First · NASDAQ:FUNC
First — First United — Q2 2021 Earnings Presentation
38 slides from First's earnings presentation, Jul 29, 2021
Slide 1: Investor Presentation Second Quarter 2021
Investor Presentation Second Quarter 2021 July 29, 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. 30 IV. Appendix Pg. 34
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 Our Board is continuing to strengthen its ESG profile ▪ Disciplined credit culture and strong allowance for loan loss ratio of 1.59% (excluding PPP balances) ▪ Capital and
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: 2Q 2021 Highlights
7 7 2Q 2021 Highlights Highlights • Pre - provision net revenue (1) of $6.5 million in 2Q21 compared to $7.9 million in 1Q21 and $5.4 million in 2Q20 • Fee income of $3.9 million driven by strong wealth management revenue as assets under management were $1.4 billion at June 30, 2021, due to expansio
Slide 8: YTD Highlights
8 8 YTD Highlights Highlights • Increased pre - provision net revenue (1) to $14.4 million in YTD 2021 from $10.4 million in YTD 2020 • Fee income of $7.9 million driven by strong wealth management revenue as assets under management were $1.4 billion at June 30, 2021, due to expansion of existing re
Slide 9: Our Core Markets
9 9 Our Core Markets (As of June 30, 2021) Note: Out of market loans and trust deposits represent $69 million and $49 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 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, ATMS, cash recyclers • Enh
Slide 12: PPP and Loan Modifications
12 12 PPP and Loan Modifications • Originated 1,174 loans totaling $149 million in 2020, and an additional 870 loans totaling $66 million in 2021 • June 2021 period - end portfolio balance - $74 million, with a YTD average balance of $126.6 million and a 2Q21 average balance of $110.7 million • Base
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 1.59%, 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 $14.4 2017 2018 2019 2020 YTD 2Q21 $1,039 $1,068 $1,142 $1,422 $1,466 2017 2018 2019 2020 Jun-21 $882 $996 $1,039 $1,168 $1,145 2017 2018 2019 2020 Jun-21 $1,071 Our Strategic Plan is Generating Reliable Growth… Pre - Provision Net Revenue ($ in millions) (*) Diluted Ea
Slide 17: As Well As Solid Profitability
17 17 7.64% 10.39% 11.44% 11.92% 17.56% 2017 2018 2019 2020 YTD 2Q21 * 0.55% 0.81% 0.93% 0.86% 1.18% 2017 2018 2019 2020 YTD 2Q21 * …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: 239% – 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: YTD Activity in Loan Portfolio
20 20 YTD Activity in Loan Portfolio • Production levels remain high YTD • Net loan production being offset by PPP payoffs • Fixed rate, longer - term mortgages being sold to secondary market (data in thousands) Production Payoffs/ Amortization 2021 Net Activity Commercial, excluding PPP 89,200.0 (6
Slide 21: Asset Quality
21 21 $45 $53 $53 $50 $50 2Q20 3Q20 4Q20 1Q21 2Q21 Asset Quality NPAs / Total Assets Criticized Loan Trends by Segment Criticized loans (Rolling quarters ended 2Q21, in millions) Nonaccrual Loans / Total Loans 1.37% 0.95% 1.40% 0.35% 0.66% 2017 2018 2019 2020 2Q21 Underwriting and Monitoring • Appra
Slide 22: Loan Loss Allowance
22 22 Loan Loss Allowance (“ALL”) ALL TRENDS ALL % by Segment (Rolling Quarters ending 2Q21, excluding PPP loans) 0.28% 0.11% - 0.02% 0.13% 0.01% 2017 2018 2019 2020 2Q21 Net Charge - Offs / Average Loans In 2020, due to the unknown impact of the pandemic on credit quality, we increased the provisio
Slide 23: Industry Leading Deposit Franchise
23 23 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 June 30, 2021 Deposit Composition (6/30//21) Deposit Type Balance (MMs) % NIB Demand $497.7 34% IB
Slide 24: Net Interest Margin
24 24 Net Interest Margin • Disciplined loan and deposit pricing has produced a strong margin that is in line with our peers • Margin contraction was primarily due to core loans adjusting down and new loan volume, including PPP, at lower rates due to the current rate environment. • The lower interes
Slide 25: Excess Cash Balances Impact Margin and Loan/Deposits
25 25 Excess Cash Balances Impact Margin and Loan/Deposits • Purchasing 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 26: Diversified Fee Income an Advantage to First United
26 26 Diversified Fee Income an Advantage to First United • First United’s fee income comprised 29% of operating revenue for YTD 2Q21 • Fee - based business provides stable growth and a diversified revenue stream not directly tied to interest rates, as well as opportunities to build client relations
Slide 27: Expense Discipline
27 27 71.8% 72.8% 70.9% 64.6% 58.1% 2017 2018 2019 2020 YTD 2Q21 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 28: Prudent Capital Management
28 28 Prudent Capital Management $13.78 $14.97 $16.17 $17.17 $18.07 2017 2018 2019 2020 Jun-21 Tangible Book Value / Share • Management has consistently grown tangible book value per share (8.0% CAGR) while simultaneously taking decisive action to benefit shareholders • Reintroduction and subsequent
Slide 29: Strategic Targets Post-COVID
29 29 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 30: III. Our Commitment to ESG
30 30 III. Our Commitment to ESG
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 • Plan to achieve best - in - class governance practices • Recent
Slide 32: Ongoing Shareholder Engagement
32 32 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 33: Strong Investor Relations and Shareholder Communications and Engagement
33 33 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 34: IV. Appendix
34 34 IV. Appendix
Slide 35: Our Dedicated Management Team
35 35 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 36: Board of Directors (May 2021)
36 36 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 37: Non-GAAP Reconciliation
37 37 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 38: Non-GAAP Reconciliation, continued
38 38 Non - GAAP Reconciliation, continued ($000s, except where otherwise noted) YTD LTM 2017 2018 2019 2020 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 6/30/2021 6/30/2021 Return on Average Tangible Common Stockholders' Equity Average common stockholders' equity (f) 106,332$ 113,659$ 125,774$ 1