FIRST UNITED CORP/MD/ 10-Q

Item 1. Financial Statements First United Corporation and Subsidiaries Consolidated Statements of Financial Condition (In thousands, except share data - Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 December 31, 2021 ​ ​ ​ ​ ​ ​ Assets ​ ​ ​ ​ ​ ​ Cash and due from banks ​ $ 28,888 ​ $ 109,823 Interest bearing deposits in banks ​ ​ 1,868 ​ ​ 5,897 Cash and cash equivalents ​ ​ 30,756 ​ ​ 115,720 Investment securities – available for sale (at fair value) ​ ​ 128,039 ​ ​ 286,771 Investment securities – held to maturity (fair value $ 205,745 at September 30, 2022 and $ 65,369 at December 31, 2021) ​ ​ 238,445 ​ ​ 56,259 Restricted investment in bank stock, at cost ​ ​ 1,027 ​ ​ 1,029 Loans held for sale ​ ​ — ​ ​ 67 Loans ​ ​ 1,277,924 ​ ​ 1,153,687 Unearned fees ​ ​ ( 210 ) ​ ​ ( 292 ) Allowance for loan losses ​ ​ ( 15,541 ) ​ ​ ( 15,955 ) Net loans ​ ​ 1,262,173 ​ ​ 1,137,440 Premises and equipment, net ​ ​ 35,022 ​ ​ 34,697 Goodwill and other intangibles ​ ​ 11,895 ​ ​ 12,052 Bank owned life insurance ​ ​ 46,041 ​ ​ 45,150 Deferred tax assets ​ ​ 16,180 ​ ​ 6,857 Other real estate owned, net ​ ​ 4,733 ​ ​ 4,477 Right of use assets ​ ​ 1,987 ​ ​ 2,247 Pension asset ​ ​ — ​ ​ 4,765 Accrued interest receivable ​ ​ 5,157 ​ ​ 4,821 Other assets ​ ​ 22,187 ​ ​ 17,486 Total Assets ​ $ 1,803,642 ​ ​ 1,729,838 Liabilities and Shareholders’ Equity ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ Non-interest bearing deposits ​ $ 474,444 ​ $ 501,627 Interest bearing deposits ​ ​ 1,036,674 ​ ​ 967,747 Total deposits ​ ​ 1,511,118 ​ ​ 1,469,374 Short-term borrowings ​ ​ 89,726 ​ ​ 57,699 Long-term borrowings ​ ​ 30,929 ​ ​ 30,929 Operating lease liability ​ ​ 2,472 ​ ​ 2,761 SERP deferred compensation ​ ​ 10,481 ​ ​ 10,395 Pension Liability ​ ​ 7,652 ​ ​ — Accrued interest payable and other liabilities ​ ​ 18,221 ​ ​ 15,787 Dividends payable ​ ​ 999 ​ ​ 993 Total Liabilities ​ ​ 1,671,598 ​ ​ 1,587,938 Shareholders’ Equity: ​ ​ ​ ​ ​ ​ Common Stock – par value $ 0.01 per share; Authorized 25,000,000 shares; issued and outstanding 6,659,390 shares at September 30, 2022 and 6,620,955 at December 31, 2021 ​ ​ 67 ​ ​ 66 Surplus ​ ​ 24,238 ​ ​ 23,661 Retained earnings ​ ​ 160,573 ​ ​ 145,487 Accumulated other comprehensive loss ​ ​ ( 52,834 ) ​ ​ ( 27,314 ) Total Shareholders’ Equity ​ ​ 132,044 ​ ​ 141,900 Total Liabilities and Shareholders’ Equity ​ $ 1,803,642 ​ $ 1,729,838 ​ See accompanying notes to the consolidated financial statements ​ ​ 3 Table of Contents First United Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ September 30, ​ 2022 2021 ​ ​ (Unaudited) Interest income ​ ​ ​ ​ ​ ​ Interest and fees on loans ​ $ 39,351 ​ $ 39,496 Interest on investment securities ​ ​ ​ ​ ​ ​ Taxable ​ ​ 4,533 ​ ​ 2,864 Exempt from federal income tax ​ ​ 834 ​ ​ 809 Total investment income ​ ​ 5,367 ​ ​ 3,673 Other ​ ​ 345 ​ ​ 239 Total interest income ​ ​ 45,063 ​ ​ 43,408 Interest expense ​ ​ ​ ​ ​ ​ Interest on deposits: ​ ​ ​ ​ ​ ​ Savings ​ ​ 70 ​ ​ 63 Interest-bearing transaction accounts ​ ​ 716 ​ ​ 827 Time deposits ​ ​ 711 ​ ​ 1,987 Total interest on Deposits ​ ​ 1,497 ​ ​ 2,877 Interest on short-term borrowings ​ ​ 86 ​ ​ 67 Interest on long-term borrowings ​ ​ 1,027 ​ ​ 1,840 Total Interest Expense ​ ​ 2,610 ​ ​ 4,784 Net Interest income ​ ​ 42,453 ​ ​ 38,624 Provision for loan losses ​ ​ 97 ​ ​ 68 Net interest income after provision for loan losses ​ ​ 42,356 ​ ​ 38,556 Other operating income ​ ​ ​ ​ ​ ​ Net gains on investments, available for sale ​ ​ 3 ​ ​ 154 Net gains/(losses) on investments, held to maturity ​ ​ 93 ​ ​ ( 54 ) Net gains on sale of residential mortgage loans ​ ​ 31 ​ ​ 996 Net gains on disposal of fixed assets ​ ​ 34 ​ ​ 16 Net gains ​ ​ 161 ​ ​ 1,112 Other Income ​ ​ ​ ​ ​ ​ Service charges on deposit accounts ​ ​ 1,451 ​ ​ 1,292 Other service charges ​ ​ 686 ​ ​ 664 Trust department ​ ​ 6,238 ​ ​ 6,441 Debit card income ​ ​ 2,922 ​ ​ 2,623 Bank owned life insurance ​ ​ 891 ​ ​ 877 Brokerage commissions ​ ​ 805 ​ ​ 854 Other ​ ​ 406 ​ ​ 431 Total other income ​ ​ 13,399 ​ ​ 13,182 Total other operating income ​ ​ 13,560 ​ ​ 14,294 Other operating expenses ​ ​ ​ ​ ​ ​ Salaries and employee benefits ​ ​ 17,891 ​ ​ 16,214 FDIC premiums ​ ​ 479 ​ ​ 575 Equipment expense ​ ​ 3,110 ​ ​ 2,837 Occupancy expense of premises ​ ​ 2,172 ​ ​ 2,102 Data processing expense ​ ​ 2,516 ​ ​ 2,420 Marketing expense ​ ​ 409 ​ ​ 408 Professional services ​ ​ 873 ​ ​ 2,872 Contract labor ​ ​ 482 ​ ​ 486 Telephone ​ ​ 365 ​ ​ 606 Losses/(gains) on sales and write downs of other real estate owned, net ​ ​ 375 ​ ​ ( 460 ) Investor relations ​ ​ 258 ​ ​ 546 Settlement expense ​ ​ — ​ ​ 3,300 FHLB prepayment penalty ​ ​ — ​ ​ 2,368 Contributions ​ ​ 184 ​ ​ 105 Other ​ ​ 2,437 ​ ​ 2,203 4 Table of Contents Total other operating expenses ​ ​ 31,551 ​ ​ 36,582 Income before income tax expense ​ ​ 24,365 ​ ​ 16,268 Provision for income tax expense ​ ​ 6,286 ​ ​ 4,047 Net Income ​ $ 18,079 ​ $ 12,221 Basic net income per share ​ $ 2.72 ​ $ 1.81 Diluted net income per share ​ $ 2.72 ​ $ 1.81 Weighted average number of basic shares outstanding ​ ​ 6,645 ​ ​ 6,741 Weighted average number of diluted shares outstanding ​ ​ 6,655 ​ ​ 6,746 Dividends declared per common share ​ $ 0.45 ​ $ 0.45 ​ See accompanying notes to the consolidated financial statements ​ 5 Table of Contents First United Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ September 30, ​ 2022 2021 ​ ​ (Unaudited) Interest income ​ ​ ​ ​ ​ ​ Interest and fees on loans ​ $ 14,058 ​ $ 13,667 Interest on investment securities ​ ​ ​ ​ ​ ​ Taxable ​ ​ 1,587 ​ ​ 880 Exempt from federal income tax ​ ​ 273 ​ ​ 266 Total investment income ​ ​ 1,860 ​ ​ 1,146 Other ​ ​ 267 ​ ​ 97 Total interest income ​ ​ 16,185 ​ ​ 14,910 Interest expense ​ ​ ​ ​ ​ ​ Interest on deposits: ​ ​ ​ ​ ​ ​ Savings ​ ​ 34 ​ ​ 17 Interest-bearing transaction accounts ​ ​ 397 ​ ​ 192 Time deposits ​ ​ 190 ​ ​ 523 Total interest on Deposits ​ ​ 621 ​ ​ 732 Interest on short-term borrowings ​ ​ 47 ​ ​ 17 Interest on long-term borrowings ​ ​ 376 ​ ​ 536 Total Interest Expense ​ ​ 1,044 ​ ​ 1,285 Net Interest income ​ ​ 15,141 ​ ​ 13,625 Provision for loan losses ​ ​ ( 108 ) ​ ​ ( 597 ) Net interest income after provision for loan losses ​ ​ 15,249 ​ ​ 14,222 Other operating income ​ ​ ​ ​ ​ ​ Net gains on investments, held to maturity ​ ​ 93 ​ ​ ( 54 ) Gains on sale of residential mortgage loans ​ ​ 3 ​ ​ 136 Net gains ​ ​ 96 ​ ​ 82 Other Income ​ ​ ​ ​ ​ ​ Service charges on deposit accounts ​ ​ 523 ​ ​ 475 Other service charges ​ ​ 241 ​ ​ 232 Trust department ​ ​ 2,005 ​ ​ 2,166 Debit card income ​ ​ 1,053 ​ ​ 900 Bank owned life insurance ​ ​ 302 ​ ​ 298 Brokerage commissions ​ ​ 272 ​ ​ 229 Other ​ ​ 208 ​ ​ 223 Total other income ​ ​ 4,604 ​ ​ 4,523 Total other operating income ​ ​ 4,700 ​ ​ 4,605 Other operating expenses ​ ​ ​ ​ ​ ​ Salaries and employee benefits ​ ​ 6,130 ​ ​ 5,719 FDIC premiums ​ ​ 150 ​ ​ 209 Equipment ​ ​ 1,037 ​ ​ 1,032 Occupancy ​ ​ 734 ​ ​ 684 Data processing ​ ​ 890 ​ ​ 819 Marketing ​ ​ 152 ​ ​ 129 Professional services ​ ​ ( 211 ) ​ ​ 615 Contract labor ​ ​ 159 ​ ​ 153 Line rentals ​ ​ 112 ​ ​ 123 Losses on sales and write downs of other real estate owned, net ​ ​ 128 ​ ​ 150 Investor relations ​ ​ 39 ​ ​ 116 Contributions ​ ​ 121 ​ ​ 55 FHLB prepayment penalty ​ ​ — ​ ​ 2,368 Other ​ ​ 895 ​ ​ 855 Total other operating expenses ​ ​ 10,336 ​ ​ 13,027 Income before income tax expense ​ ​ 9,613 ​ ​ 5,800 Provision for income tax expense ​ ​ 2,677 ​ ​ 1,412 6 Table of Contents Net Income ​ $ 6,936 ​ $ 4,388 Basic net income per common share ​ $ 1.04 ​ $ 0.66 Diluted net income per common share ​ $ 1.04 ​ $ 0.66 Weighted average number of basic shares outstanding ​ ​ 6,658 ​ ​ 6,617 Weighted average number of diluted shares outstanding ​ ​ 6,669 ​ ​ 6,624 Dividends declared per common share ​ $ 0.15 ​ $ 0.15 See accompanying notes to the consolidated financial statements ​ ​ 7 Table of Contents ​ First United Corporation and Subsidiaries Consolidated Statements of Comprehensive (Loss)/Income (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ September 30, ​ ​ 2022 ​ 2021 Comprehensive (Loss)/Income ​ (Unaudited) Net Income ​ $ 18,079 ​ $ 12,221 Other comprehensive (loss)/income, net of tax and reclassification adjustments: ​ ​ ​ ​ ​ ​ Available for sale securities: ​ ​ ​ ​ ​ ​ Unrealized holding (losses)/gains on investments with OTTI ​ $ ( 853 ) ​ $ 3,274 Reclassification adjustment for accretable yield realized in income ​ ​ 152 ​ ​ 151 Other comprehensive (loss)/income on investments with OTTI ​ ​ ( 1,005 ) ​ ​ 3,123 ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses on all other AFS investments ​ $ ( 22,971 ) ​ $ ( 5,035 ) Unrealized holding losses on securities transferred from available for sale to held to maturity ​ ​ 8,328 ​ ​ — Reclassification adjustment for gains realized in income ​ ​ 3 ​ ​ 154 Other comprehensive losses on all other AFS investments ​ ​ ( 14,646 ) ​ ​ ( 5,189 ) ​ ​ ​ ​ ​ ​ ​ Held to Maturity Securities ​ ​ ​ ​ ​ ​ Unrealized holding losses on securities transferred to held to maturity ​ $ ( 8,328 ) ​ $ — Reclassification adjustment for gains/(losses) realized in income ​ ​ 93 ​ ​ ( 54 ) Reclassification adjustment for amortization realized in income ​ ​ ( 644 ) ​ ​ ( 96 ) Other comprehensive (losses)/income on HTM investments ​ ​ ( 7,777 ) ​ ​ 150 ​ ​ ​ ​ ​ ​ ​ Cash flow hedges: ​ ​ ​ ​ ​ ​ Unrealized holding gains on cash flow hedges ​ $ 1,622 ​ $ 615 Reclassification adjustment for gains realized in income ​ ​ — ​ ​ — Other comprehensive income on cash flow hedges ​ ​ 1,622 ​ ​ 615 ​ ​ ​ ​ ​ ​ ​ Pension plan liability: ​ ​ ​ ​ ​ ​ Unrealized holding (losses)/gains on pension plan liability ​ $ ( 14,079 ) ​ $ 139 Reclassification adjustment for amortization of unrecognized loss realized in income ​ ​ ( 837 ) ​ ​ ( 1,116 ) Other comprehensive (loss)/income on pension plan liability ​ ​ ( 13,242 ) ​ ​ 1,255 ​ ​ ​ ​ ​ ​ ​ SERP liability: ​ ​ ​ ​ ​ ​ Unrealized holding losses on SERP liability ​ $ — ​ $ — Reclassification adjustment for amortization of unrealized loss realized in income ​ ​ ( 203 ) ​ ​ ( 225 ) Other comprehensive income on SERP liability ​ ​ 203 ​ ​ 225 ​ ​ ​ ​ ​ ​ ​ Other comprehensive (losses)/gains before income tax ​ ​ ( 34,845 ) ​ ​ 179 Income tax benefit/(expense) related to other comprehensive income ​ ​ 9,325 ​ ​ ( 48 ) ​ ​ ​ ​ ​ ​ ​ Other comprehensive (loss)/income, net of tax ​ ​ ( 25,520 ) ​ ​ 131 Comprehensive (loss)/income ​ $ ( 7,441 ) ​ $ 12,352 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ See accompanying notes to the consolidated financial statements ​ 8 Table of Contents First United Corporation and Subsidiaries Consolidated Statements of Comprehensive (Loss)/Income (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ September 30, ​ 2022 2021 Comprehensive Income (in thousands) ​ (Unaudited) Net Income ​ $ 6,936 ​ $ 4,388 Other comprehensive (loss)/income, net of tax and reclassification adjustments: ​ ​ ​ ​ ​ ​ Available for sale securities: ​ ​ ​ ​ ​ ​ Unrealized holding (losses)/gains on investments with OTTI ​ $ ( 199 ) ​ $ 751 Reclassification adjustment for accretable yield realized in income ​ ​ 51 ​ ​ 50 Other comprehensive(loss)/income on investments with OTTI ​ ​ ( 250 ) ​ ​ 701 ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses on all other AFS investments ​ $ ( 6,768 ) ​ $ ( 708 ) Reclassification adjustment for gains realized in income ​ ​ — ​ ​ — Other comprehensive losses on all other AFS investments ​ ​ ( 6,768 ) ​ ​ ( 708 ) ​ ​ ​ ​ ​ ​ ​ Held to Maturity Securities ​ ​ ​ ​ ​ ​ Unrealized holding losses on securities transferred to held to maturity ​ $ — ​ $ — Reclassification adjustment for gains realized in income ​ ​ 93 ​ ​ ( 54 ) Reclassification adjustment for amortization realized in income ​ ​ ( 320 ) ​ ​ 12 Other comprehensive income on HTM investments ​ ​ 227 ​ ​ 42 ​ ​ ​ ​ ​ ​ ​ Cash flow hedges: ​ ​ ​ ​ ​ ​ Unrealized holding gains on cash flow hedges ​ $ 534 ​ $ 108 Reclassification adjustment for gains realized in income ​ ​ — ​ ​ — Other comprehensive income on cash flow hedges ​ ​ 534 ​ ​ 108 ​ ​ ​ ​ ​ ​ ​ Pension plan liability: ​ ​ ​ ​ ​ ​ Unrealized holding losses on pension plan liability ​ $ ( 3,537 ) ​ $ ( 951 ) Reclassification adjustment for amortization of unrecognized loss realized in income ​ ​ ( 279 ) ​ ​ ( 372 ) Other comprehensive losses on pension plan liability ​ ​ ( 3,258 ) ​ ​ ( 579 ) ​ ​ ​ ​ ​ ​ ​ SERP liability: ​ ​ ​ ​ ​ ​ Unrealized holding losses on SERP liability ​ $ — ​ $ — Reclassification adjustment for amortization of unrealized loss realized in income ​ ​ ( 68 ) ​ ​ ( 75 ) Other comprehensive income on SERP liability ​ ​ 68 ​ ​ 75 ​ ​ ​ ​ ​ ​ ​ Other comprehensive losses before income tax ​ ​ ( 9,447 ) ​ ​ ( 361 ) Income tax benefit related to other comprehensive income ​ ​ 2,529 ​ ​ 97 ​ ​ ​ ​ ​ ​ ​ Other comprehensive loss, net of tax ​ ​ ( 6,918 ) ​ ​ ( 264 ) Comprehensive income ​ $ 18 ​ $ 4,124 ​ ​ ​ See accompanying notes to the consolidated financial statements ​ ​ 9 Table of Contents First United Corporation and Subsidiaries Consolidated Statements of Changes in Shareholders’ Equity (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock Surplus Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity Balance at January 1, 2022 ​ $ 66 ​ $ 23,661 ​ $ 145,487 ​ $ ( 27,314 ) ​ $ 141,900 Net income ​ ​ ​ ​ ​ ​ ​ ​ 5,715 ​ ​ ​ ​ ​ 5,715 Other comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 9,593 ) ​ ​ ( 9,593 ) Stock based compensation ​ ​ ​ ​ ​ ( 4 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 4 ) Common stock issued - 15,456 shares ​ ​ ​ ​ ​ 55 ​ ​ ​ ​ ​ ​ ​ ​ 55 Common stock dividend declared - $ 0.15 per share ​ ​ ​ ​ ​ ​ ​ ​ ( 995 ) ​ ​ ​ ​ ​ ( 995 ) Balance at March 31, 2022 ​ $ 66 ​ $ 23,712 ​ $ 150,207 ​ $ ( 36,907 ) ​ $ 137,078 Net income ​ ​ ​ ​ ​ ​ ​ ​ 5,428 ​ ​ ​ ​ ​ 5,428 Other comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 9,009 ) ​ ​ ( 9,009 ) Stock based compensation ​ ​ 1 ​ ​ 339 ​ ​ ​ ​ ​ ​ ​ ​ 340 Common stock issued - 18,416 shares ​ ​ ​ ​ ​ 54 ​ ​ ​ ​ ​ ​ ​ ​ 54 Common stock dividend declared - $ 0.15 per share ​ ​ ​ ​ ​ ​ ​ ​ ( 999 ) ​ ​ ​ ​ ​ ( 999 ) Balance at June 30, 2022 ​ $ 67 ​ $ 24,105 ​ $ 154,636 ​ $ ( 45,916 ) ​ $ 132,892 Net income ​ ​ ​ ​ ​ ​ ​ ​ 6,936 ​ ​ ​ ​ ​ 6,936 Other comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 6,918 ) ​ ​ ( 6,918 ) Stock based compensation ​ ​ ​ ​ ​ 80 ​ ​ ​ ​ ​ ​ ​ ​ 80 Common stock issued - 4,563 shares ​ ​ ​ ​ ​ 53 ​ ​ ​ ​ ​ ​ ​ ​ 53 Common stock dividend declared - $ 0.15 per share ​ ​ ​ ​ ​ ​ ​ ​ ( 999 ) ​ ​ ​ ​ ​ ( 999 ) Balance at September 30, 2022 ​ $ 67 ​ $ 24,238 ​ $ 160,573 ​ $ ( 52,834 ) ​ $ 132,044 ​ ​ ​ 10 Table of Contents First United Corporation and Subsidiaries Consolidated Statements of Changes in Shareholders’ Equity (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock Surplus Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity Balance at January 1, 2021 ​ $ 70 ​ $ 30,149 ​ $ 129,691 ​ $ ( 28,863 ) ​ $ 131,047 Net income ​ ​ ​ ​ ​ ​ ​ ​ 3,430 ​ ​ ​ ​ ​ 3,430 Other comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 4,335 ) ​ ​ ( 4,335 ) Stock based compensation ​ ​ ​ ​ ​ 50 ​ ​ ​ ​ ​ ​ ​ ​ 50 Common stock issued - 2,956 shares ​ ​ ​ ​ ​ 46 ​ ​ ​ ​ ​ ​ ​ ​ 46 Common stock dividend declared - $ 0.15 per share ​ ​ ​ ​ ​ ​ ​ ​ ( 1,049 ) ​ ​ ​ ​ ​ ( 1,049 ) Balance at March 31, 2021 ​ $ 70 ​ $ 30,245 ​ $ 132,072 ​ $ ( 33,198 ) ​ $ 129,189 Net income ​ ​ ​ ​ ​ ​ ​ ​ 4,403 ​ ​ ​ ​ ​ 4,403 Other comprehensive income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4,730 ​ ​ 4,730 Stock based compensation ​ ​ ​ ​ ​ 296 ​ ​ ​ ​ ​ ​ ​ ​ 296 Common stock issued - 3,261 shares ​ ​ ​ ​ ​ 56 ​ ​ ​ ​ ​ ​ ​ ​ 56 Common stock repurchase - 400,000 shares ​ ​ ( 4 ) ​ ​ ( 7,175 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 7,179 ) Common stock dividend declared - $ 0.15 per share ​ ​ ​ ​ ​ ​ ​ ​ ( 939 ) ​ ​ ​ ​ ​ ( 939 ) Balance at June 30, 2021 ​ $ 66 ​ $ 23,422 ​ $ 135,536 ​ $ ( 28,468 ) ​ $ 130,556 Net income ​ ​ ​ ​ ​ ​ ​ ​ 4,388 ​ ​ ​ ​ ​ 4,388 Other comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 264 ) ​ ​ ( 264 ) Stock based compensation ​ ​ ​ ​ ​ 43 ​ ​ ​ ​ ​ ​ ​ ​ 43 Common stock issued - 3,337 shares ​ ​ ​ ​ ​ 57 ​ ​ ​ ​ ​ ​ ​ ​ 57 Common stock dividend declared - $ 0.15 per share ​ ​ ​ ​ ​ ​ ​ ​ ( 993 ) ​ ​ ​ ​ ​ ( 993 ) Balance at September 30, 2021 ​ $ 66 ​ $ 23,522 ​ $ 138,931 ​ $ ( 28,732 ) ​ $ 133,787 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ See accompanying notes to the consolidated financial statements ​ 11 Table of Contents First United Corporation and Subsidiaries Consolidated Statements of Cash Flows (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ September 30, ​ 2022 2021 ​ ​ (Unaudited) Operating activities ​ ​ ​ ​ ​ ​ Net income ​ $ 18,079 ​ $ 12,221 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ Provision for loan losses ​ ​ 97 ​ ​ 68 Depreciation ​ ​ 2,475 ​ ​ 2,453 Stock based compensation ​ ​ 415 ​ ​ 389 Gains on sales of other real estate owned ​ ​ — ​ ​ ( 594 ) Write-downs of other real estate owned ​ ​ — ​ ​ ( 160 ) Originations of loans held for sale ​ ​ ( 1,156 ) ​ ​ ( 23,618 ) Proceeds from sale of loans held for sale ​ ​ 1,254 ​ ​ 27,758 Gains from sale of loans held for sale ​ ​ ( 31 ) ​ ​ ( 996 ) Gains on disposal of fixed assets ​ ​ ( 34 ) ​ ​ ( 16 ) Net (accretion)/ amortization of investment securities discounts and premiums- AFS ​ ​ 100 ​ ​ 790 Net (accretion)/amortization of investment securities discounts and premiums- HTM ​ ​ ( 625 ) ​ ​ 276 Amortization of intangible assets ​ ​ 157 ​ ​ — Gains on sales/calls of investment securities – AFS ​ ​ ( 3 ) ​ ​ ( 154 ) Losses/(gains) on investment securities – HTM ​ ​ ( 93 ) ​ ​ 54 Earnings on bank owned life insurance ​ ​ ( 891 ) ​ ​ ( 877 ) Amortization of deferred loan fees ​ ​ ( 123 ) ​ ​ ( 3,228 ) Amortization of operating lease right of use asset ​ ​ 260 ​ ​ 77 Increase in accrued interest receivable and other assets ​ ​ ( 651 ) ​ ​ ( 1,638 ) Deferred tax benefit ​ ​ ( 9,322 ) ​ ​ ( 48 ) Operating lease liability ​ ​ ( 289 ) ​ ​ ( 104 ) Increase/(decrease) in accrued interest payable and other liabilities ​ ​ 9,106 ​ ​ ( 2,216 ) Net cash provided by operating activities ​ ​ 18,725 ​ ​ 10,437 Investing activities ​ ​ ​ ​ ​ ​ Proceeds from maturities/calls of investment securities - AFS ​ ​ 12,153 ​ ​ 40,045 Proceeds from maturities/calls of investment securities - HTM ​ ​ 13,254 ​ ​ 12,286 Proceeds from sales of investment securities - AFS ​ ​ 1,023 ​ ​ 13,687 Purchases of investment securities - AFS ​ ​ ( 17,652 ) ​ ​ ( 65,101 ) Purchases of investment securities - HTM ​ ​ ( 55,686 ) ​ ​ ( 6,332 ) Proceeds from sales of other real estate owned ​ ​ — ​ ​ 3,477 Proceeds from disposal of fixed assets ​ ​ 37 ​ ​ 39 Net decrease in restricted stock ​ ​ 2 ​ ​ 3,439 Net (increase)/decrease in loans ​ ​ ( 124,963 ) ​ ​ 67,908 Purchases of loans ​ ​ — ​ ​ ( 58,943 ) Purchases of premises and equipment ​ ​ ( 2,803 ) ​ ​ ( 826 ) Net cash (used in)/provided by investing activities ​ ​ ( 174,635 ) ​ ​ 9,679 Financing activities ​ ​ ​ ​ ​ ​ Net increase in deposits ​ ​ 41,744 ​ ​ 22,128 Issuance of common stock ​ ​ 162 ​ ​ 103 Cash dividends paid on common stock ​ ​ ( 2,987 ) ​ ​ ( 2,898 ) Net increase in short-term borrowings ​ ​ 32,027 ​ ​ 23,236 Stock repurchase ​ ​ — ​ ​ ( 7,179 ) Net decrease in long-term borrowings ​ ​ — ​ ​ ( 70,000 ) Net cash provided by/(used in) financing activities ​ ​ 70,946 ​ ​ ( 34,610 ) Decrease in cash and cash equivalents ​ ​ ( 84,964 ) ​ ​ ( 14,494 ) Cash and cash equivalents at beginning of the year ​ ​ 115,720 ​ ​ 149,432 Cash and cash equivalents at end of period ​ $ 30,756 ​ $ 134,938 Supplemental information ​ ​ ​ ​ ​ ​ Interest paid ​ $ 2,655 ​ $ 5,033 Taxes paid ​ $ 5,248 ​ $ 4,637 Non-cash investing activities: ​ ​ ​ ​ ​ ​ Transfers from loans to other real estate owned ​ $ 256 ​ $ — Transfers from securities available for sale to held to maturity ​ $ 139,036 ​ $ — ​ See accompanying notes to the consolidated financial statements 12 Table of Contents FIRST UNITED CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 – Basis of Presentation The financial information is presented in accordance with generally accepted accounting principles and general practice for financial institutions in the United States of America (“GAAP”). In preparing financial statements, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of financial statements. In addition, these estimates and assumptions affect revenues and expenses in the financial statements and as such, actual results could differ from those estimates. Principles of Consolidation The consolidated financial statements include the accounts of First United Corporation, First United Bank & Trust (the “Bank”), First United Statutory Trust I, First United Statutory Trust II, OakFirst Loan Center, LLC, Oakfirst Loan Center, Inc., First OREO Trust and FUBT OREO I, LLC. All significant inter-company accounts and transactions have been eliminated. Certain prior period balances have been reclassified to conform to the current period presentation. Operating results for the nine and three month periods ended September 30, 2022 are not necessarily indicative of the results that may be expected for the full year or for any future interim period. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2021. As used in these notes, the terms “the Corporation” “we”, “us”, and “our” refer to First United Corporation and, unless the context clearly requires otherwise, its consolidated subsidiaries. The Corporation has evaluated events and transactions occurring subsequent to the statement of financial condition date of September 30, 2022 and through the date these consolidated financial statements were issued, for items of potential recognition or disclosure. Note 2 – Earnings Per Common Share Basic earnings per common share is derived by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period and does not include the effect of any potentially dilutive common stock equivalents. Diluted earnings per share is derived by dividing net income available to common shareholders by the weighted-average number of shares outstanding, adjusted for the dilutive effect of outstanding common stock equivalents, such as restricted stock units (“RSUs”). There were no anti-dilutive shares outstanding at September 30, 2022 or 2021. ​ 13 Table of Contents The following table sets forth the calculation of basic and diluted earnings per common share for the nine and three month periods ended September 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended September 30, ​ ​ 2022 ​ 2021 ​ ​ ​ Average Per Share ​ ​ Average Per Share (in thousands, except for per share amount) ​ Income ​ Shares ​ Amount ​ Income ​ Shares ​ Amount Basic Earnings Per Share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 18,079 ​ 6,645 ​ $ 2.72 ​ $ 12,221 ​ 6,741 ​ $ 1.81 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted Earnings Per Share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restricted stock units ​ ​ ​ ​ 10 ​ ​ ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 18,079 ​ 6,655 ​ $ 2.72 ​ $ 12,221 ​ 6,746 ​ $ 1.81 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended September 30, ​ ​ 2022 ​ 2021 ​ ​ ​ ​ ​ Average ​ Per Share ​ ​ ​ ​ Average ​ Per Share (in thousands, except for per share amount) ​ Income ​ Shares ​ Amount ​ Income ​ Shares ​ Amount Basic Earnings Per Share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 6,936 ​ 6,658 ​ $ 1.04 ​ $ 4,388 ​ 6,617 ​ $ 0.66 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted Earnings Per Share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restricted stock units ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ ​ ​ 7 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 6,936 ​ 6,669 ​ $ 1.04 ​ $ 4,388 ​ 6,624 ​ $ 0.66 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 14 Table of Contents Note 3 – Investments The following tables show a comparison of amortized cost and fair values of investment securities at September 30, 2022 and December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value OTTI in AOCL September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 11,052 ​ $ — ​ $ 1,605 ​ $ 9,447 ​ $ — Residential mortgage-backed agencies ​ ​ 45,899 ​ ​ — ​ ​ 8,165 ​ ​ 37,734 ​ ​ — Commercial mortgage-backed agencies ​ ​ 37,766 ​ ​ — ​ ​ 6,155 ​ ​ 31,611 ​ ​ — Collateralized mortgage obligations ​ ​ 26,336 ​ ​ — ​ ​ 4,635 ​ ​ 21,701 ​ ​ — Obligations of states and political subdivisions ​ ​ 11,208 ​ ​ 1 ​ ​ 465 ​ ​ 10,744 ​ ​ — Corporate bonds ​ ​ 1,000 ​ ​ — ​ ​ 80 ​ ​ 920 ​ ​ — Collateralized debt obligations ​ ​ 18,648 ​ ​ — ​ ​ 2,766 ​ ​ 15,882 ​ ​ ( 1,664 ) Total available for sale ​ $ 151,909 ​ $ 1 ​ $ 23,871 ​ $ 128,039 ​ $ ( 1,664 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Amortized Cost Gross Unrecognized Gains Gross Unrecognized Losses Fair Value OTTI in AOCL September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. treasuries ​ $ 37,140 ​ $ — ​ $ 1,727 ​ $ 35,413 ​ $ — U.S. government agencies ​ ​ 67,665 ​ ​ — ​ ​ 12,853 ​ ​ 54,812 ​ ​ — Residential mortgage-backed agencies ​ ​ 29,536 ​ ​ 1 ​ ​ 3,920 ​ ​ 25,617 ​ ​ — Commercial mortgage-backed agencies ​ ​ 23,018 ​ ​ — ​ ​ 4,378 ​ ​ 18,640 ​ ​ — Collateralized mortgage obligations ​ ​ 58,462 ​ ​ — ​ ​ 9,622 ​ ​ 48,840 ​ ​ — Obligations of states and political subdivisions ​ ​ 22,624 ​ ​ 504 ​ ​ 705 ​ ​ 22,423 ​ ​ — Total held to maturity ​ $ 238,445 ​ $ 505 ​ $ 33,205 ​ $ 205,745 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 15 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value OTTI in AOCL December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 69,602 ​ $ 66 ​ $ 2,499 ​ $ 67,169 ​ $ — Residential mortgage-backed agencies ​ ​ 49,630 ​ ​ — ​ ​ 969 ​ ​ 48,661 ​ ​ — Commercial mortgage-backed agencies ​ ​ 51,694 ​ ​ 175 ​ ​ 1,001 ​ ​ 50,868 ​ ​ — Collateralized mortgage obligations ​ ​ 93,018 ​ ​ 84 ​ ​ 3,025 ​ ​ 90,077 ​ ​ — Obligations of states and political subdivisions ​ ​ 12,439 ​ ​ 371 ​ ​ 6 ​ ​ 12,804 ​ ​ — Collateralized debt obligations ​ ​ 18,609 ​ ​ 112 ​ ​ 1,529 ​ ​ 17,192 ​ ​ ( 660 ) Total available for sale ​ $ 294,992 ​ $ 808 ​ $ 9,029 ​ $ 286,771 ​ $ ( 660 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Amortized Cost Gross Unrecognized Gains Gross Unrecognized Losses Fair Value OTTI in AOCL December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage-backed agencies ​ $ 30,634 ​ $ 649 ​ $ 436 ​ $ 30,847 ​ $ — Commercial mortgage-backed agencies ​ ​ 5,456 ​ ​ 145 ​ ​ — ​ ​ 5,601 ​ ​ — Obligations of states and political subdivisions ​ ​ 20,169 ​ ​ 8,752 ​ ​ — ​ ​ 28,921 ​ ​ — Total held to maturity ​ $ 56,259 ​ $ 9,546 ​ $ 436 ​ $ 65,369 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Corporation reassessed the classification of certain investments and, effective February 1, 2022, transferred $ 139.0 million of callable agencies, obligations of state and political subdivisions, and collateralized mortgage obligations from available for sale to held to maturity securities. The transfer occurred at fair value. The related unrealized loss of $ 8.4 million included in other comprehensive loss remained in other comprehensive loss, to be amortized out of other comprehensive loss with an offsetting entry to interest income as a yield adjustment over the remaining term of the securities. No gain or loss was recorded at the time of transfer. ​ ​ 16 Table of Contents The following table shows the Corporation’s investment securities with gross unrealized and unrecognized losses and fair values at September 30, 2022 and December 31, 2021, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 months ​ 12 months or more (in thousands) Fair Value Unrealized Losses Number of Investments Fair Value Unrealized Losses Number of Investments September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 8,145 ​ ​ 907 ​ 2 ​ ​ 1,302 ​ ​ 698 ​ 1 Residential mortgage-backed agencies ​ ​ 15,945 ​ ​ 3,065 ​ 2 ​ ​ 21,788 ​ ​ 5,100 ​ 3 Commercial mortgage-backed agencies ​ ​ 13,915 ​ ​ 2,182 ​ 6 ​ ​ 17,697 ​ ​ 3,973 ​ 4 Collateralized mortgage obligations ​ ​ 13,352 ​ ​ 2,860 ​ 8 ​ ​ 8,349 ​ ​ 1,775 ​ 2 Obligations of states and political