First United (FUNC) Q2 2024 earnings summary

Executive summary

• Net income for Q2 2024 was $4.9 million ($0.75 per diluted share), up from $4.4 million ($0.66) in Q2 2023 and $3.7 million ($0.56) in Q1 2024; year-to-date net income was $8.6 million ($1.31 per share), slightly down from $8.8 million ($1.31) in 2023.

• Net interest income increased year-over-year, driven by higher loan yields and balances, partially offset by increased deposit costs; non-interest expenses declined.

• Provision for credit losses rose to $1.2 million in Q2 2024, mainly due to a significant charge-off in the commercial and industrial portfolio.

• 201,800 shares were repurchased in Q2 2024 at an average price of $19.99 per share, and a $0.20 per share dividend was paid.

• Asset quality remains strong, with allowance for credit losses at 1.26% of loans, though nonaccrual loans increased to $9.4 million at June 30, 2024.

Financial highlights

• Net interest margin (NIM) was 3.49% for Q2 2024; year-to-date NIM was 3.31%, down from 3.39% in the prior year.

• Total assets at June 30, 2024 were $1.87 billion, down $37.3 million from December 31, 2023.

• Loans grew by $16.3 million year-to-date, with commercial real estate and residential mortgage segments showing increases.

• Non-interest income comprised 25% of operating revenue as of June 30, 2024, with trust and brokerage fees as the largest component; wealth management income increased $0.8 million year-over-year.

• Non-interest expense decreased year-over-year and sequentially, aided by lower equipment and occupancy costs.

Outlook and guidance

• Management expects continued competitive deposit pricing pressures and stable loan demand, with a disciplined approach to loan and deposit pricing.

• Liquidity remains strong, with $441.6 million in available sources as of June 30, 2024.

• Interest rate risk is managed with a slightly asset-sensitive balance sheet, with the largest risk in falling rate scenarios.

• Strategic targets include ROAA of 1.25%-1.60%, ROATCE of 13%-15%, and efficiency ratio of 53%-58%.

• No material changes in risk factors or market risk procedures anticipated.