FIRST UNITED CORP/MD/ 10-Q

Item 1. Financial Statements First United Corporation and Subsidiaries Consolidated Statements of Financial Condition (In thousands, except share data - Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 December 31, 2022 ​ ​ ​ ​ ​ ​ Assets ​ ​ ​ ​ ​ ​ Cash and due from banks ​ $ 78,939 ​ $ 72,720 Interest bearing deposits in banks ​ ​ 1,713 ​ ​ 1,595 Cash and cash equivalents ​ ​ 80,652 ​ ​ 74,315 Investment securities – available for sale (at fair value) ​ ​ 114,370 ​ ​ 125,889 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) ​ ​ 215,683 ​ ​ 235,659 Restricted investment in bank stock, at cost ​ ​ 5,251 ​ ​ 1,027 Loans held for sale ​ ​ 208 ​ ​ — Loans ​ ​ 1,380,019 ​ ​ 1,279,494 Unearned fees ​ ​ ( 371 ) ​ ​ ( 174 ) Allowance for credit/loan losses ​ ​ ( 17,146 ) ​ ​ ( 14,636 ) Net loans ​ ​ 1,362,502 ​ ​ 1,264,684 Premises and equipment, net ​ ​ 32,766 ​ ​ 34,948 Goodwill and other intangibles ​ ​ 12,185 ​ ​ 12,433 Bank owned life insurance ​ ​ 47,282 ​ ​ 46,346 Deferred tax assets ​ ​ 13,020 ​ ​ 10,605 Other real estate owned, net ​ ​ 4,878 ​ ​ 4,733 Right of use assets ​ ​ 1,905 ​ ​ 1,898 Pension asset ​ ​ 7,476 ​ ​ 8,001 Accrued interest receivable ​ ​ 6,689 ​ ​ 6,051 Other assets ​ ​ 23,334 ​ ​ 21,580 Total Assets ​ $ 1,928,201 ​ $ 1,848,169 Liabilities and Shareholders’ Equity ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ Non-interest bearing deposits ​ $ 429,691 ​ $ 506,613 Interest bearing deposits ​ ​ 1,145,378 ​ ​ 1,064,120 Total deposits ​ ​ 1,575,069 ​ ​ 1,570,733 Short-term borrowings ​ ​ 53,330 ​ ​ 64,565 Long-term borrowings ​ ​ 110,929 ​ ​ 30,929 Operating lease liability ​ ​ 2,347 ​ ​ 2,373 SERP deferred compensation ​ ​ 7,294 ​ ​ 7,194 Allowance for credit losses on off-balance sheet credit exposures ​ ​ 985 ​ ​ 133 Accrued interest payable ​ ​ 578 ​ ​ 151 Other liabilities ​ ​ 21,335 ​ ​ 19,099 Dividends payable ​ ​ 1,344 ​ ​ 1,199 Total Liabilities ​ ​ 1,773,211 ​ ​ 1,696,376 Shareholders’ Equity: ​ ​ ​ ​ ​ ​ Common Stock – par value $ 0.01 per share; Authorized 25,000,000 shares; issued and outstanding 6,715,170 shares at September 30, 2023 and 6,666,428 at December 31, 2022 ​ ​ 67 ​ ​ 67 Surplus ​ ​ 25,029 ​ ​ 24,409 Retained earnings ​ ​ 173,467 ​ ​ 166,343 Accumulated other comprehensive loss ​ ​ ( 43,573 ) ​ ​ ( 39,026 ) Total Shareholders’ Equity ​ ​ 154,990 ​ ​ 151,793 Total Liabilities and Shareholders’ Equity ​ $ 1,928,201 ​ $ 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) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ September 30, ​ 2023 2022 ​ ​ (Unaudited) Interest income ​ ​ ​ ​ ​ ​ Interest and fees on loans ​ $ 50,279 ​ $ 39,351 Interest on investment securities ​ ​ ​ ​ ​ ​ Taxable ​ ​ 5,339 ​ ​ 4,533 Exempt from federal income tax ​ ​ 661 ​ ​ 834 Total investment income ​ ​ 6,000 ​ ​ 5,367 Other ​ ​ 2,686 ​ ​ 345 Total interest income ​ ​ 58,965 ​ ​ 45,063 Interest expense ​ ​ ​ ​ ​ ​ Interest on deposits: ​ ​ ​ ​ ​ ​ Savings ​ ​ 189 ​ ​ 70 Interest-bearing transaction accounts ​ ​ 8,912 ​ ​ 716 Time deposits ​ ​ 3,599 ​ ​ 711 Total interest on Deposits ​ ​ 12,700 ​ ​ 1,497 Interest on short-term borrowings ​ ​ 93 ​ ​ 86 Interest on long-term borrowings ​ ​ 3,496 ​ ​ 1,027 Total Interest Expense ​ ​ 16,289 ​ ​ 2,610 Net Interest income ​ ​ 42,676 ​ ​ 42,453 Credit loss expense - loans ​ ​ 1,170 ​ ​ 97 Credit loss expense - debt securities held to maturity ​ ​ 45 ​ ​ — Credit loss expense - off-balance sheet credit exposures ​ ​ ( 14 ) ​ ​ 12 Total credit loss expense ​ ​ 1,201 ​ ​ 109 Net interest income after provision for credit losses ​ ​ 41,475 ​ ​ 42,344 Other operating income ​ ​ ​ ​ ​ ​ Net gains on investments, available for sale ​ ​ — ​ ​ 3 Net gains on investments, held to maturity ​ ​ — ​ ​ 93 Net gains on sales of residential mortgage loans ​ ​ 322 ​ ​ 31 Net gains on disposal of fixed assets ​ ​ — ​ ​ 34 Net gains ​ ​ 322 ​ ​ 161 Other Income ​ ​ ​ ​ ​ ​ Service charges on deposit accounts ​ ​ 1,631 ​ ​ 1,451 Other service charges ​ ​ 706 ​ ​ 686 Trust department ​ ​ 6,134 ​ ​ 6,238 Debit card income ​ ​ 2,981 ​ ​ 2,922 Bank owned life insurance ​ ​ 936 ​ ​ 891 Brokerage commissions ​ ​ 800 ​ ​ 805 Other ​ ​ 350 ​ ​ 406 Total other income ​ ​ 13,538 ​ ​ 13,399 Total other operating income ​ ​ 13,860 ​ ​ 13,560 Other operating expenses ​ ​ ​ ​ ​ ​ Salaries and employee benefits ​ ​ 21,112 ​ ​ 17,891 FDIC premiums ​ ​ 724 ​ ​ 479 Equipment expense ​ ​ 3,168 ​ ​ 3,110 Occupancy expense of premises ​ ​ 2,274 ​ ​ 2,172 Data processing expense ​ ​ 2,926 ​ ​ 2,516 Marketing expense ​ ​ 474 ​ ​ 409 Professional services ​ ​ 1,530 ​ ​ 873 Contract labor ​ ​ 471 ​ ​ 482 Telephone ​ ​ 341 ​ ​ 365 Total OREO expenses, net ​ ​ 281 ​ ​ 375 Investor relations ​ ​ 272 ​ ​ 258 Contributions ​ ​ 217 ​ ​ 184 Other ​ ​ 4,144 ​ ​ 2,425 Total other operating expenses ​ ​ 37,934 ​ ​ 31,539 Income before income tax expense ​ ​ 17,401 ​ ​ 24,365 Provision for income tax expense ​ ​ 4,099 ​ ​ 6,286 Net Income ​ $ 13,302 ​ $ 18,079 Basic net income per share ​ $ 1.99 ​ $ 2.72 Diluted net income per share ​ $ 1.98 ​ $ 2.72 Weighted average number of basic shares outstanding ​ ​ 6,698 ​ ​ 6,645 Weighted average number of diluted shares outstanding ​ ​ 6,714 ​ ​ 6,655 Dividends declared per common share ​ $ 0.60 ​ $ 0.45 ​ 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 ​ ​ September 30, ​ 2023 2022 ​ ​ (Unaudited) Interest income ​ ​ ​ ​ ​ ​ Interest and fees on loans ​ $ 18,055 ​ $ 14,058 Interest on investment securities ​ ​ ​ ​ ​ ​ Taxable ​ ​ 1,792 ​ ​ 1,587 Exempt from federal income tax ​ ​ 123 ​ ​ 273 Total investment income ​ ​ 1,915 ​ ​ 1,860 Other ​ ​ 1,194 ​ ​ 267 Total interest income ​ ​ 21,164 ​ ​ 16,185 Interest expense ​ ​ ​ ​ ​ ​ Interest on deposits: ​ ​ ​ ​ ​ ​ Savings ​ ​ 54 ​ ​ 34 Interest-bearing transaction accounts ​ ​ 3,784 ​ ​ 397 Time deposits ​ ​ 1,834 ​ ​ 190 Total interest on Deposits ​ ​ 5,672 ​ ​ 621 Interest on short-term borrowings ​ ​ 33 ​ ​ 47 Interest on long-term borrowings ​ ​ 1,475 ​ ​ 376 Total Interest Expense ​ ​ 7,180 ​ ​ 1,044 Net Interest income ​ ​ 13,984 ​ ​ 15,141 Credit loss expense/(credit) - loans ​ ​ 322 ​ ​ ( 108 ) Credit loss expense - debt securities held to maturity ​ ​ 45 ​ ​ — Credit loss (credit)/expense - off-balance sheet credit exposures ​ ​ ( 104 ) ​ ​ 7 Total credit loss expense/(credit) ​ ​ 263 ​ ​ ( 101 ) Net interest income after provision for credit losses ​ ​ 13,721 ​ ​ 15,242 Other operating income ​ ​ ​ ​ ​ ​ Net gains on investments, available for sale ​ ​ — ​ ​ — Net gains on investments, held to maturity ​ ​ — ​ ​ 93 Gains on sales of residential mortgage loans ​ ​ 182 ​ ​ 3 Gains on disposal of fixed assets ​ ​ — ​ ​ — Net gains ​ ​ 182 ​ ​ 96 Other Income ​ ​ ​ ​ ​ ​ Service charges on deposit accounts ​ ​ 569 ​ ​ 523 Other service charges ​ ​ 230 ​ ​ 241 Trust department ​ ​ 2,139 ​ ​ 2,005 Debit card income ​ ​ 995 ​ ​ 1,053 Bank owned life insurance ​ ​ 320 ​ ​ 302 Brokerage commissions ​ ​ 245 ​ ​ 272 Other ​ ​ 218 ​ ​ 208 Total other income ​ ​ 4,716 ​ ​ 4,604 Total other operating income ​ ​ 4,898 ​ ​ 4,700 Other operating expenses ​ ​ ​ ​ ​ ​ Salaries and employee benefits ​ ​ 6,957 ​ ​ 6,130 FDIC premiums ​ ​ 254 ​ ​ 150 Equipment ​ ​ 1,029 ​ ​ 1,037 Occupancy ​ ​ 747 ​ ​ 734 Data processing ​ ​ 1,011 ​ ​ 890 Marketing ​ ​ 220 ​ ​ 152 Professional services ​ ​ 490 ​ ​ ( 211 ) Contract labor ​ ​ 173 ​ ​ 159 Telephone ​ ​ — ​ ​ — Telephone ​ ​ 115 ​ ​ 112 Total other real estate owned expenses, net ​ ​ 139 ​ ​ 128 Investor relations ​ ​ 83 ​ ​ 39 Contributions ​ ​ 74 ​ ​ 121 Settlement expense ​ ​ — ​ ​ — FHLB prepayment penalty ​ ​ — ​ ​ — Other ​ ​ 1,493 ​ ​ 888 Total other operating expenses ​ ​ 12,785 ​ ​ 10,329 Income before income tax expense ​ ​ 5,834 ​ ​ 9,613 Provision for income tax expense ​ ​ 1,321 ​ ​ 2,677 Net