What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-05-07 compared with 2024-11-07 · 319 added, 552 removed, 935 unchanged (48% of the section changed)

3 unchanged sentences

(In thousands, except share data - Unaudited)

September 30,

Cash and due from banks

2 unchanged sentences

Investment securities – available for sale (at fair value)

Investment securities – held to maturity, net of allowance for credit losses of $ 59 at September 30, 2024 and $ 45 at December 31, 2023 (fair value $ 149,348 at September 30, 2024 and $ 184,415 at December 31, 2023)

Investment securities – held to maturity, net of allowance for credit losses of $ 59 at March 31, 2025 and December 31, 2024 (fair value $ 146,771 at March 31, 2025 and $ 144,760 at December 31, 2024)

Equity investments not held for trading with readily determinable fair values

Restricted investment in bank stock, at cost

7 unchanged sentences

Other real estate owned, net

Repossessed assets

Right of use assets

17 unchanged sentences

Authorized 25,000,000 shares;

issued and outstanding 6,468,625 shares at September 30, 2024 and 6,639,888 at December 31, 2023

issued and outstanding 6,478,634 shares at March 31, 2025 and 6,471,096 at December 31, 2024

Retained earnings

6 unchanged sentences

(In thousands, except per share data)

Nine Months Ended

September 30,

Three Months Ended

Interest income

13 unchanged sentences

Net Interest income

Credit loss expense

Credit loss expense - loans

Credit loss expense - debt securities held to maturity

Credit loss credit - off-balance sheet credit exposures

33 unchanged sentences

First United Corporation and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share data)

Three Months Ended

September 30,

Interest income

Interest and fees on loans

Interest on investment securities

Exempt from federal income tax

Total investment income

Total interest income

Interest expense

Interest on deposits:

Interest-bearing transaction accounts

Time deposits

Total interest on deposits

Interest on short-term borrowings

Interest on long-term borrowings

Total Interest Expense

Net Interest income

Credit loss expense - loans

Credit loss expense - debt securities held to maturity

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

Total credit loss expense

Net interest income after provision for credit losses

Other operating income

Gains on sales of residential mortgage loans

Service charges on deposit accounts

Other service charges

Trust department

Debit card income

Bank owned life insurance

Brokerage commissions

Total other income

Total other operating income

Other operating expenses

Salaries and employee benefits

FDIC premiums

Data processing

Professional services

Contract labor

Other real estate owned expense, net

Investor relations

Contributions

Total other operating expenses

Income before income tax expense

Provision for income tax expense

Basic net income per common share

Diluted net income per common share

Weighted average number of basic shares outstanding

Weighted average number of diluted shares outstanding

Dividends declared per common share

See accompanying notes to the consolidated financial statements

First United Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands)

Nine Months Ended

September 30,

Comprehensive Income

Other comprehensive income/(loss), net of tax and reclassification adjustments:

Available for sale securities:

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

Reclassification adjustment for accretable yield realized in income

Other comprehensive loss on investments with credit related impairment

Unrealized holding gains/(losses) on all other AFS investments

Other comprehensive income/(loss) on all other AFS investments

Held to Maturity Securities

Unrealized holding gains on securities transferred to held to maturity

Reclassification adjustment for amortization realized in income

Other comprehensive income on HTM investments

Cash flow hedges:

Unrealized holding (losses)/gains on cash flow hedges

Other comprehensive (loss)/income on cash flow hedges

Pension plan liability:

Unrealized holding gains/(losses) on pension plan liability

Reclassification adjustment for amortization of unrecognized losses realized in income

Other comprehensive income/(loss) on pension plan liability

SERP liability:

Unrealized holding gains on SERP liability

Reclassification adjustment for amortization of unrealized (losses)/gains realized in income

Other comprehensive income/(loss) on SERP liability

Other comprehensive income/(loss) before income tax

Income tax effect related to other comprehensive income/(loss)

Other comprehensive income/(loss), net of tax

Comprehensive income

See accompanying notes to the consolidated financial statements

First United Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands)

Three Months Ended

September 30,

Comprehensive Income

Other comprehensive income/(loss), net of tax and reclassification adjustments:

Other comprehensive (loss)/income, net of tax and reclassification adjustments:

Available for sale securities:

1 unchanged sentence

Reclassification adjustment for accretable yield realized in income

Other comprehensive income on investments with credit related impairment

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

Unrealized holding gains/(losses) on all other AFS investments

1 unchanged sentence

Held to Maturity Securities

Unrealized holding gains on HTM investments

Unrealized holding gains on securities transferred to held to maturity

Reclassification adjustment for amortization realized in income

3 unchanged sentences

Other comprehensive (loss)/income on cash flow hedges

Pension plan liability:

Unrealized holding gains/(losses) on pension plan liability

Pension plan assets:

Unrealized holding (losses)/gains on pension plan liability

Reclassification adjustment for amortization of unrecognized losses realized in income

Other comprehensive income/(loss) on pension plan liability

Other comprehensive (loss)/income on pension plan liability

SERP liability:

Unrealized holding gains on SERP liability

Reclassification adjustment for amortization of unrealized (losses)/gains realized in income

Other comprehensive income/(loss) on SERP liability

Other comprehensive income/(loss) before income tax

Income tax effect related to other comprehensive income/(loss)

Other comprehensive income/(loss), net of tax

Reclassification adjustment for amortization of unrealized losses realized in income

Other comprehensive income on SERP liability

Other comprehensive (loss)/income before income tax

Income tax effect related to other comprehensive (loss)/income

Other comprehensive (loss)/income, net of tax

Comprehensive income

6 unchanged sentences

Balance at January 1, 2025

Other comprehensive income

Stock based compensation

Common stock issued - 8,757 shares

Common stock dividend declared - $ 0.20 per share

Balance at March 31, 2024

Other comprehensive loss

1 unchanged sentence

Common stock issued - 7,538 shares

Common stock repurchased - 201,800 shares

Common stock dividend declared - $ 0.22 per share

Balance at June 30, 2024

Other comprehensive income

Stock based compensation

Common stock issued - 2,964 shares

Common stock dividend declared- $ 0.22 per share

Balance at September 30, 2024

See accompanying notes to the consolidated financial statements

First United Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(In thousands, except per share data)

Balance at March 31, 2025

Comprehensive

1 unchanged sentence

Balance at January 1, 2024

Adoption of ASC 326- Financial Instruments- Credit Losses

Other comprehensive income

3 unchanged sentences

Balance at March 31, 2024

Other comprehensive loss

Stock based compensation

Common stock issued - 18,416 shares

Common stock dividend declared - $ 0.20 per share

Balance at June 30, 2023

Other comprehensive loss

Stock based compensation

Common stock issued - 5,046 shares

Common stock repurchased - 1,298 shares

Common stock dividend declared- $ 0.20 per share

Balance at September 30, 2023

See accompanying notes to the consolidated financial statements

2 unchanged sentences

(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Operating activities

3 unchanged sentences

Gains on sales of other real estate owned

Write-downs of other real estate owned, net

Originations of loans held for sale

5 unchanged sentences

Earnings on bank owned life insurance

Amortization of deferred loan (fees)/costs, net

Amortization of deferred loan fees, net

Amortization of operating lease right of use asset

Increase in accrued interest receivable and other assets

Deferred tax expense/(benefit)

