FIRST UNITED CORP/MD/ Debt Disclosure
10. Borrowed Funds
The following is a summary of short-term borrowings at December 31, 2023 and 2022 with original maturities of less than one year:
(in thousands) |
| 2023 |
| 2022 | ||
Securities sold under agreements to repurchase: | ||||||
Outstanding at end of year | $ | 45,418 | $ | 64,565 | ||
Weighted average interest rate at year end | 0.27% | 0.12% | ||||
Maximum amount outstanding as of any month end | $ | 59,777 | $ | 75,912 | ||
Average amount outstanding | $ | 50,498 | $ | 63,182 | ||
Approximate weighted average rate during the year | 0.24% | 0.12% | ||||
Repurchase agreements were secured by $61.6 million in investment securities at December 31, 2023 and $74.6 million at December 31, 2022.
The following is a summary of long-term borrowings at December 31, 2023 and 2022 with original maturities exceeding one year:
(in thousands) |
| 2023 |
| 2022 | ||
FHLB advances bearing fixed interest rates ranging from 4.53% to 4.69% at December 31, 2023 | $ | 80,000 | $ | — | ||
Junior subordinated debt | $ | 30,929 | $ | 30,929 | ||
Total long-term debt | $ | 110,929 | $ | 30,929 | ||
In March 2004, Trust I and Trust II issued preferred securities with an aggregate liquidation amount of $30.0 million to third-party investors and issued common equity with an aggregate liquidation amount of $0.9 million to First United Corporation. These Trusts used the proceeds of these offerings to purchase an equal amount of TPS Debentures, as follows:
$20.6 million—floating rate payable quarterly based on three-month Secured Overnight Financing Rate (“SOFR”) plus 275 basis points (8.39% at December 31, 2023), maturing in 2034, became redeemable five years after issuance at First United Corporation’s option.
$10.3 million--floating rate payable quarterly based on three-month SOFR plus 275 basis points (8.39% at December 31, 2023) maturing in 2034, became redeemable five years after issuance at First United Corporation’s option.
The TPS Debentures issued to each of the Trusts represent the sole assets of that Trust, and payments of the TPS Debentures by First United Corporation are the only sources of cash flow for the Trust. First United Corporation has the right, without triggering a default, to defer interest on all of the TPS Debentures for up to 20 quarterly periods, in which case distributions on the preferred securities will also be deferred. Should this occur, the Corporation may not pay dividends or distributions on, or repurchase, redeem or acquire any shares of its capital stock.
The contractual maturities of the FHLB advances outstanding at December 31, 2023 are March 15, 2024 and September 13, 2024. The contractual maturities of the junior subordinated debt outstanding at December 31, 2023 is 2034.
The Bank has a borrowing capacity agreement with the FHLB in an amount equal to 30% of the Bank’s assets. The available line of credit equaled $571.4 million at December 31, 2023 and $544.1 million at December 31, 2022. This line of credit, which can be used for both short and long-term funding, can only be utilized to the extent of available collateral. The line is secured by certain qualified mortgage, commercial and home equity loans as follows (in thousands):
1-4 family mortgage loans |
| $ | 144,572 |
Commercial loans | 52,753 | ||
Multi-family loans | 11,453 | ||
Home equity loans | 19,160 | ||
Total available borrowing capacity | 227,938 | ||
Less: borrowings and letters of credit outstanding | (82,500) | ||
$ | 145,438 |
The Bank also has various unsecured lines of credit totaling $140.0 million with various financial institutions and a $12.2 million secured line with the Federal Reserve to meet daily liquidity requirements.Additionally, the Bank had $69.5 million in available in a secured line of credit with the FRB through the BTFP. At December 31, 2023 and 2022, there were no borrowings under these credit facilities.
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.