Income ​ $ 4,513 ​ $ 6,936 Basic net income per common share ​ $ 0.67 ​ $ 1.04 Diluted net income per common share ​ $ 0.67 ​ $ 1.04 Weighted average number of basic shares outstanding ​ ​ 6,714 ​ ​ 6,658 Weighted average number of diluted shares outstanding ​ ​ 6,728 ​ ​ 6,669 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) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ September 30, ​ ​ 2023 ​ 2022 Comprehensive Income/(Loss) ​ (Unaudited) Net Income ​ $ 13,302 ​ $ 18,079 Other comprehensive loss, net of tax and reclassification adjustments: ​ ​ ​ ​ ​ ​ Available for sale securities: ​ ​ ​ ​ ​ ​ Unrealized holding losses on investments with credit related impairment ​ $ ( 777 ) ​ $ ( 853 ) Reclassification adjustment for accretable yield realized in income ​ ​ 152 ​ ​ 152 Other comprehensive loss on investments with credit related impairment ​ ​ ( 929 ) ​ ​ ( 1,005 ) ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses on all other AFS investments ​ $ ( 5,065 ) ​ $ ( 22,971 ) 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 loss on all other AFS investments ​ ​ ( 5,065 ) ​ ​ ( 14,646 ) ​ ​ ​ ​ ​ ​ ​ Held to Maturity Securities ​ ​ ​ ​ ​ ​ Unrealized holding losses on securities transferred to held to maturity ​ $ — ​ $ ( 8,328 ) Unrealized holding losses on HTM investments ​ ​ — ​ ​ — Reclassification adjustment for gains/(losses) realized in income ​ ​ — ​ ​ 93 Reclassification adjustment for amortization realized in income ​ ​ ( 513 ) ​ ​ ( 644 ) Other comprehensive income/(loss) on HTM investments ​ ​ 513 ​ ​ ( 7,777 ) ​ ​ ​ ​ ​ ​ ​ Cash flow hedges: ​ ​ ​ ​ ​ ​ Unrealized holding gains on cash flow hedges ​ $ 30 ​ $ 1,622 Other comprehensive income on cash flow hedges ​ ​ 30 ​ ​ 1,622 ​ ​ ​ ​ ​ ​ ​ Pension plan liability: ​ ​ ​ ​ ​ ​ Unrealized holding gains/(losses) on pension plan liability ​ $ ( 1,250 ) ​ $ ( 14,079 ) Reclassification adjustment for amortization of unrecognized loss realized in income ​ ​ ( 750 ) ​ ​ ( 837 ) Other comprehensive loss on pension plan liability ​ ​ ( 500 ) ​ ​ ( 13,242 ) ​ ​ ​ ​ ​ ​ ​ SERP liability: ​ ​ ​ ​ ​ ​ Unrealized holding losses on SERP liability ​ $ — ​ $ — Reclassification adjustment for amortization of unrealized loss realized in income ​ ​ 6 ​ ​ ( 203 ) Other comprehensive (loss)/income on SERP liability ​ ​ ( 6 ) ​ ​ 203 ​ ​ ​ ​ ​ ​ ​ Other comprehensive losses before income tax ​ ​ ( 5,957 ) ​ ​ ( 34,845 ) Income tax benefit related to other comprehensive income ​ ​ 1,410 ​ ​ 9,325 ​ ​ ​ ​ ​ ​ ​ Other comprehensive loss, net of tax ​ ​ ( 4,547 ) ​ ​ ( 25,520 ) Comprehensive income/(loss) ​ $ 8,755 ​ $ ( 7,441 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ See accompanying notes to the consolidated financial statements ​ 6 Table of Contents First United Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ September 30, ​ 2023 2022 Comprehensive Income/(Loss) ​ (Unaudited) Net Income ​ $ 4,513 ​ $ 6,936 Other comprehensive loss, net of tax and reclassification adjustments: ​ ​ ​ ​ ​ ​ Available for sale securities: ​ ​ ​ ​ ​ ​ Unrealized holding gains/(losses) on investments with credit related impairment ​ $ 633 ​ $ ( 199 ) Reclassification adjustment for accretable yield realized in income ​ ​ 51 ​ ​ 51 Other comprehensive income/(loss) on investments with credit related impairment ​ ​ 582 ​ ​ ( 250 ) ​ ​ ​ ​ ​ ​ ​ Unrealized holding loss on all other AFS investments ​ $ ( 4,183 ) ​ $ ( 6,768 ) Other comprehensive loss on all other AFS investments ​ ​ ( 4,183 ) ​ ​ ( 6,768 ) ​ ​ ​ ​ ​ ​ ​ Held to Maturity Securities ​ ​ ​ ​ ​ ​ Unrealized holding losses on HTM investments ​ $ — ​ $ — Reclassification adjustment for gains realized in income ​ ​ — ​ ​ 93 Reclassification adjustment for amortization realized in income ​ ​ ( 167 ) ​ ​ ( 320 ) Other comprehensive income on HTM investments ​ ​ 167 ​ ​ 227 ​ ​ ​ ​ ​ ​ ​ Cash flow hedges: ​ ​ ​ ​ ​ ​ Unrealized holding gains on cash flow hedges ​ $ 14 ​ $ 534 Other comprehensive income on cash flow hedges ​ ​ 14 ​ ​ 534 ​ ​ ​ ​ ​ ​ ​ Pension plan liability: ​ ​ ​ ​ ​ ​ Unrealized holding losses on pension plan liability ​ $ ( 1,352 ) ​ $ ( 3,537 ) Reclassification adjustment for amortization of unrecognized loss realized in income ​ ​ ( 251 ) ​ ​ ( 279 ) Other comprehensive losses on pension plan liability ​ ​ ( 1,101 ) ​ ​ ( 3,258 ) ​ ​ ​ ​ ​ ​ ​ SERP liability: ​ ​ ​ ​ ​ ​ Unrealized holding losses on SERP liability ​ $ — ​ $ — Reclassification adjustment for amortization of unrealized loss realized in income ​ ​ 2 ​ ​ ( 68 ) Other comprehensive (loss)/income on SERP liability ​ ​ ( 2 ) ​ ​ 68 ​ ​ ​ ​ ​ ​ ​ Other comprehensive losses before income tax ​ ​ ( 4,523 ) ​ ​ ( 9,447 ) Income tax benefit related to other comprehensive income ​ ​ 1,060 ​ ​ 2,529 ​ ​ ​ ​ ​ ​ ​ Other comprehensive loss, net of tax ​ ​ ( 3,463 ) ​ ​ ( 6,918 ) Comprehensive income ​ $ 1,050 ​ $ 18 ​ ​ ​ ​ 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 Net income ​ ​ ​ ​ ​ ​ ​ ​ 4,513 ​ ​ ​ ​ ​ 4,513 Other comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 3,463 ) ​ ​ ( 3,463 ) Stock based compensation ​ ​ ​ ​ ​ 69 ​ ​ ​ ​ ​ ​ ​ ​ 69 Common stock issued - 5,046 shares ​ ​ ​ ​ ​ 80 ​ ​ ​ ​ ​ ​ ​ ​ 80 Common stock repurchased - 1,298 share ​ ​ ​ ​ ​ ( 21 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 21 ) Common stock dividend declared - $ 0.20 per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 1,344 ) ​ ​ ​ ​ ​ ( 1,344 ) Balance at September 30, 2023 ​ $ 67 ​ $ 25,029 ​ $ 173,467 ​ $ ( 43,573 ) ​ $ 154,990 ​ ​ ​ 8 Table of Contents First United Corporation and Subsidiaries Consolidated Statements of Changes in Shareholders’ Equity (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock Surplus Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity Balance at January 1, 2022 ​ $ 66 ​ $ 23,661 ​ $ 145,487 ​ $ ( 27,314 ) ​ $ 141,900 Net income ​ ​ ​ ​ ​ ​ ​ ​ 5,715 ​ ​ ​ ​ ​ 5,715 Other comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 9,593 ) ​ ​ ( 9,593 ) Stock based compensation ​ ​ ​ ​ ​ ( 4 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 4 ) Common stock issued - 15,456 shares ​ ​ ​ ​ ​ 55 ​ ​ ​ ​ ​ ​ ​ ​ 55 Common stock dividend declared - $ 0.15 per share ​ ​ ​ ​ ​ ​ ​ ​ ( 995 ) ​ ​ ​ ​ ​ ( 995 ) Balance at March 31, 2022 ​ $ 66 ​ $ 23,712 ​ $ 150,207 ​ $ ( 36,907 ) ​ $ 137,078 Net income ​ ​ ​ ​ ​ ​ ​ ​ 5,428 ​ ​ ​ ​ ​ 5,428 Other comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 9,009 ) ​ ​ ( 9,009 ) Stock based compensation ​ ​ 1 ​ ​ 339 ​ ​ ​ ​ ​ ​ ​ ​ 340 Common stock issued - 18,416 shares ​ ​ ​ ​ ​ 54 ​ ​ ​ ​ ​ ​ ​ ​ 54 Common stock dividend declared - $ 0.15 per share ​ ​ ​ ​ ​ ​ ​ ​ ( 999 ) ​ ​ ​ ​ ​ ( 999 ) Balance at June 30, 2022 ​ $ 67 ​ $ 24,105 ​ $ 154,636 ​ $ ( 45,916 ) ​ $ 132,892 Net income ​ ​ ​ ​ ​ ​ ​ ​ 6,936 ​ ​ ​ ​ ​ 6,936 Other comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 6,918 ) ​ ​ ( 6,918 ) Stock based compensation ​ ​ ​ ​ ​ 80 ​ ​ ​ ​ ​ ​ ​ ​ 80 Common stock issued - 4,563 shares ​ ​ ​ ​ ​ 53 ​ ​ ​ ​ ​ ​ ​ ​ 53 Common stock dividend declared- $ 0.15 per share ​ ​ ​ ​ ​ ​ ​ ​ ( 999 ) ​ ​ ​ ​ ​ ( 999 ) Balance at September 30, 2022 ​ $ 67 ​ $ 24,238 ​ $ 160,573 ​ $ ( 52,834 ) ​ $ 132,044 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ See accompanying notes to the consolidated financial statement ​ 9 Table of Contents First United Corporation and Subsidiaries Consolidated Statements of Cash Flows (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ September 30, ​ 2023 2022 ​ ​ (Unaudited) Operating activities ​ ​ ​ ​ ​ ​ Net income ​ $ 13,302 ​ $ 18,079 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ Provision for credit losses ​ ​ 1,201 ​ ​ 109 Depreciation ​ ​ 2,528 ​ ​ 2,475 Stock based compensation ​ ​ 423 ​ ​ 415 Gain on sales of other real estate owned ​ ​ ( 36 ) ​ ​ — Recoveries of other