Operating lease liability

(Decrease)/increase in accrued interest payable and other liabilities

Decrease in accrued interest receivable and other assets

Deferred tax (benefit)/expense

Amortization of operating lease liability

Decrease in accrued interest payable and other liabilities

Net cash provided by operating activities

2 unchanged sentences

Proceeds from maturities/calls of investment securities - HTM

Purchases of investment securities - HTM

Purchases of investment securities - AFS

Purchases of equity securities with readily determinable fair market values

Proceeds from sales of other real estate owned

Net increase in restricted stock

Net increase in loans

Net (increase)/decrease in restricted stock

Net decrease/(increase) in loans

Purchases of premises and equipment

Net cash provided by/(used in) by investing activities

Net cash (used in)/provided by investing activities

Financing activities

Net (decrease)/increase in deposits

Net increase in deposits

Issuance of common stock

Cash dividends paid on common stock

Net increase/(decrease) in short-term borrowings

Stock repurchase

Proceeds from long-term borrowings

Net (decrease)/increase in short-term borrowings

Payments of long-term borrowings

Net cash (used in)/provided by financing activities

Net cash provided by financing activities

Increase in cash and cash equivalents

3 unchanged sentences

Interest paid

Non-cash investing activities:

Transfers from loans to other real estate owned

See accompanying notes to the consolidated financial statements

4 unchanged sentences

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.

Operating results for the nine- and three-month periods ended September 30, 2024 are not necessarily indicative of the results that may be expected for the full year or for any future interim period.

Operating results for the three-month period ended March 31, 2025 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, 2024.

1 unchanged sentence

In addition, these estimates and assumptions affect revenues and expenses in the financial statements and, as such, actual results could differ from those estimates.

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.

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.

3 unchanged sentences

As used in these notes, the terms “the Corporation” “we”, “us”, and “our” refer to First United Corporation and, unless the context clearly requires otherwise, its consolidated subsidiaries.

The Corporation has evaluated events and transactions occurring subsequent to the statement of financial condition date of September 30, 2024 and through the date these consolidated financial statements were issued, for items of potential recognition or disclosure.

Newly Adopted Pronouncements in 2024

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.

“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.

The Corporation had no financial instruments tied to LIBOR at September 30, 2024.

The implementation of ASU 2020-04 did not have a material impact on our financial statements.

The Corporation has evaluated events and transactions occurring subsequent to the statement of financial condition date of March 31, 2025 and through the date these consolidated financial statements were issued, for items of potential recognition or disclosure.

Note 2 – Accounting Statements Issued but Not Yet Adopted

In November 2023, FASB issued ASU No.

2023-07, “Segment Reporting (Topic 280):

Improvement to Reportable Segment Disclosures.” ASU 2023-07 expands segment disclosure requirements for public entities to require disclosure of significant segment expense and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within the fiscal years beginning after December 15, 2024.

Early adoption is permitted.

ASU 2023-07 is not expected to have a significant impact on our financial statements.

In December 2023, FASB issued ASU No.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” ASU 2023-09 requires public business entities to disclose in their rate reconciliation table additional categories of information about Federal, state, and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold.

ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by Federal, state, and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024.

ASU 2023-09 is not expected to have a significant impact on our financial statements.

In March 2024, FASB issued ASU No.

2024-01, “Compensation- Stock Compensation (Topic 718):

Scope Application of Profits Interest and Similar Awards.” ASU 2024-01 provides an illustrative example that includes four fact patterns to demonstrate how an entity should apply the scope guidance in paragraph 718-10-15-3 to determine whether a profits interest award should be accounted for in accordance with Topic 718.

ASU 2024-01 is effective for fiscal years beginning after December 15, 2024.

ASU 2024-01 is not expected to have a significant impact on our financial statements.

2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by Federal, state, and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things.

2023-09 became effective for annual periods beginning after December 15, 2024 and early adoption is permitted.

First United Corporation will adopt this ASU in its annual report for the period ending December 31, 2025 and does not believe that such adoption will have a significant impact on the Corporation’s financial statements.

In November 2024, FASB issued ASU No.

2024-03, “Income Statement- Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.” ASU No.

2024-03 requires disaggregated disclosure of income statement expenses for public business entities.

2024-03 requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense caption.

The prescribed categories include, among other things, employee compensation, depreciation, and intangible asset amortization.

Additionally, entities must disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses.

2024-03 is effective on a prospective basis for annual periods beginning

after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, though early adoption and retrospective application is permitted.

2024-03 is not expected to have a significant impact on our financial statements.

Note 3 – Earnings Per Common Share

1 unchanged sentence

Diluted earnings per share is derived by dividing net income available to common shareholders by the weighted-average number of shares outstanding, adjusted for the dilutive effect of outstanding common stock equivalents, such as restricted stock units (“RSUs”).

There were no anti-dilutive shares outstanding at September 30, 2024 or 2023.

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, 2024 and 2023:

Nine months ended September 30,

(in thousands, except for per share amount)

Basic Earnings Per Share:

Diluted Earnings Per Share:

Restricted stock units

Three months ended September 30,

There were no anti-dilutive shares outstanding at March 31, 2025 or 2024.

The following table sets forth the calculation of basic and diluted earnings per common share for the three-month periods ended March 31, 2025 and 2024:

Three months ended March 31,

(in thousands, except for per share amount)

3 unchanged sentences

Note 4 – Investments

The following tables show a comparison of amortized cost and fair values of investment securities at September 30, 2024 and December 31, 2023:

The following tables show a comparison of amortized cost and fair values of investment securities at March 31, 2025 and December 31, 2024:

(in thousands)

1 unchanged sentence

Estimated Fair Value

September 30, 2024

March 31, 2025

Available for Sale:

10 unchanged sentences

Allowance for Credit Losses

September 30, 2024

March 31, 2025

Held to Maturity:

30 unchanged sentences

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

For AFS debt securities in an unrealized loss position, the Corporation first assesses whether it intends to sell, or whether 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, then 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 any decline in fair value has resulted from credit losses or other factors.

For any AFS debt security 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 to its amortized cost basis.

If either criterion regarding intent or requirement to sell 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, then the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security.

present value of cash flows expected to be collected is less than the amortized cost basis, then a credit loss exists and an allowance for credit losses (“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 ACL are recorded as a provision for (or reversal of) credit losses.

Losses are charged against the ACL 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 AFS debt securities and report accrued interest separately in other assets in the Consolidated Balance Sheets.

AFS debt securities are placed on non-accrual 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 non-accrual 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 similar securities and calculates expected credit losses through an estimate based on a security’s credit rating, which is recognized as part of the ACL for HTM securities and is included in the balance of HTM securities held to maturity on the Consolidated Balance Sheets.

