First · NASDAQ:FUNC
First — First United — Investor Presentation (March 2021)
44 slides from First's investor presentation, Mar 2, 2021
Slide 1: Investor Presentation Fourth Quarter 2020
Investor Presentation Fourth Quarter 2020 Dated March 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. First United Pg. 4 II. COVID - 19 Response Pg. 12 III. Operating and Financial Performance Pg. 19 IV. Our Commitment To Strong Governance Pg. 34 V. Appendix Pg. 39
Slide 4: I. First United
4 4 I. First United
Slide 5: Executive Summary
5 5 Executive Summary First United has proactively responded to COVID - 19 and is now re - imagining the future Execution of our strategy is producing steady profitable growth Our Board is continuing to strengthen its governance profile – The health and well - being of our associates and clients gui
Slide 6: Q4 2020 Highlights
6 6 Q4 2020 Highlights Highlights • Increased pre - tax, pre - provision income to $6.9 million in 4Q20 from $4.3 million in 4Q19 • Fee income of $8.5 million driven by strong wealth management revenue as assets under management increased to $1.4 billion at December 31, 2020 due to expansion of exis
Slide 7: 2020 Highlights
7 7 2020 Highlights Highlights • Increased pre - tax, pre - provision income to $23.8 million in 2020 from $17.9 million in 2019 • Paycheck Protection Program (“PPP”) 2020 production of $148.9 million in 2020, with $35 million forgiven by year end; YTD February 2021 production of $56 million • Mortg
Slide 8: Total Shareholder Return
8 8 Total Shareholder Return Source: S&P Global Market Intelligence; includes price change and reinvested cash dividends (1) SNL U.S. $1B - $5B Bank Index (2) Peer groups are defined in the Appendix to this presentation. Peer group refers to median unless stated otherwise • Our long - term performan
Slide 9: Mission Statement and Company Overview
9 9 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 Branches: 25 Business Lines: Commercial & Retail Banking, Trust Servi
Slide 10: Our Core Markets
10 10 Our Core Markets (As of December 31, 2020) Note: Out of market loans and trust deposits represent $63 million and $87 million, respectively, and are not reflected in th e a bove table (1) Source: FDIC Market Share Data, most current. Deposit market share for each region includes the following
Slide 11: Our Core Strengths
11 11 Our Core Strengths Engaged and Diverse Board & Management • Our diverse and experienced Board challenges management and has been conducting a robust refreshment plan, which has been in place since 2014 Core Deposit Franchise Diversified Revenue Stream Forward - Thinking Approach Robust Enterpr
Slide 12: II. COVID-19 Response
12 12 II. COVID - 19 Response
Slide 13: COVID-19 Response for Stakeholders
13 13 COVID - 19 Response for Stakeholders • Quickly responded to COVID - 19 through our well - designed and tested Business Continuity Plan, focusing on the health, safety, and financial well - being of our associates and clients • Proactive communication and outreach with shareholders , clients an
Slide 14: Active COVID-19 Modifications
14 14 Active COVID - 19 Modifications Industry Category # of Loans (**) Balance (000s) Balance as % of Total Portfolio # of Loans (**) Balance (000s) Balance as % of Category # of Loans (**) Balance (000s) Balance as % of Category RE/Rental/Leasing - NOO 89 135,665$ 12.9% - -$ 0.0% 25 55,293$ 40.8%
Slide 15: Summary Statistics by Industry
15 15 Summary Statistics by Industry Industry Category Balance (000s) Balance as % of Total Portfolio Balance (000s) Balance as % of Category % 30+ Days Delinquent and NPL Criticized Balances (**) % of Category Criticized RE/Rental/Leasing - NOO 135,665$ 21.3% -$ 0.0% 0.1% 3,622$ 2.7% RE/Rental/Leas
Slide 16: Active Commercial COVID-19 Modifications
16 16 Active Commercial COVID - 19 Modifications For Commercial COVID - 19 modifications updated actual and proforma Financial Statements are required at the initial deferral and after the second; evaluated interest only vs. P&I deferral, strength of guarantor, collateral coverage Risk rating impact
Slide 17: Status of PPP Loans Originated in 2020
17 17 Status of PPP Loans Originated in 2020 • 2020 year - end portfolio balance - $114 million, 2020 average balance - $137 million • Based on current and projected forgiveness activity, management estimates that $14 million will remain at 2021 year - end • Total net fees (cash received less deferr
Slide 18: PPP Loans Originated in 2021 by Size and Count
18 18 PPP Loans Originated in 2021 by Size and Count Under $50K $50K-$100K $100K- $150K $150K- $350K $350K-$1M $1M-$2M Balance $6,444 $5,460 $5,331 $12,334 $14,430 $11,771 Count as % of Total 59.1% 15.3% 8.3% 11.1% 4.8% 1.4% 0% 10% 20% 30% 40% 50% 60% 70% $0 $2 $4 $6 $8 $10 $12 $14 $16 % of Total Co
Slide 19: III. Operating and Financial Performance
19 19 III. Operating and Financial Performance
Slide 20: Key Initiatives and Strategic Priorities
20 20 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 21: Strong Risk Management, Monitoring and Mitigation
21 21 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 • Protective provision expense of $5.4 million in 2020 related to qualitative factor adju
Slide 22: Our Strategic Plan is Generating Reliable Growth
22 22 $13.2 $14.7 $15.5 $17.8 $23.8 2016 2017 2018 2019 2020 $1,014 $1,039 $1,068 $1,142 $1,422 2016 2017 2018 2019 2020 $882 $882 $996 $1,039 $1,168 2016 2017 2018 2019 2020 $1,057 Our Strategic Plan is Generating Reliable Growth… Pre - tax Pre - Provision Income ($ in millions) Tangible Book Value
Slide 23: As Well As Improved Profitability
23 23 6.38% 4.52% 9.39% 10.44% 11.21% 2016 2017 2018 2019 2020 0.55% 0.40% 0.81% 0.93% 0.88% 2016 2017 2018 2019 2020 …As Well As Improved 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
Slide 24: Proactive Loan Portfolio Management
24 24 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: 222% – ADC / Total Capit
Slide 25: Construction and Development Portfolio
25 25 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 mitigates risk to portf
Slide 26: Marked Asset Quality Improvement
26 26 $35 $37 $45 $53 $49 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Marked Asset Quality Improvement NPAs / Total Assets Criticized Loans by Segment Criticized loans 2020 by quarter (in millions) Nonaccrual Loans / Total Loans 2.39% 1.37% 0.95% 1.40% 0.35% 2016 2017 2018 2019 2020 Underwriting and Monitoring •
Slide 27: Loan Loss Allowance (ALL)
27 27 Loan Loss Allowance (“ALL”) Provision expense by quarter in 2020 ALL Trends ALL % by Segment by quarter in 2020 (excluding PPP loans) 1.11% 1.12% 1.10% 1.19% 1.41% 2016 2017 2018 2019 2020 Excluding PPP Loans, which are guaranteed, ALL = 1.56% 0.57% 0.28% 0.11% - 0.02% 0.13% 2016 2017 2018 201
Slide 28: Industry Leading Deposit Franchise
28 28 Industry Leading Deposit Franchise • The strength of our deposit franchise is driven by both our stable legacy markets and our growing portfolio of commercial deposit accounts • Community office upgrades and forward - thinking technology enhancements have driven an increase in low - cost depos
Slide 29: Significant Net Interest Margin Improvement
29 29 3.19% 3.37% 3.74% 3.68% 3.34% 2016 2017 2018 2019 2020 87.9% 85.8% 94.3% 92.1% 82.1% 2016 2017 2018 2019 2020 Significant Net Interest Margin Improvement • Disciplined loan and deposit pricing has produced a strong margin that is in line with our peers • Margin contraction was primarily due to
Slide 30: Diversified Fee Income an Advantage to First United
30 30 Diversified Fee Income an Advantage to First United • Federal Reserve actions early in 2020 have led to industry - wide decreases in net interest margin – Fee - based business provides stable growth and a diversified revenue stream not directly tied to interest rates, as well as opportunities
Slide 31: Expense Discipline
31 31 72.3% 71.1% 70.2% 68.4% 63.5% 2016 2017 2018 2019 2020 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 decrea
Slide 32: Prudential Capital Management
32 32 Prudential Capital Management $13.19 $13.78 $14.97 $16.17 $17.23 2016 2017 2018 2019 2020 Growing Tangible Book – TBV/Share 6.33% 7.35% 7.72% 8.03% 6.99% 2016 2017 2018 2019 2020 Historical Capital Trends – TCE/TA 16.71% 15.98% 15.91% 16.29% 16.11% 2016 2017 2018 2019 2020 Historical Capital T
Slide 33: Strategic Targets Post-COVID-19
33 33 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% 10% 2% - 15% Dividend Payout Ratio 21.7% 25.5% 20% - 25% ROAA 0.93% 0.88% 1.00% - 1.25% ROAE 10.44% 11.21% 10% - 14% TCE Ratio 8.03% 6.
Slide 34: IV. Our Commitment to Strong Corporate Governance
34 34 IV. Our Commitment to Strong Corporate Governance
Slide 35: Ongoing Board Refreshment Program
35 35 Ongoing Board Refreshment Program Our ongoing Board evolution will continue to provide strategic refreshment of our independent directors, maintain our commitment to diversity, and continuously update the skill set of our Board • Identifying a pipeline for highly qualified, diverse independent
Slide 36: Our Governance Enhancements
36 36 Our Governance Enhancements Board Declassification • In response to feedback from our institutional investors and market views on best - in - class governance practices, First United's Board will propose these changes at the 2021 annual meeting: • Declassify the Board , instituting annual elec
Slide 37: Formalized Lead Independent Director Role
37 37 Formalized Lead Independent Director Role • Mr. McCullough is a retired partner of Ernst & Young, LLP and is a Certified Public Accountant • Holds significant accounting, auditing, public company and M&A advisory experience, particularly with financial institutions • Serves on board of directo
Slide 38: Strong Investor Relations and Shareholder Communications and Engagement
38 38 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 39: V. Appendix
39 39 V. Appendix
Slide 40: Historical Financial Highlights
40 40 Historical Financial Highlights 2016Y 2017Y 2018Y 2019Y 2020Y 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 Total Assets 1,317,675$ 1,335,867$ 1,383,760$ 1,442,027$ 1,733,989$ 1,442,027$ 1,461,513$ 1,639,636$ 1,685,907$ 1,733,989$ Total Loans 891,588 892,089 1,007,150 1,051,431 1,167,812 1,051,431 1,053,
Slide 41: Selected Peer Groups
41 41 Selected Peer Groups • Proxy peers can be found in First United’s 2020 definitive proxy statement found here: https://www.sec.gov/Archives/edgar/data/763907/000110465920048280/tm2016149d1_defc14a.htm – Proxy peers include: ACNB, ASRV, CFFI, CHMG, CVLY, CZFS, CZNC, EVBN, FDBC, FRAF, MVBF, NKSH,
Slide 42: Our Dedicated Management Team
42 42 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 • 27 - year career with First United with in depth industry, sales, wealth management, fin
Slide 43: Board of Directors
43 43 Board of Directors Our directors know our markets and customers and are leaders in the communities we serve Note: Includes Sanu Chadha and Christy DiPietro who joined the board in January 2021. Name / Affiliation Unique Expertise Carissa Rodeheaver CEO & Chair • Certified Public Accountant, AB
Slide 44: Non-GAAP Reconciliation
44 44 Non - GAAP Reconciliation ($000s, except where otherwise noted) 2016 2017 2018 2019 2020 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Tangible common equity to tangible assets Total common stockholders' equity 93,698$ 108,390$ 117,066$ 125,940$ 131,462$ 125,940$ 118,549$ 124,453$ 130,237$ 131,462$