FIRST UNITED CORP/MD/ 10-Q

Table of Contents ​ ​ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended June 30, 2023 ◻ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from _______________ to ________________ Commission file number 0-14237 First United Corporation (Exact name of registrant as specified in its charter) ​ ​ ​ ​ Maryland 52-1380770 (State or other jurisdiction of incorporation or organization) ​ (I. R. S. Employer Identification No.) ​ ​ 19 South Second Street , Oakland , Maryland ​ 21550-0009 (Address of principal executive offices) ​ (Zip Code) ​ ( 800 ) 470-4356 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: ​ ​ ​ ​ ​ ​ Title of each class Trading Symbols Name of each exchange on which registered Common Stock ​ FUNC ​ Nasdaq Stock Market ​ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ◻ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ◻ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): ​ ​ ​ Large Accelerated filer ◻ Accelerated Filer ◻ Non-Accelerated filer ☑ Smaller Reporting Company ☑ Emerging Growth Company ◻ ​ ​ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act. ◻ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ◻ No ☑ Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 6,711,442 shares of common stock, par value $.01 per share, as of July 31, 2023 . ​ ​ ​ Table of Contents INDEX TO QUARTERLY REPORT FIRST UNITED CORPORATION ​ ​ ​ ​ ​ ​ ​ ​ Page PART I. FINANCIAL INFORMATION 3 Item 1. Financial Statements (unaudited) 3 ​ Consolidated Statements of Financial Condition – June 30, 2023 and December 31, 2022 3 ​ Consolidated Statements of Operations – for the six and three months ended June 30, 2023 and 2022 4 ​ Consolidated Statements of Comprehensive Income/(Loss) – for the six and three months ended June 30, 2023 and 2022 6 ​ Consolidated Statements of Changes in Shareholders’ Equity – for six and three months ended June 30, 2023 and 2022 8 ​ Consolidated Statements of Cash Flows – for the six months ended June 30, 2023 and 2022 9 ​ Notes to Consolidated Financial Statements 10 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 52 Item 3. Quantitative and Qualitative Disclosures about Market Risk 71 Item 4. Controls and Procedures 71 ​ ​ ​ PART II. OTHER INFORMATION 72 Item 1. Legal Proceedings 72 Item 1A. Risk Factors 72 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 72 Item 3. Defaults upon Senior Securities 72 Item 4. Mine Safety Disclosures 72 Item 5. Other Information 72 Item 6. Exhibits 73 SIGNATURES 74 ​ ​ ​ ​ 2 Table of Contents PART I. FINANCIAL INFORMATION Item 1. Financial Statements First United Corporation and Subsidiaries Consolidated Statements of Financial Condition (In thousands, except share data - Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 December 31, 2022 ​ ​ ​ ​ ​ ​ Assets ​ ​ ​ ​ ​ ​ Cash and due from banks ​ $ 86,901 ​ $ 72,720 Interest bearing deposits in banks ​ ​ 1,650 ​ ​ 1,595 Cash and cash equivalents ​ ​ 88,551 ​ ​ 74,315 Investment securities – available for sale (at fair value) ​ ​ 120,085 ​ ​ 125,889 Investment securities – held to maturity (fair value $ 199,071 at June 30, 2023 and $ 203,080 at December 31, 2022) ​ ​ 230,759 ​ ​ 235,659 Restricted investment in bank stock, at cost ​ ​ 4,490 ​ ​ 1,027 Loans held for sale ​ ​ 500 ​ ​ — Loans ​ ​ 1,350,038 ​ ​ 1,279,494 Unearned fees ​ ​ ( 327 ) ​ ​ ( 174 ) Allowance for credit losses ​ ​ ( 16,905 ) ​ ​ ( 14,636 ) Net loans ​ ​ 1,332,806 ​ ​ 1,264,684 Premises and equipment, net ​ ​ 33,532 ​ ​ 34,948 Goodwill and other intangibles ​ ​ 12,268 ​ ​ 12,433 Bank owned life insurance ​ ​ 46,963 ​ ​ 46,346 Deferred tax assets ​ ​ 11,771 ​ ​ 10,605 Other real estate owned, net ​ ​ 4,842 ​ ​ 4,733 Right of use assets ​ ​ 1,990 ​ ​ 1,898 Pension asset ​ ​ 8,620 ​ ​ 8,001 Accrued interest receivable ​ ​ 6,956 ​ ​ 6,051 Other assets ​ ​ 24,260 ​ ​ 21,580 Total Assets ​ $ 1,928,393 ​ $ 1,848,169 Liabilities and Shareholders’ Equity ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ Non-interest bearing deposits ​ $ 466,628 ​ $ 506,613 Interest bearing deposits ​ ​ 1,113,331 ​ ​ 1,064,120 Total deposits ​ ​ 1,579,959 ​ ​ 1,570,733 Short-term borrowings ​ ​ 50,078 ​ ​ 64,565 Long-term borrowings ​ ​ 110,929 ​ ​ 30,929 Operating lease liability ​ ​ 2,443 ​ ​ 2,373 SERP deferred compensation ​ ​ 7,261 ​ ​ 7,194 Allowance for credit losses on off-balance sheet credit exposures ​ ​ 1,089 ​ ​ 133 Accrued interest payable and other liabilities ​ ​ 20,136 ​ ​ 19,250 Dividends payable ​ ​ 1,342 ​ ​ 1,199 Total Liabilities ​ ​ 1,773,237 ​ ​ 1,696,376 Shareholders’ Equity: ​ ​ ​ ​ ​ ​ Common Stock – par value $ 0.01 per share; Authorized 25,000,000 shares; issued and outstanding 6,711,422 shares at June 30, 2023 and 6,666,428 at December 31, 2022 ​ ​ 67 ​ ​ 67 Surplus ​ ​ 24,901 ​ ​ 24,409 Retained earnings ​ ​ 170,298 ​ ​ 166,343 Accumulated other comprehensive loss ​ ​ ( 40,110 ) ​ ​ ( 39,026 ) Total Shareholders’ Equity ​ ​ 155,156 ​ ​ 151,793 Total Liabilities and Shareholders’ Equity ​ $ 1,928,393 ​ $ 1,848,169 ​ 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) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ June 30, ​ 2023 2022 ​ ​ (Unaudited) Interest income ​ ​ ​ ​ ​ ​ Interest and fees on loans ​ $ 32,224 ​ $ 25,293 Interest on investment securities ​ ​ ​ ​ ​ ​ Taxable ​ ​ 3,547 ​ ​ 2,946 Exempt from federal income tax ​ ​ 538 ​ ​ 561 Total investment income ​ ​ 4,085 ​ ​ 3,507 Other ​ ​ 1,492 ​ ​ 78 Total interest income ​ ​ 37,801 ​ ​ 28,878 Interest expense ​ ​ ​ ​ ​ ​ Interest on deposits: ​ ​ ​ ​ ​ ​ Savings ​ ​ 135 ​ ​ 36 Interest-bearing transaction accounts ​ ​ 5,128 ​ ​ 319 Time deposits ​ ​ 1,765 ​ ​ 521 Total interest on Deposits ​ ​ 7,028 ​ ​ 876 Interest on short-term borrowings ​ ​ 60 ​ ​ 39 Interest on long-term borrowings ​ ​ 2,021 ​ ​ 651 Total Interest Expense ​ ​ 9,109 ​ ​ 1,566 Net Interest income ​ ​ 28,692 ​ ​ 27,312 Credit loss expense - loans ​ ​ 848 ​ ​ 205 Credit loss expense - off-balance sheet credit exposures ​ ​ 90 ​ ​ 5 Credit loss expense ​ ​ 938 ​ ​ 210 Net interest income after provision for credit losses ​ ​ 27,754 ​ ​ 27,102 Other operating income ​ ​ ​ ​ ​ ​ Net gains on investments, available for sale ​ ​ — ​ ​ 3 Net gains on sale of residential mortgage loans ​ ​ 140 ​ ​ 28 Net gains on disposal of fixed assets ​ ​ — ​ ​ 34 Net gains ​ ​ 140 ​ ​ 65 Other Income ​ ​ ​ ​ ​ ​ Service charges on deposit accounts ​ ​ 1,062 ​ ​ 928 Other service charges ​ ​ 476 ​ ​ 445 Trust department ​ ​ 3,995 ​ ​ 4,233 Debit card income ​ ​ 1,986 ​ ​ 1,869 Bank owned life insurance ​ ​ 616 ​ ​ 589 Brokerage commissions ​ ​ 555 ​ ​ 533 Other ​ ​ 132 ​ ​ 198 Total other income ​ ​ 8,822 ​ ​ 8,795 Total other operating income ​ ​ 8,962 ​ ​ 8,860 Other operating expenses ​ ​ ​ ​ ​ ​ Salaries and employee benefits ​ ​ 14,155 ​ ​ 11,761 FDIC premiums ​ ​ 470 ​ ​ 329 Equipment expense ​ ​ 2,139 ​ ​ 2,073 Occupancy expense of premises ​ ​ 1,527 ​ ​ 1,438 Data processing expense ​ ​ 1,915 ​ ​ 1,626 Marketing expense ​ ​ 254 ​ ​ 257 Professional services ​ ​ 1,040 ​ ​ 1,084 Contract labor ​ ​ 298 ​ ​ 323 Telephone ​ ​ 226 ​ ​ 253 Total OREO expenses, net ​ ​ 142 ​ ​ 247 Investor relations ​ ​ 189 ​ ​ 219 Contributions ​ ​ 143 ​ ​ 63 Other ​ ​ 2,651 ​ ​ 1,537 Total other operating expenses ​ ​ 25,149 ​ ​ 21,210 Income before income tax expense ​ ​ 11,567 ​ ​ 14,752 Provision for income tax expense ​ ​ 2,778 ​ ​ 3,609 Net Income ​ $ 8,789 ​ $ 11,143 Basic net income per share ​ $ 1.32 ​ $ 1.68 Diluted net income per share ​ $ 1.31 ​ $ 1.68 Weighted average number of basic shares outstanding ​ ​ 6,689 ​ ​ 6,639 Weighted average number of diluted shares outstanding ​ ​ 6,707 ​ ​ 6,649 Dividends declared per common share ​ $ 0.40 ​ $ 0.30 ​ See accompanying notes to the consolidated financial statements ​ 4 Table of Contents First United Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ June 30, ​ 2023 2022 ​ ​ (Unaudited) Interest income ​ ​ ​ ​ ​ ​ Interest and fees on loans ​ $ 16,780 ​ $ 12,861 Interest on investment securities ​ ​ ​ ​ ​ ​ Taxable ​ ​ 1,779 ​ ​ 1,540 Exempt from federal income tax ​ ​ 268 ​ ​ 279 Total investment income ​ ​ 2,047 ​ ​ 1,819 Other ​ ​ 1,145 ​ ​ 51 Total interest income ​ ​ 19,972 ​ ​ 14,731 Interest expense ​ ​ ​ ​ ​ ​ Interest on deposits: ​ ​ ​ ​ ​ ​ Savings ​ ​ 56 ​ ​ 18 Interest-bearing transaction accounts ​ ​ 2,941 ​ ​ 167 Time deposits ​ ​ 1,353 ​ ​ 216 Total interest on Deposits ​ ​ 4,350 ​ ​ 401 Interest on short-term borrowings ​ ​ 29 ​ ​ 21 Interest on long-term borrowings ​ ​ 1,419 ​ ​ 338 Total Interest Expense ​ ​ 5,798 ​ ​ 760 Net Interest income ​ ​ 14,174 ​ ​ 13,971 Credit loss expense - loans ​ ​ 434 ​ ​ 624 Credit loss (credit)/expense - off-balance sheet credit exposures ​ ​ ( 39 ) ​ ​ 7 Credit loss expense ​ ​ 395 ​ ​ 631 Net interest income after provision for credit losses ​ ​ 13,779 ​ ​ 13,340 Other operating income ​ ​ ​ ​ ​ ​ Gains on sale of residential mortgage loans ​ ​ 86 ​ ​ 7 Gains on disposal of fixed assets ​ ​ — ​ ​ 6 Net gains ​ ​ 86 ​ ​ 13 Other Income ​ ​ ​ ​ ​ ​ Service charges on deposit accounts ​ ​ 546 ​ ​ 463 Other service charges ​ ​ 244 ​ ​ 232 Trust department ​ ​ 2,025 ​ ​ 2,044 Debit card income ​ ​ 1,031 ​ ​ 983 Bank owned life insurance ​ ​ 311 ​ ​ 297 Brokerage commissions ​ ​ 258 ​ ​ 313 Other ​ ​ 68 ​ ​ 81 Total other income ​ ​ 4,483 ​ ​ 4,413 Total other operating income ​ ​ 4,569 ​ ​ 4,426 Other operating expenses ​ ​ ​ ​ ​ ​ Salaries and employee benefits ​ ​ 6,865 ​ ​ 5,793 FDIC premiums ​ ​ 277 ​ ​ 155 Equipment ​ ​ 1,047 ​ ​ 1,029 Occupancy ​ ​ 743 ​ ​ 711 Data processing ​ ​ 946 ​ ​ 805 Marketing ​ ​ 137 ​ ​ 151 Professional services ​ ​ 522 ​ ​ 564 Contract labor ​ ​ 159 ​ ​ 158 Line rentals ​ ​ 116 ​ ​ 139 Total OREO expenses, net ​ ​ 18 ​ ​ 152 Investor relations ​ ​ 132 ​ ​ 123 Contributions ​ ​ 79 ​ ​ 42 Other ​ ​ 1,470 ​ ​ 808 Total other operating expenses ​ ​ 12,511 ​ ​ 10,630 Income before income tax expense ​ ​ 5,837 ​ ​ 7,136 Provision for income tax expense ​ ​ 1,423 ​ ​ 1,708 Net Income ​ $ 4,414 ​ $ 5,428 Basic net income per common share ​ $ 0.66 ​ $ 0.82 Diluted net income per common share ​ $ 0.66 ​ $ 0.82 Weighted average number of basic shares outstanding ​ ​ 6,704 ​ ​ 6,650 Weighted average number of diluted shares outstanding ​ ​ 6,718 ​ ​ 6,661 Dividends declared per common share ​ $ 0.20 ​ $ 0.15 ​ 5 Table of Contents First United Corporation and Subsidiaries Consolidated Statements of Comprehensive Income/ (Loss) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ June 30, ​ ​ 2023 ​ 2022 Comprehensive Income/(Loss) ​ (Unaudited) Net Income ​ $ 8,789 ​ $ 11,143 Other comprehensive loss, net of tax and reclassification adjustments: ​ ​ ​ ​ ​ ​ Available for sale securities: ​ ​ ​ ​ ​ ​ Unrealized holding losses on investments with OTTI ​ $ ( 1,408 ) ​ $ ( 654 ) Reclassification adjustment for accretable yield realized in income ​ ​ 101 ​ ​ 101 Other comprehensive loss on investments with OTTI ​ ​ ( 1,509 ) ​ ​ ( 755 ) ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses on all other AFS investments ​ $ ( 881 ) ​ $ ( 16,203 ) Unrealized holding losses on securities transferred from available for sale to held to maturity ​ ​ — ​ ​ 8,328 Reclassification adjustment for gains realized in income ​ ​ — ​ ​ 3 Other comprehensive losses on all other AFS investments ​ ​ ( 881 ) ​ ​ ( 7,878 ) ​ ​ ​ ​ ​ ​ ​ Held to Maturity Securities ​ ​ ​ ​ ​ ​ Unrealized holding losses on securities transferred to held to maturity ​ $ — ​ $ ( 8,328 ) Reclassification adjustment for amortization realized in income ​ ​ ( 345 ) ​ ​ ( 324 ) Other comprehensive income/(losses) on HTM investments ​ ​ 345 ​ ​ ( 8,004 ) ​ ​ ​ ​ ​ ​ ​ Cash flow hedges: ​ ​ ​ ​ ​ ​ Unrealized holding gains on cash flow hedges ​ $ 16 ​ $ 1,088 Other comprehensive income on cash flow hedges ​ ​ 16 ​ ​ 1,088 ​ ​ ​ ​ ​ ​ ​ Pension plan liability: ​ ​ ​ ​ ​ ​ Unrealized holding gains/(losses) on pension plan liability ​ $ 105 ​ $ ( 10,542 ) Reclassification adjustment for amortization of unrecognized loss realized in income ​ ​ ( 499 ) ​ ​ ( 558 ) Other comprehensive income/(loss) on pension plan liability ​ ​ 604 ​ ​ ( 9,984 ) ​ ​ ​ ​ ​ ​ ​ SERP liability: ​ ​ ​ ​ ​ ​ Unrealized holding losses on SERP liability ​ $ — ​ $ — Reclassification adjustment for amortization of unrealized loss realized in income ​ ​ 4 ​ ​ ( 135 ) Other comprehensive (loss)/income on SERP liability ​ ​ ( 4 ) ​ ​ 135 ​ ​ ​ ​ ​ ​ ​ Other comprehensive losses before income tax ​ ​ ( 1,429 ) ​ ​ ( 25,398 ) Income tax benefit related to other comprehensive income ​ ​ 345 ​ ​ 6,796 ​ ​ ​ ​ ​ ​ ​ Other comprehensive loss, net of tax ​ ​ ( 1,084 ) ​ ​ ( 18,602 ) Comprehensive income/(loss) ​ $ 7,705 ​ $ ( 7,459 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ See accompanying notes to the consolidated financial statements ​ 6 Table of Contents First United Corporation and Subsidiaries Consolidated Statements of Comprehensive Income/(Loss) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ June 30, ​ 2023 2022 Comprehensive Income/(Loss) ​ (Unaudited) Net Income ​ $ 4,414 ​ $ 5,428 Other comprehensive loss, net of tax and reclassification adjustments: ​ ​ ​ ​ ​ ​ Available for sale securities: ​ ​ ​ ​ ​ ​ Unrealized holding gains/(losses) on investments with OTTI ​ $ 198 ​ $ ( 795 ) Reclassification adjustment for accretable yield realized in income ​ ​ 51 ​ ​ 51 Other comprehensive income/(losses) on investments with OTTI ​ ​ 147 ​ ​ ( 846 ) ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses on all other AFS investments ​ $ ( 2,221 ) ​ $ ( 5,359 ) Reclassification adjustment for gains realized in income ​ ​ — ​ ​ — Other comprehensive losses on all other AFS investments ​ ​ ( 2,221 ) ​ ​ ( 5,359 ) ​ ​ ​ ​ ​ ​ ​ Held to Maturity Securities ​ ​ ​ ​ ​ ​ Unrealized holding losses on HTM investments ​ $ — ​ $ — Reclassification adjustment for amortization realized in income ​ ​ ( 164 ) ​ ​ ( 230 ) Other comprehensive income on HTM investments ​ ​ 164 ​ ​ 230 ​ ​ ​ ​ ​ ​ ​ Cash flow hedges: ​ ​ ​ ​ ​ ​ Unrealized holding gains on cash flow hedges ​ $ 204 ​ $ 249 Other comprehensive income on cash flow hedges ​ ​ 204 ​ ​ 249 ​ ​ ​ ​ ​ ​ ​ Pension plan liability: ​ ​ ​ ​ ​ ​ Unrealized holding losses on pension plan liability ​ $ ( 63 ) ​ $ ( 6,922 ) Reclassification adjustment for amortization of unrecognized loss realized in income ​ ​ ( 249 ) ​ ​ ( 279 ) Other comprehensive gains/(losses) on pension plan liability ​ ​ 186 ​ ​ ( 6,643 ) ​ ​ ​ ​ ​ ​ ​ SERP liability: ​ ​ ​ ​ ​ ​ Unrealized holding losses on SERP liability ​ $ — ​ $ — Reclassification adjustment for amortization of unrealized loss realized in income ​ ​ 2 ​ ​ ( 67 ) Other comprehensive (loss)/income on SERP liability ​ ​ ( 2 ) ​ ​ 67 ​ ​ ​ ​ ​ ​ ​ Other comprehensive losses before income tax ​ ​ ( 1,522 ) ​ ​ ( 12,302 ) Income tax benefit related to other comprehensive income ​ ​ 369 ​ ​ 3,293 ​ ​ ​ ​ ​ ​ ​ Other comprehensive loss, net of tax ​ ​ ( 1,153 ) ​ ​ ( 9,009 ) Comprehensive income/(loss) ​ $ 3,261 ​ $ ( 3,581 ) ​ ​ ​ 7 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, 2023 ​ $ 67 ​ $ 24,409 ​ $ 166,343 ​ $ ( 39,026 ) ​ $ 151,793 Adoption of ASC 326- Financial Instruments- Credit Losses ​ ​ ​ ​ ​ ​ ​ ​ ( 2,155 ) ​ ​ ​ ​ ​ ( 2,155 ) Net income ​ ​ ​ ​ ​ ​ ​ ​ 4,375 ​ ​ ​ ​ ​ 4,375 Other comprehensive income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 69 ​ ​ 69 Stock based compensation ​ ​ ​ ​ ​ 56 ​ ​ ​ ​ ​ ​ ​ ​ 56 Common stock issued - 22,282 shares ​ ​ ​ ​ ​ 64 ​ ​ ​ ​ ​ ​ ​ ​ 64 Common stock dividend declared - $ 0.20 per share ​ ​ ​ ​ ​ ​ ​ ​ ( 1,334 ) ​ ​ ​ ​ ​ ( 1,334 ) Balance at March 31, 2023 ​ $ 67 ​ $ 24,529 ​ $ 167,229 ​ $ ( 38,957 ) ​ $ 152,868 Net income ​ ​ ​ ​ ​ ​ ​ ​ 4,414 ​ ​ ​ ​ ​ 4,414 Other comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 1,153 ) ​ ​ ( 1,153 ) Stock based compensation ​ ​ ​ ​ ​ 298 ​ ​ ​ ​ ​ ​ ​ ​ 298 Common stock issued - 18,416 shares ​ ​ ​ ​ ​ 74 ​ ​ ​ ​ ​ ​ ​ ​ 74 Common stock dividend declared - $ 0.20 per share ​ ​ ​ ​ ​ ​ ​ ​ ( 1,345 ) ​ ​ ​ ​ ​ ( 1,345 ) Balance at June 30, 2023 ​ $ 67 ​ $ 24,901 ​ $ 170,298 ​ $ ( 40,110 ) ​ $ 155,156 ​ ​ ​ 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ See accompanying notes to the consolidated financial statement ​ 8 Table of Contents First United Corporation and Subsidiaries Consolidated Statements of Cash Flows (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ June 30, ​ 2023 2022 ​ ​ (Unaudited) Operating activities ​ ​ ​ ​ ​ ​ Net income ​ $ 8,789 ​ $ 11,143 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ Provision for credit losses ​ ​ 938 ​ ​ 210 Depreciation ​ ​ 1,700 ​ ​ 1,645 Stock based compensation ​ ​ 354 ​ ​ 336 Gain on sales of other real estate owned ​ ​ ( 36 ) ​ ​ — Write-ups of other real estate owned, net ​ ​ ( 69 ) ​ ​ — Originations of loans held for sale ​ ​ ( 1,337 ) ​ ​ ( 1,043 ) Proceeds from sale of loans held for sale ​ ​ 977 ​ ​ 1,138 Gains from sale of loans held for sale ​ ​ ( 140 ) ​ ​ ( 28 ) Gains on disposal of fixed assets ​ ​ — ​ ​ ( 34 ) Net (accretion)/ amortization of investment securities discounts and premiums- AFS ​ ​ ( 25 ) ​ ​ 100 Net accretion of investment securities discounts and premiums- HTM ​ ​ ( 405 ) ​ ​ ( 405 ) Amortization of intangible assets ​ ​ 165 ​ ​ 105 Gains on sales/calls of investment securities – AFS ​ ​ — ​ ​ ( 3 ) Earnings on bank owned life insurance ​ ​ ( 617 ) ​ ​ ( 589 ) Amortization of deferred loan costs/(fees), net ​ ​ 27 ​ ​ ( 123 ) Amortization of operating lease right of use asset ​ ​ 164 ​ ​ 172 (Increase)/decrease in accrued interest receivable and other assets ​ ​ ( 4,259 ) ​ ​ 1,295 Deferred tax expense/(benefit) ​ ​ 1,038 ​ ​ ( 6,796 ) Operating lease liability ​ ​ ( 186 ) ​ ​ ( 191 ) Increase in accrued interest payable and other liabilities ​ ​ 968 ​ ​ 3,527 Net cash provided by operating activities ​ ​ 8,046 ​ ​ 10,459 Investing activities ​ ​ ​ ​ ​ ​ Proceeds from maturities/calls of investment securities - AFS ​ ​ 3,358 ​ ​ 9,583 Proceeds from maturities/calls of investment securities - HTM ​ ​ 5,305 ​ ​ 7,571 Proceeds from sales of investment securities - AFS ​ ​ — ​ ​ 1,023 Purchases of investment securities - AFS ​ ​ — ​ ​ ( 12,892 ) Purchases of investment securities - HTM ​ ​ — ​ ​ ( 52,459 ) Proceeds from sales of other real estate owned ​ ​ 172 ​ ​ — Proceeds from disposal of fixed assets ​ ​ — ​ ​ 37 Net (increase)/decrease in restricted stock ​ ​ ( 3,463 ) ​ ​ 3 Net increase in loans ​ ​ ( 71,239 ) ​ ​ ( 80,454 ) Purchases of premises and equipment ​ ​ ( 284 ) ​ ​ ( 2,256 ) Net cash used in by investing activities ​ ​ ( 66,151 ) ​ ​ ( 129,844 ) Financing activities ​ ​ ​ ​ ​ ​ Net increase in deposits ​ ​ 9,226 ​ ​ 14,980 Issuance of common stock ​ ​ 138 ​ ​ 109 Cash dividends paid on common stock ​ ​ ( 2,536 ) ​ ​ ( 1,988 ) Net(decrease)/increase in short-term borrowings ​ ​ ( 14,487 ) ​ ​ 12,215 Proceeds from long-term borrowings ​ ​ 80,000 ​ ​ — Net cash provided by financing activities ​ ​ 72,341 ​ ​ 25,316 Increase/(decrease) in cash and cash equivalents ​ ​ 14,236 ​ ​ ( 94,069 ) Cash and cash equivalents at beginning of the year ​ ​ 74,315 ​ ​ 115,720 Cash and cash equivalents at end of period ​ $ 88,551 ​ $ 21,651 Supplemental information ​ ​ ​ ​ ​ ​ Interest paid ​ $ 8,726 ​ $ 1,667 Taxes paid ​ $ 2,550 ​ $ 3,758 Non-cash investing activities: ​ ​ ​ ​ ​ ​ Transfers from loans to other real estate owned ​ $ 176 ​ $ 40 Transfers from securities available for sale to held to maturity ​ $ — ​ $ 139,036 ​ ​ ​ 9 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”). First United Corporation has prepared these unaudited condensed consolidated financial statements in accordance with GAAP for interim financial information, rules of the Securities and Exchange Commission that permit reduced disclosure for interim periods, and Article 8 of Regulation S-X. Certain reclassifications have been made to prior year amounts to conform with current year classifications. These reclassifications did not have a material impact on the Corporation’s consolidated financial condition or results of operations. Operating results for the three- and six-month periods ended June 30, 2023, 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, 2022. 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. In the opinion of management, all adjustments (all of which are of a normal recurring nature) that are necessary for a fair statement are reflected in the unaudited condensed consolidated financial statements. 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. 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 June 30, 2023 and through the date these consolidated financial statements were issued, for items of potential recognition or disclosure. Newly Adopted Pronouncements in 2023 In June 2016, the Financial Accounting Standards Board (‘FASB’) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), universally referred to as CECL. The amendments in the ASU, among other things, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied previously are still permitted, although the inputs to those techniques changed to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on purchased financial assets with credit deterioration. For periodic report filers that are smaller reporting companies, such as the Corporation, ASU 2016-13 was effective as of January 1, 2023. As part of its process of adopting the CECL accounting method, management implemented a third party software solution and determined the appropriate loan segments, methodologies, model assumptions and qualitative components. Our CECL model includes portfolio loan segmentation based upon similar risk characteristics and both a quantitative and qualitative component of the calculation which incorporates a forecasting component of certain economic variables. Our implementation plan also includes the assessment and documentation of appropriate processes, policies and internal controls. Management had a third party independent consultant review and validate our CECL model. 10 Table of Contents In addition, ASU 2016-13 amends the accounting for credit losses on certain debt securities. The Corporation did not record any allowance for credit losses (“ACL”) on its debt securities as a result of adopting this ASU. The ultimate impact of adopting ASU 2016-13, and at each subsequent reporting period, is highly dependent on credit quality, macroeconomic forecasts and conditions, compensation of our loan portfolio, and other management judgments. The Corporation adopted ASU 2016-13 using the modified retrospective method. Results beginning after January 1, 2023 are presented under ASU 2016-13, while prior period amounts continue to be reported in accordance with previously applicable GAAP. We made the accounting policy election to not measure an ACL for accrued interest receivables for loans and securities. Accrued interest deemed uncollectible will be written off through interest income. The following table illustrates the day-one impact of adopting ASU 2016-13. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ January 1, 2023 (Dollars in thousands) ​ As Reported Under ASU 2016-13 ​ Pre ASU 2016-13 ​ Impact of ASU 2016-13 Adoption Assets ​ ​ ​ ​ ​ ​ Allowance for credit losses on loans ​ ​ ​ ​ ​ ​ Commercial real estate $ 5,202 $ 6,345 $ ( 1,143 ) Acquisition and development ​ 964 ​ 979 ​ ( 15 ) Commercial and industrial ​ 4,179 ​ 2,845 ​ 1,334 Residentail mortgage ​ 5,272 ​ 3,160 ​ 2,112 Consumer ​ 1,085 ​ 877 ​ 208 Unallocated ​ - ​ 430 ​ ( 430 ) Allowance for Credit Losses on Loans $ 16,702 $ 14,636 $ 2,066 Assets: ​ ​ ​ ​ ​ ​ Investment securities- available for sale (at fair value) $ 125,889 $ 125,889 $ - Investment securities- held to maturity ​ 245,659 ​ 245,659 ​ - Total loans held for investments, net ​ 1,262,792 ​ 1,264,858 ​ ( 2,066 ) Net deferred tax asset ​ 11,381 ​ 10,605 ​ 776 Liabilities: ​ ​ ​ ​ ​ ​ Life-of-loss reserve on unfunded loan commitments $ 998 $ 133 $ 865 Equity: ​ ​ ​ ​ ​ ​ Retained earnings $ 149,638 $ 151,793 $ ( 2,155 ) ​ In connection with our adoption of ASU 2016-13, we made changes to our loan portfolio segments to align with the methodology of CECL. Refer to Note 5, Loans and Related Allowance for Credit Losses, for further discussion of these portfolio segments. The adoption of ASU 2016-13 resulted in a Day 1 adjustment of $ 2.9 million to our ACL, including an increase of $ 2.0 million to the ACL for loans and $ 0.9 million to the ACL for unfunded commitments. The Corporation did not record any ACL on its available-for-sale or held-to-maturity investments upon adoption of ASC 326. The Corporation recorded a net decrease to retained earnings of $ 2.2 million as of January 1, 2023 for the cumulative effect of adopting ASU 2016-13. In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures . ASU 2022-02, which eliminates the troubled debt restructuring (“TDR”) accounting model for creditors that have adopted ASU 2016-13, “Financial Instruments – Credit Losses.” Due to the removal of the TDR accounting model, all loan modifications were evaluated to determine if they resulted in a new loan or a continuation of the existing loan. The amendments in ASU 2022-02 also required that entities disclose current-period gross charge-offs by year of origination for loans and leases. The amendments in ASU 2022-02 were effective January 1, 2023. This change did not have a material effect on our consolidated financial statements. Refer to Note 5, Loans and Related Allowance for Credit Losses for disclosures for debtors experiencing financial difficulty and for vintage disclosures related to gross charge-offs by loan segment by year of origination. 11 Table of Contents Allowance for Credit Losses Policy The ACL represents an amount that, in management’s judgment, is adequate to absorb expected losses on outstanding loans at the balance sheet date based on the evaluation of the size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions and prepayment experience. The ACL is measured and recorded upon the initial recognition of a financial asset. The ACL is reduced by charge-offs, net of recoveries of previous losses, and is increased or decreased by a provision for credit losses, which is recorded as a current period operating expense. Determination of an appropriate ACL is inherently complex and requires the use of significant and highly subjective estimates. The reasonableness is reviewed quarterly by management. Management believes it uses relevant information available to make determinations about the ACL and that it has established the existing allowance in accordance with GAAP. However, the determination of the ACL requires significant judgment, and estimates of expected losses in the loan portfolio can vary significantly from the amounts actually observed. While management uses available information to recognize losses, future additions to the ACL may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes to the interest rate environment which may directly impact prepayment and curtailment rate assumptions, and changes in the financial condition of borrowers. The adoption of CECL accounting did not result in a significant change to any other credit risk management and monitoring processes, including identification of past due or delinquent borrowers, nonaccrual practices, assessment of modified loans, or charge-off policy. The Corporation’s methodology for estimating the ACL includes: Segmentation . The Corporation’s loan portfolio is segmented by homogeneous loan types that behave similarly in economic cycles. Specific Analysis . A specific reserve analysis is applied to certain individually evaluated loans. These loans are evaluated quarterly generally based on collateral value, observable market value or the present value of expected future cash flows. A specific reserve is established if the fair value is less than the loan balance. A charge-off is recognized when the loss is quantifiable. Individually evaluated loans not specifically analyzed reside in the Quantitative Analysis. Quantitative Analysis. The Corporation elected to use Discounted Cash Flow (“DCF”). Economic forecasts include but are not limited to unemployment, the Consumer Price Index, the Housing Affordability Index and Gross State Product. These forecasts are assumed to revert to the long term average and are utilized in the model to estimate the probability of default and loss given default through regression. Model assumptions include, but are not limited to the discount rate, prepayments and curtailments. The product of the probability of default and the loss given default is the estimated loss rate, which varies over time. The estimated loss rate is applied within the appropriate periods in the cash flow model to determine net present value. Net present value is also impacted by assumptions related to the duration between default and recovery. The reserve is based on the differences between the summation of the principal balances taking amortized costs into consideration and the summation of the net present values. Qualitative Analysis. Based on management’s review and analysis of internal, external and model risks, management may adjust the model output. Management reviews the peaks and troughs of the model’s calibration, taking into account economic forecasts to develop guardrails that serve as the basis for determining the reasonableness of the model’s output and makes adjustments as necessary. This process challenges unexpected variability resulting from outputs beyond the model’s calibration that appear to be unreasonable. Management also enhances the calculation through the use of Moody’s economic forecast data in its calculation. Additionally, management may adjust the economic forecast if it is incompatible with known market conditions based on Mangement’s experience and perspective. Loan Commitments and Allowance for Credit Loss on Off-Balance Sheet Credit Exposures Financial instruments include off-balance sheet credit instruments such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Corporation’s exposure to credit loss in the event of nonperformance 12 Table of Contents by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded. The Corporation records a reserve for unfunded commitments (“RUC”) on off-balance sheet credit exposures through a charge to provision for credit loss expense in the Corporation’s Consolidated Statement of Income. The RUC on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur, and is included in the RUC on the Corporation’s Consolidated Balance Sheet. Loan Restructurings In situations where, for economic or legal reasons related to a borrower’s financial condition, management may grant a concession to the borrower that it would not otherwise consider, the related loan is classified as a restructured loan. Management strives to identify borrowers in financial difficulty early and work with them to modify the loan to more affordable terms before their loan reaches nonaccrual status. The Corporation modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay, or interest rate reductions. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses. These concessions are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where borrowers are granted new terms that provide for a reduction of interest, management measures any impairment on the restructuring as noted above for loans experiencing financial difficulty. Allowance for Credit Losses – Available-for-Sale and Held-to-Maturity Securities The Corporation utilizes Accounting Standards Codification (“ASC”) 326 to evaluate its available-for-sale (“AFS”) and held-to-maturity (“HTM”) debt security portfolio for expected credit losses. For AFS debt securities in an unrealized loss position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either criterion is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for that credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income, as a non-credit-related impairment. The Corporation adopted ASC 326 using the prospective transition approach for debt securities for which other than temporary impairment (“OTTI”) had been recognized prior to January 1, 2023, such as AFS collateralized debt obligations. As a result, the amortized cost basis for such debt securities remained the same before and after the effective date of ASC 326. The effective interest rate on these debt securities was not changed. Amounts previously written recognized in other comprehensive income (OCI) as of January 1, 2023 relating to improvements in cash flows expected to be collected are accreted into income over the remaining life of the asset. Recoveries of amounts previously written off relating to improvements in cash flows after January 1, 2023 are recorded in earnings when received. The entire amount of an impairment loss is recognized in earnings only when: (i) the Corporation intends to sell the security or; (ii) it is more likely than not that the Corporation will have to sell the security before recovery of its amortized cost basis; or (iii) the Corporation does not expect to recover the entire amortized cost basis of the security. In all other situations, only the portion of the impairment loss representing the credit loss must be recognized in earnings, with the remaining portion being recognized in shareholders’ equity as comprehensive income, net of deferred taxes. Changes in the allowance for credit losses are not recorded as a provision for (or credit to) credit losses. Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Any impairment not recorded through the an allowance for credit loss is recognized in other comprehensive income as a non-credit-related impairment. 13 Table of Contents We have made a policy election to exclude accrued interest from the amortized cost basis of AFS debt securities and report accrued interest separately on the Consolidated Balance Sheet. AFS debt securities are placed on nonaccrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income when a security is placed on nonaccrual status. Accordingly, we do not recognized an allowance for credit loss against accrued interest receivable. The Corporation separately evaluates its HTM investment securities for any credit losses. The Corporation pools like securities and calculates expected credit losses through an estimate based on a security’s credit rating, which is recognized as part of the allowance for credit losses for held-to-maturity securities and included in the balance of investment securities held-to-maturity on the Consolidated Balance Sheets. If the Corporation determines that a security indicates evidence of deteriorated credit quality, the security is individually evaluated, and a discounted cash flow analysis is performed and compared to the amortized cost basis. Note 2 – Accounting Statements Issued but Not Yet Adopted In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of Reference Rate Reform on Financial Reporting.” The amendments in this ASU provide optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The amendments provide optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from the London Interbank Offered Rate (“LIBOR”) toward new interest rate benchmarks. Modified contracts that meet certain scope guidance are eligible for relief from these modification accounting requirements in GAAP. The optional guidance generally allows for the modified contract to be accounted for as a continuation of the existing contract and does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. The amendments in this ASU are effective for all entities between March 12, 2020 and December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06: “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848.” The amendments in this ASU defer the sunset date for applying the reference rate reform relief by two years to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. ​ Note 3 – 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 June 30, 2023 or 2022. ​ 14 Table of Contents The following table sets forth the calculation of basic and diluted earnings per common share for the six and three month periods ended June 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six months ended June 30, ​ ​ 2023 ​ 2022 ​ ​ ​ 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 ​ $ 8,789 ​ 6,689 ​ $ 1.32 ​ $ 11,143 ​ 6,639 ​ $ 1.68 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted Earnings Per Share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restricted stock units ​ ​ ​ ​ 18 ​ ​ ​ ​ ​ ​ ​ 10 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 8,789 ​ 6,707 ​ $ 1.31 ​ $ 11,143 ​ 6,649 ​ $ 1.68 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended June 30, ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ 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 ​ $ 4,414 ​ 6,704 ​ $ 0.66 ​ $ 5,428 ​ 6,650 ​ $ 0.82 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted Earnings Per Share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restricted stock units ​ ​ ​ ​ 14 ​ ​ ​ ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 4,414 ​ 6,718 ​ $ 0.66 ​ $ 5,428 ​ 6,661 ​ $ 0.82 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Note 4 – Investments The following tables show a comparison of amortized cost and fair values of investment securities at June 30, 2023 and December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Estimated Fair Value June 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 11,028 ​ $ — ​ $ 1,487 ​ $ — ​ $ 9,541 Residential mortgage-backed agencies ​ ​ 43,224 ​ ​ — ​ ​ 7,357 ​ ​ — ​ ​ 35,867 Commercial mortgage-backed agencies ​ ​ 36,897 ​ ​ — ​ ​ 7,763 ​ ​ — ​ ​ 29,134 Collateralized mortgage obligations ​ ​ 24,836 ​ ​ — ​ ​ 4,711 ​ ​ — ​ ​ 20,125 Obligations of states and political subdivisions ​ ​ 10,837 ​ ​ 14 ​ ​ 285 ​ ​ — ​ ​ 10,566 Corporate bonds ​ ​ 1,000 ​ ​ — ​ ​ 253 ​ ​ — ​ ​ 747 Collateralized debt obligations ​ ​ 18,674 ​ ​ — ​ ​ 4,569 ​ ​ — ​ ​ 14,105 Total available for sale ​ $ 146,496 ​ $ 14 ​ $ 26,425 ​ $ — ​ $ 120,085 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 15 Table of Contents (in thousands) Amortized Cost Gross Unrecognized Gains Gross Unrecognized Losses Estimated Fair Value Allowance for Credit Losses June 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. treasuries ​ $ 37,332 ​ $ — ​ $ 1,075 ​ $ 36,257 ​ $ — U.S. government agencies ​ ​ 67,873 ​ ​ — ​ ​ 12,111 ​ ​ 55,762 ​ ​ — Residential mortgage-backed agencies ​ ​ 26,970 ​ ​ — ​ ​ 3,264 ​ ​ 23,706 ​ ​ — Commercial mortgage-backed agencies ​ ​ 21,494 ​ ​ — ​ ​ 5,188 ​ ​ 16,306 ​ ​ — Collateralized mortgage obligations ​ ​ 55,104 ​ ​ — ​ ​ 10,124 ​ ​ 44,980 ​ ​ — Obligations of states and political subdivisions ​ ​ 21,986 ​ ​ 688 ​ ​ 614 ​ ​ 22,060 ​ ​ — Total held to maturity ​ $ 230,759 ​ $ 688 ​ $ 32,376 ​ $ 199,071 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value OTTI in AOCL December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 11,044 ​ $ — ​ $ 1,582 ​ $ 9,462 ​ $ — Residential mortgage-backed agencies ​ ​ 45,052 ​ ​ — ​ ​ 7,651 ​ ​ 37,401 ​ ​ — Commercial mortgage-backed agencies ​ ​ 37,393 ​ ​ — ​ ​ 6,661 ​ ​ 30,732 ​ ​ — Collateralized mortgage obligations ​ ​ 25,828 ​ ​ — ​ ​ 4,784 ​ ​ 21,044 ​ ​ — Obligations of states and political subdivisions ​ ​ 10,848 ​ ​ 4 ​ ​ 360 ​ ​ 10,492 ​ ​ — Corporate Bonds ​ ​ 1,000 ​ ​ — ​ ​ 113 ​ ​ 887 ​ ​ — Collateralized debt obligations ​ ​ 18,664 ​ ​ — ​ ​ 2,793 ​ ​ 15,871 ​ ​ ( 1,695 ) Total available for sale ​ $ 149,829 ​ $ 4 ​ $ 23,944 ​ $ 125,889 ​ $ ( 1,695 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Amortized Cost Gross Unrecognized Gains Gross Unrecognized Losses Fair Value OTTI in AOCL December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. treasuries ​ $ 37,204 ​ $ — ​ $ 1,593 ​ $ 35,611 ​ $ — U.S. government agencies ​ ​ 67,734 ​ ​ — ​ ​ 13,261 ​ ​ 54,473 ​ ​ — Residential mortgage-backed agencies ​ ​ 28,624 ​ ​ 1 ​ ​ 3,503 ​ ​ 25,122 ​ ​ — Commercial mortgage-backed agencies ​ ​ 22,389 ​ ​ — ​ ​ 4,568 ​ ​ 17,821 ​ ​ — Collateralized mortgage obligations ​ ​ 57,085 ​ ​ — ​ ​ 10,001 ​ ​ 47,084 ​ ​ — Obligations of states and political subdivisions ​ ​ 22,623 ​ ​ 946 ​ ​ 600 ​ ​ 22,969 ​ ​ — Total held to maturity ​ $ 235,659 ​ $ 947 ​ $ 33,526 ​ $ 203,080 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 June 30, 2023 and December 31, 2022, 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 June 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ — ​ $ — ​ — ​ $ 9,541 ​ $ 1,487 ​ 3 Residential mortgage-backed agencies ​ ​ — ​ ​ — ​ — ​ ​ 35,867 ​ ​ 7,357 ​ 5 Commercial mortgage-backed agencies ​ ​ 1,715 ​ ​ 189 ​ 1 ​ ​ 27,419 ​ ​ 7,574 ​ 8 Collateralized mortgage obligations ​ ​ — ​ ​ — ​ — ​ ​ 20,125 ​ ​ 4,711 ​ 10 Obligations of states and political subdivisions ​ ​ 3,853 ​ ​ 196 ​ 3 ​ ​ 3,878 ​ ​ 89 ​ 2 Corporate Bonds ​ ​ — ​ ​ — ​ — ​ ​ 747 ​ ​ 253 ​ 1 Collateralized debt obligations ​ ​ — ​ ​ — ​ — ​ ​ 14,105 ​ ​ 4,569 ​ 9 Total available for sale ​ $ 5,568 ​ $ 385 ​ 4 ​ $ 111,682 ​ $ 26,040 ​ 38 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 months ​ 12 months or more (in thousands) Fair Value Unrecognized Losses Number of Investments Fair Value Unrecognized Losses Number of Investments June 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. treasuries ​ $ — ​ $ — ​ — ​ $ 36,257 ​ $ 1,075 ​ 4 U.S. government agencies ​ ​ — ​ ​ — ​ — ​ ​ 55,762 ​ ​ 12,111 ​ 9 Residential mortgage-backed agencies ​ ​ 3,143 ​ ​ 134 ​ 3 ​ ​ 20,563 ​ ​ 3,130 ​ 33 Commercial mortgage-backed agencies ​ ​ — ​ ​ — ​ — ​ ​ 16,306 ​ ​ 5,188 ​ 2 Collateralized mortgage obligations ​ ​ — ​ ​ — ​ — ​ ​ 44,980 ​ ​ 10,124 ​ 8 Obligations of states and political subdivisions ​ ​ — ​ ​ — ​ — ​ ​ 2,258 ​ ​ 614 ​ 1 Total held to maturity ​ $ 3,143 ​ $ 134 ​ 3 ​ $ 176,126 ​ $ 32,242 ​ 57 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 4,598 ​ $ 402 ​ 1 ​ $ 4,865 ​ $ 1,180 ​ 2 Residential mortgage-backed agencies ​ ​ — ​ ​ — ​ — ​ ​ 37,401 ​ ​ 7,651 ​ 5 Commercial mortgage-backed agencies ​ ​ 4,044 ​ ​ 455 ​ 3 ​ ​ 26,688 ​ ​ 6,206 ​ 6 Collateralized mortgage obligations ​ ​ 1,600 ​ ​ 210 ​ 5 ​ ​ 19,444 ​ ​ 4,574 ​ 5 Obligations of states and political subdivisions ​ ​ 8,906 ​ ​ 360 ​ 7 ​ ​ — ​ ​ — ​ — Corporate Bonds ​ ​ 887 ​ ​ 113 ​ 1 ​ ​ — ​ ​ — ​ — Collateralized debt obligations ​ ​ — ​ ​ — ​ — ​ ​ 15,871 ​ ​ 2,793 ​ 9 Total available for sale ​ $ 20,035 ​ $ 1,540 ​ 17 ​ $ 104,269 ​ $ 22,404 ​ 27 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. treasuries ​ $ — ​ $ — ​ — ​ $ 35,611 ​ $ 1,593 ​ 4 U.S. government agencies ​ ​ 38,883 ​ ​ 9,617 ​ 7 ​ ​ 15,591 ​ ​ 3,644 ​ 2 Residential mortgage-backed agencies ​ ​ 16,893 ​ ​ 1,425 ​ 29 ​ ​ 8,138 ​ ​ 2,078 ​ 7 Commercial mortgage-backed agencies ​ ​ 17,821 ​ ​ 4,568 ​ 3 ​ ​ — ​ ​ — ​ — Collateralized mortgage obligations ​ ​ 47,083 ​ ​ 10,001 ​ 8 ​ ​ — ​ ​ — ​ — Obligations of states and political subdivisions ​ ​ 2,269 ​ ​ 600 ​ 1 ​ ​ — ​ ​ — ​ — Total held to maturity ​ $ 122,949 ​ $ 26,211 ​ 48 ​ $ 59,340 ​ $ 7,315 ​ 13 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Corporation utilizes ASC 326 to evaluate its available-for sale (“AFS”) and held-to-maturity (“HTM”) debt security portfolio for expected credit losses. For AFS debt securities in an unrealized loss position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either criteria is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income, as a non-credit-related impairment. ​ Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit losses. Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Any impairment not recorded through an allowance for credit loss is recognized in other comprehensive income as a non-credit-related impairment. ​ 18 Table of Contents The Corporation has made the policy election to exclude accrued interest from the amortized cost basis of available-for-sale debt securities and report accrued interest separately in other assets in the Consolidated Balance Sheets. Available-for-sale debt securities are placed on nonaccrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income when a security is placed on nonaccrual status. Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable. ​ The Corporation separately evaluates its HTM investment securities for any credit losses. The Corporation pools like securities and calculates expected credit losses through an estimate based on a security’s credit rating, which is recognized as part of the allowance for credit losses for held-to-maturity securities and is included in the balance of investment securities held to maturity on the Consolidated Balance Sheets. If the Corporation determines that a security indicates evidence of deteriorated credit quality, the security is individually evaluated and a discounted cash flow analysis is performed and compared to the amortized cost basis. ​ As of June 30, 2023, the Corporation recorded no ACL related to its AFS or HTM security portfolio. ​ The following table presents a cumulative roll-forward of the amount of non-cash credit-related impairment charges related to credit losses that have been previously recognized in earnings for the trust preferred securities held in the collateralized debt obligation (“CDO”) portfolio during the six and three month periods ended June 30, 2023 and 2022 that the Corporation does not intend to sell: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ June 30, (in thousands) 2023 2022 Balance of credit-related impairment at January 1 ​ $ 1,841 ​ $ 2,043 Reduction for increases in cash flows expected to be collected ​ ​ ( 101 ) ​ ​ ( 101 ) Balance of credit-related impairment at June 30 ​ $ 1,740 ​ $ 1,942 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ June 30, (in thousands) ​ 2023 ​ 2022 Balance of credit-related impairment at April 1 ​ $ 1,791 ​ $ 1,993 Reduction for increases in cash flows expected to be collected ​ ​ ( 51 ) ​ ​ ( 51 ) Balance of credit-related impairment at June 30 ​ $ 1,740 ​ $ 1,942 ​ ​ 19 Table of Contents The amortized cost and estimated fair value of securities by contractual maturity at June 30, 2023 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 (in thousands) Amortized Cost Fair Value Available for Sale: ​ ​ ​ ​ ​ ​ Due in one year or less ​ $ 340 ​ $ 340 Due after one year through five years ​ ​ 11,948 ​ ​ 11,052 Due after five years through ten years ​ ​ 1,895 ​ ​ 1,631 Due after ten years ​ ​ 27,356 ​ ​ 21,936 ​ ​ ​ 41,539 ​ ​ 34,959 Residential mortgage-backed agencies ​ ​ 43,224 ​ ​ 35,867 Commercial mortgage-backed agencies ​ ​ 36,897 ​ ​ 29,134 Collateralized mortgage obligations ​ ​ 24,836 ​ ​ 20,125 Total available for sale ​ $ 146,496 ​ $ 120,085 Held to Maturity: ​ ​ ​ ​ ​ ​ Due in one year or less ​ $ 37,332 ​ $ 36,257 Due after one year through five years ​ ​ 12,500 ​ ​ 11,338 Due after five years through ten years ​ ​ 33,094 ​ ​ 27,382 Due after ten years ​ ​ 44,265 ​ ​ 39,102 ​ ​ ​ 127,191 ​ ​ 114,079 Residential mortgage-backed agencies ​ ​ 26,970 ​ ​ 23,706 Commercial mortgage-backed agencies ​ ​ 21,494 ​ ​ 16,306 Collateralized mortgage obligations ​ ​ 55,104 ​ ​ 44,980 Total held to maturity ​ $ 230,759 ​ $ 199,071 ​ ​ ​ ​ ​ 20 Table of Contents Note 5 – Loans and Related Allowance for Credit Losses The following table summarizes the primary segments of the loan portfolio at June 30, 2023 and December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Commercial Real Estate Acquisition and Development Commercial and Industrial Residential Mortgage Consumer Total June 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ — ​ $ — ​ $ — ​ $ 2,151 ​ $ — ​ $ 2,151 Collectively evaluated for impairment ​ ​ 483,485 ​ ​ 79,003 ​ ​ 249,683 ​ ​ 473,389 ​ ​ 62,327 ​ ​ 1,347,887 Total loans ​ $ 483,485 ​ $ 79,003 ​ $ 249,683 ​ $ 475,540 ​ $ 62,327 ​ $ 1,350,038 December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ 2,262 ​ $ 356 ​ $ — ​ $ 3,880 ​ $ — ​ $ 6,498 Collectively evaluated for impairment ​ ​ 456,569 ​ ​ 70,240 ​ ​ 245,396 ​ ​ 440,531 ​ ​ 60,260 ​ ​ 1,272,996 Total loans ​ $ 458,831 ​ $ 70,596 ​ $ 245,396 ​ $ 444,411 ​ $ 60,260 ​ $ 1,279,494 ​ The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans at June 30, 2023 and December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (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 June 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 284,580 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 284,580 All other CRE ​ ​ 198,905 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 198,905 Acquisition and development: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 20,228 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 20,228 All other A&D ​ ​ 58,647 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 128 ​ ​ 58,775 Commercial and industrial ​ ​ 249,425 ​ ​ 177 ​ ​ 81 ​ ​ — ​ ​ 258 ​ ​ — ​ ​ 249,683 Residential mortgage: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ 411,033 ​ ​ 428 ​ ​ 704 ​ ​ 45 ​ ​ 1,177 ​ ​ 2,518 ​ ​ 414,728 Residential mortgage - home equity ​ ​ 60,227 ​ ​ 241 ​ ​ — ​ ​ 18 ​ ​ 259 ​ ​ 326 ​ ​ 60,812 Consumer ​ ​ 61,591 ​ ​ 498 ​ ​ 141 ​ ​ 97 ​ ​ 736 ​ ​ — ​ ​ 62,327 Total ​ $ 1,344,636 ​ $ 1,344 ​ $ 926 ​ $ 160 ​ $ 2,430 ​ $ 2,972 ​ $ 1,350,038 December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 269,971 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 87 ​ $ 270,058 All other CRE ​ ​ 188,715 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 58 ​ ​ 188,773 Acquisition and development: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 19,637 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 19,637 All other A&D ​ ​ 50,813 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 146 ​ ​ 50,959 Commercial and industrial ​ ​ 245,342 ​ ​ 54 ​ ​ — ​ ​ — ​ ​ 54 ​ ​ — ​ ​ 245,396 Residential mortgage: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ 380,502 ​ ​ 31 ​ ​ 722 ​ ​ 239 ​ ​ 992 ​ ​ 2,893 ​ ​ 384,387 Residential mortgage - home equity ​ ​ 59,223 ​ ​ 399 ​ ​ 48 ​ ​ 43 ​ ​ 490 ​ ​ 311 ​ ​ 60,024 Consumer ​ ​ 59,789 ​ ​ 363 ​ ​ 83 ​ ​ 25 ​ ​ 471 ​ ​ — ​ ​ 60,260 Total ​ $ 1,273,992 ​ $ 847 ​ $ 853 ​ $ 307 ​ $ 2,007 ​ $ 3,495 ​ $ 1,279,494 ​ Non-accrual loans that have been subject to partial charge-offs totaled $ 0.1 million at June 30, 2023 and $ 0.1 million at December 31, 2022. Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $ 1.8 million at June 30, 2023. There were no loans subject to foreclosure at December 31, 2022. As a percentage of the loan portfolio, accruing 21 Table of Contents loans past due 30 days or more was 0.18 % at June 30, 2023 compared to 0.17 % at March 31, 2023 and 0.16 % at December 31, 2022. ​ Effective January 1, 2023, the Corporation adopted the accounting guidance in ASU No. 2022-02, which eliminated the recognition and measurement of TDRs. Due to the removal of the TDR designation, the Corporation evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a continuation of the existing loan. Loan modifications to borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the above. Therefore, the disclosures related to loan restructurings are only for modifications that directly affect cash flows. A loan that is considered a non-accrual or restructured loan may be subject to the individually evaluated loan analysis if the commitment is $ 0.1 million or greater; otherwise, the restructured loan remains in the appropriate segment in the ACL model and associated reserves are adjusted based on changes in the discounted cash flows resulting from the modification of the restructured loan. For a discussion with respect to reserve calculations regarding individually evaluated loans, refer to the “Nonrecurring Loans” section in Note 6, Fair Value Measurements. There were no loan modifications made to borrowers facing financial difficulties in the three- or six-month period ending June 30, 2023. The Corporation maintains an ACL at a level determined to be adequate to absorb expected credit losses associated with the Corporation’s financial instruments over the life of those instruments as of the balance sheet date. The Corporation develops and documents a systematic ACL methodology based on the following portfolio segments: (i) commercial real estate, (ii) acquisition and development, (iii) commercial and industrial, (iv) residential mortgage, and (v) consumer. The Corporation’s loan portfolio is segmented by homogeneous loan types that behave similarly to economic cycles. The segmentation in the CECL model is different from the segmentation in the Incurred Loss model. The following is a discussion of the key risks by portfolio segment that management assesses in preparing the ACL. Commercial Real Estate- loans are secured by commercial purpose real estate, including both owner occupied properties and investment properties, for various purposes such as hotels, strip malls and apartments. Operations of the individual projects as well as global cash flows of the debtors are the primary source of repayment of these loans. The condition of the local economy is an important indicator of risk, but there are more specific risks depending on the collateral type as well as the business. Acquisition and Development- loans include both commercial and consumer. Commercial loans are made to finance construction of buildings or other structures, as well as to finance the acquisition and development of raw land for various purposes. While the risk of these loans is generally confined to the construction period, if there are problems, the project may not be completed, and as such, may not provide sufficient cash flow on its own to service the debt or have sufficient value in a liquidation to cover the outstanding principal. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the type of project and the experience and resources of the developer. Consumer loans are made for the construction of residential homes for which a binding sales contract exists and generally are for a period of time sufficient to complete construction. Residential construction loans to individuals generally provide for the payment of interest only during the construction phase. Credit risk for residential real estate construction loans can arise from construction delays, cost overruns, failure of the contractor to complete the project to specifications and economic conditions that could impact demand for supply of the property being constructed. Commercial and Industrial- loans are made to operating companies or manufacturers for the purpose of production, operating capacity, accounts receivable, inventory or equipment financing. Cash flow from the operations of the borrower is the primary source of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the industry of the borrower. Collateral for these types of loans often do not have sufficient value in a distressed or liquidation scenario to satisfy the outstanding debt. These loans are also made to local municipalities for various purposes including refinancing existing obligations, infrastructure up-fit and expansion, or to purchase new equipment. The primary repayment source for local municipalities include the tax base of the municipality, specific revenue streams related to the infrastructure financed, and other business operations of the municipal authority. The health and stability of state and local economies directly impacts each municipality’s tax basis and are important indicators of risk for this segment. The ability of each 22 Table of Contents municipality to increase taxes and fees to offset service requirements give this type of loan a very low risk profile in the continuum of the Corporation’s loan portfolio. Residential mortgage- loans are secured by first and second liens such as home equity lines of credit and 1-4 family residential mortgages. The primary source of repayment for these loans is the income of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The state of the local housing market can also have a significant impact on this segment because low demand and/or declining home values can limit the ability of borrowers to sell a property and satisfy debt. Consumer- loans are made to individuals and may be either secured by assets other than 1-4 family residences or unsecured. This segment includes automobile loans and unsecured loans and lines of credit. The primary source of repayment for these loans is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The value of the collateral, if there is any, is less likely to be a source of repayment due to less certain collateral values. The following table summarizes the primary segments of the ACL at June 30, 2023 and allowance for loan loss (“ALL”) at December 31, 2022, 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 June 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — Collectively evaluated for impairment ​ ​ 4,946 ​ ​ 1,134 ​ ​ 3,549 ​ ​ 6,417 ​ ​ 859 ​ ​ — ​ ​ 16,905 Total ACL ​ $ 4,946 ​ $ 1,134 ​ $ 3,549 ​ $ 6,417 ​ $ 859 ​ $ — ​ $ 16,905 December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ — ​ $ — ​ $ — ​ $ 26 ​ $ — ​ $ — ​ $ 26 Collectively evaluated for impairment ​ ​ 6,345 ​ ​ 979 ​ ​ 2,845 ​ ​ 3,134 ​ ​ 877 ​ ​ 430 ​ ​ 14,610 Total ALL ​ $ 6,345 ​ $ 979 ​ $ 2,845 ​ $ 3,160 ​ $ 877 ​ $ 430 ​ $ 14,636 ​ Changes in the fair value of the types of collateral for individually evaluated loans are reported as provision for credit loss in the period of change. The evaluation of the need and amount of a specific allocation of the ACL and whether a loan can be removed from impairment status is made on a quarterly basis. The following table presents the amortized cost basis of collateral-dependent individually evaluated loans as of June 30, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 (dollars in thousands) Real Estate Non-Accrual Loans with No Allowance Residential mortgage ​ $ 2,151 ​ $ 2,151 Total Loans ​ $ 2,151 ​ $ 2,151 ​ 23 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 December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ — ​ $ — ​ $ 187 ​ $ 187 ​ $ — All other CRE ​ ​ — ​ ​ — ​ ​ 2,075 ​ ​ 2,075 ​ ​ — Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ — ​ ​ — ​ ​ 210 ​ ​ 210 ​ ​ — All other A&D ​ ​ — ​ ​ — ​ ​ 146 ​ ​ 146 ​ ​ 109 Commercial and industrial ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ ​ 345 ​ ​ 26 ​ ​ 3,225 ​ ​ 3,570 ​ ​ 41 Residential mortgage – home equity ​ ​ — ​ ​ — ​ ​ 310 ​ ​ 310 ​ ​ — Consumer ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total impaired loans ​ $ 345 ​ $ 26 ​ $ 6,153 ​ $ 6,498 ​ $ 150 ​ (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. ​ 24 Table of Contents The following tables present the activity in the ACL and ALL for the six- and three- month periods ended June 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended (in thousands) Commercial Real Estate Acquisition and Development Commercial and Industrial Residential Mortgage Consumer Unallocated Total Beginning balance at January 1, 2023 prior to adoption of ASC 326 ​ $ 6,345 ​ $ 979 ​ $ 2,845 ​ $ 3,160 ​ $ 877 ​ $ 430 ​ $ 14,636 Impact of adopting ASC 326 ​ ​ ( 1,143 ) ​ ​ ( 15 ) ​ ​ 1,334 ​ ​ 2,112 ​ ​ 208 ​ ​ ( 430 ) ​ ​ 2,066 Loan Charge-offs ​ ​ ( 87 ) ​ ​ — ​ ​ ( 166 ) ​ ​ ( 24 ) ​ ​ ( 518 ) ​ ​ — ​ ​ ( 795 ) Recoveries collected ​ ​ 5 ​ ​ 7 ​ ​ 9 ​ ​ 36 ​ ​ 93 ​ ​ — ​ ​ 150 Credit Loss Expense ​ ​ ( 174 ) ​ ​ 163 ​ ​ ( 473 ) ​ ​ 1,133 ​ ​ 199 ​ ​ — ​ ​ 848 ACL balance at June 30, 2023 ​ $ 4,946 ​ $ 1,134 ​ $ 3,549 ​ $ 6,417 ​ $ 859 ​ $ — ​ $ 16,905 ALL balance at January 1, 2022 ​ $ 6,032 ​ $ 2,615 ​ $ 2,460 ​ $ 3,484 ​ $ 934 ​ $ 430 ​ $ 15,955 Loan Charge-offs ​ ​ — ​ ​ — ​ ​ ( 52 ) ​ ​ ( 33 ) ​ ​ ( 545 ) ​ ​ — ​ ​ ( 630 ) Recoveries collected ​ ​ 1 ​ ​ 20 ​ ​ 9 ​ ​ 101 ​ ​ 76 ​ ​ — ​ ​ 207 Credit Loss Expense ​ ​ 187 ​ ​ ( 463 ) ​ ​ 413 ​ ​ ( 440 ) ​ ​ 508 ​ ​ — ​ ​ 205 ALL balance at June 30, 2022 ​ $ 6,220 ​ $ 2,172 ​ $ 2,830 ​ $ 3,112 ​ $ 973 ​ $ 430 ​ $ 15,737 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended (in thousands) ​ Commercial Real Estate ​ Acquisition and Development ​ Commercial and Industrial ​ Residential Mortgage ​ Consumer ​ Unallocated ​ Total ACL balance at April 1, 2023 ​ $ 4,862 ​ $ 1,103 ​ $ 3,755 ​ $ 6,324 ​ $ 827 ​ $ — ​ $ 16,871 Loan Charge-offs ​ ​ ( 87 ) ​ ​ — ​ ​ ( 166 ) ​ ​ ( 18 ) ​ ​ ( 185 ) ​ ​ — ​ ​ ( 456 ) Recoveries collected ​ ​ — ​ ​ 2 ​ ​ 5 ​ ​ 18 ​ ​ 31 ​ ​ — ​ ​ 56 Credit Loss Expense ​ ​ 171 ​ ​ 29 ​ ​ ( 45 ) ​ ​ 93 ​ ​ 186 ​ ​ — ​ ​ 434 ACL balance at June 30, 2023 ​ $ 4,946 ​ $ 1,134 ​ $ 3,549 ​ $ 6,417 ​ $ 859 ​ $ — ​ $ 16,905 ALL balance at April 1, 2022 ​ $ 5,922 ​ $ 2,542 ​ $ 2,513 ​ $ 2,945 ​ $ 940 ​ $ 430 ​ $ 15,292 Charge-offs ​ ​ — ​ ​ — ​ ​ ( 4 ) ​ ​ ( 24 ) ​ ​ ( 299 ) ​ ​ — ​ ​ ( 327 ) Recoveries ​ ​ — ​ ​ 2 ​ ​ 6 ​ ​ 86 ​ ​ 54 ​ ​ — ​ ​ 148 Credit Loss Expense ​ ​ 298 ​ ​ ( 372 ) ​ ​ 315 ​ ​ 105 ​ ​ 278 ​ ​ — ​ ​ 624 ALL balance at June 30, 2022 ​ $ 6,220 ​ $ 2,172 ​ $ 2,830 ​ $ 3,112 ​ $ 973 ​ $ 430 ​ $ 15,737 ​ ​ 25 Table of Contents The Corporation’s methodology for estimating the ACL includes: Segmentation. The Corporation’s loan portfolio is segmented by homogeneous loan types that behave similarly to economic cycles. Specific Analysis. A specific reserve analysis is applied to certain individually evaluated loans. These loans are evaluated quarterly generally based on collateral value, observable market value or the present value of expected future cash flows. A specific reserve is established if the fair value is less than the loan balance. A charge-off is recognized when the loss is quantifiable. Individually evaluated loans not specifically analyzed reside in the Quantitative Analysis. Quantitative Analysis. The Corporation elected to use DCF. Economic forecasts include but are not limited to unemployment, the Consumer Price Index, the Housing Affordability Index, and Gross State Product. These forecasts are assumed to revert to the long term average and are utilized in the model to estimate the probability of default and the loss given default is the estimated loss rate, which varies over time. The estimated loss rate is applied within the appropriate periods in the cash flow model to determine the net present value. Net present value is also impacted by assumption related to the duration between default and recovery. The reserve is based on the difference between the summation of the principal balances taking amortized costs into consideration and the summation of the net present values. Qualitative Analysis. Based on management’s review and analysis of internal, external and model risks, management may adjust the model output. Management reviews the peaks and troughs of the model’s calibrations, taking into account economic forecasts to develop guardrails that serve as the basis for determining the reasonableness of the model’s output and makes adjustments as necessary. This process challenges unexpected variability resulting from outputs beyond the model’s calibrations that appear to be unreasonable. Management also enhances the calculation through the use of Moody’s economic forecast data in its calculation. Additionally, management may adjust the economic forecast if it is incompatible with known market conditions based on management’s experience and perspective. The ACL 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 ACL that is representative of the risk found in the components of the portfolio at any given date. Credit Quality Indicators: The Corporation’s portfolio grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The Corporation’s internal credit risk grading system is based on debt service coverage, collateral values and other subjective factors. Mortgage and consumer loans are defaulted to pass grade until a loan migrates to past due status. The Corporation has a loan review policy and annual scope report that details the level of loan review for loans in a given year. The annual loan review provides the Credit Risk Committee with an independent analysis of the following: (i) credit quality of the loan portfolio, (ii) compliance with loan policy, (iii) adequacy of documentation in credit files and (iv) validity of risk ratings. The Corporation’s internally assigned grades are as follows: Pass - The Corporation uses six grades of pass, including its watch rating. Generally, a pass rating indicates that the loan is currently performing and is of high quality. Special Mention - Assets with potential weaknesses that warrant management’s close attention and if left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Substandard - Assets that are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Assets so classified have a well-defined weakness, or weaknesses that jeopardize the liquidation of 26 Table of Contents the debt. Such assets are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful - Assets with all weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable. Loss - Assets considered of such little value that its continuance on the books is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical to defer writing off this basically worthless asset even though partial recovery may be affected in the future. The ability of borrowers to repay commercial loans is dependent upon the success of their business and general economic conditions. Due to the greater potential for loss within our commercial portfolio, we monitor the commercial loan portfolio through an internal risk rating system. Loan risk ratings are assigned based upon the creditworthiness of the borrower and are reviewed on an ongoing basis according to our internal policies. Loans rated special mention or substandard have potential or well-defined weaknesses not generally found in high quality, performing loans, and require attention from management to limit loss. ​ 27 Table of Contents The following table presents loan balances by year of origination and internally assigned risk rating for our portfolio segments as of dates presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2023 2022 2021 2020 2019 2018 and Prior Revolving Total Portfolio Loans June 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 19,702 ​ $ 66,666 ​ $ 31,131 ​ $ 47,947 ​ $ 40,130 ​ $ 60,486 ​ $ 807 ​ $ 266,869 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 6,167 ​ ​ — ​ ​ 6,167 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 11,544 ​ ​ — ​ ​ 11,544 Total non-owner occupied ​ ​ 19,702 ​ ​ 66,666 ​ ​ 31,131 ​ ​ 47,947 ​ ​ 40,130 ​ ​ 78,197 ​ ​ 807 ​ ​ 284,580 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 87 ​ ​ — ​ ​ 87 All other CRE ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 16,648 ​ ​ 28,223 ​ ​ 25,694 ​ ​ 21,675 ​ ​ 25,017 ​ ​ 70,917 ​ ​ 4,490 ​ ​ 192,664 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,203 ​ ​ 1,203 Substandard ​ ​ — ​ ​ — ​ ​ 1,080 ​ ​ — ​ ​ 1,888 ​ ​ 1,471 ​ ​ 599 ​ ​ 5,038 Total all other CRE ​ ​ 16,648 ​ ​ 28,223 ​ ​ 26,774 ​ ​ 21,675 ​ ​ 26,905 ​ ​ 72,388 ​ ​ 6,292 ​ ​ 198,905 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Acquisition and development: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 3,905 ​ ​ 12,561 ​ ​ 1,198 ​ ​ — ​ ​ — ​ ​ 195 ​ ​ 2,369 ​ ​ 20,228 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total acquisition and development ​ ​ 3,905 ​ ​ 12,561 ​ ​ 1,198 ​ ​ — ​ ​ — ​ ​ 195 ​ ​ 2,369 ​ ​ 20,228 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — All other A&D ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 6,966 ​ ​ 20,364 ​ ​ 5,072 ​ ​ 9,427 ​ ​ 1,328 ​ ​ 11,501 ​ ​ 3,989 ​ ​ 58,647 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 128 ​ ​ — ​ ​ 128 Total all other A&D ​ ​ 6,966 ​ ​ 20,364 ​ ​ 5,072 ​ ​ 9,427 ​ ​ 1,328 ​ ​ 11,629 ​ ​ 3,989 ​ ​ 58,775 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial and industrial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 20,732 ​ ​ 73,589 ​ ​ 26,631 ​ ​ 13,851 ​ ​ 10,735 ​ ​ 12,981 ​ ​ 69,070 ​ ​ 227,589 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 334 ​ ​ 844 ​ ​ 1,178 Substandard ​ ​ — ​ ​ 8,923 ​ ​ 2,140 ​ ​ 6,896 ​ ​ 135 ​ ​ 876 ​ ​ 1,946 ​ ​ 20,916 Total commercial and industrial ​ ​ 20,732 ​ ​ 82,512 ​ ​ 28,771 ​ ​ 20,747 ​ ​ 10,870 ​ ​ 14,191 ​ ​ 71,860 ​ ​ 249,683 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ 166 ​ ​ — ​ ​ — ​ ​ — ​ ​ 166 Residential mortgage: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 29,970 ​ ​ 80,804 ​ ​ 90,055 ​ ​ 40,502 ​ ​ 26,163 ​ ​ 138,450 ​ ​ 2,004 ​ ​ 407,948 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ 926 ​ ​ 156 ​ ​ 101 ​ ​ 5,557 ​ ​ 40 ​ ​ 6,780 Total residential mortgage - term ​ ​ 29,970 ​ ​ 80,804 ​ ​ 90,981 ​ ​ 40,658 ​ ​ 26,264 ​ ​ 144,007 ​ ​ 2,044 ​ ​ 414,728 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 13 ​ ​ — ​ ​ 13 Residential mortgage - home equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 1,060 ​ ​ 5,301 ​ ​ 909 ​ ​ 505 ​ ​ 307 ​ ​ 571 ​ ​ 51,535 ​ ​ 60,188 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ 41 ​ ​ — ​ ​ 19 ​ ​ 564 ​ ​ 624 Total residential mortgage - home equity ​ ​ 1,060 ​ ​ 5,301 ​ ​ 909 ​ ​ 546 ​ ​ 307 ​ ​ 590 ​ ​ 52,099 ​ ​ 60,812 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 11 ​ ​ — ​ ​ 11 Consumer: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 12,170 ​ ​ 13,199 ​ ​ 8,094 ​ ​ 2,895 ​ ​ 930 ​ ​ 22,045 ​ ​ 2,733 ​ ​ 62,066 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ 56 ​ ​ 163 ​ ​ 24 ​ ​ 7 ​ ​ 5 ​ ​ 6 ​ ​ 261 Total consumer ​ ​ 12,170 ​ ​ 13,255 ​ ​ 8,257 ​ ​ 2,919 ​ ​ 937 ​ ​ 22,050 ​ ​ 2,739 ​ ​ 62,327 Current period gross charge-offs ​ ​ 86 ​ ​ 141 ​ ​ 272 ​ ​ 2 ​ ​ — ​ ​ 17 ​ ​ — ​ ​ 518 Total Portfolio Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 111,153 ​ ​ 300,707 ​ ​ 188,784 ​ ​ 136,802 ​ ​ 104,610 ​ ​ 317,146 ​ ​ 136,997 ​ ​ 1,296,199 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 6,501 ​ ​ 2,047 ​ ​ 8,548 Substandard ​ ​ — ​ ​ 8,979 ​ ​ 4,309 ​ ​ 7,117 ​ ​ 2,131 ​ ​ 19,600 ​ ​ 3,155 ​ ​ 45,291 Total Portfolio Loans ​ $ 111,153 ​ $ 309,686 ​ $ 193,093 ​ $ 143,919 ​ $ 106,741 ​ $ 343,247 ​ $ 142,199 ​ $ 1,350,038 Current YTD Period: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current period gross charge-offs ​ $ 86 ​ $ 141 ​ $ 272 ​ $ 168 ​ $ — ​ $ 128 ​ $ — ​ $ 795 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 28 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 2020 2019 2018 2017 and Prior Revolving Total Portfolio Loans December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 67,429 ​ $ 31,710 ​ $ 48,421 ​ $ 41,221 ​ $ 19,414 ​ $ 42,069 ​ $ 1,570 ​ $ 251,834 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 6,289 ​ ​ — ​ ​ 6,289 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 11,935 ​ ​ — ​ ​ 11,935 Total non-owner occupied ​ ​ 67,429 ​ ​ 31,710 ​ ​ 48,421 ​ ​ 41,221 ​ ​ 19,414 ​ ​ 60,293 ​ ​ 1,570 ​ ​ 270,058 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — All other CRE ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 24,655 ​ ​ 26,947 ​ ​ 22,906 ​ ​ 27,213 ​ ​ 8,873 ​ ​ 67,691 ​ ​ 4,790 ​ ​ 183,075 Special Mention ​ ​ — ​ ​ 1,111 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,111 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ 3,006 ​ ​ — ​ ​ 357 ​ ​ 1,224 ​ ​ 4,587 Total all other CRE ​ ​ 24,655 ​ ​ 28,058 ​ ​ 22,906 ​ ​ 30,219 ​ ​ 8,873 ​ ​ 68,048 ​ ​ 6,014 ​ ​ 188,773 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Acquisition and development: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 15,629 ​ ​ 1,453 ​ ​ 151 ​ ​ — ​ ​ — ​ ​ 210 ​ ​ 2,194 ​ ​ 19,637 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total acquisition and development ​ ​ 15,629 ​ ​ 1,453 ​ ​ 151 ​ ​ — ​ ​ — ​ ​ 210 ​ ​ 2,194 ​ ​ 19,637 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 20 ​ ​ — ​ ​ 20 All other A&D ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 18,733 ​ ​ 4,979 ​ ​ 9,755 ​ ​ 1,408 ​ ​ 558 ​ ​ 12,961 ​ ​ 2,419 ​ ​ 50,813 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 146 ​ ​ — ​ ​ 146 Total all other A&D ​ ​ 18,733 ​ ​ 4,979 ​ ​ 9,755 ​ ​ 1,408 ​ ​ 558 ​ ​ 13,107 ​ ​ 2,419 ​ ​ 50,959 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial and industrial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 83,608 ​ ​ 30,451 ​ ​ 15,982 ​ ​ 12,707 ​ ​ 5,013 ​ ​ 9,528 ​ ​ 63,668 ​ ​ 220,957 Special Mention ​ ​ — ​ ​ 2,555 ​ ​ — ​ ​ — ​ ​ — ​ ​ 338 ​ ​ 2,134 ​ ​ 5,027 Substandard ​ ​ 8,923 ​ ​ — ​ ​ 7,167 ​ ​ 173 ​ ​ 634 ​ ​ 311 ​ ​ 2,204 ​ ​ 19,412 Total commercial and industrial ​ ​ 92,531 ​ ​ 33,006 ​ ​ 23,149 ​ ​ 12,880 ​ ​ 5,647 ​ ​ 10,177 ​ ​ 68,006 ​ ​ 245,396 Current period gross charge-offs ​ ​ — ​ ​ 97 ​ ​ 34 ​ ​ 3 ​ ​ — ​ ​ — ​ ​ — ​ ​ 134 Residential mortgage: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 64,930 ​ ​ 93,665 ​ ​ 42,784 ​ ​ 27,120 ​ ​ 14,132 ​ ​ 133,397 ​ ​ 2,306 ​ ​ 378,334 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ 16 ​ ​ 237 ​ ​ 143 ​ ​ 5,634 ​ ​ 23 ​ ​ 6,053 Total residential mortgage - term ​ ​ 64,930 ​ ​ 93,665 ​ ​ 42,800 ​ ​ 27,357 ​ ​ 14,275 ​ ​ 139,031 ​ ​ 2,329 ​ ​ 384,387 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 28 ​ ​ — ​ ​ 28 Residential mortgage - home equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 5,739 ​ ​ 957 ​ ​ 538 ​ ​ 328 ​ ​ 97 ​ ​ 478 ​ ​ 51,232 ​ ​ 59,369 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ 44 ​ ​ — ​ ​ 21 ​ ​ 40 ​ ​ 550 ​ ​ 655 Total residential mortgage - home equity ​ ​ 5,739 ​ ​ 957 ​ ​ 582 ​ ​ 328 ​ ​ 118 ​ ​ 518 ​ ​ 51,782 ​ ​ 60,024 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 12 ​ ​ 6 ​ ​ — ​ ​ 18 Consumer: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 16,748 ​ ​ 10,495 ​ ​ 3,845 ​ ​ 1,596 ​ ​ 687 ​ ​ 24,096 ​ ​ 2,654 ​ ​ 60,121 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ 92 ​ ​ 27 ​ ​ 9 ​ ​ 7 ​ ​ — ​ ​ 4 ​ ​ 139 Total consumer ​ ​ 16,748 ​ ​ 10,587 ​ ​ 3,872 ​ ​ 1,605 ​ ​ 694 ​ ​ 24,096 ​ ​ 2,658 ​ ​ 60,260 Current period gross charge-offs ​ ​ 36 ​ ​ 494 ​ ​ 18 ​ ​ 37 ​ ​ 11 ​ ​ 40 ​ ​ — ​ ​ 636 Total Portfolio Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 297,471 ​ ​ 200,657 ​ ​ 144,382 ​ ​ 111,593 ​ ​ 48,774 ​ ​ 290,430 ​ ​ 130,833 ​ ​ 1,224,140 Special Mention ​ ​ — ​ ​ 3,666 ​ ​ — ​ ​ — ​ ​ — ​ ​ 6,627 ​ ​ 2,134 ​ ​ 12,427 Substandard ​ ​ 8,923 ​ ​ 92 ​ ​ 7,254 ​ ​ 3,425 ​ ​ 805 ​ ​ 18,423 ​ ​ 4,005 ​ ​ 42,927 Total Portfolio Loans ​ $ 306,394 ​ $ 204,415 ​ $ 151,636 ​ $ 115,018 ​ $ 49,579 ​ $ 315,480 ​ $ 136,972 ​ $ 1,279,494 Current YTD Period: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current period gross charge-offs ​ $ 36 ​ $ 591 ​ $ 52 ​ $ 40 ​ $ 23 ​ $ 94 ​ $ — ​ $ 836 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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. ​ ​ 29 Table of Contents The following tables present loan balances by year of origination segregated by performing and non-performing loans for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2023 2022 2021 2020 2019 2018 and Prior Revolving Total Portfolio Loans June 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ $ 19,702 ​ $ 66,666 ​ $ 31,131 ​ $ 47,947 ​ $ 40,130 ​ $ 78,197 ​ $ 807 ​ $ 284,580 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total non-owner occupied ​ ​ 19,702 ​ ​ 66,666 ​ ​ 31,131 ​ ​ 47,947 ​ ​ 40,130 ​ ​ 78,197 ​ ​ 807 ​ ​ 284,580 All other CRE ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 16,648 ​ ​ 28,223 ​ ​ 26,774 ​ ​ 21,675 ​ ​ 26,905 ​ ​ 72,388 ​ ​ 6,292 ​ ​ 198,905 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total all other CRE ​ ​ 16,648 ​ ​ 28,223 ​ ​ 26,774 ​ ​ 21,675 ​ ​ 26,905 ​ ​ 72,388 ​ ​ 6,292 ​ ​ 198,905 Acquisition and development: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 3,905 ​ ​ 12,561 ​ ​ 1,198 ​ ​ — ​ ​ — ​ ​ 195 ​ ​ 2,369 ​ ​ 20,228 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total acquisition and development ​ ​ 3,905 ​ ​ 12,561 ​ ​ 1,198 ​ ​ — ​ ​ — ​ ​ 195 ​ ​ 2,369 ​ ​ 20,228 All other A&D ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 6,966 ​ ​ 20,364 ​ ​ 5,072 ​ ​ 9,427 ​ ​ 1,328 ​ ​ 11,501 ​ ​ 3,989 ​ ​ 58,647 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 128 ​ ​ — ​ ​ 128 Total all other A&D ​ ​ 6,966 ​ ​ 20,364 ​ ​ 5,072 ​ ​ 9,427 ​ ​ 1,328 ​ ​ 11,629 ​ ​ 3,989 ​ ​ 58,775 Commercial and industrial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 20,732 ​ ​ 82,512 ​ ​ 28,771 ​ ​ 20,747 ​ ​ 10,870 ​ ​ 14,191 ​ ​ 71,860 ​ ​ 249,683 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total commercial and industrial ​ ​ 20,732 ​ ​ 82,512 ​ ​ 28,771 ​ ​ 20,747 ​ ​ 10,870 ​ ​ 14,191 ​ ​ 71,860 ​ ​ 249,683 Residential mortgage: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 29,970 ​ ​ 80,804 ​ ​ 90,981 ​ ​ 40,658 ​ ​ 26,163 ​ ​ 141,559 ​ ​ 2,030 ​ ​ 412,165 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 101 ​ ​ 2,448 ​ ​ 14 ​ ​ 2,563 Total residential mortgage - term ​ ​ 29,970 ​ ​ 80,804 ​ ​ 90,981 ​ ​ 40,658 ​ ​ 26,264 ​ ​ 144,007 ​ ​ 2,044 ​ ​ 414,728 Residential mortgage - home equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 1,060 ​ ​ 5,301 ​ ​ 909 ​ ​ 505 ​ ​ 307 ​ ​ 571 ​ ​ 51,814 ​ ​ 60,467 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ 41 ​ ​ — ​ ​ 19 ​ ​ 285 ​ ​ 345 Total residential mortgage - home equity ​ ​ 1,060 ​ ​ 5,301 ​ ​ 909 ​ ​ 546 ​ ​ 307 ​ ​ 590 ​ ​ 52,099 ​ ​ 60,812 Consumer: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 12,170 ​ ​ 13,255 ​ ​ 8,234 ​ ​ 2,919 ​ ​ 937 ​ ​ 21,981 ​ ​ 2,735 ​ ​ 62,231 Nonperforming ​ ​ — ​ ​ — ​ ​ 23 ​ ​ — ​ ​ — ​ ​ 69 ​ ​ 4 ​ ​ 96 Total consumer ​ ​ 12,170 ​ ​ 13,255 ​ ​ 8,257 ​ ​ 2,919 ​ ​ 937 ​ ​ 22,050 ​ ​ 2,739 ​ ​ 62,327 Total Portfolio Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 111,153 ​ ​ 309,686 ​ ​ 193,070 ​ ​ 143,878 ​ ​ 106,640 ​ ​ 340,583 ​ ​ 141,896 ​ ​ 1,346,906 Nonperforming ​ ​ — ​ ​ — ​ ​ 23 ​ ​ 41 ​ ​ 101 ​ ​ 2,664 ​ ​ 303 ​ ​ 3,132 Total Portfolio Loans ​ $ 111,153 ​ $ 309,686 ​ $ 193,093 ​ $ 143,919 ​ $ 106,741 ​ $ 343,247 ​ $ 142,199 ​ $ 1,350,038 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 30 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 2020 2019 2018 2017 and Prior Revolving Total Portfolio Loans December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ $ 67,429 ​ $ 31,710 ​ $ 48,421 ​ $ 41,221 ​ $ 19,414 ​ $ 60,206 ​ $ 1,570 ​ $ 269,971 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 87 ​ ​ — ​ ​ 87 Total non-owner occupied ​ ​ 67,429 ​ ​ 31,710 ​ ​ 48,421 ​ ​ 41,221 ​ ​ 19,414 ​ ​ 60,293 ​ ​ 1,570 ​ ​ 270,058 All other CRE ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 24,655 ​ ​ 28,058 ​ ​ 22,906 ​ ​ 30,219 ​ ​ 8,873 ​ ​ 67,990 ​ ​ 6,014 ​ ​ 188,715 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 58 ​ ​ — ​ ​ 58 Total all other CRE ​ ​ 24,655 ​ ​ 28,058 ​ ​ 22,906 ​ ​ 30,219 ​ ​ 8,873 ​ ​ 68,048 ​ ​ 6,014 ​ ​ 188,773 Acquisition and development: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 15,629 ​ ​ 1,453 ​ ​ 151 ​ ​ — ​ ​ — ​ ​ 210 ​ ​ 2,194 ​ ​ 19,637 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total acquisition and development ​ ​ 15,629 ​ ​ 1,453 ​ ​ 151 ​ ​ — ​ ​ — ​ ​ 210 ​ ​ 2,194 ​ ​ 19,637 All other A&D ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 18,733 ​ ​ 4,979 ​ ​ 9,755 ​ ​ 1,408 ​ ​ 558 ​ ​ 12,962 ​ ​ 2,419 ​ ​ 50,814 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 145 ​ ​ — ​ ​ 145 Total all other A&D ​ ​ 18,733 ​ ​ 4,979 ​ ​ 9,755 ​ ​ 1,408 ​ ​ 558 ​ ​ 13,107 ​ ​ 2,419 ​ ​ 50,959 Commercial and industrial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 92,531 ​ ​ 33,006 ​ ​ 23,149 ​ ​ 12,880 ​ ​ 5,647 ​ ​ 10,177 ​ ​ 68,006 ​ ​ 245,396 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total commercial and industrial ​ ​ 92,531 ​ ​ 33,006 ​ ​ 23,149 ​ ​ 12,880 ​ ​ 5,647 ​ ​ 10,177 ​ ​ 68,006 ​ ​ 245,396 Residential mortgage: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 64,930 ​ ​ 93,665 ​ ​ 42,800 ​ ​ 27,120 ​ ​ 14,198 ​ ​ 136,228 ​ ​ 2,313 ​ ​ 381,254 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ 237 ​ ​ 77 ​ ​ 2,803 ​ ​ 16 ​ ​ 3,133 Total residential mortgage - term ​ ​ 64,930 ​ ​ 93,665 ​ ​ 42,800 ​ ​ 27,357 ​ ​ 14,275 ​ ​ 139,031 ​ ​ 2,329 ​ ​ 384,387 Residential mortgage - home equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 5,739 ​ ​ 957 ​ ​ 538 ​ ​ 328 ​ ​ 115 ​ ​ 478 ​ ​ 51,515 ​ ​ 59,670 Nonperforming ​ ​ — ​ ​ — ​ ​ 44 ​ ​ — ​ ​ 3 ​ ​ 40 ​ ​ 267 ​ ​ 354 Total residential mortgage - home equity ​ ​ 5,739 ​ ​ 957 ​ ​ 582 ​ ​ 328 ​ ​ 118 ​ ​ 518 ​ ​ 51,782 ​ ​ 60,024 Consumer: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 16,748 ​ ​ 10,581 ​ ​ 3,872 ​ ​ 1,605 ​ ​ 694 ​ ​ 24,077 ​ ​ 2,658 ​ ​ 60,235 Nonperforming ​ ​ — ​ ​ 6 ​ ​ — ​ ​ — ​ ​ — ​ ​ 19 ​ ​ — ​ ​ 25 Total consumer ​ ​ 16,748 ​ ​ 10,587 ​ ​ 3,872 ​ ​ 1,605 ​ ​ 694 ​ ​ 24,096 ​ ​ 2,658 ​ ​ 60,260 Total Portfolio Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 306,394 ​ ​ 204,409 ​ ​ 151,592 ​ ​ 114,781 ​ ​ 49,499 ​ ​ 312,328 ​ ​ 136,689 ​ ​ 1,275,692 Nonperforming ​ ​ — ​ ​ 6 ​ ​ 44 ​ ​ 237 ​ ​ 80 ​ ​ 3,152 ​ ​ 283 ​ ​ 3,802 Total Portfolio Loans ​ $ 306,394 ​ $ 204,415 ​ $ 151,636 ​ $ 115,018 ​ $ 49,579 ​ $ 315,480 ​ $ 136,972 ​ $ 1,279,494 ​ ​ 31 Table of Contents 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 . The fair value of investments is determined using a market approach. As of June 30, 2023, 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 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. 32 Table of Contents Nonrecurring Basis – Individually Evaluated Loans- Individual loans with borrowers experiencing financial difficulty and with a remaining principal balance of $ 0.1 million or more are evaluated for potential specific reserves and adjusted, if a shortfall exists, to fair value less costs to sell. Fair value is measured based on the value of the value of the underlying collateral securing the loan if repayment is expected solely from the sale of operation of the collateral or present value of estimated future cash flows discounted at the loan’s contractual interest rate if the loan is not determined to be collateral dependent. Fair value for individually evaluated loans is determined using several methods. Generally, the fair value of real estate is determined based on appraisals by qualified licensed appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. These routine adjustments are made to adjust the value of a specific property relative to comparable properties for variations in qualitities such as location, size, and income production capacity relative to the subject property of the appraisal. Subsequent to the initial impairment date, existing individually evaluated loans are reevaluated quarterly for additional impairment and adjustments to fair value less costs to sell are made, where appropriate. For individually evaluated loans, the first state of our impairment analysis involves inspection of the property in question to affirm the condition has not deteriorated since the previous impairment analysis date. Management also engages in conversations with local real estate professionals and market participants to determine the likely marketing time and value range for the property. The second state involves an assessment of current trends in the regional market. After thorough consideration of these factors, management will order a new appraisal. For non-individually evaluated loans, the fair value is determined by updating the present value of estimated future cash flows using the loan’s existing rate to reflect the payment schedule for the remaining life of the loan. 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 – Other real estate owned 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. ​ 33 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 June 30, 2023 and December 31, 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at June 30, 2023 Using ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ ​ Assets ​ Active Markets ​ Other ​ Significant ​ ​ Measured at ​ for Identical ​ Observable ​ Unobservable ​ ​ Fair Value ​ Assets ​ Inputs ​ Inputs (in thousands) 06/30/23 (Level 1) (Level 2) (Level 3) Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 9,541 ​ ​ ​ ​ $ 9,541 ​ ​ ​ Residential mortgage-backed agencies ​ $ 35,867 ​ ​ ​ ​ $ 35,867 ​ ​ ​ Commercial mortgage-backed agencies ​ $ 29,134 ​ ​ ​ ​ $ 29,134 ​ ​ ​ Collateralized mortgage obligations ​ $ 20,125 ​ ​ ​ ​ $ 20,125 ​ ​ ​ Obligations of states and political subdivisions ​ $ 10,566 ​ ​ ​ ​ $ 10,566 ​ ​ ​ Corporate bonds ​ $ 747 ​ ​ ​ ​ $ 747 ​ ​ ​ Collateralized debt obligations ​ $ 14,105 ​ ​ ​ ​ ​ ​ ​ $ 14,105 Financial derivatives ​ $ 1,084 ​ ​ ​ ​ $ 1,084 ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity Investment ​ $ 2,545 ​ ​ ​ ​ ​ ​ ​ $ 2,545 Other real estate owned ​ $ — ​ ​ ​ ​ ​ ​ ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at December 31, 2022 Using ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ Assets/(liabilities) ​ Active Markets ​ Other ​ Significant ​ ​ Measured at ​ for Identical ​ Observable ​ Unobservable ​ ​ Fair Value ​ Assets ​ Inputs ​ Inputs (in thousands) 12/31/22 (Level 1) (Level 2) (Level 3) Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 9,462 ​ ​ ​ ​ $ 9,462 ​ ​ ​ Residential mortgage-backed agencies ​ $ 37,401 ​ ​ ​ ​ $ 37,401 ​ ​ ​ Commercial mortgage-backed agencies ​ $ 30,732 ​ ​ ​ ​ $ 30,732 ​ ​ ​ Collateralized mortgage obligations ​ $ 21,044 ​ ​ ​ ​ $ 21,044 ​ ​ ​ Obligations of states and political subdivisions ​ $ 10,492 ​ ​ ​ ​ $ 10,492 ​ ​ ​ Corporate bonds ​ $ 887 ​ ​ ​ ​ ​ 887 ​ ​ ​ Collateralized debt obligations ​ $ 15,871 ​ ​ ​ ​ ​ ​ ​ $ 15,871 Financial derivatives ​ $ 1,068 ​ ​ ​ ​ $ 1,068 ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired loans, net ​ $ 211 ​ ​ ​ ​ ​ ​ ​ $ 211 Equity investment ​ $ 1,796 ​ ​ ​ ​ ​ ​ ​ $ 1,796 Other real estate owned ​ $ — ​ ​ ​ ​ ​ ​ ​ $ — ​ At June 30, 2023, individually evaluated loans had a net carrying amount of $ 2.2 million with no valuation allowance. ​ At December 31, 2022, 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, 2022, changes to the valuation allowance or additional charge off activity was recorded on loans with a net balance of approximately $ 0.4 million. ​ 34 Table of Contents There were no transfers of assets between any of the fair value hierarchy for the six month periods ended June 30, 2023 or 2022. For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of June 30, 2023 and December 31, 2022, the significant unobservable inputs used in the fair value measurements were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Fair Value at June 30, 2023 Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment Securities – available for sale -CDO ​ $ 14,105 ​ Discounted Cash Flow ​ Discount Margin ​ Range of high 500 to low to mid 600 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually Evaluated Loans, net ​ $ - ​ Market Comparable Properties ​ Marketability Discount ​ N/A ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity Investment ​ $ 2,545 ​ Market Method ​ Revenue Multiples ​ 2.8 x ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Fair Value at December 31, 2022 Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment Securities – available for sale -CDO ​ $ 15,871 ​ Discounted Cash Flow ​ Discount Rate ​ Range of low to mid 300 and low to high 400 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired Loans, net ​ $ 211 ​ Market Comparable Properties ​ Marketability Discount ​ 10.0% - 15.0% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity Investment ​ $ 1,796 ​ Market Method ​ Revenue Multiples ​ 2.8 x ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) Range would include discounts taken since appraisal and estimated values 35 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 six and three month periods ended June 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ ​ Using Significant Unobservable Inputs ​ ​ (Level 3) ​ ​ Investment Securities (in thousands) Available for Sale Beginning balance January 1, 2023 ​ $ 15,871 Total losses realized/unrealized: ​ ​ ​ Included in other comprehensive loss ​ ​ ( 1,766 ) Ending balance June 30, 2023 ​ $ 14,105 ​ ​ ​ ​ ​ ​ ​ 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 ​ ​ ( 934 ) Ending balance June 30, 2022 ​ $ 16,258 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (in thousands) ​ Investment Securities Available for Sale Beginning balance April 1, 2023 ​ $ 14,114 Total gains realized/unrealized: ​ ​ ​ Included in other comprehensive income ​ ​ ( 9 ) Ending balance June 30, 2023 ​ $ 14,105 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (in thousands) ​ Investment Securities Available for Sale Beginning balance April 1, 2022 ​ $ 17,319 Total losses realized/unrealized: ​ ​ ​ Included in other comprehensive income ​ ​ ( 1,061 ) Ending balance June 30, 2022 ​ $ 16,258 ​ ​ 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 six or three month periods ended June 30, 2023 or 2022. 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 36 Table of Contents 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. 