% incl PPP - 1.2% incl PPP 6% - 11% Loans / Assets 67% 67% 71% - 76% Loans / Deposits 79% 79% 87% - 90% Highly Efficient Operations Efficiency Ratio (adjusted for non - core items) 64.7% 57.5% (1) 58% - 63% Positive Operating Leverage Operating Leverage Ratio 0.33% 13.5% (1) 1% - 5% Robust Risk Enterprise Management NPLs / Loans 0.21% 0.21% 0.50% - 1.00% NCOs(Recoveries) / Avg. Total Loans - 0.02% - 0.02% 0.10% - 0.50% (1) See Appendix for a reconciliation of these non - GAAP financial measures
27 27 III. Our Commitment to ESG
28 28 Ongoing Shareholder Engagement • Declassified the Board of Directors (phased - in by 2024) • Adopt Proxy Access • Shareholder access to change By - laws • Management majority vote proposal received favorable shareholder vote • Updated NGC Charter • Adopted a diversity policy for director refreshment • Formalize LID role & responsibilities • Revised stock ownership guidelines for Directors and Executives • Enhance Board oversight of Environment & Social issues • Enhance Disclosure on Environment & Social issues • Continue progress on FUNC ESG strategy Ongoing Board Refreshment Enhanced disclosure through investor materials, proxy statement, and website. • Introduced 2020 incentive programs – further aligning executive pay with performance • Adopted right to call a special meeting. • Adopted mandatory director retirement policy • Adopted plurality voting standard for contested director elections • Enhanced shareholder engagement program Spring/Fall 2021 2022+ Summer/Fall 2020 Spring 2020 2019 and earlier First United’s ESG Journey Over the past few years, we have implemented several important governance enhancements. These changes align our governance profile with our long - term investors’ expectations for best - in - class corporate governance. We are committed to continuing to improve our ESG profile over time.
29 29 • LED lighting installed throughout branch network and operations center • Recycling, focus on reduced printing (65% reduction since pre - COVID) • Leveraging virtual meeting opportunities to reduce travel footprint ESG Enhancements To Date • Adopting best - in - class governance practices and shareholder rights • Recent Enhancements – Board refreshment, Board declassification, Proxy access and Shareholder access to change By - laws • Future Enhancements under consideration - Majority Voting Standard Governance • Created Diversity Engagement team, led by our newly appointed Director of Diversity and Engagement • Developed a formal workforce Diversity and Inclusion Policy • Formalized a policy requiring that diverse slate of candidates for each future open board seat Social Environmental We plan to share more on our priorities and enhancements to our ESG strategy throughout 2022.
30 30 Strong Investor Relations and Shareholder Communications and Engagement Clear long - term strategic plan with performance targets x Dedicated Investor Relations contact x Investor conferences and prospective investor engagement x Members of the Board and senior management routinely engage with shareholders and other stakeholders, and management regularly updates the Board in the context of ongoing investor discussions. These engagements help the Board and management gain feedback on a variety of topics, including strategic and financial performance, ESG disclosure, executive compensation, Board composition, and leadership structure. Investor presentations and periodic outreach to institutional and retail shareholders x How to contact your Board: Shareholders and interested parties wishing to contact our Board may send a letter to First United Co rporation Board of Directors, c/o Tonya K. Sturm, Secretary, First United Corporation, 19 South Second Street, Oakland, Maryland, 21550 - 0009 or by e - mail at tsturm@mybank.com. The Secretary will deliver all shareholder communications directly to the Board for consideration
31 31 IV. Appendix
32 32 Our Dedicated Management Team Our management team has the right set of skills and experience to effectively execute on our strategy and continue driving shareholder returns Carissa Rodeheaver CEO & Chair • 29 - year career with First United with in depth industry, sales, wealth management, financial and operational experience • Holds leadership positions in the American & Maryland Bankers Associations as well as in Garrett County, one of our key markets Robert L. Fisher II SVP & Chief Revenue Officer • 25+years with in - depth industry, retail, commercial and mortgage banking experience • Serves a board member of the Salvation Army of Washington County Jason Rush SVP & Chief Operating Officer • 27 years with in - depth industry, retail, risk and compliance and operations experience • Serves on the Maryland Bankers Association’s Government Relations Committee • Involved in the Garrett County community as a board member for multiple organizations Keith Sanders SVP & Chief Wealth Officer • 28 years of experience specializing in Wealth management, estate planning, trust administration and financial planning • Serves on the Maryland Bankers Association’s Government Relations Committee and Trust Committee • Involved in the Garrett County community as a senior leader for several organizations Tonya Sturm SVP, CFO, Secretary & Treasurer • 35 years of extensive banking, audit, credit, retail, risk and compliance and financial experience • Serves on Advisory Councils for both the American & Maryland Bankers’ Associations • Involved in the Garrett County community as a board member for multiple organizations
