What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-09 compared with 2023-08-09 · 255 added, 249 removed, 1321 unchanged (28% of the section changed)

3 unchanged sentences

(In thousands, except share data - Unaudited)

September 30,

Cash and due from banks

2 unchanged sentences

Investment securities – available for sale (at fair value)

Investment securities – held to maturity (fair value $ 199,071 at June 30, 2023 and $ 203,080 at December 31, 2022)

Investment securities – held to maturity, net of allowance for credit losses of $ 45 and $ 0 , respectively (fair value $ 176,781 at September 30, 2023 and $ 203,080 at December 31, 2022)

Restricted investment in bank stock, at cost

1 unchanged sentence

Unearned fees

Allowance for credit losses

Allowance for credit/loan losses

Premises and equipment, net

15 unchanged sentences

Allowance for credit losses on off-balance sheet credit exposures

Accrued interest payable and other liabilities

Accrued interest payable

Other liabilities

Dividends payable

3 unchanged sentences

Authorized 25,000,000 shares;

issued and outstanding 6,711,422 shares at June 30, 2023 and 6,666,428 at December 31, 2022

issued and outstanding 6,715,170 shares at September 30, 2023 and 6,666,428 at December 31, 2022

Retained earnings

6 unchanged sentences

(In thousands, except per share data)

Six Months Ended

Nine Months Ended

September 30,

Interest income

14 unchanged sentences

Credit loss expense - loans

Credit loss expense - debt securities held to maturity

Credit loss expense - off-balance sheet credit exposures

Credit loss expense

Total credit loss expense

Net interest income after provision for credit losses

1 unchanged sentence

Net gains on investments, available for sale

Net gains on sale of residential mortgage loans

Net gains on investments, held to maturity

Net gains on sales of residential mortgage loans

Net gains on disposal of fixed assets

32 unchanged sentences

Three Months Ended

September 30,

Interest income

13 unchanged sentences

Net Interest income

Credit loss expense - loans

Credit loss expense/(credit) - loans

Credit loss expense - debt securities held to maturity

Credit loss (credit)/expense - off-balance sheet credit exposures

Credit loss expense

Total credit loss expense/(credit)

Net interest income after provision for credit losses

Other operating income

Gains on sale of residential mortgage loans

Net gains on investments, available for sale

Net gains on investments, held to maturity

Gains on sales of residential mortgage loans

Gains on disposal of fixed assets

13 unchanged sentences

Contract labor

Total OREO expenses, net

Total other real estate owned expenses, net

Investor relations

Contributions

Settlement expense

FHLB prepayment penalty

Total other operating expenses

9 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Comprehensive Income/(Loss)

1 unchanged sentence

Available for sale securities:

Unrealized holding losses on investments with OTTI

Unrealized holding losses on investments with credit related impairment

Reclassification adjustment for accretable yield realized in income

Other comprehensive loss on investments with OTTI

Other comprehensive loss on investments with credit related impairment

Unrealized holding losses on all other AFS investments

1 unchanged sentence

Reclassification adjustment for gains realized in income

Other comprehensive losses on all other AFS investments

Other comprehensive loss on all other AFS investments

Held to Maturity Securities

Unrealized holding losses on securities transferred to held to maturity

Unrealized holding losses on HTM investments

Reclassification adjustment for gains/(losses) realized in income

Reclassification adjustment for amortization realized in income

Other comprehensive income/(losses) on HTM investments

Other comprehensive income/(loss) on HTM investments

Cash flow hedges:

4 unchanged sentences

Reclassification adjustment for amortization of unrecognized loss realized in income

Other comprehensive income/(loss) on pension plan liability

Other comprehensive loss on pension plan liability

SERP liability:

8 unchanged sentences

First United Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income/(Loss)

Consolidated Statements of Comprehensive Income

(In thousands)

Three Months Ended

September 30,

Comprehensive Income/(Loss)

1 unchanged sentence

Available for sale securities:

