First United Corporation

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended March 31, 2025

◻ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _______________ to ________________

Commission file number 0-14237

First United Corporation

(Exact name of registrant as specified in its charter)


Maryland		52-1380770
(State or other jurisdiction of incorporation or organization)		(I. R. S. Employer Identification No.)

19 South Second Street, Oakland, Maryland		21550-0009
(Address of principal executive offices)		(Zip Code)

(800) 470-4356

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock	FUNC	Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):


Large Accelerated filer ◻	Accelerated Filer ◻
Non-Accelerated filer ☑	Smaller Reporting Company ☑
Emerging Growth Company ◻

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ◻ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 6,478,634 shares of common stock, par value $0.01 per share, as of April 30, 2025.

Table of Contents

INDEX TO QUARTERLY REPORT

FIRST UNITED CORPORATION


		Page
PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements (unaudited)	3
	Consolidated Statements of Financial Condition – March 31, 2025 and December 31, 2024	3
	Consolidated Statements of Operations – for the three months ended March 31, 2025 and 2024	4
	Consolidated Statements of Comprehensive Income – for the three months ended March 31, 2025 and 2024	5
	Consolidated Statements of Changes in Shareholders’ Equity – for the three months ended March 31, 2025 and 2024	6
	Consolidated Statements of Cash Flows – for the three months ended March 31, 2025 and 2024	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	58
Item 4.	Controls and Procedures	59

PART II. OTHER INFORMATION		60
Item 1.	Legal Proceedings	60
Item 1A.	Risk Factors	60
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3.	Defaults upon Senior Securities	60
Item 4.	Mine Safety Disclosures	60
Item 5.	Other Information	60
Item 6.	Exhibits	61
SIGNATURES		62

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

First United Corporation and Subsidiaries

Consolidated Statements of Financial Condition

(In thousands, except share data - Unaudited)



	March 31, 2025		December 31, 2024

Assets
Cash and due from banks	$	82,813	$	77,020
Interest bearing deposits in banks		1,618		1,307
Cash and cash equivalents		84,431		78,327
Investment securities – available for sale (at fair value)		99,998		94,494
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)		174,144		175,497
Equity investments not held for trading with readily determinable fair values		1,001		—
Restricted investment in bank stock, at cost		5,815		5,768
Loans held for sale		—		806
Loans		1,479,869		1,480,793
Unearned fees		(457)		(442)
Allowance for credit losses		(18,467)		(18,170)
Net loans		1,460,945		1,462,181
Premises and equipment, net		30,010		30,081
Goodwill and other intangibles		11,691		11,773
Bank owned life insurance		49,293		48,952
Deferred tax assets		10,021		9,989
Other real estate owned, net		3,062		3,062
Repossessed assets		2,802		2,802
Right of use assets		1,131		1,204
Pension asset		16,064		17,824
Accrued interest receivable		6,975		7,473
Other assets		22,370		22,789
Total Assets	$	1,979,753	$	1,973,022
Liabilities and Shareholders’ Equity
Liabilities:
Non-interest bearing deposits	$	422,415	$	426,737
Interest bearing deposits		1,201,159		1,148,092
Total deposits		1,623,574		1,574,829
Short-term borrowings		20,342		65,409
Long-term borrowings		120,929		120,929
Operating lease liability		1,308		1,384
SERP deferred compensation		8,400		8,335
Allowance for credit losses on off-balance sheet credit exposures		863		863
Accrued interest payable		693		489
Other liabilities		18,524		20,065
Dividends payable		1,426		1,424
Total Liabilities		1,796,059		1,793,727
Shareholders’ Equity:
Common Stock – par value $0.01 per share; Authorized 25,000,000 shares; issued and outstanding 6,478,634 shares at March 31, 2025 and 6,471,096 at December 31, 2024		65		65
Surplus		20,606		20,476
Retained earnings		193,382		189,002
Accumulated other comprehensive loss		(30,359)		(30,248)
Total Shareholders’ Equity		183,694		179,295
Total Liabilities and Shareholders’ Equity	$	1,979,753	$	1,973,022

See accompanying notes to the consolidated financial statements

Table of Contents

First United Corporation and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share data)


	Three Months Ended
	March 31,
	2025		2024

	(Unaudited)
Interest income
Interest and fees on loans	$	21,755	$	19,218
Interest on investment securities
Taxable		1,763		1,744
Exempt from federal income tax		45		53
Total investment income		1,808		1,797
Other		499		883
Total interest income		24,062		21,898
Interest expense
Interest on deposits:
Savings		43		48
Interest-bearing transaction accounts		5,200		4,701
Time deposits		1,440		1,517
Total interest on deposits		6,683		6,266
Interest on short-term borrowings		20		461
Interest on long-term borrowings		1,343		1,359
Total Interest Expense		8,046		8,086
Net Interest income		16,016		13,812
Credit loss expense
Credit loss expense - loans		657		961
Credit loss credit - off-balance sheet credit exposures		(1)		(15)
Total credit loss expense		656		946
Net interest income after provision for credit losses		15,360		12,866
Other operating income
Net gains on sales of residential mortgage loans		92		82
Net gains		92		82
Other Income
Service charges on deposit accounts		547		556
Other service charges		206		215
Trust department		2,323		2,188
Debit card income		921		932
Bank owned life insurance		341		326
Brokerage commissions		421		495
Other		63		81
Total other income		4,822		4,793
Total other operating income		4,914		4,875
Other operating expenses
Salaries and employee benefits		7,331		7,157
FDIC premiums		245		269
Equipment expense		578		923
Occupancy expense of premises		689		954
Data processing expense		1,503		1,318
Marketing expense		238		134
Professional services		476		486
Contract labor		163		183
Telephone		98		109
Other real estate owned expense, net		92		86
Investor relations		62		53
Contributions		56		50
Other		1,045		1,159
Total other operating expenses		12,576		12,881
Income before income tax expense		7,698		4,860
Provision for income tax expense		1,892		1,162
Net Income	$	5,806	$	3,698
Basic net income per share	$	0.90	$	0.56
Diluted net income per share	$	0.89	$	0.56
Weighted average number of basic shares outstanding		6,474		6,642
Weighted average number of diluted shares outstanding		6,490		6,655
Dividends declared per common share	$	0.22	$	0.20

See accompanying notes to the consolidated financial statements

Table of Contents

First United Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands)



	Three Months Ended
	March 31,
	2025		2024

Comprehensive Income	(Unaudited)
Net Income	$	5,806	$	3,698
Other comprehensive (loss)/income, net of tax and reclassification adjustments:
Available for sale securities:
Unrealized holding gains on investments with credit related impairment	$	8	$	210
Reclassification adjustment for accretable yield realized in income		50		50
Other comprehensive (loss)/income on investments with credit related impairment		(42)		160

Unrealized holding gains/(losses) on all other AFS investments	$	1,849	$	(623)
Other comprehensive income/(loss) on all other AFS investments		1,849		(623)

Held to Maturity Securities
Unrealized holding gains on securities transferred to held to maturity	$	—	$	—
Reclassification adjustment for amortization realized in income		(154)		(160)
Other comprehensive income on HTM investments		154		160

Cash flow hedges:
Unrealized holding (losses)/gains on cash flow hedges	$	(108)	$	73
Other comprehensive (loss)/income on cash flow hedges		(108)		73

Pension plan assets:
Unrealized holding (losses)/gains on pension plan liability	$	(2,128)	$	1,489
Reclassification adjustment for amortization of unrecognized losses realized in income		(132)		(203)
Other comprehensive (loss)/income on pension plan liability		(1,996)		1,692

SERP liability:
Unrealized holding gains on SERP liability	$	—	$	—
Reclassification adjustment for amortization of unrealized losses realized in income		—		(39)
Other comprehensive income on SERP liability		—		39
Other comprehensive (loss)/income before income tax		(143)		1,501
Income tax effect related to other comprehensive (loss)/income		32		(396)

Other comprehensive (loss)/income, net of tax		(111)		1,105
Comprehensive income	$	5,695	$	4,803

See accompanying notes to the consolidated financial statements

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, 2025	$	65	$	20,476	$	189,002	$	(30,248)	$	179,295
Net income						5,806				5,806
Other comprehensive loss								(111)		(111)
Stock based compensation				55						55
Common stock issued - 7,538 shares				75						75
Common stock dividend declared - $0.22 per share						(1,426)				(1,426)
Balance at March 31, 2025	$	65	$	20,606	$	193,382	$	(30,359)	$	183,694


	Common Stock		Surplus		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
Balance at January 1, 2024	$	66	$	23,734	$	173,900	$	(35,827)	$	161,873
Net income						3,698				3,698
Other comprehensive income								1,105		1,105
Stock based compensation				57						57
Common stock issued - 8,757 shares				74						74
Common stock dividend declared - $0.20 per share						(1,326)				(1,326)
Balance at March 31, 2024	$	66	$	23,865	$	176,272	$	(34,722)	$	165,481

See accompanying notes to the consolidated financial statements

Table of Contents

First United Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)


	Three Months Ended
	March 31,
	2025		2024

	(Unaudited)
Operating activities
Net income	$	5,806	$	3,698
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		656		946
Depreciation		656		1,256
Stock based compensation		55		57
Gains on sales of other real estate owned		—		(23)
Originations of loans held for sale		(153)		(1,707)
Proceeds from sales of loans held for sale		1,051		2,057
Gains from sales of loans held for sale		(92)		(82)
Net accretion of investment securities discounts and premiums- AFS		(48)		(22)
Net accretion of investment securities discounts and premiums- HTM		(134)		(178)
Amortization of intangible assets		82		82
Earnings on bank owned life insurance		(341)		(326)
Amortization of deferred loan fees, net		(27)		(44)
Amortization of operating lease right of use asset		73		68
Decrease in accrued interest receivable and other assets		868		387
Deferred tax (benefit)/expense		(32)		397
Amortization of operating lease liability		(76)		(72)
Decrease in accrued interest payable and other liabilities		(1,379)		(2,906)
Net cash provided by operating activities		6,965		3,588
Investing activities
Proceeds from maturities/calls of investment securities - AFS		1,219		1,145
Proceeds from maturities/calls of investment securities - HTM		1,487		31,339
Purchases of investment securities - AFS		(4,870)		—
Purchases of equity securities with readily determinable fair market values		(1,001)		—
Proceeds from sales of other real estate owned		—		114
Net (increase)/decrease in restricted stock		(47)		1,860
Net decrease/(increase) in loans		607		(6,101)
Purchases of premises and equipment		(585)		(65)
Net cash (used in)/provided by investing activities		(3,190)		28,292
Financing activities
Net increase in deposits		48,745		12,476
Issuance of common stock		75		74
Cash dividends paid on common stock		(1,424)		(1,327)
Net (decrease)/increase in short-term borrowings		(45,067)		34,076
Payments of long-term borrowings		—		(40,000)
Net cash provided by financing activities		2,329		5,299
Increase in cash and cash equivalents		6,104		37,179
Cash and cash equivalents at beginning of the year		78,327		49,753
Cash and cash equivalents at end of period	$	84,431	$	86,932
Supplemental information
Interest paid	$	7,842	$	7,779
Taxes paid	$	52	$	70

See accompanying notes to the consolidated financial statements

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. 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.