subdivisions ​ ​ 10,048 ​ ​ 465 ​ 9 ​ ​ — ​ ​ — ​ — Corporate Bonds ​ ​ 920 ​ ​ 80 ​ 1 ​ ​ — ​ ​ — ​ — Collateralized debt obligations ​ ​ 6,464 ​ ​ 152 ​ 4 ​ ​ 9,418 ​ ​ 2,614 ​ 5 Total available for sale ​ $ 68,789 ​ $ 9,711 ​ 32 ​ $ 58,554 ​ $ 14,160 ​ 15 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 months ​ 12 months or more (in thousands) Fair Value Unrecognized Losses Number of Investments Fair Value Unrecognized Losses Number of Investments September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. treasuries ​ $ 35,413 ​ ​ 1,727 ​ 4 ​ $ — ​ $ — ​ — U.S. government agencies ​ ​ 54,811 ​ $ 12,853 ​ 9 ​ ​ — ​ ​ — ​ — Residential mortgage-backed agencies ​ ​ 18,794 ​ ​ 1,992 ​ 33 ​ ​ 6,730 ​ ​ 1,928 ​ 3 Commercial mortgage-backed agencies ​ ​ 18,640 ​ ​ 4,378 ​ 3 ​ ​ — ​ ​ — ​ — Collateralized mortgage obligations ​ ​ 48,840 ​ ​ 9,622 ​ 8 ​ ​ — ​ ​ — ​ — Obligations of states and political subdivisions ​ ​ 2,162 ​ ​ 705 ​ 1 ​ ​ — ​ ​ — ​ — Total held to maturity ​ $ 178,660 ​ $ 31,277 ​ 58 ​ $ 6,730 ​ $ 1,928 ​ 3 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 17 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 months ​ 12 months or more (in thousands) Fair Value Unrealized Losses Number of Investments Fair Value Unrealized Losses Number of Investments December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 23,577 ​ $ 122 ​ 3 ​ $ 33,972 ​ $ 2,377 ​ 6 Residential mortgage-backed agencies ​ ​ 29,507 ​ ​ 257 ​ 3 ​ ​ 19,154 ​ ​ 712 ​ 2 Commercial mortgage-backed agencies ​ ​ 32,177 ​ ​ 787 ​ 4 ​ ​ 5,211 ​ ​ 214 ​ 1 Collateralized mortgage obligations ​ ​ 24,322 ​ ​ 649 ​ 5 ​ ​ 43,076 ​ ​ 2,376 ​ 5 Obligations of states and political subdivisions ​ ​ 3,046 ​ ​ 6 ​ 1 ​ ​ — ​ ​ — ​ — Collateralized debt obligations ​ ​ — ​ ​ — ​ — ​ ​ 10,468 ​ ​ 1,529 ​ 5 Total available for sale ​ $ 112,629 ​ $ 1,821 ​ 16 ​ $ 111,881 ​ $ 7,208 ​ 19 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 months ​ 12 months or more (in thousands) Fair Value Unrecognized Losses Number of Investments Fair Value Unrecognized Losses Number of Investments December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage-backed agencies ​ $ 7,395 ​ $ 291 ​ 6 ​ $ 2,782 ​ $ 145 ​ 1 Total held to maturity ​ $ 7,395 ​ $ 291 ​ 6 ​ $ 2,782 ​ $ 145 ​ 1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Management systematically evaluates securities for impairment on a quarterly basis. Based upon application of Accounting Standards Codification (“ASC”) Topic 320 (Section 320-10-35) issued by the Financial Accounting Standards Board (the “FASB”), management must assess whether (a) the Corporation has the intent to sell the security and (b) it is more likely than not that the Corporation will be required to sell the security prior to its anticipated recovery. If neither applies, then declines in the fair value of securities below their cost that are considered other-than-temporary declines are split into two components. The first is the loss attributable to declining credit quality. Credit losses are recognized in earnings as realized losses in the period in which the impairment determination is made. The second component consists of all other losses. The other losses are recognized in other comprehensive income. In estimating other than temporary impairment (“OTTI”) charges, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) adverse conditions specifically related to the security, an industry, or a geographic area, (3) the historic and implied volatility of the security, (4) changes in the rating of a security by a rating agency, (5) recoveries or additional declines in fair value subsequent to the balance sheet date, (6) failure of the issuer of the security to make scheduled interest payments, and (7) the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future. Due to the duration and the significant market value decline in the pooled trust preferred securities held in our portfolio, we performed more extensive testing on these securities for purposes of evaluating whether or not an OTTI has occurred. ​ 18 Table of Contents The following table presents a cumulative roll-forward of the amount of non-cash OTTI charges related to credit losses that have been recognized in earnings for the trust preferred securities held in the CDO portfolio during the nine and three month periods ended September 30, 2022 and 2021 that the Corporation does not intend to sell: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ September 30, (in thousands) 2022 2021 Balance of credit-related OTTI at January 1 ​ $ 2,043 ​ $ 2,244 Reduction for increases in cash flows expected to be collected ​ ​ ( 152 ) ​ ​ ( 151 ) Balance of credit-related OTTI at September 30 ​ $ 1,891 ​ $ 2,093 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ September 30, (in thousands) ​ 2022 ​ 2021 Balance of credit-related OTTI at July 1 ​ $ 1,942 ​ $ 2,143 Reduction for increases in cash flows expected to be collected ​ ​ ( 51 ) ​ ​ ( 50 ) Balance of credit-related OTTI at September 30 ​ $ 1,891 ​ $ 2,093 ​ The amortized cost and estimated fair value of securities by contractual maturity at September 30, 2022 are shown in the following table. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 (in thousands) Amortized Cost Fair Value Available for Sale: ​ ​ ​ ​ ​ ​ Due after one year through five years ​ $ 8,364 ​ $ 7,865 Due after five years through ten years ​ ​ 6,197 ​ ​ 5,572 Due after ten years ​ ​ 27,347 ​ ​ 23,556 ​ ​ ​ 41,908 ​ ​ 36,993 Residential mortgage-backed agencies ​ ​ 45,899 ​ ​ 37,734 Commercial mortgage-backed agencies ​ ​ 37,766 ​ ​ 31,611 Collateralized mortgage obligations ​ ​ 26,336 ​ ​ 21,701 Total available for sale ​ $ 151,909 ​ $ 128,039 Held to Maturity: ​ ​ ​ ​ ​ ​ Due after one year through five years ​ $ 49,640 ​ $ 46,582 Due after five years through ten years ​ ​ 32,986 ​ ​ 26,924 Due after ten years ​ ​ 44,803 ​ ​ 39,142 ​ ​ ​ 127,429 ​ ​ 112,648 Residential mortgage-backed agencies ​ ​ 29,536 ​ ​ 25,617 Commercial mortgage-backed agencies ​ ​ 23,018 ​ ​ 18,640 Collateralized mortgage obligations ​ ​ 58,462 ​ ​ 48,840 Total held to maturity ​ $ 238,445 ​ $ 205,745 ​ ​ ​ ​ ​ 19 Table of Contents Note 4 – Loans and Related Allowance for Loan Losses The following table summarizes the primary segments of the loan portfolio at September 30, 2022 and December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Commercial Real Estate Acquisition and Development Commercial and Industrial Residential Mortgage Consumer Total September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ 2,223 ​ $ 369 ​ $ — ​ $ 2,376 ​ $ 45 ​ $ 5,013 Collectively evaluated for impairment ​ ​ 435,750 ​ ​ 82,738 ​ ​ 269,004 ​ ​ 424,717 ​ ​ 60,702 ​ ​ 1,272,911 Total loans ​ $ 437,973 ​ $ 83,107 ​ $ 269,004 ​ $ 427,093 ​ $ 60,747 ​ $ 1,277,924 December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ 2,365 ​ $ 629 ​ $ 90 ​ $ 2,644 ​ $ — ​ $ 5,728 Collectively evaluated for impairment ​ ​ 371,926 ​ ​ 127,448 ​ ​ 180,886 ​ ​ 402,042 ​ ​ 65,657 ​ ​ 1,147,959 Total loans ​ $ 374,291 ​ $ 128,077 ​ $ 180,976 ​ $ 404,686 ​ $ 65,657 ​ $ 1,153,687 ​ The commercial and industrial portfolio in the table above includes $ 0.4 million and $ 7.7 million of Paycheck Protection Program (“PPP”) loans at September 30, 2022 and December 31, 2021, respectively, which are 100 % guaranteed by the SBA, and no allowance for loan loss (“ALL”) has been assigned to them. The following table presents the classes of the loan portfolio summarized by the aggregate pass and the criticized categories of special mention and substandard within the internal risk rating system at September 30, 2022 and December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Pass Special Mention Substandard Total September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 223,907 ​ $ 6,371 ​ $ 12,114 ​ $ 242,392 All other CRE ​ ​ 188,707 ​ ​ 2,278 ​ ​ 4,596 ​ ​ 195,581 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 23,926 ​ ​ — ​ ​ — ​ ​ 23,926 All other A&D ​ ​ 59,029 ​ ​ — ​ ​ 152 ​ ​ 59,181 Commercial and industrial ​ ​ 244,883 ​ ​ 4,589 ​ ​ 19,532 ​ ​ 269,004 Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ 360,669 ​ ​ — ​ ​ 5,217 ​ ​ 365,886 Residential mortgage - home equity ​ ​ 60,561 ​ ​ — ​ ​ 646 ​ ​ 61,207 Consumer ​ ​ 60,557 ​ ​ — ​ ​ 190 ​ ​ 60,747 Total ​ $ 1,222,239 ​ $ 13,238 ​ $ 42,447 ​ $ 1,277,924 December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 173,299 ​ $ 12,987 ​ $ 6,077 ​ $ 192,363 All other CRE ​ ​ 174,395 ​ ​ 2,357 ​ ​ 5,176 ​ ​ 181,928 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 19,924 ​ ​ — ​ ​ — ​ ​ 19,924 All other A&D ​ ​ 107,532 ​ ​ 218 ​ ​ 403 ​ ​ 108,153 Commercial and industrial ​ ​ 161,429 ​ ​ 5,071 ​ ​ 14,476 ​ ​ 180,976 Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ 338,832 ​ ​ — ​ ​ 5,624 ​ ​ 344,456 Residential mortgage - home equity ​ ​ 59,533 ​ ​ — ​ ​ 697 ​ ​ 60,230 Consumer ​ ​ 65,557 ​ ​ — ​ ​ 100 ​ ​ 65,657 Total ​ $ 1,100,501 ​ $ 20,633 ​ $ 32,553 ​ $ 1,153,687 ​ 20 Table of Contents Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The increase of $ 9.9 million in the substandard category was related to one large relationship in the nursing care sector that was downgraded from special mention in the first quarter of 2022 and one large relationship in the airline sector that was added to the substandard portfolio in the third quarter of 2022. These relationships continue to perform according to their contractual terms and are not considered impaired. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans at September 30, 2022 and December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90 Days+ Past Due Total Past Due and Accruing Non- Accrual Total Loans September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 242,304 ​ $ — ​ $ — ​ $ 88 ​ $ 88 ​ $ — ​ $ 242,392 All other CRE ​ ​ 195,518 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 63 ​ ​ 195,581 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 23,926 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 23,926 All other A&D ​ ​ 58,945 ​ ​ 69 ​ ​ 15 ​ ​ — ​ ​ 84 ​ ​ 152 ​ ​ 59,181 Commercial and industrial ​ ​ 268,900 ​ ​ 104 ​ ​ — ​ ​ — ​ ​ 104 ​ ​ — ​ ​ 269,004 Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ 362,110 ​ ​ 29 ​ ​ 1,961 ​ ​ 429 ​ ​ 2,419 ​ ​ 1,357 ​ ​ 365,886 Residential mortgage - home equity ​ ​ 60,553 ​ ​ 233 ​ ​ 71 ​ ​ 23 ​ ​ 327 ​ ​ 327 ​ ​ 61,207 Consumer ​ ​ 60,325 ​ ​ 297 ​ ​ 52 ​ ​ 29 ​ ​ 378 ​ ​ 44 ​ ​ 60,747 Total ​ $ 1,272,581 ​ $ 732 ​ $ 2,099 ​ $ 569 ​ $ 3,400 ​ $ 1,943 ​ $ 1,277,924 December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 192,363 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 192,363 All other CRE ​ ​ 181,847 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 81 ​ ​ 181,928 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 19,924 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 19,924 All other A&D ​ ​ 107,763 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 390 ​ ​ 108,153 Commercial and industrial ​ ​ 180,676 ​ ​ 132 ​ ​ 78 ​ ​ — ​ ​ 210 ​ ​ 90 ​ ​ 180,976 Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ 340,429 ​ ​ 159 ​ ​ 2,222 ​ ​ 148 ​ ​ 2,529 ​ ​ 1,498 ​ ​ 344,456 Residential mortgage - home equity ​ ​ 59,485 ​ ​ 238 ​ ​ 104 ​ ​ — ​ ​ 342 ​ ​ 403 ​ ​ 60,230 Consumer ​ ​ 65,208 ​ ​ 268 ​ ​ 29 ​ ​ 152 ​ ​ 449 ​ ​ — ​ ​ 65,657 Total ​ $ 1,147,695 ​ $ 797 ​ $ 2,433 ​ $ 300 ​ $ 3,530 ​ $ 2,462 ​ $ 1,153,687 ​ Non-accrual loans that have been subject to partial charge-offs totaled $ 0.2 million at September 30, 2022 and $ 0.5 million at December 31, 2021. There were no loans secured by 1-4 family residential real estate properties in the process of foreclosure at September 30, 2022 compared to $ 0.2 million of such loans at December 31, 2021. As a percentage of the loan portfolio, accruing loans past due 30 days or more decreased to 0.27 % compared to 0.37 % at June 30, 2022 and 0.31 % as of December 31, 2021. 21 Table of Contents The following table summarizes the primary segments of the ALL at September 30, 2022 and December 31, 2021, segregated by the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Commercial Real Estate Acquisition and Development Commercial and Industrial Residential Mortgage Consumer Unallocated Total September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ — ​ $ — ​ $ — ​ $ 26 ​ $ 4 ​ $ — ​ $ 30 Collectively evaluated for impairment ​ $ 6,356 ​ $ 1,499 ​ $ 3,402 ​ $ 2,951 ​ $ 873 ​ $ 430 ​ $ 15,511 Total ALL ​ $ 6,356 ​ $ 1,499 ​ $ 3,402 ​ $ 2,977 ​ $ 877 ​ $ 430 ​ $ 15,541 December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ — ​ $ — ​ $ 28 ​ $ 36 ​ $ — ​ $ — ​ $ 64 Collectively evaluated for impairment ​ $ 6,032 ​ $ 2,615 ​ $ 2,432 ​ $ 3,448 ​ $ 934 ​ $ 430 ​ $ 15,891 Total ALL ​ $ 6,032 ​ $ 2,615 ​ $ 2,460 ​ $ 3,484 ​ $ 934 ​ $ 430 ​ $ 15,955 ​ The evaluation of the need and amount of a specific allocation of the ALL and whether a loan can be removed from impairment status is made on a quarterly basis. 22 Table of Contents The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not required at September 30, 2022 and December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired Loans with Specific Allowance ​ Impaired Loans with No Specific Allowance ​ Total Impaired Loans (in thousands) Recorded Investment Related Allowances Recorded Investment Recorded Investment (1) Unpaid Principal Balance September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ — ​ $ — ​ $ 102 ​ $ 102 ​ $ 102 All other CRE ​ ​ — ​ ​ — ​ ​ 2,121 ​ ​ 2,121 ​ ​ 2,121 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ — ​ ​ — ​ ​ 217 ​ ​ 217 ​ ​ 217 All other A&D ​ ​ — ​ ​ — ​ ​ 152 ​ ​ 152 ​ ​ 261 Commercial and industrial ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ ​ 264 ​ ​ 26 ​ ​ 1,786 ​ ​ 2,050 ​ ​ 2,091 Residential mortgage – home equity ​ ​ — ​ ​ — ​ ​ 326 ​ ​ 326 ​ ​ 326 Consumer ​ ​ 23 ​ ​ 4 ​ ​ 22 ​ ​ 45 ​ ​ 45 Total impaired loans ​ $ 287 ​ $ 30 ​ $ 4,726 ​ $ 5,013 ​ $ 5,163 December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ — ​ $ — ​ $ 106 ​ $ 106 ​ $ 106 All other CRE ​ ​ — ​ ​ — ​ ​ 2,259 ​ ​ 2,259 ​ ​ 2,259 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ — ​ ​ — ​ ​ 239 ​ ​ 239 ​ ​ 239 All other A&D ​ ​ — ​ ​ — ​ ​ 390 ​ ​ 390 ​ ​ 1,599 Commercial and industrial ​ ​ 90 ​ ​ 28 ​ ​ — ​ ​ 90 ​ ​ 2,304 Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ ​ 344 ​ ​ 31 ​ ​ 1,897 ​ ​ 2,241 ​ ​ 2,302 Residential mortgage – home equity ​ ​ 46 ​ ​ 5 ​ ​ 357 ​ ​ 403 ​ ​ 422 Consumer ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total impaired loans ​ $ 480 ​ $ 64 ​ $ 5,248 ​ $ 5,728 ​ $ 9,231 ​ (1) Recorded investment consists of unpaid principal balance, net of charge-offs, interest payments received applied to principal and unamortized deferred loan origination fees and cost. Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate. For general allowances, historical loss trends are used in the estimation of losses in the current portfolio. These historical loss amounts are modified by other qualitative factors. The classes described above, which are based on the Federal call code assigned to each loan, provide the starting point for the ALL analysis. Management tracks the historical net charge-off activity (full and partial charge-offs, net of full and partial recoveries) at the call code level. A historical charge-off factor is calculated utilizing a defined number of consecutive historical quarters. Consumer pools currently utilize a rolling twelve quarters, while Commercial pools currently utilize a rolling eight quarters. Management supplements the historical charge-off factor with a number of additional qualitative factors that are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience. The additional factors, which are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources, are: (a) national and local economic trends and conditions; (b) levels of and trends in delinquency rates and non-accrual loans; (c) trends in volumes and terms of loans; (d) effects of changes in lending policies; (e) experience, ability, and depth of lending staff; (f) value of underlying collateral; and (g) concentrations of credit from a loan type, industry and/or geographic standpoint. 23 Table of Contents Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process to make appropriate and timely adjustments to the ALL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL. Residential mortgage and consumer loans are charged off after they are 120 days contractually past due. All other loans are charged off based on an evaluation of the facts and circumstances of each individual loan. When the Bank believes that its ability to collect is solely dependent on the liquidation of the collateral, a full or partial charge-off is recorded promptly to bring the recorded investment to an amount that the Bank believes is supported by an ability to collect on the collateral. The circumstances that may impact the Bank’s decision to charge-off all or a portion of a loan include default or non-payment by the borrower, scheduled foreclosure actions, and/or prioritization of the Bank’s claim in bankruptcy. There may be circumstances where due to pending events, the Bank will place a specific allocation of the ALL on a loan for which a partial charge-off has been previously recognized. This specific allocation may be either charged-off or removed depending upon the outcome of the pending event. Full or partial charge-offs are not recovered until full principal and interest on the loan have been collected, even if a subsequent appraisal supports a higher value. In most cases, loans with partial charge-offs remain in non-accrual status. Both full and partial charge-offs reduce the recorded investment of the loan and the ALL and are considered to be charge-offs for purposes of all credit loss metrics and trends, including the historical rolling charge-off rates used in the determination of the ALL. ​ The following tables present the activity in the ALL for the nine and three month periods ended September 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended (in thousands) Commercial Real Estate Acquisition and Development Commercial and Industrial Residential Mortgage Consumer Unallocated Total ALL balance at January 1, 2022 ​ $ 6,032 ​ $ 2,615 ​ $ 2,460 ​ $ 3,484 ​ $ 934 ​ $ 430 ​ $ 15,955 Charge-offs ​ ​ — ​ ​ ( 20 ) ​ ​ ( 134 ) ​ ​ ( 34 ) ​ ​ ( 726 ) ​ ​ — ​ ​ ( 914 ) Recoveries ​ ​ 1 ​ ​ 21 ​ ​ 92 ​ ​ 172 ​ ​ 117 ​ ​ — ​ ​ 403 Provision ​ ​ 323 ​ ​ ( 1,117 ) ​ ​ 984 ​ ​ ( 645 ) ​ ​ 552 ​ ​ — ​ ​ 97 ALL balance at September 30, 2022 ​ $ 6,356 ​ $ 1,499 ​ $ 3,402 ​ $ 2,977 ​ $ 877 ​ $ 430 ​ $ 15,541 ALL balance at January 1, 2021 ​ $ 5,543 ​ $ 2,339 ​ $ 2,584 ​ $ 5,150 ​ $ 370 ​ $ 500 ​ $ 16,486 Charge-offs ​ ​ — ​ ​ ( 85 ) ​ ​ — ​ ​ ( 141 ) ​ ​ ( 266 ) ​ ​ — ​ ​ ( 492 ) Recoveries ​ ​ — ​ ​ 172 ​ ​ 511 ​ ​ 49 ​ ​ 112 ​ ​ — ​ ​ 844 Provision ​ ​ 1,183 ​ ​ 484 ​ ​ ( 695 ) ​ ​ ( 1,460 ) ​ ​ 626 ​ ​ ( 70 ) ​ ​ 68 ALL balance at September 30, 2021 ​ $ 6,726 ​ $ 2,910 ​ $ 2,400 ​ $ 3,598 ​ $ 842 ​ $ 430 ​ $ 16,906 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended (in thousands) ​ Commercial Real Estate ​ Acquisition and Development ​ Commercial and Industrial ​ Residential Mortgage ​ Consumer ​ Unallocated ​ Total ALL balance at July 1, 2022 ​ $ 6,220 ​ $ 2,172 ​ $ 2,830 ​ $ 3,112 ​ $ 973 ​ $ 430 ​ $ 15,737 Charge-offs ​ ​ — ​ ​ ( 20 ) ​ ​ ( 82 ) ​ ​ ( 1 ) ​ ​ ( 181 ) ​ ​ — ​ ​ ( 284 ) Recoveries ​ ​ — ​ ​ 1 ​ ​ 83 ​ ​ 71 ​ ​ 41 ​ ​ — ​ ​ 196 Provision ​ ​ 136 ​ ​ ( 654 ) ​ ​ 571 ​ ​ ( 205 ) ​ ​ 44 ​ ​ — ​ ​ ( 108 ) ALL balance at September 30, 2022 ​ $ 6,356 ​ $ 1,499 ​ $ 3,402 ​ $ 2,977 ​ $ 877 ​ $ 430 ​ $ 15,541 ALL balance at July 1, 2021 ​ $ 5,675 ​ $ 2,500 ​ $ 2,944 ​ $ 4,859 ​ $ 590 ​ $ 500 ​ $ 17,068 Charge-offs ​ ​ — ​ ​ ( 4 ) ​ ​ — ​ ​ ( 59 ) ​ ​ ( 91 ) ​ ​ — ​ ​ ( 154 ) Recoveries ​ ​ — ​ ​ 62 ​ ​ 473 ​ ​ 20 ​ ​ 34 ​ ​ — ​ ​ 589 Provision ​ ​ 1,051 ​ ​ 352 ​ ​ ( 1,017 ) ​ ​ ( 1,222 ) ​ ​ 309 ​ ​ ( 70 ) ​ ​ ( 597 ) ALL balance at September 30, 2021 ​ $ 6,726 ​ $ 2,910 ​ $ 2,400 ​ $ 3,598 ​ $ 842 ​ $ 430 ​ $ 16,906 ​ 24 Table of Contents The ALL is based on estimates, and actual losses may vary from current estimates. Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date. The following table presents the average recorded investment in impaired loans by class and related interest income recognized for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended ​ Nine months ended ​ ​ September 30, 2022 ​ September 30, 2021 (in thousands) Average investment Interest income recognized on an accrual basis Interest income recognized on a cash basis ​ Average investment Interest income recognized on an accrual basis Interest income recognized on a cash basis Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 104 ​ $ 9 ​ $ — ​ $ 3,518 ​ $ 9 ​ $ — All other CRE ​ ​ 2,189 ​ ​ 67 ​ ​ — ​ ​ 2,984 ​ ​ 95 ​ ​ — Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 228 ​ ​ 10 ​ ​ — ​ ​ 256 ​ ​ 9 ​ ​ — All other A&D ​ ​ 325 ​ ​ — ​ ​ — ​ ​ 599 ​ ​ 9 ​ ​ — Commercial and industrial ​ ​ 23 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ ​ 2,138 ​ ​ 36 ​ ​ 15 ​ ​ 2,642 ​ ​ 56 ​ ​ 5 Residential mortgage – home equity ​ ​ 364 ​ ​ — ​ ​ — ​ ​ 449 ​ ​ — ​ ​ — Consumer ​ ​ 19 ​ ​ — ​ ​ — ​ ​ 17 ​ ​ — ​ ​ — Total ​ $ 5,390 ​ $ 122 ​ $ 15 ​ $ 10,465 ​ $ 178 ​ $ 5 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Three months ended ​ ​ September 30, 2022 ​ September 30, 2021 (in thousands) ​ Average investment ​ Interest income recognized on an accrual basis ​ Interest income recognized on a cash basis ​ Average investment ​ Interest income recognized on an accrual basis ​ Interest income recognized on a cash basis Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 103 ​ $ 3 ​ $ — ​ $ 4,631 ​ $ 3 ​ $ — All other CRE ​ ​ 2,143 ​ ​ 22 ​ ​ — ​ ​ 2,787 ​ ​ 26 ​ ​ — Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 221 ​ ​ 3 ​ ​ — ​ ​ 249 ​ ​ 3 ​ ​ — All other A&D ​ ​ 264 ​ ​ — ​ ​ — ​ ​ 602 ​ ​ 3 ​ ​ — Commercial and industrial ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ ​ 2,049 ​ ​ 12 ​ ​ 10 ​ ​ 2,500 ​ ​ 17 ​ ​ — Residential mortgage – home equity ​ ​ 331 ​ ​ — ​ ​ — ​ ​ 451 ​ ​ — ​ ​ — Consumer ​ ​ 39 ​ ​ ​ ​ ​ — ​ ​ 9 ​ ​ — ​ ​ — Total ​ $ 5,150 ​ $ 40 ​ $ 10 ​ $ 11,229 ​ $ 52 ​ $ — ​ In the normal course of business, the Bank modifies loan terms for various reasons. These reasons may include as a retention strategy to compete in the current interest rate environment, and to re-amortize or extend a loan term to better match the loan’s payment stream with the borrower’s cash flows. A modified loan is considered to be a troubled debt restructuring (a “TDR”) when the Bank has determined that the borrower is troubled (i.e. experiencing financial difficulties) and a concession has been granted. The Bank evaluates the probability that the borrower will be in payment default on any of its debt in the foreseeable future without 25 Table of Contents modification. To make this determination, the Bank performs a global financial review of the borrower and loan guarantors to assess their current ability to meet their financial obligations. When the Bank restructures a loan to a troubled borrower, the loan terms (i.e. interest rate, payment, amortization period and/or maturity date) are modified in such a way to enable the borrower to cover the modified debt service payments based on current financials and cash flow adequacy. If a borrower’s hardship is thought to be temporary, then modified terms are only offered for that time period. Where possible, the Bank obtains additional collateral and/or secondary payment sources at the time of the restructure in order to put the Bank in the best possible position if the borrower is not able to meet the modified terms. To date, the Bank has not forgiven any principal as a restructuring concession. The Bank will not offer modified terms if it believes that modifying the loan terms will only delay an inevitable permanent default. All loans designated as TDRs are considered impaired loans and may be in either accruing or non-accruing status. If the loan was accruing at the time of the modification, then it continues to be in accruing status subsequent to the modification. Non-accrual TDRs may return to accruing status when there has been sufficient payment performance for a period of at least six months. TDRs are considered to be in payment default if, subsequent to modification, the loans are transferred to non-accrual status or to foreclosure. A loan may be removed from being reported as a TDR in the calendar year following the modification if the interest rate at the time of modification was consistent with the interest rate for a loan with comparable credit risk and the loan has performed according to its modified terms for at least six months. Further, a loan that has been removed from TDR reporting status and has been subsequently re-modified at standard market terms, may be removed from impaired status as well. The volume, type and performance of TDR activity is considered in the assessment of the local economic trend qualitative factor used in the determination of the ALL for loans that are evaluated collectively for impairment. There were 12 loans totaling $ 3.1 million and $ 3.3 million that were classified as TDRs at September 30, 2022 and December 31, 2021, respectively. During the nine month period ended September 30, 2022, there were no new TDRs and no existing TDRs that were re-modified. The Bank had no significant commitments to lend additional funds to TDRs. During the nine month period ended September 30, 2021, there were no new TDRs and three existing TDRs that had reached their modification maturity date and were re-modified. These modifications did not impact the ALL. During the nine month periods ended September 30, 2022 and 2021, there were no payment defaults. ​ The following table presents the volume and recorded investment in TDRs at the times they were modified, by class and type of modification that occurred during the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Temporary Rate Modification ​ Extension of Maturity ​ Modification of Payment and Other Terms (in thousands) ​ Number of Contracts ​ Recorded Investment ​ Number of Contracts ​ Recorded Investment ​ Number of Contracts ​ Recorded Investment Nine months ended September 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ — ​ $ — ​ 1 ​ $ 109 ​ — ​ $ — All other CRE ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — All other A&D ​ — ​ ​ — ​ 1 ​ ​ 202 ​ — ​ ​ — Commercial and industrial ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ — ​ ​ — ​ 1 ​ ​ 215 ​ — ​ ​ — Residential mortgage – home equity ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Consumer ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Total ​ — ​ $ — ​ 3 ​ $ 526 ​ — ​ $ — ​ 26 Table of Contents During the three month period ended September 30, 2022, there were no new TDRs and no existing TDRs that were re-modified. The Bank had no significant commitments to lend additional funds to TDR borrowers. During the three month period ended September 30, 2021, there were no new TDRs and two existing TDRs that had reached their modification maturity date were re-modified. These re-modifications did not impact the ALL. During the three months ended September 30, 2022 and 2021, there were no payment defaults under TDRs. ​ The following table presents the volume and recorded investment in TDRs at the times they were modified, by class and type of modification that occurred during the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Temporary Rate Modification ​ Extension of Maturity ​ Modification of Payment and Other Terms (in thousands) ​ Number of Contracts ​ Recorded Investment ​ Number of Contracts ​ Recorded Investment ​ Number of Contracts ​ Recorded Investment Three months ended September 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ — ​ $ — ​ — ​ $ — ​ — ​ $ — All other CRE ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — All other A&D ​ — ​ ​ — ​ 1 ​ ​ 202 ​ — ​ ​ — Commercial and industrial ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ — ​ ​ — ​ 1 ​ ​ 215 ​ — ​ ​ — Residential mortgage – home equity ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Consumer ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Total ​ — ​ $ — ​ 2 ​ $ 417 ​ — ​ $ — ​ ​ Note 5 - Other Real Estate Owned, net The following table presents the components of other real estate owned (“OREO”) at September 30, 2022 and December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) September 30, 2022 December 31, 2021 Acquisition and development ​ $ 4,670 ​ $ 4,477 Residential mortgage ​ ​ 63 ​ ​ — Total OREO, net ​ $ 4,733 ​ $ 4,477 ​ The following table presents the activity in the OREO valuation allowance for the nine and three month periods ended September 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ Three Months Ended ​ ​ September 30, ​ September 30, (in thousands) 2022 2021 ​ 2022 ​ 2021 Balance beginning of period ​ $ 453 ​ $ 1,010 ​ $ 453 ​ $ 543 Fair value adjustment ​ ​ — ​ ​ ( 160 ) ​ ​ — ​ ​ — Sales of OREO ​ ​ — ​ ​ ( 396 ) ​ ​ — ​ ​ ( 89 ) Balance at end of period ​ $ 453 ​ $ 454 ​ $ 453 ​ $ 454 ​ ​ 27 Table of Contents The following table presents the components of OREO (income)/expenses, net, for the nine and three month periods ended September 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ Three Months Ended ​ ​ September 30, ​ September 30, (in thousands) 2022 2021 ​ 2022 ​ 2021 Gains on sale of real estate, net ​ $ — ​ $ ( 594 ) ​ $ — ​ $ 2 Fair value adjustment, net ​ ​ — ​ ​ ( 160 ) ​ ​ — ​ ​ — Expenses, net ​ ​ 378 ​ ​ 345 ​ ​ 129 ​ ​ 150 Rental and other income ​ ​ ( 3 ) ​ ​ ( 51 ) ​ ​ ( 1 ) ​ ​ ( 2 ) Total OREO expenses/(income), net ​ $ 375 ​ $ ( 460 ) ​ $ 128 ​ $ 150 ​ ​ ​ Note 6 – Fair Value of Financial Instruments The Corporation complies with the guidance of ASC Topic 820, Fair Value Measurements and Disclosures , which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements required under other accounting pronouncements. The Corporation also follows the guidance on matters relating to all financial instruments found in ASC Subtopic 825-10, Financial Instruments – Overall . Fair value is defined as the price to sell an asset or to transfer a liability in an orderly transaction between willing market participants as of the measurement date. Fair value is best determined by values quoted through active trading markets. Active trading markets are characterized by numerous transactions of similar financial instruments between willing buyers and willing sellers. Because no active trading market exists for various types of financial instruments, many of the fair values disclosed were derived using present value discounted cash flows or other valuation techniques described below. As a result, the Corporation’s ability to actually realize these derived values cannot be assumed. The Corporation measures fair values based on the fair value hierarchy established in ASC Paragraph 820-10-35-37. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of inputs that may be used to measure fair value under the hierarchy are as follows: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets and liabilities. This level is the most reliable source of valuation. Level 2: Quoted prices that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability. Level 2 inputs include inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). It also includes inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs). Several sources are utilized for valuing these assets, including a contracted valuation service, Standard & Poor’s (“S&P”) evaluations and pricing services, and other valuation matrices. Level 3: Prices or valuation techniques that require inputs that are both significant to the valuation assumptions and not readily observable in the market (i.e. supported with little or no market activity). Level 3 instruments are valued based on the best available data, some of which is internally developed, and consider risk premiums that a market participant would require. The level established within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Transfers in and out of Level 1, 2 or 3 are recorded at fair value at the beginning of the reporting period. Investments – The investment portfolio is classified and accounted for based on the guidance of ASC Topic 320, Investments – Debt and Equity Securities . 28 Table of Contents The fair value of investments is determined using a market approach. As of September 30, 2022, the U.S. Government agencies and treasuries, residential and commercial mortgage-backed securities, collateralized mortgage obligations, and state and political subdivisions bonds, excluding the tax increment financing (“TIF”) bonds, were classified as Level 2 within the valuation hierarchy. Their fair values were determined based upon market-corroborated inputs and valuation matrices, which were obtained through third party data service providers or securities brokers through which the Corporation has historically transacted both purchases and sales of investment securities. The TIF bonds and collateralized debt obligation (“CDO”) portfolio, which consists of pooled trust preferred securities issued by banks, thrifts, and insurance companies, are classified as Level 3 within the valuation hierarchy. The CDO fair values are determined by a third party using a discounted cash flow model. Derivative financial instruments (Cash flow hedge) – The Corporation’s open derivative positions are interest rate swap agreements. Those classified as Level 2 open derivative positions are valued using externally developed pricing models based on observable market inputs provided by a third party and validated by management. The Corporation has considered counterparty credit risk in the valuation of its interest rate swap assets. Impaired loans – Loans included in the table below are those that are considered impaired with a specific allocation or with partial charge-offs, based upon the guidance of the loan impairment subsection of the Receivables Topic, ASC Section 310-10-35, under which the Corporation has measured impairment generally based on the fair value of the loan’s collateral. Fair value consists of the loan balance less its valuation allowance and is generally determined based on independent third-party appraisals of the collateral or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values based upon the lowest level of input that is significant to the fair value measurements. Equity Investment- Equity investments included in the table below are considered impaired with losses recognized on the income statement in net gains. Fair value of the equity investment was based on an independent third-party valuation report where the value was determined based on the revenue multiples of like kind information technology businesses. These assets are included as Level 3 fair values based upon the lowest level of input that is significant to the fair value measurements. Other real estate owned – OREO included in the table below are considered impaired with specific write-downs. Fair value of other real estate owned was based on independent third-party appraisals of the properties. These values were determined based on the sales prices of similar properties in the approximate geographic area. These assets are included as Level 3 fair values based upon the lowest level of input that is significant to the fair value measurements. 29 Table of Contents For assets measured at fair value on a recurring and non-recurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2022 and December 31, 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at September 30, 2022 Using ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ ​ Assets ​ Active Markets ​ Other ​ Significant ​ ​ Measured at ​ for Identical ​ Observable ​ Unobservable ​ ​ Fair Value ​ Assets ​ Inputs ​ Inputs (in thousands) 09/30/22 (Level 1) (Level 2) (Level 3) Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 9,447 ​ ​ ​ ​ $ 9,447 ​ ​ ​ Residential mortgage-backed agencies ​ $ 37,734 ​ ​ ​ ​ $ 37,734 ​ ​ ​ Commercial mortgage-backed agencies ​ $ 31,611 ​ ​ ​ ​ $ 31,611 ​ ​ ​ Collateralized mortgage obligations ​ $ 21,701 ​ ​ ​ ​ $ 21,701 ​ ​ ​ Obligations of states and political subdivisions ​ $ 10,744 ​ ​ ​ ​ $ 10,744 ​ ​ ​ Corporate bonds ​ $ 920 ​ ​ ​ ​ $ 920 ​ ​ ​ Collateralized debt obligations ​ $ 15,882 ​ ​ ​ ​ ​ ​ ​ $ 15,882 Financial derivatives ​ $ 1,171 ​ ​ ​ ​ $ 1,171 ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired loans, net ​ $ 128 ​ ​ ​ ​ ​ ​ ​ $ 128 Equity Investment ​ $ 1,052 ​ ​ ​ ​ ​ ​ ​ $ 1,052 Other real estate owned ​ $ — ​ ​ ​ ​ ​ ​ ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at December 31, 2021 Using ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ Assets/(liabilities) ​ Active Markets ​ Other ​ Significant ​ ​ Measured at ​ for Identical ​ Observable ​ Unobservable ​ ​ Fair Value ​ Assets ​ Inputs ​ Inputs (in thousands) 12/31/21 (Level 1) (Level 2) (Level 3) Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 67,169 ​ ​ ​ ​ $ 67,169 ​ ​ ​ Residential mortgage-backed agencies ​ $ 48,661 ​ ​ ​ ​ $ 48,661 ​ ​ ​ Commercial mortgage-backed agencies ​ $ 50,868 ​ ​ ​ ​ $ 50,868 ​ ​ ​ Collateralized mortgage obligations ​ $ 90,077 ​ ​ ​ ​ $ 90,077 ​ ​ ​ Obligations of states and political subdivisions ​ $ 12,804 ​ ​ ​ ​ $ 12,804 ​ ​ ​ Collateralized debt obligations ​ $ 17,192 ​ ​ ​ ​ ​ ​ ​ $ 17,192 Financial derivatives ​ $ ( 453 ) ​ ​ ​ ​ $ ( 453 ) ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired loans, net ​ $ 408 ​ ​ ​ ​ ​ ​ ​ $ 408 Equity investment ​ $ 590 ​ ​ ​ ​ ​ ​ ​ $ 590 Other real estate owned ​ $ 349 ​ ​ ​ ​ ​ ​ ​ $ 349 ​ At September 30, 2022, the fair value of impaired loans with a valuation allowance or partial charge-off was $ 0.5 million, net of valuation allowances of $ 29,781 and partial charge-offs of $ 0.1 million. During the nine months ended September 30, 2022, changes to the valuation allowance or additional charge off activity was recorded on loans with a net balance of approximately $ 0.1 million. At December 31, 2021, the fair value of impaired loans with a valuation allowance or charge-off was $ 1.0 million, net of valuation allowances of $ 64,700 and charge-offs of $ 1.3 million. During the year ended December 31, 2021, changes to the valuation allowance or additional charge off activity was recorded on loans with a net balance of approximately $ 0.4 million. ​ 30 Table of Contents There were no transfers of assets between any of the fair value hierarchy for the nine month periods ended September 30, 2022 or 2021. For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of September 30, 2022 and December 31, 2021, the significant unobservable inputs used in the fair value measurements were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Fair Value at September 30, 2022 Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment Securities – available for sale -CDO ​ $ 15,882 ​ Discounted Cash Flow ​ Discount Margin ​ Range of low to mid 300 and low to high 400 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired Loans, net ​ $ 128 ​ Market Comparable Properties ​ Marketability Discount ​ N/A ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity Investment ​ $ 1,052 ​ Market Method ​ Revenue Multiples ​ 2.8 x ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Fair Value at December 31, 2021 Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment Securities – available for sale -CDO ​ $ 17,192 ​ Discounted Cash Flow ​ Discount Rate ​ Libor + 3.25 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired Loans, net ​ $ 408 ​ Market Comparable Properties ​ Marketability Discount ​ 10.0% - 15.0% (1) (weighted avg 13.2 %) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity Investment ​ $ 590 ​ Market Method ​ Revenue Multiples ​ 2.8 x ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other Real Estate Owned ​ $ 349 ​ Market Comparable Properties ​ Marketability Discount ​ 15.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) Range would include discounts taken since appraisal and estimated values ​ ​ 31 Table of Contents The following tables show a reconciliation of the beginning and ending balances for fair valued assets measured on a recurring basis using Level 3 significant unobservable inputs for the nine and three month periods ended September 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ ​ Using Significant Unobservable Inputs ​ ​ (Level 3) ​ ​ Investment Securities (in thousands) Available for Sale Beginning balance January 1, 2022 ​ $ 17,192 Total losses realized/unrealized: ​ ​ ​ Included in other comprehensive loss ​ ​ ( 1,310 ) Ending balance September 30, 2022 ​ $ 15,882 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (in thousands) ​ Investment Securities Available for Sale Beginning balance July 1, 2022 ​ $ 16,258 Total gains realized/unrealized: ​ ​ ​ Included in other comprehensive income ​ ​ ( 376 ) Ending balance September 30, 2022 ​ $ 15,882 ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ ​ Using Significant Unobservable Inputs ​ ​ (Level 3) ​ ​ Investment Securities (in thousands) Available for Sale Beginning balance January 1, 2021 ​ $ 13,260 Total losses realized/unrealized: ​ ​ ​ Included in other comprehensive loss ​ ​ 3,832 Ending balance September 30, 2021 ​ $ 17,092 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (in thousands) ​ Investment Securities Available for Sale Beginning balance July 1, 2021 ​ $ 16,230 Total losses realized/unrealized: ​ ​ ​ Included in other comprehensive income ​ ​ 862 Ending balance September 30, 2021 ​ $ 17,092 ​ There were no gains or losses included in earnings attributable to the change in realized/unrealized gains or losses related to the assets for the nine and three month periods ended September 30, 2022 or 2021. The disclosed fair values may vary significantly between institutions based on the estimates and assumptions used in the various valuation methodologies. The derived fair values are subjective in nature and involve uncertainties and significant judgment. Therefore, they cannot be determined with precision. Changes in the assumptions could significantly impact the derived estimates of fair value. Disclosure of non-financial assets such as buildings, as well as certain financial instruments such as leases is not required. Accordingly, the aggregate fair values presented do not represent the underlying value of the Corporation. 