If the Corporation determines that a security indicates evidence of deteriorated credit quality, then the security is individually evaluated and a discounted cash flow analysis is performed and compared to the amortized cost basis.

The Corporation recorded ACL of approximately $ 59,000 as of September 30, 2024 and $ 45,000 as of December 31, 2023, both related to one non-rated municipal bond in its HTM security portfolio.

The following tables show the Corporation’s investment securities with gross unrealized and unrecognized losses and fair values at September 30, 2024 and December 31, 2023, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are 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 allowance for credit losses (“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 the ACL is recognized in other comprehensive income (“OCI”).

The Corporation adopted ASC Topic 326 using the prospective transition approach for debt securities for which other than temporary impairment (“OTTI”) had been recognized prior to January 1, 2023, such as AFS collateralized debt obligations.

As a result, the amortized cost basis for such debt securities remained the same before and after the effective date of ASC Topic 326.

The effective interest rate on these debt securities was not changed.

Amounts previously written off are recognized in OCI as of January 1, 2023 relating to improvements in cash flows expected to be collected are accreted into income over the remaining life of the asset.

Recoveries of amounts previously written off relating to improvements in cash flows after January 1, 2023 are recorded in earnings when received.

The ACL on HTM securities is a contra-asset valuation account, calculated in accordance with ASC Topic 326.

Management measures expected credit losses on HTM debt securities on a collective basis by major security type.

Management has elected not to measure an ACL for accrued interest on securities.

The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

Management classifies the HTM portfolio into the following major security types:

(i) securities issued or guaranteed by U.S.

government agencies (including U.S.

treasuries, agency bonds, and U.S.

guaranteed residential mortgage-backed securities, commercial mortgage-backed securities, and collateralized mortgage obligations);

(ii) rated municipal securities, and (iii) unrated municipal securities.

With regard to securities issued by U.S.

government agencies and corporations, it is expected that the securities will not settle at prices less than the amortized cost bases of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S.

Accordingly, no ACL has been recorded on these securities.

With regard to securities issued by states and political subdivisions, management considers (x) issuer bond ratings, (y) historical loss rates for given bond ratings, and (z) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities.

Non-rated securities are evaluated internally based on financial performance and expected future cash flows.

As of both March 31, 2025 and December 31, 2024, the Corporation recorded ACL of approximately $ 59,000 related to one municipal bond in its HTM security portfolio.

The following tables show the Corporation’s investment securities with gross unrealized and unrecognized losses and fair values at March 31, 2025 and December 31, 2024, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:

Less than 12 months

1 unchanged sentence

(in thousands)

September 30, 2024

March 31, 2025

Available for Sale:

10 unchanged sentences

(in thousands)

September 30, 2024

March 31, 2025

Held to Maturity:

29 unchanged sentences

Total held to maturity

The amortized cost and estimated fair value of securities by contractual maturity at September 30, 2024 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, 2024

The amortized cost and estimated fair value of securities by contractual maturities at March 31, 2025 are shown in the following table.

Expected maturities for mortgage-backed securities and collateralized mortgage obligations will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

March 31, 2025

(in thousands)

1 unchanged sentence

Available for Sale:

Due in one year or less

Due after one year through five years

13 unchanged sentences

Total held to maturity

At September 30, 2024 and December 31, 2023, AFS investment securities with a fair value of $ 76.5 and $ 50.5 million, respectively, and HTM investment securities with a book value of $ 162.8 and $ 141.8 million, respectively, were pledged as permitted or required to secure public deposits, for securities sold under agreements to repurchase as required or permitted by law and as collateral for borrowing capacity.

At March 31, 2025 and December 31, 2024, AFS investment securities with an aggregate fair value of $ 79.3 million and $ 71.6 million, respectively, and HTM investment securities with an aggregate book value of $ 167.4 million and $ 161.2 million, respectively, were pledged as permitted or required to secure public deposits, for securities sold under agreements to repurchase as required or permitted by law and as collateral for borrowing capacity.

Note 5 – Loans and Related Allowance for Credit Losses

The following table summarizes the primary segments of the loan portfolio at September 30, 2024 and December 31, 2023:

The following table summarizes the primary segments of the loan portfolio at March 31, 2025 and December 31, 2024:

(in thousands)

September 30, 2024

March 31, 2025

Individually evaluated for impairment

3 unchanged sentences

Collectively evaluated for impairment

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans at September 30, 2024 and December 31, 2023:

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans at March 31, 2025 and December 31, 2024:

(in thousands)

September 30, 2024

March 31, 2025

Commercial real estate:

19 unchanged sentences

Residential mortgage - home equity

Non-accrual loans that have been subject to partial charge-offs totaled $ 1.2 million at September 30, 2024 and $ 0.1 million at December 31, 2023.

Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $ 1.6 million at September 30, 2024 and $ 1.8 million at December 31, 2023 .

As a percentage of the loan portfolio, accruing loans past due 30 days or more was 0.37 % at September 30, 2024 compared to 0.24 % at December 31, 2023.

The Corporation maintains an ACL at a level that management believes will 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.

Non-accrual loans that have been subject to partial charge-offs totaled $ 0.7 million at March 31, 2025 and December 31, 2024.

There were no loans secured by 1-4 family residential real estate properties in the process of foreclosure at March 31, 2025.

Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $ 1.6 million at December 31, 2024.

Accruing loans past due 30 days or more constituted 0.42 % of the loan portfolio at March 31, 2025 compared to 0.32 % at December 31, 2024.

A loan that is considered a non-accrual or modified loan may be subject to the individually evaluated loan analysis if the commitment is $ 0.1 million or greater;

otherwise, the modified 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 modified loan.

For a discussion with respect to reserve calculations regarding individually evaluated loans, refer to the “Nonrecurring Loans” section in Note 6, Fair Value of Financial Instruments.

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:

4 unchanged sentences

and (v) consumer.

The Corporation’s loan portfolio is segmented by homogeneous loan types that behave similarly to economic cycles.

The Corporation’s loan portfolio is

segmented by homogeneous loan types that behave similarly to economic cycles.

The following is a discussion of the key risks by portfolio segment that management assesses in preparing the ACL.

4 unchanged sentences

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.

The risk of these loans is generally confined to the construction period.

If there are problems during such period, then the project might not be completed and, as such, might not provide sufficient cash flow on its own to service the debt or have sufficient value in a liquidation to cover the outstanding principal.

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.

7 unchanged sentences

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 primary repayment source for local municipalities includes 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 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 junior liens such as home equity lines of credit and 1-4 family residential mortgages.

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.

1 unchanged sentence

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.

Consumer- loans are made to individuals and may be either secured by assets other than real estate 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 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, 2024 and December 31, 2023, segregated by the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment:

The following table summarizes the primary segments of the ACL at March 31, 2025 and December 31, 2024, segregated by the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment:

(in thousands)

September 30, 2024

March 31, 2025

Individually evaluated

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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 tables present the amortized cost basis of collateral-dependent individually evaluated loans as of September 30, 2024 and December 31, 2023.

