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us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedDebtObligationsMember 2021-06-30 0000763907 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedDebtObligationsMember 2020-12-31 0000763907 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedDebtObligationsMember 2022-07-01 2022-09-30 0000763907 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedDebtObligationsMember 2022-01-01 2022-09-30 0000763907 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedDebtObligationsMember 2021-07-01 2021-09-30 0000763907 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedDebtObligationsMember 2021-01-01 2021-09-30 0000763907 us-gaap:FairValueMeasurementsNonrecurringMember 2022-09-30 0000763907 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember 2021-12-31 0000763907 us-gaap:FairValueMeasurementsNonrecurringMember 2021-12-31 0000763907 func:Year2022Member func:UnvestedRestrictedStockUnitsMember func:LongTermIncentivePlanMember 2022-09-30 0000763907 func:Year2021Member us-gaap:RestrictedStockUnitsRSUMember func:LongTermIncentivePlanMember 2022-09-30 0000763907 func:Year2020Member func:UnvestedRestrictedStockUnitsMember func:LongTermIncentivePlanMember 2022-09-30 0000763907 us-gaap:RetainedEarningsMember 2022-07-01 2022-09-30 0000763907 us-gaap:RetainedEarningsMember 2022-04-01 2022-06-30 0000763907 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0000763907 us-gaap:RetainedEarningsMember 2021-07-01 2021-09-30 0000763907 us-gaap:RetainedEarningsMember 2021-04-01 2021-06-30 0000763907 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0000763907 us-gaap:InterestRateSwapMember 2016-03-31 0000763907 us-gaap:InterestRateSwapMember 2022-07-01 2022-09-30 0000763907 us-gaap:InterestRateSwapMember 2022-01-01 2022-09-30 0000763907 us-gaap:InterestRateSwapMember 2022-09-30 0000763907 us-gaap:InterestRateSwapMember 2021-12-31 0000763907 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2022-01-31 0000763907 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2021-01-31 0000763907 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2022-01-01 2022-01-31 0000763907 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2021-01-01 2021-01-31 0000763907 func:Year2022Member us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2022-07-01 2022-09-30 0000763907 func:Year2021Member us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2022-07-01 2022-09-30 0000763907 func:Year2021Member us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2022-01-01 2022-09-30 0000763907 func:Year2022Member 2022-01-01 2022-09-30 0000763907 func:Year2021Member us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2021-07-01 2021-09-30 0000763907 func:Year2021Member us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2021-01-01 2021-09-30 0000763907 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2021-12-31 0000763907 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2022-07-01 2022-09-30 0000763907 us-gaap:PensionPlansDefinedBenefitMember 2022-07-01 2022-09-30 0000763907 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2021-07-01 2021-09-30 0000763907 us-gaap:PensionPlansDefinedBenefitMember 2021-07-01 2021-09-30 0000763907 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2021-01-01 2021-09-30 0000763907 us-gaap:PensionPlansDefinedBenefitMember 2021-01-01 2021-09-30 0000763907 srt:DirectorMember func:TwentyEighteenEquityPlanMember 2022-05-01 2022-05-31 0000763907 srt:DirectorMember 2022-01-01 2022-09-30 0000763907 srt:DirectorMember func:TwentyEighteenEquityPlanMember 2021-05-01 2021-05-31 0000763907 srt:DirectorMember func:TwentyEighteenEquityPlanMember 2021-01-01 2021-01-31 0000763907 srt:MaximumMember func:TwentyEighteenEquityPlanMember 2022-09-30 0000763907 srt:DirectorMember 2022-09-30 0000763907 us-gaap:SecuritiesSoldUnderAgreementsToRepurchaseMember 2022-09-30 0000763907 us-gaap:SecuritiesSoldUnderAgreementsToRepurchaseMember 2021-12-31 0000763907 us-gaap:USTreasurySecuritiesMember 2022-09-30 0000763907 2021-09-30 0000763907 2020-12-31 0000763907 us-gaap:CorporateDebtSecuritiesMember 2022-09-30 0000763907 us-gaap:USStatesAndPoliticalSubdivisionsMember 2021-12-31 0000763907 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2021-12-31 0000763907 us-gaap:MortgageBackedSecuritiesMember 2021-12-31 0000763907 us-gaap:CommercialMortgageBackedSecuritiesMember 2021-12-31 0000763907 func:InvestmentSecuritiesAvailableForSaleMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember func:DiscountedCashFlowMember 2022-09-30 0000763907 func:ImpairedLoansMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember 2022-09-30 0000763907 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember 2022-09-30 0000763907 func:InvestmentSecuritiesAvailableForSaleMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember func:DiscountedCashFlowMember 2021-12-31 0000763907 func:ImpairedLoansMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember func:MarketComparablePropertiesMember 2021-12-31 0000763907 func:OtherRealEstateOwnedMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember 2021-12-31 0000763907 func:EquityMethodInvestmentMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember 2021-12-31 0000763907 us-gaap:RestrictedStockUnitsRSUMember 2022-01-01 2022-09-30 0000763907 us-gaap:RestrictedStockUnitsRSUMember 2021-01-01 2021-09-30 0000763907 func:Year2021Member us-gaap:RestrictedStockUnitsRSUMember func:LongTermIncentivePlanMember 2022-07-01 2022-09-30 0000763907 srt:DirectorMember func:TwentyEighteenEquityPlanMember 2022-07-01 2022-09-30 0000763907 func:PerformanceVestedSharesMember func:LongTermIncentivePlanMember 2022-07-01 2022-09-30 0000763907 func:Year2021Member us-gaap:RestrictedStockUnitsRSUMember func:LongTermIncentivePlanMember 2022-01-01 2022-09-30 0000763907 srt:DirectorMember func:TwentyEighteenEquityPlanMember 2022-01-01 2022-09-30 0000763907 func:PerformanceVestedSharesMember func:LongTermIncentivePlanMember 2022-01-01 2022-09-30 0000763907 srt:DirectorMember func:TwentyEighteenEquityPlanMember 2021-07-01 2021-09-30 0000763907 func:LongTermIncentivePlanMember 2021-07-01 2021-09-30 0000763907 func:Year2021Member us-gaap:RestrictedStockUnitsRSUMember func:LongTermIncentivePlanMember 2021-01-01 2021-09-30 0000763907 srt:DirectorMember func:TwentyEighteenEquityPlanMember 2021-01-01 2021-09-30 0000763907 func:LongTermIncentivePlanMember 2021-01-01 2021-09-30 0000763907 us-gaap:AdditionalPaidInCapitalMember 2022-07-01 2022-09-30 0000763907 us-gaap:CommonStockMember 2022-04-01 2022-06-30 0000763907 us-gaap:AdditionalPaidInCapitalMember 2022-04-01 2022-06-30 0000763907 2022-04-01 2022-06-30 0000763907 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-03-31 0000763907 2022-01-01 2022-03-31 0000763907 us-gaap:AdditionalPaidInCapitalMember 2021-07-01 2021-09-30 0000763907 us-gaap:AdditionalPaidInCapitalMember 2021-04-01 2021-06-30 0000763907 2021-04-01 2021-06-30 0000763907 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0000763907 2021-01-01 2021-03-31 0000763907 us-gaap:CollateralizedDebtObligationsMember 2022-09-30 0000763907 us-gaap:CollateralizedDebtObligationsMember 2021-12-31 0000763907 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2022-01-01 2022-09-30 0000763907 func:LongTermIncentivePlanMember 2022-07-01 2022-09-30 0000763907 func:LongTermIncentivePlanMember 2022-01-01 2022-09-30 0000763907 srt:OfficerMember us-gaap:RestrictedStockUnitsRSUMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2022-01-01 2022-09-30 0000763907 srt:OfficerMember us-gaap:RestrictedStockUnitsRSUMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2022-01-01 2022-09-30 0000763907 us-gaap:RestrictedStockUnitsRSUMember func:LongTermIncentivePlanMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2022-01-01 2022-09-30 0000763907 us-gaap:RestrictedStockUnitsRSUMember func:LongTermIncentivePlanMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2020-03-26 2020-03-26 0000763907 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2022-01-01 2022-09-30 0000763907 us-gaap:FairValueInputsLevel2Member 2021-01-01 2021-12-31 0000763907 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2021-01-01 2021-12-31 0000763907 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2021-01-01 2021-12-31 0000763907 func:AccumulatedNetUnrealizedInvestmentGainLossHeldToMaturityMember 2022-07-01 2022-09-30 0000763907 func:AccumulatedNetUnrealizedInvestmentGainLossHeldToMaturityMember 2021-07-01 2021-09-30 0000763907 func:AccumulatedNetUnrealizedInvestmentGainLossHeldToMaturityMember 2021-01-01 2021-09-30 0000763907 us-gaap:PensionPlansDefinedBenefitMember 2022-01-01 2022-09-30 0000763907 func:ResidentialRealEstateConstructionFinancingReceivableMember 2022-07-01 2022-09-30 0000763907 func:ResidentialRealEstateConstructionFinancingReceivableMember 2022-01-01 2022-06-30 0000763907 func:ResidentialRealEstateConstructionFinancingReceivableMember 2021-01-01 2021-12-31 0000763907 func:CoronavirusAidReliefAndEconomicSecurityActMember us-gaap:CommercialPortfolioSegmentMember 2022-01-01 2022-09-30 0000763907 func:CoronavirusAidReliefAndEconomicSecurityActMember us-gaap:CommercialPortfolioSegmentMember 2021-01-01 2021-12-31 0000763907 func:CoronavirusAidReliefAndEconomicSecurityActMember us-gaap:CommercialPortfolioSegmentMember 2022-09-30 0000763907 func:CoronavirusAidReliefAndEconomicSecurityActMember us-gaap:CommercialPortfolioSegmentMember 2021-12-31 0000763907 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2022-01-01 2022-09-30 0000763907 func:AccumulatedNetUnrealizedInvestmentGainLossHeldToMaturityMember 2022-01-01 2022-09-30 0000763907 2021-01-01 2021-01-31 0000763907 us-gaap:InterestRateSwapMember 2016-03-01 2016-03-31 0000763907 us-gaap:SubstandardMember 2022-01-01 2022-03-31 0000763907 us-gaap:USStatesAndPoliticalSubdivisionsMember 2022-09-30 0000763907 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2022-09-30 0000763907 us-gaap:ResidentialMortgageBackedSecuritiesMember 2022-09-30 0000763907 us-gaap:MortgageBackedSecuritiesMember 2022-09-30 0000763907 us-gaap:CommercialMortgageBackedSecuritiesMember 2022-09-30 0000763907 us-gaap:ResidentialMortgageBackedSecuritiesMember 2021-12-31 0000763907 func:RecognitionOfGainsLossesInIncomeMember func:AccumulatedNetUnrealizedInvestmentGainLossHeldToMaturityMember 2022-07-01 2022-09-30 0000763907 func:RecognitionOfGainsLossesInIncomeMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2022-01-01 2022-09-30 0000763907 func:RecognitionOfGainsLossesInIncomeMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember func:AccumulatedNetUnrealizedInvestmentGainLossHeldToMaturityMember 2022-01-01 2022-09-30 0000763907 func:RecognitionOfGainsLossesInIncomeMember func:AccumulatedNetUnrealizedInvestmentGainLossHeldToMaturityMember 2021-07-01 2021-09-30 0000763907 func:RecognitionOfGainsLossesInIncomeMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2021-01-01 2021-09-30 0000763907 func:RecognitionOfGainsLossesInIncomeMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember func:AccumulatedNetUnrealizedInvestmentGainLossHeldToMaturityMember 2021-01-01 2021-09-30 0000763907 srt:MinimumMember func:InvestmentSecuritiesAvailableForSaleMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember func:DiscountedCashFlowMember 2022-01-01 2022-09-30 0000763907 srt:MaximumMember func:InvestmentSecuritiesAvailableForSaleMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember func:DiscountedCashFlowMember 2022-01-01 2022-09-30 0000763907 func:ImpairedLoansMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:MeasurementInputRevenueMultipleMember 2022-01-01 2022-09-30 0000763907 func:EquityMethodInvestmentMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:MeasurementInputRevenueMultipleMember 2021-01-01 2021-12-31 0000763907 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember func:DiscountedCashFlowMember 2021-01-01 2021-12-31 0000763907 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember func:MarketComparablePropertiesMember 2021-01-01 2021-12-31 0000763907 srt:MinimumMember func:ImpairedLoansMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember func:MarketComparablePropertiesMember 2022-01-01 2022-09-30 0000763907 srt:MinimumMember func:ImpairedLoansMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember func:MarketComparablePropertiesMember 2021-01-01 2021-12-31 0000763907 srt:MaximumMember func:ImpairedLoansMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember func:MarketComparablePropertiesMember 2021-01-01 2021-12-31 0000763907 srt:WeightedAverageMember func:ImpairedLoansMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember func:MarketComparablePropertiesMember 2021-01-01 2021-12-31 0000763907 2022-02-01 2022-02-01 0000763907 func:FirstUnitedBankTrustMember 2021-12-31 0000763907 func:FirstUnitedBankTrustMember 2022-09-30 0000763907 2022-07-01 2022-09-30 0000763907 2021-07-01 2021-09-30 0000763907 2021-01-01 2021-09-30 0000763907 us-gaap:FairValueInputsLevel1Member 2022-09-30 0000763907 us-gaap:FairValueInputsLevel1Member 2021-12-31 0000763907 us-gaap:FairValueInputsLevel3Member 2021-12-31 0000763907 us-gaap:FairValueInputsLevel3Member 2022-09-30 0000763907 us-gaap:FairValueInputsLevel2Member 2022-09-30 0000763907 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2022-09-30 0000763907 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2022-09-30 0000763907 us-gaap:FairValueInputsLevel2Member 2021-12-31 0000763907 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2021-12-31 0000763907 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2021-12-31 0000763907 2022-09-30 0000763907 2021-12-31 0000763907 2022-10-31 0000763907 2022-01-01 2022-09-30 xbrli:shares iso4217:USD xbrli:pure func:security func:contract func:director iso4217:USD xbrli:shares func:employee

Table of Contents

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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 September 30, 2022

◻ 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: 6,656,390 shares of common stock, par value $.01 per share, as of October 31, 2022.

​

​

​

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 – September 30, 2022 and December 31, 2021 | 3
​ | Consolidated Statements of Operations – for the nine and three months ended September 30, 2022 and 2021 | 4
​ | Consolidated Statements of Comprehensive (Loss)/Income – for the nine and three months ended September 30, 2022 and 2021 | 8
​ | Consolidated Statements of Changes in Shareholders’ Equity – for nine months ended September 30, 2022 and 2021 | 10
​ | Consolidated Statements of Cash Flows – for the nine months ended September 30, 2022 and 2021 | 12
​ | Notes to Consolidated Financial Statements | 13
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 47
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 67
Item 4. | Controls and Procedures | 68
​ | ​ | ​
PART II. OTHER INFORMATION | 69
Item 1. | Legal Proceedings | 69
Item 1A. | Risk Factors | 69
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 69
Item 3. | Defaults upon Senior Securities | 69
Item 4. | Mine Safety Disclosures | 69
Item 5. | Other Information | 69
Item 6. | Exhibits | 70
SIGNATURES | 71

​

​

​

​

2

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

First United Corporation and Subsidiaries

Consolidated Statements of Financial Condition

(In thousands, except share data - Unaudited)

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | September 30, 2022 |  | December 31, 2021
​ | ​ | ​ | ​ | ​ | ​
Assets | ​ | ​ | ​ | ​ | ​ | ​
Cash and due from banks | ​ | $ | 28,888 | ​ | $ | 109,823
Interest bearing deposits in banks | ​ | ​ | 1,868 | ​ | ​ | 5,897
Cash and cash equivalents | ​ | ​ | 30,756 | ​ | ​ | 115,720
Investment securities – available for sale (at fair value) | ​ | ​ | 128,039 | ​ | ​ | 286,771
Investment securities – held to maturity (fair value $205,745 at September 30, 2022 and $65,369 at December 31, 2021) | ​ | ​ | 238,445 | ​ | ​ | 56,259
Restricted investment in bank stock, at cost | ​ | ​ | 1,027 | ​ | ​ | 1,029
Loans held for sale | ​ | ​ | — | ​ | ​ | 67
Loans | ​ | ​ | 1,277,924 | ​ | ​ | 1,153,687
Unearned fees | ​ | ​ | (210) | ​ | ​ | (292)
Allowance for loan losses | ​ | ​ | (15,541) | ​ | ​ | (15,955)
Net loans | ​ | ​ | 1,262,173 | ​ | ​ | 1,137,440
Premises and equipment, net | ​ | ​ | 35,022 | ​ | ​ | 34,697
Goodwill and other intangibles | ​ | ​ | 11,895 | ​ | ​ | 12,052
Bank owned life insurance | ​ | ​ | 46,041 | ​ | ​ | 45,150
Deferred tax assets | ​ | ​ | 16,180 | ​ | ​ | 6,857
Other real estate owned, net | ​ | ​ | 4,733 | ​ | ​ | 4,477
Right of use assets | ​ | ​ | 1,987 | ​ | ​ | 2,247
Pension asset | ​ | ​ | — | ​ | ​ | 4,765
Accrued interest receivable | ​ | ​ | 5,157 | ​ | ​ | 4,821
Other assets | ​ | ​ | 22,187 | ​ | ​ | 17,486
Total Assets | ​ | $ | 1,803,642 | ​ | ​ | 1,729,838
Liabilities and Shareholders’ Equity | ​ | ​ | ​ | ​ | ​ | ​
Liabilities: | ​ | ​ | ​ | ​ | ​ | ​
Non-interest bearing deposits | ​ | $ | 474,444 | ​ | $ | 501,627
Interest bearing deposits | ​ | ​ | 1,036,674 | ​ | ​ | 967,747
Total deposits | ​ | ​ | 1,511,118 | ​ | ​ | 1,469,374
Short-term borrowings | ​ | ​ | 89,726 | ​ | ​ | 57,699
Long-term borrowings | ​ | ​ | 30,929 | ​ | ​ | 30,929
Operating lease liability | ​ | ​ | 2,472 | ​ | ​ | 2,761
SERP deferred compensation | ​ | ​ | 10,481 | ​ | ​ | 10,395
Pension Liability | ​ | ​ | 7,652 | ​ | ​ | —
Accrued interest payable and other liabilities | ​ | ​ | 18,221 | ​ | ​ | 15,787
Dividends payable | ​ | ​ | 999 | ​ | ​ | 993
Total Liabilities | ​ | ​ | 1,671,598 | ​ | ​ | 1,587,938
Shareholders’ Equity: | ​ | ​ | ​ | ​ | ​ | ​
Common Stock – par value $0.01 per share; Authorized 25,000,000 shares; issued and outstanding 6,659,390 shares at September 30, 2022 and 6,620,955 at December 31, 2021 | ​ | ​ | 67 | ​ | ​ | 66
Surplus | ​ | ​ | 24,238 | ​ | ​ | 23,661
Retained earnings | ​ | ​ | 160,573 | ​ | ​ | 145,487
Accumulated other comprehensive loss | ​ | ​ | (52,834) | ​ | ​ | (27,314)
Total Shareholders’ Equity | ​ | ​ | 132,044 | ​ | ​ | 141,900
Total Liabilities and Shareholders’ Equity | ​ | $ | 1,803,642 | ​ | $ | 1,729,838

​

See accompanying notes to the consolidated financial statements

​

​

3

Table of Contents

First United Corporation and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share data)

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended
​ | ​ | September 30,
​ |  | 2022 |  | 2021
​ | ​ | (Unaudited)
Interest income | ​ | ​ | ​ | ​ | ​ | ​
Interest and fees on loans | ​ | $ | 39,351 | ​ | $ | 39,496
Interest on investment securities | ​ | ​ | ​ | ​ | ​ | ​
Taxable | ​ | ​ | 4,533 | ​ | ​ | 2,864
Exempt from federal income tax | ​ | ​ | 834 | ​ | ​ | 809
Total investment income | ​ | ​ | 5,367 | ​ | ​ | 3,673
Other | ​ | ​ | 345 | ​ | ​ | 239
Total interest income | ​ | ​ | 45,063 | ​ | ​ | 43,408
Interest expense | ​ | ​ | ​ | ​ | ​ | ​
Interest on deposits: | ​ | ​ | ​ | ​ | ​ | ​
Savings | ​ | ​ | 70 | ​ | ​ | 63
Interest-bearing transaction accounts | ​ | ​ | 716 | ​ | ​ | 827
Time deposits | ​ | ​ | 711 | ​ | ​ | 1,987
Total interest on Deposits | ​ | ​ | 1,497 | ​ | ​ | 2,877
Interest on short-term borrowings | ​ | ​ | 86 | ​ | ​ | 67
Interest on long-term borrowings | ​ | ​ | 1,027 | ​ | ​ | 1,840
Total Interest Expense | ​ | ​ | 2,610 | ​ | ​ | 4,784
Net Interest income | ​ | ​ | 42,453 | ​ | ​ | 38,624
Provision for loan losses | ​ | ​ | 97 | ​ | ​ | 68
Net interest income after provision for loan losses | ​ | ​ | 42,356 | ​ | ​ | 38,556
Other operating income | ​ | ​ | ​ | ​ | ​ | ​
Net gains on investments, available for sale | ​ | ​ | 3 | ​ | ​ | 154
Net gains/(losses) on investments, held to maturity | ​ | ​ | 93 | ​ | ​ | (54)
Net gains on sale of residential mortgage loans | ​ | ​ | 31 | ​ | ​ | 996
Net gains on disposal of fixed assets | ​ | ​ | 34 | ​ | ​ | 16
Net gains | ​ | ​ | 161 | ​ | ​ | 1,112
Other Income | ​ | ​ | ​ | ​ | ​ | ​
Service charges on deposit accounts | ​ | ​ | 1,451 | ​ | ​ | 1,292
Other service charges | ​ | ​ | 686 | ​ | ​ | 664
Trust department | ​ | ​ | 6,238 | ​ | ​ | 6,441
Debit card income | ​ | ​ | 2,922 | ​ | ​ | 2,623
Bank owned life insurance | ​ | ​ | 891 | ​ | ​ | 877
Brokerage commissions | ​ | ​ | 805 | ​ | ​ | 854
Other | ​ | ​ | 406 | ​ | ​ | 431
Total other income | ​ | ​ | 13,399 | ​ | ​ | 13,182
Total other operating income | ​ | ​ | 13,560 | ​ | ​ | 14,294
Other operating expenses | ​ | ​ | ​ | ​ | ​ | ​
Salaries and employee benefits | ​ | ​ | 17,891 | ​ | ​ | 16,214
FDIC premiums | ​ | ​ | 479 | ​ | ​ | 575
Equipment expense | ​ | ​ | 3,110 | ​ | ​ | 2,837
Occupancy expense of premises | ​ | ​ | 2,172 | ​ | ​ | 2,102
Data processing expense | ​ | ​ | 2,516 | ​ | ​ | 2,420
Marketing expense | ​ | ​ | 409 | ​ | ​ | 408
Professional services | ​ | ​ | 873 | ​ | ​ | 2,872
Contract labor | ​ | ​ | 482 | ​ | ​ | 486
Telephone | ​ | ​ | 365 | ​ | ​ | 606
Losses/(gains) on sales and write downs of other real estate owned, net | ​ | ​ | 375 | ​ | ​ | (460)
Investor relations | ​ | ​ | 258 | ​ | ​ | 546
Settlement expense | ​ | ​ | — | ​ | ​ | 3,300
FHLB prepayment penalty | ​ | ​ | — | ​ | ​ | 2,368
Contributions | ​ | ​ | 184 | ​ | ​ | 105
Other | ​ | ​ | 2,437 | ​ | ​ | 2,203