33 33 Board of Directors (May 2021) Our directors know our markets and customers and are leaders in the communities we serve Name / Affiliation Unique Expertise Carissa Rodeheaver CEO & Chair • Certified Public Accountant, ABA and MBA with 29 - year career at First United and in - depth industry, company, and operational experience • Involvement in community activities, including board seats at Garrett College Foundation and Garrett Development Corporation John McCullough Lead Director ( Nom/Gov Chair) • Certified Public Accountant and retired partner of Ernst & Young, LLP with extensive audit and accounting experience • Public company M&A advisory experience, particularly with financial companies John Barr Independent Director • Business ownership and operational experience in Maryland and the surrounding area • Involvement in Washington County, Maryland and is a former 3 - term Washington County Commissioner Brian Boal Independent Director (Audit Chair) • Certified public accountant and previous tax manager at PwC with extensive ownership, accounting, public company, M&A and business advisory experience, most recently in Garrett County • Serves as the treasurer of several organizations in Garrett County Sanu Chadha Independent Director • Certified Project Management Professional • Business and ownership experience in Monongalia County WV in a management and solutions company that provides consulting services to enterprise organizations across the United States and abroad for strategic process and technology solutions, project management, process improvement, data analytics, and cloud solutions Name / Affiliation Unique Expertise Christy DiPietro Independent Director • Chartered Financial Analyst • Private investor who provides wealth management services for a diverse portfolio of assets, including investment analysis and strategy, asset allocation, tax matters, insurance matters, estate planning, property management, and charitable giving. • Operational experience in a large public investment firm where she managed $2.3 billion in high - quality taxable fixed income assets for numerous institutional clients Patricia Milon Independent Director • Accomplished regulatory expert • Enterprise risk management and corporate governance experience with expertise in compliance, legal and regulatory risk for public companies • Consulting roles for fintech and regtech companies Irvin Robert Rudy Independent Director • Business ownership and operational experience in Garrett County • Board and committee experience as a trustee of The Ohio University Foundation, past first prevention Commissioner, retired chief of local fire department Marisa Shockley Independent Director (Compensation Chair) • Business ownership and operational experience in Frederick County • Chairman for the Maryland Auto Dealers’ Association, past President of Maryland School for the Deaf; TIME Quality Award regional finalist Hoye Andrew Walls III Independent Director • Business ownership and operational experience in Monongalia County, WV in a large printing company • Director experience at various community organizations such as United Way, Public Theatre, Red Cross and the Salvation Army
34 34 Non - GAAP Reconciliation This presentation includes certain non - GAAP financial measures, including pre - provision net revenue, net income, earnings per share (basic and diluted), return on average assets, return on average tangible common equity, tangible common equity, tangible assets, the ratio of tangible common equity to tangible assets, tangible book value per share, net interest margin, and efficiency ratio. These non - GAAP finan cial measures and any other non - GAAP financial measures that are discussed in this presentation should not be considered in isolation, and should be considered as additions to, and not substitutes for or superior to, measures of financial performance prepared in accordance with GAAP. The re are a number of limitations related to the use of these non - GAAP financial measures versus their nearest GAAP equivalents. For example, other co mpanies may calculate non - GAAP financial measures differently or may use other measures to evaluate their performance, all of which could re duce the usefulness of the Company’s non - GAAP financial measures as tools for comparison. The following is a reconciliation of the non - GAAP financia l measures used in (or conveyed orally during) this presentation to their most directly comparable GAAP financial measures.
35 35 Non - GAAP Reconciliation, continued ($000s, except where otherwise noted) YTD 2017 2018 2019 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 12/31/2021 Earnings Per Share - Basic Earnings Per Share - Basic, as reported (a)/(d) 0.58$ 1.51$ 1.85$ 1.98$ 0.65$ 0.49$ 0.66$ 0.66$ 1.14$ 2.95$ Add Back: Impact of Tax Reform Act 0.47 Add back: FHLB penalty, net of tax - - - - - - - 0.27 - 0.27 Add back: Contribution, net of tax 0.12 0.12 Add back: Insurance reimbursement, net of tax (0.16) (0.16) Add back: Settlement expense, net of tax - - - - - 0.37 - - - 0.37 Earnings Per Share - Basic, as adjusted (b)/(d) 1.05$ 1.51$ 1.85$ 1.98$ 0.65$ 0.86$ 0.66$ 0.93$ 1.10$ 3.54$ Earnings Per Share - Diluted Earnings Per Share - Diluted, as reported (a)/(e) 0.58$ 1.51$ 1.85$ 1.97$ 0.65$ 0.49$ 0.66$ 0.66$ 1.14$ 2.95$ Add Back: Impact of Tax Reform Act 0.47 Add back: FHLB penalty, net of tax - - - - - - 0.27 - 0.27 Add back: Contribution, net of tax 0.12 0.12 Add back: Insurance reimbursement, net of tax (0.16) (0.16) Add back: Settlement expense, net of tax - - - - - 0.37 - - - 0.37 Earnings Per Share - Diluted, as adjusted (b)/(e) 1.05$ 1.51$ 1.85$ 1.97$ 0.65$ 0.86$ 0.66$ 0.93$ 1.10$ 3.54$ Return on Average Assets (quarter and YTD annualized) Average Assets ( c) 1,322,013$ 1,311,902$ 1,418,928$ 1,613,669$ 1,710,900$ 1,765,133$ 1,783,821$ 1,768,803$ 1,750,614$ 1,765,148$ Return on Average Assets, as reported (a)/(c) 0.31% 0.81% 0.93% 0.86% 1.07% 0.78% 0.99% 0.99% 1.72% 1.12% Add Back: Impact of Tax Reform Act 0.24% Add back: FHLB penalty, net of tax - - - - - - - 0.40% - 0.10% Add back: Contribution, net of tax 0.18% 0.04% Add back: Insurance reimbursement, net of tax -0.24% -0.06% Add back: Settlement expense, net of tax - - - - - 0.58% - - - 0.15% Return on Average Assets, as adjusted (b)/(c) 0.55% 0.81% 0.93% 0.86% 1.07% 1.36% 0.99% 1.40% 1.66% 1.35%
36 36 Non - GAAP Reconciliation, continued ($000s, except where otherwise noted) YTD 2017 2018 2019 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 12/31/2021 Return on Average Tangible Common Stockholders' Equity Average common stockholders' equity (f) 106,332$ 113,659$ 125,774$ 127,101$ 132,087$ 131,541$ 127,269$ 133,952$ 137,436$ 132,550$ Less: Average goodwill 11,004 11,004 11,004 11,004 11,004 11,004 11,004 11,004 11,004 11,004 Average tangible common equity (g) 95,328$ 102,655$ 114,770$ 116,097$ 121,083$ 120,537$ 116,265$ 122,948$ 126,432$ 121,546$ Return on average tangible common equity, as reported (a)/(g) 4.25% 10.39% 11.44% 11.92% 15.05% 11.38% 15.15% 14.28% 23.88% 16.27% Add Back: Impact of Tax Reform Act 3.38% Add back: FHLB penalty, net of tax - - - - - - - 5.82% 1.47% Add back: Contribution 2.44% 0.63% Add back: Insurance reimbursement -3.35% -0.87% Add back: Settlement expense, net of tax - - - - 8.51% - - - 2.11% Return on average tangible common equity, as