real estate owned, net ​ ​ ( 55 ) ​ ​ — Originations of loans held for sale ​ ​ ( 3,627 ) ​ ​ ( 1,156 ) Proceeds from sales of loans held for sale ​ ​ 3,741 ​ ​ 1,254 Gains from sales of loans held for sale ​ ​ ( 322 ) ​ ​ ( 31 ) Gains on disposal of fixed assets ​ ​ — ​ ​ ( 34 ) Net (accretion)/ amortization of investment securities discounts and premiums- AFS ​ ​ ( 32 ) ​ ​ 100 Net accretion of investment securities discounts and premiums- HTM ​ ​ ( 618 ) ​ ​ ( 625 ) Amortization of intangible assets ​ ​ 248 ​ ​ 157 Gains on sales/calls of investment securities – AFS ​ ​ — ​ ​ ( 3 ) Gains on calls of investment securities – HTM ​ ​ — ​ ​ ( 93 ) Earnings on bank owned life insurance ​ ​ ( 936 ) ​ ​ ( 891 ) Amortization of deferred loan costs/(fees), net ​ ​ 40 ​ ​ ( 123 ) Amortization of operating lease right of use asset ​ ​ 249 ​ ​ 260 Increase in accrued interest receivable and other assets ​ ​ ( 1,754 ) ​ ​ ( 651 ) Deferred tax expense/(benefit) ​ ​ ( 97 ) ​ ​ ( 9,322 ) Operating lease liability ​ ​ ( 282 ) ​ ​ ( 289 ) Increase in accrued interest payable and other liabilities ​ ​ 2,793 ​ ​ 9,094 Net cash provided by operating activities ​ ​ 16,766 ​ ​ 18,725 Investing activities ​ ​ ​ ​ ​ ​ Proceeds from maturities/calls of investment securities - AFS ​ ​ 5,320 ​ ​ 12,153 Proceeds from maturities/calls of investment securities - HTM ​ ​ 24,537 ​ ​ 13,254 Proceeds from sales of investment securities - AFS ​ ​ — ​ ​ 1,023 Purchases of investment securities - AFS ​ ​ — ​ ​ ( 17,652 ) Purchases of investment securities - HTM ​ ​ ( 3,988 ) ​ ​ ( 55,686 ) Proceeds from sales of other real estate owned ​ ​ 172 ​ ​ — Proceeds from disposal of fixed assets ​ ​ — ​ ​ 37 Net (increase)/decrease in restricted stock ​ ​ ( 4,224 ) ​ ​ 2 Net increase in loans ​ ​ ( 101,320 ) ​ ​ ( 124,963 ) Purchases of premises and equipment ​ ​ ( 346 ) ​ ​ ( 2,803 ) Net cash used in by investing activities ​ ​ ( 79,849 ) ​ ​ ( 174,635 ) Financing activities ​ ​ ​ ​ ​ ​ Net increase in deposits ​ ​ 4,336 ​ ​ 41,744 Issuance of common stock ​ ​ 218 ​ ​ 162 Cash dividends paid on common stock ​ ​ ( 3,878 ) ​ ​ ( 2,987 ) Net (decrease)/increase in short-term borrowings ​ ​ ( 11,235 ) ​ ​ 32,027 Stock repurchase ​ ​ ( 21 ) ​ ​ — Proceeds from long-term borrowings ​ ​ 80,000 ​ ​ — Net cash provided by financing activities ​ ​ 69,420 ​ ​ 70,946 Increase/(decrease) in cash and cash equivalents ​ ​ 6,337 ​ ​ ( 84,964 ) Cash and cash equivalents at beginning of the year ​ ​ 74,315 ​ ​ 115,720 Cash and cash equivalents at end of period ​ $ 80,652 ​ $ 30,756 Supplemental information ​ ​ ​ ​ ​ ​ Interest paid ​ $ 16,406 ​ $ 2,655 Taxes paid ​ $ 4,821 ​ $ 5,248 Non-cash investing activities: ​ ​ ​ ​ ​ ​ Transfers from loans to other real estate owned ​ $ 226 ​ $ 256 Transfers from securities available for sale to held to maturity ​ $ — ​ $ 139,036 ​ ​ ​ 10 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 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. 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 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 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 , 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, 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. 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. 11 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, 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. 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. 12 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 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. 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. 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 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 13 Table of Contents 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. 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, FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): 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. 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 ASU 2020-04 are effective for all entities between March 12, 2020 and December 31, 2022. In December 2022, FASB issued ASU No. 2022-06: “Reference Rate Reform (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 Basic earnings per common share is derived by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period and does not include the effect of any potentially dilutive common stock equivalents. Diluted earnings per share is derived by dividing net income available to common shareholders by the weighted-average number of shares outstanding, adjusted for the dilutive effect of outstanding common stock equivalents, such as restricted stock units (“RSUs”). There were no anti-dilutive shares outstanding at September 30, 2023 or 2022. ​ 14 Table of Contents The following table sets forth the calculation of basic and diluted earnings per common share for the nine- and three-month periods ended September 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended September 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 ​ $ 13,302 ​ 6,698 ​ $ 1.99 ​ $ 18,079 ​ 6,645 ​ $ 2.72 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted Earnings Per Share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restricted stock units ​ ​ ​ ​ 16 ​ ​ ​ ​ ​ ​ ​ 10 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 13,302 ​ 6,714 ​ $ 1.98 ​ $ 18,079 ​ 6,655 ​ $ 2.72 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended September 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 ​ $ 4,513 ​ 6,714 ​ $ 0.67 ​ $ 6,936 ​ 6,658 ​ $ 1.04 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted Earnings Per Share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restricted stock units ​ ​ ​ ​ 14 ​ ​ ​ ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 4,513 ​ 6,728 ​ $ 0.67 ​ $ 6,936 ​ 6,669 ​ $ 1.04 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Note 4 – Investments 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) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Estimated Fair Value September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 11,020 ​ $ — ​ $ 1,660 ​ $ — ​ $ 9,360 Residential mortgage-backed agencies ​ ​ 42,073 ​ ​ — ​ ​ 8,704 ​ ​ — ​ ​ 33,369 Commercial mortgage-backed agencies ​ ​ 36,722 ​ ​ — ​ ​ 9,667 ​ ​ — ​ ​ 27,055 Collateralized mortgage obligations ​ ​ 24,223 ​ ​ — ​ ​ 5,236 ​ ​ — ​ ​ 18,987 Obligations of states and political subdivisions ​ ​ 10,832 ​ ​ — ​ ​ 766 ​ ​ — ​ ​ 10,066 Corporate bonds ​ ​ 1,000 ​ ​ — ​ ​ 251 ​ ​ — ​ ​ 749 Collateralized debt obligations ​ ​ 18,670 ​ ​ — ​ ​ 3,886 ​ ​ — ​ ​ 14,784 Total available for sale ​ $ 144,540 ​ $ — ​ $ 30,170 ​ $ — ​ $ 114,370 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 15 Table of Contents (in thousands) Amortized Cost Gross Unrecognized Gains Gross Unrecognized Losses Estimated Fair Value Allowance for Credit Losses September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. treasuries ​ $ 37,397 ​ $ — ​ $ 670 ​ $ 36,727 ​ $ — U.S. government agencies ​ ​ 67,944 ​ ​ — ​ ​ 14,411 ​ ​ 53,533 ​ ​ — Residential mortgage-backed agencies ​ ​ 30,336 ​ ​ — ​ ​ 4,495 ​ ​ 25,841 ​ ​ — Commercial mortgage-backed agencies ​ ​ 21,454 ​ ​ — ​ ​ 6,494 ​ ​ 14,960 ​ ​ — Collateralized mortgage obligations ​ ​ 53,994 ​ ​ — ​ ​ 12,114 ​ ​ 41,880 ​ ​ — Obligations of states and political subdivisions ​ ​ 4,603 ​ ​ 126 ​ ​ 844 ​ ​ 3,885 ​ ​ 45 Total held to maturity ​ $ 215,728 ​ $ 126 ​ $ 39,028 ​ $ 176,826 ​ $ 45 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (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 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 ​ 12 months or more (in thousands) Fair Value Unrealized Losses Number of Investments Fair Value Unrealized Losses Number of Investments