32 Table of Contents The following tables present fair value information about financial instruments, whether or not recognized in the Consolidated Statement of Financial Condition, for which it is practicable to estimate that value. The actual carrying amounts and estimated fair values of the Corporation’s financial instruments that are included in the Consolidated Statement of Financial Condition are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ Fair Value Measurements ​ ​ ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ ​ ​ ​ ​ Active Markets ​ Other ​ Significant ​ ​ ​ ​ ​ ​ for Identical ​ Observable ​ Unobservable ​ ​ Carrying ​ Fair ​ Assets ​ Inputs ​ Inputs (in thousands) Amount Value (Level 1) (Level 2) (Level 3) Financial Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and due from banks ​ $ 28,888 ​ $ 28,888 ​ $ 28,888 ​ ​ ​ ​ ​ ​ Interest bearing deposits in banks ​ ​ 1,868 ​ ​ 1,868 ​ ​ 1,868 ​ ​ ​ ​ ​ ​ Investment securities - AFS ​ ​ 128,039 ​ ​ 128,039 ​ ​ ​ ​ $ 112,157 ​ $ 15,882 Investment securities - HTM ​ ​ 238,445 ​ ​ 205,745 ​ ​ ​ ​ ​ 185,484 ​ ​ 20,261 Restricted bank stock ​ ​ 1,027 ​ ​ N/A ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans, net ​ ​ 1,262,173 ​ ​ 1,186,783 ​ ​ ​ ​ ​ ​ ​ ​ 1,186,783 Financial derivatives ​ ​ 1,171 ​ ​ 1,171 ​ ​ ​ ​ ​ 1,171 ​ ​ ​ Accrued interest receivable ​ ​ 5,157 ​ ​ 5,157 ​ ​ ​ ​ ​ 751 ​ ​ 4,406 Financial Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposits - non-maturity ​ ​ 1,386,816 ​ ​ 1,386,816 ​ ​ ​ ​ ​ 1,386,816 ​ ​ ​ Deposits - time deposits ​ ​ 124,302 ​ ​ 124,217 ​ ​ ​ ​ ​ 124,217 ​ ​ ​ Short-term borrowed funds ​ ​ 89,726 ​ ​ 89,726 ​ ​ ​ ​ ​ 89,726 ​ ​ ​ Long-term borrowed funds ​ ​ 30,929 ​ ​ 30,928 ​ ​ ​ ​ ​ 30,928 ​ ​ ​ Accrued interest payable ​ ​ 104 ​ ​ 104 ​ ​ ​ ​ ​ 104 ​ ​ ​ Off balance sheet financial instruments ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ Fair Value Measurements ​ ​ ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ ​ ​ ​ ​ Active Markets ​ Other ​ Significant ​ ​ ​ ​ ​ ​ for Identical ​ Observable ​ Unobservable ​ ​ Carrying ​ Fair ​ Assets ​ Inputs ​ Inputs (in thousands) Amount Value (Level 1) (Level 2) (Level 3) Financial Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and due from banks ​ $ 109,823 ​ $ 109,823 ​ $ 109,823 ​ ​ ​ ​ ​ ​ Interest bearing deposits in banks ​ ​ 5,897 ​ ​ 5,897 ​ ​ 5,897 ​ ​ ​ ​ ​ ​ Investment securities - AFS ​ ​ 286,771 ​ ​ 286,771 ​ ​ ​ ​ $ 269,579 ​ $ 17,192 Investment securities - HTM ​ ​ 56,259 ​ ​ 65,369 ​ ​ ​ ​ ​ 36,448 ​ ​ 28,921 Restricted bank stock ​ ​ 1,029 ​ ​ 1,029 ​ ​ ​ ​ ​ 1,029 ​ ​ ​ Loan held for sale ​ ​ 67 ​ ​ 67 ​ ​ ​ ​ ​ ​ ​ ​ 67 Loans, net ​ ​ 1,137,440 ​ ​ 1,122,671 ​ ​ ​ ​ ​ ​ ​ ​ 1,122,671 Accrued interest receivable ​ ​ 4,821 ​ ​ 4,821 ​ ​ ​ ​ ​ 4,821 ​ ​ ​ Financial Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposits - non-maturity ​ ​ 1,306,145 ​ ​ 1,306,145 ​ ​ ​ ​ ​ 1,306,145 ​ ​ ​ Deposits - time deposits ​ ​ 163,229 ​ ​ 163,961 ​ ​ ​ ​ ​ 163,961 ​ ​ ​ Financial derivatives ​ ​ 453 ​ ​ 453 ​ ​ ​ ​ ​ 453 ​ ​ ​ Short-term borrowed funds ​ ​ 57,699 ​ ​ 57,699 ​ ​ ​ ​ ​ 57,699 ​ ​ ​ Long-term borrowed funds ​ ​ 30,929 ​ ​ 31,085 ​ ​ ​ ​ ​ 31,085 ​ ​ ​ Accrued interest payable ​ ​ 137 ​ ​ 137 ​ ​ ​ ​ ​ 137 ​ ​ ​ ​ ​ ​ 33 Table of Contents Note 7 – Accumulated Other Comprehensive Loss The following table presents the changes in each component of accumulated other comprehensive loss for the 12 months ended December 31, 2021 and the three month periods ended March 31, 2022, June 30, 2022 and September 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment ​ Investment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ securities- ​ securities- ​ Investment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ with OTTI ​ all other ​ securities- ​ Cash Flow ​ Pension ​ ​ ​ ​ (in thousands) AFS AFS HTM Hedge Plan SERP Total Accumulated OCL, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance - January 1, 2021 ​ $ ( 3,277 ) ​ $ ( 25 ) ​ $ ( 315 ) ​ $ ( 954 ) ​ $ ( 22,630 ) ​ $ ( 1,662 ) ​ $ ( 28,863 ) Other comprehensive income/(loss) before reclassifications ​ ​ 2,475 ​ ​ ( 5,611 ) ​ ​ — ​ ​ 635 ​ ​ 3,431 ​ ​ ( 521 ) ​ ​ 409 Amounts reclassified from accumulated other comprehensive loss ​ ​ ( 147 ) ​ ​ ( 113 ) ​ ​ 181 ​ ​ — ​ ​ 1,091 ​ ​ 128 ​ ​ 1,140 Balance - December 31, 2021 ​ $ ( 949 ) ​ $ ( 5,749 ) ​ $ ( 134 ) ​ $ ( 319 ) ​ $ ( 18,108 ) ​ $ ( 2,055 ) ​ $ ( 27,314 ) Other comprehensive income/(loss) before reclassifications ​ ​ 103 ​ ​ ( 1,843 ) ​ ​ ( 6,100 ) ​ ​ 614 ​ ​ ( 2,651 ) ​ ​ — ​ ​ ( 9,877 ) Amounts reclassified from accumulated other comprehensive loss ​ ​ ( 37 ) ​ ​ ( 2 ) ​ ​ 69 ​ ​ — ​ ​ 204 ​ ​ 50 ​ ​ 284 Balance - March 31, 2022 ​ $ ( 883 ) ​ $ ( 7,594 ) ​ $ ( 6,165 ) ​ $ 295 ​ $ ( 20,555 ) ​ $ ( 2,005 ) ​ $ ( 36,907 ) Other comprehensive income/(loss) before reclassifications ​ ​ ( 582 ) ​ ​ ( 3,924 ) ​ ​ — ​ ​ 182 ​ ​ ( 5,069 ) ​ ​ — ​ ​ ( 9,393 ) Amounts reclassified from accumulated other comprehensive loss ​ ​ ( 37 ) ​ ​ — ​ ​ 168 ​ ​ — ​ ​ 204 ​ ​ 49 ​ ​ 384 Balance - June 30, 2022 ​ $ ( 1,502 ) ​ $ ( 11,518 ) ​ $ ( 5,997 ) ​ $ 477 ​ $ ( 25,420 ) ​ $ ( 1,956 ) ​ $ ( 45,916 ) Other comprehensive income/(loss) before reclassifications ​ ​ ( 146 ) ​ ​ ( 4,957 ) ​ ​ — ​ ​ 392 ​ ​ ( 2,592 ) ​ ​ — ​ ​ ( 7,303 ) Amounts reclassified from accumulated other comprehensive loss ​ ​ ( 37 ) ​ ​ — ​ ​ 167 ​ ​ — ​ ​ 205 ​ ​ 50 ​ ​ 385 Balance - September 30, 2022 ​ $ ( 1,685 ) ​ $ ( 16,475 ) ​ $ ( 5,830 ) ​ $ 869 ​ $ ( 27,807 ) ​ $ ( 1,906 ) ​ $ ( 52,834 ) ​ 34 Table of Contents The following tables present the components of other comprehensive income/(loss) for the nine and three month periods ended September 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Before ​ Tax ​ ​ Components of Other Comprehensive Loss ​ Tax ​ (Expense) ​ ​ (in thousands) Amount Benefit Net For the nine months ended September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ $ ( 853 ) ​ $ 228 ​ $ ( 625 ) Less: accretable yield recognized in income ​ ​ 152 ​ ​ ( 41 ) ​ ​ 111 Net unrealized losses on investments with OTTI ​ ​ ( 1,005 ) ​ ​ 269 ​ ​ ( 736 ) Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ ​ ( 22,971 ) ​ ​ 6,147 ​ ​ ( 16,824 ) Unrealized holding losses on securities transferred from available for sale to held to maturity ​ ​ 8,328 ​ ​ ( 2,228 ) ​ ​ 6,100 Less: gains recognized in income ​ ​ 3 ​ ​ ( 1 ) ​ ​ 2 Net unrealized losses on all other AFS securities ​ ​ ( 14,646 ) ​ ​ 3,920 ​ ​ ( 10,726 ) Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses on securities transferred to held to maturity ​ ​ ( 8,328 ) ​ ​ 2,228 ​ ​ ( 6,100 ) Less: gains recognized in income ​ ​ 93 ​ ​ ( 25 ) ​ ​ 68 Less: amortization recognized in income ​ ​ ( 644 ) ​ ​ 172 ​ ​ ( 472 ) Net unrealized losses on HTM securities ​ ​ ( 7,777 ) ​ ​ 2,081 ​ ​ ( 5,696 ) Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 1,622 ​ ​ ( 434 ) ​ ​ 1,188 Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ ( 14,079 ) ​ ​ 3,767 ​ ​ ( 10,312 ) Less: amortization of unrecognized loss ​ ​ ( 837 ) ​ ​ 224 ​ ​ ( 613 ) Net pension plan liability adjustment ​ ​ ( 13,242 ) ​ ​ 3,543 ​ ​ ( 9,699 ) SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ — ​ ​ — ​ ​ — Less: amortization of unrecognized loss ​ ​ ( 203 ) ​ ​ 54 ​ ​ ( 149 ) Net SERP liability adjustment ​ ​ 203 ​ ​ ( 54 ) ​ ​ 149 Other comprehensive loss ​ $ ( 34,845 ) ​ $ 9,325 ​ $ ( 25,520 ) ​ ​ ​ 35 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Before ​ Tax ​ ​ Components of Other Comprehensive Income ​ Tax ​ (Expense) ​ ​ (in thousands) Amount Benefit Net For the nine months ended September 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ $ 3,274 ​ $ ( 877 ) ​ $ 2,397 Less: accretable yield recognized in income ​ ​ 151 ​ ​ ( 40 ) ​ ​ 111 Net unrealized gains on investments with OTTI ​ ​ 3,123 ​ ​ ( 837 ) ​ ​ 2,286 Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ ​ ( 5,035 ) ​ ​ 1,349 ​ ​ ( 3,686 ) Less: gains recognized in income ​ ​ 154 ​ ​ ( 41 ) ​ ​ 113 Net unrealized losses on all other AFS securities ​ ​ ( 5,189 ) ​ ​ 1,390 ​ ​ ( 3,799 ) Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ — ​ ​ — ​ ​ — Less: gains recognized in income ​ ​ ( 54 ) ​ ​ 14 ​ ​ ( 40 ) Less: amortization recognized in income ​ ​ ( 96 ) ​ ​ 26 ​ ​ ( 70 ) Net unrealized gains on HTM securities ​ ​ 150 ​ ​ ( 40 ) ​ ​ 110 Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 615 ​ ​ ( 165 ) ​ ​ 450 Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial gain ​ ​ 139 ​ ​ ( 37 ) ​ ​ 102 Less: amortization of unrecognized loss ​ ​ ( 1,116 ) ​ ​ 299 ​ ​ ( 817 ) Net pension plan liability adjustment ​ ​ 1,255 ​ ​ ( 336 ) ​ ​ 919 SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ — ​ ​ — ​ ​ — Less: amortization of unrecognized loss ​ ​ ( 226 ) ​ ​ 60 ​ ​ ( 166 ) Less: amortization of prior service costs ​ ​ 1 ​ ​ — ​ ​ 1 Net SERP liability adjustment ​ ​ 225 ​ ​ ( 60 ) ​ ​ 165 Other comprehensive income ​ $ 179 ​ $ ( 48 ) ​ $ 131 ​ ​ 36 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Components of Other Comprehensive Loss (in thousands) ​ Before Tax Amount ​ Tax (Expense) Benefit ​ Net For the three months ended September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ $ ( 199 ) ​ $ 53 ​ $ ( 146 ) Less: accretable yield recognized in income ​ ​ 51 ​ ​ ( 14 ) ​ ​ 37 Net unrealized losses on investments with OTTI ​ ​ ( 250 ) ​ ​ 67 ​ ​ ( 183 ) Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ ​ ( 6,768 ) ​ ​ 1,811 ​ ​ ( 4,957 ) Less: gains recognized in income ​ ​ — ​ ​ — ​ ​ — Net unrealized losses on all other AFS securities ​ ​ ( 6,768 ) ​ ​ 1,811 ​ ​ ( 4,957 ) Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ — ​ ​ — ​ ​ — Less: gains recognized in income ​ ​ 93 ​ ​ ( 25 ) ​ ​ 68 Less: amortization recognized in income ​ ​ ( 320 ) ​ ​ 85 ​ ​ ( 235 ) Net unrealized gains on HTM securities ​ ​ 227 ​ ​ ( 60 ) ​ ​ 167 Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 534 ​ ​ ( 142 ) ​ ​ 392 Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ ( 3,537 ) ​ ​ 945 ​ ​ ( 2,592 ) Less: amortization of unrecognized loss ​ ​ ( 279 ) ​ ​ 74 ​ ​ ( 205 ) Net pension plan liability adjustment ​ ​ ( 3,258 ) ​ ​ 871 ​ ​ ( 2,387 ) SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ — ​ ​ — ​ ​ — Less: amortization of unrecognized loss ​ ​ ( 68 ) ​ ​ 18 ​ ​ ( 50 ) Net SERP liability adjustment ​ ​ 68 ​ ​ ( 18 ) ​ ​ 50 Other comprehensive loss ​ $ ( 9,447 ) ​ $ 2,529 ​ $ ( 6,918 ) ​ ​ 37 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Components of Other Comprehensive Loss (in thousands) ​ Before Tax Amount ​ Tax (Expense) Benefit ​ Net For the three months ended September 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ $ 751 ​ $ ( 201 ) ​ $ 550 Less: accretable yield recognized in income ​ ​ 50 ​ ​ ( 13 ) ​ ​ 37 Net unrealized gains on investments with OTTI ​ ​ 701 ​ ​ ( 188 ) ​ ​ 513 Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ ​ ( 708 ) ​ ​ 190 ​ ​ ( 518 ) Less: gains recognized in income ​ ​ — ​ ​ — ​ ​ — Net unrealized losses on all other AFS securities ​ ​ ( 708 ) ​ ​ 190 ​ ​ ( 518 ) Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ — ​ ​ — ​ ​ — Less: gains recognized in income ​ ​ ( 54 ) ​ ​ 14 ​ ​ ( 40 ) Less: amortization recognized in income ​ ​ 12 ​ ​ ( 3 ) ​ ​ 9 Net unrealized gains on HTM securities ​ ​ 42 ​ ​ ( 11 ) ​ ​ 31 Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 108 ​ ​ ( 29 ) ​ ​ 79 Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ ( 951 ) ​ ​ 254 ​ ​ ( 697 ) Less: amortization of unrecognized loss ​ ​ ( 372 ) ​ ​ 99 ​ ​ ( 273 ) Less: amortization of prior service costs ​ ​ — ​ ​ — ​ ​ — Net pension plan liability adjustment ​ ​ ( 579 ) ​ ​ 155 ​ ​ ( 424 ) SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ — ​ ​ — ​ ​ — Less: amortization of unrecognized loss ​ ​ ( 76 ) ​ ​ 20 ​ ​ ( 56 ) Less: amortization of prior service costs ​ ​ 1 ​ ​ — ​ ​ 1 Net SERP liability adjustment ​ ​ 75 ​ ​ ( 20 ) ​ ​ 55 Other comprehensive loss ​ $ ( 361 ) ​ $ 97 ​ $ ( 264 ) ​ ​ 38 Table of Contents The following table presents the details of amounts reclassified from accumulated other comprehensive loss for the nine and three month periods ended September 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ Amounts Reclassified from ​ Nine Months Ended ​ ​ Accumulated Other Comprehensive Loss ​ September 30, ​ Affected Line Item in the Statement (in thousands) 2022 2021 Where Net Income is Presented Net unrealized gains on available for sale investment securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ Accretable yield ​ $ 152 ​ $ 151 ​ Interest income on taxable investment securities Taxes ​ ​ ( 41 ) ​ ​ ( 40 ) ​ Provision for income tax expense ​ ​ $ 111 ​ $ 111 ​ Net of tax Net unrealized gains on available for sale investment securities - all others: ​ ​ ​ ​ ​ ​ ​ ​ Gains recognized ​ $ 3 ​ $ 154 ​ Net gains Taxes ​ ​ ( 1 ) ​ ​ ( 41 ) ​ Provision for income tax expense ​ ​ $ 2 ​ $ 113 ​ Net of tax Net unrealized losses on held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ Amortization ​ $ ( 644 ) ​ $ ( 96 ) ​ Interest income on taxable investment securities Gains/(losses) recognized ​ ​ 93 ​ ​ ( 54 ) ​ Net gains/(losses) Taxes ​ ​ 147 ​ ​ 40 ​ Provision for income tax expense ​ ​ $ ( 404 ) ​ $ ( 110 ) ​ Net of tax Net pension plan liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized loss ​ $ ( 837 ) ​ $ ( 1,116 ) ​ Other Expense Taxes ​ ​ 224 ​ ​ 299 ​ Provision for income tax expense ​ ​ $ ( 613 ) ​ $ ( 817 ) ​ Net of tax Net SERP liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized loss ​ $ ( 203 ) ​ $ ( 226 ) ​ Other Expense Amortization of prior service costs ​ ​ — ​ ​ 1 ​ Salaries and employee benefits Taxes ​ ​ 54 ​ ​ 60 ​ Provision for income tax expense ​ ​ $ ( 149 ) ​ $ ( 165 ) ​ Net of tax Total reclassifications for the period ​ $ ( 1,053 ) ​ $ ( 868 ) ​ Net of tax ​ ​ ​ ​ ​ ​ ​ 39 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amounts Reclassified from ​ Three Months Ended ​ ​ Accumulated Other Comprehensive