September 30, 2024

The following tables present the amortized cost basis of collateral-dependent individually evaluated loans as of March 31, 2025 and December 31, 2024.

March 31, 2025

(in thousands)

1 unchanged sentence

Non-Accrual Loans with No Allowance

Commercial real estate

Commercial and industrial

6 unchanged sentences

Residential mortgage

The following tables present the activity in the ACL for the nine- and three-month periods ended September 30, 2024 and 2023:

The following tables present the activity in the ACL for the three-month periods ended March 31, 2025 and 2024:

Nine months ended (in thousands)

3 unchanged sentences

Credit loss (credit)/expense

ACL balance at September 30, 2024

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

Impact of adopting ASC 326

ACL balance at March 31, 2025

Beginning balance at January 1, 2024

Loan charge-offs

1 unchanged sentence

Credit loss (credit)/expense

ACL balance at September 30, 2023

Three months ended (in thousands)

ACL balance at July 1, 2024

Loan charge-offs

Recoveries collected

Credit loss expense/(credit)

ACL balance at September 30, 2024

ACL balance at July 1, 2023

Loan charge-offs

Recoveries collected

Credit loss expense/(credit)

ACL balance at September 30, 2023

ACL balance at March 31, 2024

The Corporation’s methodology for estimating the ACL includes:

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Additionally, management may adjust the economic forecast if it is incompatible with known market conditions based on management’s experience and perspective.

The Corporation has elected to forecast the first four quarters of the credit loss estimate and revert on a straight-line basis.

Based on the final values in the forecast and the uncertainty of a post-pandemic recovery, management has elected to revert over eight quarters.

By reverting these modeling inputs to their historical mean and considering loan/borrower specific attributes, our models are intended to yield a measurement of expected credit losses that reflects our average historical loss rates for periods subsequent to the reversion period.

The ACL is based on estimates, and actual losses may vary from current estimates.

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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

Assets so classified have a well-defined weakness, or weaknesses that jeopardize the liquidation of the debt.

Such assets are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

10 unchanged sentences

Total Portfolio Loans

September 30, 2024

March 31, 2025

Commercial real estate:

85 unchanged sentences

Total Portfolio Loans

September 30, 2024

March 31, 2025

Commercial real estate:

61 unchanged sentences

Loan Modifications for Borrowers Experiencing Financial Difficulty

The Corporation evaluates all loan modifications according to the accounting guidance in ASU 2022-02 to determine if the modification results in a new loan or a continuation of the existing loan.

The Corporation evaluates all loan modifications according to the accounting guidance in ASU No.

2022-02 to determine if the modification results in a new loan or a continuation of the existing loan.

Loan modifications to borrowers experiencing financial difficulties 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, or combinations of the listed

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The allowance may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan.

The following tables present the amortized cost basis as of September 30, 2024 and the financial effect of loans modified to borrowers experiencing financial difficulty during the nine- and three-month periods ended September 30, 2024:

(in thousands)

Term Extension

Percentage of Total Loan Type

Weighted Average Term and Principal Payment Extension

Nine months ended September 30, 2024

Owner-occupied commercial real estate

Commercial and industrial

The following table present the amortized cost basis as of March 31, 2025 and the financial effect of loans modified to borrowers experiencing financial difficulty during the three-month period ended March 31, 2025:

(in thousands)

2 unchanged sentences

Weighted Average Term and Principal Payment Extension

Three months ended September 30, 2024

Three months ended March 31, 2025

Commercial and industrial

There were no loan modifications made to borrowers experiencing financial difficulty during the nine- or three-month periods ended September 30, 2023.

There were no loan modifications made to borrowers experiencing financial difficulty during the three-month period ended March 31, 2024.

The Corporation monitors loan payments on performing and non-performing loans on an ongoing basis to determine if a loan is considered to have a payment default.

The loans that were modified in the nine- and three-month periods ended September 30, 2024 have made all contractual payments.

The borrowers for whom loan modifications were made in the three-month period ended March 31, 2025 have made all contractual payments.

If a modified loan with an outstanding balance of $ 0.1 million or greater subsequently defaults and goes on non-accrual status, then the Corporation individually evaluates the loan when performing its CECL estimate to calculate the ACL.

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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:

The fair value of an asset or liability is the price to sell an asset or to transfer a liability in an orderly transaction between willing market participants as of the measurement date.

In estimating fair value, the Corporation utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach.

Such valuation techniques are consistently applied.

Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability.

ASU Topic 820, “Fair Value Measurements and Disclosures,” establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

The fair value hierarchy is as follows:

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets and liabilities.

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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 evaluations and pricing services, and other valuation matrices.

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.

Prices or valuation techniques that require inputs that are both significant to the valuation assumptions and not readily observable in the market (i.e.

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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, 2024, 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 collateralized debt obligation (“CDO”) portfolio, which consists of pooled trust preferred securities issued by banks, thrifts, and insurance companies, are classified as Level 3 within the valuation hierarchy.

The CDO fair values are determined by a third party using a discounted cash flow model.

The fair value of investments available-for-sale is determined using a market approach.

At March 31, 2025 and December 31, 2024, the U.S.

Government agencies and treasuries, residential and commercial mortgage-backed securities, and municipal bonds segments 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 we have historically transacted both purchases and sales of investment securities.

Equity investments not held for trading with readily determinable fair values consisted of money market mutual funds as of March 31, 2025 and are classified as Level 1 within the valuation hierarchy.

Their fair values were determined based upon daily published net asset values with which investors can freely redeem from the fund.

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.

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.

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 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.

Individually evaluated loans – Loans included in the table below are those that are considered individually evaluated with a specific allocation or with partial charge-offs, based upon the guidance of the loan impairment subsection of the Receivables Topic, ASC Section 310-10-35, under which the Corporation has measured impairment generally based on the fair value of the loan’s collateral.

Fair value consists of the loan balance less its valuation allowance and is generally determined based on independent third-party appraisals of the collateral or discounted cash flows based upon the expected proceeds.

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

Other real estate owned – Other real estate owned included in the table below are considered impaired with specific write-downs.

Equity investments- Equity investments included in the table below are considered are recorded with a write-down to fair value recorded in other operating expenses.

Fair value of the equity investment was based on an independent third-party valuation

report where the value was determined based on the revenue multiples of like kind information technology businesses.

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

Other real estate owned – OREO included in the table below are recorded with specific write-downs.

Fair value of other real estate owned was based on independent third-party appraisals of the properties.

1 unchanged sentence

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

For assets measured at fair value on a recurring and non-recurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2024 and December 31, 2023 were as follows:

For assets measured at fair value on a recurring and non-recurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2025 and December 31, 2024 were as follows:

Fair Value Measurements

at September 30, 2024 Using

at March 31, 2025 Using

Active Markets

9 unchanged sentences

Collateralized debt obligations

Equity investments not held for trading with readily determinable fair values

Financial derivatives

Non-recurring:

Individually evaluated loans, net

Equity investment

Other real estate owned

Fair Value Measurements

17 unchanged sentences

Other real estate owned

Individually evaluated loans had a net carrying amount of $ 7.4 million and $ 3.0 million with no valuation allowance at September 30, 2024 or December 31, 2023, respectively.

