First · NASDAQ:FUNC
First — First United — Investor Presentation (August 2020)
47 slides from First's investor presentation, Aug 19, 2020
Slide 1: Investor Presentation June 2020
Investor Presentation June 2020
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 II. COVID - 19 Response III. Operating and Financial Performance IV. Our Commitment To Strong Governance V. Appendix
Slide 4: I. First United
4 4 I. First United
Slide 5: Executive Summary
5 5 Executive Summary First United is proactively responding to COVID - 19 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 is guiding the implementation and execution of our pa
Slide 6: Q2 2020 Highlights
6 6 Q2 2020 Highlights Highlights • Increased pre - tax, pre - provision income to $5.4 million in 2Q20 from $3.7 million in 2Q19 • Paycheck Protection Program (“PPP”) loans totaled $144.4 million • Mortgage production, primarily in loans sold to the secondary market, totaled $61.4 million through J
Slide 7: Franchise Overview
7 7 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 8: Our Core Markets
8 8 Our Core Markets (As of June 30, 2020) Note: Out of market loans and trust deposits represent $62 million and $71 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 counti
Slide 9: Our Core Strengths
9 9 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 Enterpris
Slide 10: II. COVID-19 Response
10 10 II. COVID - 19 Response
Slide 11: COVID-19 Response for Stakeholders
11 11 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 12: Clients and Associates COVID-19 Response
12 12 Clients • 90% of associates (excluding front line community office staff) are working remotely each week; no furloughs or layoffs • Pandemic Pay Policy and flexible scheduling for associates who are unable to work, such as those who need to care for family members during the crisis • Financial
Slide 13: Active COVID-19 Modifications
13 13 Active COVID - 19 Modifications 65% of the active commercial loan modifications are for deferred P&I, and 35% are for extended interest only Industry Category # of Loans (**) Balance (000s) Balance as % of Total Portfolio # of Loans (**) Balance (000s) Balance as % of Category # of Loans (**)
Slide 14: Active COVID-19 Modifications by Region and Loan Type
14 14 Active COVID - 19 Modifications By Region: By Loan Type: Loan type Balance at 6.30.20 ($000) % Modified % Returned to Contractual Terms % of Modified # $ % in Initial Mod Period Non-Owner Occupied 170,637$ 58% 20% 80% 31 79,304$ 48% Owner Occupied 135,367 30% 26% 74% 31 29,731 94% C&D (Consume
Slide 15: Commercial COVID-19 Modifications by Industry
15 15 Commercial COVID - 19 Modifications by Industry Industry Balance at 6.30.20 ($000) % of Commercial Portfolio % Modified % Returned to Contractual Terms % of Modified # $ % in Initial Mod Period All RE / Rental / Leasing 276,550$ 47% 38% 24% 76% 73 79,766$ 68% RE / Rental / Leasing - NOO 120,89
Slide 16: Commercial COVID-19 Modifications by Cure Date
16 16 Commercial COVID - 19 Modifications by Cure Date (*) We have conservatively assumed the Cure Date to be 60 days after the last payment date covered by the modification, to ensure that 1) the next payment due is received, or 2) an additional modification has been processed for the borrower # Ba
Slide 17: Commercial COVID-19 Second Modifications
17 17 Commercial COVID - 19 Second Modifications Median Loan Size - $367,000 # of Borrowers - 20 Industry # Loans Balance at 6.30 ($000) RE/Rental/Leasing - NOO 8 24,533$ Accommodations 7 16,951 Health Care/Social Assistance 6 4,582 Construction - All Other 2 1,012 Entertainment/Recreation 3 983 RE/
Slide 18: PPP Loans at 8/14/20 by Industry
18 18 PPP Loans at 8/14/20 by Industry
Slide 19: PPP Loans at 8/14/20 by Size and Count
19 19 PPP Loans at 8/14/20 by Size and Count 85% of the loans are under $150,000
Slide 20: Our Relationships with Clients Are Critical to Our Success
20 20 Our Relationships with Clients in the Communities We Serve are Critical to Our Success in Dealing with COVID - 19 Client Satisfaction “We have worked with several banks between our two offices and you guys are LIGHT YEARS ahead of all of the others. I am so glad you are able to take on new cus
Slide 21: Our Relationships with Clients: Feedback on the PPP Program
21 21 Our Relationships with Clients in the Communities We Serve are Critical to Our Success in Dealing with COVID - 19 Feedback on the PPP Program “I was about to decide to close the business on Monday because there was a major payment discrepancy with MSDE. The PPP loan will literally save our com
Slide 22: III. Operating and Financial Performance
22 22 III. Operating and Financial Performance
Slide 23: Key Initiatives and Strategic Priorities
23 23 Key Initiatives and Strategic Priorities Optimize shareholder return through a keen focus on the client experience, profitability, efficiencies and future growth Create Exceptional Client Experience • Utilize relationship advisor model to provide a seamless client experience across our busines
Slide 24: Our Strategic Plan is Generating Reliable Growth
24 24 $13.2 $14.7 $15.5 $17.8 $10.4 2016 2017 2018 2019 YTD 6/30/2020 $1,014 $1,039 $1,068 $1,142 $1,352 2016 2017 2018 2019 6/30/2020 $882 $882 $996 $1,039 $1,187 2016 2017 2018 2019 6/30/2020 Our Strategic Plan is Generating Reliable Growth… Pre - tax Pre - Provision Income ($ in millions) Tangibl