September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ — ​ $ — ​ — ​ $ 9,360 ​ $ 1,660 ​ 3 Residential mortgage-backed agencies ​ ​ — ​ ​ — ​ — ​ ​ 33,369 ​ ​ 8,704 ​ 5 Commercial mortgage-backed agencies ​ ​ — ​ ​ — ​ — ​ ​ 27,055 ​ ​ 9,667 ​ 8 Collateralized mortgage obligations ​ ​ — ​ ​ — ​ — ​ ​ 18,987 ​ ​ 5,236 ​ 10 Obligations of states and political subdivisions ​ ​ 3,357 ​ ​ 294 ​ 6 ​ ​ 6,369 ​ ​ 472 ​ 3 Corporate Bonds ​ ​ — ​ ​ — ​ — ​ ​ 749 ​ ​ 251 ​ 1 Collateralized debt obligations ​ ​ — ​ ​ — ​ — ​ ​ 14,784 ​ ​ 3,886 ​ 9 Total available for sale ​ $ 3,357 ​ $ 294 ​ 6 ​ $ 110,673 ​ $ 29,876 ​ 39 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 months ​ 12 months or more (in thousands) Fair Value Unrecognized Losses Number of Investments Fair Value Unrecognized Losses Number of Investments September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. treasuries ​ $ — ​ $ — ​ — ​ $ 36,727 ​ $ 670 ​ 4 U.S. government agencies ​ ​ — ​ ​ — ​ — ​ ​ 53,533 ​ ​ 14,411 ​ 9 Residential mortgage-backed agencies ​ ​ 3,977 ​ ​ 98 ​ 3 ​ ​ 21,864 ​ ​ 4,397 ​ 35 Commercial mortgage-backed agencies ​ ​ — ​ ​ — ​ — ​ ​ 14,960 ​ ​ 6,494 ​ 2 Collateralized mortgage obligations ​ ​ — ​ ​ — ​ — ​ ​ 41,880 ​ ​ 12,114 ​ 8 Obligations of states and political subdivisions ​ ​ — ​ ​ — ​ — ​ ​ 2,030 ​ ​ 844 ​ 1 Total held to maturity ​ $ 3,977 ​ $ 98 ​ 3 ​ $ 170,994 ​ $ 38,930 ​ 59 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 AFS and 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. ​ 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 18 Table of Contents 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 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) 2023 2022 Balance of credit-related impairment at January 1 ​ $ 1,841 ​ $ 2,043 Reduction for increases in cash flows expected to be collected ​ ​ ( 152 ) ​ ​ ( 152 ) Balance of credit-related impairment at September 30 ​ $ 1,689 ​ $ 1,891 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ September 30, (in thousands) ​ 2023 ​ 2022 Balance of credit-related impairment at July 1 ​ $ 1,740 ​ $ 1,942 Reduction for increases in cash flows expected to be collected ​ ​ ( 51 ) ​ ​ ( 51 ) Balance of credit-related impairment at September 30 ​ $ 1,689 ​ $ 1,891 ​ ​ 19 Table of Contents 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 (in thousands) Amortized Cost Fair Value Available for Sale: ​ ​ ​ ​ ​ ​ Due in one year or less ​ $ 3,010 ​ $ 2,953 Due after one year through five years ​ ​ 9,270 ​ ​ 8,391 Due after five years through ten years ​ ​ 1,895 ​ ​ 1,560 Due after ten years ​ ​ 27,347 ​ ​ 22,055 ​ ​ ​ 41,522 ​ ​ 34,959 Residential mortgage-backed agencies ​ ​ 42,073 ​ ​ 33,369 Commercial mortgage-backed agencies ​ ​ 36,722 ​ ​ 27,055 Collateralized mortgage obligations ​ ​ 24,223 ​ ​ 18,987 Total available for sale ​ $ 144,540 ​ $ 114,370 Held to Maturity: ​ ​ ​ ​ ​ ​ Due in one year or less ​ $ 37,397 ​ $ 36,727 Due after one year through five years ​ ​ 12,500 ​ ​ 11,306 Due after five years through ten years ​ ​ 38,681 ​ ​ 30,544 Due after ten years ​ ​ 21,366 ​ ​ 15,568 ​ ​ ​ 109,944 ​ ​ 94,145 Residential mortgage-backed agencies ​ ​ 30,336 ​ ​ 25,841 Commercial mortgage-backed agencies ​ ​ 21,454 ​ ​ 14,960 Collateralized mortgage obligations ​ ​ 53,994 ​ ​ 41,880 Total held to maturity ​ $ 215,728 ​ $ 176,826 ​ ​ ​ ​ ​ 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 September 30, 2023 and December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Commercial Real Estate Acquisition and Development Commercial and Industrial Residential Mortgage Consumer Total September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ — ​ $ — ​ $ — ​ $ 2,314 ​ $ — ​ $ 2,314 Collectively evaluated for impairment ​ ​ 491,284 ​ ​ 79,796 ​ ​ 254,650 ​ ​ 489,372 ​ ​ 62,603 ​ ​ 1,377,705 Total loans ​ $ 491,284 ​ $ 79,796 ​ $ 254,650 ​ $ 491,686 ​ $ 62,603 ​ $ 1,380,019 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 September 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 September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-owner-occupied ​ $ 293,932 ​ $ — ​ $ 229 ​ $ — ​ $ 229 ​ $ — ​ $ 294,161 All other CRE ​ ​ 196,524 ​ ​ 599 ​ ​ — ​ ​ — ​ ​ 599 ​ ​ — ​ ​ 197,123 Acquisition and development: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 17,527 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 17,527 All other A&D ​ ​ 62,149 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 120 ​ ​ 62,269 Commercial and industrial ​ ​ 254,193 ​ ​ 75 ​ ​ 382 ​ ​ — ​ ​ 457 ​ ​ — ​ ​ 254,650 Residential mortgage: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ 425,383 ​ ​ 214 ​ ​ 1,109 ​ ​ — ​ ​ 1,323 ​ ​ 3,011 ​ ​ 429,717 Residential mortgage - home equity ​ ​ 61,299 ​ ​ 288 ​ ​ 22 ​ ​ 86 ​ ​ 396 ​ ​ 274 ​ ​ 61,969 Consumer ​ ​ 61,786 ​ ​ 541 ​ ​ 143 ​ ​ 59 ​ ​ 743 ​ ​ 74 ​ ​ 62,603 Total ​ $ 1,372,793 ​ $ 1,717 ​ $ 1,885 ​ $ 145 ​ $ 3,747 ​ $ 3,479 ​ $ 1,380,019 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 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 21 Table of Contents 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. 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 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. 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 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. 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 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) Commercial Real Estate Acquisition and Development Commercial and Industrial Residential Mortgage Consumer Unallocated Total September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — Collectively evaluated for impairment ​ ​ 5,038 ​ ​ 1,065 ​ ​ 3,477 ​ ​ 6,642 ​ ​ 924 ​ ​ — ​ ​ 17,146 Total ACL ​ $ 5,038 ​ $ 1,065 ​ $ 3,477 ​ $ 6,642 ​ $ 924 ​ $ — ​ $ 17,146 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 September 30, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 (dollars in thousands) Real Estate Non-Accrual Loans with No Allowance Residential mortgage ​ $ 2,314 ​ $ 2,314 Total Loans ​ $ 2,314 ​ $ 2,314 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 September 30, 2023 and 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 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 ​ ​ — ​ ​ — ​ ​ 2,314 ​ ​ 2,314 ​ ​ — Residential mortgage – home equity ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Consumer ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total impaired loans ​ $ — ​ $ — ​ $ 2,314 ​ $ 2,314 ​ $ — 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 nine- and three-month periods ended September 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine 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 ) ​ ​ — ​ ​ ( 301 ) ​ ​ ( 55 ) ​ ​ ( 681 ) ​ ​ — ​ ​ ( 1,124 ) Recoveries collected ​ ​ 5 ​ ​ 8 ​ ​ 176 ​ ​ 56 ​ ​ 153 ​ ​ — ​ ​ 398 Credit loss (credit)/expense ​ ​ ( 82 ) ​ ​ 93 ​ ​ ( 577 ) ​ ​ 1,369 ​ ​ 367 ​ ​ — ​ ​ 1,170 ACL balance at September 30, 2023 ​ $ 5,038 ​ $ 1,065 ​ $ 3,477 ​ $ 6,642 ​ $ 924 ​ $ — ​ $ 17,146 ALL balance at January 1, 2022 ​ $ 6,032 ​ $ 2,615 ​ $ 2,460 ​ $ 3,484 ​ $ 934 ​ $ 430 ​ $ 15,955 Loan Charge-offs ​ ​ — ​ ​ ( 20 ) ​ ​ ( 134 ) ​ ​ ( 34 ) ​ ​ ( 726 ) ​ ​ — ​ ​ ( 914 ) Recoveries collected ​ ​ 1 ​ ​ 21 ​ ​ 92 ​ ​ 172 ​ ​ 117 ​ ​ — ​ ​ 403 Loan loss expense/(credit) ​ ​ 323 ​ ​ ( 1,117 ) ​ ​ 984 ​ ​ ( 645 ) ​ ​ 552 ​ ​ — ​ ​ 97 ALL balance at September 30, 2022 ​ $ 6,356 ​ $ 1,499 ​ $ 3,402 ​ $ 2,977 ​ $ 877 ​ $ 430 ​ $ 15,541 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended (in thousands) ​ Commercial Real Estate ​ Acquisition and Development ​ Commercial and Industrial ​ Residential Mortgage ​ Consumer ​ Unallocated ​ Total ACL balance at July 1, 2023 ​ $ 4,946 ​ $ 1,134 ​ $ 3,549 ​ $ 6,417 ​ $ 859 ​ $ — ​ $ 16,905 Loan charge-offs ​ ​ — ​ ​ — ​ ​ ( 135 ) ​ ​ ( 31 ) ​ ​ ( 163 ) ​ ​ — ​ ​ ( 329 ) Recoveries collected ​ ​ — ​ ​ 1 ​ ​ 167 ​ ​ 20 ​ ​ 60 ​ ​ — ​ ​ 248 Credit loss expense/(credit) ​ ​ 92 ​ ​ ( 70 ) ​ ​ ( 104 ) ​ ​ 236 ​ ​ 168 ​ ​ — ​ ​ 322 ACL balance at September 30, 2023 ​ $ 5,038 ​ $ 1,065 ​ $ 3,477 ​ $ 6,642 ​ $ 924 ​ $ — ​ $ 17,146 ALL balance at July 1, 2022 ​ $ 6,220 ​ $ 2,172 ​ $ 2,830 ​ $ 3,112 ​ $ 973 ​ $ 430 ​ $ 15,737 Charge-offs ​ ​ — ​ ​ ( 20 ) ​ ​ ( 82 ) ​ ​ ( 1 ) ​ ​ ( 181 ) ​ ​ — ​ ​ ( 284 ) Recoveries ​ ​ — ​ ​ 1 ​ ​ 83 ​ ​ 71 ​ ​ 41 ​ ​ — ​ ​ 196 Loan loss expense/(credit) ​ ​ 136 ​ ​ ( 654 ) ​ ​ 571 ​ ​ ( 205 ) ​ ​ 44 ​ ​ — ​ ​ ( 108 ) ALL balance at September 30, 2022 ​ $ 6,356 ​ $ 1,499 ​ $ 3,402 ​ $ 2,977 ​ $ 877 ​ $ 430 ​ $ 15,541 ​ ​ 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 discounted cash flows. 