Loss ​ September 30, ​ Affected Line Item in the Statement (in thousands) ​ 2022 ​ 2021 ​ Where Net Income is Presented Net unrealized gains on available for sale investment securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ Accretable Yield ​ $ 51 ​ $ 50 ​ Interest income on taxable investment securities Taxes ​ ​ ( 14 ) ​ ​ ( 13 ) ​ Provision for income tax expense ​ ​ $ 37 ​ $ 37 ​ Net of tax Net unrealized losses on held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ Amortization ​ $ ( 320 ) ​ $ 12 ​ Interest income on taxable investment securities Gains/(losses) recognized ​ ​ 93 ​ ​ ( 54 ) ​ Net gains/(losses) Taxes ​ ​ 60 ​ ​ 11 ​ Provision for income tax expense ​ ​ $ ( 167 ) ​ $ ( 31 ) ​ Net of tax Net pension plan liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized loss ​ $ ( 279 ) ​ $ ( 372 ) ​ Other expense Amortization of prior service costs ​ ​ — ​ ​ — ​ Salaries and employee benefits Taxes ​ ​ 74 ​ ​ 99 ​ Provision for income tax expense ​ ​ $ ( 205 ) ​ $ ( 273 ) ​ Net of tax Net SERP liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized loss ​ $ ( 68 ) ​ $ ( 76 ) ​ Other expense Amortization of prior service costs ​ ​ — ​ ​ 1 ​ Salaries and employee benefits Taxes ​ ​ 18 ​ ​ 20 ​ Provision for income tax expense ​ ​ $ ( 50 ) ​ $ ( 55 ) ​ Net of tax Total reclassifications for the period ​ $ ( 385 ) ​ $ ( 322 ) ​ Net of tax ​ ​ ​ ​ ​ Note 8 – Employee Benefit Plans The following tables present the components of the net periodic pension plan cost for First United Corporation’s noncontributory Defined Benefit Pension Plan (the “Pension Plan”) and the Bank’s Defined Benefit Supplemental Executive Retirement Plan (“Defined Benefit SERP”) for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ Three Months Ended Pension Plan ​ September 30, ​ September 30, (in thousands) 2022 2021 2022 2021 Service cost ​ $ 42 ​ $ 117 ​ $ 14 ​ $ 39 Interest cost ​ ​ 1,152 ​ ​ 1,066 ​ ​ 384 ​ ​ 355 Expected return on assets ​ ​ ( 2,858 ) ​ ​ ( 2,677 ) ​ ​ ( 953 ) ​ ​ ( 892 ) Amortization of net actuarial loss ​ ​ 837 ​ ​ 1,116 ​ ​ 279 ​ ​ 372 Net pension credit included in employee benefits and other expense ​ $ ( 827 ) ​ $ ( 378 ) ​ $ ( 276 ) ​ $ ( 126 ) ​ The market value of the pension plan decreased $ 12.5 million during the first nine months of 2022. This decrease was due to the increasing rate environment and market volatility, which resulted in a pension plan liability of $ 7.7 million at September 30, 2022 compared to a pension plan asset of $ 4.8 million at December 31, 2021. ​ 40 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ Three Months Ended Defined Benefit SERP ​ September 30, ​ September 30, (in thousands) 2022 2021 2022 2021 Service cost ​ $ 124 ​ $ 104 ​ $ 41 ​ $ 35 Interest cost ​ ​ 215 ​ ​ 179 ​ ​ 72 ​ ​ 60 Amortization of recognized loss ​ ​ 203 ​ ​ 226 ​ ​ 68 ​ ​ 75 Amortization of prior service cost ​ ​ — ​ ​ ( 1 ) ​ ​ — ​ ​ — Net Defined Benefit SERP expense included in employee benefits and other expense ​ $ 542 ​ $ 508 ​ $ 181 ​ $ 170 ​ The service cost component of net periodic benefit cost is included in salaries and benefits and all other components of net periodic benefit cost are included in other expense in the Consolidated Statement of Operations for the Pension Plan and the Defined Benefit SERP. The Pension Plan is a noncontributory defined benefit pension plan that covers our employees who were hired prior to the freeze and others who were grandfathered into the plan. The benefits are based on years of service and the employees’ compensation during the last five years of employment. Effective April 30, 2010, the Pension Plan was amended, resulting in a “soft freeze”, the effect of which prohibits new entrants into the plan and ceases crediting of additional years of service after that date. Effective January 1, 2013, the Pension Plan was amended to unfreeze it for those employees for whom the sum of their (a) ages, at their closest birthday plus (b) years of service for vesting purposes equals 80 or greater. The “soft freeze” continues to apply to all other plan participants. Pension benefits for these participants are managed through discretionary contributions to the First United Corporation 401(k) Profit Sharing Plan (the “401(k) Plan”). The Bank established the Defined Benefit SERP in 2001 as an unfunded supplemental executive retirement plan. The Defined Benefit SERP is available only to a select group of management or highly compensated employees to provide supplemental retirement benefits in excess of limits imposed on qualified plans by federal tax law. Concurrent with the establishment of the Defined Benefit SERP, the Bank acquired Bank Owned Life Insurance (“BOLI”) policies on the senior management personnel and officers of the Bank. The benefits resulting from the favorable tax treatment accorded the earnings on the BOLI policies are intended to provide a source of funds for the future payment of the Defined Benefit SERP benefits as well as other employee benefit costs. The benefit obligation activity for both the Pension Plan and the Defined Benefit SERP was calculated using an actuarial measurement date of January 1. Plan assets and the benefit obligations were calculated using an actuarial measurement date of December 31. The Corporation will assess the need for future annual contributions to the pension plan based upon its funded status and an evaluation of the future benefits to be provided thereunder. No contributions were made to the Pension Plan during the first nine months of 2022 or 2021. The Corporation expects to fund the annual projected benefit payments for the Defined Benefit SERP from operations. On January 9, 2015, First United Corporation and members of management who do not participate in the Defined Benefit SERP entered into participation agreements under the Deferred Compensation Plan, each styled as a Defined Contribution SERP Agreement (the “Contribution Agreement”). Pursuant to each Contribution Agreement, First United Corporation agreed, for each Plan Year (as defined in the Deferred Compensation Plan) in which it determines that it has been Profitable (as defined in the Contribution Agreement), to make a discretionary contribution to the participant’s Employer Account in an amount equal to 15 % of the participant’s base salary level for such Plan Year, with the first Plan Year being the year ending December 31, 2015. The Contribution Agreement provides that the participant will become 100% vested in the amount maintained in his or her Employer Account upon the earliest to occur of the following events: (a) Normal Retirement (as defined in the Contribution Agreement); (b) Separation from Service (as defined in the Contribution Agreement) following a Change of Control (as defined in the Deferred Compensation Plan) and subsequent Triggering Event (as defined in the Contribution Agreement); (c) Separation from Service due to a Disability (as defined in the Contribution Agreement); (d) with respect to a particular award of Employer Contribution Credits, the participant’s completion of 2 consecutive Years of Service (as defined in the Contribution Agreement) immediately following the Plan Year for which such award was made; or (e) death. Notwithstanding the foregoing, however, a participant will 41 Table of Contents lose entitlement to the amount maintained in his or her Employer Account in the event employment is terminated for Cause (as defined in the Contribution Agreement). In addition, the Contribution Agreement conditions entitlement to the amounts held in the Employer Account on the participant (1) refraining from engaging in Competitive Employment (as defined in the Contribution Agreement) for three years following his or her Separation from Service, (2) refraining from injurious disclosure of confidential information concerning the Corporation, and (3) remaining available, at the First United Corporation’s reasonable request, to provide at least six hours of transition services per month for 12 months following his or her Separation from Service (except in the case of death or Disability), except that only item (2) will apply in the event of a Separation from Service following a Change of Control and subsequent Triggering Event. In January 2021, the Board of Directors approved discretionary contributions to three participants totaling $ 101,257 . The Corporation recorded $ 37,971 of related compensation expense for the first nine months of 2022 and 2021 related to these contributions. The Corporation recorded $ 12,657 of related compensation expense for the third quarter of 2022 and 2021 related to these contributions. In January 2022, the Board of Directors approved discretionary contributions to three participants totaling $ 103,689 . The Corporation recorded $ 38,883 of related compensation expense for the first nine months of 2022 and $ 12,961 of related compensation expense for the third quarter of 2022 related to these contributions. Each discretionary contribution has a two year vesting period. Note 9 - Equity Compensation Plan Information At the 2018 Annual Meeting of Shareholders, First United Corporation’s shareholders approved the First United Corporation 2018 Equity Compensation Plan (the “Equity Plan”) which authorizes the issuance of up to 325,000 shares of common stock to employees, directors and qualifying consultants pursuant to stock options, stock appreciation rights, stock awards, dividend equivalents, and other stock-based awards. The Corporation complies with the provisions of ASC Topic 718, Compensation - Stock Compensation , in measuring and disclosing stock compensation cost. The measurement objective in ASC Paragraph 718-10-30-6 requires public companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The cost is recognized in expense over the period in which an employee is required to provide service in exchange for the award (the vesting period). Pursuant to First United Corporation’s director compensation policy, each director receives an annual retainer of 1,000 shares of First United Corporation common stock, plus $ 10,000 to be paid, at the director’s election, in cash or additional shares of common stock. In January 2021, a total of 1,202 fully vested shares were issued to two new directors, which had a grant date fair market value of $ 16.66 per share. In May 2021, a total of 12,726 fully vested shares of common stock were issued to directors, which had a grant date fair value of $ 18.50 per share. In May 2022, a total of 14,940 fully vested shares of common stock were issued to directors, which had a grant date fair value of $ 18.92 per share. Director stock compensation expense was $ 196,254 for the nine months ended September 30, 2022 and $ 191,717 for the nine months ended September 30, 2021. Director stock compensation expense was $ 70,666 for the third quarter of 2022 and $ 58,857 for the third quarter of 2021. Restricted Stock Units On March 26, 2020, pursuant to the Corporation’s Long Term Incentive Plan (the "LTIP"), which is a sub-plan of the Equity Plan, the Compensation Committee of First United Corporation’s Board of Directors (the "Committee") granted RSUs to the Corporation’s principal executive officer, its principal financial officer, and certain of its other executive officers. An RSU contemplates the issuance of shares of common stock of First United Corporation if and when the RSU vests. The RSUs granted to each of the foregoing officers consist of (a) a performance vesting award for a three year performance period and (b) a time-vesting award that will vest ratably over a three year period. Target performance levels were set based on the annual budget which supports the Corporation’s long-term objective of achieving high performance as compared to peers. Threshold performance is the minimum level of acceptable performance as defined by the Committee and maximum performance represented a level potentially achievable under ideal circumstances. Achievement of the threshold performance level would result in each executive participant earning a payout at 50 % of his or her respective target award opportunity. Achievement of the target performance level would result in the executive participant earning the target award and achievement at or above the maximum performance level would result in the executive participant earning 150 % of the target opportunity. Actual results for any goal that 42 Table of Contents falls between performance levels would be interpolated to calculate a proportionate award. For the performance period ending December 31, 2021, the RSUs’ performance goal is based on earnings per share for the year ending December 31, 2021. For the performance period ending December 31, 2022, the RSUs performance goals are based on earnings per share for the year ending December 31, 2022 and growth in tangible book value per share during the performance period. For the performance period ending December 31, 2023, the RSUs performance goals are based on earnings per share for the year ending December 31, 2023 and growth in tangible book value per share during the performance period. To receive any shares under an RSU, a grantee must be employed by the Corporation or one of its subsidiaries on the applicable vesting date, except that a grantee whose employment terminates prior to such vesting date due to death, disability or retirement will be entitled to a pro-rated portion of the shares subject to the RSUs, assuming that, in the case of performance-vesting RSUs, the performance goals had been met at their "target" levels. In the first quarter of 2020, RSUs were granted relating to 9,791 performance vesting shares (target level) for 2019 LTIP plan for the performance period ending December 31, 2021 and 10,143 performance vesting shares and 5,070 time vesting shares (target level) for 2020 LTIP plan for the performance period ending December 31, 2022, which had a grant date fair market value of $ 12.54 per share of common stock underlying each RSU. The 2020 plan has a performance period for the performance-vesting RSUs of three years ending December 31, 2022 and the time-vesting RSUs will vest ratably over a three