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 ​ 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 ​ $ 86,901 ​ $ 86,901 ​ $ 86,901 ​ ​ ​ ​ ​ ​ Interest bearing deposits in banks ​ ​ 1,650 ​ ​ 1,650 ​ ​ 1,650 ​ ​ ​ ​ ​ ​ Investment securities - AFS ​ ​ 120,085 ​ ​ 120,085 ​ ​ ​ ​ $ 105,980 ​ $ 14,105 Investment securities - HTM ​ ​ 230,759 ​ ​ 199,071 ​ ​ ​ ​ ​ 179,270 ​ ​ 19,801 Restricted bank stock ​ ​ 4,490 ​ ​ N/A ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans held for sale ​ ​ 500 ​ ​ 500 ​ ​ ​ ​ ​ ​ ​ ​ 500 Loans, net ​ ​ 1,332,806 ​ ​ 1,255,997 ​ ​ ​ ​ ​ ​ ​ ​ 1,255,997 Financial derivatives ​ ​ 1,084 ​ ​ 1,084 ​ ​ ​ ​ ​ 1,084 ​ ​ ​ Accrued interest receivable ​ ​ 6,956 ​ ​ 6,956 ​ ​ ​ ​ ​ 851 ​ ​ 6,105 Financial Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposits - non-maturity ​ ​ 1,372,823 ​ ​ 1,372,823 ​ ​ ​ ​ ​ 1,372,823 ​ ​ ​ Deposits - time deposits ​ ​ 207,136 ​ ​ 207,774 ​ ​ ​ ​ ​ 207,774 ​ ​ ​ Short-term borrowed funds ​ ​ 50,078 ​ ​ 50,078 ​ ​ ​ ​ ​ 50,078 ​ ​ ​ Long-term borrowed funds ​ ​ 110,929 ​ ​ 110,666 ​ ​ ​ ​ ​ 110,666 ​ ​ ​ Accrued interest payable ​ ​ 517 ​ ​ 517 ​ ​ ​ ​ ​ 517 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 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 ​ $ 72,720 ​ $ 72,720 ​ $ 72,720 ​ ​ ​ ​ ​ ​ Interest bearing deposits in banks ​ ​ 1,595 ​ ​ 1,595 ​ ​ 1,595 ​ ​ ​ ​ ​ ​ Investment securities - AFS ​ ​ 125,889 ​ ​ 125,889 ​ ​ ​ ​ $ 110,018 ​ $ 15,871 Investment securities - HTM ​ ​ 235,659 ​ ​ 203,080 ​ ​ ​ ​ ​ 182,380 ​ ​ 20,700 Restricted bank stock ​ ​ 1,027 ​ ​ N/A ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans held for sale ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans, net ​ ​ 1,264,684 ​ ​ 1,177,702 ​ ​ ​ ​ ​ ​ ​ ​ 1,177,702 Financial derivative ​ ​ 1,068 ​ ​ 1,068 ​ ​ ​ ​ ​ 1,068 ​ ​ ​ Accrued interest receivable ​ ​ 6,051 ​ ​ 6,051 ​ ​ ​ ​ ​ 933 ​ ​ 5,118 Financial Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposits - non-maturity ​ ​ 1,450,210 ​ ​ 1,450,210 ​ ​ ​ ​ ​ 1,450,210 ​ ​ ​ Deposits - time deposits ​ ​ 120,523 ​ ​ 120,083 ​ ​ ​ ​ ​ 120,083 ​ ​ ​ Financial derivatives ​ ​ — ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ Short-term borrowed funds ​ ​ 64,565 ​ ​ 64,565 ​ ​ ​ ​ ​ 64,565 ​ ​ ​ Long-term borrowed funds ​ ​ 30,929 ​ ​ 30,909 ​ ​ ​ ​ ​ 30,909 ​ ​ ​ Accrued interest payable ​ ​ 151 ​ ​ 151 ​ ​ ​ ​ ​ 151 ​ ​ ​ ​ 37 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, 2022 and the three month periods ended March 31, 2023 and June 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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, 2022 ​ $ ( 949 ) ​ $ ( 5,749 ) ​ $ ( 134 ) ​ $ ( 319 ) ​ $ ( 18,108 ) ​ $ ( 2,055 ) ​ $ ( 27,314 ) Other comprehensive (loss)/income before reclassifications ​ ​ ( 614 ) ​ ​ ( 10,629 ) ​ ​ ( 6,120 ) ​ ​ 1,116 ​ ​ 684 ​ ​ 2,430 ​ ​ ( 13,133 ) Amounts reclassified from accumulated other comprehensive loss ​ ​ ( 148 ) ​ ​ ( 2 ) ​ ​ 551 ​ ​ — ​ ​ 821 ​ ​ 199 ​ ​ 1,421 Balance - December 31, 2022 ​ $ ( 1,711 ) ​ $ ( 16,380 ) ​ $ ( 5,703 ) ​ $ 797 ​ $ ( 16,603 ) ​ $ 574 ​ $ ( 39,026 ) Other comprehensive (loss)/income before reclassifications ​ ​ ( 1,180 ) ​ ​ 985 ​ ​ — ​ ​ ( 138 ) ​ ​ 123 ​ ​ — ​ ​ ( 210 ) Amounts reclassified from accumulated other comprehensive income ​ ​ ( 37 ) ​ ​ — ​ ​ 133 ​ ​ — ​ ​ 184 ​ ​ ( 1 ) ​ ​ 279 Balance - March 31, 2023 ​ $ ( 2,928 ) ​ $ ( 15,395 ) ​ $ ( 5,570 ) ​ $ 659 ​ $ ( 16,296 ) ​ $ 573 ​ $ ( 38,957 ) Other comprehensive income/(loss) before reclassifications ​ ​ 111 ​ ​ ( 1,654 ) ​ ​ — ​ ​ 150 ​ ​ ( 42 ) ​ ​ — ​ ​ ( 1,435 ) Amounts reclassified from accumulated other comprehensive loss ​ ​ ( 40 ) ​ ​ — ​ ​ 129 ​ ​ — ​ ​ 195 ​ ​ ( 2 ) ​ ​ 282 Balance - June 30, 2023 ​ $ ( 2,857 ) ​ $ ( 17,049 ) ​ $ ( 5,441 ) ​ $ 809 ​ $ ( 16,143 ) ​ $ 571 ​ $ ( 40,110 ) ​ ​ 38 Table of Contents The following tables present the components of other comprehensive loss for the six and three month periods ended June 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Before ​ Tax ​ ​ Components of Other Comprehensive Loss ​ Tax ​ (Expense) ​ ​ (in thousands) Amount Benefit Net For the six months ended June 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ $ ( 1,408 ) ​ $ 339 ​ $ ( 1,069 ) Less: accretable yield recognized in income ​ ​ 101 ​ ​ ( 24 ) ​ ​ 77 Net unrealized losses on investments with OTTI ​ ​ ( 1,509 ) ​ ​ 363 ​ ​ ( 1,146 ) Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ ​ ( 881 ) ​ ​ 212 ​ ​ ( 669 ) Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses on securities transferred to held to maturity ​ ​ — ​ ​ — ​ ​ — Less: amortization recognized in income ​ ​ ( 345 ) ​ ​ 83 ​ ​ ( 262 ) Net unrealized gains on HTM securities ​ ​ 345 ​ ​ ( 83 ) ​ ​ 262 Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 16 ​ ​ ( 4 ) ​ ​ 12 Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial gain ​ ​ 105 ​ ​ ( 24 ) ​ ​ 81 Less: amortization of unrecognized loss ​ ​ ( 499 ) ​ ​ 120 ​ ​ ( 379 ) Net pension plan liability adjustment ​ ​ 604 ​ ​ ( 144 ) ​ ​ 460 SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ — ​ ​ — ​ ​ — Less: amortization of unrecognized loss ​ ​ 4 ​ ​ ( 1 ) ​ ​ 3 Net SERP liability adjustment ​ ​ ( 4 ) ​ ​ 1 ​ ​ ( 3 ) Other comprehensive loss ​ $ ( 1,429 ) ​ $ 345 ​ $ ( 1,084 ) ​ ​ ​ 39 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Before ​ Tax ​ ​ Components of Other Comprehensive Loss ​ Tax ​ (Expense) ​ ​ (in thousands) Amount Benefit Net For the six months ended June 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ $ ( 654 ) ​ $ 175 ​ $ ( 479 ) Less: accretable yield recognized in income ​ ​ 101 ​ ​ ( 27 ) ​ ​ 74 Net unrealized losses on investments with OTTI ​ ​ ( 755 ) ​ ​ 202 ​ ​ ( 553 ) Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ ​ ( 16,203 ) ​ ​ 4,336 ​ ​ ( 11,867 ) 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 ​ ​ ( 7,878 ) ​ ​ 2,109 ​ ​ ( 5,769 ) Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses on securities transferred to held to maturity ​ ​ ( 8,328 ) ​ ​ 2,228 ​ ​ ( 6,100 ) Less: amortization recognized in income ​ ​ ( 324 ) ​ ​ 87 ​ ​ ( 237 ) Net unrealized losses on HTM securities ​ ​ ( 8,004 ) ​ ​ 2,141 ​ ​ ( 5,863 ) Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 1,088 ​ ​ ( 292 ) ​ ​ 796 Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ ( 10,542 ) ​ ​ 2,822 ​ ​ ( 7,720 ) Less: amortization of unrecognized loss ​ ​ ( 558 ) ​ ​ 150 ​ ​ ( 408 ) Net pension plan liability adjustment ​ ​ ( 9,984 ) ​ ​ 2,672 ​ ​ ( 7,312 ) SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ — ​ ​ — ​ ​ — Less: amortization of unrecognized loss ​ ​ ( 135 ) ​ ​ 36 ​ ​ ( 99 ) Less: amortization of prior service costs ​ ​ — ​ ​ — ​ ​ — Net SERP liability adjustment ​ ​ 135 ​ ​ ( 36 ) ​ ​ 99 Other comprehensive loss ​ $ ( 25,398 ) ​ $ 6,796 ​ $ ( 18,602 ) ​ ​ 40 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Components of Other Comprehensive Loss (in thousands) ​ Before Tax Amount ​ Tax (Expense) Benefit ​ Net For the three months ended June 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ $ 198 ​ $ ( 87 ) ​ $ 111 Less: accretable yield recognized in income ​ ​ 51 ​ ​ ( 11 ) ​ ​ 40 Net unrealized gains on investments with OTTI ​ ​ 147 ​ ​ ( 76 ) ​ ​ 71 Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net unrealized losses on all other AFS securities ​ ​ ( 2,221 ) ​ ​ 567 ​ ​ ( 1,654 ) Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ — ​ ​ — ​ ​ — Less: amortization recognized in income ​ ​ ( 164 ) ​ ​ 35 ​ ​ ( 129 ) Net unrealized gains on HTM securities ​ ​ 164 ​ ​ ( 35 ) ​ ​ 129 Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 204 ​ ​ ( 54 ) ​ ​ 150 Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ ( 63 ) ​ ​ 21 ​ ​ ( 42 ) Less: amortization of unrecognized loss ​ ​ ( 249 ) ​ ​ 54 ​ ​ ( 195 ) Net pension plan liability adjustment ​ ​ 186 ​ ​ ( 33 ) ​ ​ 153 SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ — ​ ​ — ​ ​ — Less: amortization of unrecognized loss ​ ​ 2 ​ ​ — ​ ​ 2 Net SERP liability adjustment ​ ​ ( 2 ) ​ ​ — ​ ​ ( 2 ) Other comprehensive loss ​ $ ( 1,522 ) ​ $ 369 ​ $ ( 1,153 ) ​ ​ 41 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Components of Other Comprehensive Loss (in thousands) ​ Before Tax Amount ​ Tax (Expense) Benefit ​ Net For the three months ended June 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ $ ( 795 ) ​ $ 213 ​ $ ( 582 ) Less: accretable yield recognized in income ​ ​ 51 ​ ​ ( 14 ) ​ ​ 37 Net unrealized losses on investments with OTTI ​ ​ ( 846 ) ​ ​ 227 ​ ​ ( 619 ) Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ ​ ( 5,359 ) ​ ​ 1,435 ​ ​ ( 3,924 ) Less: gains recognized in income ​ ​ — ​ ​ — ​ ​ — Net unrealized losses on all other AFS securities ​ ​ ( 5,359 ) ​ ​ 1,435 ​ ​ ( 3,924 ) Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ — ​ ​ — ​ ​ — Less: gains recognized in income ​ ​ — ​ ​ — ​ ​ — Less: amortization recognized in income ​ ​ ( 230 ) ​ ​ 62 ​ ​ ( 168 ) Net unrealized gains on HTM securities ​ ​ 230 ​ ​ ( 62 ) ​ ​ 168 Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 249 ​ ​ ( 67 ) ​ ​ 182 Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ ( 6,922 ) ​ ​ 1,853 ​ ​ ( 5,069 ) Less: amortization of unrecognized loss ​ ​ ( 279 ) ​ ​ 75 ​ ​ ( 204 ) Less: amortization of prior service costs ​ ​ — ​ ​ — ​ ​ — Net pension plan liability adjustment ​ ​ ( 6,643 ) ​ ​ 1,778 ​ ​ ( 4,865 ) SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ — ​ ​ — ​ ​ — Less: amortization of unrecognized loss ​ ​ ( 67 ) ​ ​ 18 ​ ​ ( 49 ) Less: amortization of prior service costs ​ ​ — ​ ​ — ​ ​ — Net SERP liability adjustment ​ ​ 67 ​ ​ ( 18 ) ​ ​ 49 Other comprehensive loss ​ $ ( 12,302 ) ​ $ 3,293 ​ $ ( 9,009 ) ​ 42 Table of Contents The following table presents the details of amounts reclassified from accumulated other comprehensive loss for the six and three month periods ended June 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amounts Reclassified from ​ Six Months Ended ​ ​ Accumulated Other Comprehensive Loss ​ June 30, ​ Affected Line Item in the Statement (in thousands) 2023 2022 Where Net Income is Presented Net unrealized gains on available for sale investment securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ Accretable yield ​ $ 101 ​ $ 101 ​ Interest income on taxable investment securities Taxes ​ ​ ( 24 ) ​ ​ ( 27 ) ​ Credit for income tax expense ​ ​ $ 77 ​ $ 74 ​ Net of tax Net unrealized gains on available for sale investment securities - all others: ​ ​ ​ ​ ​ ​ ​ ​ Gains recognized ​ $ — ​ $ 3 ​ Net gains Taxes ​ ​ — ​ ​ ( 1 ) ​ Provision for income tax expense ​ ​ $ — ​ $ 2 ​ Net of tax Net unrealized losses on held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ Amortization ​ $ ( 345 ) ​ $ ( 324 ) ​ Interest income on taxable investment securities Taxes ​ ​ 83 ​ ​ 87 ​ Provision for income tax expense ​ ​ $ ( 262 ) ​ $ ( 237 ) ​ Net of tax Net pension plan liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized loss ​ $ ( 499 ) ​ $ ( 558 ) ​ Other Expense Taxes ​ ​ 120 ​ ​ 150 ​ Provision for income tax expense ​ ​ $ ( 379 ) ​ $ ( 408 ) ​ Net of tax Net SERP liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized gain/(loss) ​ $ 4 ​ $ ( 135 ) ​ Other Expense Taxes ​ ​ ( 1 ) ​ ​ 36 ​ (Credit)/provision for income tax expense ​ ​ $ 3 ​ $ ( 99 ) ​ Net of tax Total reclassifications for the period ​ $ ( 561 ) ​ $ ( 668 ) ​ Net of tax ​ ​ ​ ​ ​ ​ ​ ​ 43 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amounts Reclassified from ​ Three Months Ended ​ ​ Accumulated Other Comprehensive Loss ​ June 30, ​ Affected Line Item in the Statement (in thousands) ​ 2023 ​ 2022 ​ Where Net Income is Presented Net unrealized gains on available for sale investment securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ Accretable Yield ​ $ 51 ​ $ 51 ​ Interest income on taxable investment securities Taxes ​ ​ ( 11 ) ​ ​ ( 14 ) ​ Provision for income tax expense ​ ​ $ 40 ​ $ 37 ​ Net of tax Net unrealized losses on held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ Amortization ​ $ ( 164 ) ​ $ ( 230 ) ​ Interest income on taxable investment securities Taxes ​ ​ 35 ​ ​ 62 ​ Provision for income tax expense ​ ​ $ ( 129 ) ​ $ ( 168 ) ​ Net of tax Net pension plan liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized loss ​ $ ( 249 ) ​ $ ( 279 ) ​ Other expense Taxes ​ ​ 54 ​ ​ 75 ​ Provision for income tax expense ​ ​ $ ( 195 ) ​ $ ( 204 ) ​ Net of tax Net SERP liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized loss ​ $ 2 ​ $ ( 67 ) ​ Other expense Taxes ​ ​ — ​ ​ 18 ​ Provision for income tax expense ​ ​ $ 2 ​ $ ( 49 ) ​ Net of tax Total reclassifications for the period ​ $ ( 282 ) ​ $ ( 384 ) ​ Net of tax ​ ​ ​ ​ ​ ​ Note 8 - 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 $ 15,000 to be paid, at the director’s election, in cash or additional shares of common stock. In May 2023, a total of 16,931 fully vested shares of common stock were issued to directors, which had a grant date fair value of $ 13.23 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. In January 2023, a total of 333 fully vested shares of common stock were issued to a new director, which had a grant date fair value of $ 19.36 per share. Director stock compensation was $ 138,001 for the six months ended June 30, 2023 and $ 125,588 for the six months ended June 30, 2022. Director stock compensation expense was $ 62,500 for the quarter ended June 30, 2023 and $ 66,730 for the quarter ended June 30, 2022. During the six- and three- month periods ended June 30, 2023, employee stock compensation expense was $ 0.2 million and $ 0.1 million, respectively. Employee stock compensation expense was $ 0 for both the six- and three- month periods ended June 30, 2022. 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 44 Table of Contents 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 (i) a performance vesting award for a three year performance period and (ii) 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 falls between performance levels would be interpolated to calculate a proportionate award. 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. For the performance period ending December 31, 2024, the RSUs performance goals are based on earnings per share for the year ending December 31, 2024 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 (i) 9,791 performance-vesting shares (target level) for the performance period ending December 31, 2021 (the “2019 LTIP year”) and (ii) 10,143 performance-vesting shares and 5,070 time-vesting shares (target level) for the performance period ending December 31, 2022 (the “2020 LTIP year”). Each RSU had a grant date fair market value of $ 12.54 per share of common stock underlying the RSU. The time-vesting RSUs will vest ratably over a three-year period that began on March 26, 2021. On March 9, 2022, 14,688 shares subject to RSUs granted for the 2019 LTIP year were issued at maximum performance level. On March 8, 2023, 15,216 shares subject to RSUs granted for the 2020 LTIP year were issued at maximum performance. On March 26, 2021, 1,690 of the 5,070 time-vesting shares were issued to participants. On March 28, 2022, 1,688 shares of the 3,380 remaining time vesting shares were issued to participants. On March 26, 2023, 1,692 shares of the remaining time-vesting shares were issued to participants. Stock compensation expense was $ 15,896 for the six months ended June 30, 2023, and $ 42,024 for the six months ended June 30, 2022. Stock compensation expense was $ 0 and $ 15,896 for the second quarters of 2023 and 2022, respectively. All compensation expense related to the 2019 LTIP year was recognized as of March 31, 2022. All compensation expense related to the 2020 LTIP plans was recognized as of March 31, 2023. 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 beginning on May 5, 2022. On May 5, 2022, 1,230 shares of the 3,693 time-vesting RSUs were issued to participants. On May 5, 2023, 1,230 shares of the remaining 2,463 time vesting shares were issued to the participants. Stock compensation expense was $ 33,142 for the six-month periods ended of 2023 and 2022. Stock compensation expense was $ 16,571 for both of the three month periods ended June 30, 2023 and 2022. Unrecognized compensation expense as of June 30, 2023 related to unvested units was $ 183,017 . 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. On March 9, 2023 2,079 shares of the 6,238 time-vesting RSUs were issued to participants. Stock compensation expense was $ 52,290 and $ 26,145 for the six months ended June 30, 2023 and 2022, respectively. Stock compensation expense was $ 26,145 for both of the three month periods ended June 30, 2023 and 2022. Unrecognized compensation expense as of June 30, 2023 related to unvested units was $ 183,017 . 45 Table of Contents In March 2023, RSUs relating to 10,214 performance vesting shares and 7,920 time vesting shares (target level) for plan year 2023 were granted, which had a grant date fair market value of $ 18.25 per share of common stock underlying each RSU. The performance period for the performance-vesting RSUs is the three year period ending December 31, 2025. The time-vesting RSUs will vest ratably over a three year period beginning on March 15, 2024. Stock compensation expense was $ 27,585 for both the six and three month periods ended June 30, 2023. Unrecognized compensation expense as of June 30, 2023 related to unvested units was $ 303,434 . Note 9– 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 June 30, 2023, $ 15.0 million notional amount remains. The interest rate swap creates an effective fixed interest rate of 4.6450 % on the $ 15.0 million notional amount of the Corporation’s junior subordination debt until the interest rate swap’s maturity in March 2026. The fair value of the interest rate swap contracts was $ 1.1 million at June 30, 2023 and December 31, 2022. For the six months ended June 30, 2023, the Corporation recorded an increase in the value of the derivatives of $ 16 thousand and the related deferred tax of $ 4 thousand in net accumulated other comprehensive loss to reflect the effective portion of cash flow hedges. For the three months ended June 30, 2023, the Corporation recorded an increase in the value of the derivatives of $ 0.2 million and the related deferred tax of $ 0.1 million in net accumulated other comprehensive income 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 month periods ended June 30, 2023. 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 June 30, 2023. The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the six and three month periods ended June 30, 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ Six months ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 ​ $ 12 ​ $ — ​ $ — June 30, 2022 ​ ​ 796 ​ ​ — ​ ​ — Three months ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 ​ $ 150 ​ $ — ​ $ — June 30, 2022 ​ ​ 182 ​ ​ — ​ ​ — ​ Notes: (a) Reported as interest expense (b) Reported as other income 46 Table of Contents ​ ​ ​ Note 10 – Regulatory Capital Requirements The following table presents our capital ratios as of June 30, 2023 and December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 December 31, 2022 Required for Capital Adequacy Purposes Required to be Well Capitalized Total Capital (to risk-weighted assets) ​ 13.87 % 14.37 % 8.00 % 10.00 % Tier 1 Capital (to risk-weighted assets) ​ 12.64 % 13.29 % 6.00 % 8.00 % Common Equity Tier 1 Capital (to risk-weighted assets) ​ 12.64 % 13.29 % 4.50 % 6.50 % Tier 1 Capital (to average assets) ​ 9.78 % 10.01 % 4.00 % 5.00 % ​ As of June 30, 2023 and December 31, 2022, the Bank was considered “well capitalized” under the regulatory framework for prompt corrective action. We adopted CECL effective January 1, 2023 and elected not to implement the regulatory agencies’ capital transition and instead opted to record the impact to our capital ratios immediately upon implementation. ​ Effective with the implementation of CECL, a $ 2.2 million, net of tax, adjustment was made to retained earnings. The adjustment did not have a material impact to our capital ratios. ​ ​ ​ 47 Table of Contents Note 11 – Deposits The following table summarizes deposits as of June 30, 2023 and December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) June 30, 2023 December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-Interest-bearing deposits: ​ $ 466,628 30 % ​ $ 506,613 ​ 32 % Interest-bearing deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Demand ​ ​ 393,234 ​ 25 % ​ ​ 327,685 ​ 21 % Money Market ​ ​ 297,312 ​ 19 % ​ ​ 365,192 ​ 23 % Savings deposits ​ ​ 215,649 ​ 13 % ​ ​ 250,720 ​ 16 % Time deposits- retail ​ ​ 146,055 ​ 9 % ​ ​ 120,523 ​ 8 % Time deposits- brokered ​ ​ 61,081 ​ 4 % ​ ​ — ​ 0 % Total Deposits ​ $ 1,579,959 ​ 100 % ​ $ 1,570,733 ​ 100 % ​ ​ The following table summarizes the percentage of deposits that are insured by deposit insurance or otherwise fully collateralized by securities compared to uninsured deposits as of June 30, 2023 and December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 ​ December 31, 2022 (dollars in thousands) ​ ​ Balance Percent ​ ​ Balance Percent Insured/collateralized deposits ​ $ 1,350,060 85 % ​ $ 1,118,190 71 % Uninsured deposits ​ ​ 229,899 15 % ​ ​ 452,543 29 % ​ ​ $ 1,579,959 100 % ​ $ 1,570,733 100 % ​ The following table summarizes the percentage of deposit balances from retail customers compared to business customers as June 30, 2023 and December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 ​ December 31, 2022 (dollars in thousands) ​ ​ Balance Percent ​ ​ Balance Percent Retail deposits ​ $ 798,737 51 % ​ $ 855,014 54 % Business deposits ​ ​ 781,222 49 % ​ ​ 715,719 46 % ​ ​ $ 1,579,959 100 % ​ $ 1,570,733 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ 48 Table of Contents Note 12 – Borrowed Funds The following is a summary of borrowings: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ Six Months Ended June 30, 2023 ​ Year Ended December 31, 2022 Short-term Correspondent Bank Advance: ​ ​ ​ ​ ​ ​ Securities sold under agreements to repurchase: ​ ​ ​ ​ ​ ​ Outstanding at end of period ​ $ 50,078 ​ $ 64,565 Weighted average interest rate at end of period ​ ​ 0.23 % ​ ​ 0.12 % Maximum amount outstanding as of any month end ​ $ 53,892 ​ $ 75,912 Average amount outstanding ​ $ 51,988 ​ $ 63,182 Approximate weighted average rate during the period ​ ​ 0.21 % ​ ​ 0.12 % FHLB advances, bearing fixed interest at rates ranging from 4.53 % to 4.69 % at June 30, 2023 ​ $ 80,000 ​ $ - Junior subordinated debt, bearing variable interest rate of 8.26 % at June 30, 2023 and 7.49 % at December 31, 2022 ​ ​ 30,929 ​ ​ 30,929 Total borrowings outstanding ​ $ 161,007 ​ $ 95,494 ​ At June 30, 2023, the repurchase agreements were secured by $ 66.4 million in investment securities issued by government related agencies. A minimum of 102 % of fair value is pledged against account balances. ​ Note 13 – Segment Reporting Currently, the Corporation conducts business in two operating segments: (i) Community Banking and (ii) Trust and Investment Services. The accounting policies of the segments are the same as those described in the summary of significant accounting policies provided earlier in this report. Business activity for the operating segments are as follows: Community Banking : The Community Banking segment is conducted through the Bank and involves delivering a broad range of financial products and services, including various loan and deposit products, to consumer, business, and not-for-profit customers. Parent company income and assets are included in the Community Banking segment, as the majority of parent company functions are related to this segment. Major revenue sources include net interest income, gains on sales of mortgage loans, and service charges on deposit accounts. Expenses include personnel, occupancy, marketing, equipment, and other expenses. Non-cash charges other than depreciation of fixed assets were immaterial for the six and three months ended June 30, 2023 and 2022. Trust and Investment Services : The Trust and Investment Services segment is conducted through the Bank and offers corporate trustee services, trust and estate administration, IRA administration and custody services. Revenues for this segment is generated from administration, service and custody fees, as well as management fees that are derived from Assets Under Management. Expenses include personnel, occupancy, marketing, equipment, and other expenses. Non-cash charges associated with amortization of intangibles were approximately $ 104,000 for both of the six month periods ended June 30, 2023 and 2022 and $ 52,000 for both of the three month periods ended June 30, 2023 and 2022. ​ ​ ​ ​ ​ 49 Table of Contents Information for the operating segments for the six and three month periods ended June 30, 2023 are presented in the following tables: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ ​ ​ June 30, 2023 ​ ​ ​ ​ ​ ​ Trust and ​ ​ ​ ​ ​ ​ Community ​ Investment ​ ​ (in thousands) ​ ​ ​ Banking ​ Services ​ Total Interest income ​ ​ $ 37,801 $ - $ 37,801 Interest expense ​ ​ ​ 9,109 ​ - ​ 9,109 Credit loss expense ​ ​ ​ 938 ​ - ​ 938 Non-interest income ​ ​ ​ 4,411 ​ 4,551 ​ 8,962 Non-interest expense ​ ​ ​ 22,562 ​ 2,587 ​ 25,149 Income before income taxes and intercompany fees ​ ​ ​ 9,603 ​ 1,964 ​ 11,567 Intercompany management fee income (expense) ​ ​ ​ 6 ​ ( 6 ) ​ - Income before income taxes ​ ​ ​ 9,609 ​ 1,958 ​ 11,567 Income tax expense ​ ​ ​ 2,367 ​ 411 ​ 2,778 Net income ​ ​ $ 7,242 $ 1,547 $ 8,789 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six months ended ​ ​ ​ ​ June 30, 2022 ​ ​ ​ ​ ​ ​ Trust and ​ ​ ​ ​ ​ ​ Community ​ Investment ​ ​ (in thousands) ​ ​ ​ Banking ​ Services ​ Total Interest income ​ ​ $ 28,878 $ - $ 28,878 Interest expense ​ ​ ​ 1,566 ​ - ​ 1,566 Credit for loan losses ​ ​ ​ 210 ​ - ​ 210 Non-interest income ​ ​ ​ 4,094 ​ 4,766 ​ 8,860 Non-interest expense ​ ​ ​ 18,805 ​ 2,405 ​ 21,210 Income before income taxes and intercompany fees ​ ​ ​ 12,391 ​ 2,361 ​ 14,752 Intercompany management fee income (expense) ​ ​ ​ 6 ​ ( 6 ) ​ - Income before income taxes ​ ​ ​ 12,397 ​ 2,355 ​ 14,752 Income tax expense ​ ​ ​ 3,115 ​ 494 ​ 3,609 Net income ​ ​ $ 9,282 $ 1,861 $ 11,143 ​ ​ ​ ​ ​ ​ ​ ​ ​ 50 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ ​ June 30, 2023 ​ ​ ​ ​ ​ ​ Trust and ​ ​ ​ ​ ​ ​ Community ​ Investment ​ ​ (in thousands) ​ ​ ​ Banking ​ Services ​ Total Interest income ​ ​ $ 19,972 $ - $ 19,972 Interest expense ​ ​ ​ 5,798 ​ - ​ 5,798 Credit loss expense ​ ​ ​ 395 ​ - ​ 395 Non-interest income ​ ​ ​ 2,285 ​ 2,284 ​ 4,569 Non-interest expense ​ ​ ​ 11,177 ​ 1,334 ​ 12,511 Income before income taxes and intercompany fees ​ ​ ​ 4,887 ​ 950 ​ 5,837 Intercompany management fee income (expense) ​ ​ ​ 3 ​ ( 3 ) ​ - Income before income taxes ​ ​ ​ 4,890 ​ 947 ​ 5,837 Income tax expense ​ ​ ​ 1,224 ​ 199 ​ 1,423 Net income ​ ​ $ 3,666 $ 748 $ 4,414 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ ​ June 30, 2022 ​ ​ ​ ​ ​ ​ Trust and ​ ​ ​ ​ ​ ​ Community ​ Investment ​ ​ (in thousands) ​ ​ ​ Banking ​ Services ​ Total Interest income ​ ​ $ 14,731 $ - $ 14,731 Interest expense ​ ​ ​ 760 ​ - ​ 760 Credit for loan losses ​ ​ ​ 631 ​ - ​ 631 Non-interest income ​ ​ ​ 2,069 ​ 2,357 ​ 4,426 Non-interest expense ​ ​ ​ 9,427 ​ 1,203 ​ 10,630 Income before income taxes and intercompany fees ​ ​ ​ 5,982 ​ 1,154 ​ 7,136 Intercompany management fee income (expense) ​ ​ ​ 3 ​ ( 3 ) ​ - Income before income taxes ​ ​ ​ 5,985 ​ 1,151 ​ 7,136 Income tax expense ​ ​ ​ 1,467 ​ 241 ​ 1,708 Net income ​ ​ $ 4,518 $ 910 $ 5,428 ​ Total non-fiduciary assets of the trust and investment services segment were $ 0.8 million (including $ 0.7 million in intangible assets) as of June 30, 2023 and $ 0.9 million (including $ 0.8 million in intangible assets) as of December 31, 2022. ​ Note 14 – Goodwill ASC Topic 350, Intangibles- Goodwill and Other Intangibles provides guidance with respect to goodwill. Under this guidance, goodwill is not amortized but shall be tested at least annually for impairment at a level of accounting referred to as a reporting unit. The Corporation is considered the sole reporting unit. Goodwill of a reporting unit shall be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Impairment of goodwill is the condition that exists when the carrying amount of a reporting unit that includes goodwill exceeds the fair value. A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds fair value, limited to the total amount of goodwill allocated to that reporting unit. An entity may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill. If after assessing the totality of events or circumstances qualitatively, an entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the quantitative goodwill impairment test is unnecessary. 