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 September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-owner-occupied ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 20,580 ​ $ 66,381 ​ $ 30,726 ​ $ 54,643 ​ $ 39,758 ​ $ 63,496 ​ $ 1,111 ​ $ 276,695 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 6,098 ​ ​ — ​ ​ 6,098 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 11,368 ​ ​ — ​ ​ 11,368 Total non-owner occupied ​ ​ 20,580 ​ ​ 66,381 ​ ​ 30,726 ​ ​ 54,643 ​ ​ 39,758 ​ ​ 80,962 ​ ​ 1,111 ​ ​ 294,161 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 87 ​ ​ — ​ ​ 87 All other CRE ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 21,848 ​ ​ 27,791 ​ ​ 25,848 ​ ​ 22,666 ​ ​ 24,603 ​ ​ 65,306 ​ ​ 4,057 ​ ​ 192,119 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,095 ​ ​ 1,095 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,871 ​ ​ 1,438 ​ ​ 600 ​ ​ 3,909 Total all other CRE ​ ​ 21,848 ​ ​ 27,791 ​ ​ 25,848 ​ ​ 22,666 ​ ​ 26,474 ​ ​ 66,744 ​ ​ 5,752 ​ ​ 197,123 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Acquisition and development: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 7,716 ​ ​ 9,311 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 500 ​ ​ 17,527 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total acquisition and development ​ ​ 7,716 ​ ​ 9,311 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 500 ​ ​ 17,527 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — All other A&D ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 14,592 ​ ​ 23,197 ​ ​ 3,994 ​ ​ 3,101 ​ ​ 2,512 ​ ​ 10,631 ​ ​ 4,122 ​ ​ 62,149 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 120 ​ ​ — ​ ​ 120 Total all other A&D ​ ​ 14,592 ​ ​ 23,197 ​ ​ 3,994 ​ ​ 3,101 ​ ​ 2,512 ​ ​ 10,751 ​ ​ 4,122 ​ ​ 62,269 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial and industrial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 28,861 ​ ​ 71,185 ​ ​ 25,176 ​ ​ 12,868 ​ ​ 9,915 ​ ​ 12,253 ​ ​ 71,371 ​ ​ 231,629 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 329 ​ ​ 562 ​ ​ 891 Substandard ​ ​ — ​ ​ 8,923 ​ ​ 2,022 ​ ​ 6,885 ​ ​ 117 ​ ​ 842 ​ ​ 3,341 ​ ​ 22,130 Total commercial and industrial ​ ​ 28,861 ​ ​ 80,108 ​ ​ 27,198 ​ ​ 19,753 ​ ​ 10,032 ​ ​ 13,424 ​ ​ 75,274 ​ ​ 254,650 Current period gross charge-offs ​ ​ 100 ​ ​ — ​ ​ 35 ​ ​ 166 ​ ​ — ​ ​ — ​ ​ — ​ ​ 301 Residential mortgage: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 43,211 ​ ​ 87,386 ​ ​ 91,415 ​ ​ 40,083 ​ ​ 25,855 ​ ​ 132,866 ​ ​ 1,723 ​ ​ 422,539 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 7,120 ​ ​ 58 ​ ​ 7,178 Total residential mortgage - term ​ ​ 43,211 ​ ​ 87,386 ​ ​ 91,415 ​ ​ 40,083 ​ ​ 25,855 ​ ​ 139,986 ​ ​ 1,781 ​ ​ 429,717 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 13 ​ ​ — ​ ​ 13 Residential mortgage - home equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 1,194 ​ ​ 5,131 ​ ​ 887 ​ ​ 490 ​ ​ 296 ​ ​ 523 ​ ​ 52,821 ​ ​ 61,342 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ 40 ​ ​ — ​ ​ 17 ​ ​ 570 ​ ​ 627 Total residential mortgage - home equity ​ ​ 1,194 ​ ​ 5,131 ​ ​ 887 ​ ​ 530 ​ ​ 296 ​ ​ 540 ​ ​ 53,391 ​ ​ 61,969 Current period gross charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 42 ​ ​ — ​ ​ 42 Consumer: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 15,997 ​ ​ 11,773 ​ ​ 7,254 ​ ​ 2,503 ​ ​ 718 ​ ​ 21,278 ​ ​ 2,807 ​ ​ 62,330 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ 48 ​ ​ 35 ​ ​ 139 ​ ​ 25 ​ ​ 7 ​ ​ 7 ​ ​ 12 ​ ​ 273 Total consumer ​ ​ 16,045 ​ ​ 11,808 ​ ​ 7,393 ​ ​ 2,528 ​ ​ 725 ​ ​ 21,285 ​ ​ 2,819 ​ ​ 62,603 Current period gross charge-offs ​ ​ 158 ​ ​ 184 ​ ​ 55 ​ ​ 3 ​ ​ — ​ ​ 281 ​ ​ — ​ ​ 681 Total Portfolio Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 153,999 ​ ​ 302,155 ​ ​ 185,300 ​ ​ 136,354 ​ ​ 103,657 ​ ​ 306,353 ​ ​ 138,512 ​ ​ 1,326,330 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 6,427 ​ ​ 1,657 ​ ​ 8,084 Substandard ​ ​ 48 ​ ​ 8,958 ​ ​ 2,161 ​ ​ 6,950 ​ ​ 1,995 ​ ​ 20,912 ​ ​ 4,581 ​ ​ 45,605 Total Portfolio Loans ​ $ 154,047 ​ $ 311,113 ​ $ 187,461 ​ $ 143,304 ​ $ 105,652 ​ $ 333,692 ​ $ 144,750 ​ $ 1,380,019 Current YTD Period: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current period gross charge-offs ​ $ 258 ​ $ 184 ​ $ 90 ​ $ 169 ​ $ — ​ $ 423 ​ $ — ​ $ 1,124 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-owner-occupied ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ $ 20,580 ​ $ 66,381 ​ $ 30,726 ​ $ 54,643 ​ $ 39,758 ​ $ 80,962 ​ $ 1,111 ​ $ 294,161 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total non-owner occupied ​ ​ 20,580 ​ ​ 66,381 ​ ​ 30,726 ​ ​ 54,643 ​ ​ 39,758 ​ ​ 80,962 ​ ​ 1,111 ​ ​ 294,161 All other CRE ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 21,848 ​ ​ 27,791 ​ ​ 25,848 ​ ​ 22,666 ​ ​ 26,474 ​ ​ 66,744 ​ ​ 5,752 ​ ​ 197,123 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total all other CRE ​ ​ 21,848 ​ ​ 27,791 ​ ​ 25,848 ​ ​ 22,666 ​ ​ 26,474 ​ ​ 66,744 ​ ​ 5,752 ​ ​ 197,123 Acquisition and development: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 7,716 ​ ​ 9,311 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 500 ​ ​ 17,527 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total acquisition and development ​ ​ 7,716 ​ ​ 9,311 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 500 ​ ​ 17,527 All other A&D ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 14,592 ​ ​ 23,197 ​ ​ 3,994 ​ ​ 3,101 ​ ​ 2,512 ​ ​ 10,631 ​ ​ 4,122 ​ ​ 62,149 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 120 ​ ​ — ​ ​ 120 Total all other A&D ​ ​ 14,592 ​ ​ 23,197 ​ ​ 3,994 ​ ​ 3,101 ​ ​ 2,512 ​ ​ 10,751 ​ ​ 4,122 ​ ​ 62,269 Commercial and industrial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 28,861 ​ ​ 80,108 ​ ​ 27,198 ​ ​ 19,753 ​ ​ 10,032 ​ ​ 13,424 ​ ​ 75,274 ​ ​ 254,650 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total commercial and industrial ​ ​ 28,861 ​ ​ 80,108 ​ ​ 27,198 ​ ​ 19,753 ​ ​ 10,032 ​ ​ 13,424 ​ ​ 75,274 ​ ​ 254,650 Residential mortgage: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 43,211 ​ ​ 87,386 ​ ​ 91,415 ​ ​ 40,083 ​ ​ 25,755 ​ ​ 137,107 ​ ​ 1,749 ​ ​ 426,706 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 100 ​ ​ 2,879 ​ ​ 32 ​ ​ 3,011 Total residential mortgage - term ​ ​ 43,211 ​ ​ 87,386 ​ ​ 91,415 ​ ​ 40,083 ​ ​ 25,855 ​ ​ 139,986 ​ ​ 1,781 ​ ​ 429,717 Residential mortgage - home equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 1,194 ​ ​ 5,131 ​ ​ 887 ​ ​ 490 ​ ​ 296 ​ ​ 524 ​ ​ 53,087 ​ ​ 61,609 Nonperforming ​ ​ — ​ ​ — ​ ​ — ​ ​ 40 ​ ​ — ​ ​ 16 ​ ​ 304 ​ ​ 360 Total residential mortgage - home equity ​ ​ 1,194 ​ ​ 5,131 ​ ​ 887 ​ ​ 530 ​ ​ 296 ​ ​ 540 ​ ​ 53,391 ​ ​ 61,969 Consumer: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 16,045 ​ ​ 11,793 ​ ​ 7,384 ​ ​ 2,504 ​ ​ 725 ​ ​ 21,200 ​ ​ 2,819 ​ ​ 62,470 Nonperforming ​ ​ — ​ ​ 15 ​ ​ 9 ​ ​ 24 ​ ​ — ​ ​ 85 ​ ​ — ​ ​ 133 Total consumer ​ ​ 16,045 ​ ​ 11,808 ​ ​ 7,393 ​ ​ 2,528 ​ ​ 725 ​ ​ 21,285 ​ ​ 2,819 ​ ​ 62,603 Total Portfolio Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performing ​ ​ 154,047 ​ ​ 311,098 ​ ​ 187,452 ​ ​ 143,240 ​ ​ 105,552 ​ ​ 330,592 ​ ​ 144,414 ​ ​ 1,376,395 Nonperforming ​ ​ — ​ ​ 15 ​ ​ 9 ​ ​ 64 ​ ​ 100 ​ ​ 3,100 ​ ​ 336 ​ ​ 3,624 Total Portfolio Loans ​ $ 154,047 ​ $ 311,113 ​ $ 187,461 ​ $ 143,304 ​ $ 105,652 ​ $ 333,692 ​ $ 144,750 ​ $ 1,380,019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 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. 