Unrealized holding gains/(losses) on investments with OTTI

Unrealized holding gains/(losses) on investments with credit related impairment

Reclassification adjustment for accretable yield realized in income

Other comprehensive income/(losses) on investments with OTTI

Unrealized holding losses on all other AFS investments

Reclassification adjustment for gains realized in income

Other comprehensive losses on all other AFS investments

Other comprehensive income/(loss) on investments with credit related impairment

Unrealized holding loss on all other AFS investments

Other comprehensive loss on all other AFS investments

Held to Maturity Securities

Unrealized holding losses on HTM investments

Reclassification adjustment for gains realized in income

Reclassification adjustment for amortization realized in income

6 unchanged sentences

Reclassification adjustment for amortization of unrecognized loss realized in income

Other comprehensive gains/(losses) on pension plan liability

Other comprehensive losses on pension plan liability

SERP liability:

5 unchanged sentences

Other comprehensive loss, net of tax

Comprehensive income/(loss)

Comprehensive income

First United Corporation and Subsidiaries

15 unchanged sentences

Balance at June 30, 2023

Other comprehensive loss

Stock based compensation

Common stock issued - 5,046 shares

Common stock repurchased - 1,298 share

Common stock dividend declared - $ 0.20 per share

Balance at September 30, 2023

First United Corporation and Subsidiaries

14 unchanged sentences

Balance at June 30, 2022

Other comprehensive loss

Stock based compensation

Common stock issued - 4,563 shares

Common stock dividend declared- $ 0.15 per share

Balance at September 30, 2022

See accompanying notes to the consolidated financial statement

2 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating activities

3 unchanged sentences

Gain on sales of other real estate owned

Write-ups of other real estate owned, net

Recoveries of other real estate owned, net

Originations of loans held for sale

Proceeds from sale of loans held for sale

Gains from sale of loans held for sale

Proceeds from sales of loans held for sale

Gains from sales of loans held for sale

Gains on disposal of fixed assets

3 unchanged sentences

Gains on sales/calls of investment securities – AFS

Gains on calls of investment securities – HTM

Earnings on bank owned life insurance

1 unchanged sentence

Amortization of operating lease right of use asset

(Increase)/decrease in accrued interest receivable and other assets

Increase in accrued interest receivable and other assets

Deferred tax expense/(benefit)

19 unchanged sentences

Net (decrease)/increase in short-term borrowings

Stock repurchase

Proceeds from long-term borrowings

15 unchanged sentences

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.

Operating results for the three- and nine-month periods ended September 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.

6 unchanged sentences

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.

The Corporation has evaluated events and transactions occurring subsequent to the statement of financial condition date of September 30, 2023 and through the date these consolidated financial statements were issued, for items of potential recognition or disclosure.

Newly Adopted Pronouncements in 2023

1 unchanged sentence

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.

Measurement of Credit Losses on Financial Instruments , universally referred to as CECL.

The amendments in ASU, 2016-13 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.

In addition, ASU 2016-13 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.

32 unchanged sentences

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.

In March 2022, 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.

ASU 2022-02, which eliminates the troubled debt restructuring (“TDR”) accounting model for creditors that have adopted ASU 2016-13.

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.

12 unchanged sentences

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.

The Corporation’s note 5 for discussion related to the Corporation’s methodology for estimating the ACL includes:

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

by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments.

The Corporation’s exposure to credit loss in the event of nonperformance 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.

7 unchanged sentences

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.

See Note 5 for more detail related to the accounting of restructured loans.

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.

The Corporation adopted Accounting Standards Codification (“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 available-for-sale (“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.

previously written off are 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.

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.

See Note 5 for additional information related to investment securities and the related allowance for credit losses on the AFS and held-to-maturity (“HTM “) portfolio.

Note 2 – Accounting Statements Issued but Not Yet Adopted

In March 2020, the FASB issued ASU No.

In March 2020, 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.

Facilitation of Reference Rate Reform on Financial Reporting.” The amendments in ASU 2020-04 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.

1 unchanged sentence

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.

The amendments in ASU 2020-04 are effective for all entities between March 12, 2020 and December 31, 2022.