51 Table of Contents Management notes that the heightened liquidity concerns that caused the failure of three banks in the United States in 2023 has had global impacts on some macroeconomic conditions and has created an unprecedented economic environment in which the Corporation and many other financial institutions are operating. The uncertainty has resulted in a significant decrease in the Corporation’s stock price, as well as the banking industry in general. Based on the totality of the circumstances and the impact of the economic conditions on the stock price, the events more likely than not reduce the fair value of a reporting unit below its carrying amount, including goodwill. An internal analysis of the fair value of the Corporation as of June 30, 2023, was performed. The results of the of the internal analysis determined fair value exceeded carrying value and, therefore, management has concluded there is no impairment at June 30, 2023. Management will continue to monitor the goodwill throughout the remainder of 2023. ​ Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations INTRODUCTION The following discussion and analysis is intended as a review of material changes in and significant factors affecting the financial condition and results of operations of First United Corporation and its consolidated subsidiaries for the periods indicated. This discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and the notes thereto contained in Item 1 of Part I of this report, as well as the audited consolidated financial statements and related notes included in First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022. Unless the context clearly suggests otherwise, references in this report to “us”, “we”, “our”, and “the Corporation” are to First United Corporation and its consolidated subsidiaries. FORWARD-LOOKING STATEMENTS This report contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not represent historical facts, but are statements about management’s beliefs, plans and objectives about the future, as well as its assumptions and judgments concerning such beliefs, plans and objectives. These statements are evidenced by terms such as "anticipate," "estimate," "should," "expect," "believe," "intend," and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. The beliefs, plans and objectives on which forward-looking statements are based involve risks and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports that First United Corporation files with the Securities and Exchange Commission entitled "Risk Factors". FIRST UNITED CORPORATION First United Corporation is a Maryland corporation chartered in 1985 and a financial holding company registered with the Board of Governors of the Federal Reserve System (the “FRB”) under the Bank Holding Company Act of 1956, as amended, that elected financial holding company status in 2021. The Corporation’s primary business is serving as the parent company of First United Bank & Trust, a Maryland trust company (the “Bank”), First United Statutory Trust I (“Trust I”) and First United Statutory Trust II (“Trust II” and together with Trust I, “the Trusts”), both Connecticut statutory business trusts. The Trusts were formed for the purpose of selling trust preferred securities that qualified as Tier 1 capital. The Bank has two consumer finance company subsidiaries- OakFirst Loan Center, Inc., a West Virginia corporation, and OakFirst Loan Center, LLC, a Maryland limited liability company – and two subsidiaries that it uses to hold real estate acquired through foreclosure or by deed in lieu of foreclosure – First OREO Trust, a Maryland statutory trust, and FUBT OREO I, LLC, a Maryland limited liability company. In addition, the Bank owns 99.9% of the limited partnership interests in Liberty Mews Limited Partnership, a Maryland limited partnership formed for the purpose of acquiring, developing and operating low-income housing units in Garrett County, Maryland, and a 99.9% non-voting membership interest in MCC FUBT Fund, LLC, an Ohio limited liability company formed for the purpose of acquiring, developing and operating low-income housing units in Allegany County, Maryland. At June 30, 2023, the Corporation’s total assets were $1.9 billion, net loans were $1.3 billion, and deposits were $1.6 billion. Shareholders’ equity at June 30, 2023 was $155.2 million. 52 Table of Contents The Corporation maintains an Internet site at www.mybank.com on which it makes available, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to the foregoing as soon as reasonably practicable after these reports are electronically filed with, or furnished to, the SEC. SELECTED FINANCIAL DATA The following table sets forth certain selected financial data for the six month periods ended June 30, 2023 and 2022 and is qualified in its entirety by the detailed information and unaudited financial statements, including the notes thereto, included elsewhere in this quarterly report. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of the six months ended ​ ​ ​ June 30, ​ ​ 2023 2022 Per Share Data ​ ​ ​ ​ ​ ​ ​ Basic net income per common share ​ $ 1.32 ​ $ 1.68 ​ Diluted net income per common share ​ $ 1.31 ​ $ 1.68 ​ Basic book value per common share ​ $ 23.12 ​ $ 20.22 ​ Diluted book value per common share ​ $ 23.07 ​ $ 20.19 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Significant Ratios: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on Average Assets (a) ​ ​ 0.95 % ​ 1.26 % ​ ​ ​ ​ ​ ​ ​ ​ Return on Average Equity (a) ​ ​ 11.43 % ​ 16.32 % ​ ​ ​ ​ ​ ​ ​ ​ Average Equity to Average Assets ​ ​ 8.21 % ​ 7.75 % ​ ​ ​ ​ ​ ​ ​ ​ Capital Ratios: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated Total Capital (to risk weighted assets) ​ ​ 15.60 % ​ 15.56 % Consolidated Tier 1 Capital (to risk weighted assets) ​ ​ 14.40 % ​ 14.41 % Consolidated Common Equity Tier 1 Capital (to risk weighted assets) ​ ​ 12.40 % ​ 12.35 % Consolidated Tier 1 Capital (to average assets) ​ ​ 11.25 % ​ 11.23 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ RESULTS OF OPERATIONS Overview Consolidated net income was $4.4 million for the second quarter of 2023, compared to $5.4 million for the second quarter of 2022 and $4.4 million for the first quarter of 2023. Basic and diluted net income was $0.66 per share for the second quarter of 2023, compared to basic and diluted net income per share of $0.82 for the second quarter of 2022. For the first quarter of 2023, basic net income was $0.66 per share and diluted net income was $0.65 per share. ​ The decrease in quarterly net income year-over-year was primarily driven by a $1.1 million increase in salaries and employee benefits due to an increase in health insurance costs related to unusually high claims, as well as increased salary expense for new hires, merit increases effective April 1, 2023, increased incentive compensation, and decreases in deferred loan costs due to decrease in loan reductions. Data processing expenses increased by $0.1 million, FDIC premiums increased by $0.1 million and miscellaneous expenses increased by $0.7 million primarily attributable to increased pension plan of $0.3 million, check fraud related expenses of $0.2 million, and increases in membership dues and licenses, mortgage escrow, debit card expense, and miscellaneous loan fees, partially offset by decreases in personnel related expense and loan service fees. An increase in net interest income of $0.2 53 Table of Contents million and a decrease in income tax expense of $0.3 million also partially offset the decrease. The provision for credit losses was $0.4 million for the second quarter of 2023, compared to provision for loan loss of $0.6 million for the second quarter of 2022. ​ ​ Year-to-date net income for the first six months of 2023 was $8.8 million compared to $11.1 million for the same period in 2022. The year-over-year decrease was primarily driven by a $2.4 million in salaries and employee benefits due primarily to increased salary expense of $1.1 million related to new hires and merit increases effective April 1, 2023, increased health insurance costs of $0.8 million associated with unusually high claims and increased incentive payouts of $0.2 million. Occupancy and equipment expense increased by $0.2 million, data processing expense increased by $0.3 million, and FDIC assessments increased by $0.1 million. Other miscellaneous expenses, such as loan service fees, dues and licenses, check fraud expenses, employee benefit plan expense, and miscellaneous expenses increased by $1.1 million. Provision for credit losses increased by $0.7 million when compared to the prior year period. These increases were partially offset by an increase in net interest income of $1.4 million, gains on sales of mortgages of $0.1 million, service charges on deposit accounts of $0.1 million, and debit card income of $0.1 million. ​ Other operating income, including gains, for the second quarter of 2023 increased slightly by $0.1 million when compared to the same period of 2022. Increases in service charges, debit card income, and gains on sales of mortgages were partially offset by decreases in wealth management income attributable to the decline in market values of assets under management. ​ Other operating income for the six months ended June 30, 2023 remained stable when compared to the same period of 2022. This increase was primarily due to the increase in gains on sales of residential mortgage loans of $0.1 million, service charges on deposit accounts of $0.1 million, and debit card income of $0.1 million, which was partially offset by decreases in wealth management income attributable to the decline in market values of assets under management. ​ Operating expenses increased by $1.9 million when comparing the second quarter of 2023 to the second quarter of 2022. This increase was primarily driven by a $1.1 million increase in salaries and employee benefits due to an increase in health insurance costs related to unusually high claims, as well as increased salary expense for new hires, merit increases effective April 1, 2023, and increased incentive compensation. Data processing expenses increased by $0.1 million, FDIC premiums increased by $0.1 million and miscellaneous expenses increased by $0.7 million primarily attributable to increased employee benefit plan costs of $0.3 million, check fraud related expenses of $0.2 million, and increases in membership dues and licenses, mortgage escrow interest expense, debit card expense, and miscellaneous loan fees, partially offset by decreases in personnel related expense and loan service fees. ​ For the six months ended June 30, 2023, non-interest expenses increased by $3.9 million when compared to the six months ended June 30, 2022. Salaries and employee benefits increased by $2.4 million year-over-year due primarily to increased salary expense of $1.1 million related to new hires and merit increases effective April 1, 2023, increased health insurance costs of $0.8 million associated with unusually high claims and increased incentive payouts of $0.2 million. Occupancy and equipment expense increased by $0.2 million, data processing expense increased by $0.3 million, and FDIC assessments increased by $0.1 million. Other miscellaneous expenses, such as loan service fees, dues and licenses, check fraud expenses, employee benefit plan expense, and miscellaneous expenses increased by $1.1 million. ​ ​ Net Interest Income Net interest income is our largest source of operating revenue. Net interest income is the difference between the interest that we earn on our interest-earning assets and the interest expense we incur on our interest-bearing liabilities. For analytical and discussion purposes, net interest income is adjusted to a fully tax equivalent (“FTE”) basis to facilitate performance comparisons between taxable and tax-exempt assets by increasing tax-exempt income by an amount equal to the federal income taxes that would have been paid if this income were taxable at the statutorily applicable rate. This is a non-GAAP disclosure and management believes it is not materially different than the corresponding GAAP disclosure. ​ ​ 54 Table of Contents The tables below summarizes net interest income for the three month periods ended June 30, 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-GAAP GAAP ​ ​ ​ ​ Six Months Ended Six Months Ended ​ ​ ​ ​ June 30, June 30, ​ (dollars in thousands) ​ 2023 2022 2023 2022 Interest income ​ $ 38,253 ​ $ 29,355 ​ $ 37,801 ​ $ 28,878 ​ Interest expense ​ ​ 9,109 ​ ​ 1,566 ​ ​ 9,109 ​ ​ 1,566 ​ Net interest income ​ $ 29,144 ​ $ 27,789 ​ $ 28,692 ​ $ 27,312 ​ Net interest margin % ​ ​ 3.39 % ​ 3.40 % ​ 3.34 % ​ 3.46 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Three Months Ended ​ ​ ​ ​ June 30, June 30, ​ (dollars in thousands) ​ ​ 2023 ​ ​ 2022 ​ ​ 2023 ​ ​ 2022 ​ Interest income ​ $ 20,197 ​ $ 14,967 ​ $ 19,972 ​ $ 14,731 ​ Interest expense ​ ​ 5,798 ​ ​ 760 ​ ​ 5,798 ​ ​ 760 ​ Net interest income ​ $ 14,399 ​ $ 14,207 ​ $ 14,174 ​ $ 13,971 ​ Net interest margin % ​ ​ 3.26 % ​ 3.46 % ​ 3.21 % ​ 3.52 % ​ ​ 55 Table of Contents The following tables set forth the average balances, net interest income and expense, and average yields and rates of our interest-earning assets and interest-bearing liabilities for the six- and three- month periods ended June 30 , 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ ​ June 30, ​ ​ ​ 2023 ​ 2022 ​ ​ ​ Average ​ ​ ​ Average ​ Average ​ ​ ​ Average ​ (dollars in thousands) Balance Interest Yield/Rate Balance Interest Yield/Rate Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 1,298,743 ​ $ 32,251 ​ 5.01 % $ 1,184,804 ​ $ 25,326 ​ 4.31 % Investment Securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ ​ 338,817 ​ ​ 3,547 ​ 2.11 % ​ 356,878 ​ ​ 2,946 ​ 1.66 % Non taxable ​ ​ 26,099 ​ ​ 963 ​ 7.44 % ​ 27,447 ​ ​ 1,005 ​ 7.38 % Total ​ ​ 364,916 ​ ​ 4,510 ​ 2.49 % ​ 384,325 ​ ​ 3,951 ​ 2.07 % Federal funds sold ​ ​ 62,361 ​ ​ 1,409 ​ 4.56 % ​ 44,689 ​ ​ 57 ​ 0.26 % Interest-bearing deposits with other banks ​ ​ 3,342 ​ ​ 45 ​ 2.72 % ​ 4,487 ​ ​ 5 ​ 0.21 % Other interest earning assets ​ ​ 3,069 ​ ​ 38 ​ 2.56 % ​ 1,028 ​ ​ 16 ​ 3.14 % Total earning assets ​ ​ 1,732,431 ​ ​ 38,253 ​ 4.45 % ​ 1,619,333 ​ ​ 29,355 ​ 3.66 % Allowance for loan losses ​ ​ (15,905) ​ ​ ​ ​ ​ ​ ​ (15,558) ​ ​ ​ ​ ​ ​ Non-earning assets ​ ​ 172,461 ​ ​ ​ ​ ​ ​ ​ 172,839 ​ ​ ​ ​ ​ ​ Total Assets ​ $ 1,888,987 ​ ​ ​ ​ ​ ​ $ 1,776,614 ​ ​ ​ ​ ​ ​ Liabilities and Shareholders’ Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ $ 365,491 ​ $ 2,021 ​ 1.11 % $ 291,220 ​ $ 182 ​ 0.13 % Interest-bearing money markets ​ ​ 314,246 ​ ​ 3,107 ​ 1.99 % ​ 289,377 ​ ​ 137 ​ 0.10 % Savings deposits ​ ​ 236,383 ​ ​ 135 ​ 0.12 % ​ 247,573 ​ ​ 36 ​ 0.03 % Time deposits - Retail ​ ​ 124,684 ​ ​ 832 ​ 1.35 % ​ 148,377 ​ ​ 521 ​ 0.71 % Time deposits - Brokered ​ ​ 35,771 ​ ​ 933 ​ 5.26 % ​ — ​ ​ — ​ — % Short-term borrowings ​ ​ 52,332 ​ ​ 60 ​ 0.23 % ​ 60,144 ​ ​ 39 ​ 0.13 % Long-term borrowings ​ ​ 77,338 ​ ​ 2,021 ​ 5.27 % ​ 30,929 ​ ​ 651 ​ 4.24 % Total interest-bearing liabilities ​ ​ 1,206,245 ​ ​ 9,109 ​ 1.52 % ​ 1,067,620 ​ ​ 1,566 ​ 0.30 % Non-interest-bearing deposits ​ ​ 497,226 ​ ​ ​ ​ ​ ​ ​ 542,992 ​ ​ ​ ​ ​ ​ Other liabilities ​ ​ 30,497 ​ ​ ​ ​ ​ ​ ​ 29,337 ​ ​ ​ ​ ​ ​ Shareholders’ Equity ​ ​ 155,019 ​ ​ ​ ​ ​ ​ ​ 137,665 ​ ​ ​ ​ ​ ​ Total Liabilities and Shareholders’ Equity ​ $ 1,888,987 ​ ​ ​ ​ ​ ​ $ 1,777,614 ​ ​ ​ ​ ​ ​ Net interest income and spread ​ ​ ​ ​ $ 29,144 ​ 2.93 % ​ ​ ​ $ 27,789 ​ 3.36 % Net interest margin ​ ​ ​ ​ ​ ​ ​ 3.39 % ​ ​ ​ ​ ​ ​ 3.46 % ​ (1) The above table reflects the average rates earned or paid stated on an FTE basis assuming a 21% tax rate for 2023 and 2022. Non-GAAP interest income on a fully taxable equivalent was $452 and $477, respectively. (2) Net interest margin is calculated as net interest income divided by average earning assets. (3) The average yields on investments are based on amortized cost. ​ 56 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ June 30, ​ ​ ​ 2023 ​ 2022 ​ (dollars in thousands) ​ Average Balance ​ Interest ​ Average Yield/Rate ​ Average Balance ​ Interest ​ Average Yield/Rate ​ Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 1,317,728 ​ $ 16,794 ​ 5.11 % $ 1,200,651 ​ $ 12,876 ​ 4.30 % Investment Securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ ​ 337,032 ​ ​ 1,779 ​ 2.12 % ​ 350,602 ​ ​ 1,540 ​ 1.76 % Non taxable ​ ​ 26,093 ​ ​ 479 ​ 7.36 % ​ 26,879 ​ ​ 500 ​ 7.46 % Total ​ ​ 363,125 ​ ​ 2,258 ​ 2.49 % ​ 377,481 ​ ​ 2,040 ​ 2.17 % Federal funds sold ​ ​ 84,629 ​ ​ 1,102 ​ 5.22 % ​ 36,151 ​ ​ 39 ​ 0.43 % Interest-bearing deposits with other banks ​ ​ 1,735 ​ ​ 19 ​ 4.46 % ​ 3,728 ​ ​ 4 ​ 0.43 % Other interest earning assets ​ ​ 4,490 ​ ​ 24 ​ 2.23 % ​ 1,026 ​ ​ 8 ​ 3.13 % Total earning assets ​ ​ 1,771,707 ​ ​ 20,197 ​ 4.57 % ​ 1,619,037 ​ ​ 14,967 ​ 3.71 % Allowance for loan losses ​ ​ (16,982) ​ ​ ​ ​ ​ ​ ​ (15,221) ​ ​ ​ ​ ​ ​ Non-earning assets ​ ​ 175,369 ​ ​ ​ ​ ​ ​ ​ 166,785 ​ ​ ​ ​ ​ ​ Total Assets ​ $ 1,930,094 ​ ​ ​ ​ ​ ​ $ 1,770,601 ​ ​ ​ ​ ​ ​ Liabilities and Shareholders’ Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ $ 377,773 ​ $ 1,132 ​ 1.20 % $ 298,571 ​ $ 93 ​ 0.12 % Interest-bearing money markets ​ ​ 304,322 ​ ​ 1,809 ​ 2.38 % ​ 282,083 ​ ​ 74 ​ 0.11 % Savings deposits ​ ​ 226,172 ​ ​ 56 ​ 0.10 % ​ 251,187 ​ ​ 18 ​ 0.03 % Time deposits - retail ​ ​ 130,634 ​ ​ 552 ​ 1.69 % ​ 142,013 ​ ​ 216 ​ 0.61 % Time deposits - brokered ​ ​ 61,081 ​ ​ 801 ​ 5.26 % ​ — ​ ​ — ​ — % Short-term borrowings ​ ​ 47,356 ​ ​ 29 ​ 0.25 % ​ 60,727 ​ ​ 21 ​ 0.14 % Long-term borrowings ​ ​ 110,929 ​ ​ 1,419 ​ 5.13 % ​ 30,929 ​ ​ 338 ​ 4.38 % Total interest-bearing liabilities ​ ​ 1,258,267 ​ ​ 5,798 ​ 1.85 % ​ 1,065,510 ​ ​ 760 ​ 0.29 % Non-interest-bearing deposits ​ ​ 484,952 ​ ​ ​ ​ ​ ​ ​ 539,488 ​ ​ ​ ​ ​ ​ Other liabilities ​ ​ 31,517 ​ ​ ​ ​ ​ ​ ​ 30,564 ​ ​ ​ ​ ​ ​ Shareholders’ Equity ​ ​ 155,358 ​ ​ ​ ​ ​ ​ ​ 136,039 ​ ​ ​ ​ ​ ​ Total Liabilities and Shareholders’ Equity ​ $ 1,930,094 ​ ​ ​ ​ ​ ​ $ 1,771,601 ​ ​ ​ ​ ​ ​ Net interest income and spread ​ ​ ​ ​ $ 14,399 ​ 2.72 % ​ ​ ​ $ 14,207 ​ 3.42 % Net interest margin ​ ​ ​ ​ ​ ​ ​ 3.26 % ​ ​ ​ ​ ​ ​ 3.52 % (1) The above table reflects the average rates earned or paid stated on an FTE basis assuming a 21% tax rate for 2023 and 2022. Non-GAAP interest income on a fully taxable equivalent was $226 and $236, respectively. (2) Net interest margin is calculated as net interest income divided by average earning assets. (3) The average yields on investments are based on amortized cost. ​ Net interest income, on a non-GAAP, FTE basis, increased by $0.2 million for the second quarter of 2023 when compared to the second quarter of 2022. This increase was driven by an increase of $5.2 million in interest income from an overall increase in yield of 86 basis points on interest earning assets and an increase in average balances of $152.7 million. Interest income on loans increased by $3.9 million due to the increase of 81 basis points in overall yield on the loan portfolio as new loans were booked at higher rates as well as adjustable-rate loans repricing in correlation to the rising rate environment and an increase in average balances of $117.1 million. Investment income increased by $0.2 million. The increase of $5.0 million in interest expense was driven by an increase of 142 basis points on interest paid on deposit accounts as well as an increase of $126.1 million in average balances of interest-bearing deposit accounts when compared to the