FIRST UNITED CORPORATION ANNOUNCES SECOND QUARTER 2025 FINANCIAL RESULTS
Income Statement Overview
On a GAAP basis, net income for the second quarter of 2025 was $6.0 million. This compares to $5.8 million for the first quarter of 2025 and $4.9 million for the second quarter of 2024.
The $1.1 million increase in quarterly net income when compared to the second quarter of 2024 was primarily driven by a $1.5 million increase in net interest income, a $0.3 million decrease in provision for credit loss, and a $0.2 million increase in non-interest income, partially offset by increases in non-interest expense of $0.6 million and income tax expense of $0.4 million. Comparing the second quarter of 2025 to the same period of 2024, interest and fees on loans increased by $2.1 million due to from the repricing of adjustable-rate loans and growth in our loan portfolio. Interest expense increased by $0.3 million when comparing year-over-year quarterly expense as increased funding was offset by reductions in deposit rates and borrowing costs. Other operating income increased by $0.2 million driven primarily by increases in wealth management income, and other operating expenses increased by $0.6 million driven by a $0.2 million increase in net OREO expenses, a $0.2 million increase in professional services and contract labor expenses, and a $0.2 million increase in data processing costs.
Compared to the linked quarter, net income increased slightly as net interest income increased by $0.7 million due to interest and fees on loans, and other operating income increased by $0.2 million due to increases in gains in sales of residential mortgages, trust department income and debit card income. These increases were partially offset by a $0.2 million increase in the provision for credit losses and a $0.4 million increase in other operating expenses driven by increased net OREO expenses and data processing, professional services, and investor relations expenses.
Net income for the first six months of 2025 was $11.8 million compared to $8.6 million for the same period in 2024. Net interest income increased by $3.7 million. Provision for credit losses decreased by $0.6 million related due primarily to a $1.1 million charge-off related to equipment loans of one commercial relationship in 2024. Other operating income increased by $0.3 million primarily due to increases in gains on sales of residential mortgages and wealth management income. These increases were partially offset by a $0.3 million increase in other operating expenses that was primarily related to a $0.2 million increase in salaries and employee benefits, a $0.1 million increase in marketing and professional services expenses, and a $0.2 million increase in net OREO costs.
Net Interest Income and Net Interest Margin
Net interest income, on a non-GAAP, FTE basis, increased by $1.5 million for the second quarter of 2025 when compared to the second quarter of 2024. This increase was driven by an increase of $1.8 million in interest income due to a $2.1 million increase in interest income on loans that resulted from an increase of 26 basis points in the overall yield on the loan portfolio, upward repricing of adjustable-rate loans, and an increase in average balances of $74.1 million. Interest income on Federal funds sold decreased by $0.4 million due to a decrease of 129 basis points in average rates and a decrease of $16.0 million in average balances. Interest expense increased by $0.3 million when compared to the second quarter of 2024. Interest expense paid on deposits increased by $0.4 million due to a $73.3 million increase in average balances, partially offset by a decrease of 2 basis points on the rate paid. Interest paid on short-term borrowings decreased by $0.5 million when compared to the same period of 2024 due to the repayment of the $40.0 million from the Bank Term Funding Program (“BTFP”) late in the third quarter of 2024. Interest paid on long-term borrowings increased by $0.4 million when compared to the second quarter of 2024 due to a $50.0 million increase in average balances, partially offset by a decrease in 100 basis points on rates paid.
Comparing the second quarter of 2025 to the first quarter of 2025, net interest income, on a non-GAAP, FTE basis, increased by $0.7 million. This increase was driven by a $0.8 million increase in interest income that resulted from an increase in interest and fees on loans of $0.5 million as average loan balances increased by $6.3 million and average yield increased by 6 basis points. Interest expense was stable when comparing the second quarter of 2025 to the linked quarter.