In December 2022, FASB issued ASU No.

“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.

Deferral of the Sunset Date of Topic 848.” The amendments in ASU 2020-06 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.

An internal team of the Corporation was formed to transition loans held for investment away from LIBOR.

As of September 30, 2023, there are no loans in our loan portfolio whose variable rate is tied to the LIBOR.

The Corporation no longer offers LIBOR for any new contract as part of this transition.

The Corporation has identified all known LIBOR exposures, created a plan to address the exposures, and continues to communicate with all stakeholders to transition to alternative reference rates.

The Corporation does not anticipate that the adoption of ASU 2020-04 will have a material impact on the Corporation’s consolidated financial statements.

Note 3 – Earnings Per Common Share

1 unchanged sentence

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.

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,

There were no anti-dilutive shares outstanding at September 30, 2023 or 2022.

The following table sets forth the calculation of basic and diluted earnings per common share for the nine- and three-month periods ended September 30, 2023 and 2022:

Nine months ended September 30,

(in thousands, except for per share amount)

2 unchanged sentences

Restricted stock units

Three months ended June 30,

Three months ended September 30,

(in thousands, except for per share amount)

3 unchanged sentences

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:

The following tables show a comparison of amortized cost and fair values of investment securities at September 30, 2023 and December 31, 2022:

(in thousands)

1 unchanged sentence

Estimated Fair Value

June 30, 2023

September 30, 2023

Available for Sale:

10 unchanged sentences

Allowance for Credit Losses

June 30, 2023

September 30, 2023

Held to Maturity:

29 unchanged sentences

No gain or loss was recorded at the time of transfer.

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:

The following table shows the Corporation’s investment securities with gross unrealized and unrecognized losses and fair values at September 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

1 unchanged sentence

(in thousands)

June 30, 2023

September 30, 2023

Available for Sale:

10 unchanged sentences

(in thousands)

June 30, 2023

September 30, 2023

Held to Maturity:

29 unchanged sentences

Total held to maturity

The Corporation utilizes ASC 326 to evaluate its available-for sale (“AFS”) and held-to-maturity (“HTM”) debt security portfolio for expected credit losses.

The Corporation utilizes ASC 326 to evaluate its AFS and HTM debt security portfolio for expected credit losses.

9 unchanged sentences

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.

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.

3 unchanged sentences

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

As of September 30, 2023, the Corporation recorded ACL of approximately $ 45,000 related to one bond in the HTM security portfolio.

There was no ACL related to its AFS or HTM security portfolio at December 31, 2022.

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 nine- and three- month periods ended September 30, 2023 and 2022 that the Corporation does not intend to sell:

Nine Months Ended

September 30,

(in thousands)

1 unchanged sentence

Reduction for increases in cash flows expected to be collected

Balance of credit-related impairment at June 30

Balance of credit-related impairment at September 30

Three Months Ended

September 30,

(in thousands)

Balance of credit-related impairment at April 1

Balance of credit-related impairment at July 1

Reduction for increases in cash flows expected to be collected

Balance of credit-related impairment at June 30

The amortized cost and estimated fair value of securities by contractual maturity at June 30, 2023 are shown in the following table.

Balance of credit-related impairment at September 30

The amortized cost and estimated fair value of securities by contractual maturity at September 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

September 30, 2023

(in thousands)

18 unchanged sentences

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:

The following table summarizes the primary segments of the loan portfolio at September 30, 2023 and December 31, 2022:

(in thousands)

June 30, 2023

September 30, 2023

Individually evaluated for impairment

3 unchanged sentences

Collectively evaluated for impairment

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:

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans at September 30, 2023 and December 31, 2022:

(in thousands)

June 30, 2023

September 30, 2023

Commercial real estate:

19 unchanged sentences

Residential mortgage - home equity

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

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.

Non-accrual loans that have been subject to partial charge-offs totaled $ 0.1 million at September 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 September 30, 2023.

There were no loans in the process of foreclosure at December 31, 2022.