same period of 2022. Increased deposit pricing is a result of the continued pressure on deposits as well as a shift in the deposit portfolio mix from non-interest-bearing deposits to interest-bearing accounts including the Insured Cash Sweep (“ICS”) product to ensure full FDIC insurance coverage. The net interest margin for the three months ended June 30, 2023 was 3.26%, compared to 3.52% for the three months ended June 30, 2022. ​ 57 Table of Contents Comparing the six months ended June 30, 2023 to the six months ended June 30, 2022, net interest income, on a non-GAAP, FTE basis, increased by $1.4 million. Interest income increased by $8.9 million and interest expense increased by $7.5 million. The yield on earning assets increased 79 basis points to 4.45% in 2023 compared to 3.66% in 2022 in correlation with the rising interest rate environment and new loans booked at higher rates. Interest expense on deposits increased $6.2 million while the average balances increased $100.0 million and interest on long-term borrowings increased $1.4 million relating to $80.0 million in Federal Home Loan Bank (“FHLB”) borrowings obtained during the first quarter of 2023 and an increase of interest rates on variable rate trust preferred borrowings. The increased interest expense resulted in an overall increase of 122 basis points on interest bearing liabilities. The net interest margin for the six months ended June 30, 2023 was 3.39%, compared to 3.46% for the six months ended June 30, 2022. ​ The following table sets forth an analysis of volume and rate changes in interest income and interest expense for our average interest-earning assets and average interest-bearing liabilities for the six and three month periods ended June 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Six months ended June 30, 2023 ​ ​ compared to the Six months ended June 30, 2022 (in thousands and tax equivalent basis) Volume Rate Net Interest Income: ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 2,455 ​ $ 4,470 ​ $ 6,925 Taxable Investments ​ ​ (150) ​ ​ 751 ​ ​ 601 Non-taxable Investments ​ ​ (50) ​ ​ 8 ​ ​ (42) Federal funds sold ​ ​ 23 ​ ​ 1,329 ​ ​ 1,352 Interest-bearing deposits ​ ​ (1) ​ ​ 41 ​ ​ 40 Other interest earning assets ​ ​ 32 ​ ​ (10) ​ ​ 22 Total interest income ​ ​ 2,309 ​ ​ 6,589 ​ ​ 8,898 Interest Expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ ​ 48 ​ ​ 1,791 ​ ​ 1,839 Interest-bearing money markets ​ ​ 12 ​ ​ 2,958 ​ ​ 2,970 Savings deposits ​ ​ (2) ​ ​ 101 ​ ​ 99 Time deposits - Retail ​ ​ (84) ​ ​ 395 ​ ​ 311 Time deposits - Brokered ​ ​ 0 ​ ​ 933 ​ ​ 933 Short-term borrowings ​ ​ (5) ​ ​ 26 ​ ​ 21 Long-term borrowings ​ ​ 984 ​ ​ 386 ​ ​ 1,370 Total interest expense ​ ​ 953 ​ ​ 6,590 ​ ​ 7,543 Net interest income ​ $ 1,356 ​ $ (1) ​ $ 1,355 (1) The change in interest income/expense due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. ​ 58 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three months ended June 30, 2023 compared to the Three months ended June 30, 2022 (in thousands and tax equivalent basis) ​ Volume ​ Rate ​ Net Interest Income: ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 1,259 ​ $ 2,659 ​ $ 3,918 Taxable Investments ​ ​ (58) ​ ​ 297 ​ ​ 239 Non-taxable Investments ​ ​ (15) ​ ​ (6) ​ ​ (21) Federal funds sold ​ ​ 52 ​ ​ 1,011 ​ ​ 1,063 Interest-bearing deposits ​ ​ (2) ​ ​ 17 ​ ​ 15 Other interest earning assets ​ ​ 27 ​ ​ (11) ​ ​ 16 Total interest income ​ ​ 1,263 ​ ​ 3,967 ​ ​ 5,230 Interest Expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ ​ 24 ​ ​ 1,015 ​ ​ 1,039 Interest-bearing money markets ​ ​ 6 ​ ​ 1,729 ​ ​ 1,735 Savings deposits ​ ​ (2) ​ ​ 40 ​ ​ 38 Time deposits - Retail ​ ​ (17) ​ ​ 353 ​ ​ 336 Time deposits - Brokered ​ ​ 0 ​ ​ 801 ​ ​ 801 Short-term borrowings ​ ​ (5) ​ ​ 13 ​ ​ 8 Long-term borrowings ​ ​ 876 ​ ​ 205 ​ ​ 1,081 Total interest expense ​ ​ 882 ​ ​ 4,156 ​ ​ 5,038 Net interest income ​ $ 381 ​ $ (189) ​ $ 192 (1) The change in interest income/expense due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. Provision for Credit Losses Specific allocations have been made for loans where management has determined that the collateral supporting the loans is not adequate to cover the loan balance, and the qualitative factors affecting the allowance for credit losses (“ACL”) and allowance for loan losses (“ALL”) have been adjusted based on the current economic environment and the characteristics of the loan portfolio. ​ Other Income The composition of other operating income for the six and three month periods ended June 30, 2023 and 2022 is illustrated in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income as % of ​ Income as % of ​ ​ Total Other Income ​ Total Other Income ​ ​ Six Months Ended ​ Three Months Ended ​ ​ June 30, ​ June 30, (in thousands) 2023 2022 2023 2022 Service charges on deposit accounts ​ $ 1,062 12% ​ $ 928 11% ​ $ 546 12% ​ $ 463 11% Other service charges ​ ​ 476 ​ 5% ​ ​ 445 ​ 5% ​ ​ 244 ​ 6% ​ ​ 232 ​ 5% Trust department ​ ​ 3,995 ​ 46% ​ ​ 4,233 ​ 48% ​ ​ 2,025 ​ 45% ​ ​ 2,044 ​ 46% Debit card income ​ ​ 1,986 ​ 23% ​ ​ 1,869 ​ 21% ​ ​ 1,031 ​ 23% ​ ​ 983 ​ 22% Bank owned life insurance ​ ​ 616 ​ 7% ​ ​ 589 ​ 7% ​ ​ 311 ​ 7% ​ ​ 297 ​ 7% Brokerage commissions ​ ​ 555 ​ 6% ​ ​ 533 ​ 6% ​ ​ 258 ​ 6% ​ ​ 313 ​ 7% Other income ​ ​ 132 ​ 1% ​ ​ 198 ​ 2% ​ ​ 68 ​ 2% ​ ​ 81 ​ 2% ​ ​ $ 8,822 ​ 100% ​ $ 8,795 ​ 100% ​ $ 4,483 ​ 100% ​ $ 4,413 ​ 100% ​ ​ 59 Table of Contents Other Operating Expenses The composition of other operating expenses for the six and three month periods ended June 30, 2023 and 2022 is illustrated in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Expense as % of ​ Expense as % of ​ ​ Total Other Operating Expenses ​ Total Other Operating Expenses ​ ​ Six Months Ended ​ Three Months Ended ​ ​ June 30, ​ June 30, (in thousands) 2023 2022 2023 2022 Salaries and employee benefits ​ $ 14,155 56% ​ $ 11,761 55% ​ $ 6,865 55% ​ $ 5,793 54% FDIC premiums ​ ​ 470 ​ 2% ​ ​ 329 ​ 2% ​ ​ 277 ​ 2% ​ ​ 155 ​ 2% Equipment ​ ​ 2,139 ​ 9% ​ ​ 2,073 ​ 10% ​ ​ 1,047 ​ 8% ​ ​ 1,029 ​ 10% Occupancy expense of premises ​ ​ 1,527 ​ 6% ​ ​ 1,438 ​ 7% ​ ​ 743 ​ 6% ​ ​ 711 ​ 7% Data processing expense ​ ​ 1,915 ​ 8% ​ ​ 1,626 ​ 8% ​ ​ 946 ​ 8% ​ ​ 805 ​ 8% Marketing expense ​ ​ 254 ​ 1% ​ ​ 257 ​ 1% ​ ​ 137 ​ 1% ​ ​ 151 ​ 1% Professional services ​ ​ 1,040 ​ 3% ​ ​ 1,084 ​ 5% ​ ​ 522 ​ 4% ​ ​ 564 ​ 5% Contract labor ​ ​ 298 ​ 1% ​ ​ 323 ​ 2% ​ ​ 159 ​ 1% ​ ​ 158 ​ 1% Telephone ​ ​ 226 ​ 1% ​ ​ 253 ​ 1% ​ ​ 116 ​ 1% ​ ​ 139 ​ 1% Other real estate owned ​ ​ 142 ​ 1% ​ ​ 247 ​ 1% ​ ​ 18 ​ 0% ​ ​ 152 ​ 1% Investor relations ​ ​ 189 ​ 1% ​ ​ 219 ​ 1% ​ ​ 132 ​ 1% ​ ​ 123 ​ 1% Contributions ​ ​ 143 ​ 1% ​ ​ 63 ​ 0% ​ ​ 79 ​ 1% ​ ​ 42 ​ 0% Other ​ ​ 2,651 ​ 10% ​ ​ 1,537 ​ 7% ​ ​ 1,470 ​ 12% ​ ​ 808 ​ 9% ​ ​ $ 25,149 ​ 100% ​ $ 21,210 ​ 100% ​ $ 12,511 ​ 100% ​ $ 10,630 ​ 100% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Provision for Income Taxes In reporting interim financial information, income tax provisions should be determined under the procedures set forth in Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 740, Income Taxes (Section 740-270-30). This guidance provides that at the end of each interim period, an entity should make its best estimate of the effective tax rate expected to be applicable for the full fiscal year. The rate so determined should be used in providing for income taxes on a current year-to-date basis. The effective tax rate should reflect anticipated investment tax credits, capital gains rates, and other available tax planning alternatives. In arriving at this effective tax rate, however, no effect should be included for the tax related to significant, unusual or extraordinary items that will be separately reported or reported net of their related tax effect in reports for the interim period or for the fiscal year. The effective income tax rates as a percentage of income for the six-month periods ended June 30, 2023 and June 30, 2022 were 24.0% and 24.5%, respectively. The decrease in the tax rate for the 2023 period was primarily related to a new low-income housing tax credit investment in 2022 that began generating tax credits during the fourth quarter of 2022. This tax credit is expected to continue through 2032. ​ FINANCIAL CONDITION Balance Sheet Overview Total assets at June 30, 2023 were $1.9 billion, representing an $80.2 million increase since December 31, 2022. During the first six months of 2023, cash and interest-bearing deposits in other banks increased by $14.2 million resulting from implementation of the contingency funding plan and obtaining $61.1 million of brokered certificates of deposit and $80.0 million in FHLB borrowings. Implementing the contingency funding plan and the increase in on-balance sheet liquidity was a precautionary move given the market disruption associated with the volatile banking environment and the near-term uncertainties regarding growth in the deposit portfolio. The increase in cash obtained from contingency funding was partially offset by the funding of loan growth during 2023. The investment portfolio decreased by $10.7 million associated with normal principal amortization and gross loans increased by $70.5 million. Other assets, including deferred taxes, premises and equipment, and accrued interest receivable, 60 Table of Contents increased by $4.0 million as pension assets increased by $0.6 million, equity investments increased by $0.7 million, and deferred tax assets increased by $1.2 million. ​ Total liabilities at June 30, 2023 were $1.8 billion, representing a $76.9 million increase since December 31, 2022. Total deposits increased by $9.2 million since December 31, 2022. The increase in deposits during the first six months of 2023 was primarily attributable to $61.1 million in new brokered deposits, which was partially offset by a decrease of approximately $40.0 million in non-interest-bearing deposits due to a shift to interest bearing accounts, two large commercial customers having large deposit withdrawals totaling $39.5 million during 2023 to fund business activity, the effects of consumer and commercial spending and the competitive market for deposits. Short term borrowings decreased by $14.5 million since December 31, 2022 due to municipalities utilizing cash in our treasury management product for normal spending. Long term borrowings increased by $80.0 million in the first six months of 2023 when compared to December 31, 2022 due to the advance of $80.0 million in FHLB borrowings. The addition of brokered deposits and the FHLB borrowings was a precautionary move as described above. ​ Loan Portfolio The following table presents the composition of our loan portfolio at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) June 30, 2023 December 31, 2022 Commercial real estate ​ $ 483,485 36% ​ $ 458,831 36% Acquisition and development ​ ​ 79,003 ​ 6% ​ ​ 70,596 ​ 6% Commercial and industrial * ​ ​ 249,683 ​ 18% ​ ​ 245,396 ​ 19% Residential mortgage ​ ​ 475,540 ​ 35% ​ ​ 444,411 ​ 35% Consumer ​ ​ 62,327 ​ 5% ​ ​ 60,260 ​ 5% Total Loans ​ $ 1,350,038 ​ 100% ​ $ 1,279,494 ​ 100% *Includes $0.1 million of Paycheck Protection Program loans at June 30, 2023 and $0.4 million at December 31, 2022 ​ Outstanding loans of $1.4 billion at June 30, 2023 reflected growth of $70.5 million for the first six months of 2023. Since December 31, 2022, commercial real estate loans increased by $24.7 million and acquisition and development loans increased by $8.4 million. Commercial and industrial loans increased by $4.3 million since December 31, 2022. Growth in the commercial portfolios was driven by increased activity with existing clients as well as cultivating new business relationships. Residential mortgage loans increased by $31.1 million related to management’s strategic decision to book new mortgage loans at higher rates to our in-house portfolio. The consumer loan portfolio increased slightly by $2.1 million. ​ New commercial loan production for the three months ended June 30, 2023 was approximately $67.6 million. The pipeline of commercial loans as of June 30, 2023 was $22.5 million. At June 30, 2023, unfunded, committed commercial construction loans totaled approximately $42.6 million. Commercial amortization and payoffs were approximately $99.3 million through June 30, 2023 due primarily to pay-offs of short-term commercial loans as well as normal amortizations of the commercial loan portfolio. ​ New consumer mortgage loan production for the second quarter of 2023 was approximately $32.3 million, with most of this production comprised of in-house mortgages. The pipeline of in-house, portfolio loans as of June 30, 2023, was $6.2 million. The residential mortgage production level normalized in the second quarter of 2023 due to the increasing interest rates that occurred throughout 2022 and 2023. Unfunded commitments related to residential construction loans totaled $21.0 million at June 30, 2023. Management began shifting activity toward the secondary market in the second quarter of 2023 to reduce the need for additional funding. ​ Non-accrual loans totaled $3.0 million at June 30, 2023, compared to $3.5 million at December 31, 2022. The decrease in non-accrual balances at June 30, 2023 was primarily driven by principal reductions in the residential mortgage portfolio. Other real estate owned (“OREO”) balances increased by $0.1 million since December 31, 2022 due to the addition of a new OREO property during the second quarter of 2023, which was partially offset by sale of OREO held by the Bank at December 31, 2022. ​ ​ 61 Table of Contents Risk Elements of Loan Portfolio The following table presents the risk elements of our loan portfolio at the dates indicated. Management is not aware of any potential problem loans other than those listed in this table or discussed below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) June 30, 2023 % of Applicable Portfolio December 31, 2022 % of Applicable Portfolio Non-accrual loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ $ — ​ 0.00% ​ $ 145 ​ 0.03% Acquisition and development ​ ​ 128 ​ 0.16% ​ ​ 146 ​ 0.21% Residential mortgage ​ ​ 2,844 ​ 0.60% ​ ​ 3,204 ​ 0.72% Consumer ​ ​ — ​ 0.00% ​ ​ — ​ 0.00% Total non-accrual loans ​ $ 2,972 ​ 0.22% ​ $ 3,495 ​ 0.27% Accruing Loans Past Due 90 days or more: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage ​ ​ 63 ​ ​ ​ ​ 282 ​ ​ Consumer ​ ​ 97 ​ ​ ​ ​ 25 ​ ​ Total loans past due 90 days or more ​ $ 160 ​ ​ ​ $ 307 ​ ​ Total non-accrual and accruing loans past due 90 days or more ​ $ 3,132 ​ ​ ​ $ 3,802 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other real estate owned ​ $ 4,842 ​ ​ ​ $ 4,733 ​ ​ Total Non-performing assets ​ $ 7,974 ​ ​ ​ $ 8,535 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-accrual loans to total loans (as %) ​ ​ 0.22% ​ ​ ​ ​ 0.27% ​ ​ Non-performing loans to total loans (as %) ​ ​ 0.23% ​ ​ ​ ​ 0.30% ​ ​ Non-performing assets to total assets (as %) ​ ​ 0.41% ​ ​ ​ ​ 0.46% ​ ​ Allowance for credit losses to non-accrual loans (as %) ​ ​ 568.81% ​ ​ ​ ​ 418.77% ​ ​ Allowance for credit losses to non-performing assets (as %) ​ ​ 212.00% ​ ​ ​ ​ 171.48% ​ ​ ​ ​ 62 Table of Contents ​ Allowance for Credit Losses The ACL represents an amount which, in management’s judgment, is adequate to absorb expected credit losses over the life of outstanding loans as of the balance sheet date based on the evaluation of current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions and prepayment experience. The ACL is measured and recorded upon the initial recognition of a financial asset. The ACL is reduced by charge-offs, net of recoveries of previous losses, and is increased by a provision or decreased by a recovery for credit losses, which is recorded as a current period operating expense. Determination of an appropriate ACL is inherently complex and requires the use of highly subjective estimates. The reasonableness of the ACL is reviewed quarterly by management. Management believes it uses relevant information available to make determination about the ACL and that it has established the existing allowance in accordance with GAAP. However, the determination of the ACL requires significant judgment, and estimates of expected credit losses in the loan portfolio can vary from the amounts actually observed. While management uses available information to recognize expected credit losses, future additions to the ACL may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes to the interest rate environment which may directly impact prepayment and curtailment rate assumptions, and changes in the financial condition of borrowers. The ACL “base case” model is derived from various economic forecasts provided by widely recognized sources. Management evaluates the variability of market conditions by examining the peak and trough of economic cycles. These peaks and troughs are used to stress the base case model to develop a range of potential outcomes. Management then determines the appropriate reserve through an evaluation of these various outcomes relative to current economic conditions and known risks in the portfolio. Management enhances its calculation with the use of Moody’s economic forecast data to provide additional support to substantiate its ACL. The following table presents a summary of the activity in the ACL and ALL for the six month periods ended June 30: ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) 2023 2022 Balance, January 1 ​ $ 14,636 ​ $ 15,955 ​ Impact of CECL Adoption ​ ​ 2,066 ​ ​ — ​ Charge-offs: ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ (87) ​ ​ — ​ Acquisition and development ​ ​ — ​ ​ — ​ Commercial and industrial ​ ​ (166) ​ ​ (52) ​ Residential mortgage ​ ​ (24) ​ ​ (33) ​ Consumer ​ ​ (518) ​ ​ (545) ​ Total charge-offs ​ ​ (795) ​ ​ (630) ​ Recoveries: ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ 5 ​ ​ 1 ​ Acquisition and development ​ ​ 7 ​ ​ 20 ​ Commercial and industrial ​ ​ 9 ​ ​ 9 ​ Residential mortgage ​ ​ 36 ​ ​ 101 ​ Consumer ​ ​ 93 ​ ​ 76 ​ Total recoveries ​ ​ 150 ​ ​ 207 ​ Net losses ​ ​ (645) ​ ​ (423) ​ Credit Loss Expense/(Credit) ​ ​ 848 ​ ​ 205 ​ Balance at end of period ​ $ 16,905 ​ $ 15,737 ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit/loan losses to gross loans outstanding (as %) ​ ​ 1.25 % ​ 1.28 % ​ 63 Table of Contents ​ ​ ​ ​ ​ ​ ​ Net (Charge-offs)/Recoveries as a % of Average Applicable Portfolio ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 Commercial real estate ​ ​ (0.04)% ​ ​ 0.00% Acquisition and development ​ ​ 0.02% ​ ​ (0.07)% Commercial and industrial ​ ​ (0.13)% ​ ​ (0.23)% Residential mortgage ​ ​ 0.01% ​ ​ 0.02% Consumer ​ ​ (1.40)% ​ ​ 0.45% ​ ​ ​ ​ ​ ​ ​ ​ Investment Securities At June 30, 2023, the total amortized cost basis of the available-for-sale investment portfolio was $146.5 million, compared to a fair value of $120.1 million. Unrealized gains and losses on securities available-for-sale are reflected in accumulated other comprehensive loss, a component of shareholders’ equity. The amortized cost basis of the held to maturity portfolio was $230.8 million, compared to a fair value of $199.1 million. The following table presents the composition of our securities portfolio at amortized cost and fair values at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 ​ December 31, 2022 ​ ​ Amortized ​ Fair Value ​ FV as % ​ Amortized ​ Fair Value ​ FV as % (dollars in thousands) Cost (FV) of Total Cost (FV) of Total Securities Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 11,028 ​ $ 9,541 ​ 9% ​ $ 11,044 ​ $ 9,462 ​ 8% Residential mortgage-backed agencies ​ ​ 43,224 ​ ​ 35,867 ​ 30% ​ ​ 45,052 ​ ​ 37,401 ​ 30% Commercial mortgage-backed agencies ​ ​ 36,897 ​ ​ 29,134 ​ 24% ​ ​ 37,393 ​ ​ 30,732 ​ 23% Collateralized mortgage obligations ​ ​ 24,836 ​ ​ 20,125 ​ 17% ​ ​ 25,828 ​ ​ 21,044 ​ 17% Obligations of state and political subdivisions ​ ​ 10,837 ​ ​ 10,566 ​ 9% ​ ​ 10,848 ​ ​ 10,492 ​ 8% Corporate bonds ​ ​ 1,000 ​ ​ 747 ​ 1% ​ ​ 1,000 ​ ​ 887 ​ 1% Collateralized debt obligations ​ ​ 18,674 ​ ​ 14,105 ​ 12% ​ ​ 18,664 ​ ​ 15,871 ​ 13% Total available for sale ​ $ 146,496 ​ $ 120,085 ​ 100% ​ $ 149,829 ​ $ 125,889 ​ 100% Securities Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. treasuries ​ $ 37,332 ​ $ 36,257 ​ 18% ​ $ 37,204 ​ $ 35,611 ​ 18% U.S. government agencies ​ ​ 67,873 ​ ​ 55,762 ​ 28% ​ ​ 67,734 ​ ​ 54,473 ​ 27% Residential mortgage-backed agencies ​ ​ 26,970 ​ ​ 23,706 ​ 12% ​ ​ 28,624 ​ ​ 25,122 ​ 12% Commercial mortgage-backed agencies ​ ​ 21,494 ​ ​ 16,306 ​ 8% ​ ​ 22,389 ​ ​ 17,821 ​ 9% Collateralized mortgage obligations ​ ​ 55,104 ​ ​ 44,980 ​ 23% ​ ​ 57,085 ​ ​ 47,084 ​ 23% Obligations of state and political subdivisions ​ ​ 21,986 ​ ​ 22,060 ​ 11% ​ ​ 22,623 ​ ​ 22,969 ​ 11% Total held to maturity ​ $ 230,759 ​ $ 199,071 ​ 100% ​ $ 235,659 ​ $ 203,080 ​ 100% ​ Total fair value of investment securities available for sale decreased by $5.8 million since December 31, 2022 due to principal paydowns of the portfolio in the first six months of 2023 and declines in the fair value of investment securities of $2.4 million. At June 30, 2023, the securities classified as available-for-sale included a net unrealized loss of $26.4 million, which represents the difference between the fair value and amortized cost of securities in the portfolio. As discussed in Note 6 to the consolidated financial statements presented elsewhere in this report, the Corporation measures fair market values based on the fair value hierarchy established in ASC Topic 820, Fair Value Measurements and Disclosures . 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). Level 3 prices or valuation techniques require inputs that are both significant to the valuation assumptions and are not readily observable in the market (i.e. supported with little or no market activity). These Level 3 instruments are valued based on both observable and unobservable inputs derived from the best available data, some of which is internally developed, and considers risk premiums that a market participant would require. 64 Table of Contents Approximately $105.9 million of the available for sale portfolio was valued using Level 2 pricing and had net unrealized losses of $21.8 million at June 30, 2023. The remaining $14.1 million of the securities available for sale represents the entire collateralized debt obligation portfolio, which was valued using significant unobservable inputs (Level 3 assets). The $4.6 million in net unrealized losses associated with this portfolio relates to nine pooled trust preferred securities that comprise the collateralized debt obligation portfolio. Net unrealized losses of $1.6 million represent non-credit related impairment charges on seven of the securities, while $3.0 million of unrealized losses relates to two securities which have had no impairment-related charges. Deposits The following table presents the composition of our deposits at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) June 30, 2023 December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest-bearing demand deposits ​ $ 466,628 29% ​ $ 506,613 32% ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing deposits: ​ ​ ​ ​ ​ ​ ​ ​ Demand ​ ​ 393,234 25% ​ ​ 327,685 21% Money Market ​ ​ 297,312 19% ​ ​ 365,192 23% Savings deposits ​ ​ 215,649 14% ​ ​ 250,720 16% Time deposits- retail ​ ​ 146,055 9% ​ ​ 120,523 8% Time deposits- brokered ​ ​ 61,081 4% ​ ​ — 0% Total Deposits ​ $ 1,579,959 100% ​ $ 1,570,733 100% ​ Total deposits at June 30, 2023 increased by $9.2 million when compared to December 31, 2022. During the first six months of 2023, non-interest-bearing deposits decreased by $40.0 million primarily due a shift in the deposit portfolio mix from non-interest-bearing deposits to interest-bearing accounts including the ICS product to ensure full FDIC insurance coverage, consumer and commercial spending and the competitive deposit market. Interest bearing demand deposits increased by $65.5 million and traditional savings and money market accounts decreased by $103.0 million, which is primarily related to consumer spending habits during 2023, businesses utilizing cash, and two large customers reducing deposits by approximately $39.5 million for regular business purposes. Total time deposits increased by $86.6 million. This increase in time deposits was primarily driven by management’s decision to acquire $61.1 million in brokered deposits during the first quarter of 2023 due to the heightened uncertainty in the deposit market associated with the volatile banking environment as well as increased interest rates on a promotional nine-month CD product offered in early 2023. ​ The following table summarizes the percentage of deposits that are insured by deposit insurance or otherwise fully collateralized by securities compared to uninsured deposits as of June 30, 2023 and December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 ​ ​ December 31, 2022 (dollars in thousands) ​ ​ Balance Percent ​ ​ Balance Percent Insured/collateralized deposits ​ $ 1,350,060 85% ​ $ 1,118,190 71% Uninsured deposits ​ ​ 229,899 15% ​ ​ 452,543 29% ​ ​ $ 1,579,959 100% ​ $ 1,570,733 100% ​ ​ The following table summarizes the percentage of deposit balances from retail customers compared to business customers as of June 30, 2023 and December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 ​ ​ December 31, 2022 (dollars in thousands) ​ ​ Balance Percent ​ ​ Balance Percent Retail deposits ​ $ 798,737 51% ​ $ 855,014 55% Business deposits ​ ​ 781,222 49% ​ ​ 715,719 45% ​ ​ $ 1,579,959 100% ​ $ 1,570,733 100% ​ 65 Table of Contents Deposit outflows experienced in late 2022 and January 2023 were due to the competitive pricing landscape and inflationary spending. Changes in deposit levels were not directly related to the market disruptions during the first six months of 2023. Borrowed Funds The following table presents the composition of our borrowings at the dates indicated: ​ ​ ​ ​ ​ ​ ​ (in thousands) June 30, 2023 December 31, 2022 Securities sold under agreements to repurchase ​ $ 50,078 ​ $ 64,565 Total short-term borrowings ​ ​ 50,078 ​ ​ 64,565 FHLB advances ​ $ 80,000 ​ $ — Junior subordinated debt ​ ​ 30,929 ​ ​ 30,929 Total long-term borrowings ​ $ 110,929 ​ $ 30,929 ​ Short term borrowings decreased $14.5 million since December 31, 2022, driven by the utilization of cash by municipalities in our Treasury Management product. ​ During the first quarter of 2023, management implemented the Contingency Funding plan and borrowed $80.0 million from FHLB in two advances with 12 and 18 month maturities. ​ Liquidity Management Liquidity is a financial institution’s capability to meet customer demands for deposit withdrawals while funding all credit-worthy loans. The factors that determine the institution’s liquidity are: ● Reliability and stability of core deposits; ● Cash flow structure and pledging status of investments; and ● Potential for unexpected loan demand. We actively manage our liquidity position through regular meetings of a sub-committee of executive management, known as the Treasury Team, which looks forward 12 months at 30-day intervals. The measurement is based upon the projection of funds sold or purchased position, along with ratios and trends developed to measure dependence on purchased funds and core growth. Monthly reviews by management and quarterly reviews by the Asset and Liability Committee under prescribed policies and procedures are designed to ensure that we will maintain adequate levels of available funds. It is our policy to manage our affairs so that liquidity needs are fully satisfied through normal Bank operations. That is, the Bank will manage its liquidity to minimize the need to make unplanned sales of assets or to borrow funds under emergency conditions. The Bank will use funding sources where the interest cost is relatively insensitive to market changes in the short run (periods of one year or less) to satisfy operating cash needs. The remaining normal funding will come from interest-sensitive liabilities, either deposits or borrowed funds. When the marginal cost of needed wholesale funding is lower than the cost of raising this funding in the retail markets, the Corporation may supplement retail funding with external funding sources such as: 1. Unsecured Fed Funds lines of credit with upstream correspondent banks (M&T Bank, Pacific Coast Banker’s Bank, PNC Financial Services, Atlantic Community Bankers Bank and Community Bankers Bank). 2. Secured advances with the FHLB, which are collateralized by eligible one to four family residential mortgage loans, home equity lines of credit, commercial real estate loans. 3. Secured line of credit with the Fed Discount Window for use in borrowing funds up to 90 days, using municipal securities as collateral. 4. Brokered deposits, including CDs and money market funds, provide a method to generate deposits quickly. These deposits are strictly rate driven but often provide the most cost-effective means of funding growth. 5. One Way Buy CDARS/ICS funding – a form of brokered deposits that has become a viable supplement to brokered deposits obtained directly. 6. Bank Term Funding Program – A Federal Reserve program collateralized by government agency securities, if needed. 66 Table of Contents ​ ​ The following table presents sources of liquidity available to the Corporation as of June 30, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) ​ ​ Total Availability ​ ​ Amount Used ​ ​ Net Availability Internal Sources ​ ​ ​ ​ ​ ​ ​ ​ ​ Excess cash ​ $ 66,969 ​ $ - ​ $ 66,969 Unpledged securities ​ ​ 56,338 ​ ​ - ​ ​ 56,338 External Sources ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal Reserve (discount window) ​ ​ 9,735 ​ ​ - ​ ​ 9,735 Correspondent unsecured lines of credit ​ ​ 105,000 ​ ​ - ​ ​ 105,000 FHLB ​ ​ 217,493 ​ ​ 82,500 ​ ​ 134,993 Bank Term Funding Program* ​ ​ 87,263 ​ ​ - ​ ​ 87,263 ​ ​ $ 542,798 ​ $ 82,500 ​ $ 460,298 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ *Bank Term Funding Program has been established and eligible securities with a total par balance of $87.3 million have been pledged to the program as of June 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Management is not aware of any demands, commitments, events or uncertainties that are likely to materially affect our ability to meet our future capital requirements. ​ Due to the market disruption and uncertainties, management implemented the Liquidity Contingency Plan in the first quarter and believes that we have adequate liquidity available to respond to current and anticipated liquidity demands and is not aware of any trends or demands, commitments, events or uncertainties that are likely to materially affect our ability to maintain liquidity at satisfactory levels. Market Risk and Interest Sensitivity Our primary market risk is interest rate fluctuation. Interest rate risk results primarily from the traditional banking activities that we engage in, such as gathering deposits and extending loans. Many factors, including economic and financial conditions, movements in interest rates and consumer preferences affect the difference between the interest earned on our assets and the interest paid on our liabilities. Interest rate sensitivity refers to the degree that earnings will be impacted by changes in the prevailing level of interest rates. Interest rate risk arises from mismatches in the repricing or maturity characteristics between interest-bearing assets and liabilities. Management seeks to minimize fluctuating net interest margins, and to enhance consistent growth of net interest income through periods of changing interest rates. Management uses interest sensitivity gap analysis and simulation models to measure and manage these risks. The interest rate sensitivity gap analysis assigns each interest-earning asset and interest-bearing liability to a time frame reflecting its next repricing or maturity date. The differences between total interest-sensitive assets and liabilities at each time interval represent the interest sensitivity gap for that interval. A positive gap generally indicates that rising interest rates during a given interval will increase net interest income, as more assets than liabilities will reprice. A negative gap position would benefit us during a period of declining interest rates. At June 30, 2023, we were asset sensitive. Our interest rate risk management goals are: ● Ensure that the Board of Directors and senior management will provide effective oversight and ensure that risks are adequately identified, measured, monitored and controlled; ● Enable dynamic measurement and management of interest rate risk; ● Select strategies that optimize our ability to meet our long-range financial goals while maintaining interest rate risk within policy limits established by the Board of Directors; ● Use both income and market value oriented techniques to select strategies that optimize the relationship between risk and return; and ● Establish interest rate risk exposure limits for fluctuation in net interest income (“NII”), net income and economic value of equity. 67 Table of Contents To manage interest sensitivity risk, management formulates guidelines regarding asset generation and pricing, funding sources and pricing, and off-balance sheet commitments. These guidelines are based on management’s outlook regarding future interest rate movements, the state of the regional and national economy, and other financial and business risk factors. Management uses computer simulations to measure the effect on net interest income of various interest rate scenarios. Key assumptions used in the computer simulations include cash flows and maturities of interest rate sensitive assets and liabilities, changes in asset volumes and pricing, and management’s capital plans. This modeling reflects interest rate changes and the related impact on net interest income over specified periods. We evaluate the effect of a change in interest rates of +/-100 basis points to +/-400 basis points on both NII and Net Portfolio Value (“NPV”) / Economic Value of Equity (“EVE”). We concentrate on NII rather than net income as long as NII remains the significant contributor to net income. NII modeling allows management to view how changes in interest rates will affect the spread between the yield paid on assets and the cost of deposits and borrowed funds. Unlike traditional Gap modeling, NII modeling takes into account the different degree to which installments in the same repricing period will adjust to a change in interest rates. It also allows the use of different assumptions in a falling versus a rising rate environment. The period considered by the NII modeling is the next eight quarters. NPV / EVE modeling focuses on the change in the market value of equity. NPV / EVE is defined as the market value of assets less the market value of liabilities plus/minus the market value of any off-balance sheet positions. By effectively looking at the present value of all future cash flows on or off the balance sheet, NPV / EVE modeling takes a longer-term view of interest rate risk. This complements the shorter-term view of the NII modeling. Measures of NII at risk produced by simulation analysis are indicators of an institution’s short-term performance in alternative rate environments. These measures are typically based upon a relatively brief period, usually one year. They do not necessarily indicate the long-term prospects or economic value of the institution. ​ 68 Table of Contents Based on the simulation analysis performed at June 30, 2023 and December 31, 2022, management estimated the following changes in net interest income, assuming the indicated rate changes: ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) June 30, 2023 ​ December 31, 2022 +400 basis points ​ $ 2,901 ​ $ 1,112 +300 basis points ​ $ 2,136 ​ $ 225 +200 basis points ​ $ 1,405 ​ $ 173 +100 basis points ​ $ 726 ​ $ 121 -100 basis points ​ $ (964) ​ $ (776) -200 basis points ​ $ (2,697) ​ $ (3,165) -300 basis points ​ $ (5,479) ​ $ (7,382) -400 basis points ​ $ (8,956) ​ $ N/A ​ ​ This estimate is based on assumptions that may be affected by unforeseeable changes in the general interest rate environment and any number of unforeseeable factors. Rates on different assets and liabilities within a single maturity category adjust to changes in interest rates to varying degrees and over varying periods of time. The relationships between lending rates and rates paid on purchased funds are not constant over time. Management can respond to current or anticipated market conditions by lengthening or shortening the Bank’s sensitivity through loan repricings or changing its funding mix. The rate of growth in interest-free sources of funds will influence the level of interest-sensitive funding sources. In addition, the absolute level of interest rates will affect the volume of earning assets and funding sources. As a result of these limitations, the interest-sensitive gap is only one factor to be considered in estimating the net interest margin. Management believes that no material changes in our market risks, our procedures used to evaluate and mitigate those risks, or our actual or simulated sensitivity positions have occurred since December 31, 2022. Our NII simulation analysis as of December 31, 2022 is included in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2022 under the heading “Market Risk and Interest Sensitivity. Impact of Inflation – Our assets and liabilities are primarily monetary in nature, and as such, future changes in prices do not affect the obligations to pay or receive fixed and determinable amounts of money. During inflationary periods, monetary assets lose value in terms of purchasing power and monetary liabilities have corresponding purchasing power gains. The concept of purchasing power is not an adequate indicator of the impact of inflation on financial institutions because it does not incorporate changes in our earnings. Capital Resources We require capital to fund loans, satisfy our obligations under the Bank’s letters of credit, meet the deposit withdrawal demands of the Bank’s customers, and satisfy our other monetary obligations. To the extent that deposits are not adequate to fund our capital requirements, we can rely on the funding sources identified above under the heading “Liquidity Management”. In addition to operational requirements, the Bank is subject to risk-based capital regulations, which were adopted and are monitored by federal banking regulators. These regulations are used to evaluate capital adequacy and require an analysis of an institution’s asset risk profile and off-balance sheet exposures, such as unused loan commitments and stand-by letters of credit. Based on capital ratios at June 30, 2023, the Bank was considered to be well-capitalized. ​ 69 Table of Contents The following table presents the Bank’s capital ratios as of the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 December 31, 2022 Required for Capital Adequacy Purposes Required to be Well Capitalized Total Capital (to risk-weighted assets) ​ 13.87 % 14.37 % 8.00 % 10.00 % Tier 1 Capital (to risk-weighted assets) ​ 12.64 % 13.29 % 6.00 % 8.00 % Common Equity Tier 1 Capital (to risk-weighted assets) ​ 12.64 % 13.29 % 4.50 % 6.50 % Tier 1 Capital (to average assets) ​ 9.78 % 10.01 % 4.00 % 5.00 % ​ As of June 30, 2023 and December 31, 2022, the Bank was considered “well capitalized” under the regulatory framework for prompt corrective action. We adopted CECL effective January 1, 2023 and elected not to implement the regulatory agencies’ capital transition and instead opted to record the impact to our capital ratios immediately upon implementation. ​ Effective with the implementation of CECL, a $2.2 million, net of tax, adjustment was made to retained earnings. The adjustment did not have a material impact to our capital ratios. Contractual Obligations, Commitments and Off-Balance Sheet Arrangements Contractual Obligations The Corporation enters into contractual obligations in the normal course of business. Among these obligations are FHLB advances and junior subordinated debentures, operating lease agreements for banking and subsidiaries’ offices and for data processing and telecommunications equipment. Comparing June 30, 2023 to December 31, 2022, short-term borrowings decreased $14.5 million, driven by a the utilization of cash balances by municipalities related to the overnight investments product. Long-term borrowings increased by $80.0 million during the quarter due to management’s decision to obtain $80 million in FHLB advances during the first quarter of 2023. Commitments Loan commitments are made to accommodate the financial needs of our customers. Letters of credit commit us to make payments on behalf of customers when certain specified future events occur. The credit risks inherent in loan commitments and letters of credit are essentially the same as those involved in extending loans to customers, and these arrangements are subject to our normal credit policies. We are not a party to any other off-balance sheet arrangements. Commitments to extend credit in the form of consumer, commercial and business at the dates indicated were as follows: ​ ​ ​ ​ ​ ​ ​ (in thousands) June 30, 2023 December 31, 2022 Residential Mortgage - home equity ​ $ 72,726 ​ $ 70,845 Residential Mortgage - construction ​ ​ 21,241 ​ ​ 25,499 Commercial ​ ​ 171,604 ​ ​ 153,235 Consumer - personal credit lines ​ ​ 4,267 ​ ​ 4,323 Standby letters of credit ​ ​ 6,893 ​ ​ 14,325 Total ​ $ 276,731 ​ $ 268,227 ​ The increase of $8.5 million in commitments at June 30, 2023 when compared to December 31, 2022 was due to new business in construction commitments in the commercial portfolio as well as new home equity lines of credit. Upon adoption of ASC 326 on January 1, 2023, the Corporation recorded an initial increase to the ACL for off-balance sheet exposures of $0.9 million. Credit loss expense for off-balance sheet credit exposures totaled $0.1 million for the six-month period ended June 30, 2023. 70 Table of Contents Item 3. Quantitative and Qualitative Disclosures about Market Risk The information required by this item is included in Item 2 of Part I of this report under the caption “ Market Risk and Interest Sensitivity ” and in Item 7 of Part II of First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022 under the heading “Market Risk and Interest Sensitivity” both of which are incorporated in this Item 3 by reference. Item 4. Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 with the SEC, such as this Quarterly Report, is recorded, processed, summarized and reported within the periods specified in those rules and forms, and that such information is accumulated and communicated to our management, including First United Corporation’s principal executive officer (“PEO”) and its principal financial officer (“PFO”), as appropriate, to allow for timely decisions regarding required disclosure. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. An evaluation of the effectiveness of these disclosure controls as of June 30, 2023 was carried out under the supervision and with the participation of management, including the PEO and the PFO. Based on that evaluation, management, including the PEO and the PFO, has concluded that our disclosure controls and procedures are, in fact, effective at the reasonable assurance level. During the six months ended June 30, 2023, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ​ 71 Table of Contents Part II. OTHER INFORMATION Item 1. Legal Proceedings None. Item 1A. Risk Factors The risks and uncertainties to which our financial condition and operations are subject are discussed in detail in Item 1A of Part I of First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022. Management does not believe that any material changes in our risk factors have occurred since they were last disclosed. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. Item 3. Defaults upon Senior Securities None. Item 4. Mine Safety Disclosures Not Applicable. Item 5. Other Information None. ​ 72 Table of Contents Item 6. Exhibits The exhibits filed or furnished with this quarterly report are listed in the following Exhibit Index. ​ ​ ​ Exhibit Description 31.1 ​ Certifications of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith) 31.2 ​ Certifications of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith) 32 ​ Certification of the Principal Executive Officer and the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act (furnished herewith) 101.INS ​ Inline XBRL Instance Document (filed herewith) 101.SCH ​ Inline XBRL Taxonomy Extension Schema (filed herewith) 101.CAL ​ Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith) 101.DEF ​ Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith) 101.LAB ​ Inline XBRL Taxonomy Extension Label Linkbase (filed herewith) 101.PRE ​ Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith) 104 ​ The cover page of First United Corporation’s Quarterly Report on Form 10Q for the quarter ended June 30, 2023 formatted in Inline XBRL, included within the Exhibit 101 attachments (filed herewith). ​ ​ ​ ​ ​ 73 Table of Contents SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ​ ​ ​ ​ ​ FIRST UNITED CORPORATION ​ ​ ​ ​ Date: August 9, 2023 /s/ Carissa L. Rodeheaver ​ Carissa L. Rodeheaver, CPA ​ Chairman of the Board, President and Chief Executive Officer ​ (Principal Executive Officer) ​ ​ ​ ​ Date: August 9, 2023 /s/ Tonya K. Sturm ​ Tonya K. Sturm, Senior Vice President, ​ Chief Financial Officer ​ (Principal Financial Officer and Principal Accounting Officer) ​ ​ ​ ​ ​ 74