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 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. 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 September 30, 2023 and December 31, 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at September 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) 09/30/23 (Level 1) (Level 2) (Level 3) Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 9,360 ​ ​ ​ ​ $ 9,360 ​ ​ ​ Residential mortgage-backed agencies ​ $ 33,369 ​ ​ ​ ​ $ 33,369 ​ ​ ​ Commercial mortgage-backed agencies ​ $ 27,055 ​ ​ ​ ​ $ 27,055 ​ ​ ​ Collateralized mortgage obligations ​ $ 18,987 ​ ​ ​ ​ $ 18,987 ​ ​ ​ Obligations of states and political subdivisions ​ $ 10,066 ​ ​ ​ ​ $ 10,066 ​ ​ ​ Corporate bonds ​ $ 749 ​ ​ ​ ​ $ 749 ​ ​ ​ Collateralized debt obligations ​ $ 14,784 ​ ​ ​ ​ ​ ​ ​ $ 14,784 Financial derivatives ​ $ 1,099 ​ ​ ​ ​ $ 1,099 ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity Investment ​ $ 2,862 ​ ​ ​ ​ ​ ​ ​ $ 2,862 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 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. ​ 34 Table of Contents 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, 2023 Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment Securities – available for sale -CDO ​ $ 14,784 ​ Discounted Cash Flow ​ Discount Margin ​ Range of mid 500 to low 600 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually Evaluated Loans, net ​ $ - ​ Market Comparable Properties ​ Marketability Discount ​ N/A ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity Investment ​ $ 2,862 ​ 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 nine- and three- month periods ended September 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 ​ ​ ( 1,087 ) Ending balance September 30, 2023 ​ $ 14,784 ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ ​ Using Significant Unobservable Inputs ​ ​ (Level 3) ​ ​ Investment Securities (in thousands) Available for Sale Beginning balance January 1, 2022 ​ $ 17,192 Total losses realized/unrealized: ​ ​ ​ Included in other comprehensive loss ​ ​ ( 1,310 ) Ending balance September 30, 2022 ​ $ 15,882 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (in thousands) ​ Investment Securities Available for Sale Beginning balance July 1, 2023 ​ $ 14,105 Total gains realized/unrealized: ​ ​ ​ Included in other comprehensive income ​ ​ 679 Ending balance September 30, 2023 ​ $ 14,784 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (in thousands) ​ Investment Securities Available for Sale Beginning balance July 1, 2022 ​ $ 16,258 Total losses realized/unrealized: ​ ​ ​ Included in other comprehensive income ​ ​ ( 376 ) Ending balance September 30, 2022 ​ $ 15,882 ​ ​ 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. The derived fair values are subjective in nature and involve uncertainties and significant judgment. 36 Table of Contents Therefore, they cannot be determined with precision. Changes in the assumptions could significantly impact the derived estimates of fair value. Disclosure of non-financial assets such as buildings, as well as certain financial instruments such as leases is not required. Accordingly, the aggregate fair values presented do not represent the underlying value of the Corporation. 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: ​ 37 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 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 ​ $ 78,939 ​ $ 78,939 ​ $ 78,939 ​ ​ ​ ​ ​ ​ Interest bearing deposits in banks ​ ​ 1,713 ​ ​ 1,713 ​ ​ 1,713 ​ ​ ​ ​ ​ ​ Investment securities - AFS ​ ​ 114,370 ​ ​ 114,370 ​ ​ ​ ​ $ 99,586 ​ $ 14,784 Investment securities - HTM ​ ​ 215,683 ​ ​ 176,826 ​ ​ ​ ​ ​ 174,971 ​ ​ 1,855 Restricted bank stock ​ ​ 5,251 ​ ​ N/A ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans held for sale ​ ​ 208 ​ ​ 208 ​ ​ ​ ​ ​ ​ ​ ​ 208 Loans, net ​ ​ 1,362,502 ​ ​ 1,265,829 ​ ​ ​ ​ ​ ​ ​ ​ 1,265,829 Financial derivatives ​ ​ 1,099 ​ ​ 1,099 ​ ​ ​ ​ ​ 1,099 ​ ​ ​ Accrued interest receivable ​ ​ 6,689 ​ ​ 6,689 ​ ​ ​ ​ ​ 874 ​ ​ 5,815 Financial Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposits - non-maturity ​ ​ 1,354,015 ​ ​ 1,354,015 ​ ​ ​ ​ ​ 1,354,015 ​ ​ ​ Deposits - time deposits ​ ​ 221,054 ​ ​ 217,610 ​ ​ ​ ​ ​ 217,610 ​ ​ ​ Short-term borrowed funds ​ ​ 53,330 ​ ​ 53,330 ​ ​ ​ ​ ​ 53,330 ​ ​ ​ Long-term borrowed funds ​ ​ 110,929 ​ ​ 110,514 ​ ​ ​ ​ ​ 110,514 ​ ​ ​ Accrued interest payable ​ ​ 578 ​ ​ 578 ​ ​ ​ ​ ​ 578 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ ​ ​ ​ 38 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, June 30, 2023, and September 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ securities- ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ with credit ​ Investment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ related ​ securities- ​ Investment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ impairment ​ 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 ) Other comprehensive income/(loss) before reclassifications ​ ​ 475 ​ ​ ( 3,201 ) ​ ​ — ​ ​ 11 ​ ​ ( 1,033 ) ​ ​ — ​ ​ ( 3,748 ) Amounts reclassified from accumulated other comprehensive loss ​ ​ ( 38 ) ​ ​ — ​ ​ 130 ​ ​ — ​ ​ 194 ​ ​ ( 1 ) ​ ​ 285 Balance - September 30, 2023 ​ $ ( 2,420 ) ​ $ ( 20,250 ) ​ $ ( 5,311 ) ​ $ 820 ​ $ ( 16,982 ) ​ $ 570 ​ $ ( 43,573 ) ​ ​ 39 Table of Contents The following tables present the components of other comprehensive loss for the nine- and three- month periods ended September 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Before ​ Tax ​ ​ Components of Other Comprehensive Loss ​ Tax ​ (Expense) ​ ​ (in thousands) Amount Benefit Net For the nine months ended September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with credit related impairment: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ $ ( 777 ) ​ $ 183 ​ $ ( 594 ) Less: accretable yield recognized in income ​ ​ 152 ​ ​ ( 37 ) ​ ​ 115 Net unrealized losses on investments with credit related impairment ​ ​ ( 929 ) ​ ​ 220 ​ ​ ( 709 ) Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ ​ ( 5,065 ) ​ ​ 1,195 ​ ​ ( 3,870 ) Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses on securities transferred to held to maturity ​ ​ — ​ ​ — ​ ​ — Less: amortization recognized in income ​ ​ ( 513 ) ​ ​ 121 ​ ​ ( 392 ) Net unrealized gains on HTM securities ​ ​ 513 ​ ​ ( 121 ) ​ ​ 392 Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 30 ​ ​ ( 7 ) ​ ​ 23 Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial gain ​ ​ ( 1,250 ) ​ ​ 298 ​ ​ ( 952 ) Less: amortization of unrecognized loss ​ ​ ( 750 ) ​ ​ 177 ​ ​ ( 573 ) Net pension plan liability adjustment ​ ​ ( 500 ) ​ ​ 121 ​ ​ ( 379 ) SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ — ​ ​ — ​ ​ — Less: amortization of unrecognized loss ​ ​ 6 ​ ​ ( 2 ) ​ ​ 4 Net SERP liability adjustment ​ ​ ( 6 ) ​ ​ 2 ​ ​ ( 4 ) Other comprehensive loss ​ $ ( 5,957 ) ​ $ 1,410 ​ $ ( 4,547 ) ​ ​ ​ 40 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Before ​ Tax ​ ​ Components of Other Comprehensive Loss ​ Tax ​ (Expense) ​ ​ (in thousands) Amount Benefit Net For the nine months ended September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with credit related impairment: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ $ ( 853 ) ​ $ 228 ​ $ ( 625 ) Less: accretable yield recognized in income ​ ​ 