Individually evaluated loans recorded at fair value at September 30, 2024 totalled $ 1.1 million which was inclusive of $ 0.5 million in partial charge-offs.

No individually evaluated loans were recorded at fair value at December 31, 2023.

There were no transfers of assets between any of the fair value hierarchy for the nine-month periods ended September 30, 2024 or 2023.

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of September 30, 2024 and December 31, 2023, the significant unobservable inputs used in the fair value measurements were as follows:

Individually evaluated loans, with no valuation allowance, had a net carrying amount of $ 3.4 million and $ 4.4 million at March 31, 2025 and December 31, 2024, respectively.

Individually evaluated loans recorded at fair value at both March 31, 2025 and December 31, 2024 totaled $ 0.6 million, which was inclusive of $ 0.2 million in partial charge-offs.

There were no transfers of assets between any of the fair value hierarchy for the three-month periods ended March 31, 2025 or 2024.

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of March 31, 2025 and December 31, 2024, the significant unobservable inputs used in the fair value measurements were as follows:

(in thousands)

Fair Value at

September 30,

Investment securities – available for sale -CDO

1 unchanged sentence

Discount Margin

Range of high 300 to low 500

Range of low 300 to high 400

Non-recurring:

Individually evaluated loans, net

Market Comparable Properties

Marketability Discount

Equity investment

1 unchanged sentence

Revenue Multiples

Other real estate owned

Market Comparable Properties

Marketability Discount

5.0 % to 15.0 % (weighted avg 5.9 %)

(in thousands)

3 unchanged sentences

Discount Margin

Range of low to mid 500 and low to mid 600

Range of low to mid 300 and low 500

Non-recurring:

Individually Evaluated Loans

Market Comparable Properties

Marketability Discount

Equity investment

4 unchanged sentences

Marketability Discount

5.0 % to 15.0 % (weighted avg 5.9 %)

5.0 % to 15.0 %

(weighted avg 5.9 %)

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

The following tables show a reconciliation of the beginning and ending balances for fair valued assets measured on a recurring basis using Level 3 significant unobservable inputs for the nine- and three-month periods ended September 30, 2024 and 2023:

Fair Value Measurements

4 unchanged sentences

Beginning balance January 1, 2025

Total gains realized/unrealized:

Total losses realized/unrealized:

Included in other comprehensive income

Ending balance September 30, 2024

Ending balance March 31, 2025

Fair Value Measurements

4 unchanged sentences

Beginning balance January 1, 2024

Total losses realized/unrealized:

Included in other comprehensive loss

Ending balance September 30, 2023

Fair Value Measurements

Using Significant Unobservable Inputs

(in thousands)

Investment Securities

Available for Sale

Beginning balance July 1, 2024

Total gains realized/unrealized:

Included in other comprehensive income

Ending balance September 30, 2024

Fair Value Measurements

Using Significant Unobservable Inputs

(in thousands)

Investment Securities

Available for Sale

Beginning balance July 1, 2023

Total gains realized/unrealized:

Included in other comprehensive loss

Ending balance September 30, 2023

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, 2024 or 2023.

Ending balance March 31, 2024

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 three-month periods ended March 31, 2025 or 2024.

The disclosed fair values may vary significantly between institutions based on the estimates and assumptions used in the various valuation methodologies.

6 unchanged sentences

The actual carrying amounts and estimated fair values of the Corporation’s financial instruments that are included in the Consolidated Statement of Financial Condition are as follows:

September 30, 2024

March 31, 2025

Fair Value Measurements

7 unchanged sentences

Investment securities - HTM

Equity securities not held for trading with readily determinable fair values

Restricted bank stock

27 unchanged sentences

Note 7 – Accumulated Other Comprehensive Loss

The following table presents the changes in each component of accumulated other comprehensive loss for the three-month periods ended September 30, 2024, June 30, 2024, March 31, 2024, September 30, 2023, June 30, 2023 and March 31,2023:

The following table presents the changes in each component of accumulated other comprehensive loss for the three-month periods ended March 31, 2025 and 2024:

(in thousands)

4 unchanged sentences

Balance - March 31, 2025

Other comprehensive (loss)/income before reclassifications

Amounts reclassified from accumulated other comprehensive income

Balance - June 30, 2024

Other comprehensive income/(loss)before reclassifications

Amounts reclassified from accumulated other comprehensive income

Balance - September 30, 2024

(in thousands)

Balance - January 1, 2024

Other comprehensive (loss)/income before reclassifications

Other comprehensive income/(loss) before reclassifications

Amounts reclassified from accumulated other comprehensive income

Balance - March 31, 2024

Other comprehensive income/(loss) before reclassifications

Amounts reclassified from accumulated other comprehensive loss

Balance - June 30, 2023

Other comprehensive

income/(loss) before

reclassifications

Amounts reclassified from

accumulated other

comprehensive loss

Balance - September 30, 2023

The following tables present the components of other comprehensive income/(loss) for the nine- and three-month periods ended September 30, 2024 and 2023:

Components of Other Comprehensive Income

The following tables present the components of other comprehensive (loss)/income for the three-month periods ended March 31, 2025 and 2024:

Components of Other Comprehensive Loss

(in thousands)

For the nine months ended September 30, 2024

For the three months ended March 31, 2025

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

11 unchanged sentences

Pension Plan:

Unrealized net actuarial gains

amortization of unrecognized losses

Net pension plan liability adjustment

Unrealized net actuarial gain

amortization of unrecognized losses

Net SERP liability adjustment

Other comprehensive income

Components of Other Comprehensive Loss

(in thousands)

For the nine months ended September 30, 2023

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

Unrealized holding losses

accretable yield recognized in income

Net unrealized losses on investments with credit related impairment

Available for sale securities – all other:

Unrealized holding losses

Held to maturity securities:

Unrealized holding gains on securities transferred to held to maturity

amortization recognized in income

Net unrealized gains on HTM securities

Cash flow hedges:

Unrealized holding gains

Pension Plan:

Unrealized net actuarial losses

amortization of unrecognized losses

Net pension plan liability adjustment

Unrealized net actuarial gains

amortization of unrecognized gains

Net SERP liability adjustment

Net pension plan asset adjustment

Other comprehensive loss

1 unchanged sentence

(in thousands)

For the three months ended September 30, 2024

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

Unrealized holding gains

accretable yield recognized in income

Net unrealized losses on investments with credit related impairment

Available for sale securities – all other:

Unrealized holding gains

Held to maturity securities:

Unrealized holding gains

amortization recognized in income

Net unrealized gains on HTM securities

Cash flow hedges:

Unrealized holding losses

Pension Plan:

Unrealized net actuarial gains

amortization of unrecognized loss

Net pension plan liability adjustment

Unrealized net actuarial loss

amortization of unrecognized losses

Net SERP liability adjustment

Other comprehensive income

Components of Other Comprehensive Loss

(in thousands)

For the three months ended September 30, 2023

For the three months ended March 31, 2024

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

1 unchanged sentence

accretable yield recognized in income

unrealized losses on investments with credit related impairment

Net unrealized gains on investments with credit related impairment

Available for sale securities – all other:

1 unchanged sentence

Held to maturity securities:

Unrealized holding gains

Unrealized holding gains on securities transferred to held to maturity

amortization recognized in income

3 unchanged sentences

Pension Plan:

Unrealized net actuarial loss

amortization of unrecognized loss

Net pension plan liability adjustment

Unrealized net actuarial loss

Unrealized net actuarial gains

amortization of unrecognized losses

Net pension plan asset adjustment

Unrealized net actuarial gains

amortization of unrecognized gains

Net SERP liability adjustment

Other comprehensive loss

The following table presents the details of amounts reclassified from accumulated other comprehensive income/(loss) for the nine- and three-month periods ended September 30, 2024 and 2023:

Other comprehensive income

The following table presents the details of amounts reclassified from accumulated other comprehensive (loss)/income for the three-month periods ended March 31, 2025 and 2024:

Amounts Reclassified from

Nine Months Ended

Accumulated Other Comprehensive Income/(Loss)

September 30,

Accumulated Other

Details of Accumulated Other Comprehensive Loss

Comprehensive Loss

Three Months Ended

Affected Line Item in the Statement

(in thousands)

March 31, 2025

Where Net Income is Presented

6 unchanged sentences

Provision for income tax expense

Net pension plan liability adjustment:

Net pension plan asset adjustment:

Amortization of unrecognized losses

1 unchanged sentence

Provision for income tax expense

Net SERP liability adjustment:

Amortization of unrecognized (losses)/gains

Other Expense

Provision/(credit) for income tax expense

Total reclassifications for the period

Amounts Reclassified from

Three Months Ended

Accumulated Other Comprehensive Income/(Loss)

September 30,

Accumulated Other

Details of Accumulated Other Comprehensive Income

Comprehensive Income

Three Months Ended March 31,

Affected Line Item in the Statement

(in thousands)

March 31, 2024

Where Net Income is Presented

6 unchanged sentences

Provision for income tax expense

Net pension plan liability adjustment:

Net pension plan asset adjustment:

Amortization of unrecognized losses

2 unchanged sentences

Net SERP liability adjustment:

Amortization of unrecognized (losses)/gains

Amortization of unrecognized gains

Other Expense

8 unchanged sentences

In May 2024, a total of 14,325 fully vested shares of common stock were issued to directors, which had a grant date fair value of $ 21.94 per share.

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 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.

In October 2023, a total of 852 fully vested shares of common stock were issued to a new director which had a grant date fair value of $ 16.26 per share.

Director stock compensation was $ 213,536 and $ 194,001 for the nine-month periods ended September 30, 2024 and 2023, respectively.

Director stock compensation expense was $ 78,573 and $ 56,000 for the three-month periods ended September 30, 2024 and 2023, respectively.

Employee stock compensation expense was $ 8,240 and $ 12,092 for the nine-month periods ended September 30, 2024 and 2023, respectively.

Employee stock compensation expense was $ 2,483 and $ 4,892 for the three-month periods ended September 30, 2024 and 2023, respectively.

Director stock compensation expense was $ 78,573 and $ 61,937 for the three-month periods ended March 31, 2025 and 2024, respectively.

Employee stock compensation expense was $ 15,567 and $ 5,058 for the three-month periods ended March 31, 2025 and 2024, respectively.

Restricted Stock Units

9 unchanged sentences

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 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.

In May 2021, the Corporation granted performance-vesting RSUs relating to 7,389 shares (target) and time-vesting RSUs relating to 3,693 shares, 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 was the three-year period ended December 31, 2023.

On March 9, 2024, it was determined that 7,389 performance-vesting RSUs failed to vest.

The time-vesting RSUs will vest ratably over a three year period that began on May 5, 2022.

On May 5, 2022, 1,230 shares of the 3,693 time-vesting RSUs were issued to participants.

On May 5, 2023, 1,230 additional shares of the 3,693 time-vesting RSUs were issued to participants.

On May 5, 2024, the remaining 1,233 shares of the 3,693 time-vesting RSUs were issued to participants.

Stock compensation expense was $ 7,365 and $ 49,714 for the nine-month periods ended September 30, 2024 and 2023, respectively.

Stock compensation expense was $ 0 and $ 16,571 for the three-month periods ended September 30, 2024 and 2023, respectively.

All compensation expense related to the 2021 LTIP plans was recognized as of September 30, 2024.

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 time-vesting RSUs vested ratably over a three-year period that began on May 5, 2021.

On May 5, 2022, 1,230 shares underlying the time-vesting RSUs were issued to participants.

On May 5, 2023, 1,230 additional shares underlying the time-vesting RSUs were issued to participants.

On May 5, 2024, the remaining 1,233 shares underlying the time-vesting RSUs were issued to participants.

Stock compensation expense was $ 16,571 for the three-month period ended March 31, 2024.

All compensation expense related to these RSUs was recognized as of June 30, 2024.

In March 2022, the Corporation granted performance-vesting RSUs relating to 8,096 shares (target) and time-vesting RSUs relating to 6,238 shares, 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 that began on March 9, 2022.

On March 9, 2023, 2,079 shares of the 6,238 time-vesting RSUs were issued to participants.

On March 9, 2024, 2,079 additional shares of the 6,238 time-vesting RSUs were issued to participants.

In the third quarter of 2024, it was projected that the performance metric will fail to vest;

and, the stock compensation expense was adjusted accordingly.

Net stock compensation (credit)/expense was ($ 69,228 ) and $ 78,436 for the nine-month periods ended September 30, 2024 and 2023, respectively.

Net stock compensation (credit)/expense was ($ 121,518 ) and $ 26,145 for the three-month periods ended September 30, 2024 and 2023, respectively.

Unrecognized compensation expense as of September 30, 2024 related to unvested RSUs was $ 22,758 .

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.

On March 9, 2023, 2,079 shares underlying the time-vesting RSUs were issued to participants.

On March 9, 2024, 2,079 additional shares underlying the time-vesting RSUs were issued to participants.

On March 9, 2025, the remaining 2,080 shares underlying the RSUs were issued to participants.

In the third quarter of 2024, it was projected that the performance-vesting RSUs would not be satisfied, and the stock compensation expense was adjusted accordingly.

Stock compensation expense was $ 11,379 and $ 26,145 for each of the three-month periods ended March 31, 2025 and 2024, respectively.

All compensation expense related to these RSUs were recognized as of March 31, 2025.

In March 2023, the Corporation granted performance-vesting RSUs relating to 10,214 shares (target) and time-vesting RSUs relating to 7,920 shares, 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 that began on March 15, 2023.