year period that began on March 26, 2021. On March 26, 2021, 1,690 of the 5,070 time vesting shares were issued to participants. On March 26, 2022, 1,688 shares of the 3,380 remaining time vesting shares were issued to participants. In the third quarter of 2022, it was projected that the growth metric will not be met at 50%; therefore, the stock compensation expense was adjusted accordingly. Stock compensation expense was ($ 5,299 ) and $ 78,381 for the nine month periods ended September 30, 2022 and 2021. Stock compensation expense was ($ 37,091 ) and $ 26,127 for the third quarter of 2022 and 2021, respectively. Unrecognized compensation expense at September 30, 2022 related to unvested RSUs was $ 21,195 . In May 2021, RSUs relating to 7,389 performance vesting shares and 3,693 time vesting shares (target level) for plan year 2021 were granted, which had a grant date fair market value of $ 17.93 per share of common stock underlying each RSU. The performance period for the performance-vesting RSUs is the three year period ending December 31, 2023. The time-vesting RSUs will vest ratably over a three year period that began on May 5, 2022. On May 5, 2022, 1,230 shares of the 3,693 time-vesting RSUs were issued to participants. Stock compensation expense was $ 49,714 and $ 27,619 for the first nine months of 2022 and 2021, respectively. Stock compensation expense was $ 16,571 for both the third quarter of 2022 and 2021, respectively. Unrecognized compensation expense as of September 30, 2022 related to unvested units was $ 104,951 . In March 2022, RSUs relating to 8,096 performance vesting shares and 6,238 time vesting shares (target level) for plan year 2022 were granted, which had a grant date fair market value of $ 21.88 per share of common stock underlying each RSU. The performance period for the performance-vesting RSUs is the three year period ending December 31, 2024. The time-vesting RSUs will vest ratably over a three year period beginning on March 9, 2023. Stock compensation expense was $ 52,290 and $ 26,145 for the nine and three month periods ended September 30, 2022, respectively. Unrecognized compensation expense as of September 30, 2022 related to unvested units was $ 261,453 . Note 10 – Derivative Financial Instruments As a part of managing interest rate risk, the Corporation entered into interest rate swap agreements to modify the re-pricing characteristics of certain interest-bearing liabilities. The Corporation has designated its interest rate swap agreements as cash flow hedges under the guidance of ASC Subtopic 815-30, Derivatives and Hedging – Cash Flow Hedges . Cash flow hedges have the effective portion of changes in the fair value of the derivative, net of taxes, recorded in net accumulated other comprehensive income. In March 2016, the Corporation entered into four interest rate swap contracts totaling $ 30.0 million notional amount, hedging future cash flows associated with floating rate trust preferred debt. As of September 30, 2022, $ 20.0 million notional amount remains. The fair value of the interest rate swap contracts was $ 1.2 million and $( 0.5 ) million at September 30, 2022 and December 31, 2021, respectively. 43 Table of Contents For the nine months ended September 30, 2022, the Corporation recorded an increase in the value of the derivatives of $ 1.6 million and the related deferred tax of $ 0.5 million in net accumulated other comprehensive loss to reflect the effective portion of cash flow hedges. For the three months ended September 30, 2022, the Corporation recorded an increase in the value of the derivatives of $ 0.5 million and the related deferred tax of $ 0.1 million in net accumulated other comprehensive loss to reflect the effective portion of cash flow hedges. ASC Subtopic 815-30 requires the net accumulated other comprehensive loss to be reclassified to earnings if the hedge becomes ineffective or is terminated. There was no hedge ineffectiveness recorded for the six or three months ended September 30, 2022. The Corporation does not expect any material losses relating to these hedges to be reclassified into earnings within the next 12 months. Interest rate swap agreements are entered into with counterparties that meet established credit standards and the Corporation believes that the credit risk inherent in these contracts is not significant as of September 30, 2022. The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the nine and three month periods ended September 30, 2022 and 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative in Cash Flow Hedging Relationships ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount of gain or ​ ​ ​ ​ ​ ​ ​ ​ (loss) recognized in ​ ​ Amount of gain or ​ Amount of gain or ​ income or derivative ​ ​ (loss) recognized in ​ (loss) reclassified from ​ (ineffective portion ​ ​ OCI on derivative ​ accumulated OCI into ​ and amount excluded ​ ​ (effective portion), ​ income (effective ​ from effectiveness (in thousands) net of tax portion) (a) testing) (b) Interest rate contracts: ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ $ 1,188 ​ $ — ​ $ — September 30, 2021 ​ ​ 450 ​ ​ — ​ ​ — Three months ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ $ 392 ​ $ — ​ $ — September 30, 2021 ​ ​ 79 ​ ​ — ​ ​ — ​ Notes: (a) Reported as interest expense (b) Reported as other income Note 11 – Revenue Recognition ASC Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. ASC Topic 606 is applicable to noninterest revenue streams such as wealth management, including trust and brokerage services, service charges on deposit accounts, interchange fee income – debit card income and gains/losses on OREO sales. Noninterest revenue streams in-scope of ASC Topic 606 are discussed below. Wealth Management – Trust and Brokerage Trust and asset management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Corporation’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts. Optional services such as real estate sales and tax return preparation services are also available to existing trust and asset management customers. The Corporation’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered. 44 Table of Contents Service Charges on Deposit Accounts Service charges on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. The Corporation’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account related fees are largely transactional based, and therefore, the Corporation’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts. Other Service Charges Fees, exchange, and other service charges are primarily comprised of ATM fees, loan servicing fees and other service charges. ATM fees are primarily generated when a Bank cardholder uses a non-Bank ATM or a non-Bank cardholder uses a Bank ATM. Loan servicing fees are comprised of fees earned on servicing of loan portfolios sold to the secondary market. Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Corporation’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Interchange Fees – Debit and Credit Card Income Debit and credit card income is primarily comprised of interchange fees earned whenever the Corporation’s debit cards are processed through card payment networks such as Visa. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. Payment is typically received immediately or in the following month. The following presents noninterest income, segregated by revenue streams that are within and outside the scope of ASC Topic 606, for the nine and three month periods ended September 30, 2022 and September 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ Three Months Ended ​ ​ September 30, ​ September 30, (in thousands) 2022 ​ 2021 ​ 2022 ​ 2021 Noninterest income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ In-scope of Topic 606: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Service charges on deposit accounts ​ $ 1,451 ​ $ 1,292 ​ $ 523 ​ $ 475 Other service charges ​ ​ 686 ​ ​ 664 ​ ​ 241 ​ ​ 232 Trust department ​ ​ 6,238 ​ ​ 6,441 ​ ​ 2,005 ​ ​ 2,166 Debit card income ​ ​ 2,922 ​ ​ 2,623 ​ ​ 1,053 ​ ​ 900 Brokerage commissions ​ ​ 805 ​ ​ 854 ​ ​ 272 ​ ​ 229 Noninterest income (in-scope of Topic 606) ​ ​ 12,102 ​ ​ 11,874 ​ ​ 4,094 ​ ​ 4,002 Noninterest income (out-of-scope of Topic 606) ​ ​ 1,297 ​ ​ 1,308 ​ ​ 510 ​ ​ 521 Total Noninterest Income ​ $ 13,399 ​ $ 13,182 ​ $ 4,604 ​ $ 4,523 ​ ​ ​ ​ ​ 45 Table of Contents Note 12 – Regulatory Capital Requirements The following table presents our capital ratios as of September 30, 2022 and December 31, 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 December 31, 2021 Required for Capital Adequacy Purposes Required to be Well Capitalized Total Capital (to risk-weighted assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ First United Bank & Trust ​ 14.49 % 14.97 % 8.00 % 10.00 % Tier 1 Capital (to risk-weighted assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ First United Bank & Trust ​ 13.36 % 13.72 % 6.00 % 8.00 % Common Equity Tier 1 Capital (to risk-weighted assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ First United Bank & Trust ​ 13.36 % 13.72 % 4.50 % 6.50 % Tier 1 Capital (to average assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ First United Bank & Trust ​ 10.33 % 10.00 % 4.00 % 5.00 % ​ As of September 30, 2022 and December 31, 2021, the Bank was considered “well capitalized” under the regulatory framework for prompt corrective action. ​ Note 13 – Borrowed Funds The following is a summary of short-term borrowings with original maturities of less than one year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ Nine Months Ended September 30, 2022 ​ Year Ended December 31, 2021 Overnight borrowings, weighted average interest rate of 3.25 % at September 30, 2022 ​ $ 20,000 ​ $ — Securities sold under agreements to repurchase: ​ ​ ​ ​ ​ ​ Outstanding at end of period ​ $ 69,726 ​ $ 57,699 Weighted average interest rate at end of period ​ ​ 0.13 % ​ ​ 0.15 % Maximum amount outstanding as of any month end ​ $ 75,912 ​ $ 72,396 Average amount outstanding ​ $ 60,839 ​ $ 57,697 Approximate weighted average rate during the period ​ ​ 0.12 % ​ ​ 0.15 % ​ Short term borrowings increased $ 32.0 million since December 31, 2021, driven by $ 20.0 million in overnight borrowings and an increase in our overnight investments Treasury product of $ 12.0 million during the quarter. The increase in overnight borrowings at September 30, 2022 was primarily driven by the strong loan growth and a timing delay of the receipt of deposit funding from a large customer driven transaction. These funds were received shortly after quarter end and subsequently repaid the $ 20.0 million in overnight borrowings in full. ​ At September 30, 2022, the repurchase agreements were secured by $ 85.4 million in investment securities issued by government related agencies. A minimum of 102 % of fair value is pledged against account balances. ​ ​ Note 14 – Recent Accounting Pronouncements Recently issued but not yet effective Accounting Pronouncements ​ In June 2016, FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . ASU 2016-13 introduces an approach based on expected losses to 46 Table of Contents estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchases financial assets with credit deterioration since their origination. The new model referred to as current expected credit losses (“CECL”) model, will apply to: (a) financial assets subject to credit losses and measured at amortized cost; and (b) certain off-balance sheet credit exposures. This includes loans, held to maturity debt securities, loan commitments, financial guarantees and net investments in leases as well as reinsurance and trade receivables. The estimate of expected credit losses should consider historical information, current information, and supportable forecasts, including estimates of prepayments. ASU 2016-13 was originally effective for SEC filers for annual periods beginning after December 15, 2019, and interim periods within those annual periods. In November 2019, the FASB approved a delay of the required implementation date of ASU No. 2016-13 for smaller reporting companies, as defined by the Securities and Exchange Commission, including the Corporation, resulting in a required implementation date for the Corporation of January 1, 2023. Management has formed a focus group consisting of multiple members from areas, including credit, finance, loan servicing, reporting, and information systems. The Corporation is completing its data and model validation analyses, with parallel processing of our existing allowance for loan losses model with the CECL model to follow. The Corporation is currently evaluating the provisions of ASU No. 2016-13 to determine the potential impact the new standard will have on the financial condition or results of operations. In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848).” The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendment only applies to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. The ASU is effective as of March 12, 2020 and through December 31, 2022. The Corporation is in the process of evaluating the impact of this standard on the loan portfolio, investment portfolio, long term debt and interest rate swaps, but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations. ​ In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 made certain targeted amendments specific to troubled debt restructurings (TDRs) by creditors and vintage disclosure related to gross write-offs. Upon adoption, the Corporation will be required to apply the loan and refinancing and restructuring guidance to determine whether a modification results in a new loan or a continuation of an existing loan, rather than applying the recognition and measurement guidance for TDRs. The ASU also requires companies to disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within scope of Subtopic 326-20. ASU 2022-02 is effective March 31, 2023, for entities that have adopted ASU 2016-13, otherwise effective date is the same as ASU 2016-13. The Corporation’s current plan is to adopt ASU 2016-13 effective January 1, 2023 at which time it will also implement ASU 2022-02. ​