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 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 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 No. 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 No. 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. ASU No. 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. ASU No. 2024-03 is effective on a prospective basis for annual periods beginning

Table of Contents

after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, though early adoption and retrospective application is permitted. ASU No. 2024-03 is not expected to have a significant impact on our 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 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,
	2025					2024
			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	$	5,806	6,474	$	0.90	$	3,698	6,642	$	0.56

Diluted Earnings Per Share:

Restricted stock units			16					13

Net income	$	5,806	6,490	$	0.89	$	3,698	6,655	$	0.56

Table of Contents

Note 4 – Investments

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)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
March 31, 2025
Available for Sale:
U.S. treasuries	$	3,862	$	151	$	—	$	—	$	4,013
U.S. government agencies		7,000		—		781		—	$	6,219
Residential mortgage-backed agencies		24,050		8		3,841		—		20,217
Commercial mortgage-backed agencies		36,943		—		8,018		—		28,925
Collateralized mortgage obligations		20,706		—		2,943		—		17,763
Obligations of states and political subdivisions		7,543		2		287		—		7,258
Corporate bonds		1,000				94		—		906
Collateralized debt obligations		18,707		—		4,010		—		14,697
Total available for sale	$	119,811	$	161	$	19,974	$	—	$	99,998

(in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value		Allowance for Credit Losses
March 31, 2025
Held to Maturity:
U.S. government agencies	$	68,374	$	—	$	9,483	$	58,891	$	—
Residential mortgage-backed agencies		31,539		25		3,051		28,513		—
Commercial mortgage-backed agencies		21,089		—		5,441		15,648		—
Collateralized mortgage obligations		48,696		—		8,905		39,791		—
Obligations of states and political subdivisions		4,505		188		765		3,928		59
Total held to maturity	$	174,203	$	213	$	27,645	$	146,771	$	59


(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
December 31, 2024
Available for Sale:
U.S. government agencies	$	7,000	$	—	$	885	$	—	$	6,115
Residential mortgage-backed agencies		24,621		—		4,425		—		20,196
Commercial mortgage-backed agencies		37,205		—		8,571		—		28,634
Collateralized mortgage obligations		21,069		—		3,343		—		17,726
Obligations of states and political subdivisions		6,533		—		324		—		6,209
Corporate bonds		1,000		—		104		—		896
Collateralized debt obligations		18,686		—		3,968		—		14,718
Total available for sale	$	116,114	$	—	$	21,620	$	—	$	94,494

Table of Contents

(in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value		Allowance for Credit Losses
December 31, 2024
Held to Maturity:
U.S. government agencies	$	68,301	$	—	$	11,192	$	57,109	$	—
Residential mortgage-backed agencies		32,171		1		3,561		28,611		—
Commercial mortgage-backed agencies		21,134		—		5,794		15,340		—
Collateralized mortgage obligations		49,439		—		9,724		39,715		—
Obligations of states and political subdivisions		4,511		177		703		3,985		59
Total held to maturity	$	175,556	$	178	$	30,974	$	144,760	$	59

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 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, 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. government. 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.

Table of Contents

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					12 months or more
(in thousands)	Fair Value		Unrealized Losses		Number of Investments	Fair Value		Unrealized Losses		Number of Investments
March 31, 2025
Available for Sale:
U.S. government agencies	$	—	$	—	—	$	6,219	$	781	2
Residential mortgage-backed agencies		—		—	—		18,298		3,841	3
Commercial mortgage-backed agencies		1,692		63	1		27,233		7,955	8
Collateralized mortgage obligations		2,905		8	1		14,858		2,935	9
Obligations of states and political subdivisions		1,946		44	2		4,050		243	4
Corporate bonds		—		—	—		906		94	1
Collateralized debt obligations		—		—	—		14,697		4,010	9
Total available for sale	$	6,543	$	115	4	$	86,261	$	19,859	36

	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrecognized Losses		Number of Investments	Fair Value		Unrecognized Losses		Number of Investments
March 31, 2025
Held to Maturity:
U.S. government agencies	$	—	$	—	—	$	58,891		9,483	9
Residential mortgage-backed agencies		4,459		56	3		20,310		2,995	35
Commercial mortgage-backed agencies		—		—	—		15,648		5,441	2
Collateralized mortgage obligations		—		—	—		39,791		8,905	8
Obligations of states and political subdivisions		—		—	—		2,111		765	1
Total held to maturity	$	4,459	$	56	3	$	136,751	$	27,589	55

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, 2024
Available for Sale:
U.S. government agencies	$	—	$	—	—	$	6,115	$	885	2
Residential mortgage-backed agencies		1,974		18	1		18,222		4,407	3
Commercial mortgage-backed agencies		1,688		59	1		26,946		8,512	8
Collateralized mortgage obligations		2,892		50	1		14,834		3,293	9
Obligations of states and political subdivisions		1,224		18	2		3,742		306	3
Corporate Bonds		—		—	—		896		104	1
Collateralized debt obligations		—		—	—		14,718		3,968	9
Total available for sale	$	7,778	$	145	5	$	85,473	$	21,475	35

	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, 2024
Held to Maturity:
U.S. government agencies	$	—	$	—	—	$	57,109	$	11,192	9
Residential mortgage-backed agencies		8,291		132	5		20,243		3,429	35
Commercial mortgage-backed agencies		—		—	—		15,340		5,794	2
Collateralized mortgage obligations		—		—	—		39,715		9,724	8
Obligations of states and political subdivisions		—		—	—		2,179		703	1
Total held to maturity	$	8,291	$	132	5	$	134,586	$	30,842	55

Table of Contents

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)	Amortized Cost		Fair Value
Contractual Maturity
Available for Sale:
Due after one year through five years		5,250		5,101
Due after five years through ten years		5,400		5,180
Due after ten years		27,462		22,812
		38,112		33,093
Residential mortgage-backed agencies		24,050		20,217
Commercial mortgage-backed agencies		36,943		28,925
Collateralized mortgage obligations		20,706		17,763
Total available for sale	$	119,811	$	99,998
Held to Maturity:
Due after one year through five years	$	17,050	$	16,317
Due after five years through ten years		36,044		31,322
Due after ten years		19,785		15,180
		72,879		62,819
Residential mortgage-backed agencies		31,539		28,513
Commercial mortgage-backed agencies		21,089		15,648
Collateralized mortgage obligations		48,696		39,791
Total held to maturity	$	174,203	$	146,771

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 March 31, 2025 and December 31, 2024:



(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Total
March 31, 2025
Individually evaluated for impairment	$	—	$	—	$	1,839	$	1,593	$	—	$	3,432
Collectively evaluated for impairment		532,764		94,063		280,531		518,479		50,600		1,476,437
Total loans	$	532,764	$	94,063	$	282,370	$	520,072	$	50,600	$	1,479,869
December 31, 2024
Individually evaluated for impairment	$	574	$	—	$	2,048	$	1,810	$	—	$	4,432
Collectively evaluated for impairment		525,790		95,314		285,486		517,005		52,766		1,476,361
Total loans	$	526,364	$	95,314	$	287,534	$	518,815	$	52,766	$	1,480,793

Table of Contents

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)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days+ Past Due		Total Past Due and Accruing		Non- Accrual		Total Loans
March 31, 2025
Commercial real estate:
Non-owner-occupied	$	304,568	$	—	$	—	$	—	$	—	$	—	$	304,568
All other CRE		224,979		721		2,417		—		3,138		79		228,196
Acquisition and development:
1-4 family residential construction		20,490		—		—		—		—		—		20,490
All other A&D		73,482		52		—		—		52		39		73,573
Commercial and industrial		280,461		20		50		—		70		1,839		282,370
Residential mortgage:
Residential mortgage - term		450,936		773		790		140		1,703		1,869		454,508
Residential mortgage - home equity		64,620		314		450		93		857		87		65,564
Consumer		50,045		355		87		—		442		113		50,600
Total	$	1,469,581	$	2,235	$	3,794	$	233	$	6,262	$	4,026	$	1,479,869
December 31, 2024
Commercial real estate:
Non-owner-occupied	$	296,259	$	—	$	—	$	—	$	—	$	—	$	296,259
All other CRE		228,875		257		—		317		574		656		230,105
Acquisition and development:
1-4 family residential construction		16,630		—		—		—		—		—		16,630
All other A&D		78,588		—		14		—		14		82		78,684
Commercial and industrial		285,675		—		21		—		21		1,838		287,534
Residential mortgage:
Residential mortgage - term		447,161		66		2,411		504		2,981		2,100		452,242
Residential mortgage - home equity		65,824		371		228		69		668		81		66,573
Consumer		52,117		364		83		28		475		174		52,766
Total	$	1,471,129	$	1,058	$	2,757	$	918	$	4,733	$	4,931	$	1,480,793

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: (i) commercial real estate; (ii) acquisition and development; (iii) commercial and industrial; (iv) residential mortgage; and (v) consumer. The Corporation’s loan portfolio is

Table of Contents

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.

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 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 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 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 value of the collateral, if there is any, is less likely to be a source of repayment due to less certain collateral values.

Table of Contents

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)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Total
March 31, 2025
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		5,670		940		4,334		6,723		800		18,467
Total ACL	$	5,670	$	940	$	4,334	$	6,723	$	800	$	18,467
December 31, 2024
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		5,272		909		4,205		7,010		774		18,170
Total ACL	$	5,272	$	909	$	4,205	$	7,010	$	774	$	18,170

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 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)	Real Estate			Other Collateral	Non-Accrual Loans with No Allowance
Commercial and industrial		—		1,839		1,839
Residential mortgage		1,593		—		1,593
Total Loans	$	1,593	$	1,839	$	3,432


	December 31, 2024
(in thousands)	Real Estate			Other Collateral	Non-Accrual Loans with No Allowance
Commercial real estate	$	574	$	—	$	574
Residential mortgage		1,810		—		1,810
Total Loans	$	2,384	$	—	$	2,384

Table of Contents

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)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Total
Beginning balance at January 1, 2025	$	5,272	$	909	$	4,205	$	7,010	$	774	$	18,170
Loan charge-offs		—		(3)		(355)		—		(184)		(542)
Recoveries collected		—		64		2		16		100		182
Credit loss (credit)/expense		398		(30)		482		(303)		110		657
ACL balance at March 31, 2025	$	5,670	$	940	$	4,334	$	6,723	$	800	$	18,467
Beginning balance at January 1, 2024	$	5,120	$	940	$	3,717	$	6,774	$	929	$	17,480
Loan charge-offs		—		—		(112)		—		(506)		(618)
Recoveries collected		37		3		31		18		70		159
Credit loss (credit)/expense		(195)		71		366		225		494		961
ACL balance at March 31, 2024	$	4,962	$	1,014	$	4,002	$	7,017	$	987	$	17,982

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 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. 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.

Table of Contents

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 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.

Table of Contents

The following tables present loan balances by year of origination and internally assigned risk rating for our portfolio segments for the periods presented:


(in thousands)	2025		2024		2023		2022		2021		2020 and Prior		Revolving		Total Portfolio Loans
March 31, 2025
Commercial real estate:
Non-owner-occupied
Pass	$	71	$	22,723	$	36,103	$	73,044	$	28,629	$	138,309	$	2,334	$	301,213
Special Mention		—		—		—		—		—		693		—		693
Substandard		—		—		—		—		—		2,662		—		2,662
Total non-owner occupied		71		22,723		36,103		73,044		28,629		141,664		2,334		304,568
Current period gross charge-offs		—		—		—		—		—		—		—		—
All other CRE
Pass		2,976		43,041		32,269		28,660		23,655		86,188		4,531		221,320
Special Mention		—		—		—		—		—		913		—		913
Substandard		—		992		—		—		1,737		2,848		386		5,963
Total all other CRE		2,976		44,033		32,269		28,660		25,392		89,949		4,917		228,196
Current period gross charge-offs		—		—		—		—		—		—		—		—
Acquisition and development:
1-4 family residential construction
Pass		495		14,560		2,400		—		—		—		3,035		20,490
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total acquisition and development		495		14,560		2,400		—		—		—		3,035		20,490
Current period gross charge-offs		—		—		—		—		—		—		—		—
All other A&D
Pass		1,018		24,961		12,270		11,039		1,854		10,294		12,046		73,482
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		91		—		91
Total all other A&D		1,018		24,961		12,270		11,039		1,854		10,385		12,046		73,573
Current period gross charge-offs		—		—		—		—		—		3		—		3
Commercial and industrial:
Pass		3,782		35,325		28,084		62,622		15,291		18,512		76,160		239,776
Special Mention		—		4,251		13,000		3,500		49		1,773		9,325		31,898
Substandard		25		117		—		1,192		669		6,713		1,980		10,696
Total commercial and industrial		3,807		39,693		41,084		67,314		16,009		26,998		87,465		282,370
Current period gross charge-offs		—		—		—		—		—		355		—		355
Residential mortgage:
Residential mortgage - term
Pass		6,745		33,565		69,683		90,865		77,551		166,715		1,147		446,271
Special Mention		—		—		—		678		830		503		—		2,011
Substandard		—		—		—		211		1,339		4,652		24		6,226
Total residential mortgage - term		6,745		33,565		69,683		91,754		79,720		171,870		1,171		454,508
Current period gross charge-offs		—		—		—		—		—		—		—		—
Residential mortgage - home equity
Pass		44		79		755		3,679		679		946		58,591		64,773
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		43		748		791
Total residential mortgage - home equity		44		79		755		3,679		679		989		59,339		65,564
Current period gross charge-offs		—		—		—		—		—		—		—		—
Consumer:
Pass		2,681		9,960		9,588		5,405		2,934		16,958		2,727		50,253
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		54		202		45		18		22		6		347
Total consumer		2,681		10,014		9,790		5,450		2,952		16,980		2,733		50,600
Current period gross charge-offs		36		24		22		10		38		54		—		184
Total Portfolio Loans
Pass		17,812		184,214		191,152		275,314		150,593		437,922		160,571		1,417,578
Special Mention		—		4,251		13,000		4,178		879		3,882		9,325		35,515
Substandard		25		1,163		202		1,448		3,763		17,031		3,144		26,776
Total Portfolio Loans	$	17,837	$	189,628	$	204,354	$	280,940	$	155,235	$	458,835	$	173,040	$	1,479,869
Current YTD Period:
Current period gross charge-offs	$	36	$	24	$	22	$	10	$	38	$	412	$	—	$	542

