Business Overview
First United Corporation (NASDAQ:FUNC), a regional bank headquartered in Oakland, Maryland, has been steadily gaining traction in the financial services industry. With a strong focus on community banking and a diverse range of financial products and services, the company has demonstrated resilience and adaptability in the face of evolving market conditions.First United Corporation operates primarily through its subsidiary, First United Bank & Trust, which serves customers across Maryland, Pennsylvania, and West Virginia. The bank's core business segments include Community Banking and Trust and Investment Services. The Community Banking segment offers a broad array of financial products and services, including various loan and deposit products, to consumer, business, and not-for-profit customers. The Trust and Investment Services segment provides corporate trustee services, trust and estate administration, IRA administration, and custody services.
Financial Performance
In the latest fiscal year, First United Corporation reported annual net income of $15,060,000 and annual revenue of $95,055,000. The company's annual operating cash flow stood at $22,532,000, while its annual free cash flow reached $22,179,000. These figures demonstrate the company's ability to generate consistent and robust financial results, even in the face of market challenges.Quarterly Highlights
For the first quarter of 2024, First United Corporation reported net income of $3,698,000, a decrease of 15.5% compared to the same period in the previous year. This decline was primarily driven by a $0.7 million decrease in net interest income and a $0.4 million increase in provision for credit losses. The company's net interest margin for the quarter was 3.10%, down from 3.48% in the same period last year.Loan Portfolio and Asset Quality
As of March 31, 2024, First United Corporation's loan portfolio stood at $1.4 billion, reflecting a 0.4% increase from the previous quarter. The company's non-accrual loans totaled $16.0 million, or 1.13% of total loans, up from $4.0 million, or 0.28% of total loans, at the end of 2023. This increase was primarily due to two commercial and industrial loan relationships being classified as substandard and moved to non-accrual status during the first quarter.Liquidity
First United Corporation maintains a strong liquidity position, with cash and cash equivalents of $86.9 million as of March 31, 2024. The company's total deposits increased by $12.5 million, or 0.8%, during the first quarter, reaching $1.6 billion. Additionally, the bank's capital ratios remain well above regulatory requirements, with a total risk-based capital ratio of 14.17% and a Tier 1 capital ratio of 12.92% as of March 31, 2024.Dividend and Shareholder Returns
First United Corporation is also an attractive option for income-oriented investors. The company currently pays a quarterly dividend of $0.20 per share, translating to an annualized dividend of $0.80 per share and a dividend yield of 2.89%. Over the last five years, the company has increased its dividend by an average of 13.88% per year.Geographical Breakdown
First United Corporation's operations are primarily concentrated in the state of Maryland, with a strong presence in the western and central regions of the state. The company also has a footprint in Pennsylvania and West Virginia, allowing it to serve a diverse customer base across the Mid-Atlantic region.Revenue Breakdown and Trends
The company's revenue is primarily generated from its Community Banking segment, which accounted for approximately 82% of total revenue in the first quarter of 2024. The Trust and Investment Services segment contributed the remaining 18% of revenue. During the first quarter, the Community Banking segment reported a 2.9% year-over-year increase in revenue, driven by higher net interest income and fee income. The Trust and Investment Services segment experienced a 16.2% year-over-year increase in revenue, reflecting improved market conditions and growth in new customer relationships.Risks and Challenges
While First United Corporation has demonstrated strong financial performance, the company faces several risks and challenges that investors should be aware of. These include interest rate risk, credit risk, and regulatory changes that could impact the banking industry. Additionally, the company's geographic concentration in the Mid-Atlantic region exposes it to economic conditions in that specific market.Guidance and Outlook
In its latest earnings release, First United Corporation did not provide specific financial guidance for the upcoming fiscal year. However, the company's management team expressed cautious optimism about the company's ability to navigate the current economic environment and continue delivering solid financial results.