First · NASDAQ:FUNC
First — First United — Q3 2021 Earnings Presentation
37 slides from First's earnings presentation, Nov 2, 2021
Slide 1: Investor Presentation Third Quarter 2021
Investor Presentation Third Quarter 2021 November 2, 2021
Slide 2: Forward looking statements
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 fut
Slide 3: Table of Contents
3 3 Table of Contents I. Executive Summary Pg. 4 II. Operating and Financial Performance Pg. 13 III. Our Commitment To ESG Pg. 29 IV. Appendix Pg. 33
Slide 4: I. Executive Summary
4 4 I. Executive Summary
Slide 5: Executive Summary
5 5 Executive Summary Robust enterprise risk management protocol Execution of our strategy is producing steady profitable growth ▪ Disciplined credit culture and strong allowance for loan loss ratio of 1.49% (excluding PPP balances) ▪ Capital and liquidity remain strong ▪ Well - positioned for risin
Slide 6: Mission Statement and Company Overview
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
Slide 7: 3Q 2021 Highlights
7 7 3Q 2021 Highlights Highlights • Pre - provision net revenue (1) of $7.6 million in 3Q21 compared to $6.5 million in 2Q21 and $6.5 million in 3Q20 • Non - interest income of $4.6 million driven by strong wealth management revenue as assets under management were $1.4 billion at September 30, 2021,
Slide 8: YTD Highlights
8 8 YTD Highlights Highlights • Increased pre - provision net revenue (1) to $22.0 million in YTD 2021 from $16.9 million in YTD 2020 • Non - interest income of $14.7 million driven by strong wealth management revenue as assets under management were $1.4 billion at September 30, 2021, due to expansi
Slide 9: Our Core Markets
9 9 Our Core Markets (As of September 30, 2021) Note: Out of market loans represent $103 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; Mononga
Slide 10: Our Core Strengths
10 10 Our Core Strengths Engaged and Diverse Board & Management • Our diverse and experienced Board has the skills to oversee key business risks and strategic initiatives. A robust refreshment plan has been underway since 2014, and our Board continues to adopt governance best practices Core Deposit
Slide 11: Transitioning to Post-COVID Environment
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, full - service ATMS, cash
Slide 12: PPP and Loan Modifications
12 12 PPP and Loan Modifications • Originated 1,175 loans totaling $149 million in 2020, and an additional 871 loans totaling $66 million in 2021 • September 2021 period - end portfolio balance - $30 million, with a YTD average balance of $100.6 million and a 3Q21 average balance of $48.5 million •
Slide 13: II. Operating and Financial Performance
13 13 II. Operating and Financial Performance
Slide 14: Key Initiatives and Strategic Priorities
14 14 Key Initiatives and Strategic Priorities Optimize shareholder return through a keen 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 inte
Slide 15: Strong Risk Management, Monitoring and Mitigation
15 15 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 1.49%, excluding PPP loans; future provisioning based on
Slide 16: Our Strategic Plan is Generating Reliable Growth
16 16 $14.7 $15.5 $17.8 $23.2 $22.0 2017 2018 2019 2020 YTD 3Q21 $1,039 $1,068 $1,142 $1,422 $1,445 2017 2018 2019 2020 9/30/2021 $882 $996 $1,039 $1,168 $1,162 2017 2018 2019 2020 9/30/2021 $1,071 Our Strategic Plan is Generating Reliable Growth… Pre - Provision Net Revenue ($ in millions) (*) Dilu
Slide 17: As Well As Solid Profitability
17 17 7.64% 10.39% 11.44% 11.92% 18.43% 2017 2018 2019 2020 YTD 3Q21 * 0.55% 0.81% 0.93% 0.86% 1.25% 2017 2018 2019 2020 YTD 3Q21 * …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 fu
Slide 18: Proactive Loan Portfolio Management
18 18 Total 1 - 4 Family CRE - OO CRE - NOO Multi - family C&D C&I Consumer PPP 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: 237% – ADC / Total Capit
Slide 19: Construction and Development Portfolio
19 19 Central East West Commercial Acquisition and Development Commercial Construction 1 - 4 Family Commercial Construction Amortizing Consumer Lot Loans 1 - 4 Family Residential Construction Construction and Development Portfolio • Geographically diverse construction and development portfolio mitig
Slide 20: Asset Quality