Table of Contents


(in thousands)	2024		2023		2022		2021		2020		2019 and Prior		Revolving		Total Portfolio Loans
December 31, 2024
Commercial real estate:
Non-owner-occupied
Pass	$	22,807	$	23,454	$	73,649	$	28,941	$	52,080	$	89,977	$	1,960	$	292,868
Special Mention		—		—		—		—		706		—		—		706
Substandard		—		—		—		—		—		2,685		—		2,685
Total non-owner occupied		22,807		23,454		73,649		28,941		52,786		92,662		1,960		296,259
Current period gross charge-offs		—		—		—		—		—		—		—		—
All other CRE
Pass		42,855		32,599		29,951		24,073		16,842		72,630		4,535		223,485
Special Mention		—		—		—		—		199		—		—		199
Substandard		994		—		—		1,744		—		3,453		230		6,421
Total all other CRE		43,849		32,599		29,951		25,817		17,041		76,083		4,765		230,105
Current period gross charge-offs		—		—		—		—		—		—		—		—
Acquisition and development:
1-4 family residential construction
Pass		11,686		3,317		—		—		—		—		1,627		16,630
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total acquisition and development		11,686		3,317		—		—		—		—		1,627		16,630
Current period gross charge-offs		—		—		—		—		—		—		—		—
All other A&D
Pass		23,304		24,114		10,672		1,848		1,773		9,230		7,661		78,602
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		82		—		82
Total all other A&D		23,304		24,114		10,672		1,848		1,773		9,312		7,661		78,684
Current period gross charge-offs		—		—		—		—		—		—		—		—
Commercial and industrial:
Pass		35,898		29,786		65,663		17,558		6,777		13,758		75,440		244,880
Special Mention		4,250		13,000		3,500		—		1,842		—		9,084		31,676
Substandard		122		—		1,209		680		6,562		692		1,713		10,978
Total commercial and industrial		40,270		42,786		70,372		18,238		15,181		14,450		86,237		287,534
Current period gross charge-offs		465		—		125		892		41		87		—		1,610
Residential mortgage:
Residential mortgage - term
Pass		32,582		70,643		91,775		78,892		35,790		133,725		1,235		444,642
Special Mention		—		—		684		840		—		—		—		1,524
Substandard		—		—		60		1,054		—		4,923		39		6,076
Total residential mortgage - term		32,582		70,643		92,519		80,786		35,790		138,648		1,274		452,242
Current period gross charge-offs		—		—		—		—		—		30		—		30
Residential mortgage - home equity
Pass		171		803		3,948		696		361		622		59,307		65,908
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		33		12		620		665
Total residential mortgage - home equity		171		803		3,948		696		394		634		59,927		66,573
Current period gross charge-offs		—		—		15		—		—		—		—		15
Consumer:
Pass		11,132		10,945		6,312		3,525		1,091		16,593		2,833		52,431
Special Mention		—		—		—		—		—		—		—		—
Substandard		3		177		100		24		25		4		2		335
Total consumer		11,135		11,122		6,412		3,549		1,116		16,597		2,835		52,766
Current period gross charge-offs		204		314		109		64		23		655		—		1,369
Total Portfolio Loans
Pass		180,435		195,661		281,970		155,533		114,714		336,535		154,598		1,419,446
Special Mention		4,250		13,000		4,184		840		2,747		—		9,084		34,105
Substandard		1,119		177		1,369		3,502		6,620		11,851		2,604		27,242
Total Portfolio Loans	$	185,804	$	208,838	$	287,523	$	159,875	$	124,081	$	348,386	$	166,286	$	1,480,793
Current YTD Period:
Current period gross charge-offs	$	669	$	314	$	249	$	956	$	64	$	772	$	—	$	3,024

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.

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)	2025		2024		2023		2022		2021		2020 and Prior		Revolving		Total Portfolio Loans
March 31, 2025
Commercial real estate:
Non-owner-occupied
Performing	$	71	$	22,723	$	36,103	$	73,044	$	28,629	$	141,664	$	2,334	$	304,568
Nonperforming		—		—		—		—		—		—		—		—
Total non-owner occupied		71		22,723		36,103		73,044		28,629		141,664		2,334		304,568
All other CRE
Performing		2,976		44,033		32,269		28,660		25,392		89,870		4,917		228,117
Nonperforming		—		—		—		—		—		79		—		79
Total all other CRE		2,976		44,033		32,269		28,660		25,392		89,949		4,917		228,196
Acquisition and development:
1-4 family residential construction
Performing		495		14,560		2,400		—		—		—		3,035		20,490
Nonperforming		—		—		—		—		—		—		—		—
Total acquisition and development		495		14,560		2,400		—		—		—		3,035		20,490
All other A&D
Performing		1,018		24,961		12,270		11,039		1,854		10,346		12,046		73,534
Nonperforming		—		—		—		—		—		39		—		39
Total all other A&D		1,018		24,961		12,270		11,039		1,854		10,385		12,046		73,573
Commercial and industrial:
Performing		3,807		39,693		41,084		66,122		15,362		26,998		87,465		280,531
Nonperforming		—		—		—		1,192		647		—		—		1,839
Total commercial and industrial		3,807		39,693		41,084		67,314		16,009		26,998		87,465		282,370
Residential mortgage:
Residential mortgage - term
Performing		6,745		33,565		69,683		91,754		79,596		169,985		1,171		452,499
Nonperforming		—		—		—		—		124		1,885		—		2,009
Total residential mortgage - term		6,745		33,565		69,683		91,754		79,720		171,870		1,171		454,508
Residential mortgage - home equity
Performing		44		79		755		3,679		679		958		59,190		65,384
Nonperforming		—		—		—		—		—		31		149		180
Total residential mortgage - home equity		44		79		755		3,679		679		989		59,339		65,564
Consumer:
Performing		2,681		10,014		9,677		5,450		2,952		16,980		2,733		50,487
Nonperforming		—		—		113		—		—		—		—		113
Total consumer		2,681		10,014		9,790		5,450		2,952		16,980		2,733		50,600
Total Portfolio Loans
Performing		17,837		189,628		204,241		279,748		154,464		456,801		172,891		1,475,610
Nonperforming		—		—		113		1,192		771		2,034		149		4,259
Total Portfolio Loans	$	17,837	$	189,628	$	204,354	$	280,940	$	155,235	$	458,835	$	173,040	$	1,479,869

Table of Contents


(in thousands)	2024		2023		2022		2021		2020		2019 and Prior		Revolving		Total Portfolio Loans
December 31, 2024
Commercial real estate:
Non-owner-occupied
Performing	$	22,807	$	23,454	$	73,649	$	28,941	$	52,786	$	92,662	$	1,960	$	296,259
Nonperforming		—		—		—		—		—		—		—		—
Total non-owner occupied		22,807		23,454		73,649		28,941		52,786		92,662		1,960		296,259
All other CRE
Performing		43,849		32,599		29,951		25,500		17,041		75,427		4,765		229,132
Nonperforming		—		—		—		317		—		656		—		973
Total all other CRE		43,849		32,599		29,951		25,817		17,041		76,083		4,765		230,105
Acquisition and development:
1-4 family residential construction
Performing		11,686		3,317		—		—		—		—		1,627		16,630
Nonperforming		—		—		—		—		—		—		—		—
Total acquisition and development		11,686		3,317		—		—		—		—		1,627		16,630
All other A&D
Performing		23,304		24,114		10,672		1,848		1,773		9,230		7,661		78,602
Nonperforming		—		—		—		—		—		82		—		82
Total all other A&D		23,304		24,114		10,672		1,848		1,773		9,312		7,661		78,684
Commercial and industrial:
Performing		40,270		42,786		69,180		17,592		15,181		14,450		86,237		285,696
Nonperforming		—		—		1,192		646		—		—		—		1,838
Total commercial and industrial		40,270		42,786		70,372		18,238		15,181		14,450		86,237		287,534
Residential mortgage:
Residential mortgage - term
Performing		32,582		70,643		92,519		80,661		35,790		136,184		1,259		449,638
Nonperforming		—		—		—		125		—		2,464		15		2,604
Total residential mortgage - term		32,582		70,643		92,519		80,786		35,790		138,648		1,274		452,242
Residential mortgage - home equity
Performing		171		803		3,948		696		361		634		59,810		66,423
Nonperforming		—		—		—		—		33		—		117		150
Total residential mortgage - home equity		171		803		3,948		696		394		634		59,927		66,573
Consumer:
Performing		11,135		11,008		6,378		3,549		1,116		16,543		2,835		52,564
Nonperforming		—		114		34		—		—		54		—		202
Total consumer		11,135		11,122		6,412		3,549		1,116		16,597		2,835		52,766
Total Portfolio Loans
Performing		185,804		208,724		286,297		158,787		124,048		345,130		166,154		1,474,944
Nonperforming		—		114		1,226		1,088		33		3,256		132		5,849
Total Portfolio Loans	$	185,804	$	208,838	$	287,523	$	159,875	$	124,081	$	348,386	$	166,286	$	1,480,793

Loan Modifications for Borrowers Experiencing Financial Difficulty

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

Table of Contents

modifications. Therefore, the disclosures related to loan restructurings are for modifications which have a direct impact on cash flows.

The Corporation may offer various types of modifications when restructuring a loan. Commercial and industrial loans modified in a loan restructuring often involve temporary interest-only payments, term extensions, and converting credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often requested.

Commercial mortgage and construction loans modified in a loan restructuring often involve reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, or substituting or adding a new borrower or guarantor. Construction loans modified in a loan restructuring may also involve extending the interest-only payment period.

Loans modified in a loan restructuring for the Corporation may have the financial effect of increasing the specific allowance associated with the loan. An allowance for loans that have been modified in a loan restructuring is measured based on the present value of expected cash flows discounted at the loan’s effective interest rate or the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent. Management exercises significant judgment in developing these estimates.

Commercial and consumer loans modified in a loan restructuring are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a loan restructuring subsequently default, the Corporation evaluates the loan for possible further loss. 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 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)	Term Extension		Percentage of Total Loan Type	Weighted Average Term and Principal Payment Extension
Three months ended March 31, 2025
Commercial and industrial		24	0.01%	60 months
Total	$	24

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 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. Upon determination that a modified loan (or a portion of a modified loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is charged off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount.

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.

Table of Contents

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:

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 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. The Corporation has considered counterparty credit risk in the valuation of its interest rate swap assets.

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.

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

Table of Contents

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. 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.

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 March 31, 2025 Using
			Quoted
			Prices in		Significant
	Assets		Active Markets		Other		Significant
	Measured at		for Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs
(in thousands)	03/31/25		(Level 1)		(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. treasuries	$	4,013			$	4,013
U.S. government agencies	$	6,219			$	6,219
Residential mortgage-backed agencies	$	20,217			$	20,217
Commercial mortgage-backed agencies	$	28,925			$	28,925
Collateralized mortgage obligations	$	17,763			$	17,763
Obligations of states and political subdivisions	$	7,258			$	7,258
Corporate bonds	$	906			$	906
Collateralized debt obligations	$	14,697					$	14,697
Equity investments not held for trading with readily determinable fair values	$	1,001	$	1,001
Financial derivatives	$	347			$	347
Non-recurring:
Equity investment	$	4,034					$	4,034

Table of Contents



			Fair Value Measurements at December 31, 2024 Using
			Quoted
			Prices in	Significant
	Assets/(liabilities)		Active Markets	Other		Significant
	Measured at		for Identical	Observable		Unobservable
	Fair Value		Assets	Inputs		Inputs
(in thousands)	12/31/24		(Level 1)	(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	6,115		$	6,115
Residential mortgage-backed agencies	$	20,196		$	20,196
Commercial mortgage-backed agencies	$	28,634		$	28,634
Collateralized mortgage obligations	$	17,726		$	17,726
Obligations of states and political subdivisions	$	6,209		$	6,209
Corporate bonds	$	896		$	896
Collateralized debt obligations	$	14,718				$	14,718
Financial derivatives	$	455		$	455
Non-recurring:
Individually evaluated loans, net	$	647				$	647
Equity investment	$	3,928				$	3,928
Other real estate owned	$	2,698				$	2,698

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.