adj (b)/(g) 7.64% 10.39% 11.44% 11.92% 15.05% 19.89% 15.15% 20.10% 22.97% 19.61% Tangible Book Value per Common Share Total common equity, as reported (h) 108,390$ 117,066$ 125,940$ 131,047$ 131,047$ 129,189$ 130,556$ 133,787$ 141,900$ 141,900$ Less: Goodwill 11,004 11,004 11,004 11,004 11,004 11,004 11,004 11,004 12,052 12,052 Total tangible common equity (i) 97,386$ 106,062$ 114,936$ 120,043$ 120,043$ 118,185$ 119,552$ 122,783$ 129,848$ 129,848$ Common shares outstanding - basic (actual) (j) 7,067,425 7,086,632 7,110,022 6,992,911 6,992,911 6,998,617 6,614,604 6,617,941 6,620,955 6,620,955 Tangible book value per basic common share (i)/(j) 14.05$ 14.98$ 16.17$ 17.17$ 17.17$ 16.89$ 18.07$ 18.55$ 19.61$ 19.61$ Tangible common equity to tangible assets ("TCE Ratio") Total assets, as reported (k) 1,336,470 1,384,516 1,442,966 1,733,414 1,733,414 1,781,833 1,763,806 1,708,555 1,729,838 1,729,838 Less: Goodwill 11,004 11,004 11,004 11,004 11,004 11,004 11,004 11,004 12,052 12,052 Total tangible assets (l) 1,325,466$ 1,373,512$ 1,431,962$ 1,722,410$ 1,722,410$ 1,770,829$ 1,752,802$ 1,697,551$ 1,717,786$ 1,717,786$ Tangible common equity to tangible assets (k)/(l) 7.35% 7.72% 8.03% 6.97% 6.97% 6.67% 6.82% 7.23% 7.56% 7.56%
37 37 Non - GAAP Reconciliation, continued ($000s, except where otherwise noted) YTD 2017 2018 2019 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 12/31/2021 Net interest margin (tax equivalent) Net interest income 39,578$ 44,182$ 46,391$ 48,546$ 12,101$ 12,236$ 12,762$ 13,625$ 13,919$ 52,542$ Tax equivalent adjustment 637 796 868 917 239 239 234 232 234 939 Tax equivalent net interest income (m) 40,215$ 44,978$ 47,259$ 49,463$ 12,340$ 12,475$ 12,996$ 13,857$ 14,153$ 53,481$ Average earning assets (n) 1,193,949$ 1,203,813$ 1,285,019$ 1,480,165$ 1,586,360$ 1,627,190$ 1,652,816$ 1,628,594$ 1,609,156$ 1,629,299$ Net interest margin (tax equivalent) (m)/(n) 3.37% 3.74% 3.68% 3.34% 3.09% 3.11% 3.15% 3.38% 3.49% 3.28% Efficiency Ratio Noninterest expense, as reported 39,170$ 43,808$ 45,389$ 43,934$ 10,962$ 12,927$ 11,033$ 13,027$ 10,777$ 47,764$ Less: FHLB penalty, gross (2,368) - (2,368) Less: Contribution (1,000) (1,000) Less: Settlement expense - - - - - (3,300) - - - (3,300) Noninterest expense, adjusted (o) 39,170$ 43,808$ 45,389$ 43,934$ 10,962$ 9,627$ 11,033$ 10,659$ 9,777$ 41,096$ Net interest income 39,578$ 44,182$ 46,391$ 48,546$ 12,101$ 12,236$ 12,762$ 13,625$ 13,919$ 52,542$ Noninterest income 14,340 15,168 16,783 18,577 5,155 5,330 4,764 4,605 6,015 20,714 Less: Insurance reimbursement - - - - - - (1,375) (1,375) Tax equivalent adjustment 637 796 868 917 239 239 234 232 234 939 Total tax equivalent revenue (p) 54,555$ 60,146$ 64,042$ 68,040$ 17,495$ 17,805$ 17,760$ 18,462$ 18,793$ 72,820$ Efficiency ratio, as adjusted (o)/(p) 71.80% 72.84% 70.87% 64.57% 62.66% 54.07% 62.12% 57.73% 52.02% 56.44%