Comparing the six months ended June 30, 2025 to the six months ended June 30, 2024, net interest income, on a non-GAAP, FTE basis, increased by $3.7 million. Interest income increased by $3.9 million and was driven by an increase of $4.6 million on interest and fees on loans as average loan balances increased by $74.7 million and the overall yield increased by 36 basis points in correlation with upward repricing of adjustable-rate loans. Interest expense on deposits increased by $0.8 million as the average deposit balances increased by $75.3 million, driven by increases of $4.8 million in demand deposit accounts, $76.6 million in money market balances and $15.9 million in brokered time deposits, partially offset by decreases in savings balances of $16.1 million and $6.1 million in retail time deposits. Interest expense on short-term borrowings decreased by $0.9 million due to the Bank’s utilization of the BTFP program in 2024 and subsequent repayment late in the third quarter of 2024. The net interest margin for the six months ended June 30, 2025 was 3.61% compared to 3.31% for the six months ended June 30, 2024.
Non-Interest Income
Other operating income, including net gains, for the second quarter of 2025 increased by $0.2 million when compared to the same period of 2024. This increase was driven by a $0.1 million increase in wealth management income, reflecting higher market valuations and expanded relationships with both new and existing clients. Additionally, gains on sales of residential mortgages increased by $0.1 million due to growth in production year-over-year.
On a linked quarter basis, other operating income, including net gains, increased by $0.2 million. Debit card income increased by $0.1 million, and gains on sales of residential mortgages increased by $0.1 million due to higher production volumes. Wealth management income was stable when compared to the prior quarter.
Other operating income for the six months ended June 30, 2025 increased by $0.3 million when compared to the same period of 2024. This was attributable to a $0.2 million increase in wealth management income, driven by improving market conditions, increased annuity sales and growth in new and existing customer relationships. Gains on sales of residential mortgages increased by $0.1 million. Service charge and debit card income were both stable when comparing the first six months of 2025 to the same period of 2024.
Non-Interest Expense
Operating expenses increased by $0.6 million in the second quarter of 2025 when compared to the second quarter of 2024. Net OREO expenses increased by $0.2 million due to a $0.1 million gain on the sale of OREO property in the second quarter of 2024 and an increase in costs associated with one OREO property in the second quarter of 2025. Data processing fees increased by $0.2 million and professional services expenses increased by $0.1 million. Salaries and employee benefits increased by $0.1 million due to a $0.3 million increase in salary expense related to normal merit increases effective April 1, 2025, partially offset by decreases in employee life and health insurance expense due to decreased claims.
Operating expenses increased by $0.4 million for the second quarter of 2025 when compared to the linked quarter. Net OREO expenses increased by $0.1 million due primarily to costs associated with one OREO property in the second quarter of 2025. Additionally, data processing, professional services, and investor relations expenses each increased by $0.1 million when compared to the linked quarter.
For the six months ended June 30, 2025, non-interest expense increased by $0.3 million when compared to the six months ended June 30, 2024. Salaries and employee benefits increased by $0.2 million due to normal merit increases effective April 1, 2025, increases in stock compensation expense as a result of to increased stock prices and 401K expenses offset by reduced life and health insurance costs related to reduced claims in 2025. Net OREO expenses increased by $0.2 million due to a $0.1 million gain on the sale of OREO in 2024 as well as one-time expense associated with an OREO property recorded in the second quarter of 2025, increases of $0.1 million in marketing and professional services and an increase in data processing expenses of $0.9 million. These increases were partially offset by a $0.7 million decrease in occupancy and equipment expenses related to accelerated depreciation expense recognized in the first quarter of 2024 related to branch closures.
The effective income tax rates as a percentage of income for the six-month periods ended June 30, 2025 and June 30, 2024 were 24.7% and 24.3%, respectively.