As a percentage of the loan portfolio, accruing loans past due 30 days or more was 0.27 % at September 30, 2023 compared to 0.16 % at December 31, 2022.

Effective January 1, 2023, the Corporation adopted the accounting guidance in ASU 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.

4 unchanged sentences

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.

There were no loan modifications made to borrowers facing financial difficulties in the three- or nine-month period ending September 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.

4 unchanged sentences

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.

Commercial Real Estate- loans are secured by commercial purpose real estate, including both owner occupied properties and properties obtained for investment 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.

25 unchanged sentences

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:

The following table summarizes the primary segments of the ACL at September 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)

June 30, 2023

September 30, 2023

Individually evaluated

9 unchanged sentences

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

The following table presents the amortized cost basis of collateral-dependent individually evaluated loans as of September 30, 2023.

September 30, 2023

(dollars in thousands)

1 unchanged sentence

Residential mortgage

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:

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not required at September 30, 2023 and December 31, 2022:

Impaired Loans with

3 unchanged sentences

Investment (1)

September 30, 2023

Commercial real estate

Non-owner-occupied

All other CRE

Acquisition and development

1-4 family residential construction

All other A&D

Commercial and industrial

Residential mortgage

Residential mortgage – term

Residential mortgage – home equity

Total impaired loans

December 31, 2022

11 unchanged sentences

(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.

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)

The following tables present the activity in the ACL and ALL for the nine- and three-month periods ended September 30, 2023 and 2022:

Nine months ended (in thousands)

Beginning balance at January 1, 2023 prior to adoption of ASC 326

2 unchanged sentences

Recoveries collected

Credit Loss Expense

ACL balance at June 30, 2023

Credit loss (credit)/expense

ACL balance at September 30, 2023

ALL balance at January 1, 2022

1 unchanged sentence

Recoveries collected

Credit Loss Expense

ALL balance at June 30, 2022

Loan loss expense/(credit)

ALL balance at September 30, 2022

Three months ended (in thousands)

ACL balance at April 1, 2023

ACL balance at July 1, 2023

Loan charge-offs

Recoveries collected

Credit Loss Expense

ACL balance at June 30, 2023

ALL balance at April 1, 2022

Credit Loss Expense

ALL balance at June 30, 2022

Credit loss expense/(credit)

ACL balance at September 30, 2023

ALL balance at July 1, 2022

Loan loss expense/(credit)

ALL balance at September 30, 2022

The Corporation’s methodology for estimating the ACL includes:

8 unchanged sentences

Quantitative Analysis.

The Corporation elected to use DCF.

The Corporation elected to use discounted cash flows.

Economic forecasts include but are not limited to unemployment, the Consumer Price Index, the Housing Affordability Index, and Gross State Product.

36 unchanged sentences

Total Portfolio Loans

June 30, 2023

September 30, 2023

Commercial real estate:

85 unchanged sentences

Total Portfolio Loans

June 30, 2023

September 30, 2023

Commercial real estate:

84 unchanged sentences

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.

As of September 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 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.

11 unchanged sentences

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.

These routine adjustments are made to adjust the value of a specific property relative to comparable properties for variations in qualities 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.

11 unchanged sentences

These assets are included as Level 3 fair values based upon the lowest level of input that is significant to the fair value measurements.

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:

For assets measured at fair value on a recurring and non-recurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2023 and December 31, 2022 were as follows:

Fair Value Measurements

at June 30, 2023 Using

at September 30, 2023 Using

Active Markets

32 unchanged sentences

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 September 30, 2023, individually evaluated loans had a net carrying amount of $ 2.3 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.

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:

There were no transfers of assets between any of the fair value hierarchy for the nine-month periods ended September 30, 2023 or 2022.