On March 15, 2024, 2,639 shares of the 7,920 time-vesting RSUs were issued to participants.

Stock compensation expense was $ 82,755 and $ 55,170 for the nine-month periods ended September 30, 2024 and 2023, respectively.

Stock compensation expense was $ 27,585 for both of the three-month periods ended September 30, 2024 and 2023.

Unrecognized compensation expense as of September 30, 2024 related to unvested RSUs was $ 165,509 .

In May 2024, RSUs relating to 8,593 performance vesting shares and 6,662 time vesting shares (target level) for plan year 2024 were granted, which had a grant date fair market value of $ 22.26 per share of common stock underlying each RSU.

On March 15, 2024, 2,639 shares underlying the time-vesting RSUs were issued to participants.

On March 15, 2025, 2,639 shares underlying the time-vesting RSUs were issued to participants.

Stock compensation expense was $ 27,585 for both of the three-month periods ended March 31, 2025 and 2024.

Unrecognized compensation expense related to these RSUs that have not vested was $ 110,340 as of March 31, 2025.

In May 2024, the Corporation granted performance-vesting RSUs relating to 8,593 shares (target) and time-vesting RSUs relating to 6,662 shares, which had a grant date fair market value of $ 22.26 per share of common stock underlying each RSU.

The performance period for the performance-vesting RSUs is the three-year period ending December 31, 2026.

The time-vesting RSUs will vest ratably over a three-year period that began on May 20, 2024.

Stock compensation expense was $ 37,752 for the nine-month period ended September 30, 2024.

Stock compensation expense was $ 28,314 for the three-month period ended September 30, 2024.

Unrecognized compensation expense as of September 30, 2024 related to unvested RSUs was $ 302,016 .

Stock compensation expense was $ 28,314 for the three-month

period ended March 31, 2025.

Unrecognized compensation expense related to these RSUs that have not vested was $ 245,388 as of March 31, 2025.

In February 2025, the Corporation granted performance-vesting RSUs relating to 6,006 shares (target) and time-vesting RSUs relating to 4,797 shares, which had a grant date fair market value of $ 37.59 per share of common stock underlying each RSU.

The performance period for the performance-vesting RSUs is the three-year period ending December 31, 2027.

The time-vesting RSUs will vest ratably over a three-year period beginning on February 25, 2025.

Stock compensation expense was $ 11,287 for the three-month period ended March 31, 2025.

Unrecognized compensation expense related to these RSUs that have not vested was $ 395,036 as of March 31, 2025.

Note 9– Derivative Financial Instruments

3 unchanged sentences

In March 2016, the Corporation entered into four interest rate swap contracts totaling $ 30.0 million notional amount, hedging future cash flows associated with floating rate trust preferred debt.

As of September 30, 2024, $ 15.0 million notional amount remains.

As of March 31, 2025, $ 15.0 million notional amount remains.

The interest rate swap creates an effective fixed interest rate of 4.6550 % 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 $ 0.4 million and $ 0.8 million at September 30, 2024 and December 31, 2023, respectively.

For the nine- and three-month periods ended September 30, 2024, the Corporation recorded decreases in the value of the derivatives of $ 319,000 and $ 323,000 , respectively, and the related deferred tax benefits of $ 84,000 and $ 85,000 , respectively, in net accumulated other comprehensive income to reflect the effective portion of cash flow hedges.

This compares to an increases of $ 30,000 and $ 14,000 , respectively, and related deferred taxes of $ 7,000 and $ 3,000 , respectively, for the nine-and three-months ended September 30, 2023.

ASC Subtopic 815-30 requires the net accumulated other comprehensive income/(loss) to be reclassified to earnings if the hedge becomes ineffective or is terminated.

There was no hedge ineffectiveness recorded for any of the nine-month periods or three-month periods ended September 30, 2024 or 2023.

The fair value of the interest rate swap contracts was $ 0.4 million and $ 0.5 million at March 31, 2025 and December 31, 2024, respectively.

For the three-month period ended March 31, 2025, a $ 108,000 decrease in the aggregate value of the derivatives and $ 23,000 in related deferred tax benefits was recorded in net accumulated other comprehensive income to reflect the effective portion of cash flow hedges.

This compares to a $ 73,000 increase in value and related deferred taxes of $ 19,000 for the three-months ended March 31, 2024.

ASC Subtopic 815-30 requires the net accumulated other comprehensive (loss)/income to be reclassified to earnings if the hedge becomes ineffective or is terminated.

There was no hedge ineffectiveness recorded for any of the three-month periods ended March 31, 2025 or 2024.

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, 2024.

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, 2024 and 2023.

The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the three-month periods ended March 31, 2025 and 2024.

Derivative in Cash Flow Hedging Relationships

1 unchanged sentence

(loss) recognized in

Amount of gain or

Amount of (loss) or

Amount of gain or

income or derivative

(loss) recognized in

gain recognized in

(loss) reclassified from

8 unchanged sentences

Interest rate contracts:

Nine months ended:

September 30, 2024

September 30, 2023

Three months ended:

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

(a) Reported as interest expense

1 unchanged sentence

Note 10 – Regulatory Capital Requirements

The following table presents the Bank’s capital ratios as of September 30, 2024 and December 31, 2023.

September 30,

The following table presents the Bank’s capital ratios as of March 31, 2025 and December 31, 2024.

Total Capital (to risk-weighted assets)

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Tier 1 Capital (to average assets)

As of September 30, 2024 and December 31, 2023, the Bank was considered “well capitalized” under the regulatory framework for prompt corrective action.

As of March 31, 2025 and December 31, 2024, the Bank was considered “well capitalized” under the regulatory framework for prompt corrective action.

Note 11 – Deposits

The following table summarizes deposits at September 30, 2024 and December 31, 2023.

The following table summarizes deposits at March 31, 2025 and December 31, 2024.

(in thousands)

September 30, 2024

March 31, 2025

December 31, 2024

8 unchanged sentences

Note 12 – Borrowed Funds

The following is a summary of borrowings at September 30, 2024 and December 31, 2023:

The following is a summary of borrowings at March 31, 2025 and December 31, 2024:

(in thousands)

September 30,

Short-term borrowings:

5 unchanged sentences

Approximate weighted average rate during the period

Overnight borrowings, weighted average interest rate of 5.00 % at September 30, 2024

Overnight borrowings, weighted average interest rate of 4.50 % at December 31, 2024

Long-term borrowings:

FHLB advances, bearing fixed interest rate ranging from 3.84 % to 4.04 % at September 30, 2024 and rates ranging from 4.53 % to 4.69 % at December 31, 2023.

Junior subordinated debt, bearing variable interest rate of 7.95 % at September 30, 2024 and 8.39 % at December 31, 2023

FHLB advances, bearing fixed interest rate ranging from 3.84 % to 4.04 % at March 31, 2025 and December 31, 2024.