Balance Sheet Overview
Total assets at June 30, 2025 were $2.0 billion, representing a $34.4 million increase since December 31, 2024. During the first six months of 2025, the investment portfolio increased by $9.6 million as bonds were purchased to gain yield in anticipation of potential declines in long-term rates. Gross loans increased by $21.7 million. Management expects stronger growth in the second half of the year due to strong loan pipelines. Other assets, including deferred taxes, premises and equipment, bank owned life insurance, pension assets, and accrued interest receivable, increased by $4.0 million.
Total liabilities at June 30, 2025 were $1.8 billion, representing a $22.6 million increase since December 31, 2024. Total deposits increased by $39.4 million when compared to December 31, 2024 due primarily to the $50.0 million in new brokered deposits that were obtained in January 2025 to fund the repayment of the $50.0 million in overnight borrowings that were outstanding at December 31, 2024. Savings and money market accounts increased by $25.5 million and retail time deposits increased by $3.9 million. Interest-bearing demand deposits, primarily our ICS product, decreased by $39.1 million due primarily to seasonal fluctuations in municipal deposit accounts, and non-interest-bearing deposits decreased by $0.9 million due to increased spending by businesses and consumers related to inflation. Short-term borrowings decreased by $14.5 million due to a $20.9 million decrease in overnight borrowings, partially offset by increases in balances of the overnight investment sweep product.
Outstanding loans of $1.5 billion at June 30, 2025 reflected a $21.7 million increase since December 31, 2024.
Since December 31, 2024, commercial real estate loans increased by $24.4 million, acquisition and development loans increased by $3.6 million, commercial and industrial loans decreased by $6.1 million, residential mortgage loans increased by $3.2 million, and consumer loans decreased by $3.4 million.
New commercial loan production for the second quarter of 2025 was approximately $65.1 million. The pipeline of commercial loans as of June 30, 2025 was $32.3 million and unfunded, committed commercial construction loans totaled approximately $47.0 million. Commercial amortization and payoffs were approximately $27.0 million for the three months ended June 30, 2025, due primarily to pay-offs of short-term commercial loans as well as normal amortizations of the commercial loan portfolio.
New consumer mortgage loan production for the second quarter of 2025 was approximately $19.2 million, with most of this production comprised of in-house mortgages. The pipeline of in-house, portfolio loans as of June 30, 2025 was $11.4 million. Unfunded commitments related to residential construction loans totaled $10.0 million at June 30, 2025.
Total deposits at June 30, 2025 increased by $39.4 million when compared to December 31, 2024.
In January 2025, $50.0 million in brokered time deposits with an average interest rate of 4.24% were obtained to fund the repayment of $50.0 million in overnight borrowings that were outstanding at December 31, 2024. Savings and money market accounts increased by $25.5 million due primarily to the expansion of current and new relationships throughout the first six months of 2025. Non-interest-bearing checking deposits decreased by $0.9 million and interest-bearing checking deposits decreased by $39.1 million due primarily to seasonal fluctuations in municipal and commercial account balances and increased spending by businesses and consumers related to inflation. Retail time deposits increased by $3.9 million since December 31, 2024.
The book value of the Corporation’s common stock was $29.43 per share at June 30, 2025 compared to $27.71 per share at December 31, 2024. At June 30, 2025, there were 6,494,611 basic outstanding shares and 6,506,493 diluted outstanding shares of common stock. The increase in the book value at June 30, 2025 was due to the undistributed net income of $8.9 million for the first six months of 2025.
Asset Quality
The allowance for credit losses (“ACL”) was $19.0 million at June 30, 2025 compared to $17.9 million at June 30, 2024 and $18.2 million at December 31, 2024. The provision for credit losses was $0.9 million for the quarter ended June 30, 2025 compared to $1.2 million for the quarter ended June 30, 2024 and $0.7 million for the first quarter of 2025. The decreased provision expense recorded in the second quarter of 2025 when compared to the same period in 2024 was primarily due to $1.1 million in charge-offs related to one non-accrual commercial loan relationship that occurred in 2024. The increase in provision expense compared to the linked quarter was due to an increase of $22.6 in unfunded loan commitments quarter over quarter. Asset quality remained strong during the second quarter of 2025. Net charge-offs of $0.2 million were recorded for the quarter ended June 30, 2025 compared to net charge-offs of $1.3 million for the quarter ended June 30, 2024. The ratio of the ACL to loans outstanding has been consistent at 1.27% at June 30, 2025 compared to1.25% at March 31, 2025 and 1.26% at June 30, 2024.
The ratio of net charge offs to average loans was 0.07% for the six months ended June 30, 2025, and 0.25% for the six months ended June 30, 2024. The commercial and industrial portfolio had net charge offs of 0.25% and 0.89% for the six-month periods ended June 30, 2025 and 2024, respectively. This shift was due primarily to charge offs of equipment loan balances on one non-accrual commercial relationship during 2024. The acquisition and development portfolio had net recoveries of 0.13% and 0.01% for the six-month periods ended June 30, 2025 and 2024, respectively. This shift was due primarily to recoveries recognized in 2025 related to one relationship that was previously charged off in 2021. The decrease in net charge offs in consumer loans in the first six months of 2025 was primarily driven by approximately $0.3 million in charge offs of demand deposit balances during the first quarter of 2024. Details of the ratios, by loan type, are shown below. Our special assets team continues to actively collect on charged-off loans, resulting in overall low net charge-off ratios.
Non-accrual loans totaled $3.8 million at June 30, 2025 compared to $4.9 million at December 31, 2024. The decrease in non-accrual balances at June 30, 2025 was related to principal reductions.
Non-accrual loans that have been subject to partial charge-offs totaled $0.7 million at both June 30, 2025 and December 31, 2024. Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $0.1 million and $1.6 million at June 30, 2025 and December 31, 2024, respectively. As a percentage of the loan portfolio, accruing loans past due 30 days or more was 0.27% at June 30, 2025 compared to 0.32% at December 31, 2024 and 0.26% as June 30, 2024.
ABOUT FIRST UNITED CORPORATION
First United Corporation is a Maryland corporation chartered in 1985 and a financial holding company registered with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended, that elected financial holding company status in 2021. The Corporation’s primary business is serving as the parent company of the Bank, First United Statutory Trust I (“Trust I”) and First United Statutory Trust II (“Trust II” and together with Trust I, “the Trusts”), both Connecticut statutory business trusts. The Trusts were formed for the purpose of selling trust preferred securities that qualified as Tier 1 capital. The Bank has two consumer finance company subsidiaries- Oak First Loan Center, Inc., a West Virginia corporation, and OakFirst Loan Center, LLC, a Maryland limited liability company – and two subsidiaries that it uses to hold real estate acquired through foreclosure or by deed in lieu of foreclosure – First OREO Trust, a Maryland statutory trust, and FUBT OREO I, LLC, a Maryland limited liability company. In addition, the Bank owns 99.9% of the limited partnership interests in Liberty Mews Limited Partnership, a Maryland limited partnership formed for the purpose of acquiring, developing and operating low-income housing units in Garrett County, Maryland, and a 99.9% non-voting membership interest in MCC FUBT Fund, LLC, an Ohio limited liability company formed for the purpose of acquiring, developing and operating low-income housing units in Allegany County, Maryland (the “MCC Fund”). The Corporation’s website is www.mybank.com.
FORWARD-LOOKING STATEMENTS
This press release 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 future, as well as its assumptions and judgments concerning such beliefs, plans and objectives. These statements are evidenced by terms such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. The beliefs, plans and objectives on which forward-looking statements are based involve risks and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports that First United Corporation files with the Securities and Exchange Commission entitled “Risk Factors”. In addition, investors should understand that the Corporation is required under generally accepted accounting principles to evaluate subsequent events through the filing of the consolidated financial statements included in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2025 and the impact that any such events have on our critical accounting assumptions and estimates made as of June 30, 2025, which could require us to make adjustments to the amounts reflected in this press release.
Cision
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SOURCE First United Corporation