20 20 $53 $53 $50 $50 $52 3Q20 4Q20 1Q21 2Q21 3Q21 Asset Quality NPAs / Total Assets Criticized Loan Trends by Segment Criticized loans (Rolling quarters ended 3Q21, in millions) Nonaccrual Loans / Total Loans 1.37% 0.95% 1.40% 0.35% 0.60% 2017 2018 2019 2020 3Q21 Underwriting and Monitoring • Appra
Slide 21: Loan Loss Allowance
21 21 Loan Loss Allowance (“ALL”) ALL Trends ALL % by Segment (excluding PPP loans) 0.28% 0.11% - 0.02% 0.13% - 0.04% 2017 2018 2019 2020 YTD 2021 Net Charge - Offs / Average Loans In 2020, due to the unknown impact of the pandemic on credit quality, we increased the provision expense by $4.1 millio
Slide 22: Industry Leading Deposit Franchise
22 22 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 September 30, 2021 Deposit Composition (9/30//21) Deposit Type Balance (MMs) % NIB Demand $491.4 3
Slide 23: Net Interest Margin
23 23 Net Interest Margin • Disciplined loan and deposit pricing has produced a strong margin that is in line with our peers • Margin expansion in the third quarter primarily due to new loan volume pricing at higher rates and the recognition of deferred PPP loan fees related to the forgiveness of PP
Slide 24: Excess Cash Balances Impact Margin and Loan/Deposits
24 24 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
Slide 25: Diversified Fee Income an Advantage to First United
25 25 Diversified Fee Income an Advantage to First United • First United’s non - interest income comprised 27% of operating revenue for YTD 3Q21 • Fee - based business provides stable growth and a diversified revenue stream not directly tied to interest rates, as well as opportunities to build clien
Slide 26: Expense Discipline
26 26 71.8% 72.8% 70.9% 64.6% 58.0% 2017 2018 2019 2020 YTD 3Q21 Expense Discipline Significant portion of earnings improvement can be attributed to expense reductions • First United’s investment in its wealth management business line generates additional expenses; even so, efficiency ratio has decr
Slide 27: Prudent Capital Management
27 27 Prudent Capital Management $13.78 $14.97 $16.17 $17.17 $18.55 2017 2018 2019 2020 Sep-21 Tangible Book Value / Share • Management has consistently grown tangible book value per share (8.25% CAGR) while simultaneously taking decisive action to benefit shareholders • Reintroduction and subsequen
Slide 28: Strategic Targets Post-COVID
28 28 Strategic Targets Post - COVID - 19 Metric Actual 12/31/2019 Actual 12/31/2020 Long Term Strategic Target Range Strong Shareholder Return EPS Growth (YoY) 23% 7% 2% - 15% Dividend Payout Ratio 21.7% 26.3% 20% - 25% ROAA 0.93% 0.86% 1.00% - 1.25% ROAE 10.44% 10.89% 10% - 14% TCE Ratio 8.03% 6.9
Slide 29: III. Our Commitment to ESG
29 29 III. Our Commitment to ESG
Slide 30: Ongoing Shareholder Engagement
30 30 Ongoing Shareholder Engagement • Declassified the Board of Directors Management Proposals received favorable shareholder vote: • Adopt a majority vote standard • Adopt Proxy Access • Updated NGC Charter • Adopted a diversity policy for director refreshment • Formalize LID role & responsibiliti
Slide 31: ESG Enhancements To Date
31 31 • LED lighting installed throughout branch network and operations center • Recycling, focus on reduced printing (65% reduction since pre - COVID) • Reduced travel due to shift to video meetings and calls ESG Enhancements To Date • Adopting best - in - class governance practices and shareholder
Slide 32: Strong Investor Relations and Shareholder Communications and Engagement
32 32 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
Slide 33: IV. Appendix
33 33 IV. Appendix
Slide 34: Our Dedicated Management Team
34 34 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, fin
Slide 35: Board of Directors (May 2021)
35 35 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, co
Slide 36: Non-GAAP Reconciliation
36 36 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, th
Slide 37: Non-GAAP Reconciliation, continued
37 37 Non - GAAP Reconciliation, continued ($000s, except where otherwise noted) YTD LTM 2017 2018 2019 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 9/30/2021 9/30/2021 Return on Average Tangible Common Stockholders' Equity Average common stockholders' equity (f) 106,332$ 113,659$ 125,774$ 127,101$