Junior subordinated debt, bearing variable interest rate of 7.31 % at March 31, 2025 and 7.36 % at December 31, 2024

Total borrowings outstanding

Short-term borrowings increased by $ 4.8 million when compared to December 31, 2023, which were comprised of $ 29.0 million in overnight borrowings from the Federal Reserve offset by a shift of approximately $ 22.0 million in overnight investment sweep balances into FDIC insured accounts due to management’s strategy to release pledging of investment securities for municipalities to provide additional liquidity.

Overnight borrowings outstanding at September 30, 2024 are secured by AFS and HTM investment securities.

At September 30, 2024, the repurchase agreements were secured by $ 32.5 million in investment securities issued by government related agencies.

Short-term borrowings decreased by $ 45.1 million as a result of the purchase of $ 50.0 million in brokered CDs to fully repay the $ 50.0 million in overnight borrowings outstanding at December 31, 2024.

This decrease was partially offset by increases in balances of the overnight investment sweep product.

At March 31, 2025, the repurchase agreements were secured by $ 28.0 million in investment securities issued by government related agencies.

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

Long-term borrowings increased by $ 10.0 million when compared to December 31, 2023.

Maturities of Federal Home Loan Bank (“FHLB”) advances of $ 40.0 million in March and $ 40.0 million in September were fully repaid.

During the third quarter and after the Federal Reserve announced that it would reduce rates by 50 basis points, the Bank borrowed $ 90.0 million in three new FHLB advances with maturities of 12 - and 18-months and a weighted average rate of 3.89 %.

All outstanding FHLB advances at September 30, 2024 and December 31, 2023 are secured by certain eligible residential real estate and commercial real estate loans as permitted by FHLB.

The following table presents contractual maturities of long-term borrowings outstanding at September 30, 2024 and December 31 2023:

September 30, 2024

The following table presents contractual maturities of long-term borrowings outstanding at March 31, 2025 and December 31 2024:

March 31, 2025

December 31, 2024

4 unchanged sentences

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.

The Corporation is managed under an organizational structure that conducts business in two primary operating segments;

(i) Community Banking and (ii) Wealth Management.

The Corporation is primarily managed based on the line of business structure.

In that regard, the Corporation provides the same lines of business, which have the same product and service offerings, have similar types and classes of customers and utilize similar service delivery methods across our entire geographic footprint.

Pricing guidelines for products and services are across all regions.

Community Banking and Trust and Investment Services are delineated by the products and services that each segment offers.

Business activity for the operating segments are as follows:

3 unchanged sentences

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-month periods ended September 30, 2024 and 2023.

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, 2024 and 2023 and $ 52,000 for both of the three-month periods ended September 30, 2024 and 2023.

Information for the operating segments for the nine- and three-month periods ended September 30, 2024 and 2023 are presented in the following tables:

Nine Months Ended

September 30,

Expenses include salaries and employee benefits, occupancy, data processing, FDIC premiums, marketing, equipment, and other expenses.

Wealth Management :

The Wealth Management 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, brokerage commissions, and management fees that are derived from Assets Under Management.

Expenses include personnel, occupancy, data processing, marketing, equipment, and other expenses.

The accounting policies of each reportable segment are the same as those of our consolidated entity except that expenses for consolidated back-office operations and general overhead-type expenses such as executive administration, accounting, information technology and human resources are recorded in the Community Banking segment and reimbursed by the Wealth Management segment through a monthly management fee based on estimated uses of those services.

An internal team of the Corporation’s executive directors including the Chief Executive Officer, Chief Financial Officer, and Chief Wealth Officer serve as the Corporation’s Chief Operating Decision Maker (“CODM”).

The CODM reviews actual net income verses budgeted net income to assess segment performance on a monthly basis and to make decisions about allocating capital and personnel to the segments.

Financial results by operating segment, including significant expense categories provided to the CODM are detailed below.

Certain prior period amounts have been reclassified to conform to the current presentation.

The Trust and Investment Services segment excludes off-balance-sheet assets under management with a total fair value of $ 1.7 billion at both March 31, 2025 and December 31 2024.

Total assets of each operating segment at March 31, 2025 and December 31, 2024 were as follows:

Total assets as of March 31, 2025

Total assets as of December 31, 2024

Information for the operating segments for the three-month periods ended March 31, 2025 and 2024 are presented in the following tables:

Three Months Ended

March 31, 2025

(in thousands)

1 unchanged sentence

Interest expense

Net interest income

Credit loss expense

Non-interest income

Non-interest expense

Net interest income after credit loss expense

Other operating income:

Net gains on sales of residential mortgages

Service charges on deposit accounts

Other service charges

Trust department income

Debit card income

Brokerage commissions

Other segment income (1)

Total other operating income

Other operating expenses:

Salaries and employee benefits

Equipment and occupancy

Data processing

FDIC premiums

Other segment expenses (2)

Total operating expenses

Income before income taxes and intercompany fees

2 unchanged sentences

Income tax expense

Nine Months Ended

September 30, 2023

(in thousands)

Interest income

Interest expense

Significant noncash items

Credit loss expense

Non-interest income

Non-interest expense

Income before income taxes and intercompany fees

Intercompany management fee income (expense)

Income before income taxes

Income tax expense

Amortization of intangible assets

(1) Other segment income includes net gains/(losses) on disposals of fixed assets, bank owned life insurance income, and miscellaneous income.

(2) Other segment expenses include professional services, contract labor, line rentals, investor relations, contributions, net OREO expense/(income), and miscellaneous expenses.

Three Months Ended

September 30,

March 31, 2024

(in thousands)

1 unchanged sentence

Interest expense

Net interest income

Credit loss expense

Non-interest income

Non-interest expense

Income before income taxes and intercompany fees

Intercompany management fee income (expense)

Income before income taxes

Income tax expense

Three Months Ended

September 30, 2023

(in thousands)

Interest income

Interest expense

Credit loss credit

Non-interest income

Non-interest expense

Net interest income after credit loss expense

Other operating income:

Net gains on sales of residential mortgages

Service charges on deposit accounts

Other service charges

Trust department income

Debit card income

Brokerage commissions

Total other operating income

Other operating expenses:

Salaries and employee benefits

Equipment and occupancy

Data processing

FDIC premiums

Total operating expenses

Income before income taxes and intercompany fees

2 unchanged sentences

Income tax expense

Total non-fiduciary assets of the trust and investment services segment were $ 0.6 million (including $ 0.5 million in intangible assets) at September 30, 2024 and $ 0.7 million (including $ 0.6 million in intangible assets) at December 31, 2023.

All other assets (including goodwill of $ 11.0 million at both September 30, 2024 and December 31, 2023 and other intangible assets of $ 0.4 million and $ 0.5 million at September 30, 2024 and December 31, 2023, respectively) were held by the community banking segment.

Significant noncash items

Credit loss expense

Amortization of intangible assets

(1) Other segment income includes net gains/(losses) on disposals of fixed assets, bank owned life insurance income, and miscellaneous income.

(2) Other segment expenses include professional services, contract labor, line rentals, investor relations, contributions, net OREO expense/(income), and miscellaneous expenses.

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

What changed 10-Q

Item 1. Financial Statements