On July 22, 2024, First United Corp (FUNC, Financial) released its 8-K filing announcing financial results for the second quarter of 2024. The company reported consolidated net income of $4.9 million, or $0.75 per diluted share, surpassing the analyst estimate of $0.66 per share. This compares favorably to $4.4 million, or $0.66 per diluted share, for the same period in 2023.
Company Overview
First United Corp is active in the financial services domain, offering a range of products including checking, savings, money market deposit accounts, certificates of deposit, business loans, personal loans, mortgage loans, and lines of credit. The company operates in two segments: Community Banking and Trust and Investment Services.
Performance and Challenges
First United Corp's performance in Q2 2024 was bolstered by a $1.1 million increase in net interest income, driven by higher interest on loans due to new loans being booked at higher rates and the repricing of adjustable-rate loans. However, this was partially offset by a $0.8 million increase in provision expense, primarily due to increased charge-offs in the commercial and industrial portfolio.
Financial Achievements
The company's net interest income for Q2 2024 was $15.2 million, up from $14.2 million in Q2 2023. This increase was driven by a $3.4 million rise in interest income on loans. The net interest margin for the six months ended June 30, 2024, was 3.31%, compared to 3.39% for the same period in 2023. These metrics are crucial for banks as they reflect the profitability of their core lending activities.
Income Statement Highlights
| Metric | Q2 2024 | Q1 2024 | Q2 2023 |
|---|---|---|---|
| Net Income (GAAP, millions) | $4.9 | $3.7 | $4.4 |
| Basic and Diluted EPS (GAAP) | $0.75 | $0.56 | $0.66 |
Balance Sheet Overview
Total assets at June 30, 2024, were $1.9 billion, a decrease of $37.3 million since December 31, 2023. Gross loans increased by $16.3 million, while total deposits decreased by $13.9 million. The company's book value per share increased to $25.39 from $24.38 at the end of 2023.
Asset Quality
The allowance for credit losses was $17.9 million at June 30, 2024, compared to $16.9 million at June 30, 2023. The provision for credit losses was $1.2 million for Q2 2024, up from $0.4 million in Q2 2023. Non-accrual loans totaled $9.4 million at June 30, 2024, compared to $4.0 million at December 31, 2023.
Commentary
According to Carissa Rodeheaver, Chairman, President, and CEO, “Net interest income improved as we experienced higher repricing of loans and saw stabilization of deposit expense as we remained disciplined in our pricing. Non-interest expenses declined, and loan and wealth production were solid, all resulting in solid core earnings for the quarter offset slightly by increased provision expense. We also took advantage of the lower stock price and improved shareholder position by repurchasing common stock. We believe the environment will continue to be challenging due to the higher interest rates, but we are well positioned to continue to post solid earnings the remainder of the year.”
Analysis
First United Corp's strong performance in Q2 2024, driven by higher net interest income and effective cost management, positions the company well for future growth. However, the increase in provision expenses and the challenging interest rate environment remain areas to watch. The company's ability to maintain its net interest margin and manage credit quality will be crucial for sustaining its financial health.
Explore the complete 8-K earnings release (here) from First United Corp for further details.