152 ​ ​ ( 41 ) ​ ​ 111 Net unrealized losses on investments with credit related impairment ​ ​ ( 1,005 ) ​ ​ 269 ​ ​ ( 736 ) Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ ​ ( 22,971 ) ​ ​ 6,147 ​ ​ ( 16,824 ) Unrealized holding losses on securities transferred from available for sale to held to maturity ​ ​ 8,328 ​ ​ ( 2,228 ) ​ ​ 6,100 Less: gains recognized in income ​ ​ 3 ​ ​ ( 1 ) ​ ​ 2 Net unrealized losses on all other AFS securities ​ ​ ( 14,646 ) ​ ​ 3,920 ​ ​ ( 10,726 ) Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses on securities transferred to held to maturity ​ ​ ( 8,328 ) ​ ​ 2,228 ​ ​ ( 6,100 ) Less: gains recognized in income ​ ​ 93 ​ ​ ( 25 ) ​ ​ 68 Less: amortization recognized in income ​ ​ ( 644 ) ​ ​ 172 ​ ​ ( 472 ) Net unrealized losses on HTM securities ​ ​ ( 7,777 ) ​ ​ 2,081 ​ ​ ( 5,696 ) Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 1,622 ​ ​ ( 434 ) ​ ​ 1,188 Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ ( 14,079 ) ​ ​ 3,767 ​ ​ ( 10,312 ) Less: amortization of unrecognized loss ​ ​ ( 837 ) ​ ​ 224 ​ ​ ( 613 ) Net pension plan liability adjustment ​ ​ ( 13,242 ) ​ ​ 3,543 ​ ​ ( 9,699 ) SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ — ​ ​ — ​ ​ — Less: amortization of unrecognized loss ​ ​ ( 203 ) ​ ​ 54 ​ ​ ( 149 ) Less: amortization of prior service costs ​ ​ — ​ ​ — ​ ​ — Net SERP liability adjustment ​ ​ 203 ​ ​ ( 54 ) ​ ​ 149 Other comprehensive loss ​ $ ( 34,845 ) ​ $ 9,325 ​ $ ( 25,520 ) ​ ​ 41 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Components of Other Comprehensive Loss (in thousands) ​ Before Tax Amount ​ Tax (Expense) Benefit ​ Net For the three months ended September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with credit related impairment: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ $ 633 ​ $ ( 158 ) ​ $ 475 Less: accretable yield recognized in income ​ ​ 51 ​ ​ ( 13 ) ​ ​ 38 Net unrealized gains on investments with credit related impairment ​ ​ 582 ​ ​ ( 145 ) ​ ​ 437 Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net unrealized losses on all other AFS securities ​ ​ ( 4,183 ) ​ ​ 982 ​ ​ ( 3,201 ) Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ — ​ ​ — ​ ​ — Less: amortization recognized in income ​ ​ ( 167 ) ​ ​ 37 ​ ​ ( 130 ) Net unrealized gains on HTM securities ​ ​ 167 ​ ​ ( 37 ) ​ ​ 130 Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 14 ​ ​ ( 3 ) ​ ​ 11 Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ ( 1,352 ) ​ ​ 319 ​ ​ ( 1,033 ) Less: amortization of unrecognized loss ​ ​ ( 251 ) ​ ​ 57 ​ ​ ( 194 ) Net pension plan liability adjustment ​ ​ ( 1,101 ) ​ ​ 262 ​ ​ ( 839 ) SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ — ​ ​ — ​ ​ — Less: amortization of unrecognized loss ​ ​ 2 ​ ​ ( 1 ) ​ ​ 1 Net SERP liability adjustment ​ ​ ( 2 ) ​ ​ 1 ​ ​ ( 1 ) Other comprehensive loss ​ $ ( 4,523 ) ​ $ 1,060 ​ $ ( 3,463 ) ​ ​ 42 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Components of Other Comprehensive Loss (in thousands) ​ Before Tax Amount ​ Tax (Expense) Benefit ​ Net For the three months ended September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with credit related impairment: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ $ ( 199 ) ​ $ 53 ​ $ ( 146 ) Less: accretable yield recognized in income ​ ​ 51 ​ ​ ( 14 ) ​ ​ 37 Net unrealized losses on investments with credit related impairment ​ ​ ( 250 ) ​ ​ 67 ​ ​ ( 183 ) Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ ​ ( 6,768 ) ​ ​ 1,811 ​ ​ ( 4,957 ) Less: gains recognized in income ​ ​ — ​ ​ — ​ ​ — Net unrealized losses on all other AFS securities ​ ​ ( 6,768 ) ​ ​ 1,811 ​ ​ ( 4,957 ) Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ — ​ ​ — ​ ​ — Less: gains recognized in income ​ ​ 93 ​ ​ ( 25 ) ​ ​ 68 Less: amortization recognized in income ​ ​ ( 320 ) ​ ​ 85 ​ ​ ( 235 ) Net unrealized gains on HTM securities ​ ​ 227 ​ ​ ( 60 ) ​ ​ 167 Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 534 ​ ​ ( 142 ) ​ ​ 392 Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ ( 3,537 ) ​ ​ 945 ​ ​ ( 2,592 ) Less: amortization of unrecognized loss ​ ​ ( 279 ) ​ ​ 74 ​ ​ ( 205 ) Less: amortization of prior service costs ​ ​ — ​ ​ — ​ ​ — Net pension plan liability adjustment ​ ​ ( 3,258 ) ​ ​ 871 ​ ​ ( 2,387 ) SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ — ​ ​ — ​ ​ — Less: amortization of unrecognized loss ​ ​ ( 68 ) ​ ​ 18 ​ ​ ( 50 ) Less: amortization of prior service costs ​ ​ — ​ ​ — ​ ​ — Net SERP liability adjustment ​ ​ 68 ​ ​ ( 18 ) ​ ​ 50 Other comprehensive loss ​ $ ( 9,447 ) ​ $ 2,529 ​ $ ( 6,918 ) ​ 43 Table of Contents The following table presents the details of amounts reclassified from accumulated other comprehensive loss for the nine- and three- month periods ended September 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amounts Reclassified from ​ Nine Months Ended ​ ​ Accumulated Other Comprehensive Loss ​ September 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 ​ $ 152 ​ $ 152 ​ Interest income on taxable investment securities Taxes ​ ​ ( 37 ) ​ ​ ( 41 ) ​ Credit for income tax expense ​ ​ $ 115 ​ $ 111 ​ 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 ​ $ ( 513 ) ​ $ ( 644 ) ​ Interest income on taxable investment securities Gains/(losses) recognized ​ ​ — ​ ​ 93 ​ Net gains/(losses) Taxes ​ ​ 121 ​ ​ 147 ​ Provision for income tax expense ​ ​ $ ( 392 ) ​ $ ( 404 ) ​ Net of tax Net pension plan liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized loss ​ $ ( 750 ) ​ $ ( 837 ) ​ Other Expense Taxes ​ ​ 177 ​ ​ 224 ​ Provision for income tax expense ​ ​ $ ( 573 ) ​ $ ( 613 ) ​ Net of tax Net SERP liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized gain/(loss) ​ $ 6 ​ $ ( 203 ) ​ Other Expense Taxes ​ ​ ( 2 ) ​ ​ 54 ​ (Credit)/provision for income tax expense ​ ​ $ 4 ​ $ ( 149 ) ​ Net of tax Total reclassifications for the period ​ $ ( 846 ) ​ $ ( 1,053 ) ​ Net of tax ​ ​ ​ ​ ​ ​ ​ ​ 44 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amounts Reclassified from ​ Three Months Ended ​ ​ Accumulated Other Comprehensive Loss ​ September 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 ​ ​ ( 12 ) ​ ​ ( 14 ) ​ Provision for income tax expense ​ ​ $ 39 ​ $ 37 ​ Net of tax Net unrealized losses on held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ Amortization ​ $ ( 167 ) ​ $ ( 320 ) ​ Interest income on taxable investment securities Gains/(losses) recognized ​ ​ — ​ ​ 93 ​ Net gains/(losses) Taxes ​ ​ 38 ​ ​ 60 ​ Provision for income tax expense ​ ​ $ ( 129 ) ​ $ ( 167 ) ​ Net of tax Net pension plan liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized loss ​ $ ( 251 ) ​ $ ( 279 ) ​ Other expense Taxes ​ ​ 57 ​ ​ 74 ​ Provision for income tax expense ​ ​ $ ( 194 ) ​ $ ( 205 ) ​ Net of tax Net SERP liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized loss ​ $ 2 ​ $ ( 68 ) ​ Other expense Taxes ​ ​ ( 1 ) ​ ​ 18 ​ Provision for income tax expense ​ ​ $ 1 ​ $ ( 50 ) ​ Net of tax Total reclassifications for the period ​ $ ( 283 ) ​ $ ( 385 ) ​ 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 $ 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. 45 Table of Contents Restricted Stock Units On March 26, 2020, pursuant to the Corporation’s Long Term Incentive Plan (the "LTIP"), which is a sub-plan of the Equity Plan, the Compensation Committee of First United Corporation’s Board of Directors (the "Committee") granted RSUs to the Corporation’s principal executive officer, its principal financial officer, and certain of its other executive officers. An RSU contemplates the issuance of shares of common stock of First United Corporation if and when the RSU vests. The RSUs granted to each of the foregoing officers consist of (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. 