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of September 30, 2023 and December 31, 2022, the significant unobservable inputs used in the fair value measurements were as follows:

(in thousands)

Fair Value at

September 30,

Investment Securities – available for sale -CDO

1 unchanged sentence

Discount Margin

Range of high 500 to low to mid 600

Range of mid 500 to low 600

Non-recurring:

21 unchanged sentences

(1) Range would include discounts taken since appraisal and estimated values

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:

The following tables show a reconciliation of the beginning and ending balances for fair valued assets measured on a recurring basis using Level 3 significant unobservable inputs for the nine- and three- month periods ended September 30, 2023 and 2022:

Fair Value Measurements

6 unchanged sentences

Included in other comprehensive loss

Ending balance June 30, 2023

Ending balance September 30, 2023

Fair Value Measurements

6 unchanged sentences

Included in other comprehensive loss

Ending balance June 30, 2022

Ending balance September 30, 2022

Fair Value Measurements

3 unchanged sentences

Available for Sale

Beginning balance April 1, 2023

Beginning balance July 1, 2023

Total gains realized/unrealized:

Included in other comprehensive income

Ending balance June 30, 2023

Ending balance September 30, 2023

Fair Value Measurements

3 unchanged sentences

Available for Sale

Beginning balance April 1, 2022

Beginning balance July 1, 2022

Total losses realized/unrealized:

Included in other comprehensive income

Ending balance June 30, 2022

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.

Ending balance September 30, 2022

There were no gains or losses included in earnings attributable to the change in realized/unrealized gains or losses related to the assets for the nine- or three-month periods ended September 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.

1 unchanged sentence

Therefore, they cannot be determined with precision.

Changes in the assumptions could significantly impact the derived estimates

of fair value.

Changes in the assumptions could significantly impact the derived estimates of fair value.

Disclosure of non-financial assets such as buildings, as well as certain financial instruments such as leases is not required.

2 unchanged sentences

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

September 30, 2023

Fair Value Measurements

39 unchanged sentences

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:

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, June 30, 2023, and September 30, 2023:

(in thousands)

10 unchanged sentences

Balance - June 30, 2023

The following tables present the components of other comprehensive loss for the six and three month periods ended June 30, 2023 and 2022:

Other comprehensive

income/(loss) before

reclassifications

Amounts reclassified from

accumulated other

comprehensive loss

Balance - September 30, 2023

The following tables present the components of other comprehensive loss for the nine- and three- month periods ended September 30, 2023 and 2022:

Components of Other Comprehensive Loss

(in thousands)

For the six months ended June 30, 2023

Available for sale (AFS) securities with OTTI:

For the nine months ended September 30, 2023

Available for sale (AFS) securities with credit related impairment:

Unrealized holding losses

accretable yield recognized in income

Net unrealized losses on investments with OTTI

Net unrealized losses on investments with credit related impairment

Available for sale securities – all other:

16 unchanged sentences

(in thousands)

For the six months ended June 30, 2022

Available for sale (AFS) securities with OTTI:

For the nine months ended September 30, 2022

Available for sale (AFS) securities with credit related impairment:

Unrealized holding gains

accretable yield recognized in income

Net unrealized losses on investments with OTTI

Net unrealized losses on investments with credit related impairment

Available for sale securities – all other:

5 unchanged sentences

Unrealized holding losses on securities transferred to held to maturity

gains recognized in income

amortization recognized in income

13 unchanged sentences

(in thousands)

For the three months ended June 30, 2023

Available for sale (AFS) securities with OTTI:

Unrealized holding losses

For the three months ended September 30, 2023

Available for sale (AFS) securities with credit related impairment:

Unrealized holding gains

accretable yield recognized in income

Net unrealized gains on investments with OTTI

Net unrealized gains on investments with credit related impairment

Available for sale securities – all other:

16 unchanged sentences

(in thousands)

For the three months ended June 30, 2022

Available for sale (AFS) securities with OTTI:

For the three months ended September 30, 2022

Available for sale (AFS) securities with credit related impairment:

Unrealized holding gains

accretable yield recognized in income

Net unrealized losses on investments with OTTI

Net unrealized losses on investments with credit related impairment

Available for sale securities – all other:

19 unchanged sentences

Other comprehensive loss

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:

The following table presents the details of amounts reclassified from accumulated other comprehensive loss for the nine- and three- month periods ended September 30, 2023 and 2022:

Amounts Reclassified from

Six Months Ended

Nine Months Ended

Accumulated Other Comprehensive Loss

September 30,

Affected Line Item in the Statement

10 unchanged sentences

Interest income on taxable investment securities

Gains/(losses) recognized

Net gains/(losses)

Provision for income tax expense

11 unchanged sentences

Accumulated Other Comprehensive Loss

September 30,

Affected Line Item in the Statement

7 unchanged sentences

Interest income on taxable investment securities

Gains/(losses) recognized

Net gains/(losses)

Provision for income tax expense

17 unchanged sentences

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.

Director stock compensation was $ 194,001 for the nine months ended September 30, 2023 and $ 196,254 for the nine months ended September 30, 2022.

Director stock compensation expense was $ 56,000 for the quarter ended September 30, 2023 and $ 70,666 for the quarter ended September 30, 2022.

During the nine- and three-month periods ended September 30, 2023, employee stock compensation expense was approximately $ 12,000 and $ 5,000 , respectively.

Employee stock compensation expense was $ 0 for both the nine- and three-month periods ended September 30, 2022.

Restricted Stock Units

Corporation’s principal executive officer, its principal financial officer, and certain of its other executive officers.

On March 26, 2020, pursuant to the Corporation’s Long Term Incentive Plan (the "LTIP"), which is a sub-plan of the Equity Plan, the Compensation Committee of First United Corporation’s Board of Directors (the "Committee") granted RSUs to the Corporation’s principal executive officer, its principal financial officer, and certain of its other executive officers.

An RSU contemplates the issuance of shares of common stock of First United Corporation if and when the RSU vests.

17 unchanged sentences

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.

Net stock compensation expense/(credit) was $ 15,896 for the nine months ended September 30, 2023, and ($ 5,299 ) for the nine months ended September 30, 2022.

Stock compensation expense was $ 0 and ($ 37,091 ) for the third quarters of 2023 and 2022, respectively.

All compensation expense related to the 2019 LTIP year was recognized as of March 31, 2022.

5 unchanged sentences

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 .

Stock compensation expense was $ 49,714 for the nine-month periods ended of 2023 and 2022.

Stock compensation expense was $ 16,571 for both of the three-month periods ended September 30, 2023 and 2022.

Unrecognized compensation expense as of September 30, 2023 related to unvested units was $ 38,667 .

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.

1 unchanged sentence

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 .

On March 9, 2023, 2,079 shares of the 6,238 time-vesting

RSUs were issued to participants.

Stock compensation expense was $ 78,436 and $ 52,290 for the nine-month periods ended September 30, 2023 and 2022, respectively.

Stock compensation expense was $ 26,145 for both of the three-month periods ended September 30, 2023 and 2022.

Unrecognized compensation expense as of September 30, 2023 related to unvested units was $ 156,872 .

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.

1 unchanged sentence

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 .

Stock compensation expense was $ 55,170 and $ 27,585 for the nine- and three-month periods ended September 30, 2023.

Unrecognized compensation expense as of September 30, 2023 related to unvested units was $ 275,859 .

Note 9– Derivative Financial Instruments

3 unchanged sentences

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.

As of September 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.

The fair value of the interest rate swap contracts was $ 1.1 million at both September 30, 2023 and December 31, 2022.

For the nine months ended September 30, 2023, the Corporation recorded an increase in the value of the derivatives of thousand and the related deferred tax of $ 7 thousand in net accumulated other comprehensive loss to reflect the effective portion of cash flow hedges.

For the three months ended September 30, 2023, the Corporation recorded an increase in the value of the derivatives of $ 14 thousand and the related deferred tax of $3 thousand 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.

There was no hedge ineffectiveness recorded for the nine- or three-month periods ended September 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.

The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the nine-and three-month periods ended September 30, 2023 and 2022.