Table of Contents

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 March 31, 2025		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment securities – available for sale -CDO	$	14,697	Discounted Cash Flow	Discount Margin	Range of low 300 to high 400

Non-recurring:
Equity investment	$	4,034	Market Method	Revenue Multiples	2.8x


(in thousands)	Fair Value at December 31, 2024		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment securities – available for sale -CDO	$	14,718	Discounted Cash Flow	Discount Margin	Range of low to mid 300 and low 500

Non-recurring:
Individually Evaluated Loans	$	647	Market Comparable Properties	Marketability Discount	N/A

Equity investment	$	3,928	Market Method	Revenue Multiples	2.8x

Other real estate owned (1)	$	2,698	Market Comparable Properties	Marketability Discount	5.0% to 15.0% (weighted avg 5.9%)

(1)

Range would include discounts taken since appraisal and estimated values

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 three-month periods ended March 31, 2025 and 2024:


	Fair Value Measurements
	Using Significant Unobservable Inputs
	(Level 3)
	Investment Securities
(in thousands)	Available for Sale
Beginning balance January 1, 2025	$	14,718
Total losses realized/unrealized:
Included in other comprehensive income		(21)
Ending balance March 31, 2025	$	14,697


	Fair Value Measurements
	Using Significant Unobservable Inputs
	(Level 3)
	Investment Securities
(in thousands)	Available for Sale
Beginning balance January 1, 2024	$	14,709
Total gains realized/unrealized:
Included in other comprehensive loss		177
Ending balance March 31, 2024	$	14,886

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. The derived fair values are subjective in nature and involve uncertainties and significant judgment. Therefore, they cannot be determined with precision. Changes in the assumptions could significantly impact the derived estimates of fair value. Disclosure of non-financial assets such as buildings, as well as certain financial instruments such as leases is not required. Accordingly, the aggregate fair values presented do not represent the underlying value of the Corporation.

Table of Contents

The following tables present fair value information about financial instruments, whether or not recognized in the Consolidated Statement of Financial Condition, for which it is practicable to estimate that value. The actual carrying amounts and estimated fair values of the Corporation’s financial instruments that are included in the Consolidated Statement of Financial Condition are as follows:


	March 31, 2025				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	$	82,813	$	82,813	$	82,813
Interest bearing deposits in banks		1,618		1,618		1,618
Investment securities - AFS		99,998		99,998			$	85,301	$	14,697
Investment securities - HTM		174,144		146,771				144,924		1,847
Equity securities not held for trading with readily determinable fair values		1,001		1,001		1,001
Restricted bank stock		5,815		N/A
Loans, net		1,460,945		1,408,335						1,408,335
Financial derivatives		347		347				347
Accrued interest receivable		6,975		6,975				796		6,179
Financial Liabilities:
Deposits - non-maturity		1,428,220		1,428,220				1,428,220
Deposits - time deposits		195,354		193,981				193,981
Short-term borrowed funds		20,342		20,342				20,342
Long-term borrowed funds		120,929		119,442				119,442
Accrued interest payable		693		693				693

Table of Contents


	December 31, 2024				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	$	77,020	$	77,020	$	77,020
Interest bearing deposits in banks		1,307		1,307		1,307
Investment securities - AFS		94,494		94,494			$	79,776	$	14,718
Investment securities - HTM		175,497		144,760				142,954		1,806
Restricted bank stock		5,768		N/A
Loans, net		1,462,181		1,421,600						1,421,600
Financial derivative		455		455				455
Accrued interest receivable		7,473		7,473				827		6,646
Financial Liabilities:
Deposits - non-maturity		1,431,662		1,431,662				1,431,662
Deposits - time deposits		143,167		141,698				141,698
Short-term borrowed funds		65,409		65,409				65,409
Long-term borrowed funds		120,929		119,586				119,586
Accrued interest payable		489		489				489

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 three-month periods ended March 31, 2025 and 2024:


	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, 2025		(2,592)		(13,792)		(4,696)		372		(9,723)		183		(30,248)
Other comprehensive income/(loss) before reclassifications		6		1,357		—		(85)		(1,562)		—		(284)
Amounts reclassified from accumulated other comprehensive income		(37)		—		113		—		97		—		173
Balance - March 31, 2025	$	(2,623)	$	(12,435)	$	(4,583)	$	287	$	(11,188)	$	183	$	(30,359)

	Investment
	securities-
	with credit		Investment
	related		securities-		Investment
	impairment		all other		securities-		Cash Flow		Pension
(in thousands)	AFS		AFS		HTM		Hedge		Plan		SERP		Total
Balance - January 1, 2024	$	(2,482)	$	(13,217)	$	(5,201)	$	569	$	(14,263)	$	(1,233)	$	(35,827)
Other comprehensive income/(loss) before reclassifications		155		(459)		—		54		1,096		—		846
Amounts reclassified from accumulated other comprehensive income		(37)		—		118		—		149		29		259
Balance - March 31, 2024	$	(2,364)	$	(13,676)	$	(5,083)	$	623	$	(13,018)	$	(1,204)	$	(34,722)

Table of Contents

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


	Before		Tax
Components of Other Comprehensive Loss	Tax		(Expense)
(in thousands)	Amount		Benefit		Net
For the three months ended March 31, 2025
Available for sale (AFS) securities with credit related impairment:
Unrealized holding gains	$	8	$	(2)	$	6
Less: accretable yield recognized in income		50		(13)		37
Net unrealized loss on investments with credit related impairment		(42)		11		(31)
Available for sale securities – all other:
Unrealized holding gains		1,849		(492)		1,357
Held to maturity securities:
Unrealized holding gains on securities transferred to held to maturity		—		—		—
Less: amortization recognized in income		(154)		41		(113)
Net unrealized gains on HTM securities		154		(41)		113
Cash flow hedges:
Unrealized holding losses		(108)		23		(85)
Pension Plan:
Unrealized net actuarial losses		(2,128)		566		(1,562)
Less: amortization of unrecognized gains		(132)		35		(97)
Net pension plan asset adjustment		(1,996)		531		(1,465)
Other comprehensive loss	$	(143)	$	32	$	(111)


	Before		Tax
Components of Other Comprehensive Income	Tax		(Expense)
(in thousands)	Amount		Benefit		Net
For the three months ended March 31, 2024
Available for sale (AFS) securities with credit related impairment:
Unrealized holding gains	$	210	$	(55)	$	155
Less: accretable yield recognized in income		50		(13)		37
Net unrealized gains on investments with credit related impairment		160		(42)		118
Available for sale securities – all other:
Unrealized holding losses		(623)		164		(459)
Held to maturity securities:
Unrealized holding gains on securities transferred to held to maturity		—		—		—
Less: amortization recognized in income		(160)		42		(118)
Net unrealized gains on HTM securities		160		(42)		118
Cash flow hedges:
Unrealized holding gains		73		(19)		54
Pension Plan:
Unrealized net actuarial gains		1,489		(393)		1,096
Less: amortization of unrecognized losses		(203)		54		(149)
Net pension plan asset adjustment		1,692		(447)		1,245
SERP:
Unrealized net actuarial gains		—		—		—
Less: amortization of unrecognized gains		(39)		10		(29)
Net SERP liability adjustment		39		(10)		29
Other comprehensive income	$	1,501	$	(396)	$	1,105

Table of Contents

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
		Accumulated Other
Details of Accumulated Other Comprehensive Loss		Comprehensive Loss
Components	Three Months Ended		Affected Line Item in the Statement
(in thousands)	March 31, 2025		Where Net Income is Presented
Net unrealized gains on available for sale investment securities with credit related impairment:
Accretable yield	$	50	Interest income on taxable investment securities
Taxes		(13)	Credit for income tax expense
	$	37	Net of tax
Net unrealized losses on held to maturity securities:
Amortization	$	(154)	Interest income on taxable investment securities
Taxes		41	Provision for income tax expense
	$	(113)	Net of tax
Net pension plan asset adjustment:
Amortization of unrecognized losses	$	(132)	Other Expense
Taxes		35	Provision for income tax expense
	$	(97)	Net of tax
Total reclassifications for the period	$	(173)	Net of tax

Table of Contents


	Amounts Reclassified from
		Accumulated Other
Details of Accumulated Other Comprehensive Income		Comprehensive Income
Components	Three Months Ended March 31,		Affected Line Item in the Statement
(in thousands)	March 31, 2024		Where Net Income is Presented
Net unrealized gains on available for sale investment securities with credit related impairment:
Accretable yield	$	50	Interest income on taxable investment securities
Taxes		(13)	Credit for income tax expense
	$	37	Net of tax
Net unrealized losses on held to maturity securities:
Amortization	$	(160)	Interest income on taxable investment securities
Taxes		42	Provision for income tax expense
	$	(118)	Net of tax
Net pension plan asset adjustment:
Amortization of unrecognized losses	$	(203)	Other Expense
Taxes		54	Provision for income tax expense
	$	(149)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized gains	$	(39)	Other Expense
Taxes		10	Provision/(credit) for income tax expense
	$	(29)	Net of tax
Total reclassifications for the period	$	(259)	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 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. 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.

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 "Compensation 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 Compensation Committee and maximum performance represented a level potentially achievable under ideal circumstances. Achievement of all threshold performance levels would result in each executive participant earning a payout at 50% of his or her respective target award opportunity. Achievement of all target performance levels would result in the executive participant earning the target award. Achievement at or above all maximum performance levels 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.

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, 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 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 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 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 $28,314 for the three-month

Table of Contents

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

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 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 $0.5 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 March 31, 2025.

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
					Amount of gain or
					(loss) recognized in
	Amount of (loss) or		Amount of gain or		income or derivative
	gain 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:
Three months ended:
March 31, 2025	$	(85)	$	—	$	—
March 31, 2024		54		—		—

Notes:

(a)

Reported as interest expense

(b)

Reported as other income

Table of Contents

Note 10 – Regulatory Capital Requirements

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


	March 31, 2025		December 31, 2024		Required for Capital Adequacy Purposes		Required to be Well Capitalized
Total Capital (to risk-weighted assets)	14.83	%	14.59	%	8.00	%	10.00	%
Tier 1 Capital (to risk-weighted assets)	13.58	%	13.35	%	6.00	%	8.00	%
Common Equity Tier 1 Capital (to risk-weighted assets)	13.58	%	13.35	%	4.50	%	6.50	%
Tier 1 Capital (to average assets)	10.76	%	10.70	%	4.00	%	5.00	%

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 March 31, 2025 and December 31, 2024.


(in thousands)	March 31, 2025			December 31, 2024
		Balance	Percent		Balance	Percent
Non-Interest-bearing deposits:	$	422,415	26%	$	426,737	27%
Interest-bearing deposits:
Demand		368,945	23%		386,803	25%
Money market-retail		465,504	29%		447,149	28%
Money market- brokered		2	0%		1	0%
Savings deposits		171,354	10%		170,972	11%
Time deposits- retail		145,354	9%		143,167	9%
Time deposits- brokered		50,000	3%		—	—
Total Deposits	$	1,623,574	100%	$	1,574,829	100%

Note 12 – Borrowed Funds

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



(in thousands)	March 31, 2025		December 31, 2024
Short-term borrowings:
Securities sold under agreements to repurchase:
Outstanding at end of period	$	20,342	$	15,409
Weighted average interest rate at end of period		0.23%		0.24%
Maximum amount outstanding as of any month end	$	20,342	$	44,415
Average amount outstanding	$	18,274	$	29,805
Approximate weighted average rate during the period		0.22%		0.26%
Overnight borrowings, weighted average interest rate of 4.50% at December 31, 2024	$	—	$	50,000
Long-term borrowings:
FHLB advances, bearing fixed interest rate ranging from 3.84% to 4.04% at March 31, 2025 and December 31, 2024.	$	90,000	$	90,000
Junior subordinated debt, bearing variable interest rate of 7.31% at March 31, 2025 and 7.36% at December 31, 2024		30,929		30,929
Total borrowings outstanding	$	141,271	$	186,338

Table of Contents

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.

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
(in thousands)	Fixed Rate		Floating Rate		Total		Fixed Rate		Floating Rate		Total
Due in 2025	$	25,000	$	—	$	25,000	$	25,000	$	—	$	25,000
Due in 2026		65,000		—		65,000		65,000		—		65,000
Thereafter		—		30,929		30,929		—		30,929		30,929
Total long-term debt	$	90,000	$	30,929	$	120,929	$	90,000	$	30,929	$	120,929

Note 13 – Segment Reporting

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:

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 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.

Table of Contents

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:


	Community		Wealth
	Banking		Management		Total
Total assets as of March 31, 2025	$	1,979,296	$	457	$	1,979,753

Total assets as of December 31, 2024	$	1,972,513	$	509	$	1,973,022

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

	Community		Wealth
(in thousands)	Banking		Management		Total
Interest income	$	24,062	$	—	$	24,062
Interest expense		8,046		—		8,046
Net interest income		16,016		—		16,016
Credit loss expense		656		—		656
Net interest income after credit loss expense		15,360		—		15,360
Other operating income:
Net gains on sales of residential mortgages		92		—		92
Service charges on deposit accounts		547		—		547
Other service charges		206		—		206
Trust department income		—		2,323		2,323
Debit card income		921		—		921
Brokerage commissions		—		421		421
Other segment income (1)		404		—		404
Total other operating income		2,170		2,744		4,914
Other operating expenses:
Salaries and employee benefits		6,247		1,084		7,331
Equipment and occupancy		1,242		25		1,267
Data processing		1,408		95		1,503
FDIC premiums		245		—		245
Other segment expenses (2)		2,103		127		2,230
Total operating expenses		11,245		1,331		12,576
Income before income taxes and intercompany fees		6,285		1,413		7,698
Intercompany management fee income (expense)		3		(3)		—
Income before income taxes		6,288		1,410		7,698
Income tax expense		1,595		297		1,892
Net income	$	4,693	$	1,113	$	5,806
Significant noncash items
Credit loss expense	$	656	$	—	$	656
Depreciation		652		4		656
Amortization of intangible assets		30		52		82

(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.

Table of Contents


		Three Months Ended
		March 31, 2024

	Community		Wealth
(in thousands)	Banking		Management		Total
Interest income	$	21,898	$	—	$	21,898
Interest expense		8,086		—		8,086
Net interest income		13,812		—		13,812
Credit loss expense		946		—		946
Net interest income after credit loss expense		12,866		—		12,866
Other operating income:
Net gains on sales of residential mortgages		82		—		82
Service charges on deposit accounts		556		—		556
Other service charges		215		—		215
Trust department income		—		2,188		2,188
Debit card income		932		—		932
Brokerage commissions		—		495		495
Other		407		—		407
Total other operating income		2,192		2,683		4,875
Other operating expenses:
Salaries and employee benefits		6,114		1,043		7,157
Equipment and occupancy		1,845		32		1,877
Data processing		1,220		98		1,318
FDIC premiums		269		—		269
Other		2,147		113		2,260
Total operating expenses		11,595		1,286		12,881
Income before income taxes and intercompany fees		3,463		1,397		4,860
Intercompany management fee income (expense)		3		(3)		—
Income before income taxes		3,466		1,394		4,860
Income tax expense		869		293		1,162
Net income	$	2,597	$	1,101	$	3,698
Significant noncash items
Credit loss expense	$	946	$	—	$	946
Depreciation		1,246		10		1,256
Amortization of intangible assets		30		52		82

(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.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

The following discussion and analysis is intended as a review of material changes in and significant factors affecting the financial condition and results of operations of First United Corporation and its consolidated subsidiaries for the periods indicated. This discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and the notes thereto contained in Item 1 of Part I of this report, as well as the audited consolidated financial statements and related notes included in First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2024.

Unless the context clearly suggests otherwise, references in this report to “us”, “we”, “our”, and “the Corporation” are to First United Corporation and its consolidated subsidiaries.

Table of Contents

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not represent historical facts, but are statements about management’s beliefs, plans and objectives about the future, as well as its assumptions and judgments concerning such beliefs, plans and objectives. These statements are evidenced by terms such as "anticipate," "estimate," "should," “will”, "expect," "believe," "intend," and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. The beliefs, plans and objectives on which forward-looking statements are based involve risks and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports that First United Corporation files with the Securities and Exchange Commission entitled "Risk Factors".

FIRST UNITED CORPORATION

First United Corporation is a Maryland corporation chartered in 1985 and a financial holding company registered with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended, that elected financial holding company status in 2021. The Corporation’s primary business is serving as the parent company of First United Bank & Trust, a Maryland trust company (the “Bank”), First United Statutory Trust I (“Trust I”) and First United Statutory Trust II (“Trust II” and together with Trust I, “the Trusts”), both Connecticut statutory business trusts. The Trusts were formed for the purpose of selling trust preferred securities that qualified as Tier 1 capital. The Bank has two consumer finance company subsidiaries- OakFirst Loan Center, Inc., a West Virginia corporation, and OakFirst Loan Center, LLC, a Maryland limited liability company – and two subsidiaries that it uses to hold real estate acquired through foreclosure or by deed in lieu of foreclosure – First OREO Trust, a Maryland statutory trust, and FUBT OREO I, LLC, a Maryland limited liability company. In addition, the Bank owns 99.9% of the limited partnership interests in Liberty Mews Limited Partnership, a Maryland limited partnership formed for the purpose of acquiring, developing and operating low-income housing units in Garrett County, Maryland, and a 99.9% non-voting membership interest in MCC FUBT Fund, LLC, an Ohio limited liability company formed for the purpose of acquiring, developing and operating low-income housing units in Allegany County, Maryland.

At March 31, 2025, the Corporation’s total assets were $2.0 billion, net loans were $1.5 billion, and deposits were $1.6 billion. Shareholders’ equity at March 31, 2025 was $183.7 million.

We maintain an Internet site at www.mybank.com on which we make available, free of charge, First United Corporation’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to the foregoing as soon as reasonably practicable after these reports are electronically filed with, or furnished to, the SEC.

RESULTS OF OPERATIONS

Overview

Consolidated net income was $5.8 million for the first quarter of 2025. This compares to $3.7 million for the first quarter of 2024. Basic net income was $0.90 per share and diluted net income was $0.89 per share for the first quarter of 2025, compared to basic and diluted net income of $0.56 per share for the first quarter of 2024.

The $2.1 million increase in quarterly net income when compared to the first quarter of 2024 was primarily driven by a $2.2 million increase in net interest income, a $0.3 million decrease in provision for credit loss, stable non-interest income, and a decrease in non-interest expense of $0.3 million, partially offset by an increase in income tax expense of $0.7 million. Comparing the first quarter of 2025 to the same period of 2024, interest and fees on loans increased by $2.5 million resulting from new loans booked at higher rates, the repricing of adjustable-rate loans, and growth in our loan portfolio. Interest expense remained stable when comparing year-over-year quarterly expense as reductions in the rate environment offset the increased funding.

Other operating income, including net gains, for the first quarter of 2025 was stable when compared to the same period of 2024. Wealth management income increased by $0.1 million due to increased market values and growth in new and existing customer relationships. This was offset by a decrease in brokerage commissions due to slower annuity sales comparing these quarters.

Table of Contents

Operating expenses decreased by $0.3 million in the first quarter of 2025 when compared to the first quarter of 2024. The decrease was largely driven by a $0.6 million decrease in equipment and occupancy expense due to the accelerated depreciation expenses recognized in the first quarter of 2024 in conjunction with the branch closures in February 2024. This decrease was partially offset by a $0.2 million increase in salaries and benefits primarily driven by increases in incentive pay and life and health insurance expenses due to increased claims. Additionally, data processing expenses increased by $0.2 million in the first quarter of 2025 when compared to the first quarter of 2024, partially offset by a decrease in other miscellaneous expenses of $0.1 million due primarily to reduced net periodic pension costs and check fraud related costs.

Net Interest Income

Net interest income is our largest source of operating revenue. Net interest income is the difference between the interest that we earn on our interest-earning assets and the interest expense we incur on our interest-bearing liabilities. For analytical and discussion purposes, net interest income is adjusted to a fully taxable equivalent (“FTE”) basis to facilitate performance comparisons between taxable and tax-exempt assets by increasing tax-exempt income by an amount equal to the federal income taxes that would have been paid if this income were taxable at the statutorily applicable rate. This is a non-GAAP disclosure and management believes it is not materially different than the corresponding GAAP disclosure.

The tables below summarize net interest income for the three-month periods ended March 31, 2025 and 2024.


		Non-GAAP					GAAP
		Three Months Ended					Three Months Ended
		March 31,					March 31,
(in thousands)		2025		2024			2025			2024
Interest income	$	24,111		$	21,955		$	24,062		$	21,898
Interest expense		8,046			8,086			8,046			8,086
Net interest income	$	16,065		$	13,869		$	16,016		$	13,812
Net interest margin %		3.56	%		3.12	%		3.55	%		3.10	%

Table of Contents

The following tables set forth the average balances, net interest income and expense, and average yields and rates of our interest-earning assets and interest-bearing liabilities for the three-month periods ended March 31, 2025 and 2024:


	Three Months Ended
	March 31,
	2025						2024
	Average				Average		Average				Average
(in thousands)	Balance		Interest		Yield/Rate		Balance		Interest		Yield/Rate
Assets
Loans	$	1,483,151	$	21,768	5.95	%	$	1,407,886	$	19,234	5.49	%
Investment Securities:
Taxable		284,303		1,763	2.51	%		294,526		1,744	2.38	%
Non taxable		6,524		81	5.04	%		7,806		94	4.84	%
Total		290,827		1,844	2.57	%		302,332		1,838	2.45	%
Federal funds sold		41,750		384	3.73	%		63,843		758	4.78	%
Interest-bearing deposits with other banks		8,488		15	0.72	%		8,787		31	1.42	%
Other interest earning assets		5,774		100	7.02	%		5,107		94	7.40	%
Total earning assets		1,829,990		24,111	5.34	%		1,787,955		21,955	4.94	%
Allowance for loan losses		(18,413)						(17,696)
Non-earning assets		165,125						188,425
Total Assets	$	1,976,702					$	1,958,684
Liabilities and Shareholders’ Equity
Deposits
Interest-bearing demand deposits	$	373,903	$	1,652	1.79	%	$	348,998	$	1,441	1.66	%
Interest-bearing money markets - retail		464,151		3,547	3.10	%		322,965		3,260	4.06	%
Interest-bearing money markets - brokered		134		1	3.03	%		—		—	—	%
Savings deposits		171,517		43	0.10	%		189,572		48	0.10	%
Time deposits - retail		144,519		1,055	2.96	%		157,678		1,118	2.85	%
Time deposits - brokered		36,041		385	4.33	%		30,000		399	5.35	%
Total		1,190,265		6,683	2.28	%		1,049,213		6,266	2.42	%
Short-term borrowings		23,053		20	0.35	%		73,351		461	2.53	%
Long-term borrowings		120,929		1,343	4.50	%		103,017		1,359	5.31	%
Total interest-bearing liabilities		1,334,247		8,046	2.45	%		1,225,581		8,086	2.65	%
Non-interest-bearing deposits		427,518						534,412
Other liabilities		31,474						34,747
Shareholders’ Equity		183,463						163,944
Total Liabilities and Shareholders’ Equity	$	1,976,702					$	1,958,684
Net interest income and spread			$	16,065	2.89	%			$	13,869	2.29	%
Net interest margin					3.56	%					3.12	%

(1)

The above table reflects the average rates earned or paid stated on an FTE basis assuming a 21% tax rate for 2025 and 2024. Non-GAAP interest income on a fully taxable equivalent for the three-month periods ended March 31, 2025 and 2024 was $49 and $57, respectively.

(2)

Net interest margin is calculated as net interest income divided by average earning assets.

(3)

The average yields on investments are based on amortized cost.

Net interest income, on a non-GAAP, FTE basis, increased by $2.2 million for the first quarter of 2025 when compared to the first quarter of 2024. This increase was driven by an increase of $2.2 million in interest income. Interest income on loans increased by $2.5 million due to the increase of 46 basis points in overall yield on the loan portfolio as new loans were booked at higher rates during 2024, upward repricing of adjustable-rate loans, and an increase in average balances of $75.3 million. Interest income on Federal funds sold decreased by $0.4 million due to a decrease of 105 basis points in average rates and a decrease of $22.1 million in average balances. Interest expense in the first quarter of 2025 was stable when compared to the first quarter of 2024. Interest expense paid on deposits increased by $0.4 million due to a $141.1 million increase in average balances, partially offset by a decrease of 12 basis points on the rate paid. Interest paid on short-term borrowings decreased by $0.4 million for the first

Table of Contents

quarter of 2025 when compared to the same period of 2024 due to the repayment of the $40.0 million from the Bank Term Funding Program late in the third quarter of 2024.

The following table sets forth an analysis of volume and rate changes in interest income and interest expense for our average interest-earning assets and average interest-bearing liabilities for the three-month periods ended March 31, 2025 and 2024:


	For the three months ended March 31, 2025
	compared to the three months ended March 31, 2024
(in thousands and tax equivalent basis)	Volume		Rate		Net
Interest Income:
Loans	$	4,132	$	(1,598)	$	2,534
Taxable Investments		(243)		262		19
Non-taxable Investments		(62)		49		(13)
Federal funds sold		(1,056)		682		(374)
Interest-bearing deposits		(4)		(12)		(16)
Other interest earning assets		49		(43)		6
Total interest income		2,816		(660)		2,156
Interest Expense:
Interest-bearing demand deposits		413		(202)		211
Interest-bearing money markets- retail		5,732		(5,445)		287
Interest-bearing money markets- brokered		134		(133)		1
Savings deposits		(18)		13		(5)
Time deposits - retail		(375)		312		(63)
Time deposits - brokered		323		(337)		(14)
Short-term borrowings		(1,273)		832		(441)
Long-term borrowings		951		(967)		(16)
Total interest expense		5,887		(5,927)		(40)
Net interest income	$	(3,071)	$	5,267	$	2,196

(1)

The change in interest income/expense due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

Provision for Credit Losses

Specific allocations have been made for loans where management has determined that the collateral supporting the loans is not adequate to cover the loan balance, and the qualitative factors affecting the estimated allowance for credit losses (“ACL”) have been adjusted based on the current economic environment and the characteristics of the loan portfolio. For the first three months of 2025 and 2024, net provision expense was $0.7 million and $0.9 million, respectively. The decreased provision expense recorded in the first quarter of 2025 when compared to the same period in 2024 was primarily related to the $12.1 million in commercial loan balances moved to non-accrual in the first quarter of 2024.

Table of Contents

Other Income

The composition of other operating income for the three-month periods ended March 31, 2025 and 2024 is illustrated in the following table:


	Income as % of
	Total Other Income
	Three Months Ended
	March 31,
(in thousands)	2025			2024
Service charges on deposit accounts	$	547	12%	$	556	12%
Other service charges		206	4%		215	4%
Trust department		2,323	48%		2,188	46%
Debit card income		921	19%		932	19%
Bank owned life insurance		341	7%		326	7%
Brokerage commissions		421	9%		495	10%
Other income		63	1%		81	2%
	$	4,822	100%	$	4,793	100%

Other Operating Expenses

The composition of other operating expenses for the three-month periods ended March 31, 2025 and 2024 is illustrated in the following table:


	Expense as % of
	Total Other Operating Expenses
	Three Months Ended
	March 31,
(in thousands)	2025			2024
Salaries and employee benefits	$	7,331	58%	$	7,157	56%
FDIC premiums		245	2%		269	2%
Equipment		578	5%		923	7%
Occupancy expense of premises		689	5%		954	8%
Data processing expense		1,503	12%		1,318	10%
Marketing expense		238	2%		134	1%
Professional services		476	4%		486	4%
Contract labor		163	1%		183	1%
Telephone		98	1%		109	1%
Other real estate owned		92	1%		86	1%
Investor relations		62	1%		53	0%
Contributions		56	0%		50	0%
Other		1,045	8%		1,159	9%
	$	12,576	100%	$	12,881	100%

Provision for Income Taxes

In reporting interim financial information, income tax provisions should be determined under the procedures set forth in Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 740, Income Taxes (Section 740-270-30). This guidance provides that at the end of each interim period, an entity should make its best estimate of the effective tax rate expected to be applicable for the full fiscal year. The rate so determined should be used in providing for income taxes on a current year-to-date basis. The effective tax rate should reflect anticipated investment tax credits, capital gains rates, and other available tax planning alternatives. In arriving at this effective tax rate, however, no effect should be included for the tax related to significant, unusual or extraordinary items that will be separately reported or reported net of their related tax effect in reports for the interim period or for the fiscal year.

Table of Contents

The effective income tax rates as a percentage of income for the three-month periods ended March 31, 2025 and March 31, 2024 were 24.6% and 23.9%, respectively.

GAAP and Non-GAAP Financial Measures

The following tables sets forth certain selected financial data for the periods ended March 31, 2025 and 2024 under GAAP (as reported) and non-GAAP. A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed in the most directly comparable measure calculated and presented in accordance with GAAP in the United States. The Corporation’s management believes that the presentation of non-GAAP financial measures provides investors with a greater understanding of the Corporation’s operating results in addition to the results measured in accordance with GAAP. While management uses these non-GAAP measures in its analysis of the Corporation’s performance, this information should not be viewed as a substitute for financial results determined in accordance with GAAP or considered to be more important than financial results determined in accordance with GAAP.

The following table presents a reconciliation of net income and diluted earnings per share (as reported) to adjusted net income and adjusted diluted earnings per share:


	Three months ended March 31,
(in thousands, except for per share amount)	2025		2024
Per Share Data
Basic net income per common share	$	0.90	$	0.56
Basic net income per common share - non-GAAP	$	0.90	$	0.62
Diluted net income per common share	$	0.89	$	0.56
Diluted net income per common share - non-GAAP	$	0.89	$	0.62
Basic book value per common share	$	28.40	$	24.89
Diluted book value per common share	$	28.42	$	24.86


Net income - as reported	$	5,806	$	3,698
Adjustments:
Accelerated depreciation expenses		—		562
Income tax effect of adjustments		—		(137)
Adjusted net income (non-GAAP)	$	5,806	$	4,123

Diluted earnings per share - as reported	$	0.89	$	0.56
Adjustments:
Accelerated depreciation expenses		—		0.08
Income tax effect of adjustments		—		(0.02)
Adjusted diluted earnings per share (non-GAAP)	$	0.89	$	0.62


Significant Ratios:	Three months ended March 31,
		2025		2024
Return on Average Assets - as reported		1.19%		0.76%
Accelerated depreciation expenses		-		0.03%
Income tax effect of adjustments		-		(0.01%)
Adjusted Return on Average Assets (non-GAAP)		1.19%		0.78%

Return on Average Equity - as reported		12.83%		9.07%
Accelerated depreciation expenses		-		0.34%
Income tax effect of adjustments		-		(0.08%)
Adjusted Return on Average Equity (non-GAAP)		12.83%		9.33%

Table of Contents

FINANCIAL CONDITION

Balance Sheet Overview

Total assets at March 31, 2025 were $2.0 billion, representing a $6.7 million increase since December 31, 2024. During the first quarter of 2025, cash and interest-bearing deposits in other banks increased by $6.1 million. The investment portfolio increased by $5.2 million as bonds were purchased to gain yield before long-term rates decline. Gross loans decreased slightly by $0.9 million. While loan production was modest during the quarter, amortization and payoffs exceeded growth levels. Pension assets decreased by $1.8 million due to decreased market values.

Total liabilities at March 31, 2025 were $1.8 billion, representing a $2.3 million increase since December 31, 2024. Total deposits increased by $48.7 million when compared to December 31, 2024 related primarily to the $50.0 million in new brokered deposits that were obtained in January 2025 to fund the repayment of the $50.0 million in overnight borrowings outstanding at December 31, 2024. Savings and money market accounts increased by $18.7 million and retail time deposits increased by $2.2 million. Interest-bearing demand deposits, primarily our ICS product, decreased by $17.9 million and non-interest-bearing deposits decreased by $4.3 million due primarily to seasonal fluctuations in municipal deposit accounts and increased spending by businesses and consumers related to inflation, respectively. Short-term borrowings decreased by $45.1 million primarily due to the repayment of $50.0 million in overnight borrowings outstanding at December 31, 2024, partially offset by increases in balances of the overnight investment sweep product.

Loan Portfolio

The following table presents the composition of our loan portfolio at the dates indicated:


(in thousands)	March 31, 2025			December 31, 2024
Commercial real estate	$	532,764	36%	$	526,364	36%
Acquisition and development		94,063	6%		95,314	6%
Commercial and industrial		282,370	19%		287,534	19%
Residential mortgage		520,072	36%		518,815	35%
Consumer		50,600	3%		52,766	4%
Total Loans	$	1,479,869	100%	$	1,480,793	100%

Outstanding loans of $1.5 billion at March 31, 2025 reflected a $0.9 million decrease since December 31, 2024. Since December 31, 2024, commercial real estate loans increased by $6.4 million, acquisition and development loans decreased by $1.2 million, commercial and industrial loans decreased by $5.2 million, residential mortgage loans increased by $1.3 million, and consumer loans decreased by $2.2 million.

New commercial loan production for the three months ended March 31, 2025 was approximately $36.1 million. The pipeline of commercial loans as of March 31, 2025 was $56.0 million. Commercial amortization and payoffs were approximately $35.0 million through March 31, 2025, due primarily to pay-offs of short-term commercial loans as well as normal amortizations of the commercial loan portfolio.

New consumer mortgage loan production for the first quarter of 2025 was approximately $11.4 million, with most of this production comprised of in-house mortgages. The pipeline of in-house, portfolio loans as of March 31, 2025 was $10.9 million.

Non-accrual loans totaled $4.0 million at March 31, 2025 compared to $4.9 million at December 31, 2024. The decrease in non-accrual balances at March 31, 2025 was related to principal reductions.

Table of Contents

The following table presents loans in our commercial real estate portfolio by industry type at March 31, 2025.


(in thousands)	Non-owner-occupied		Owner-occupied		Multi-family		Total
Accommodations and food services	$	70,613	$	5,437	$	—	$	76,050
Administration and support, waste management, and remediation services		—		1,397		—		1,397
Agriculture, forestry, fishing and hunting		—		1,360		—		1,360
Arts, entertainment and recreation		—		4,364		—		4,364
Construction		2,019		5,641		2		7,662
Educational services		—		851		—		851
Finance and insurance		—		106		—		106
Health care and social assistance		6,407		14,119		—		20,526
Manufacturing		—		12,996		—		12,996
Other services (except public services)		—		19,722		305		20,027
Professional, scientific and technical services		—		1,884		—		1,884
Public administration		1,415		927		—		2,342
Commercial rental properties		3,761		3,520		339		7,620
Residential rental properties		177,742		84,970		—		262,712
Student rental properties		1,940		528		17,490		19,958
Mixed use rental properties		188		120		25,371		25,679
Storage units		40,406		—		—		40,406
Real estate rental and leasing- other		—		—		2,659		2,659
Retail trade		77		3,090		—		3,167
Transportation and warehousing		—		452		—		452
Wholesale trade		—		20,546		—		20,546
Total	$	304,568	$	182,030	$	46,166	$	532,764

Our loan portfolio does not consist of any loans secured by office buildings located in major metropolitan areas or that are over four stories or any retail properties rented to major big box retail tenants. There have been no significant changes in our commercial real estate concentrations since December 31, 2024.

Table of Contents

Risk Elements of Loan Portfolio

The following table presents the risk elements of our loan portfolio at the dates indicated. Management is not aware of any potential problem loans other than those listed in this table or discussed below.


(in thousands)	March 31, 2025		% of Applicable Portfolio	December 31, 2024		% of Applicable Portfolio
Non-accrual loans:
Commercial real estate	$	79	0.01%	$	656	0.12%
Acquisition and development		39	0.04%		82	0.09%
Commercial and industrial		1,839	0.65%		1,838	0.00%
Residential mortgage		1,956	0.38%		2,181	0.42%
Consumer		113	0.22%		174	0.33%
Total non-accrual loans	$	4,026	0.27%	$	4,931	0.33%
Accruing Loans Past Due 90 days or more:
Commercial real estate	$	—		$	317
Residential mortgage		233			573
Consumer		—			28
Total loans past due 90 days or more	$	233		$	918
Total non-accrual and accruing loans past due 90 days or more	$	4,259		$	5,849

Repossessed assets		2,802			2,802
Other real estate owned	$	3,062		$	3,062
Total Non-performing assets	$	10,123		$	11,713
Individually evaluated loans without a valuation allowance	$	3,432		$	4,432
Total individually evaluated loans	$	3,432		$	4,432

Non-accrual loans to total loans (as %)		0.27%			0.33%
Non-performing loans to total loans (as %)		0.29%			0.39%
Non-performing assets to total assets (as %)		0.51%			0.59%
Allowance for credit losses to non-accrual loans (as %)		458.69%			368.49%
Allowance for credit losses to non-performing assets (as %)		182.43%			155.13%

Table of Contents

Allowance for Credit Losses

The ACL represents an amount which, in management’s judgment, is adequate to absorb expected credit losses over the life of outstanding loans as of the balance sheet date based on the evaluation of current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions and prepayment experience. The ACL is measured and recorded upon the initial recognition of a financial asset. The ACL is reduced by charge-offs, net of recoveries of previous losses, and is increased by a provision or decreased by a recovery for credit losses, which is recorded as a current period operating expense.

Determination of an appropriate ACL is inherently complex and requires the use of significant and highly subjective estimates. The reasonableness of the ACL is reviewed quarterly by management.

Management believes that 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 credit losses in the loan portfolio can vary from the amounts actually observed. While management uses available information to recognize expected credit losses, future additions to the ACL may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes to the interest rate environment which may directly impact prepayment and curtailment rate assumptions, and changes in the financial conditions of borrowers.

The ACL “base case” model is derived from various economic forecasts provided by widely recognized sources. Management evaluates the variability of market conditions by examining the peak and trough of economic cycles. These peaks and troughs are used to stress the base case model to develop a range of potential outcomes. Management then determines the appropriate reserve through an evaluation of these various outcomes relative to current economic conditions and known risks in the portfolio. For the period ended March 31, 2025 the range of outcomes would produce a 16% reduction or a 63% increase in reserves based on the best-case and worst-case scenarios, respectively.

The following table presents a summary of the activity in the ACL for the three-month periods ended March 31, 2025 and 2024:


(in thousands)	2025			2024
Balance, January 1	$	18,170		$	17,480
Charge-offs:
Acquisition and development		(3)			—
Commercial and industrial		(355)			(112)
Consumer		(184)			(506)
Total charge-offs		(542)			(618)
Recoveries:
Commercial real estate		—			37
Acquisition and development		64			3
Commercial and industrial		2			31
Residential mortgage		16			18
Consumer		100			70
Total recoveries		182			159
Net losses		(360)			(459)
Credit loss expense		657			961
Balance at end of period	$	18,467		$	17,982

Allowance for credit losses to gross loans outstanding (as %)		1.25	%		1.27	%

Table of Contents


Net (Charge-offs)/Recoveries as a % of Average Applicable Portfolio

	2025		2024
Commercial real estate		0.00%		0.03%
Acquisition and development		0.26%		0.01%
Commercial and industrial		(0.50)%		(0.12)%
Residential mortgage		0.01%		0.01%
Consumer		(0.65)%		(2.89)%
Total		(0.10)%		(0.13)%

Investment Securities

At March 31, 2025, the total amortized cost basis of the available-for-sale investment portfolio was $119.8 million compared to a fair value of $100.0 million. Unrealized gains and losses on available-for-sale securities are reflected in accumulated other comprehensive loss, a component of shareholders’ equity. The amortized cost basis of the held to maturity portfolio was $174.2 million compared to a fair value of $146.8 million.

The following table presents the composition of our securities portfolio at amortized cost and fair values at the dates indicated:


	March 31, 2025					December 31, 2024
	Amortized		Fair Value		FV as %	Amortized		Fair Value		FV as %
(in thousands)	Cost		(FV)		of Total	Cost		(FV)		of Total
Available for Sale Securities:
U.S. treasuries	$	3,862	$	4,013	4%	$	—	$	—	—
U.S. government agencies		7,000		6,219	6%		7,000		6,115	6%
Residential mortgage-backed agencies		24,050		20,217	20%		24,621		20,196	21%
Commercial mortgage-backed agencies		36,943		28,925	29%		37,205		28,634	30%
Collateralized mortgage obligations		20,706		17,763	18%		21,069		17,726	19%
Obligations of state and political subdivisions		7,543		7,258	7%		6,533		6,209	7%
Corporate bonds		1,000		906	1%		1,000		896	1%
Collateralized debt obligations		18,707		14,697	15%		18,686		14,718	16%
Total available for sale	$	119,811	$	99,998	100%	$	116,114	$	94,494	100%
Held to Maturity Securities:
U.S. government agencies	$	68,374	$	58,891	40%	$	68,301	$	57,109	39%
Residential mortgage-backed agencies		31,539		28,513	19%		32,171		28,611	20%
Commercial mortgage-backed agencies		21,089		15,648	11%		21,134		15,340	11%
Collateralized mortgage obligations		48,696		39,791	27%		49,439		39,715	27%
Obligations of state and political subdivisions		4,505		3,928	3%		4,511		3,985	3%
Total held to maturity	$	174,203	$	146,771	100%	$	175,556	$	144,760	100%

Total fair value of investment securities available for sale increased by $5.5 million since December 31, 2024 as cash flow from the portfolio was reinvested into securities at higher yields and to maintain balances for liquidity. At March 31, 2025, the securities classified as available-for-sale included a net unrealized loss of $19.8 million, which represents the difference between the fair value and amortized cost of securities in the portfolio.

Total amortized cost of securities held to maturity decreased by $1.4 million since December 31, 2024 due primarily to principal paydowns of the portfolio.

As discussed in Note 6 to the consolidated financial statements presented elsewhere in this report, the Corporation measures fair market values based on the fair value hierarchy established in ASC Topic 820, Fair Value Measurements and Disclosures. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Level 3 prices or valuation techniques require inputs that are both significant to the valuation assumptions and are not readily observable in the market (i.e., supported with little

Table of Contents

or no market activity). These Level 3 instruments are valued based on both observable and unobservable inputs derived from the best available data, some of which is internally developed, and considers risk premiums that a market participant would require.

Approximately $85.3 million of the available-for-sale portfolio was valued using Level 2 pricing and had net unrealized losses of $15.8 million at March 31, 2025. The remaining $14.7 million of the available-for-sale securities represents the entire collateralized debt obligation portfolio, which was valued using significant unobservable inputs (Level 3 assets). The $4.0 million in net unrealized losses associated with this portfolio relates to nine pooled trust preferred securities that comprise the collateralized debt obligation portfolio.

Deposits

The following table presents the composition of our deposits at the dates indicated:


(in thousands)	March 31, 2025			December 31, 2024
		Balance	Percent		Balance	Percent
Non-interest-bearing demand deposits	$	422,415	26%	$	426,737	27%
Interest-bearing deposits:
Demand		368,945	23%		386,803	25%
Money market- retail		465,504	29%		447,149	28%
Money market- brokered		2	0%		1	0%
Savings deposits		171,354	10%		170,972	11%
Time deposits- retail		145,354	9%		143,167	9%
Time deposits- brokered		50,000	3%		—	—
Total Deposits	$	1,623,574	100%	$	1,574,829	100%

Total deposits at March 31, 2025 increased by $48.7 million when compared to December 31, 2024 driven by the purchase of $50.0 million in brokered certificates of deposit with an average interest rate of 4.24% to fully repay the $50.0 million in overnight borrowings that were outstanding at December 31, 2024. Savings and money market accounts increased by $18.7 million due primarily to the expansion of current and new relationships throughout the first three months of 2025. Non-interest-bearing checking deposits decreased by $4.3 million and interest-bearing checking deposits decreased by $17.9 million due to seasonal fluctuations in municipal and commercial account balances and increased spending by businesses and consumers related to inflation. Retail time deposits increased by $2.2 million since December 31, 2024.

The following table summarizes the percentage of deposits that are insured by deposit insurance or otherwise fully collateralized by securities compared to uninsured deposits as of March 31, 2025 and December 31, 2024.


		March 31, 2025			December 31, 2024
(in thousands)		Balance	Percent		Balance	Percent
Insured deposits	$	1,230,373	76%	$	1,192,182	76%
Uninsured and fully collateralized deposits		83,365	5%		77,369	5%
Uninsured and uncollateralized deposits		309,836	19%		305,278	19%
	$	1,623,574	100%	$	1,574,829	100%

Table of Contents

The following table summarizes the percentage of deposit balances from retail customers compared to business customers as of March 31, 2025 and December 31, 2024.


		March 31, 2025			December 31, 2024
(in thousands)		Balance	Percent		Balance	Percent
Retail deposits	$	795,181	49%	$	798,664	51%
Business deposits		828,393	51%		776,165	49%
	$	1,623,574	100%	$	1,574,829	100%

Borrowed Funds

The following table presents the composition of our borrowings at the dates indicated:


(in thousands)	March 31, 2025		December 31, 2024
Overnight borrowings from Federal Reserve Discount Window	$	—	$	50,000
Securities sold under agreements to repurchase		20,342		15,409
Total short-term borrowings	$	20,342	$	65,409
FHLB advances		90,000		90,000
Junior subordinated debt		30,929		30,929
Total long-term borrowings	$	120,929	$	120,929

Short-term borrowings decreased by $45.1 million as a result of the purchase of a $50.0 million brokered CD to fully repay the overnight borrowings outstanding at December 31, 2024, partially offset by increases in balances of the overnight investment sweep product. There were no changes in long-term borrowings when comparing March 31, 2025 to December 31, 2024.

Liquidity Management

Liquidity is a financial institution’s capability to meet customer demands for deposit withdrawals while funding all credit-worthy loans. The factors that determine the institution’s liquidity are:

●

Reliability and stability of core deposits;

●

Cash flow structure and pledging status of investments; and

●

Potential for unexpected loan demand.

We actively manage our liquidity position through meetings of a sub-committee of executive management, which looks forward 12 months at 30-day intervals. The measurement is based upon the projection of funds sold or purchased position, along with ratios and trends developed to measure dependence on purchased funds and core growth. Monthly reviews by management and quarterly reviews by the Asset and Liability Committee under prescribed policies and procedures are designed to ensure that we will maintain adequate levels of available funds.

It is our policy to manage our affairs so that liquidity needs are fully satisfied through normal Bank operations. That is, the Bank will manage its liquidity to minimize the need to make unplanned sales of assets or to borrow funds under emergency conditions. The Bank will use funding sources where the interest cost is relatively insensitive to market changes in the short run (periods of one year or less) to satisfy operating cash needs. The remaining normal funding will come from interest-sensitive liabilities, either deposits or borrowed funds. When the marginal cost of needed wholesale funding is lower than the cost of raising this funding in the retail markets, the Corporation may supplement retail funding with external funding sources such as:

●

Unsecured Fed Funds lines of credit with upstream correspondent banks (M&T Bank, Atlantic Community Bankers Bank, Community Bankers Bank, PNC Financial Services, Pacific Coast Banker’s Bank and Zions Bancorp).

●

Secured advances with the FHLB of Atlanta, which are collateralized by eligible one-to-four family residential mortgage loans, home equity lines of credit, commercial real estate loans. Cash and various securities may also be pledged as collateral.

Table of Contents

●

Secured line of credit with the Federal Reserve Discount Window for use in borrowing funds up to 90 days, using eligible investment securities as collateral.

●

Brokered deposits, including CDs and money market funds, provide a method to generate deposits quickly. These deposits are strictly rate driven but often provide the most cost-effective means of funding growth.

●

One Way Buy CDARS/ICS funding – a form of brokered deposits that has become a viable supplement to brokered deposits obtained directly.

The following table presents sources of liquidity available to the Corporation as of March 31, 2025.


(in thousands)		Total Availability		Amount Used		Net Availability
Internal Sources
Excess cash	$	62,422	$	-	$	62,422
Unpledged securities		31,036		-		31,036
External Sources
Federal Reserve (discount window)		87,275		-		87,275
Correspondent unsecured lines of credit		140,000		-		140,000
FHLB		334,100		96,214		237,886
	$	654,833	$	96,214	$	558,619

Management is not aware of any demands, commitments, events or uncertainties that are likely to materially affect our ability to meet our future capital requirements.

Market Risk and Interest Sensitivity

Our primary market risk is interest rate fluctuation. Interest rate risk results primarily from the traditional banking activities that we engage in, such as gathering deposits and extending loans. Many factors, including economic and financial conditions, movements in interest rates and consumer preferences affect the difference between the interest earned on our assets and the interest paid on our liabilities. Interest rate sensitivity refers to the degree that earnings will be impacted by changes in the prevailing level of interest rates. Interest rate risk arises from mismatches in the repricing or maturity characteristics between interest-bearing assets and liabilities. Management seeks to minimize fluctuating net interest margins, and to enhance consistent growth of net interest income through periods of changing interest rates. Management uses interest sensitivity gap analysis and simulation models to measure and manage these risks. The interest rate sensitivity gap analysis assigns each interest-earning asset and interest-bearing liability to a time frame reflecting its next repricing or maturity date. The differences between total interest-sensitive assets and liabilities at each time interval represent the interest sensitivity gap for that interval. A positive gap generally indicates that rising interest rates during a given interval will increase net interest income, as more assets than liabilities will reprice. A negative gap position would benefit us during a period of declining interest rates.

At March 31, 2025, we were asset sensitive.

Our interest rate risk management goals are:

●

Ensure that the Board of Directors and senior management will provide effective oversight and ensure that risks are adequately identified, measured, monitored and controlled;

●

Enable dynamic measurement and management of interest rate risk;

●

Select strategies that optimize our ability to meet our long-range financial goals while maintaining interest rate risk within policy limits established by the Board of Directors;

●

Use both income and market value oriented techniques to select strategies that optimize the relationship between risk and return; and

●

Establish interest rate risk exposure limits for fluctuation in net interest income (“NII”), net income and economic value of equity.

To manage interest sensitivity risk, management formulates guidelines regarding asset generation and pricing, funding sources and pricing, and off-balance sheet commitments. These guidelines are based on management’s outlook regarding future

Table of Contents

interest rate movements, the state of the regional and national economy, and other financial and business risk factors. Management uses computer simulations to measure the effect on net interest income of various interest rate scenarios. Key assumptions used in the computer simulations include cash flows and maturities of interest rate sensitive assets and liabilities, changes in asset volumes and pricing, and management’s capital plans. This modeling reflects interest rate changes and the related impact on net interest income over specified periods.

We evaluate the effect of a change in interest rates of +/-100 basis points to +/-400 basis points on both NII and Net Portfolio Value (“NPV”) / Economic Value of Equity (“EVE”). We concentrate on NII rather than net income as long as NII remains the significant contributor to net income.

NII modeling allows management to view how changes in interest rates will affect the spread between the yield paid on assets and the cost of deposits and borrowed funds. Unlike traditional Gap modeling, NII modeling takes into account the different degree to which installments in the same repricing period will adjust to a change in interest rates. It also allows the use of different assumptions in a falling versus a rising rate environment. The period considered by the NII modeling is the next eight quarters.

NPV / EVE modeling focuses on the change in the market value of equity. NPV / EVE is defined as the market value of assets less the market value of liabilities plus/minus the market value of any off-balance sheet positions. By effectively looking at the present value of all future cash flows on or off the balance sheet, NPV / EVE modeling takes a longer-term view of interest rate risk. This complements the shorter-term view of the NII modeling.

Measures of NII at risk produced by simulation analysis are indicators of an institution’s short-term performance in alternative rate environments. These measures are typically based upon a relatively brief period, usually one year. They do not necessarily indicate the long-term prospects or economic value of the institution.

Table of Contents

Based on the simulation analysis performed at March 31, 2025 and December 31, 2024, management estimated the following changes in net interest income, assuming the indicated rate changes:


(in thousands)	March 31, 2025		December 31, 2024
+400 basis points	$	10,677	$	5,722
+300 basis points	$	8,785	$	5,300
+200 basis points	$	6,402	$	4,253
+100 basis points	$	3,462	$	2,391
-100 basis points	$	(3,764)	$	(2,851)
-200 basis points	$	(7,194)	$	(5,424)
-300 basis points	$	(10,809)	$	(8,080)
-400 basis points	$	(14,968)	$	(11,151)

Due to the current rate environment and changes to prepayment speeds, the Corporation became slightly more asset sensitive as compared to December 31, 2024. All changes in net interest income from our simulation analysis remains within our policy limits.

This estimate is based on assumptions that may be affected by unforeseeable changes in the general interest rate environment and any number of unforeseeable factors. Rates on different assets and liabilities within a single maturity category adjust to changes in interest rates to varying degrees and over varying periods of time. The relationships between lending rates and rates paid on purchased funds are not constant over time. Management can respond to current or anticipated market conditions by lengthening or shortening the Bank’s sensitivity through loan repricings or changing its funding mix. The rate of growth in interest-free sources of funds will influence the level of interest-sensitive funding sources. In addition, the absolute level of interest rates will affect the volume of earning assets and funding sources. As a result of these limitations, the interest-sensitive gap is only one factor to be considered in estimating the net interest margin.

Management believes that no material changes in our market risks, our procedures used to evaluate and mitigate those risks, or our actual or simulated sensitivity positions have occurred since December 31, 2024. Our NII simulation analysis as of December 31, 2024 is included in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2024 under the heading “Market Risk and Interest Sensitivity.

Impact of Inflation – Our assets and liabilities are primarily monetary in nature, and as such, future changes in prices do not affect the obligations to pay or receive fixed and determinable amounts of money. During inflationary periods, monetary assets lose value in terms of purchasing power and monetary liabilities have corresponding purchasing power gains. The concept of purchasing power is not an adequate indicator of the impact of inflation on financial institutions because it does not incorporate changes in our earnings.

Capital Resources

We require capital to fund loans, satisfy our obligations under the Bank’s letters of credit, meet the deposit withdrawal demands of the Bank’s customers, and satisfy our other monetary obligations. To the extent that deposits are not adequate to fund our capital requirements, we can rely on the funding sources identified above under the heading “Liquidity Management”.

In addition to operational requirements, the Bank is subject to risk-based capital regulations, which were adopted and are monitored by federal banking regulators. These regulations are used to evaluate capital adequacy and require an analysis of an institution’s asset risk profile and off-balance sheet exposures, such as unused loan commitments and stand-by letters of credit.

Table of Contents

The following table presents the Bank’s capital ratios as of the dates indicated:


	March 31, 2025		December 31, 2024		Required for Capital Adequacy Purposes		Required to be Well Capitalized
Total Capital (to risk-weighted assets)	14.83	%	14.59	%	8.00	%	10.00	%
Tier 1 Capital (to risk-weighted assets)	13.58	%	13.35	%	6.00	%	8.00	%
Common Equity Tier 1 Capital (to risk-weighted assets)	13.58	%	13.35	%	4.50	%	6.50	%
Tier 1 Capital (to average assets)	10.76	%	10.70	%	4.00	%	5.00	%

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

Contractual Obligations, Commitments and Off-Balance Sheet Arrangements

Contractual Obligations

The Corporation enters into contractual obligations in the normal course of business. Among these obligations are Federal Home Loan Bank advances and junior subordinated debentures, operating lease agreements for banking and subsidiaries’ offices and for data processing and telecommunications equipment. Comparing March 31, 2025 to December 31, 2024, short-term borrowings decreased by $45.1 million primarily due to the repayment of $50.0 million in overnight borrowings outstanding at December 31, 2024, partially offset by increases in balances of the overnight investment sweep product.

Commitments

Loan commitments are made to accommodate the financial needs of our customers. Letters of credit commit us to make payments on behalf of customers when certain specified future events occur. The credit risks inherent in loan commitments and letters of credit are essentially the same as those involved in extending loans to customers, and these arrangements are subject to our normal credit policies. We are not a party to any other off-balance sheet arrangements.

Commitments to extend credit in the form of consumer, commercial and business at the dates indicated were as follows:


(in thousands)	March 31, 2025		December 31, 2024
Residential mortgage - home equity	$	70,386	$	70,894
Residential mortgage - construction		10,996		13,138
Commercial		162,727		163,079
Consumer - personal credit lines		4,307		4,224
Standby letters of credit		16,363		16,522
Total	$	264,779	$	267,857

The decrease of $3.1 million in commitments at March 31, 2025 when compared to December 31, 2024 was due to businesses and consumers utilizing construction funding. These balances shifted to loans outstanding.

For the three-month periods ended March 31, 2025 and 2024, net credit loss expense for off-balance sheet exposures was a credit of approximately $1,000 and a credit of approximately $15,000, respectively.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

First United Corporation is a “smaller reporting company” as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended, and, accordingly, is not required to include the information required by this item.

Table of Contents

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act with the Securities and Exchange Commission (the “SEC”), such as this Quarterly Report, is recorded, processed, summarized and reported within the periods specified in those rules and forms, and that such information is accumulated and communicated to our management, including First United Corporation’s principal executive officer (“PEO”) and its principal financial officer (“PFO”), as appropriate, to allow for timely decisions regarding required disclosure. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

An evaluation of the effectiveness of these disclosure controls as of March 31, 2025 was carried out under the supervision and with the participation of management, including the PEO and the PFO. Based on that evaluation, management, including the PEO and the PFO, has concluded that our disclosure controls and procedures are, in fact, effective at the reasonable assurance level.

During the three months ended March 31, 2025, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

The risks and uncertainties to which our financial condition and operations are subject are discussed in detail in Item 1A of Part I of First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2024. Management does not believe that any material changes in our risk factors have occurred since they were last disclosed.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

During the quarter ended March 31, 2025, Julie Peterson, an officer of the Company, terminated a “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of the SEC’s Regulation S-K). The arrangement was adopted on February 2, 2024 and contemplated the monthly purchase on the open market of a specified dollar amount of shares of the Corporation’s common stock on the 15^th business day of each month, beginning on February 15, 2024.

During the three months ended March 31, 2025, based on information provided to the Corporation, no other director or officer of the Corporation adopted or terminated (i) any contract, instruction or written plan for the purchase or sale of securities of the registrant intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) promulgated under the Exchange Act or (ii) any “non-Rule 10b51 trading arrangement” (as defined in Item 408(c) of the SEC’s Registration S-K).

Table of Contents

Item 6. Exhibits

The exhibits filed or furnished with this quarterly report are listed in the following Exhibit Index.


Exhibit		Description
10.1		Revised Appendix A to the First United Corporation Short-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Corporation’s Current Report on Form 8-K filed on March 3, 2025)*
10.2		Form of First Amendment to the Participation Agreement under the First United Bank & Trust Defined Benefit Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.1 to the Corporation’s Current Report on Form 8-K filed on March 28, 2025
31.1		Certifications of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)
31.2		Certifications of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)
32		Certification of the Principal Executive Officer and the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act (furnished herewith)
101.INS		Inline XBRL Instance Document (filed herewith)
101.SCH		Inline XBRL Taxonomy Extension Schema (filed herewith)
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith)
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith)
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase (filed herewith)
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith)
104		The cover page of First United Corporation’s Quarterly Report on Form 10Q for the quarter ended March 31, 2025 formatted in Inline XBRL, included within the Exhibit 101 attachments (filed herewith).

*Portions of Exhibit 10.1, identified in brackets, are excluded because they are both not material and would likely cause competitive harm to the Corporation if publicly disclosed. Such information will be disclosed as, if and when required pursuant to Item 402 of Regulation S-K.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	FIRST UNITED CORPORATION


Date: May 7, 2025	/s/ Carissa L. Rodeheaver
	Carissa L. Rodeheaver, CPA
	Chairman of the Board, President and Chief Executive Officer
	(Principal Executive Officer)


Date: May 7, 2025	/s/ Tonya K. Sturm
	Tonya K. Sturm, Senior Vice President,
	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)