Slide 25: …As Well As Improved Profitability
25 25 …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 • Conservative provisioning for loan losses, given the uncertain duration of the pandemic and its impact on the
Slide 26: Industry Leading Deposit Franchise
26 26 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 27: Diversified Fee Income an Advantage to First United
27 27 Diversified Fee Income an Advantage to First United • Recent Federal Reserve actions are leading 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 cross - selling op
Slide 28: Significant Net Interest Margin Improvement
28 28 Significant Net Interest Margin Improvement • Disciplined loan and deposit pricing has produced a strong and stable margin that is in line with our peers • Margin has expanded more than 42 basis points since 2016, primarily as a result of increased loan volume and rates, reduced long - term bo
Slide 29: Expense Discipline
29 29 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 decreased ~5 points since 2016 and is approaching peer levels
Slide 30: Proactive Loan Portfolio Management
30 30 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: 230% – ADC / Total Capit
Slide 31: Construction and Development Portfolio
31 31 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 32: Marked Asset Quality Improvement
32 32 Marked Asset Quality Improvement • Management has diligently worked to improve asset quality while maintaining strong reserve levels • Underwriting guidelines and risk management framework have been enhanced • Low net charge offs and strong asset quality as a result of conservative and proacti
Slide 33: Prudential Capital Management
33 33 Prudential Capital Management $13.19 $13.78 $14.97 $16.17 $16.25 2016 2017 2018 2019 6/30/2020 Growing Tangible Book – TBV/Share 6.33% 7.35% 7.72% 8.03% 6.97% 2016 2017 2018 2019 6/30/2020 Historical Capital Trends – TCE/TA 16.71% 15.98% 15.91% 16.29% 15.86% 2016 2017 2018 2019 6/30/2020 Histo
Slide 34: Total Shareholder Return
34 34 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 perform
Slide 35: Strategic Targets Post-COVID-19
35 35 Strategic Targets Post - COVID - 19 Metric Actual 12/31/2018 Actual 12/31/2019 Long Term Strategic Target Range Strong Shareholder Return EPS Growth (YoY) 156% 23% 10% - 15% Dividend Payout Ratio 17.9% 21.7% 20% - 25% ROAA 0.81% 0.93% 1.00% - 1.20% ROAE 9.39% 10.44% 10% - 13% TCE Ratio 7.72% 8
Slide 36: First United Well-Positioned for Next Recession
36 36 First United Well - Positioned for Next Recession Significant resources dedicated to Enterprise Risk Management, increased emphasis on low - cost core deposit relationships, a more diversified loan portfolio and decreased reliance on participations, reduction of adversely classified assets and
Slide 37: IV. Our Commitment to Strong Corporate Governance
37 37 IV. Our Commitment to Strong Corporate Governance
Slide 38: Ongoing Board Refreshment Program
38 38 Ongoing Board Refreshment Program Our ongoing Board evolution will result in the strategic refreshment of a majority of our independent directors, maintain our commitment to diversity, and continuously update the skill set of our Board • In July 2020 , Elaine McDonald retired, and a search is
Slide 39: Our Governance Enhancements
39 39 Our Governance Enhancements Board Declassification • In response to feedback from our institutional investors, market views on best - in - class governance practices, and the preferences of leading proxy advisors, First United's Board will propose to declassify, instituting annual election of
Slide 40: Independent Lead Director Role
40 40 Independent Lead 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 directors of insur
Slide 41: Strong Investor Relations and Shareholder Communications and Engagement
41 41 Strong Investor Relations and Shareholder Communications and Engagement Clear long - term strategic plan with performance targets x Dedicated Investor Relations contact x Investor non - deal roadshows x Members of the Board and senior management routinely engage with shareholders and other sta
Slide 42: V. Appendix
42 42 V. Appendix
Slide 43: Historical Financial Highlights
43 43 Historical Financial Highlights YTD 2016Y 2017Y 2018Y 2019Y 202006 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 Total Assets 1,317,675$ 1,335,867$ 1,383,760$ 1,442,027$ 1,639,636$ 1,405,629$ 1,440,964$ 1,442,027$ 1,461,513$ 1,639,636$ Total Loans 891,588 892,089 1,007,150 1,051,431 1,186,940 1,003,616 9
Slide 44: Selected Peer Groups
44 44 Selected Peer Groups • Proxy peers can be found in First United’s 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, OPOF
Slide 45: Our Dedicated Management Team
45 45 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 46: Board of Directors
46 46 Board of Directors 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 27 - year career at First United and in - depth industry, company, and
Slide 47: Non-GAAP Reconciliation
47 47 Non - GAAP Reconciliation ($000s, except where otherwise noted) Quarterly YTD LTM 2016 2017 2018 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 6/30/2020 6/30/2020 Tangible common equity to tangible assets Total common stockholders' equity 93,698$ 108,390$ 117,066$ 125,940$ 126,155$ 129,339$ 125