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. 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 $ 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. 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 46 Table of Contents 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. 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 $ 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 As a part of managing interest rate risk, the Corporation entered into interest rate swap agreements to modify the re-pricing characteristics of certain interest-bearing liabilities. The Corporation has designated its interest rate swap agreements as cash flow hedges under the guidance of ASC Subtopic 815-30, Derivatives and Hedging – Cash Flow Hedges . Cash flow hedges have the effective portion of changes in the fair value of the derivative, net of taxes, recorded in net accumulated other comprehensive income. In March 2016, the Corporation entered into four interest rate swap contracts totaling $ 30.0 million notional amount, hedging future cash flows associated with floating rate trust preferred debt. As of September 30, 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 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 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 September 30, 2023. 47 Table of Contents 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount of gain or ​ ​ ​ ​ ​ ​ ​ ​ (loss) recognized in ​ ​ Amount of gain or ​ Amount of gain or ​ income or derivative ​ ​ (loss) recognized in ​ (loss) reclassified from ​ (ineffective portion ​ ​ OCI on derivative ​ accumulated OCI into ​ and amount excluded ​ ​ (effective portion), ​ income (effective ​ from effectiveness (in thousands) net of tax portion) (a) testing) (b) Interest rate contracts: ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 ​ $ 23 ​ $ — ​ $ — September 30, 2022 ​ ​ 1,188 ​ ​ — ​ ​ — Three months ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 ​ $ 11 ​ $ — ​ $ — September 30, 2022 ​ ​ 392 ​ ​ — ​ ​ — ​ Notes: (a) Reported as interest expense (b) Reported as other income ​ ​ ​ Note 10 – Regulatory Capital Requirements The following table presents our capital ratios as of September 30, 2023 and December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 December 31, 2022 Required for Capital Adequacy Purposes Required to be Well Capitalized Total Capital (to risk-weighted assets) ​ 14.12 % 14.37 % 8.00 % 10.00 % Tier 1 Capital (to risk-weighted assets) ​ 12.88 % 13.29 % 6.00 % 8.00 % Common Equity Tier 1 Capital (to risk-weighted assets) ​ 12.88 % 13.29 % 4.50 % 6.50 % Tier 1 Capital (to average assets) ​ 9.81 % 10.01 % 4.00 % 5.00 % ​ 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 adjustment, net of tax, was made to retained earnings. The adjustment did not have a material impact to our capital ratios. ​ ​ ​ 48 Table of Contents Note 11 – Deposits The following table summarizes deposits as of September 30, 2023 and December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) September 30, 2023 December 31, 2022 ​ ​ ​ Balance ​ Percent ​ ​ Balance ​ Percent Non-Interest-bearing deposits: ​ $ 429,691 27 % ​ $ 506,613 ​ 32 % Interest-bearing deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Demand ​ ​ 381,782 ​ 24 % ​ ​ 327,685 ​ 21 % Money Market ​ ​ 338,153 ​ 22 % ​ ​ 365,192 ​ 23 % Savings deposits ​ ​ 204,389 ​ 13 % ​ ​ 250,720 ​ 16 % Time deposits- retail ​ ​ 160,380 ​ 10 % ​ ​ 120,523 ​ 8 % Time deposits- brokered ​ ​ 60,674 ​ 4 % ​ ​ — ​ 0 % Total Deposits ​ $ 1,575,069 ​ 100 % ​ $ 1,570,733 ​ 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 49 Table of Contents Note 12 – Borrowed Funds The following is a summary of borrowings: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ Nine Months Ended September 30, 2023 ​ Year Ended December 31, 2022 Short-term Correspondent Bank Advance: ​ ​ ​ ​ ​ ​ Securities sold under agreements to repurchase: ​ ​ ​ ​ ​ ​ Outstanding at end of period ​ $ 53,330 ​ $ 64,565 Weighted average interest rate at end of period ​ ​ 0.27 % ​ ​ 0.12 % Maximum amount outstanding as of any month end ​ $ 59,777 ​ $ 75,912 Average amount outstanding ​ $ 51,044 ​ $ 63,182 Approximate weighted average rate during the period ​ ​ 0.23 % ​ ​ 0.12 % FHLB advances, bearing fixed interest at rates ranging from 4.53 % to 4.69 % at September 30, 2023 ​ $ 80,000 ​ $ - Junior subordinated debt, bearing variable interest rate of 8.42 % at September 30, 2023 and 7.49 % at December 31, 2022 ​ ​ 30,929 ​ ​ 30,929 Total borrowings outstanding ​ $ 164,259 ​ $ 95,494 ​ 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. ​ 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 nine and three months ended September 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 $ 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. ​ ​ ​ ​ 50 Table of Contents ​ 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 ​ ​ ​ ​ ​ ​ Trust and ​ ​ ​ ​ ​ ​ Community ​ Investment ​ ​ (in thousands) ​ ​ ​ Banking ​ Services ​ Total Interest income ​ ​ $ 58,965 $ - $ 58,965 Interest expense ​ ​ ​ 16,289 ​ - ​ 16,289 Credit loss expense ​ ​ ​ 1,201 ​ - ​ 1,201 Non-interest income ​ ​ ​ 6,927 ​ 6,933 ​ 13,860 Non-interest expense ​ ​ ​ 34,070 ​ 3,864 ​ 37,934 Income before income taxes and intercompany fees ​ ​ ​ 14,332 ​ 3,069 ​ 17,401 Intercompany management fee income (expense) ​ ​ ​ 9 ​ ( 9 ) ​ - Income before income taxes ​ ​ ​ 14,341 ​ 3,060 ​ 17,401 Income tax expense ​ ​ ​ 3,456 ​ 643 ​ 4,099 Net income ​ ​ $ 10,885 $ 2,417 $ 13,302 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended ​ ​ ​ ​ September 30, 2022 ​ ​ ​ ​ ​ ​ Trust and ​ ​ ​ ​ ​ ​ Community ​ Investment ​ ​ (in thousands) ​ ​ ​ Banking ​ Services ​ Total Interest income ​ ​ $ 45,063 $ - $ 45,063 Interest expense ​ ​ ​ 2,610 ​ - ​ 2,610 Credit loss expense ​ ​ ​ 109 ​ - ​ 109 Non-interest income ​ ​ ​ 6,517 ​ 7,043 ​ 13,560 Non-interest expense ​ ​ ​ 28,007 ​ 3,532 ​ 31,539 Income before income taxes and intercompany fees ​ ​ ​ 20,854 ​ 3,511 ​ 24,365 Intercompany management fee income (expense) ​ ​ ​ - ​ - ​ - Income before income taxes ​ ​ ​ 20,854 ​ 3,511 ​ 24,365 Income tax expense ​ ​ ​ 5,549 ​ 737 ​ 6,286 Net income ​ ​ $ 15,305 $ 2,774 $ 18,079 ​ ​ ​ ​ ​ ​ ​ ​ 51 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ ​ September 30, 2023 ​ ​ ​ ​ ​ ​ Trust and ​ ​ ​ ​ ​ ​ Community ​ Investment ​ ​ (in thousands) ​ ​ ​ Banking ​ Services ​ Total Interest income ​ ​ $ 21,164 $ - $ 21,164 Interest expense ​ ​ ​ 7,180 ​ - ​ 7,180 Credit loss expense ​ ​ ​ 263 ​ - ​ 263 Non-interest income ​ ​ ​ 2,515 ​ 2,383 ​ 4,898 Non-interest expense ​ ​ ​ 11,507 ​ 1,278 ​ 12,785 Income before income taxes and intercompany fees ​ ​ ​ 4,729 ​ 1,105 ​ 5,834 Intercompany management fee income (expense) ​ ​ ​ 3 ​ ( 3 ) ​ - Income before income taxes ​ ​ ​ 4,732 ​ 1,102 ​ 5,834 Income tax expense ​ ​ ​ 1,090 ​ 231 ​ 1,321 Net income ​ ​ $ 3,642 $ 871 $ 4,513 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ ​ September 30, 2022 ​ ​ ​ ​ ​ ​ Trust and ​ ​ ​ ​ ​ ​ Community ​ Investment ​ ​ (in thousands) ​ ​ ​ Banking ​ Services ​ Total Interest income ​ ​ $ 16,185 $ - $ 16,185 Interest expense ​ ​ ​ 1,044 ​ - ​ 1,044 Credit loss credit ​ ​ ​ ( 101 ) ​ - ​ ( 101 ) Non-interest income ​ ​ ​ 2,423 ​ 2,277 ​ 4,700 Non-interest expense ​ ​ ​ 9,208 ​ 1,121 ​ 10,329 Income before income taxes and intercompany fees ​ ​ ​ 8,457 ​ 1,156 ​ 9,613 Intercompany management fee income (expense) ​ ​ ​ - ​ - ​ - Income before income taxes ​ ​ ​ 8,457 ​ 1,156 ​ 9,613 Income tax expense ​ ​ ​ 2,434 ​ 243 ​ 2,677 Net income ​ ​ $ 6,023 $ 913 $ 6,936 ​ 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 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. 52 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, 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. ​