Derivative in Cash Flow Hedging Relationships

15 unchanged sentences

Interest rate contracts:

Six months ended:

June 30, 2023

June 30, 2022

Nine months ended:

September 30, 2023

September 30, 2022

Three months ended:

June 30, 2023

June 30, 2022

September 30, 2023

September 30, 2022

(a) Reported as interest expense

1 unchanged sentence

Note 10 – Regulatory Capital Requirements

The following table presents our capital ratios as of June 30, 2023 and December 31, 2022.

The following table presents our capital ratios as of September 30, 2023 and December 31, 2022.

September 30,

Total Capital (to risk-weighted assets)

2 unchanged sentences

Tier 1 Capital (to average assets)

As of June 30, 2023 and December 31, 2022, the Bank was considered “well capitalized” under the regulatory framework for prompt corrective action.

As of September 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.

Effective with the implementation of CECL, a $ 2.2 million adjustment, net of tax, was made to retained earnings.

The adjustment did not have a material impact to our capital ratios.

Note 11 – Deposits

The following table summarizes deposits as of June 30, 2023 and December 31, 2022.

The following table summarizes deposits as of September 30, 2023 and December 31, 2022.

(dollars in thousands)

June 30, 2023

September 30, 2023

December 31, 2022

5 unchanged sentences

Total Deposits

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)

Insured/collateralized deposits

Uninsured deposits

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)

Retail deposits

Business deposits

Note 12 – Borrowed Funds

1 unchanged sentence

(Dollars in thousands)

June 30, 2023

September 30, 2023

December 31, 2022

6 unchanged sentences

Approximate weighted average rate during the period

FHLB advances, bearing fixed interest at rates ranging from 4.53 % to 4.69 % at June 30, 2023

Junior subordinated debt, bearing variable interest rate of 8.26 % at June 30, 2023 and 7.49 % at December 31, 2022

FHLB advances, bearing fixed interest at rates ranging from 4.53 % to 4.69 % at September 30, 2023

Junior subordinated debt, bearing variable interest rate of 8.42 % at September 30, 2023 and 7.49 % at December 31, 2022

Total borrowings outstanding

At June 30, 2023, the repurchase agreements were secured by $ 66.4 million in investment securities issued by government related agencies.

At September 30, 2023, the repurchase agreements were secured by $ 58.7 million in investment securities issued by government related agencies.

A minimum of 102 % of fair value is pledged against account balances.

9 unchanged sentences

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.

Non-cash charges other than depreciation of fixed assets were immaterial for the nine and three months ended September 30, 2023 and 2022.

Trust and Investment Services :

2 unchanged sentences

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.

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

Non-cash charges associated with amortization of intangibles were approximately $ 156,000 for both of the nine-month periods ended September 30, 2023 and 2022 and $ 52,000 for both of the three-month periods ended September 30, 2023 and 2022.

Information for the operating segments for the nine- and three-month periods ended September 30, 2023 are presented in the following tables:

Nine Months Ended

September 30, 2023

(in thousands)

8 unchanged sentences

Income tax expense

Six months ended

June 30, 2022

Nine months ended

September 30, 2022

(in thousands)

1 unchanged sentence

Interest expense

Credit for loan losses

Credit loss expense

Non-interest income

5 unchanged sentences

Three Months Ended

June 30, 2023

September 30, 2023

(in thousands)

9 unchanged sentences

Three Months Ended

June 30, 2022

September 30, 2022

(in thousands)

1 unchanged sentence

Interest expense

Credit for loan losses

Credit loss credit

Non-interest income

4 unchanged sentences

Income tax expense

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.

Total non-fiduciary assets of the trust and investment services segment were $ 0.8 million (including $ 0.7 million in intangible assets) at September 30, 2023 and $ 0.9 million (including $ 0.8 million in intangible assets) at December 31, 2022.

Note 14 – Goodwill

9 unchanged sentences

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.

Based on the totality of the circumstances and the impact of the economic conditions on the stock price, an internal analysis as of September 30, 2023, was performed.

The results of the internal analysis determined there is no goodwill impairment as of September 30, 2023.

Management will continue to monitor the goodwill throughout the remainder of 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements