8-K: First United Reports Record Core Earnings for 2025

First United Corporation announced strong full-year 2025 financial results, driven by record core earnings and improved asset quality, despite a fourth-quarter GAAP net income dip.

Summary

• GAAP net income for the full year 2025 was $24.5 million, or $3.77 per diluted share, an increase from $20.6 million, or $3.15 per diluted share, in 2024.
• Non-GAAP net income, excluding certain items, reached a record $25.8 million, or $3.97 per diluted share, for the full year 2025, up from $21.0 million, or $3.21 per diluted share, in 2024.
• Fourth quarter 2025 GAAP net income was $5.8 million, or $0.89 per diluted share, a decrease from $6.2 million, or $0.95 per diluted share, in Q4 2024.
• Fourth quarter 2025 non-GAAP net income was $7.2 million, or $1.10 per diluted share, an increase from $6.2 million, or $0.95 per diluted share, in Q4 2024.
• Net interest margin (FTE, non-GAAP) for the full year 2025 was 3.67%, up from 3.38% in 2024, and 3.75% for Q4 2025.
• Total assets increased by $114.4 million to $2.1 billion at December 31, 2025, compared to December 31, 2024.
• Gross loans grew by $40.9 million to $1.52 billion at December 31, 2025, with strong commercial loan production of $247.0 million for the year.
• Total deposits increased by $160.3 million to $1.74 billion at December 31, 2025, driven by growth in savings, money market, and non-interest-bearing accounts.
• Asset quality improved, with the allowance for credit losses (ACL) to loans outstanding stable at 1.28%, net charge-offs to average loans decreasing to 0.07% for the year, and non-accrual loans decreasing to $4.2 million.
• The Board of Directors increased the quarterly dividend to $0.26 per share in the third quarter of 2025.
• Jason B. Rush was appointed President and Chief Executive Officer, succeeding Carissa L. Rodeheaver, who remains Executive Chairman of the Board.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong report, with record core earnings and significant improvements in key financial and asset quality metrics for the full year. While Q4 GAAP net income saw a slight dip due to a specific OREO write-down, the underlying operational performance and strategic positioning are positive.

Positives

• Record core earnings for the full year 2025, with non-GAAP net income of $25.8 million and diluted EPS of $3.97.
• Significant increase in GAAP net income for the full year 2025 to $24.5 million, up $3.9 million from 2024.
• Improved net interest margin (FTE, non-GAAP) for the full year 2025 at 3.67% and for Q4 2025 at 3.75%, reflecting increased loan yields and stable funding costs.
• Strong loan growth, with gross loans increasing by $40.9 million to $1.52 billion, and commercial loan production of $247.0 million for the year.
• Robust deposit growth, with total deposits increasing by $160.3 million to $1.74 billion, including significant increases in savings, money market, and non-interest-bearing accounts.
• Enhanced asset quality metrics, including a decrease in net charge-offs to average loans to 0.07% for the year and a reduction in non-accrual loans to $4.2 million.
• Non-performing assets to total assets improved to 0.41% at December 31, 2025, from 0.59% at December 31, 2024.
• Capital ratios remain strong and significantly above regulatory well-capitalized definitions, with CET1 at 13.52% and Total Risk-Based Capital at 16.61%.
• Increased quarterly dividend to $0.26 per share in Q3 2025, demonstrating confidence in financial performance.
• Wealth management income increased by $0.7 million for the year, driven by improving market conditions and client relationships.

Negatives

• Fourth quarter 2025 GAAP net income decreased to $5.8 million from $6.2 million in Q4 2024 and $6.9 million in Q3 2025.
• Operating expenses for Q4 2025 increased by $1.9 million compared to Q3 2025, primarily due to a $1.6 million fair value write-down on an Other Real Estate Owned (OREO) property.
• A $0.2 million net loss was recognized on the contracted sale of a retail branch office in Q4 2025.
• Unusually high payoffs in the commercial loan portfolio partially offset strong loan production during the year.
• Interest expense on deposits increased by $1.7 million for the year, despite a slight decrease in the overall rate paid on deposits, due to strong growth in balances and new accounts.

Risks

• Risks and uncertainties could cause actual results to differ materially from forward-looking statements, as detailed in the 'Risk Factors' section of periodic SEC reports.
• The company's largest interest rate risk is from falling rate scenarios, although management is positioning towards a neutral stance.
• Potential for monetary loss and administrative costs associated with cyber security and fraud, despite robust detection and management systems.
• Credit risk associated with loan growth and unfunded loan commitments, requiring ongoing provision for credit losses.
• Market fluctuations impacting wealth management income and investment portfolio valuations.

Future Outlook

Management anticipates continued strong focus on margin management into 2026. Higher cash levels at December 31, 2025, are expected to facilitate the repayment of outstanding debt and brokered deposits as they mature. Specific maturities include a $25.0 million brokered certificate of deposit repaid in January 2026, and FHLB advances of $25.0 million and $40.0 million maturing in March 2026, along with $25.0 million in brokered CDs maturing in July 2026. The company aims to optimize its balance sheet mix, expand net interest margin through disciplined pricing, and improve efficiency using technology and data.

Management Comments

• Carissa L. Rodeheaver, Executive Chairman of the Board, stated that 2025 was a 'truly remarkable year' for First United, marking its 125th anniversary and delivering a 'record year of core earnings'.
• Rodeheaver highlighted that performance was driven by a strong net interest margin, robust loan, deposit, and trust production, and a disciplined approach to expense management.
• Rodeheaver expressed confidence in Jason B. Rush, the newly appointed President and Chief Executive Officer, to 'continue to advance our mission and uphold our uncommon commitment to exceptional service and comprehensive financial solutions'.

Industry Context

StockSavvy.ai notes that First United Corporation's strong full-year 2025 performance, particularly its record core earnings and improved net interest margin, positions it favorably within the regional banking sector. The focus on disciplined expense management, robust loan and deposit growth, and enhanced asset quality aligns with broader industry trends emphasizing financial stability and efficient operations amidst evolving interest rate environments. The strategic investment in FinTech and digital platforms also reflects a proactive approach to staying competitive and meeting modern customer demands.

Comparison to Industry Standards

• First United's adjusted Return on Average Assets (ROAA) of 1.28% for FY 2025 is within its long-term strategic target range of 1.25% 1.45%, indicating solid performance relative to its internal benchmarks.
• The adjusted Return on Average Tangible Common Equity (ROATCE) of 14.25% for FY 2025 is also within its long-term strategic target range of 13% 15%, suggesting efficient use of tangible equity.
• The Net Interest Margin (NIM) of 3.67% for FY 2025 falls within the company's strategic target of 3.5% 3.8%, demonstrating effective margin management.
• The efficiency ratio (adjusted for non-core items) of 58.19% for FY 2025 is within the strategic target range of 55% 60%, indicating efficient operations compared to its own goals.
• Non-performing loans (NPLs) to total loans at 0.28% and net charge-offs to average total loans at -0.07% (net recoveries) are well below the company's strategic targets of 0.50% 1.00% and 0.10% 0.50% respectively, highlighting strong asset quality relative to its own risk management framework. No specific comparable companies were mentioned in the filing for direct peer comparison.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders: Positive impact due to record core earnings, increased dividend, improved asset quality, and strong capital ratios. The appointment of a new CEO and robust governance practices aim to drive long-term value.
• Employees (Associates): Positive impact through strategic initiatives focused on attracting diverse talent, fostering career development, and expanding associate engagement.
• Customers: Benefits from continued commitment to exceptional service, customized financial solutions, and investments in FinTech and digital platforms for a seamless and secure experience.
• Communities: Ongoing commitment to future generations through trust, innovation, and meaningful community impact, as highlighted by the 125th-anniversary celebration.
• Creditors: Strong capital levels and disciplined liquidity management, including planned repayment of borrowings, enhance the company's financial stability and creditworthiness.

Next Steps

• Continue strong focus on margin management into 2026.
• Repay outstanding debt and brokered deposits at their maturities, leveraging higher cash levels.
• Repayment of a $25.0 million brokered certificate of deposit in January 2026.
• Repayment of a $25.0 million FHLB advance in March 2026.
• Repayment of a $40.0 million FHLB advance in March 2026.
• Repayment of $25.0 million in brokered CDs in July 2026.
• Execute on strategic pillars: Culture & Human Capital, Product & Service Revenue Diversification, and Resource Optimization.
• Advance mission and uphold commitment to exceptional service and comprehensive financial solutions under new CEO Jason B. Rush.
• Continue to attract and hire diverse talent, foster career development, and expand associate engagement.
• Increase non-interest income as a percentage of revenue and expand business development training.
• Optimize balance sheet mix, expand net interest margin, and effectively manage capital.
• Improve efficiency through technology, data, AI, and digital alternatives.

Key Dates

Recommendation

First United Corporation's full-year 2025 results demonstrate strong underlying performance, marked by record core earnings, improved net interest margin, and enhanced asset quality. The increase in the quarterly dividend and robust capital ratios are positive indicators. However, the GAAP net income dip in Q4, primarily due to a non-recurring OREO write-down, introduces a note of caution. While the long-term strategic targets and management changes are encouraging, a 'hold' recommendation is appropriate to observe the sustained execution of these strategies and the impact of the delayed loan closings on Q1 2026 results, balancing the strong full-year performance against the specific Q4 challenges.

Keywords

First United Corporation, FUNC, Bank Holding Company, Financial Results, Earnings, Net Income, EPS, Net Interest Margin, Loan Growth, Deposit Growth, Asset Quality, Capital Ratios, Dividends, OREO Write-down, Wealth Management, Corporate Governance, Risk Management, Banking Industry, Regional Bank