DEF 14A: First United Corporation Announces Notice of 2024 Annual Meeting and Proxy Statement

First United Corporation has announced its 2024 Annual Meeting of Shareholders to be held on May 9, 2024, including proposals for director elections, charter amendments, executive compensation, and auditor ratification.

Summary

• First United Corporation will hold its 2024 Annual Meeting of Shareholders on May 9, 2024.
• Shareholders will vote on the election of eleven director nominees.
• A proposal to amend the Corporation's charter to reduce the required vote for certain shareholder actions from two-thirds to a majority will be considered.
• Shareholders will cast a non-binding advisory vote on executive compensation for 2023.
• The ratification of Crowe LLP as the Corporation's independent registered public accounting firm for 2024 will be voted on.
• A proposal to approve the adjournment or postponement of the Annual Meeting, if necessary, will also be considered.
• The Board recommends voting FOR all director nominees and FOR Proposals 2, 3, 4, and 5.
• The record date for determining shareholders eligible to vote is February 29, 2024.
• The Corporation's total assets increased by $57.7 million to $1.9 billion.
• Gross loans increased by $127.2 million and deposits declined by $19.8 million.
• Consolidated net income was $18.8 million for the year ended December 31, 2023, on a non-GAAP basis.
• Basic and diluted net income per share for 2023 were $2.81 and $2.80, respectively on a non-GAAP basis.
• The net interest margin decreased to 3.26% in 2022 from 3.56% in 2022.
• Non-interest income, including gains, for the year ended December 31, 2023 decreased by $3.6 million when compared to 2022.
• For the year ended December 31, 2023, non-interest expenses increased by $7.1 million when compared to the year ended December 31, 2022.

Sentiment

Score: 5

Explanation: The document is neutral in tone, primarily providing factual information about the upcoming annual meeting and related proposals. While it highlights some positive financial metrics, it also acknowledges challenges and declines in certain areas, resulting in a balanced sentiment.

Positives

• The Corporation is providing shareholders with the opportunity to voice their opinions on key governance matters.
• The Board is recommending a change to a majority vote standard, which is viewed by many investors as improving corporate governance.
• The Corporation's total assets increased by $57.7 million to $1.9 billion.
• Gross loans increased by $127.2 million.

Negatives

• The net interest margin decreased to 3.26% in 2022 from 3.56% in 2022.
• Non-interest income, including gains, for the year ended December 31, 2023 decreased by $3.6 million when compared to 2022.
• For the year ended December 31, 2023, non-interest expenses increased by $7.1 million when compared to the year ended December 31, 2022.
• Deposits declined by $19.8 million.
• Consolidated net income was $18.8 million for the year ended December 31, 2023, on a non-GAAP basis, compared to $25.0 million for 2022.

Risks

• Failure to obtain sufficient votes for the charter amendment could hinder the Corporation's ability to align with modern governance practices.
• Economic conditions and industry turmoil could impact the Corporation's financial performance.
• Increased interest expense related to the rising rate environment as well as the addition of brokered deposits and FHLB borrowings to boost on balance sheet liquidity.

Future Outlook

The document does not contain a specific future outlook, but it does mention the Corporation's long-term objective of achieving high performance as compared to peers.

Management Comments

• The Board believes that a single leader serving as both Chairman of the Board and CEO is the most appropriate leadership structure for the Corporation.
• The Board believes that this structure reduces the potential for confusion or duplication of efforts and assures clarity of leadership.

Industry Context

The document notes that 2023 was a challenging year for First United Corporation due to industry turmoil and the impact of the rapidly increased rate environment. It also mentions that the Corporation experienced volatility in its share price consistent with the banking industry.

Comparison to Industry Standards

• The document compares First United's total shareholder return to the S&P US Small Cap Banks and a 2022 proxy peer group over 1-year, 3-year and 5-year periods.
• The 2022 proxy peer group consisted of 20 banks traded on The New York Stock Exchange or Nasdaq with post-acquisition assets between $900M and $3.0B, located in the mid-Atlantic or Northeast regions, non-interest income as a % of total revenue between 15%-40%, headquarters location with population below the top 20 metropolitan statistical areas, and last 12 months return on average equity greater than 0%.

Corporate Governance

Related Party Transactions

• The Bank has had banking transactions in the ordinary course of its business with certain directors and officers of the Corporation and with their affiliates.
• Morgantown Printing & Binding (MP&B), a corporation owned by Mr. Walls, provides various printing services, document storage and warehouse services, and related services to the Corporation.

Stakeholder Impact

• Shareholders: The proposals directly impact shareholder voting rights and corporate governance.
• Employees: Executive compensation and benefit plans are discussed, potentially affecting employee morale and retention.
• Customers: The Corporation's financial performance and strategic decisions can impact the services and products offered to customers.
• Directors: The election of directors and changes to the Board's composition are key aspects of the document.

Next Steps

• Shareholders are encouraged to vote on the proposals outlined in the Proxy Statement.
• The Board will file Articles of Amendment with the State Department of Assessments and Taxation of Maryland if the Charter Amendment is approved.
• The Board and/or the Compensation Committee may take into account the outcome of the advisory vote on executive compensation when considering future executive compensation arrangements.

Key Dates

Keywords

Annual Meeting, Proxy Statement, Shareholders, Director Election, Charter Amendment, Executive Compensation, Auditor Ratification, Corporate Governance, Financial Performance, First United Corporation