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Total other operating expenses | ​ | ​ | 31,551 | ​ | ​ | 36,582
Income before income tax expense | ​ | ​ | 24,365 | ​ | ​ | 16,268
Provision for income tax expense | ​ | ​ | 6,286 | ​ | ​ | 4,047
Net Income | ​ | $ | 18,079 | ​ | $ | 12,221
Basic net income per share | ​ | $ | 2.72 | ​ | $ | 1.81
Diluted net income per share | ​ | $ | 2.72 | ​ | $ | 1.81
Weighted average number of basic shares outstanding | ​ | ​ | 6,645 | ​ | ​ | 6,741
Weighted average number of diluted shares outstanding | ​ | ​ | 6,655 | ​ | ​ | 6,746
Dividends declared per common share | ​ | $ | 0.45 | ​ | $ | 0.45

​

See accompanying notes to the consolidated financial statements

​

5

Table of Contents

First United Corporation and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share data)

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | September 30,
​ |  | 2022 |  | 2021
​ | ​ | (Unaudited)
Interest income | ​ | ​ | ​ | ​ | ​ | ​
Interest and fees on loans | ​ | $ | 14,058 | ​ | $ | 13,667
Interest on investment securities | ​ | ​ | ​ | ​ | ​ | ​
Taxable | ​ | ​ | 1,587 | ​ | ​ | 880
Exempt from federal income tax | ​ | ​ | 273 | ​ | ​ | 266
Total investment income | ​ | ​ | 1,860 | ​ | ​ | 1,146
Other | ​ | ​ | 267 | ​ | ​ | 97
Total interest income | ​ | ​ | 16,185 | ​ | ​ | 14,910
Interest expense | ​ | ​ | ​ | ​ | ​ | ​
Interest on deposits: | ​ | ​ | ​ | ​ | ​ | ​
Savings | ​ | ​ | 34 | ​ | ​ | 17
Interest-bearing transaction accounts | ​ | ​ | 397 | ​ | ​ | 192
Time deposits | ​ | ​ | 190 | ​ | ​ | 523
Total interest on Deposits | ​ | ​ | 621 | ​ | ​ | 732
Interest on short-term borrowings | ​ | ​ | 47 | ​ | ​ | 17
Interest on long-term borrowings | ​ | ​ | 376 | ​ | ​ | 536
Total Interest Expense | ​ | ​ | 1,044 | ​ | ​ | 1,285
Net Interest income | ​ | ​ | 15,141 | ​ | ​ | 13,625
Provision for loan losses | ​ | ​ | (108) | ​ | ​ | (597)
Net interest income after provision for loan losses | ​ | ​ | 15,249 | ​ | ​ | 14,222
Other operating income | ​ | ​ | ​ | ​ | ​ | ​
Net gains on investments, held to maturity | ​ | ​ | 93 | ​ | ​ | (54)
Gains on sale of residential mortgage loans | ​ | ​ | 3 | ​ | ​ | 136
Net gains | ​ | ​ | 96 | ​ | ​ | 82
Other Income | ​ | ​ | ​ | ​ | ​ | ​
Service charges on deposit accounts | ​ | ​ | 523 | ​ | ​ | 475
Other service charges | ​ | ​ | 241 | ​ | ​ | 232
Trust department | ​ | ​ | 2,005 | ​ | ​ | 2,166
Debit card income | ​ | ​ | 1,053 | ​ | ​ | 900
Bank owned life insurance | ​ | ​ | 302 | ​ | ​ | 298
Brokerage commissions | ​ | ​ | 272 | ​ | ​ | 229
Other | ​ | ​ | 208 | ​ | ​ | 223
Total other income | ​ | ​ | 4,604 | ​ | ​ | 4,523
Total other operating income | ​ | ​ | 4,700 | ​ | ​ | 4,605
Other operating expenses | ​ | ​ | ​ | ​ | ​ | ​
Salaries and employee benefits | ​ | ​ | 6,130 | ​ | ​ | 5,719
FDIC premiums | ​ | ​ | 150 | ​ | ​ | 209
Equipment | ​ | ​ | 1,037 | ​ | ​ | 1,032
Occupancy | ​ | ​ | 734 | ​ | ​ | 684
Data processing | ​ | ​ | 890 | ​ | ​ | 819
Marketing | ​ | ​ | 152 | ​ | ​ | 129
Professional services | ​ | ​ | (211) | ​ | ​ | 615
Contract labor | ​ | ​ | 159 | ​ | ​ | 153
Line rentals | ​ | ​ | 112 | ​ | ​ | 123
Losses on sales and write downs of other real estate owned, net | ​ | ​ | 128 | ​ | ​ | 150
Investor relations | ​ | ​ | 39 | ​ | ​ | 116
Contributions | ​ | ​ | 121 | ​ | ​ | 55
FHLB prepayment penalty | ​ | ​ | — | ​ | ​ | 2,368
Other | ​ | ​ | 895 | ​ | ​ | 855
Total other operating expenses | ​ | ​ | 10,336 | ​ | ​ | 13,027
Income before income tax expense | ​ | ​ | 9,613 | ​ | ​ | 5,800
Provision for income tax expense | ​ | ​ | 2,677 | ​ | ​ | 1,412

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Net Income | ​ | $ | 6,936 | ​ | $ | 4,388
Basic net income per common share | ​ | $ | 1.04 | ​ | $ | 0.66
Diluted net income per common share | ​ | $ | 1.04 | ​ | $ | 0.66
Weighted average number of basic shares outstanding | ​ | ​ | 6,658 | ​ | ​ | 6,617
Weighted average number of diluted shares outstanding | ​ | ​ | 6,669 | ​ | ​ | 6,624
Dividends declared per common share | ​ | $ | 0.15 | ​ | $ | 0.15

See accompanying notes to the consolidated financial statements

​

​

7

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​

First United Corporation and Subsidiaries

Consolidated Statements of Comprehensive (Loss)/Income

(In thousands)

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended
​ | ​ | September 30,
​ | ​ | 2022 | ​ | 2021
Comprehensive (Loss)/Income | ​ | (Unaudited)
Net Income | ​ | $ | 18,079 | ​ | $ | 12,221
Other comprehensive (loss)/income, net of tax and reclassification adjustments: | ​ | ​ | ​ | ​ | ​ | ​
Available for sale securities: | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding (losses)/gains on investments with OTTI | ​ | $ | (853) | ​ | $ | 3,274
Reclassification adjustment for accretable yield realized in income | ​ | ​ | 152 | ​ | ​ | 151
Other comprehensive (loss)/income on investments with OTTI | ​ | ​ | (1,005) | ​ | ​ | 3,123
​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses on all other AFS investments | ​ | $ | (22,971) | ​ | $ | (5,035)
Unrealized holding losses on securities transferred from available for sale to held to maturity | ​ | ​ | 8,328 | ​ | ​ | —
Reclassification adjustment for gains realized in income | ​ | ​ | 3 | ​ | ​ | 154
Other comprehensive losses on all other AFS investments | ​ | ​ | (14,646) | ​ | ​ | (5,189)
​ | ​ | ​ | ​ | ​ | ​ | ​
Held to Maturity Securities | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses on securities transferred to held to maturity | ​ | $ | (8,328) | ​ | $ | —
Reclassification adjustment for gains/(losses) realized in income | ​ | ​ | 93 | ​ | ​ | (54)
Reclassification adjustment for amortization realized in income | ​ | ​ | (644) | ​ | ​ | (96)
Other comprehensive (losses)/income on HTM investments | ​ | ​ | (7,777) | ​ | ​ | 150
​ | ​ | ​ | ​ | ​ | ​ | ​
Cash flow hedges: | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains on cash flow hedges | ​ | $ | 1,622 | ​ | $ | 615
Reclassification adjustment for gains realized in income | ​ | ​ | — | ​ | ​ | —
Other comprehensive income on cash flow hedges | ​ | ​ | 1,622 | ​ | ​ | 615
​ | ​ | ​ | ​ | ​ | ​ | ​
Pension plan liability: | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding (losses)/gains on pension plan liability | ​ | $ | (14,079) | ​ | $ | 139
Reclassification adjustment for amortization of unrecognized loss realized in income | ​ | ​ | (837) | ​ | ​ | (1,116)
Other comprehensive (loss)/income on pension plan liability | ​ | ​ | (13,242) | ​ | ​ | 1,255
​ | ​ | ​ | ​ | ​ | ​ | ​
SERP liability: | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses on SERP liability | ​ | $ | — | ​ | $ | —
Reclassification adjustment for amortization of unrealized loss realized in income | ​ | ​ | (203) | ​ | ​ | (225)
Other comprehensive income on SERP liability | ​ | ​ | 203 | ​ | ​ | 225
​ | ​ | ​ | ​ | ​ | ​ | ​
Other comprehensive (losses)/gains before income tax | ​ | ​ | (34,845) | ​ | ​ | 179
Income tax benefit/(expense) related to other comprehensive income | ​ | ​ | 9,325 | ​ | ​ | (48)
​ | ​ | ​ | ​ | ​ | ​ | ​
Other comprehensive (loss)/income, net of tax | ​ | ​ | (25,520) | ​ | ​ | 131
Comprehensive (loss)/income | ​ | $ | (7,441) | ​ | $ | 12,352
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​

​

See accompanying notes to the consolidated financial statements

​

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First United Corporation and Subsidiaries

Consolidated Statements of Comprehensive (Loss)/Income

(In thousands)

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | September 30,
​ |  | 2022 |  | 2021
Comprehensive Income (in thousands) | ​ | (Unaudited)
Net Income | ​ | $ | 6,936 | ​ | $ | 4,388
Other comprehensive (loss)/income, net of tax and reclassification adjustments: | ​ | ​ | ​ | ​ | ​ | ​
Available for sale securities: | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding (losses)/gains on investments with OTTI | ​ | $ | (199) | ​ | $ | 751
Reclassification adjustment for accretable yield realized in income | ​ | ​ | 51 | ​ | ​ | 50
Other comprehensive(loss)/income on investments with OTTI | ​ | ​ | (250) | ​ | ​ | 701
​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses on all other AFS investments | ​ | $ | (6,768) | ​ | $ | (708)
Reclassification adjustment for gains realized in income | ​ | ​ | — | ​ | ​ | —
Other comprehensive losses on all other AFS investments | ​ | ​ | (6,768) | ​ | ​ | (708)
​ | ​ | ​ | ​ | ​ | ​ | ​
Held to Maturity Securities | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses on securities transferred to held to maturity | ​ | $ | — | ​ | $ | —
Reclassification adjustment for gains realized in income | ​ | ​ | 93 | ​ | ​ | (54)
Reclassification adjustment for amortization realized in income | ​ | ​ | (320) | ​ | ​ | 12
Other comprehensive income on HTM investments | ​ | ​ | 227 | ​ | ​ | 42
​ | ​ | ​ | ​ | ​ | ​ | ​
Cash flow hedges: | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains on cash flow hedges | ​ | $ | 534 | ​ | $ | 108
Reclassification adjustment for gains realized in income | ​ | ​ | — | ​ | ​ | —
Other comprehensive income on cash flow hedges | ​ | ​ | 534 | ​ | ​ | 108
​ | ​ | ​ | ​ | ​ | ​ | ​
Pension plan liability: | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses on pension plan liability | ​ | $ | (3,537) | ​ | $ | (951)
Reclassification adjustment for amortization of unrecognized loss realized in income | ​ | ​ | (279) | ​ | ​ | (372)
Other comprehensive losses on pension plan liability | ​ | ​ | (3,258) | ​ | ​ | (579)
​ | ​ | ​ | ​ | ​ | ​ | ​
SERP liability: | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses on SERP liability | ​ | $ | — | ​ | $ | —
Reclassification adjustment for amortization of unrealized loss realized in income | ​ | ​ | (68) | ​ | ​ | (75)
Other comprehensive income on SERP liability | ​ | ​ | 68 | ​ | ​ | 75
​ | ​ | ​ | ​ | ​ | ​ | ​
Other comprehensive losses before income tax | ​ | ​ | (9,447) | ​ | ​ | (361)
Income tax benefit related to other comprehensive income | ​ | ​ | 2,529 | ​ | ​ | 97
​ | ​ | ​ | ​ | ​ | ​ | ​
Other comprehensive loss, net of tax | ​ | ​ | (6,918) | ​ | ​ | (264)
Comprehensive income | ​ | $ | 18 | ​ | $ | 4,124

​

​

​

See accompanying notes to the consolidated financial statements

​

​

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First United Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(In thousands, except per share data)

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Common Stock |  | Surplus |  | Retained Earnings |  | Accumulated Other Comprehensive Loss |  | Total Shareholders' Equity
Balance at January 1, 2022 | ​ | $ | 66 | ​ | $ | 23,661 | ​ | $ | 145,487 | ​ | $ | (27,314) | ​ | $ | 141,900
Net income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 5,715 | ​ | ​ | ​ | ​ | ​ | 5,715
Other comprehensive loss | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (9,593) | ​ | ​ | (9,593)
Stock based compensation | ​ | ​ | ​ | ​ | ​ | (4) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (4)
Common stock issued - 15,456 shares | ​ | ​ | ​ | ​ | ​ | 55 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 55
Common stock dividend declared - $0.15 per share | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (995) | ​ | ​ | ​ | ​ | ​ | (995)
Balance at March 31, 2022 | ​ | $ | 66 | ​ | $ | 23,712 | ​ | $ | 150,207 | ​ | $ | (36,907) | ​ | $ | 137,078
Net income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 5,428 | ​ | ​ | ​ | ​ | ​ | 5,428
Other comprehensive loss | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (9,009) | ​ | ​ | (9,009)
Stock based compensation | ​ | ​ | 1 | ​ | ​ | 339 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 340
Common stock issued - 18,416 shares | ​ | ​ | ​ | ​ | ​ | 54 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 54
Common stock dividend declared - $0.15 per share | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (999) | ​ | ​ | ​ | ​ | ​ | (999)
Balance at June 30, 2022 | ​ | $ | 67 | ​ | $ | 24,105 | ​ | $ | 154,636 | ​ | $ | (45,916) | ​ | $ | 132,892
Net income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 6,936 | ​ | ​ | ​ | ​ | ​ | 6,936
Other comprehensive loss | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (6,918) | ​ | ​ | (6,918)
Stock based compensation | ​ | ​ | ​ | ​ | ​ | 80 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 80
Common stock issued - 4,563 shares | ​ | ​ | ​ | ​ | ​ | 53 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 53
Common stock dividend declared - $0.15 per share | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (999) | ​ | ​ | ​ | ​ | ​ | (999)
Balance at September 30, 2022 | ​ | $ | 67 | ​ | $ | 24,238 | ​ | $ | 160,573 | ​ | $ | (52,834) | ​ | $ | 132,044

​

​

​

10

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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, 2021 | ​ | $ | 70 | ​ | $ | 30,149 | ​ | $ | 129,691 | ​ | $ | (28,863) | ​ | $ | 131,047
Net income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 3,430 | ​ | ​ | ​ | ​ | ​ | 3,430
Other comprehensive loss | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (4,335) | ​ | ​ | (4,335)
Stock based compensation | ​ | ​ | ​ | ​ | ​ | 50 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 50
Common stock issued - 2,956 shares | ​ | ​ | ​ | ​ | ​ | 46 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 46
Common stock dividend declared - $0.15 per share | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (1,049) | ​ | ​ | ​ | ​ | ​ | (1,049)
Balance at March 31, 2021 | ​ | $ | 70 | ​ | $ | 30,245 | ​ | $ | 132,072 | ​ | $ | (33,198) | ​ | $ | 129,189
Net income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 4,403 | ​ | ​ | ​ | ​ | ​ | 4,403
Other comprehensive income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 4,730 | ​ | ​ | 4,730
Stock based compensation | ​ | ​ | ​ | ​ | ​ | 296 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 296
Common stock issued - 3,261 shares | ​ | ​ | ​ | ​ | ​ | 56 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 56
Common stock repurchase - 400,000 shares | ​ | ​ | (4) | ​ | ​ | (7,175) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (7,179)
Common stock dividend declared - $0.15 per share | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (939) | ​ | ​ | ​ | ​ | ​ | (939)
Balance at June 30, 2021 | ​ | $ | 66 | ​ | $ | 23,422 | ​ | $ | 135,536 | ​ | $ | (28,468) | ​ | $ | 130,556
Net income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 4,388 | ​ | ​ | ​ | ​ | ​ | 4,388
Other comprehensive loss | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (264) | ​ | ​ | (264)
Stock based compensation | ​ | ​ | ​ | ​ | ​ | 43 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 43
Common stock issued - 3,337 shares | ​ | ​ | ​ | ​ | ​ | 57 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 57
Common stock dividend declared - $0.15 per share | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (993) | ​ | ​ | ​ | ​ | ​ | (993)
Balance at September 30, 2021 | ​ | $ | 66 | ​ | $ | 23,522 | ​ | $ | 138,931 | ​ | $ | (28,732) | ​ | $ | 133,787
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

​

See accompanying notes to the consolidated financial statements

​

11

Table of Contents

First United Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended
​ | ​ | September 30,
​ |  | 2022 |  | 2021
​ | ​ | (Unaudited)
Operating activities | ​ | ​ | ​ | ​ | ​ | ​
Net income | ​ | $ | 18,079 | ​ | $ | 12,221
Adjustments to reconcile net income to net cash provided by operating activities: | ​ | ​ | ​ | ​ | ​ | ​
Provision for loan losses | ​ | ​ | 97 | ​ | ​ | 68
Depreciation | ​ | ​ | 2,475 | ​ | ​ | 2,453
Stock based compensation | ​ | ​ | 415 | ​ | ​ | 389
Gains on sales of other real estate owned | ​ | ​ | — | ​ | ​ | (594)
Write-downs of other real estate owned | ​ | ​ | — | ​ | ​ | (160)
Originations of loans held for sale | ​ | ​ | (1,156) | ​ | ​ | (23,618)
Proceeds from sale of loans held for sale | ​ | ​ | 1,254 | ​ | ​ | 27,758
Gains from sale of loans held for sale | ​ | ​ | (31) | ​ | ​ | (996)
Gains on disposal of fixed assets | ​ | ​ | (34) | ​ | ​ | (16)
Net (accretion)/ amortization of investment securities discounts and premiums- AFS | ​ | ​ | 100 | ​ | ​ | 790
Net (accretion)/amortization of investment securities discounts and premiums- HTM | ​ | ​ | (625) | ​ | ​ | 276
Amortization of intangible assets | ​ | ​ | 157 | ​ | ​ | —
Gains on sales/calls of investment securities – AFS | ​ | ​ | (3) | ​ | ​ | (154)
Losses/(gains) on investment securities – HTM | ​ | ​ | (93) | ​ | ​ | 54
Earnings on bank owned life insurance | ​ | ​ | (891) | ​ | ​ | (877)
Amortization of deferred loan fees | ​ | ​ | (123) | ​ | ​ | (3,228)
Amortization of operating lease right of use asset | ​ | ​ | 260 | ​ | ​ | 77
Increase in accrued interest receivable and other assets | ​ | ​ | (651) | ​ | ​ | (1,638)
Deferred tax benefit | ​ | ​ | (9,322) | ​ | ​ | (48)
Operating lease liability | ​ | ​ | (289) | ​ | ​ | (104)
Increase/(decrease) in accrued interest payable and other liabilities | ​ | ​ | 9,106 | ​ | ​ | (2,216)
Net cash provided by operating activities | ​ | ​ | 18,725 | ​ | ​ | 10,437
Investing activities | ​ | ​ | ​ | ​ | ​ | ​
Proceeds from maturities/calls of investment securities - AFS | ​ | ​ | 12,153 | ​ | ​ | 40,045
Proceeds from maturities/calls of investment securities - HTM | ​ | ​ | 13,254 | ​ | ​ | 12,286
Proceeds from sales of investment securities - AFS | ​ | ​ | 1,023 | ​ | ​ | 13,687
Purchases of investment securities - AFS | ​ | ​ | (17,652) | ​ | ​ | (65,101)
Purchases of investment securities - HTM | ​ | ​ | (55,686) | ​ | ​ | (6,332)
Proceeds from sales of other real estate owned | ​ | ​ | — | ​ | ​ | 3,477
Proceeds from disposal of fixed assets | ​ | ​ | 37 | ​ | ​ | 39
Net decrease in restricted stock | ​ | ​ | 2 | ​ | ​ | 3,439
Net (increase)/decrease in loans | ​ | ​ | (124,963) | ​ | ​ | 67,908
Purchases of loans | ​ | ​ | — | ​ | ​ | (58,943)
Purchases of premises and equipment | ​ | ​ | (2,803) | ​ | ​ | (826)
Net cash (used in)/provided by investing activities | ​ | ​ | (174,635) | ​ | ​ | 9,679
Financing activities | ​ | ​ | ​ | ​ | ​ | ​
Net increase in deposits | ​ | ​ | 41,744 | ​ | ​ | 22,128
Issuance of common stock | ​ | ​ | 162 | ​ | ​ | 103
Cash dividends paid on common stock | ​ | ​ | (2,987) | ​ | ​ | (2,898)
Net increase in short-term borrowings | ​ | ​ | 32,027 | ​ | ​ | 23,236
Stock repurchase | ​ | ​ | — | ​ | ​ | (7,179)
Net decrease in long-term borrowings | ​ | ​ | — | ​ | ​ | (70,000)
Net cash provided by/(used in) financing activities | ​ | ​ | 70,946 | ​ | ​ | (34,610)
Decrease in cash and cash equivalents | ​ | ​ | (84,964) | ​ | ​ | (14,494)
Cash and cash equivalents at beginning of the year | ​ | ​ | 115,720 | ​ | ​ | 149,432
Cash and cash equivalents at end of period | ​ | $ | 30,756 | ​ | $ | 134,938
Supplemental information | ​ | ​ | ​ | ​ | ​ | ​
Interest paid | ​ | $ | 2,655 | ​ | $ | 5,033
Taxes paid | ​ | $ | 5,248 | ​ | $ | 4,637
Non-cash investing activities: | ​ | ​ | ​ | ​ | ​ | ​
Transfers from loans to other real estate owned | ​ | $ | 256 | ​ | $ | —
Transfers from securities available for sale to held to maturity | ​ | $ | 139,036 | ​ | $ | —

​

See accompanying notes to the consolidated financial statements

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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”). 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.

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.

Certain prior period balances have been reclassified to conform to the current period presentation. Operating results for the nine and three month periods ended September 30, 2022 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, 2021.

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

The Corporation has evaluated events and transactions occurring subsequent to the statement of financial condition date of September 30, 2022 and through the date these consolidated financial statements were issued, for items of potential recognition or disclosure.

Note 2 – Earnings Per Common Share

Basic earnings per common share is derived by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period and does not include the effect of any potentially dilutive common stock equivalents. Diluted earnings per share is derived by dividing net income available to common shareholders by the weighted-average number of shares outstanding, adjusted for the dilutive effect of outstanding common stock equivalents, such as restricted stock units (“RSUs”). There were no anti-dilutive shares outstanding at September 30, 2022 or 2021.

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The following table sets forth the calculation of basic and diluted earnings per common share for the nine and three month periods ended September 30, 2022 and 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine months ended September 30,
​ | ​ | 2022 | ​ | 2021
​ |  | ​ | ​ |  | 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 | ​ | $ | 18,079 | ​ | 6,645 | ​ | $ | 2.72 | ​ | $ | 12,221 | ​ | 6,741 | ​ | $ | 1.81
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Diluted Earnings Per Share: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Restricted stock units | ​ | ​ | ​ | ​ | 10 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 5 | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net income | ​ | $ | 18,079 | ​ | 6,655 | ​ | $ | 2.72 | ​ | $ | 12,221 | ​ | 6,746 | ​ | $ | 1.81

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three months ended September 30,
​ | ​ | 2022 | ​ | 2021
​ | ​ | ​ | ​ | ​ | 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 | ​ | $ | 6,936 | ​ | 6,658 | ​ | $ | 1.04 | ​ | $ | 4,388 | ​ | 6,617 | ​ | $ | 0.66
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Diluted Earnings Per Share: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Restricted stock units | ​ | ​ | ​ | ​ | 11 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 7 | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net income | ​ | $ | 6,936 | ​ | 6,669 | ​ | $ | 1.04 | ​ | $ | 4,388 | ​ | 6,624 | ​ | $ | 0.66

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Note 3 – Investments

The following tables show a comparison of amortized cost and fair values of investment securities at September 30, 2022 and December 31, 2021:

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value |  | OTTI in AOCL
September 30, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Available for Sale: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. government agencies | ​ | $ | 11,052 | ​ | $ | — | ​ | $ | 1,605 | ​ | $ | 9,447 | ​ | $ | —
Residential mortgage-backed agencies | ​ | ​ | 45,899 | ​ | ​ | — | ​ | ​ | 8,165 | ​ | ​ | 37,734 | ​ | ​ | —
Commercial mortgage-backed agencies | ​ | ​ | 37,766 | ​ | ​ | — | ​ | ​ | 6,155 | ​ | ​ | 31,611 | ​ | ​ | —
Collateralized mortgage obligations | ​ | ​ | 26,336 | ​ | ​ | — | ​ | ​ | 4,635 | ​ | ​ | 21,701 | ​ | ​ | —
Obligations of states and political subdivisions | ​ | ​ | 11,208 | ​ | ​ | 1 | ​ | ​ | 465 | ​ | ​ | 10,744 | ​ | ​ | —
Corporate bonds | ​ | ​ | 1,000 | ​ | ​ | — | ​ | ​ | 80 | ​ | ​ | 920 | ​ | ​ | —
Collateralized debt obligations | ​ | ​ | 18,648 | ​ | ​ | — | ​ | ​ | 2,766 | ​ | ​ | 15,882 | ​ | ​ | (1,664)
Total available for sale | ​ | $ | 151,909 | ​ | $ | 1 | ​ | $ | 23,871 | ​ | $ | 128,039 | ​ | $ | (1,664)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Amortized Cost |  | Gross Unrecognized Gains |  | Gross Unrecognized Losses |  | Fair Value |  | OTTI in AOCL
September 30, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Held to Maturity: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. treasuries | ​ | $ | 37,140 | ​ | $ | — | ​ | $ | 1,727 | ​ | $ | 35,413 | ​ | $ | —
U.S. government agencies | ​ | ​ | 67,665 | ​ | ​ | — | ​ | ​ | 12,853 | ​ | ​ | 54,812 | ​ | ​ | —
Residential mortgage-backed agencies | ​ | ​ | 29,536 | ​ | ​ | 1 | ​ | ​ | 3,920 | ​ | ​ | 25,617 | ​ | ​ | —
Commercial mortgage-backed agencies | ​ | ​ | 23,018 | ​ | ​ | — | ​ | ​ | 4,378 | ​ | ​ | 18,640 | ​ | ​ | —
Collateralized mortgage obligations | ​ | ​ | 58,462 | ​ | ​ | — | ​ | ​ | 9,622 | ​ | ​ | 48,840 | ​ | ​ | —
Obligations of states and political subdivisions | ​ | ​ | 22,624 | ​ | ​ | 504 | ​ | ​ | 705 | ​ | ​ | 22,423 | ​ | ​ | —
Total held to maturity | ​ | $ | 238,445 | ​ | $ | 505 | ​ | $ | 33,205 | ​ | $ | 205,745 | ​ | $ | —
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value |  | OTTI in AOCL
December 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Available for Sale: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. government agencies | ​ | $ | 69,602 | ​ | $ | 66 | ​ | $ | 2,499 | ​ | $ | 67,169 | ​ | $ | —
Residential mortgage-backed agencies | ​ | ​ | 49,630 | ​ | ​ | — | ​ | ​ | 969 | ​ | ​ | 48,661 | ​ | ​ | —
Commercial mortgage-backed agencies | ​ | ​ | 51,694 | ​ | ​ | 175 | ​ | ​ | 1,001 | ​ | ​ | 50,868 | ​ | ​ | —
Collateralized mortgage obligations | ​ | ​ | 93,018 | ​ | ​ | 84 | ​ | ​ | 3,025 | ​ | ​ | 90,077 | ​ | ​ | —
Obligations of states and political subdivisions | ​ | ​ | 12,439 | ​ | ​ | 371 | ​ | ​ | 6 | ​ | ​ | 12,804 | ​ | ​ | —
Collateralized debt obligations | ​ | ​ | 18,609 | ​ | ​ | 112 | ​ | ​ | 1,529 | ​ | ​ | 17,192 | ​ | ​ | (660)
Total available for sale | ​ | $ | 294,992 | ​ | $ | 808 | ​ | $ | 9,029 | ​ | $ | 286,771 | ​ | $ | (660)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Amortized Cost |  | Gross Unrecognized Gains |  | Gross Unrecognized Losses |  | Fair Value |  | OTTI in AOCL
December 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Held to Maturity: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage-backed agencies | ​ | $ | 30,634 | ​ | $ | 649 | ​ | $ | 436 | ​ | $ | 30,847 | ​ | $ | —
Commercial mortgage-backed agencies | ​ | ​ | 5,456 | ​ | ​ | 145 | ​ | ​ | — | ​ | ​ | 5,601 | ​ | ​ | —
Obligations of states and political subdivisions | ​ | ​ | 20,169 | ​ | ​ | 8,752 | ​ | ​ | — | ​ | ​ | 28,921 | ​ | ​ | —
Total held to maturity | ​ | $ | 56,259 | ​ | $ | 9,546 | ​ | $ | 436 | ​ | $ | 65,369 | ​ | $ | —
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

​

The Corporation reassessed the classification of certain investments and, effective February 1, 2022, transferred $139.0 million of callable agencies, obligations of state and political subdivisions, and collateralized mortgage obligations from available for sale to held to maturity securities. The transfer occurred at fair value. The related unrealized loss of $8.4 million included in other comprehensive loss remained in other comprehensive loss, to be amortized out of other comprehensive loss with an offsetting entry to interest income as a yield adjustment over the remaining term of the securities. No gain or loss was recorded at the time of transfer.

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The following table shows the Corporation’s investment securities with gross unrealized and unrecognized losses and fair values at September 30, 2022 and December 31, 2021, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Less than 12 months | ​ | 12 months or more
(in thousands) |  | Fair Value |  | Unrealized Losses |  | Number of Investments |  | Fair Value |  | Unrealized Losses |  | Number of Investments
September 30, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Available for Sale: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. government agencies | ​ | $ | 8,145 | ​ | ​ | 907 | ​ | 2 | ​ | ​ | 1,302 | ​ | ​ | 698 | ​ | 1
Residential mortgage-backed agencies | ​ | ​ | 15,945 | ​ | ​ | 3,065 | ​ | 2 | ​ | ​ | 21,788 | ​ | ​ | 5,100 | ​ | 3
Commercial mortgage-backed agencies | ​ | ​ | 13,915 | ​ | ​ | 2,182 | ​ | 6 | ​ | ​ | 17,697 | ​ | ​ | 3,973 | ​ | 4
Collateralized mortgage obligations | ​ | ​ | 13,352 | ​ | ​ | 2,860 | ​ | 8 | ​ | ​ | 8,349 | ​ | ​ | 1,775 | ​ | 2
Obligations of states and political subdivisions | ​ | ​ | 10,048 | ​ | ​ | 465 | ​ | 9 | ​ | ​ | — | ​ | ​ | — | ​ | —
Corporate Bonds | ​ | ​ | 920 | ​ | ​ | 80 | ​ | 1 | ​ | ​ | — | ​ | ​ | — | ​ | —
Collateralized debt obligations | ​ | ​ | 6,464 | ​ | ​ | 152 | ​ | 4 | ​ | ​ | 9,418 | ​ | ​ | 2,614 | ​ | 5
Total available for sale | ​ | $ | 68,789 | ​ | $ | 9,711 | ​ | 32 | ​ | $ | 58,554 | ​ | $ | 14,160 | ​ | 15
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Less than 12 months | ​ | 12 months or more
(in thousands) |  | Fair Value |  | Unrecognized Losses |  | Number of Investments |  | Fair Value |  | Unrecognized Losses |  | Number of Investments
September 30, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Held to Maturity: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. treasuries | ​ | $ | 35,413 | ​ | ​ | 1,727 | ​ | 4 | ​ | $ | — | ​ | $ | — | ​ | —
U.S. government agencies | ​ | ​ | 54,811 | ​ | $ | 12,853 | ​ | 9 | ​ | ​ | — | ​ | ​ | — | ​ | —
Residential mortgage-backed agencies | ​ | ​ | 18,794 | ​ | ​ | 1,992 | ​ | 33 | ​ | ​ | 6,730 | ​ | ​ | 1,928 | ​ | 3
Commercial mortgage-backed agencies | ​ | ​ | 18,640 | ​ | ​ | 4,378 | ​ | 3 | ​ | ​ | — | ​ | ​ | — | ​ | —
Collateralized mortgage obligations | ​ | ​ | 48,840 | ​ | ​ | 9,622 | ​ | 8 | ​ | ​ | — | ​ | ​ | — | ​ | —
Obligations of states and political subdivisions | ​ | ​ | 2,162 | ​ | ​ | 705 | ​ | 1 | ​ | ​ | — | ​ | ​ | — | ​ | —
Total held to maturity | ​ | $ | 178,660 | ​ | $ | 31,277 | ​ | 58 | ​ | $ | 6,730 | ​ | $ | 1,928 | ​ | 3
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 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, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Available for Sale: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. government agencies | ​ | $ | 23,577 | ​ | $ | 122 | ​ | 3 | ​ | $ | 33,972 | ​ | $ | 2,377 | ​ | 6
Residential mortgage-backed agencies | ​ | ​ | 29,507 | ​ | ​ | 257 | ​ | 3 | ​ | ​ | 19,154 | ​ | ​ | 712 | ​ | 2
Commercial mortgage-backed agencies | ​ | ​ | 32,177 | ​ | ​ | 787 | ​ | 4 | ​ | ​ | 5,211 | ​ | ​ | 214 | ​ | 1
Collateralized mortgage obligations | ​ | ​ | 24,322 | ​ | ​ | 649 | ​ | 5 | ​ | ​ | 43,076 | ​ | ​ | 2,376 | ​ | 5
Obligations of states and political subdivisions | ​ | ​ | 3,046 | ​ | ​ | 6 | ​ | 1 | ​ | ​ | — | ​ | ​ | — | ​ | —
Collateralized debt obligations | ​ | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | 10,468 | ​ | ​ | 1,529 | ​ | 5
Total available for sale | ​ | $ | 112,629 | ​ | $ | 1,821 | ​ | 16 | ​ | $ | 111,881 | ​ | $ | 7,208 | ​ | 19
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 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, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Held to Maturity: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage-backed agencies | ​ | $ | 7,395 | ​ | $ | 291 | ​ | 6 | ​ | $ | 2,782 | ​ | $ | 145 | ​ | 1
Total held to maturity | ​ | $ | 7,395 | ​ | $ | 291 | ​ | 6 | ​ | $ | 2,782 | ​ | $ | 145 | ​ | 1
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

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Management systematically evaluates securities for impairment on a quarterly basis. Based upon application of Accounting Standards Codification (“ASC”) Topic 320 (Section 320-10-35) issued by the Financial Accounting Standards Board (the “FASB”), management must assess whether (a) the Corporation has the intent to sell the security and (b) it is more likely than not that the Corporation will be required to sell the security prior to its anticipated recovery. If neither applies, then declines in the fair value of securities below their cost that are considered other-than-temporary declines are split into two components. The first is the loss attributable to declining credit quality. Credit losses are recognized in earnings as realized losses in the period in which the impairment determination is made. The second component consists of all other losses. The other losses are recognized in other comprehensive income. In estimating other than temporary impairment (“OTTI”) charges, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) adverse conditions specifically related to the security, an industry, or a geographic area, (3) the historic and implied volatility of the security, (4) changes in the rating of a security by a rating agency, (5) recoveries or additional declines in fair value subsequent to the balance sheet date, (6) failure of the issuer of the security to make scheduled interest payments, and (7) the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future. Due to the duration and the significant market value decline in the pooled trust preferred securities held in our portfolio, we performed more extensive testing on these securities for purposes of evaluating whether or not an OTTI has occurred.

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The following table presents a cumulative roll-forward of the amount of non-cash OTTI charges related to credit losses that have been recognized in earnings for the trust preferred securities held in the CDO portfolio during the nine and three month periods ended September 30, 2022 and 2021 that the Corporation does not intend to sell:

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​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended
​ | ​ | September 30,
(in thousands) |  | 2022 |  | 2021
Balance of credit-related OTTI at January 1 | ​ | $ | 2,043 | ​ | $ | 2,244
Reduction for increases in cash flows expected to be collected | ​ | ​ | (152) | ​ | ​ | (151)
Balance of credit-related OTTI at September 30 | ​ | $ | 1,891 | ​ | $ | 2,093

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​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | September 30,
(in thousands) | ​ | 2022 | ​ | 2021
Balance of credit-related OTTI at July 1 | ​ | $ | 1,942 | ​ | $ | 2,143
Reduction for increases in cash flows expected to be collected | ​ | ​ | (51) | ​ | ​ | (50)
Balance of credit-related OTTI at September 30 | ​ | $ | 1,891 | ​ | $ | 2,093

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The amortized cost and estimated fair value of securities by contractual maturity at September 30, 2022 are shown in the following table. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

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​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, 2022
(in thousands) |  | Amortized Cost |  | Fair Value
Available for Sale: | ​ | ​ | ​ | ​ | ​ | ​
Due after one year through five years | ​ | $ | 8,364 | ​ | $ | 7,865
Due after five years through ten years | ​ | ​ | 6,197 | ​ | ​ | 5,572
Due after ten years | ​ | ​ | 27,347 | ​ | ​ | 23,556
​ | ​ | ​ | 41,908 | ​ | ​ | 36,993
Residential mortgage-backed agencies | ​ | ​ | 45,899 | ​ | ​ | 37,734
Commercial mortgage-backed agencies | ​ | ​ | 37,766 | ​ | ​ | 31,611
Collateralized mortgage obligations | ​ | ​ | 26,336 | ​ | ​ | 21,701
Total available for sale | ​ | $ | 151,909 | ​ | $ | 128,039
Held to Maturity: | ​ | ​ | ​ | ​ | ​ | ​
Due after one year through five years | ​ | $ | 49,640 | ​ | $ | 46,582
Due after five years through ten years | ​ | ​ | 32,986 | ​ | ​ | 26,924
Due after ten years | ​ | ​ | 44,803 | ​ | ​ | 39,142
​ | ​ | ​ | 127,429 | ​ | ​ | 112,648
Residential mortgage-backed agencies | ​ | ​ | 29,536 | ​ | ​ | 25,617
Commercial mortgage-backed agencies | ​ | ​ | 23,018 | ​ | ​ | 18,640
Collateralized mortgage obligations | ​ | ​ | 58,462 | ​ | ​ | 48,840
Total held to maturity | ​ | $ | 238,445 | ​ | $ | 205,745

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Note 4 – Loans and Related Allowance for Loan Losses

The following table summarizes the primary segments of the loan portfolio at September 30, 2022 and December 31, 2021:

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Commercial Real Estate |  | Acquisition and Development |  | Commercial and Industrial |  | Residential Mortgage |  | Consumer |  | Total
September 30, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Individually evaluated for impairment | ​ | $ | 2,223 | ​ | $ | 369 | ​ | $ | — | ​ | $ | 2,376 | ​ | $ | 45 | ​ | $ | 5,013
Collectively evaluated for impairment | ​ | ​ | 435,750 | ​ | ​ | 82,738 | ​ | ​ | 269,004 | ​ | ​ | 424,717 | ​ | ​ | 60,702 | ​ | ​ | 1,272,911
Total loans | ​ | $ | 437,973 | ​ | $ | 83,107 | ​ | $ | 269,004 | ​ | $ | 427,093 | ​ | $ | 60,747 | ​ | $ | 1,277,924
December 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Individually evaluated for impairment | ​ | $ | 2,365 | ​ | $ | 629 | ​ | $ | 90 | ​ | $ | 2,644 | ​ | $ | — | ​ | $ | 5,728
Collectively evaluated for impairment | ​ | ​ | 371,926 | ​ | ​ | 127,448 | ​ | ​ | 180,886 | ​ | ​ | 402,042 | ​ | ​ | 65,657 | ​ | ​ | 1,147,959
Total loans | ​ | $ | 374,291 | ​ | $ | 128,077 | ​ | $ | 180,976 | ​ | $ | 404,686 | ​ | $ | 65,657 | ​ | $ | 1,153,687

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The commercial and industrial portfolio in the table above includes $0.4 million and $7.7 million of Paycheck Protection Program (“PPP”) loans at September 30, 2022 and December 31, 2021, respectively, which are 100% guaranteed by the SBA, and no allowance for loan loss (“ALL”) has been assigned to them.

The following table presents the classes of the loan portfolio summarized by the aggregate pass and the criticized categories of special mention and substandard within the internal risk rating system at September 30, 2022 and December 31, 2021:

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Pass |  | Special Mention |  | Substandard |  | Total
September 30, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | $ | 223,907 | ​ | $ | 6,371 | ​ | $ | 12,114 | ​ | $ | 242,392
All other CRE | ​ | ​ | 188,707 | ​ | ​ | 2,278 | ​ | ​ | 4,596 | ​ | ​ | 195,581
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | ​ | 23,926 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 23,926
All other A&D | ​ | ​ | 59,029 | ​ | ​ | — | ​ | ​ | 152 | ​ | ​ | 59,181
Commercial and industrial | ​ | ​ | 244,883 | ​ | ​ | 4,589 | ​ | ​ | 19,532 | ​ | ​ | 269,004
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage - term | ​ | ​ | 360,669 | ​ | ​ | — | ​ | ​ | 5,217 | ​ | ​ | 365,886
Residential mortgage - home equity | ​ | ​ | 60,561 | ​ | ​ | — | ​ | ​ | 646 | ​ | ​ | 61,207
Consumer | ​ | ​ | 60,557 | ​ | ​ | — | ​ | ​ | 190 | ​ | ​ | 60,747
Total | ​ | $ | 1,222,239 | ​ | $ | 13,238 | ​ | $ | 42,447 | ​ | $ | 1,277,924
December 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | $ | 173,299 | ​ | $ | 12,987 | ​ | $ | 6,077 | ​ | $ | 192,363
All other CRE | ​ | ​ | 174,395 | ​ | ​ | 2,357 | ​ | ​ | 5,176 | ​ | ​ | 181,928
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | ​ | 19,924 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 19,924
All other A&D | ​ | ​ | 107,532 | ​ | ​ | 218 | ​ | ​ | 403 | ​ | ​ | 108,153
Commercial and industrial | ​ | ​ | 161,429 | ​ | ​ | 5,071 | ​ | ​ | 14,476 | ​ | ​ | 180,976
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage - term | ​ | ​ | 338,832 | ​ | ​ | — | ​ | ​ | 5,624 | ​ | ​ | 344,456
Residential mortgage - home equity | ​ | ​ | 59,533 | ​ | ​ | — | ​ | ​ | 697 | ​ | ​ | 60,230
Consumer | ​ | ​ | 65,557 | ​ | ​ | — | ​ | ​ | 100 | ​ | ​ | 65,657
Total | ​ | $ | 1,100,501 | ​ | $ | 20,633 | ​ | $ | 32,553 | ​ | $ | 1,153,687

​

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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 due.

The increase of $9.9 million in the substandard category was related to one large relationship in the nursing care sector that was downgraded from special mention in the first quarter of 2022 and one large relationship in the airline sector that was added to the substandard portfolio in the third quarter of 2022. These relationships continue to perform according to their contractual terms and are not considered impaired.

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans at September 30, 2022 and December 31, 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Current |  | 30-59 Days Past Due |  | 60-89 Days Past Due |  | 90 Days+ Past Due |  | Total Past Due and Accruing |  | Non- Accrual |  | Total Loans
September 30, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | $ | 242,304 | ​ | $ | — | ​ | $ | — | ​ | $ | 88 | ​ | $ | 88 | ​ | $ | — | ​ | $ | 242,392
All other CRE | ​ | ​ | 195,518 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 63 | ​ | ​ | 195,581
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | ​ | 23,926 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 23,926
All other A&D | ​ | ​ | 58,945 | ​ | ​ | 69 | ​ | ​ | 15 | ​ | ​ | — | ​ | ​ | 84 | ​ | ​ | 152 | ​ | ​ | 59,181
Commercial and industrial | ​ | ​ | 268,900 | ​ | ​ | 104 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 104 | ​ | ​ | — | ​ | ​ | 269,004
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage - term | ​ | ​ | 362,110 | ​ | ​ | 29 | ​ | ​ | 1,961 | ​ | ​ | 429 | ​ | ​ | 2,419 | ​ | ​ | 1,357 | ​ | ​ | 365,886
Residential mortgage - home equity | ​ | ​ | 60,553 | ​ | ​ | 233 | ​ | ​ | 71 | ​ | ​ | 23 | ​ | ​ | 327 | ​ | ​ | 327 | ​ | ​ | 61,207
Consumer | ​ | ​ | 60,325 | ​ | ​ | 297 | ​ | ​ | 52 | ​ | ​ | 29 | ​ | ​ | 378 | ​ | ​ | 44 | ​ | ​ | 60,747
Total | ​ | $ | 1,272,581 | ​ | $ | 732 | ​ | $ | 2,099 | ​ | $ | 569 | ​ | $ | 3,400 | ​ | $ | 1,943 | ​ | $ | 1,277,924
December 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | $ | 192,363 | ​ | $ | — | ​ | $ | — | ​ | $ | — | ​ | $ | — | ​ | $ | — | ​ | $ | 192,363
All other CRE | ​ | ​ | 181,847 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 81 | ​ | ​ | 181,928
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | ​ | 19,924 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 19,924
All other A&D | ​ | ​ | 107,763 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 390 | ​ | ​ | 108,153
Commercial and industrial | ​ | ​ | 180,676 | ​ | ​ | 132 | ​ | ​ | 78 | ​ | ​ | — | ​ | ​ | 210 | ​ | ​ | 90 | ​ | ​ | 180,976
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage - term | ​ | ​ | 340,429 | ​ | ​ | 159 | ​ | ​ | 2,222 | ​ | ​ | 148 | ​ | ​ | 2,529 | ​ | ​ | 1,498 | ​ | ​ | 344,456
Residential mortgage - home equity | ​ | ​ | 59,485 | ​ | ​ | 238 | ​ | ​ | 104 | ​ | ​ | — | ​ | ​ | 342 | ​ | ​ | 403 | ​ | ​ | 60,230
Consumer | ​ | ​ | 65,208 | ​ | ​ | 268 | ​ | ​ | 29 | ​ | ​ | 152 | ​ | ​ | 449 | ​ | ​ | — | ​ | ​ | 65,657
Total | ​ | $ | 1,147,695 | ​ | $ | 797 | ​ | $ | 2,433 | ​ | $ | 300 | ​ | $ | 3,530 | ​ | $ | 2,462 | ​ | $ | 1,153,687

​

Non-accrual loans that have been subject to partial charge-offs totaled $0.2 million at September 30, 2022 and $0.5 million at December 31, 2021. There were no loans secured by 1-4 family residential real estate properties in the process of foreclosure at September 30, 2022 compared to $0.2 million of such loans at December 31, 2021. As a percentage of the loan portfolio, accruing loans past due 30 days or more decreased to 0.27% compared to 0.37% at June 30, 2022 and 0.31% as of December 31, 2021.

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The following table summarizes the primary segments of the ALL at September 30, 2022 and December 31, 2021, segregated by the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Commercial Real Estate |  | Acquisition and Development |  | Commercial and Industrial |  | Residential Mortgage |  | Consumer |  | Unallocated |  | Total
September 30, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Individually evaluated for impairment | ​ | $ | — | ​ | $ | — | ​ | $ | — | ​ | $ | 26 | ​ | $ | 4 | ​ | $ | — | ​ | $ | 30
Collectively evaluated for impairment | ​ | $ | 6,356 | ​ | $ | 1,499 | ​ | $ | 3,402 | ​ | $ | 2,951 | ​ | $ | 873 | ​ | $ | 430 | ​ | $ | 15,511
Total ALL | ​ | $ | 6,356 | ​ | $ | 1,499 | ​ | $ | 3,402 | ​ | $ | 2,977 | ​ | $ | 877 | ​ | $ | 430 | ​ | $ | 15,541
December 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Individually evaluated for impairment | ​ | $ | — | ​ | $ | — | ​ | $ | 28 | ​ | $ | 36 | ​ | $ | — | ​ | $ | — | ​ | $ | 64
Collectively evaluated for impairment | ​ | $ | 6,032 | ​ | $ | 2,615 | ​ | $ | 2,432 | ​ | $ | 3,448 | ​ | $ | 934 | ​ | $ | 430 | ​ | $ | 15,891
Total ALL | ​ | $ | 6,032 | ​ | $ | 2,615 | ​ | $ | 2,460 | ​ | $ | 3,484 | ​ | $ | 934 | ​ | $ | 430 | ​ | $ | 15,955

​

The evaluation of the need and amount of a specific allocation of the ALL and whether a loan can be removed from impairment status is made on a quarterly basis.

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The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not required at September 30, 2022 and December 31, 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Impaired Loans with Specific Allowance | ​ | Impaired Loans with No Specific Allowance | ​ | Total Impaired Loans
(in thousands) |  | Recorded Investment |  | Related Allowances |  | Recorded Investment |  | Recorded Investment (1) |  | Unpaid Principal Balance
September 30, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | $ | — | ​ | $ | — | ​ | $ | 102 | ​ | $ | 102 | ​ | $ | 102
All other CRE | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 2,121 | ​ | ​ | 2,121 | ​ | ​ | 2,121
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 217 | ​ | ​ | 217 | ​ | ​ | 217
All other A&D | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 152 | ​ | ​ | 152 | ​ | ​ | 261
Commercial and industrial | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage – term | ​ | ​ | 264 | ​ | ​ | 26 | ​ | ​ | 1,786 | ​ | ​ | 2,050 | ​ | ​ | 2,091
Residential mortgage – home equity | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 326 | ​ | ​ | 326 | ​ | ​ | 326
Consumer | ​ | ​ | 23 | ​ | ​ | 4 | ​ | ​ | 22 | ​ | ​ | 45 | ​ | ​ | 45
Total impaired loans | ​ | $ | 287 | ​ | $ | 30 | ​ | $ | 4,726 | ​ | $ | 5,013 | ​ | $ | 5,163
December 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | $ | — | ​ | $ | — | ​ | $ | 106 | ​ | $ | 106 | ​ | $ | 106
All other CRE | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 2,259 | ​ | ​ | 2,259 | ​ | ​ | 2,259
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 239 | ​ | ​ | 239 | ​ | ​ | 239
All other A&D | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 390 | ​ | ​ | 390 | ​ | ​ | 1,599
Commercial and industrial | ​ | ​ | 90 | ​ | ​ | 28 | ​ | ​ | — | ​ | ​ | 90 | ​ | ​ | 2,304
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage – term | ​ | ​ | 344 | ​ | ​ | 31 | ​ | ​ | 1,897 | ​ | ​ | 2,241 | ​ | ​ | 2,302
Residential mortgage – home equity | ​ | ​ | 46 | ​ | ​ | 5 | ​ | ​ | 357 | ​ | ​ | 403 | ​ | ​ | 422
Consumer | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Total impaired loans | ​ | $ | 480 | ​ | $ | 64 | ​ | $ | 5,248 | ​ | $ | 5,728 | ​ | $ | 9,231

​

| (1) | Recorded investment consists of unpaid principal balance, net of charge-offs, interest payments received applied to principal and unamortized deferred loan origination fees and cost.

Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate. For general allowances, historical loss trends are used in the estimation of losses in the current portfolio. These historical loss amounts are modified by other qualitative factors.

The classes described above, which are based on the Federal call code assigned to each loan, provide the starting point for the ALL analysis. Management tracks the historical net charge-off activity (full and partial charge-offs, net of full and partial recoveries) at the call code level. A historical charge-off factor is calculated utilizing a defined number of consecutive historical quarters. Consumer pools currently utilize a rolling twelve quarters, while Commercial pools currently utilize a rolling eight quarters.

Management supplements the historical charge-off factor with a number of additional qualitative factors that are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience. The additional factors, which are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources, are: (a) national and local economic trends and conditions; (b) levels of and trends in delinquency rates and non-accrual loans; (c) trends in volumes and terms of loans; (d) effects of changes in lending policies; (e) experience, ability, and depth of lending staff; (f) value of underlying collateral; and (g) concentrations of credit from a loan type, industry and/or geographic standpoint.

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Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process to make appropriate and timely adjustments to the ALL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL. Residential mortgage and consumer loans are charged off after they are 120 days contractually past due. All other loans are charged off based on an evaluation of the facts and circumstances of each individual loan. When the Bank believes that its ability to collect is solely dependent on the liquidation of the collateral, a full or partial charge-off is recorded promptly to bring the recorded investment to an amount that the Bank believes is supported by an ability to collect on the collateral. The circumstances that may impact the Bank’s decision to charge-off all or a portion of a loan include default or non-payment by the borrower, scheduled foreclosure actions, and/or prioritization of the Bank’s claim in bankruptcy. There may be circumstances where due to pending events, the Bank will place a specific allocation of the ALL on a loan for which a partial charge-off has been previously recognized. This specific allocation may be either charged-off or removed depending upon the outcome of the pending event. Full or partial charge-offs are not recovered until full principal and interest on the loan have been collected, even if a subsequent appraisal supports a higher value. In most cases, loans with partial charge-offs remain in non-accrual status. Both full and partial charge-offs reduce the recorded investment of the loan and the ALL and are considered to be charge-offs for purposes of all credit loss metrics and trends, including the historical rolling charge-off rates used in the determination of the ALL.

​

The following tables present the activity in the ALL for the nine and three month periods ended September 30, 2022 and 2021:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Nine months ended (in thousands) |  | Commercial Real Estate |  | Acquisition and Development |  | Commercial and Industrial |  | Residential Mortgage |  | Consumer |  | Unallocated |  | Total
ALL balance at January 1, 2022 | ​ | $ | 6,032 | ​ | $ | 2,615 | ​ | $ | 2,460 | ​ | $ | 3,484 | ​ | $ | 934 | ​ | $ | 430 | ​ | $ | 15,955
Charge-offs | ​ | ​ | — | ​ | ​ | (20) | ​ | ​ | (134) | ​ | ​ | (34) | ​ | ​ | (726) | ​ | ​ | — | ​ | ​ | (914)
Recoveries | ​ | ​ | 1 | ​ | ​ | 21 | ​ | ​ | 92 | ​ | ​ | 172 | ​ | ​ | 117 | ​ | ​ | — | ​ | ​ | 403
Provision | ​ | ​ | 323 | ​ | ​ | (1,117) | ​ | ​ | 984 | ​ | ​ | (645) | ​ | ​ | 552 | ​ | ​ | — | ​ | ​ | 97
ALL balance at September 30, 2022 | ​ | $ | 6,356 | ​ | $ | 1,499 | ​ | $ | 3,402 | ​ | $ | 2,977 | ​ | $ | 877 | ​ | $ | 430 | ​ | $ | 15,541
ALL balance at January 1, 2021 | ​ | $ | 5,543 | ​ | $ | 2,339 | ​ | $ | 2,584 | ​ | $ | 5,150 | ​ | $ | 370 | ​ | $ | 500 | ​ | $ | 16,486
Charge-offs | ​ | ​ | — | ​ | ​ | (85) | ​ | ​ | — | ​ | ​ | (141) | ​ | ​ | (266) | ​ | ​ | — | ​ | ​ | (492)
Recoveries | ​ | ​ | — | ​ | ​ | 172 | ​ | ​ | 511 | ​ | ​ | 49 | ​ | ​ | 112 | ​ | ​ | — | ​ | ​ | 844
Provision | ​ | ​ | 1,183 | ​ | ​ | 484 | ​ | ​ | (695) | ​ | ​ | (1,460) | ​ | ​ | 626 | ​ | ​ | (70) | ​ | ​ | 68
ALL balance at September 30, 2021 | ​ | $ | 6,726 | ​ | $ | 2,910 | ​ | $ | 2,400 | ​ | $ | 3,598 | ​ | $ | 842 | ​ | $ | 430 | ​ | $ | 16,906

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Three months ended (in thousands) | ​ | Commercial Real Estate | ​ | Acquisition and Development | ​ | Commercial and Industrial | ​ | Residential Mortgage | ​ | Consumer | ​ | Unallocated | ​ | Total
ALL balance at July 1, 2022 | ​ | $ | 6,220 | ​ | $ | 2,172 | ​ | $ | 2,830 | ​ | $ | 3,112 | ​ | $ | 973 | ​ | $ | 430 | ​ | $ | 15,737
Charge-offs | ​ | ​ | — | ​ | ​ | (20) | ​ | ​ | (82) | ​ | ​ | (1) | ​ | ​ | (181) | ​ | ​ | — | ​ | ​ | (284)
Recoveries | ​ | ​ | — | ​ | ​ | 1 | ​ | ​ | 83 | ​ | ​ | 71 | ​ | ​ | 41 | ​ | ​ | — | ​ | ​ | 196
Provision | ​ | ​ | 136 | ​ | ​ | (654) | ​ | ​ | 571 | ​ | ​ | (205) | ​ | ​ | 44 | ​ | ​ | — | ​ | ​ | (108)
ALL balance at September 30, 2022 | ​ | $ | 6,356 | ​ | $ | 1,499 | ​ | $ | 3,402 | ​ | $ | 2,977 | ​ | $ | 877 | ​ | $ | 430 | ​ | $ | 15,541
ALL balance at July 1, 2021 | ​ | $ | 5,675 | ​ | $ | 2,500 | ​ | $ | 2,944 | ​ | $ | 4,859 | ​ | $ | 590 | ​ | $ | 500 | ​ | $ | 17,068
Charge-offs | ​ | ​ | — | ​ | ​ | (4) | ​ | ​ | — | ​ | ​ | (59) | ​ | ​ | (91) | ​ | ​ | — | ​ | ​ | (154)
Recoveries | ​ | ​ | — | ​ | ​ | 62 | ​ | ​ | 473 | ​ | ​ | 20 | ​ | ​ | 34 | ​ | ​ | — | ​ | ​ | 589
Provision | ​ | ​ | 1,051 | ​ | ​ | 352 | ​ | ​ | (1,017) | ​ | ​ | (1,222) | ​ | ​ | 309 | ​ | ​ | (70) | ​ | ​ | (597)
ALL balance at September 30, 2021 | ​ | $ | 6,726 | ​ | $ | 2,910 | ​ | $ | 2,400 | ​ | $ | 3,598 | ​ | $ | 842 | ​ | $ | 430 | ​ | $ | 16,906

​

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The ALL 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 ALL that is representative of the risk found in the components of the portfolio at any given date.

The following table presents the average recorded investment in impaired loans by class and related interest income recognized for the periods indicated:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine months ended | ​ | Nine months ended
​ | ​ | September 30, 2022 | ​ | September 30, 2021
(in thousands) |  | Average investment |  | Interest income recognized on an accrual basis |  | Interest income recognized on a cash basis | ​ | Average investment |  | Interest income recognized on an accrual basis |  | Interest income recognized on a cash basis
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | $ | 104 | ​ | $ | 9 | ​ | $ | — | ​ | $ | 3,518 | ​ | $ | 9 | ​ | $ | —
All other CRE | ​ | ​ | 2,189 | ​ | ​ | 67 | ​ | ​ | — | ​ | ​ | 2,984 | ​ | ​ | 95 | ​ | ​ | —
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | ​ | 228 | ​ | ​ | 10 | ​ | ​ | — | ​ | ​ | 256 | ​ | ​ | 9 | ​ | ​ | —
All other A&D | ​ | ​ | 325 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 599 | ​ | ​ | 9 | ​ | ​ | —
Commercial and industrial | ​ | ​ | 23 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage – term | ​ | ​ | 2,138 | ​ | ​ | 36 | ​ | ​ | 15 | ​ | ​ | 2,642 | ​ | ​ | 56 | ​ | ​ | 5
Residential mortgage – home equity | ​ | ​ | 364 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 449 | ​ | ​ | — | ​ | ​ | —
Consumer | ​ | ​ | 19 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 17 | ​ | ​ | — | ​ | ​ | —
Total | ​ | $ | 5,390 | ​ | $ | 122 | ​ | $ | 15 | ​ | $ | 10,465 | ​ | $ | 178 | ​ | $ | 5

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three months ended | ​ | Three months ended
​ | ​ | September 30, 2022 | ​ | September 30, 2021
(in thousands) | ​ | Average investment | ​ | Interest income recognized on an accrual basis | ​ | Interest income recognized on a cash basis | ​ | Average investment | ​ | Interest income recognized on an accrual basis | ​ | Interest income recognized on a cash basis
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | $ | 103 | ​ | $ | 3 | ​ | $ | — | ​ | $ | 4,631 | ​ | $ | 3 | ​ | $ | —
All other CRE | ​ | ​ | 2,143 | ​ | ​ | 22 | ​ | ​ | — | ​ | ​ | 2,787 | ​ | ​ | 26 | ​ | ​ | —
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | ​ | 221 | ​ | ​ | 3 | ​ | ​ | — | ​ | ​ | 249 | ​ | ​ | 3 | ​ | ​ | —
All other A&D | ​ | ​ | 264 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 602 | ​ | ​ | 3 | ​ | ​ | —
Commercial and industrial | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage – term | ​ | ​ | 2,049 | ​ | ​ | 12 | ​ | ​ | 10 | ​ | ​ | 2,500 | ​ | ​ | 17 | ​ | ​ | —
Residential mortgage – home equity | ​ | ​ | 331 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 451 | ​ | ​ | — | ​ | ​ | —
Consumer | ​ | ​ | 39 | ​ | ​ | ​ | ​ | ​ | — | ​ | ​ | 9 | ​ | ​ | — | ​ | ​ | —
Total | ​ | $ | 5,150 | ​ | $ | 40 | ​ | $ | 10 | ​ | $ | 11,229 | ​ | $ | 52 | ​ | $ | —

​

In the normal course of business, the Bank modifies loan terms for various reasons. These reasons may include as a retention strategy to compete in the current interest rate environment, and to re-amortize or extend a loan term to better match the loan’s payment stream with the borrower’s cash flows. A modified loan is considered to be a troubled debt restructuring (a “TDR”) when the Bank has determined that the borrower is troubled (i.e. experiencing financial difficulties) and a concession has been granted. The Bank evaluates the probability that the borrower will be in payment default on any of its debt in the foreseeable future without

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modification. To make this determination, the Bank performs a global financial review of the borrower and loan guarantors to assess their current ability to meet their financial obligations.

When the Bank restructures a loan to a troubled borrower, the loan terms (i.e. interest rate, payment, amortization period and/or maturity date) are modified in such a way to enable the borrower to cover the modified debt service payments based on current financials and cash flow adequacy. If a borrower’s hardship is thought to be temporary, then modified terms are only offered for that time period. Where possible, the Bank obtains additional collateral and/or secondary payment sources at the time of the restructure in order to put the Bank in the best possible position if the borrower is not able to meet the modified terms. To date, the Bank has not forgiven any principal as a restructuring concession. The Bank will not offer modified terms if it believes that modifying the loan terms will only delay an inevitable permanent default.

All loans designated as TDRs are considered impaired loans and may be in either accruing or non-accruing status. If the loan was accruing at the time of the modification, then it continues to be in accruing status subsequent to the modification. Non-accrual TDRs may return to accruing status when there has been sufficient payment performance for a period of at least six months. TDRs are considered to be in payment default if, subsequent to modification, the loans are transferred to non-accrual status or to foreclosure. A loan may be removed from being reported as a TDR in the calendar year following the modification if the interest rate at the time of modification was consistent with the interest rate for a loan with comparable credit risk and the loan has performed according to its modified terms for at least six months. Further, a loan that has been removed from TDR reporting status and has been subsequently re-modified at standard market terms, may be removed from impaired status as well.

The volume, type and performance of TDR activity is considered in the assessment of the local economic trend qualitative factor used in the determination of the ALL for loans that are evaluated collectively for impairment.

There were 12 loans totaling $3.1 million and $3.3 million that were classified as TDRs at September 30, 2022 and December 31, 2021, respectively. During the nine month period ended September 30, 2022, there were no new TDRs and no existing TDRs that were re-modified. The Bank had no significant commitments to lend additional funds to TDRs. During the nine month period ended September 30, 2021, there were no new TDRs and three existing TDRs that had reached their modification maturity date and were re-modified. These modifications did not impact the ALL. During the nine month periods ended September 30, 2022 and 2021, there were no payment defaults.

​

The following table presents the volume and recorded investment in TDRs at the times they were modified, by class and type of modification that occurred during the periods indicated.

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Temporary Rate Modification | ​ | Extension of Maturity | ​ | Modification of Payment and Other Terms
(in thousands) | ​ | Number of Contracts | ​ | Recorded Investment | ​ | Number of Contracts | ​ | Recorded Investment | ​ | Number of Contracts | ​ | Recorded Investment
Nine months ended September 30, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | — | ​ | $ | — | ​ | 1 | ​ | $ | 109 | ​ | — | ​ | $ | —
All other CRE | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
All other A&D | ​ | — | ​ | ​ | — | ​ | 1 | ​ | ​ | 202 | ​ | — | ​ | ​ | —
Commercial and industrial | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage – term | ​ | — | ​ | ​ | — | ​ | 1 | ​ | ​ | 215 | ​ | — | ​ | ​ | —
Residential mortgage – home equity | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Consumer | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Total | ​ | — | ​ | $ | — | ​ | 3 | ​ | $ | 526 | ​ | — | ​ | $ | —

​

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During the three month period ended September 30, 2022, there were no new TDRs and no existing TDRs that were re-modified. The Bank had no significant commitments to lend additional funds to TDR borrowers. During the three month period ended September 30, 2021, there were no new TDRs and two existing TDRs that had reached their modification maturity date were re-modified. These re-modifications did not impact the ALL. During the three months ended September 30, 2022 and 2021, there were no payment defaults under TDRs.

​

The following table presents the volume and recorded investment in TDRs at the times they were modified, by class and type of modification that occurred during the periods indicated.

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Temporary Rate Modification | ​ | Extension of Maturity | ​ | Modification of Payment and Other Terms
(in thousands) | ​ | Number of Contracts | ​ | Recorded Investment | ​ | Number of Contracts | ​ | Recorded Investment | ​ | Number of Contracts | ​ | Recorded Investment
Three months ended September 30, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | — | ​ | $ | — | ​ | — | ​ | $ | — | ​ | — | ​ | $ | —
All other CRE | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
All other A&D | ​ | — | ​ | ​ | — | ​ | 1 | ​ | ​ | 202 | ​ | — | ​ | ​ | —
Commercial and industrial | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage – term | ​ | — | ​ | ​ | — | ​ | 1 | ​ | ​ | 215 | ​ | — | ​ | ​ | —
Residential mortgage – home equity | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Consumer | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Total | ​ | — | ​ | $ | — | ​ | 2 | ​ | $ | 417 | ​ | — | ​ | $ | —

​

​

Note 5 - Other Real Estate Owned, net

The following table presents the components of other real estate owned (“OREO”) at September 30, 2022 and December 31, 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | September 30, 2022 |  | December 31, 2021
Acquisition and development | ​ | $ | 4,670 | ​ | $ | 4,477
Residential mortgage | ​ | ​ | 63 | ​ | ​ | —
Total OREO, net | ​ | $ | 4,733 | ​ | $ | 4,477

​

The following table presents the activity in the OREO valuation allowance for the nine and three month periods ended September 30, 2022 and 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended | ​ | Three Months Ended
​ | ​ | September 30, | ​ | September 30,
(in thousands) |  | 2022 |  | 2021 | ​ | 2022 | ​ | 2021
Balance beginning of period | ​ | $ | 453 | ​ | $ | 1,010 | ​ | $ | 453 | ​ | $ | 543
Fair value adjustment | ​ | ​ | — | ​ | ​ | (160) | ​ | ​ | — | ​ | ​ | —
Sales of OREO | ​ | ​ | — | ​ | ​ | (396) | ​ | ​ | — | ​ | ​ | (89)
Balance at end of period | ​ | $ | 453 | ​ | $ | 454 | ​ | $ | 453 | ​ | $ | 454

​

​

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The following table presents the components of OREO (income)/expenses, net, for the nine and three month periods ended September 30, 2022 and 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended | ​ | Three Months Ended
​ | ​ | September 30, | ​ | September 30,
(in thousands) |  | 2022 |  | 2021 | ​ | 2022 | ​ | 2021
Gains on sale of real estate, net | ​ | $ | — | ​ | $ | (594) | ​ | $ | — | ​ | $ | 2
Fair value adjustment, net | ​ | ​ | — | ​ | ​ | (160) | ​ | ​ | — | ​ | ​ | —
Expenses, net | ​ | ​ | 378 | ​ | ​ | 345 | ​ | ​ | 129 | ​ | ​ | 150
Rental and other income | ​ | ​ | (3) | ​ | ​ | (51) | ​ | ​ | (1) | ​ | ​ | (2)
Total OREO expenses/(income), net | ​ | $ | 375 | ​ | $ | (460) | ​ | $ | 128 | ​ | $ | 150

​

​

​

Note 6 – Fair Value of Financial Instruments

The Corporation complies with the guidance of ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements required under other accounting pronouncements. The Corporation also follows the guidance on matters relating to all financial instruments found in ASC Subtopic 825-10, Financial Instruments – Overall.

Fair value is defined as the price to sell an asset or to transfer a liability in an orderly transaction between willing market participants as of the measurement date. Fair value is best determined by values quoted through active trading markets. Active trading markets are characterized by numerous transactions of similar financial instruments between willing buyers and willing sellers. Because no active trading market exists for various types of financial instruments, many of the fair values disclosed were derived using present value discounted cash flows or other valuation techniques described below. As a result, the Corporation’s ability to actually realize these derived values cannot be assumed.

The Corporation measures fair values based on the fair value hierarchy established in ASC Paragraph 820-10-35-37. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of inputs that may be used to measure fair value under the hierarchy are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets and liabilities. This level is the most reliable source of valuation.

Level 2: Quoted prices that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability. Level 2 inputs include inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). It also includes inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs). Several sources are utilized for valuing these assets, including a contracted valuation service, Standard & Poor’s (“S&P”) evaluations and pricing services, and other valuation matrices.

Level 3: Prices or valuation techniques that require inputs that are both significant to the valuation assumptions and not readily observable in the market (i.e. supported with little or no market activity). Level 3 instruments are valued based on the best available data, some of which is internally developed, and consider risk premiums that a market participant would require.

The level established within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Transfers in and out of Level 1, 2 or 3 are recorded at fair value at the beginning of the reporting period.

Investments – The investment portfolio is classified and accounted for based on the guidance of ASC Topic 320, Investments – Debt and Equity Securities.

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The fair value of investments is determined using a market approach. As of September 30, 2022, the U.S. Government agencies and treasuries, residential and commercial mortgage-backed securities, collateralized mortgage obligations, and state and political subdivisions bonds, excluding the tax increment financing (“TIF”) bonds, were classified as Level 2 within the valuation hierarchy. Their fair values were determined based upon market-corroborated inputs and valuation matrices, which were obtained through third party data service providers or securities brokers through which the Corporation has historically transacted both purchases and sales of investment securities. The TIF bonds and collateralized debt obligation (“CDO”) portfolio, which consists of pooled trust preferred securities issued by banks, thrifts, and insurance companies, are classified as Level 3 within the valuation hierarchy. The CDO fair values are determined by a third party using a discounted cash flow model.

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.

Impaired loans – Loans included in the table below are those that are considered impaired 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 Investment- Equity investments included in the table below are considered impaired with losses recognized on the income statement in net gains. Fair value of the equity investment was based on an independent third-party valuation report where the value was determined based on the revenue multiples of like kind information technology businesses. These assets are included as Level 3 fair values based upon the lowest level of input that is significant to the fair value measurements.

Other real estate owned – OREO included in the table below are considered impaired with specific write-downs. Fair value of other real estate owned was based on independent third-party appraisals of the properties. These values were determined based on the sales prices of similar properties in the approximate geographic area. These assets are included as Level 3 fair values based upon the lowest level of input that is significant to the fair value measurements.

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For assets measured at fair value on a recurring and non-recurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2022 and December 31, 2021 were as follows:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Fair Value Measurements at September 30, 2022 Using
​ | ​ | ​ | ​ | Quoted | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Prices in | ​ | Significant | ​ | ​ | ​
​ | ​ | Assets | ​ | Active Markets | ​ | Other | ​ | Significant
​ | ​ | Measured at | ​ | for Identical | ​ | Observable | ​ | Unobservable
​ | ​ | Fair Value | ​ | Assets | ​ | Inputs | ​ | Inputs
(in thousands) |  | 09/30/22 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Recurring: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Investment securities available-for-sale: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. government agencies | ​ | $ | 9,447 | ​ | ​ | ​ | ​ | $ | 9,447 | ​ | ​ | ​
Residential mortgage-backed agencies | ​ | $ | 37,734 | ​ | ​ | ​ | ​ | $ | 37,734 | ​ | ​ | ​
Commercial mortgage-backed agencies | ​ | $ | 31,611 | ​ | ​ | ​ | ​ | $ | 31,611 | ​ | ​ | ​
Collateralized mortgage obligations | ​ | $ | 21,701 | ​ | ​ | ​ | ​ | $ | 21,701 | ​ | ​ | ​
Obligations of states and political subdivisions | ​ | $ | 10,744 | ​ | ​ | ​ | ​ | $ | 10,744 | ​ | ​ | ​
Corporate bonds | ​ | $ | 920 | ​ | ​ | ​ | ​ | $ | 920 | ​ | ​ | ​
Collateralized debt obligations | ​ | $ | 15,882 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 15,882
Financial derivatives | ​ | $ | 1,171 | ​ | ​ | ​ | ​ | $ | 1,171 | ​ | ​ | ​
Non-recurring: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Impaired loans, net | ​ | $ | 128 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 128
Equity Investment | ​ | $ | 1,052 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 1,052
Other real estate owned | ​ | $ | — | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | —

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Fair Value Measurements at December 31, 2021 Using
​ | ​ | ​ | ​ | Quoted | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Prices in | ​ | Significant | ​ | ​
​ | ​ | Assets/(liabilities) | ​ | Active Markets | ​ | Other | ​ | Significant
​ | ​ | Measured at | ​ | for Identical | ​ | Observable | ​ | Unobservable
​ | ​ | Fair Value | ​ | Assets | ​ | Inputs | ​ | Inputs
(in thousands) |  | 12/31/21 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Recurring: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Investment securities available-for-sale: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. government agencies | ​ | $ | 67,169 | ​ | ​ | ​ | ​ | $ | 67,169 | ​ | ​ | ​
Residential mortgage-backed agencies | ​ | $ | 48,661 | ​ | ​ | ​ | ​ | $ | 48,661 | ​ | ​ | ​
Commercial mortgage-backed agencies | ​ | $ | 50,868 | ​ | ​ | ​ | ​ | $ | 50,868 | ​ | ​ | ​
Collateralized mortgage obligations | ​ | $ | 90,077 | ​ | ​ | ​ | ​ | $ | 90,077 | ​ | ​ | ​
Obligations of states and political subdivisions | ​ | $ | 12,804 | ​ | ​ | ​ | ​ | $ | 12,804 | ​ | ​ | ​
Collateralized debt obligations | ​ | $ | 17,192 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 17,192
Financial derivatives | ​ | $ | (453) | ​ | ​ | ​ | ​ | $ | (453) | ​ | ​ | ​
Non-recurring: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Impaired loans, net | ​ | $ | 408 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 408
Equity investment | ​ | $ | 590 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 590
Other real estate owned | ​ | $ | 349 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 349

​

At September 30, 2022, the fair value of impaired loans with a valuation allowance or partial charge-off was $0.5 million, net of valuation allowances of $29,781 and partial charge-offs of $0.1 million. During the nine months ended September 30, 2022, changes to the valuation allowance or additional charge off activity was recorded on loans with a net balance of approximately $0.1 million. At December 31, 2021, the fair value of impaired loans with a valuation allowance or charge-off was $1.0 million, net of valuation allowances of $64,700 and charge-offs of $1.3 million. During the year ended December 31, 2021, changes to the valuation allowance or additional charge off activity was recorded on loans with a net balance of approximately $0.4 million.

​

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There were no transfers of assets between any of the fair value hierarchy for the nine month periods ended September 30, 2022 or 2021.

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of September 30, 2022 and December 31, 2021, the significant unobservable inputs used in the fair value measurements were as follows:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Fair Value at September 30, 2022 |  | Valuation Technique |  | Significant Unobservable Inputs |  | Significant Unobservable Input Value
Recurring: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Investment Securities – available for sale -CDO | ​ | $ | 15,882 | ​ | Discounted Cash Flow | ​ | Discount Margin | ​ | Range of low to mid 300 and low to high 400
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-recurring: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Impaired Loans, net | ​ | $ | 128 | ​ | Market Comparable Properties | ​ | Marketability Discount | ​ | N/A
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Equity Investment | ​ | $ | 1,052 | ​ | Market Method | ​ | Revenue Multiples | ​ | 2.8x

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Fair Value at December 31, 2021 |  | Valuation Technique |  | Significant Unobservable Inputs |  | Significant Unobservable Input Value
Recurring: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Investment Securities – available for sale -CDO | ​ | $ | 17,192 | ​ | Discounted Cash Flow | ​ | Discount Rate | ​ | Libor + 3.25%
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-recurring: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Impaired Loans, net | ​ | $ | 408 | ​ | Market Comparable Properties | ​ | Marketability Discount | ​ | 10.0% - 15.0% (1) (weighted avg 13.2%)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Equity Investment | ​ | $ | 590 | ​ | Market Method | ​ | Revenue Multiples | ​ | 2.8x
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other Real Estate Owned | ​ | $ | 349 | ​ | Market Comparable Properties | ​ | Marketability Discount | ​ | 15.0%
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

​

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

​

​

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The following tables show a reconciliation of the beginning and ending balances for fair valued assets measured on a recurring basis using Level 3 significant unobservable inputs for the nine and three month periods ended September 30, 2022 and 2021:

​

​ | ​ | ​ | ​
​ | ​ | Fair Value Measurements
​ | ​ | Using Significant Unobservable Inputs
​ | ​ | (Level 3)
​ | ​ | Investment Securities
(in thousands) |  | Available for Sale
Beginning balance January 1, 2022 | ​ | $ | 17,192
Total losses realized/unrealized: | ​ | ​ | ​
Included in other comprehensive loss | ​ | ​ | (1,310)
Ending balance September 30, 2022 | ​ | $ | 15,882

​

​ | ​ | ​ | ​
​ | ​ | ​ | ​
​ | ​ | Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(in thousands) | ​ | Investment Securities Available for Sale
Beginning balance July 1, 2022 | ​ | $ | 16,258
Total gains realized/unrealized: | ​ | ​ | ​
Included in other comprehensive income | ​ | ​ | (376)
Ending balance September 30, 2022 | ​ | $ | 15,882

​

​

​ | ​ | ​ | ​
​ | ​ | Fair Value Measurements
​ | ​ | Using Significant Unobservable Inputs
​ | ​ | (Level 3)
​ | ​ | Investment Securities
(in thousands) |  | Available for Sale
Beginning balance January 1, 2021 | ​ | $ | 13,260
Total losses realized/unrealized: | ​ | ​ | ​
Included in other comprehensive loss | ​ | ​ | 3,832
Ending balance September 30, 2021 | ​ | $ | 17,092

​

​ | ​ | ​ | ​
​ | ​ | ​ | ​
​ | ​ | Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(in thousands) | ​ | Investment Securities Available for Sale
Beginning balance July 1, 2021 | ​ | $ | 16,230
Total losses realized/unrealized: | ​ | ​ | ​
Included in other comprehensive income | ​ | ​ | 862
Ending balance September 30, 2021 | ​ | $ | 17,092

​

There were no gains or losses included in earnings attributable to the change in realized/unrealized gains or losses related to the assets for the nine and three month periods ended September 30, 2022 or 2021.

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.

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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:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, 2022 | ​ | Fair Value Measurements
​ | ​ | ​ | ​ | ​ | ​ | Quoted | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | Prices in | ​ | Significant | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | Active Markets | ​ | Other | ​ | Significant
​ | ​ | ​ | ​ | ​ | ​ | for Identical | ​ | Observable | ​ | Unobservable
​ | ​ | Carrying | ​ | Fair | ​ | Assets | ​ | Inputs | ​ | Inputs
(in thousands) |  | Amount |  | Value |  | (Level 1) |  | (Level 2) |  | (Level 3)
Financial Assets: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash and due from banks | ​ | $ | 28,888 | ​ | $ | 28,888 | ​ | $ | 28,888 | ​ | ​ | ​ | ​ | ​ | ​
Interest bearing deposits in banks | ​ | ​ | 1,868 | ​ | ​ | 1,868 | ​ | ​ | 1,868 | ​ | ​ | ​ | ​ | ​ | ​
Investment securities - AFS | ​ | ​ | 128,039 | ​ | ​ | 128,039 | ​ | ​ | ​ | ​ | $ | 112,157 | ​ | $ | 15,882
Investment securities - HTM | ​ | ​ | 238,445 | ​ | ​ | 205,745 | ​ | ​ | ​ | ​ | ​ | 185,484 | ​ | ​ | 20,261
Restricted bank stock | ​ | ​ | 1,027 | ​ | ​ | N/A | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans, net | ​ | ​ | 1,262,173 | ​ | ​ | 1,186,783 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 1,186,783
Financial derivatives | ​ | ​ | 1,171 | ​ | ​ | 1,171 | ​ | ​ | ​ | ​ | ​ | 1,171 | ​ | ​ | ​
Accrued interest receivable | ​ | ​ | 5,157 | ​ | ​ | 5,157 | ​ | ​ | ​ | ​ | ​ | 751 | ​ | ​ | 4,406
Financial Liabilities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deposits - non-maturity | ​ | ​ | 1,386,816 | ​ | ​ | 1,386,816 | ​ | ​ | ​ | ​ | ​ | 1,386,816 | ​ | ​ | ​
Deposits - time deposits | ​ | ​ | 124,302 | ​ | ​ | 124,217 | ​ | ​ | ​ | ​ | ​ | 124,217 | ​ | ​ | ​
Short-term borrowed funds | ​ | ​ | 89,726 | ​ | ​ | 89,726 | ​ | ​ | ​ | ​ | ​ | 89,726 | ​ | ​ | ​
Long-term borrowed funds | ​ | ​ | 30,929 | ​ | ​ | 30,928 | ​ | ​ | ​ | ​ | ​ | 30,928 | ​ | ​ | ​
Accrued interest payable | ​ | ​ | 104 | ​ | ​ | 104 | ​ | ​ | ​ | ​ | ​ | 104 | ​ | ​ | ​
Off balance sheet financial instruments | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | ​ | ​ | ​ | ​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | December 31, 2021 | ​ | 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 | ​ | $ | 109,823 | ​ | $ | 109,823 | ​ | $ | 109,823 | ​ | ​ | ​ | ​ | ​ | ​
Interest bearing deposits in banks | ​ | ​ | 5,897 | ​ | ​ | 5,897 | ​ | ​ | 5,897 | ​ | ​ | ​ | ​ | ​ | ​
Investment securities - AFS | ​ | ​ | 286,771 | ​ | ​ | 286,771 | ​ | ​ | ​ | ​ | $ | 269,579 | ​ | $ | 17,192
Investment securities - HTM | ​ | ​ | 56,259 | ​ | ​ | 65,369 | ​ | ​ | ​ | ​ | ​ | 36,448 | ​ | ​ | 28,921
Restricted bank stock | ​ | ​ | 1,029 | ​ | ​ | 1,029 | ​ | ​ | ​ | ​ | ​ | 1,029 | ​ | ​ | ​
Loan held for sale | ​ | ​ | 67 | ​ | ​ | 67 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 67
Loans, net | ​ | ​ | 1,137,440 | ​ | ​ | 1,122,671 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 1,122,671
Accrued interest receivable | ​ | ​ | 4,821 | ​ | ​ | 4,821 | ​ | ​ | ​ | ​ | ​ | 4,821 | ​ | ​ | ​
Financial Liabilities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deposits - non-maturity | ​ | ​ | 1,306,145 | ​ | ​ | 1,306,145 | ​ | ​ | ​ | ​ | ​ | 1,306,145 | ​ | ​ | ​
Deposits - time deposits | ​ | ​ | 163,229 | ​ | ​ | 163,961 | ​ | ​ | ​ | ​ | ​ | 163,961 | ​ | ​ | ​
Financial derivatives | ​ | ​ | 453 | ​ | ​ | 453 | ​ | ​ | ​ | ​ | ​ | 453 | ​ | ​ | ​
Short-term borrowed funds | ​ | ​ | 57,699 | ​ | ​ | 57,699 | ​ | ​ | ​ | ​ | ​ | 57,699 | ​ | ​ | ​
Long-term borrowed funds | ​ | ​ | 30,929 | ​ | ​ | 31,085 | ​ | ​ | ​ | ​ | ​ | 31,085 | ​ | ​ | ​
Accrued interest payable | ​ | ​ | 137 | ​ | ​ | 137 | ​ | ​ | ​ | ​ | ​ | 137 | ​ | ​ | ​

​

​

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Note 7 – Accumulated Other Comprehensive Loss

The following table presents the changes in each component of accumulated other comprehensive loss for the 12 months ended December 31, 2021 and the three month periods ended March 31, 2022, June 30, 2022 and September 30, 2022:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Investment | ​ | Investment | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | securities- | ​ | securities- | ​ | Investment | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | with OTTI | ​ | all other | ​ | securities- | ​ | Cash Flow | ​ | Pension | ​ | ​ | ​ | ​
(in thousands) |  | AFS |  | AFS |  | HTM |  | Hedge |  | Plan |  | SERP |  | Total
Accumulated OCL, net: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Balance - January 1, 2021 | ​ | $ | (3,277) | ​ | $ | (25) | ​ | $ | (315) | ​ | $ | (954) | ​ | $ | (22,630) | ​ | $ | (1,662) | ​ | $ | (28,863)
Other comprehensive income/(loss) before reclassifications | ​ | ​ | 2,475 | ​ | ​ | (5,611) | ​ | ​ | — | ​ | ​ | 635 | ​ | ​ | 3,431 | ​ | ​ | (521) | ​ | ​ | 409
Amounts reclassified from accumulated other comprehensive loss | ​ | ​ | (147) | ​ | ​ | (113) | ​ | ​ | 181 | ​ | ​ | — | ​ | ​ | 1,091 | ​ | ​ | 128 | ​ | ​ | 1,140
Balance - December 31, 2021 | ​ | $ | (949) | ​ | $ | (5,749) | ​ | $ | (134) | ​ | $ | (319) | ​ | $ | (18,108) | ​ | $ | (2,055) | ​ | $ | (27,314)
Other comprehensive income/(loss) before reclassifications | ​ | ​ | 103 | ​ | ​ | (1,843) | ​ | ​ | (6,100) | ​ | ​ | 614 | ​ | ​ | (2,651) | ​ | ​ | — | ​ | ​ | (9,877)
Amounts reclassified from accumulated other comprehensive loss | ​ | ​ | (37) | ​ | ​ | (2) | ​ | ​ | 69 | ​ | ​ | — | ​ | ​ | 204 | ​ | ​ | 50 | ​ | ​ | 284
Balance - March 31, 2022 | ​ | $ | (883) | ​ | $ | (7,594) | ​ | $ | (6,165) | ​ | $ | 295 | ​ | $ | (20,555) | ​ | $ | (2,005) | ​ | $ | (36,907)
Other comprehensive income/(loss) before reclassifications | ​ | ​ | (582) | ​ | ​ | (3,924) | ​ | ​ | — | ​ | ​ | 182 | ​ | ​ | (5,069) | ​ | ​ | — | ​ | ​ | (9,393)
Amounts reclassified from accumulated other comprehensive loss | ​ | ​ | (37) | ​ | ​ | — | ​ | ​ | 168 | ​ | ​ | — | ​ | ​ | 204 | ​ | ​ | 49 | ​ | ​ | 384
Balance - June 30, 2022 | ​ | $ | (1,502) | ​ | $ | (11,518) | ​ | $ | (5,997) | ​ | $ | 477 | ​ | $ | (25,420) | ​ | $ | (1,956) | ​ | $ | (45,916)
Other comprehensive income/(loss) before reclassifications | ​ | ​ | (146) | ​ | ​ | (4,957) | ​ | ​ | — | ​ | ​ | 392 | ​ | ​ | (2,592) | ​ | ​ | — | ​ | ​ | (7,303)
Amounts reclassified from accumulated other comprehensive loss | ​ | ​ | (37) | ​ | ​ | — | ​ | ​ | 167 | ​ | ​ | — | ​ | ​ | 205 | ​ | ​ | 50 | ​ | ​ | 385
Balance - September 30, 2022 | ​ | $ | (1,685) | ​ | $ | (16,475) | ​ | $ | (5,830) | ​ | $ | 869 | ​ | $ | (27,807) | ​ | $ | (1,906) | ​ | $ | (52,834)

​

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The following tables present the components of other comprehensive income/(loss) for the nine and three month periods ended September 30, 2022 and 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Before | ​ | Tax | ​ | ​
Components of Other Comprehensive Loss | ​ | Tax | ​ | (Expense) | ​ | ​
(in thousands) |  | Amount |  | Benefit |  | Net
For the nine months ended September 30, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Available for sale (AFS) securities with OTTI: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses | ​ | $ | (853) | ​ | $ | 228 | ​ | $ | (625)
Less: accretable yield recognized in income | ​ | ​ | 152 | ​ | ​ | (41) | ​ | ​ | 111
Net unrealized losses on investments with OTTI | ​ | ​ | (1,005) | ​ | ​ | 269 | ​ | ​ | (736)
Available for sale securities – all other: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses | ​ | ​ | (22,971) | ​ | ​ | 6,147 | ​ | ​ | (16,824)
Unrealized holding losses on securities transferred from available for sale to held to maturity | ​ | ​ | 8,328 | ​ | ​ | (2,228) | ​ | ​ | 6,100
Less: gains recognized in income | ​ | ​ | 3 | ​ | ​ | (1) | ​ | ​ | 2
Net unrealized losses on all other AFS securities | ​ | ​ | (14,646) | ​ | ​ | 3,920 | ​ | ​ | (10,726)
Held to maturity securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses on securities transferred to held to maturity | ​ | ​ | (8,328) | ​ | ​ | 2,228 | ​ | ​ | (6,100)
Less: gains recognized in income | ​ | ​ | 93 | ​ | ​ | (25) | ​ | ​ | 68
Less: amortization recognized in income | ​ | ​ | (644) | ​ | ​ | 172 | ​ | ​ | (472)
Net unrealized losses on HTM securities | ​ | ​ | (7,777) | ​ | ​ | 2,081 | ​ | ​ | (5,696)
Cash flow hedges: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains | ​ | ​ | 1,622 | ​ | ​ | (434) | ​ | ​ | 1,188
Pension Plan: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized net actuarial loss | ​ | ​ | (14,079) | ​ | ​ | 3,767 | ​ | ​ | (10,312)
Less: amortization of unrecognized loss | ​ | ​ | (837) | ​ | ​ | 224 | ​ | ​ | (613)
Net pension plan liability adjustment | ​ | ​ | (13,242) | ​ | ​ | 3,543 | ​ | ​ | (9,699)
SERP: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized net actuarial loss | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Less: amortization of unrecognized loss | ​ | ​ | (203) | ​ | ​ | 54 | ​ | ​ | (149)
Net SERP liability adjustment | ​ | ​ | 203 | ​ | ​ | (54) | ​ | ​ | 149
Other comprehensive loss | ​ | $ | (34,845) | ​ | $ | 9,325 | ​ | $ | (25,520)

​

​

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Before | ​ | Tax | ​ | ​
Components of Other Comprehensive Income | ​ | Tax | ​ | (Expense) | ​ | ​
(in thousands) |  | Amount |  | Benefit |  | Net
For the nine months ended September 30, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Available for sale (AFS) securities with OTTI: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains | ​ | $ | 3,274 | ​ | $ | (877) | ​ | $ | 2,397
Less: accretable yield recognized in income | ​ | ​ | 151 | ​ | ​ | (40) | ​ | ​ | 111
Net unrealized gains on investments with OTTI | ​ | ​ | 3,123 | ​ | ​ | (837) | ​ | ​ | 2,286
Available for sale securities – all other: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses | ​ | ​ | (5,035) | ​ | ​ | 1,349 | ​ | ​ | (3,686)
Less: gains recognized in income | ​ | ​ | 154 | ​ | ​ | (41) | ​ | ​ | 113
Net unrealized losses on all other AFS securities | ​ | ​ | (5,189) | ​ | ​ | 1,390 | ​ | ​ | (3,799)
Held to maturity securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Less: gains recognized in income | ​ | ​ | (54) | ​ | ​ | 14 | ​ | ​ | (40)
Less: amortization recognized in income | ​ | ​ | (96) | ​ | ​ | 26 | ​ | ​ | (70)
Net unrealized gains on HTM securities | ​ | ​ | 150 | ​ | ​ | (40) | ​ | ​ | 110
Cash flow hedges: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains | ​ | ​ | 615 | ​ | ​ | (165) | ​ | ​ | 450
Pension Plan: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized net actuarial gain | ​ | ​ | 139 | ​ | ​ | (37) | ​ | ​ | 102
Less: amortization of unrecognized loss | ​ | ​ | (1,116) | ​ | ​ | 299 | ​ | ​ | (817)
Net pension plan liability adjustment | ​ | ​ | 1,255 | ​ | ​ | (336) | ​ | ​ | 919
SERP: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized net actuarial loss | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Less: amortization of unrecognized loss | ​ | ​ | (226) | ​ | ​ | 60 | ​ | ​ | (166)
Less: amortization of prior service costs | ​ | ​ | 1 | ​ | ​ | — | ​ | ​ | 1
Net SERP liability adjustment | ​ | ​ | 225 | ​ | ​ | (60) | ​ | ​ | 165
Other comprehensive income | ​ | $ | 179 | ​ | $ | (48) | ​ | $ | 131

​

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​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Components of Other Comprehensive Loss (in thousands) | ​ | Before Tax Amount | ​ | Tax (Expense) Benefit | ​ | Net
For the three months ended September 30, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Available for sale (AFS) securities with OTTI: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses | ​ | $ | (199) | ​ | $ | 53 | ​ | $ | (146)
Less: accretable yield recognized in income | ​ | ​ | 51 | ​ | ​ | (14) | ​ | ​ | 37
Net unrealized losses on investments with OTTI | ​ | ​ | (250) | ​ | ​ | 67 | ​ | ​ | (183)
Available for sale securities – all other: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses | ​ | ​ | (6,768) | ​ | ​ | 1,811 | ​ | ​ | (4,957)
Less: gains recognized in income | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Net unrealized losses on all other AFS securities | ​ | ​ | (6,768) | ​ | ​ | 1,811 | ​ | ​ | (4,957)
Held to maturity securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Less: gains recognized in income | ​ | ​ | 93 | ​ | ​ | (25) | ​ | ​ | 68
Less: amortization recognized in income | ​ | ​ | (320) | ​ | ​ | 85 | ​ | ​ | (235)
Net unrealized gains on HTM securities | ​ | ​ | 227 | ​ | ​ | (60) | ​ | ​ | 167
Cash flow hedges: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains | ​ | ​ | 534 | ​ | ​ | (142) | ​ | ​ | 392
Pension Plan: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized net actuarial loss | ​ | ​ | (3,537) | ​ | ​ | 945 | ​ | ​ | (2,592)
Less: amortization of unrecognized loss | ​ | ​ | (279) | ​ | ​ | 74 | ​ | ​ | (205)
Net pension plan liability adjustment | ​ | ​ | (3,258) | ​ | ​ | 871 | ​ | ​ | (2,387)
SERP: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized net actuarial loss | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Less: amortization of unrecognized loss | ​ | ​ | (68) | ​ | ​ | 18 | ​ | ​ | (50)
Net SERP liability adjustment | ​ | ​ | 68 | ​ | ​ | (18) | ​ | ​ | 50
Other comprehensive loss | ​ | $ | (9,447) | ​ | $ | 2,529 | ​ | $ | (6,918)

​

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​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Components of Other Comprehensive Loss (in thousands) | ​ | Before Tax Amount | ​ | Tax (Expense) Benefit | ​ | Net
For the three months ended September 30, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Available for sale (AFS) securities with OTTI: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains | ​ | $ | 751 | ​ | $ | (201) | ​ | $ | 550
Less: accretable yield recognized in income | ​ | ​ | 50 | ​ | ​ | (13) | ​ | ​ | 37
Net unrealized gains on investments with OTTI | ​ | ​ | 701 | ​ | ​ | (188) | ​ | ​ | 513
Available for sale securities – all other: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses | ​ | ​ | (708) | ​ | ​ | 190 | ​ | ​ | (518)
Less: gains recognized in income | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Net unrealized losses on all other AFS securities | ​ | ​ | (708) | ​ | ​ | 190 | ​ | ​ | (518)
Held to maturity securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Less: gains recognized in income | ​ | ​ | (54) | ​ | ​ | 14 | ​ | ​ | (40)
Less: amortization recognized in income | ​ | ​ | 12 | ​ | ​ | (3) | ​ | ​ | 9
Net unrealized gains on HTM securities | ​ | ​ | 42 | ​ | ​ | (11) | ​ | ​ | 31
Cash flow hedges: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains | ​ | ​ | 108 | ​ | ​ | (29) | ​ | ​ | 79
Pension Plan: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized net actuarial loss | ​ | ​ | (951) | ​ | ​ | 254 | ​ | ​ | (697)
Less: amortization of unrecognized loss | ​ | ​ | (372) | ​ | ​ | 99 | ​ | ​ | (273)
Less: amortization of prior service costs | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Net pension plan liability adjustment | ​ | ​ | (579) | ​ | ​ | 155 | ​ | ​ | (424)
SERP: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized net actuarial loss | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Less: amortization of unrecognized loss | ​ | ​ | (76) | ​ | ​ | 20 | ​ | ​ | (56)
Less: amortization of prior service costs | ​ | ​ | 1 | ​ | ​ | — | ​ | ​ | 1
Net SERP liability adjustment | ​ | ​ | 75 | ​ | ​ | (20) | ​ | ​ | 55
Other comprehensive loss | ​ | $ | (361) | ​ | $ | 97 | ​ | $ | (264)

​

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The following table presents the details of amounts reclassified from accumulated other comprehensive loss for the nine and three month periods ended September 30, 2022 and 2021:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amounts Reclassified from | ​ | Nine Months Ended | ​ | ​
Accumulated Other Comprehensive Loss | ​ | September 30, | ​ | Affected Line Item in the Statement
(in thousands) |  | 2022 |  | 2021 |  | Where Net Income is Presented
Net unrealized gains on available for sale investment securities with OTTI: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Accretable yield | ​ | $ | 152 | ​ | $ | 151 | ​ | Interest income on taxable investment securities
Taxes | ​ | ​ | (41) | ​ | ​ | (40) | ​ | Provision for income tax expense
​ | ​ | $ | 111 | ​ | $ | 111 | ​ | Net of tax
Net unrealized gains on available for sale investment securities - all others: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Gains recognized | ​ | $ | 3 | ​ | $ | 154 | ​ | Net gains
Taxes | ​ | ​ | (1) | ​ | ​ | (41) | ​ | Provision for income tax expense
​ | ​ | $ | 2 | ​ | $ | 113 | ​ | Net of tax
Net unrealized losses on held to maturity securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amortization | ​ | $ | (644) | ​ | $ | (96) | ​ | Interest income on taxable investment securities
Gains/(losses) recognized | ​ | ​ | 93 | ​ | ​ | (54) | ​ | Net gains/(losses)
Taxes | ​ | ​ | 147 | ​ | ​ | 40 | ​ | Provision for income tax expense
​ | ​ | $ | (404) | ​ | $ | (110) | ​ | Net of tax
Net pension plan liability adjustment: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amortization of unrecognized loss | ​ | $ | (837) | ​ | $ | (1,116) | ​ | Other Expense
Taxes | ​ | ​ | 224 | ​ | ​ | 299 | ​ | Provision for income tax expense
​ | ​ | $ | (613) | ​ | $ | (817) | ​ | Net of tax
Net SERP liability adjustment: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amortization of unrecognized loss | ​ | $ | (203) | ​ | $ | (226) | ​ | Other Expense
Amortization of prior service costs | ​ | ​ | — | ​ | ​ | 1 | ​ | Salaries and employee benefits
Taxes | ​ | ​ | 54 | ​ | ​ | 60 | ​ | Provision for income tax expense
​ | ​ | $ | (149) | ​ | $ | (165) | ​ | Net of tax
Total reclassifications for the period | ​ | $ | (1,053) | ​ | $ | (868) | ​ | Net of tax

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​

​

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​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amounts Reclassified from | ​ | Three Months Ended | ​ | ​
Accumulated Other Comprehensive Loss | ​ | September 30, | ​ | Affected Line Item in the Statement
(in thousands) | ​ | 2022 | ​ | 2021 | ​ | Where Net Income is Presented
Net unrealized gains on available for sale investment securities with OTTI: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Accretable Yield | ​ | $ | 51 | ​ | $ | 50 | ​ | Interest income on taxable investment securities
Taxes | ​ | ​ | (14) | ​ | ​ | (13) | ​ | Provision for income tax expense
​ | ​ | $ | 37 | ​ | $ | 37 | ​ | Net of tax
Net unrealized losses on held to maturity securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amortization | ​ | $ | (320) | ​ | $ | 12 | ​ | Interest income on taxable investment securities
Gains/(losses) recognized | ​ | ​ | 93 | ​ | ​ | (54) | ​ | Net gains/(losses)
Taxes | ​ | ​ | 60 | ​ | ​ | 11 | ​ | Provision for income tax expense
​ | ​ | $ | (167) | ​ | $ | (31) | ​ | Net of tax
Net pension plan liability adjustment: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amortization of unrecognized loss | ​ | $ | (279) | ​ | $ | (372) | ​ | Other expense
Amortization of prior service costs | ​ | ​ | — | ​ | ​ | — | ​ | Salaries and employee benefits
Taxes | ​ | ​ | 74 | ​ | ​ | 99 | ​ | Provision for income tax expense
​ | ​ | $ | (205) | ​ | $ | (273) | ​ | Net of tax
Net SERP liability adjustment: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amortization of unrecognized loss | ​ | $ | (68) | ​ | $ | (76) | ​ | Other expense
Amortization of prior service costs | ​ | ​ | — | ​ | ​ | 1 | ​ | Salaries and employee benefits
Taxes | ​ | ​ | 18 | ​ | ​ | 20 | ​ | Provision for income tax expense
​ | ​ | $ | (50) | ​ | $ | (55) | ​ | Net of tax
Total reclassifications for the period | ​ | $ | (385) | ​ | $ | (322) | ​ | Net of tax

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​

​

Note 8 – Employee Benefit Plans

The following tables present the components of the net periodic pension plan cost for First United Corporation’s noncontributory Defined Benefit Pension Plan (the “Pension Plan”) and the Bank’s Defined Benefit Supplemental Executive Retirement Plan (“Defined Benefit SERP”) for the periods indicated:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended | ​ | Three Months Ended
Pension Plan | ​ | September 30, | ​ | September 30,
(in thousands) |  | 2022 |  | 2021 |  | 2022 |  | 2021
Service cost | ​ | $ | 42 | ​ | $ | 117 | ​ | $ | 14 | ​ | $ | 39
Interest cost | ​ | ​ | 1,152 | ​ | ​ | 1,066 | ​ | ​ | 384 | ​ | ​ | 355
Expected return on assets | ​ | ​ | (2,858) | ​ | ​ | (2,677) | ​ | ​ | (953) | ​ | ​ | (892)
Amortization of net actuarial loss | ​ | ​ | 837 | ​ | ​ | 1,116 | ​ | ​ | 279 | ​ | ​ | 372
Net pension credit included in employee benefits and other expense | ​ | $ | (827) | ​ | $ | (378) | ​ | $ | (276) | ​ | $ | (126)

​

The market value of the pension plan decreased $12.5 million during the first nine months of 2022. This decrease was due to the increasing rate environment and market volatility, which resulted in a pension plan liability of $7.7 million at September 30, 2022 compared to a pension plan asset of $4.8 million at December 31, 2021.

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended | ​ | Three Months Ended
Defined Benefit SERP | ​ | September 30, | ​ | September 30,
(in thousands) |  | 2022 |  | 2021 |  | 2022 |  | 2021
Service cost | ​ | $ | 124 | ​ | $ | 104 | ​ | $ | 41 | ​ | $ | 35
Interest cost | ​ | ​ | 215 | ​ | ​ | 179 | ​ | ​ | 72 | ​ | ​ | 60
Amortization of recognized loss | ​ | ​ | 203 | ​ | ​ | 226 | ​ | ​ | 68 | ​ | ​ | 75
Amortization of prior service cost | ​ | ​ | — | ​ | ​ | (1) | ​ | ​ | — | ​ | ​ | —
Net Defined Benefit SERP expense included in employee benefits and other expense | ​ | $ | 542 | ​ | $ | 508 | ​ | $ | 181 | ​ | $ | 170

​

The service cost component of net periodic benefit cost is included in salaries and benefits and all other components of net periodic benefit cost are included in other expense in the Consolidated Statement of Operations for the Pension Plan and the Defined Benefit SERP.

The Pension Plan is a noncontributory defined benefit pension plan that covers our employees who were hired prior to the freeze and others who were grandfathered into the plan. The benefits are based on years of service and the employees’ compensation during the last five years of employment.

Effective April 30, 2010, the Pension Plan was amended, resulting in a “soft freeze”, the effect of which prohibits new entrants into the plan and ceases crediting of additional years of service after that date. Effective January 1, 2013, the Pension Plan was amended to unfreeze it for those employees for whom the sum of their (a) ages, at their closest birthday plus (b) years of service for vesting purposes equals 80 or greater. The “soft freeze” continues to apply to all other plan participants. Pension benefits for these participants are managed through discretionary contributions to the First United Corporation 401(k) Profit Sharing Plan (the “401(k) Plan”).

The Bank established the Defined Benefit SERP in 2001 as an unfunded supplemental executive retirement plan. The Defined Benefit SERP is available only to a select group of management or highly compensated employees to provide supplemental retirement benefits in excess of limits imposed on qualified plans by federal tax law. Concurrent with the establishment of the Defined Benefit SERP, the Bank acquired Bank Owned Life Insurance (“BOLI”) policies on the senior management personnel and officers of the Bank. The benefits resulting from the favorable tax treatment accorded the earnings on the BOLI policies are intended to provide a source of funds for the future payment of the Defined Benefit SERP benefits as well as other employee benefit costs.

The benefit obligation activity for both the Pension Plan and the Defined Benefit SERP was calculated using an actuarial measurement date of January 1. Plan assets and the benefit obligations were calculated using an actuarial measurement date of December 31.

The Corporation will assess the need for future annual contributions to the pension plan based upon its funded status and an evaluation of the future benefits to be provided thereunder. No contributions were made to the Pension Plan during the first nine months of 2022 or 2021. The Corporation expects to fund the annual projected benefit payments for the Defined Benefit SERP from operations.

On January 9, 2015, First United Corporation and members of management who do not participate in the Defined Benefit SERP entered into participation agreements under the Deferred Compensation Plan, each styled as a Defined Contribution SERP Agreement (the “Contribution Agreement”). Pursuant to each Contribution Agreement, First United Corporation agreed, for each Plan Year (as defined in the Deferred Compensation Plan) in which it determines that it has been Profitable (as defined in the Contribution Agreement), to make a discretionary contribution to the participant’s Employer Account in an amount equal to 15% of the participant’s base salary level for such Plan Year, with the first Plan Year being the year ending December 31, 2015. The Contribution Agreement provides that the participant will become 100% vested in the amount maintained in his or her Employer Account upon the earliest to occur of the following events: (a) Normal Retirement (as defined in the Contribution Agreement); (b) Separation from Service (as defined in the Contribution Agreement) following a Change of Control (as defined in the Deferred Compensation Plan) and subsequent Triggering Event (as defined in the Contribution Agreement); (c) Separation from Service due to a Disability (as defined in the Contribution Agreement); (d) with respect to a particular award of Employer Contribution Credits, the participant’s completion of 2 consecutive Years of Service (as defined in the Contribution Agreement) immediately following the Plan Year for which such award was made; or (e) death. Notwithstanding the foregoing, however, a participant will

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lose entitlement to the amount maintained in his or her Employer Account in the event employment is terminated for Cause (as defined in the Contribution Agreement). In addition, the Contribution Agreement conditions entitlement to the amounts held in the Employer Account on the participant (1) refraining from engaging in Competitive Employment (as defined in the Contribution Agreement) for three years following his or her Separation from Service, (2) refraining from injurious disclosure of confidential information concerning the Corporation, and (3) remaining available, at the First United Corporation’s reasonable request, to provide at least six hours of transition services per month for 12 months following his or her Separation from Service (except in the case of death or Disability), except that only item (2) will apply in the event of a Separation from Service following a Change of Control and subsequent Triggering Event.

In January 2021, the Board of Directors approved discretionary contributions to three participants totaling $101,257. The Corporation recorded $37,971 of related compensation expense for the first nine months of 2022 and 2021 related to these contributions. The Corporation recorded $12,657 of related compensation expense for the third quarter of 2022 and 2021 related to these contributions. In January 2022, the Board of Directors approved discretionary contributions to three participants totaling $103,689. The Corporation recorded $38,883 of related compensation expense for the first nine months of 2022 and $12,961 of related compensation expense for the third quarter of 2022 related to these contributions. Each discretionary contribution has a two year vesting period.

Note 9 - 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 $10,000 to be paid, at the director’s election, in cash or additional shares of common stock. In January 2021, a total of 1,202 fully vested shares were issued to two new directors, which had a grant date fair market value of $16.66 per share. In May 2021, a total of 12,726 fully vested shares of common stock were issued to directors, which had a grant date fair value of $18.50 per share. In May 2022, a total of 14,940 fully vested shares of common stock were issued to directors, which had a grant date fair value of $18.92 per share. Director stock compensation expense was $196,254 for the nine months ended September 30, 2022 and $191,717 for the nine months ended September 30, 2021. Director stock compensation expense was $70,666 for the third quarter of 2022 and $58,857 for the third quarter of 2021.

Restricted Stock Units

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

The RSUs granted to each of the foregoing officers consist of (a) a performance vesting award for a three year performance period and (b) a time-vesting award that will vest ratably over a three year period. Target performance levels were set based on the annual budget which supports the Corporation’s long-term objective of achieving high performance as compared to peers. Threshold performance is the minimum level of acceptable performance as defined by the Committee and maximum performance represented a level potentially achievable under ideal circumstances. Achievement of the threshold performance level would result in each executive participant earning a payout at 50% of his or her respective target award opportunity. Achievement of the target performance level would result in the executive participant earning the target award and achievement at or above the maximum performance level would result in the executive participant earning 150% of the target opportunity. Actual results for any goal that

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falls between performance levels would be interpolated to calculate a proportionate award. For the performance period ending December 31, 2021, the RSUs’ performance goal is based on earnings per share for the year ending December 31, 2021. For the performance period ending December 31, 2022, the RSUs performance goals are based on earnings per share for the year ending December 31, 2022 and growth in tangible book value per share during the performance period. For the performance period ending December 31, 2023, the RSUs performance goals are based on earnings per share for the year ending December 31, 2023 and growth in tangible book value per share during the performance period.

To receive any shares under an RSU, a grantee must be employed by the Corporation or one of its subsidiaries on the applicable vesting date, except that a grantee whose employment terminates prior to such vesting date due to death, disability or retirement will be entitled to a pro-rated portion of the shares subject to the RSUs, assuming that, in the case of performance-vesting RSUs, the performance goals had been met at their "target" levels.

In the first quarter of 2020, RSUs were granted relating to 9,791 performance vesting shares (target level) for 2019 LTIP plan for the performance period ending December 31, 2021 and 10,143 performance vesting shares and 5,070 time vesting shares (target level) for 2020 LTIP plan for the performance period ending December 31, 2022, which had a grant date fair market value of $12.54 per share of common stock underlying each RSU. The 2020 plan has a performance period for the performance-vesting RSUs of three years ending December 31, 2022 and the time-vesting RSUs will vest ratably over a three year period that began on March 26, 2021. On March 26, 2021, 1,690 of the 5,070 time vesting shares were issued to participants. On March 26, 2022, 1,688 shares of the 3,380 remaining time vesting shares were issued to participants. In the third quarter of 2022, it was projected that the growth metric will not be met at 50%; therefore, the stock compensation expense was adjusted accordingly. Stock compensation expense was ($5,299) and $78,381 for the nine month periods ended September 30, 2022 and 2021. Stock compensation expense was ($37,091) and $26,127 for the third quarter of 2022 and 2021, respectively. Unrecognized compensation expense at September 30, 2022 related to unvested RSUs was $21,195.

In May 2021, RSUs relating to 7,389 performance vesting shares and 3,693 time vesting shares (target level) for plan year 2021 were granted, which had a grant date fair market value of $17.93 per share of common stock underlying each RSU. The performance period for the performance-vesting RSUs is the three year period ending December 31, 2023. The time-vesting RSUs will vest ratably over a three year period that began on May 5, 2022. On May 5, 2022, 1,230 shares of the 3,693 time-vesting RSUs were issued to participants. Stock compensation expense was $49,714 and $27,619 for the first nine months of 2022 and 2021, respectively. Stock compensation expense was $16,571 for both the third quarter of 2022 and 2021, respectively. Unrecognized compensation expense as of September 30, 2022 related to unvested units was $104,951.

In March 2022, RSUs relating to 8,096 performance vesting shares and 6,238 time vesting shares (target level) for plan year 2022 were granted, which had a grant date fair market value of $21.88 per share of common stock underlying each RSU. The performance period for the performance-vesting RSUs is the three year period ending December 31, 2024. The time-vesting RSUs will vest ratably over a three year period beginning on March 9, 2023. Stock compensation expense was $52,290 and $26,145 for the nine and three month periods ended September 30, 2022, respectively. Unrecognized compensation expense as of September 30, 2022 related to unvested units was $261,453.

Note 10 – Derivative Financial Instruments

As a part of managing interest rate risk, the Corporation entered into interest rate swap agreements to modify the re-pricing characteristics of certain interest-bearing liabilities. The Corporation has designated its interest rate swap agreements as cash flow hedges under the guidance of ASC Subtopic 815-30, Derivatives and Hedging – Cash Flow Hedges. Cash flow hedges have the effective portion of changes in the fair value of the derivative, net of taxes, recorded in net accumulated other comprehensive income.

In March 2016, the Corporation entered into four interest rate swap contracts totaling $30.0 million notional amount, hedging future cash flows associated with floating rate trust preferred debt. As of September 30, 2022, $20.0 million notional amount remains.

The fair value of the interest rate swap contracts was $1.2 million and $(0.5) million at September 30, 2022 and December 31, 2021, respectively.

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For the nine months ended September 30, 2022, the Corporation recorded an increase in the value of the derivatives of $1.6 million and the related deferred tax of $0.5 million in net accumulated other comprehensive loss to reflect the effective portion of cash flow hedges. For the three months ended September 30, 2022, the Corporation recorded an increase in the value of the derivatives of $0.5 million and the related deferred tax of $0.1 million in net accumulated other comprehensive loss to reflect the effective portion of cash flow hedges. ASC Subtopic 815-30 requires the net accumulated other comprehensive loss to be reclassified to earnings if the hedge becomes ineffective or is terminated. There was no hedge ineffectiveness recorded for the six or three months ended September 30, 2022. The Corporation does not expect any material losses relating to these hedges to be reclassified into earnings within the next 12 months.

Interest rate swap agreements are entered into with counterparties that meet established credit standards and the Corporation believes that the credit risk inherent in these contracts is not significant as of September 30, 2022.

The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the nine and three month periods ended September 30, 2022 and 2021.

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Derivative in Cash Flow Hedging Relationships | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Amount of gain or
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (loss) recognized in
​ | ​ | Amount of gain or | ​ | Amount of gain or | ​ | income or derivative
​ | ​ | (loss) recognized in | ​ | (loss) reclassified from | ​ | (ineffective portion
​ | ​ | OCI on derivative | ​ | accumulated OCI into | ​ | and amount excluded
​ | ​ | (effective portion), | ​ | income (effective | ​ | from effectiveness
(in thousands) |  | net of tax |  | portion) (a) |  | testing) (b)
Interest rate contracts: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Nine months ended: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
September 30, 2022 | ​ | $ | 1,188 | ​ | $ | — | ​ | $ | —
September 30, 2021 | ​ | ​ | 450 | ​ | ​ | — | ​ | ​ | —
Three months ended: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
September 30, 2022 | ​ | $ | 392 | ​ | $ | — | ​ | $ | —
September 30, 2021 | ​ | ​ | 79 | ​ | ​ | — | ​ | ​ | —

​

Notes:

| (a) | Reported as interest expense

| (b) | Reported as other income

Note 11 – Revenue Recognition

ASC Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. ASC Topic 606 is applicable to noninterest revenue streams such as wealth management, including trust and brokerage services, service charges on deposit accounts, interchange fee income – debit card income and gains/losses on OREO sales. Noninterest revenue streams in-scope of ASC Topic 606 are discussed below.

Wealth Management – Trust and Brokerage

Trust and asset management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Corporation’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts. Optional services such as real estate sales and tax return preparation services are also available to existing trust and asset management customers. The Corporation’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered.

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Service Charges on Deposit Accounts

Service charges on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. The Corporation’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account related fees are largely transactional based, and therefore, the Corporation’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

Other Service Charges

Fees, exchange, and other service charges are primarily comprised of ATM fees, loan servicing fees and other service charges. ATM fees are primarily generated when a Bank cardholder uses a non-Bank ATM or a non-Bank cardholder uses a Bank ATM. Loan servicing fees are comprised of fees earned on servicing of loan portfolios sold to the secondary market. Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Corporation’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion.

Interchange Fees – Debit and Credit Card Income

Debit and credit card income is primarily comprised of interchange fees earned whenever the Corporation’s debit cards are processed through card payment networks such as Visa. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. Payment is typically received immediately or in the following month.

The following presents noninterest income, segregated by revenue streams that are within and outside the scope of ASC Topic 606, for the nine and three month periods ended September 30, 2022 and September 30, 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended | ​ | Three Months Ended
​ | ​ | September 30, | ​ | September 30,
(in thousands) |  | 2022 | ​ | 2021 | ​ | 2022 | ​ | 2021
Noninterest income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
In-scope of Topic 606: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Service charges on deposit accounts | ​ | $ | 1,451 | ​ | $ | 1,292 | ​ | $ | 523 | ​ | $ | 475
Other service charges | ​ | ​ | 686 | ​ | ​ | 664 | ​ | ​ | 241 | ​ | ​ | 232
Trust department | ​ | ​ | 6,238 | ​ | ​ | 6,441 | ​ | ​ | 2,005 | ​ | ​ | 2,166
Debit card income | ​ | ​ | 2,922 | ​ | ​ | 2,623 | ​ | ​ | 1,053 | ​ | ​ | 900
Brokerage commissions | ​ | ​ | 805 | ​ | ​ | 854 | ​ | ​ | 272 | ​ | ​ | 229
Noninterest income (in-scope of Topic 606) | ​ | ​ | 12,102 | ​ | ​ | 11,874 | ​ | ​ | 4,094 | ​ | ​ | 4,002
Noninterest income (out-of-scope of Topic 606) | ​ | ​ | 1,297 | ​ | ​ | 1,308 | ​ | ​ | 510 | ​ | ​ | 521
Total Noninterest Income | ​ | $ | 13,399 | ​ | $ | 13,182 | ​ | $ | 4,604 | ​ | $ | 4,523

​

​

​

​

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Note 12 – Regulatory Capital Requirements

The following table presents our capital ratios as of September 30, 2022 and December 31, 2021.

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | September 30, 2022 |  | December 31, 2021 |  | Required for Capital Adequacy Purposes |  | Required to be Well Capitalized |
Total Capital (to risk-weighted assets) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
First United Bank & Trust | ​ | 14.49 | % | 14.97 | % | 8.00 | % | 10.00 | %
Tier 1 Capital (to risk-weighted assets) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
First United Bank & Trust | ​ | 13.36 | % | 13.72 | % | 6.00 | % | 8.00 | %
Common Equity Tier 1 Capital (to risk-weighted assets) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
First United Bank & Trust | ​ | 13.36 | % | 13.72 | % | 4.50 | % | 6.50 | %
Tier 1 Capital (to average assets) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
First United Bank & Trust | ​ | 10.33 | % | 10.00 | % | 4.00 | % | 5.00 | %

​

As of September 30, 2022 and December 31, 2021, the Bank was considered “well capitalized” under the regulatory framework for prompt corrective action.

​

Note 13 – Borrowed Funds

The following is a summary of short-term borrowings with original maturities of less than one year:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​
(Dollars in thousands) | ​ | Nine Months Ended September 30, 2022 | ​ | Year Ended December 31, 2021
Overnight borrowings, weighted average interest rate of 3.25% at September 30, 2022 | ​ | $ | 20,000 | ​ | $ | —
Securities sold under agreements to repurchase: | ​ | ​ | ​ | ​ | ​ | ​
Outstanding at end of period | ​ | $ | 69,726 | ​ | $ | 57,699
Weighted average interest rate at end of period | ​ | ​ | 0.13% | ​ | ​ | 0.15%
Maximum amount outstanding as of any month end | ​ | $ | 75,912 | ​ | $ | 72,396
Average amount outstanding | ​ | $ | 60,839 | ​ | $ | 57,697
Approximate weighted average rate during the period | ​ | ​ | 0.12% | ​ | ​ | 0.15%

​

Short term borrowings increased $32.0 million since December 31, 2021, driven by $20.0 million in overnight borrowings and an increase in our overnight investments Treasury product of $12.0 million during the quarter. The increase in overnight borrowings at September 30, 2022 was primarily driven by the strong loan growth and a timing delay of the receipt of deposit funding from a large customer driven transaction. These funds were received shortly after quarter end and subsequently repaid the $20.0 million in overnight borrowings in full.

​

At September 30, 2022, the repurchase agreements were secured by $85.4 million in investment securities issued by government related agencies. A minimum of 102% of fair value is pledged against account balances.

​

​

Note 14 – Recent Accounting Pronouncements

Recently issued but not yet effective Accounting Pronouncements

​

In June 2016, FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 introduces an approach based on expected losses to

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estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchases financial assets with credit deterioration since their origination. The new model referred to as current expected credit losses (“CECL”) model, will apply to: (a) financial assets subject to credit losses and measured at amortized cost; and (b) certain off-balance sheet credit exposures. This includes loans, held to maturity debt securities, loan commitments, financial guarantees and net investments in leases as well as reinsurance and trade receivables. The estimate of expected credit losses should consider historical information, current information, and supportable forecasts, including estimates of prepayments. ASU 2016-13 was originally effective for SEC filers for annual periods beginning after December 15, 2019, and interim periods within those annual periods. In November 2019, the FASB approved a delay of the required implementation date of ASU No. 2016-13 for smaller reporting companies, as defined by the Securities and Exchange Commission, including the Corporation, resulting in a required implementation date for the Corporation of January 1, 2023.

Management has formed a focus group consisting of multiple members from areas, including credit, finance, loan servicing, reporting, and information systems. The Corporation is completing its data and model validation analyses, with parallel processing of our existing allowance for loan losses model with the CECL model to follow. The Corporation is currently evaluating the provisions of ASU No. 2016-13 to determine the potential impact the new standard will have on the financial condition or results of operations.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848).” The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendment only applies to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. The ASU is effective as of March 12, 2020 and through December 31, 2022. The Corporation is in the process of evaluating the impact of this standard on the loan portfolio, investment portfolio, long term debt and interest rate swaps, but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations.

​

In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 made certain targeted amendments specific to troubled debt restructurings (TDRs) by creditors and vintage disclosure related to gross write-offs. Upon adoption, the Corporation will be required to apply the loan and refinancing and restructuring guidance to determine whether a modification results in a new loan or a continuation of an existing loan, rather than applying the recognition and measurement guidance for TDRs. The ASU also requires companies to disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within scope of Subtopic 326-20. ASU 2022-02 is effective March 31, 2023, for entities that have adopted ASU 2016-13, otherwise effective date is the same as ASU 2016-13. The Corporation’s current plan is to adopt ASU 2016-13 effective January 1, 2023 at which time it will also implement ASU 2022-02.

​

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, 2021.

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

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not represent historical facts, but are statements about management’s beliefs, plans and objectives about the future, as well as its assumptions and judgments concerning such beliefs, plans and objectives. These statements are

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evidenced by terms such as "anticipate," "estimate," "should," "expect," "believe," "intend," and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. The beliefs, plans and objectives on which forward-looking statements are based involve risks and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports that First United Corporation files with the Securities and Exchange Commission entitled "Risk Factors".

FIRST UNITED CORPORATION

First United Corporation is a Maryland corporation chartered in 1985 and a financial holding company registered with the Board of Governors of the Federal Reserve System (the “FRB”) under the Bank Holding Company Act of 1956, as amended. 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, LC, an Ohio limited liability company formed for the purpose of acquiring, developing and operating low-income housing units in Allegany County, Maryland.

At September 30, 2022, the Corporation’s total assets were $1.8 billion, net loans were $1.3 billion, and deposits were $1.5 billion. Shareholders’ equity at September 30, 2022 was $132.0 million.

The Corporation maintains an Internet site at www.mybank.com on which it makes available, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to the foregoing as soon as reasonably practicable after these reports are electronically filed with, or furnished to, the SEC.

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SELECTED FINANCIAL DATA

The following table sets forth certain selected financial data for the nine month periods ended September 30, 2022 and 2021 and is qualified in its entirety by the detailed information and unaudited financial statements, including the notes thereto, included elsewhere in this quarterly report.

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of the nine months ended | ​
​ | ​ | September 30, | ​
​ |  | 2022 |  | 2021 |
Per Share Data | ​ | ​ | ​ | ​ | ​ | ​ | ​
Basic net income per common share (1) - as reported | ​ | $ | 2.72 | ​ | $ | 1.81 | ​
Basic net income per common share (1) - non-GAAP | ​ | $ | 2.72 | ​ | $ | 2.45 | ​
Diluted net income per common share (1) - as reported | ​ | $ | 2.72 | ​ | $ | 1.81 | ​
Diluted net income per common share (1) - non-GAAP | ​ | $ | 2.72 | ​ | $ | 2.45 | ​
Basic book value per common share - as reported | ​ | $ | 19.83 | ​ | $ | 20.22 | ​
Diluted book value per common share - as reported | ​ | $ | 19.80 | ​ | $ | 20.19 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Significant Ratios: | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Return on Average Assets (a) (1) - as reported | ​ | ​ | 1.35 | % | ​ | 0.92 | %
Settlement and FHLB expenses, net of income tax | ​ | ​ | — | ​ | ​ | 0.33 | %
Adjusted Return on Average Assets (a) (1) (non-GAAP) | ​ | ​ | 1.35 | % | ​ | 1.25 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Return on Average Equity (a) (1) - as reported | ​ | ​ | 17.66 | % | ​ | 12.45 | %
Settlement and FHLB expenses, net of income tax | ​ | ​ | — | ​ | ​ | 4.43 | %
Adjusted Return on Average Equity (a) (1) (non-GAAP) | ​ | ​ | 17.66 | % | ​ | 16.88 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Average Equity to Average Assets | ​ | ​ | 7.66 | % | ​ | 10.70 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Capital Ratios: | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Consolidated Total Capital (to risk weighted assets) | ​ | ​ | 15.50 | % | ​ | 15.51 | %
Consolidated Tier 1 Capital (to risk weighted assets) | ​ | ​ | 14.40 | % | ​ | 14.26 | %
Consolidated Common Equity Tier 1 Capital (to risk weighted assets) | ​ | ​ | 12.36 | % | ​ | 12.15 | %
Consolidated Tier 1 Capital (to average assets) | ​ | ​ | 11.23 | % | ​ | 10.33 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(1) See reconciliation of this non-GAAP financial measure provided elsewhere herein associated with settlement and FHLB expenses incurred during the first and third quarters of 2021. | ​ | ​ | ​ | ​ | ​ | ​ | ​

​

Note: (a) Annualized

RESULTS OF OPERATIONS

Overview

Consolidated net income was $18.1 million for the first nine months of 2022 compared to $12.2 million for the first nine months of 2021. The year-over-year increase was primarily due to a $3.8 million increase in net interest income as a result of a $1.7 million increase in interest income and a $2.2 million decrease in interest expense. Additionally, non-interest expense decreased significantly due to our payment of $3.3 million in litigation settlement expenses during the first quarter of 2021 and a $2.4 million FHLB prepayment penalty for the early repayment of debt recognized in the third quarter of 2021.

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​

Consolidated net income was $6.9 million for the third quarter of 2022, or $1.04 per diluted share, compared to $4.4 million, or $0.66 per diluted share, for the third quarter of 2021. The year over year increase in net income was driven by an increase in net interest income of $1.5 million and reduced operating expenses of $2.7 million primarily offset by the $2.4 million FHLB prepayment penalty in the third quarter of 2021, offset by an decrease in credit to provision expense of $0.5 million, reduced other operating income, and a decrease of $0.1 million in gains from sales of mortgages.

​

Comparing the nine months ended September 30, 2022, to the nine months ended September 30, 2021, net interest income, on a non-GAAP, fully taxable equivalent (“FTE”) basis, increased by $3.8 million. Interest income increased by $1.6 million and interest expense decreased by $2.2 million. Interest income for the 2021 period included $3.2 million in fees related to PPP loan forgiveness. The yield on earning assets increased 14 basis points to 3.74% in 2022 compared to 3.60% in 2021 in correlation with the rising interest rate environment and new loans booked at higher rates. Interest expense on deposits decreased $1.4 million while the average balance of deposits increased $5.0 million and interest on long-term borrowings decreased $0.8 million related to the prepayment of $70.0 million of Federal Home Loan Bank (“FHLB”) advances in the third quarter of 2021. The decreased interest expense resulted in an overall decrease of 25 basis points on interest bearing liabilities. We anticipate increased margin pressure in the remaining quarter of 2022 due to increasing deposit pricing demands in our market areas. The net interest margin for the nine months ended September 30, 2022, was 3.53% compared to 3.21% for the nine months ended September 30, 2021.

​

Net interest income, on a non-GAAP, FTE basis, increased by $1.5 million for the third quarter of 2022 when compared to the third quarter of 2021. This increase was driven by an increase of $1.3 million in interest income from an overall increase in yield of 22 basis points on interest earning assets and an increase in average balances of $36.8 million. Interest income on loans increased $0.4 million due primarily to continued growth in our commercial loan portfolio, increased rates on new loans booked and adjustable-rate loans repricing related to the current rising rate environment. Investment income increased $0.7 million primarily due to an increase in average balances of $70.3 million and an increase of 44 basis points in yield related to the deployment of excess cash balances to purchase investment securities late in the fourth quarter of 2021 and early in the first quarter of 2022. The reduction of $0.2 million in interest expense was driven primarily by the decline of $49.9 million of average balances in the higher cost CD portfolio and the prepayment of $70.0 million of FHLB advances in 2021. The net interest margin for the third quarter of 2022 was 3.66%, compared to 3.38% for the third quarter of 2021.

​

Non-interest income for the nine months ended September 30, 2022 decreased by approximately $0.1 million when compared to the same period of 2021. This decrease was primarily due to the decrease in net gains from the sale of residential mortgage loans of $1.0 million as refinance activity has slowed considerably and due to management’s strategic decision to book new mortgage loans at higher rates to our in-house portfolio.

​

Other operating income, including gains, for the third quarter of 2022 increased by approximately $0.1 million when compared to the same period of 2021. Increased net gains on investments of $0.1 million, debit card income of $0.2 million and brokerage commissions and service charges of $0.1 million were offset by reductions on gains on the sale of mortgage loans of $0.1 million due to management’s decision to book loans to the portfolio in light of the rising interest rate environment Trust department income also decreased $0.2 million as a result of the volatile market and the impact of the rising rate environment on the market value of the assets under management. Assets under management in the trust department were $1.3 billion at September 30, 2022.

​

For the nine months ended September 30, 2022, non-interest expenses decreased by $5.0 million when compared to the nine months ended September 30, 2021. This decrease was primarily attributable to the one-time litigation settlement expense of $3.3 million recorded in the first quarter of 2021, and $2.4 million in prepayment penalties that were recognized in 2021. The decrease from these one-time expenses was partially offset by a $1.7 million increase in salaries and employee benefits as a result of increased incentives of $1.3 million, stock compensation expense of $0.1 million and reduced deferred loan costs of $0.8 million, which were partially offset by reductions in life and health and pension related expenses.

​

Operating expenses decreased by $2.7 million when comparing the third quarter of 2022 to the third quarter of 2021. This decrease was driven largely by a decrease of $2.4 million of expense for prepayment penalties related to the repayment of $70.0 million in FHLB debt in 2021 and a reduction of legal expenses of $0.8 million related to the reimbursement of certain litigation expenses in 2021. These decreases were partially offset by an increase of $0.4 million in salaries and employee benefits from increased incentives, part-time salaries and stock compensation expense, partially offset by decreases in 401(k) plan expense.

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The provision for loan losses was a credit of $0.1 million for the third quarter of 2022 compared to a credit of $0.6 million for the third quarter of 2021. The credit to the provision expense recorded in the third quarter of 2022 was primarily attributable to the continuation of payments of loans previously modified due to uncertainties related to COVID-19. Net charge-offs of $88,000 were recorded for the quarter ended September 30, 2022, compared to net recoveries of $0.4 million for 2021. The ratio of the ALL to loans outstanding was 1.22% at September 30, 2022, compared to 1.28% at June 30, 2022 and 1.38% at December 31, 2021.

​

The effective income tax rates as a percentage of income for the nine months ended September 30, 2022 and September 30, 2021 were 25.8% and 24.9%, respectively. The increased tax rate for the nine months ended September 30, 2022, when compared to the nine months ended September 30, 2021, was primarily related to state tax treatment of litigation settlement expenses in 2021. A new low-income housing tax credit investment in 2021 is expected to begin generating tax credits during the fourth quarter of 2022 and should provide increased tax credits beginning in 2023 and beyond for the term of the tax credit.

​

​

Non-GAAP Financial Measures

The Corporation believes that certain non-GAAP financial measures are meaningful because they reflect adjustments commonly made by management, investors, regulators and analysts to evaluate performance trends and the adequacy of common equity. This non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for performance and financial condition measures determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

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

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine months ended September 30, | ​ | Three months ended September 30,
​ |  | 2022 |  | 2021 | ​ | 2022 | ​ | 2021
(in thousands, except for per share amount) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net income - as reported | ​ | $ | 18,079 | ​ | $ | 12,221 | ​ | $ | 6,936 | ​ | $ | 4,388
Adjustments: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Settlement expense | ​ | ​ | — | ​ | ​ | 3,300 | ​ | ​ | — | ​ | ​ | —
FHLB penalty | ​ | ​ | — | ​ | ​ | 2,368 | ​ | ​ | — | ​ | ​ | 2368
Income tax effect of adjustment | ​ | ​ | — | ​ | ​ | (1,313) | ​ | ​ | — | ​ | ​ | (578)
Adjusted net income (non-GAAP) | ​ | $ | 18,079 | ​ | $ | 16,576 | ​ | $ | 6,936 | ​ | $ | 6,178
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Basic and Diluted earnings per share - as reported | ​ | $ | 2.72 | ​ | $ | 1.81 | ​ | $ | 1.04 | ​ | $ | 0.66
Adjustments: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Settlement expense | ​ | ​ | — | ​ | ​ | 0.47 | ​ | ​ | — | ​ | ​ | —
FHLB penalty | ​ | ​ | — | ​ | ​ | 0.35 | ​ | ​ | — | ​ | ​ | 0.35
Income tax effect of adjustment | ​ | ​ | — | ​ | ​ | (0.18) | ​ | ​ | — | ​ | ​ | (0.08)
Adjusted basic and diluted earnings per share (non-GAAP) | ​ | $ | 2.72 | ​ | $ | 2.45 | ​ | $ | 1.04 | ​ | $ | 0.93
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Significant Ratios: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Return on Average Assets (1) - as reported | ​ | ​ | 1.35% | ​ | ​ | 0.88% | ​ | ​ | ​ | ​ | ​ | ​
Settlement, FHLB and contribution expenses, and insurance reimbursement income, net of income tax effect | ​ | ​ | — | ​ | ​ | 0.23% | ​ | ​ | ​ | ​ | ​ | ​
Adjusted Return on Average Assets (1) (non-GAAP) | ​ | ​ | 1.35% | ​ | ​ | 1.11% | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Return on Average Equity (1) - as reported | ​ | ​ | 17.66% | ​ | ​ | 12.21% | ​ | ​ | ​ | ​ | ​ | ​
Settlement, FHLB and contribution expenses, and insurance reimbursement income, net of income tax effect | ​ | ​ | — | ​ | ​ | 2.90% | ​ | ​ | ​ | ​ | ​ | ​
Adjusted Return on Average Equity (1) (non-GAAP) | ​ | ​ | 17.66% | ​ | ​ | 15.11% | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

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 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.

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The tables below summarizes net interest income for the nine and three month periods ended September 30, 2022 and 2021.

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | GAAP | ​ | Non-GAAP - FTE | ​
​ | ​ | Nine Months Ended | ​ | Nine Months Ended | ​
​ | ​ | September 30, | ​ | September 30, | ​
(dollars in thousands) |  | 2022 |  | 2021 |  | 2022 |  | 2021 | ​
Interest income | ​ | $ | 45,063 | ​ | $ | 43,408 | ​ | $ | 45,771 | ​ | $ | 44,113 | ​
Interest expense | ​ | ​ | 2,610 | ​ | ​ | 4,784 | ​ | ​ | 2,610 | ​ | ​ | 4,784 | ​
Net interest income | ​ | $ | 42,453 | ​ | $ | 38,624 | ​ | $ | 43,161 | ​ | $ | 39,329 | ​
Net interest margin % | ​ | ​ | 3.47 | % | ​ | 3.16 | % | ​ | 3.53 | % | ​ | 3.21 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | ​ | Three Months Ended | ​
​ | ​ | September 30, | ​ | September 30, | ​
(dollars in thousands) | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2022 | ​ | ​ | 2021 | ​
Interest income | ​ | $ | 16,185 | ​ | $ | 14,910 | ​ | $ | 16,416 | ​ | $ | 15,142 | ​
Interest expense | ​ | ​ | 1,044 | ​ | ​ | 1,285 | ​ | ​ | 1,044 | ​ | ​ | 1,285 | ​
Net interest income | ​ | $ | 15,141 | ​ | $ | 13,625 | ​ | $ | 15,372 | ​ | $ | 13,857 | ​
Net interest margin % | ​ | ​ | 3.61 | % | ​ | 3.32 | % | ​ | 3.66 | % | ​ | 3.38 | %

​

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 nine and three month periods ended September 30, 2022 and 2021:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended | ​
​ | ​ | September 30, | ​
​ | ​ | 2022 | ​ | 2021 | ​
​ | ​ | Average | ​ | ​ | ​ | Average | ​ | Average | ​ | ​ | ​ | Average | ​
(dollars in thousands) |  | Balance |  | Interest |  | Yield/Rate |  | Balance |  | Interest |  | Yield/Rate |
Assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans | ​ | $ | 1,203,650 | ​ | $ | 39,399 | ​ | 4.38 | % | $ | 1,179,205 | ​ | $ | 39,562 | ​ | 4.49 | %
Investment Securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Taxable | ​ | ​ | 352,446 | ​ | ​ | 4,533 | ​ | 1.72 | % | ​ | 267,899 | ​ | ​ | 2,864 | ​ | 1.43 | %
Non taxable | ​ | ​ | 27,118 | ​ | ​ | 1,494 | ​ | 7.37 | % | ​ | 25,487 | ​ | ​ | 1,448 | ​ | 7.60 | %
Total | ​ | ​ | 379,564 | ​ | ​ | 6,027 | ​ | 2.12 | % | ​ | 293,386 | ​ | ​ | 4,312 | ​ | 1.96 | %
Federal funds sold | ​ | ​ | 47,173 | ​ | ​ | 308 | ​ | 0.87 | % | ​ | 156,504 | ​ | ​ | 128 | ​ | 0.11 | %
Interest-bearing deposits with other banks | ​ | ​ | 3,564 | ​ | ​ | 12 | ​ | 0.45 | % | ​ | 3,419 | ​ | ​ | 1 | ​ | 0.06 | %
Other interest earning assets | ​ | ​ | 1,027 | ​ | ​ | 25 | ​ | 3.25 | % | ​ | 3,622 | ​ | ​ | 110 | ​ | 4.07 | %
Total earning assets | ​ | ​ | 1,634,978 | ​ | ​ | 45,771 | ​ | 3.74 | % | ​ | 1,636,136 | ​ | ​ | 44,113 | ​ | 3.60 | %
Allowance for loan losses | ​ | ​ | (15,611) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (16,924) | ​ | ​ | ​ | ​ | ​ | ​
Non-earning assets | ​ | ​ | 166,594 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 154,464 | ​ | ​ | ​ | ​ | ​ | ​
Total Assets | ​ | $ | 1,785,961 | ​ | ​ | ​ | ​ | ​ | ​ | $ | 1,773,676 | ​ | ​ | ​ | ​ | ​ | ​
Liabilities and Shareholders’ Equity | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest-bearing demand deposits | ​ | $ | 296,069 | ​ | $ | 369 | ​ | 0.17 | % | $ | 211,005 | ​ | $ | 460 | ​ | 0.29 | %
Interest-bearing money markets | ​ | ​ | 294,481 | ​ | ​ | 347 | ​ | 0.16 | % | ​ | 340,322 | ​ | ​ | 367 | ​ | 0.14 | %
Savings deposits | ​ | ​ | 249,596 | ​ | ​ | 70 | ​ | 0.04 | % | ​ | 218,605 | ​ | ​ | 63 | ​ | 0.04 | %
Time deposits | ​ | ​ | 143,734 | ​ | ​ | 711 | ​ | 0.66 | % | ​ | 208,972 | ​ | ​ | 1,987 | ​ | 1.27 | %
Short-term borrowings | ​ | ​ | 62,175 | ​ | ​ | 86 | ​ | 0.18 | % | ​ | 55,151 | ​ | ​ | 67 | ​ | 0.16 | %
Long-term borrowings | ​ | ​ | 30,929 | ​ | ​ | 1,027 | ​ | 4.44 | % | ​ | 92,980 | ​ | ​ | 1,840 | ​ | 2.65 | %
Total interest-bearing liabilities | ​ | ​ | 1,076,984 | ​ | ​ | 2,610 | ​ | 0.32 | % | ​ | 1,127,035 | ​ | ​ | 4,784 | ​ | 0.57 | %
Non-interest-bearing deposits | ​ | ​ | 540,082 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 488,870 | ​ | ​ | ​ | ​ | ​ | ​
Other liabilities | ​ | ​ | 32,057 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 26,850 | ​ | ​ | ​ | ​ | ​ | ​
Shareholders’ Equity | ​ | ​ | 136,838 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 130,921 | ​ | ​ | ​ | ​ | ​ | ​
Total Liabilities and Shareholders’ Equity | ​ | $ | 1,785,961 | ​ | ​ | ​ | ​ | ​ | ​ | $ | 1,773,676 | ​ | ​ | ​ | ​ | ​ | ​
Net interest income and spread | ​ | ​ | ​ | ​ | $ | 43,161 | ​ | 3.42 | % | ​ | ​ | ​ | $ | 39,329 | ​ | 3.03 | %
Net interest margin | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 3.53 | % | ​ | ​ | ​ | ​ | ​ | ​ | 3.21 | %

​

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| (1) | The above table reflects the average rates earned or paid stated on an FTE basis assuming a 21% tax rate for 2022 and 2021. Non-GAAP interest income on a fully taxable equivalent was $708 and $705, 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.

Comparing the nine months ended September 30, 2022 to the nine months ended September 30, 2021, net interest income, on a non-GAAP, FTE basis, increased by $3.8 million. Interest income increased by $1.7 million and interest expense decreased by $2.2 million. Interest income for the 2021 period included $3.2 million in fees related to PPP loan forgiveness. The yield on earning assets increased 14 basis points to 3.74% in the 2022 period compared to 3.60% in the 2021 period in correlation with the rising interest rate environment and new loans booked at higher rates. Interest expense on deposits decreased $1.4 million while the average balance of deposits increased $5.0 million and interest on long-term borrowings decreased $0.8 million related to the prepayment of $70.0 million of FHLB advances in the third quarter of 2021. The decreased interest expense resulted in an overall decrease of 25 basis points on interest bearing liabilities. We anticipate increased margin pressure in the fourth quarter of 2022 due to increasing deposit pricing demands in our market areas. The net interest margin for the nine months ended September 30, 2022, was 3.53% compared to 3.21% for the nine months ended September 30, 2021.

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​
​ | ​ | September 30, | ​
​ | ​ | 2022 | ​ | 2021 | ​
(dollars in thousands) | ​ | Average Balance | ​ | Interest | ​ | Average Yield/Rate | ​ | Average Balance | ​ | Interest | ​ | Average Yield/Rate | ​
Assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans | ​ | $ | 1,240,706 | ​ | $ | 14,073 | ​ | 4.50 | % | $ | 1,162,374 | ​ | $ | 13,689 | ​ | 4.67 | %
Investment Securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Taxable | ​ | ​ | 343,581 | ​ | ​ | 1,587 | ​ | 1.83 | % | ​ | 274,648 | ​ | ​ | 880 | ​ | 1.27 | %
Non taxable | ​ | ​ | 26,471 | ​ | ​ | 489 | ​ | 7.33 | % | ​ | 25,073 | ​ | ​ | 476 | ​ | 7.54 | %
Total | ​ | ​ | 370,052 | ​ | ​ | 2,076 | ​ | 2.23 | % | ​ | 299,721 | ​ | ​ | 1,356 | ​ | 1.79 | %
Federal funds sold | ​ | ​ | 52,019 | ​ | ​ | 251 | ​ | 1.91 | % | ​ | 159,444 | ​ | ​ | 65 | ​ | 0.16 | %
Interest-bearing deposits with other banks | ​ | ​ | 1,552 | ​ | ​ | 7 | ​ | 1.79 | % | ​ | 4,283 | ​ | ​ | — | ​ | — | %
Other interest earning assets | ​ | ​ | 1,026 | ​ | ​ | 9 | ​ | 3.48 | % | ​ | 2,772 | ​ | ​ | 32 | ​ | 4.64 | %
Total earning assets | ​ | ​ | 1,665,355 | ​ | ​ | 16,416 | ​ | 3.91 | % | ​ | 1,628,594 | ​ | ​ | 15,142 | ​ | 3.69 | %
Allowance for loan losses | ​ | ​ | (15,715) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (17,597) | ​ | ​ | ​ | ​ | ​ | ​
Non-earning assets | ​ | ​ | 170,092 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 157,806 | ​ | ​ | ​ | ​ | ​ | ​
Total Assets | ​ | $ | 1,819,732 | ​ | ​ | ​ | ​ | ​ | ​ | $ | 1,768,803 | ​ | ​ | ​ | ​ | ​ | ​
Liabilities and Shareholders’ Equity | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest-bearing demand deposits | ​ | $ | 305,608 | ​ | $ | 187 | ​ | 0.24 | % | $ | 215,085 | ​ | $ | 113 | ​ | 0.21 | %
Interest-bearing money markets | ​ | ​ | 305,185 | ​ | ​ | 210 | ​ | 0.27 | % | ​ | 332,889 | ​ | ​ | 79 | ​ | 0.09 | %
Savings deposits | ​ | ​ | 253,576 | ​ | ​ | 34 | ​ | 0.05 | % | ​ | 230,925 | ​ | ​ | 17 | ​ | 0.03 | %
Time deposits | ​ | ​ | 134,600 | ​ | ​ | 190 | ​ | 0.56 | % | ​ | 184,493 | ​ | ​ | 523 | ​ | 1.12 | %
Short-term borrowings | ​ | ​ | 66,172 | ​ | ​ | 47 | ​ | 0.28 | % | ​ | 63,968 | ​ | ​ | 17 | ​ | 0.11 | %
Long-term borrowings | ​ | ​ | 30,929 | ​ | ​ | 376 | ​ | 4.82 | % | ​ | 77,342 | ​ | ​ | 536 | ​ | 2.75 | %
Total interest-bearing liabilities | ​ | ​ | 1,096,070 | ​ | ​ | 1,044 | ​ | 0.38 | % | ​ | 1,104,702 | ​ | ​ | 1,285 | ​ | 0.46 | %
Non-interest-bearing deposits | ​ | ​ | 550,978 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 503,006 | ​ | ​ | ​ | ​ | ​ | ​
Other liabilities | ​ | ​ | 37,499 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 27,143 | ​ | ​ | ​ | ​ | ​ | ​
Shareholders’ Equity | ​ | ​ | 135,186 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 133,952 | ​ | ​ | ​ | ​ | ​ | ​
Total Liabilities and Shareholders’ Equity | ​ | $ | 1,819,733 | ​ | ​ | ​ | ​ | ​ | ​ | $ | 1,768,803 | ​ | ​ | ​ | ​ | ​ | ​
Net interest income and spread | ​ | ​ | ​ | ​ | $ | 15,372 | ​ | 3.53 | % | ​ | ​ | ​ | $ | 13,857 | ​ | 3.23 | %
Net interest margin | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 3.66 | % | ​ | ​ | ​ | ​ | ​ | ​ | 3.38 | %

​

| (1) | The above table reflects the average rates earned or paid stated on an FTE basis assuming a 21% tax rate for 2022 and 2021. Non-GAAP interest income on a fully taxable equivalent was $231 and $232 respectively.

| (2) | Net interest margin is calculated as net interest income divided by average earning assets.

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| (3) | The average yields on investments are based on amortized cost.

Net interest income, on a non-GAAP, FTE basis, increased by $1.5 million for the third quarter of 2022 when compared to the third quarter of 2021. This increase was driven by an increase of $1.3 million in interest income from an overall increase in yield of 22 basis points on interest earning assets and an increase in average balances of $36.8 million. Interest income on loans increased $0.4 million due primarily to continued growth in our commercial loan portfolio, increased rates on new loans booked and adjustable-rate loans repricing related to the current rising rate environment. Investment income increased $0.7 million primarily due to an increase in average balances of $70.3 million and an increase of 44 basis points in yield related to the deployment of excess cash balances to purchase investment securities late in the fourth quarter of 2021 and early in the first quarter of 2022. The reduction of $0.2 million in interest expense was driven primarily by the decline of $49.9 million of average balances in the higher cost CD portfolio and the prepayment of $70.0 million of FHLB advances in 2021. The net interest margin for the third quarter of 2022 was 3.66% compared to 3.38% for the third quarter of 2021.

​

​

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 nine and three month periods ended September 30, 2022 and 2021:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the Nine months ended September 30, 2022
​ | ​ | compared to the Nine months ended September 30, 2021
(in thousands and tax equivalent basis) |  | Volume |  | Rate |  | Net
Interest Income: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans | ​ | $ | 823 | ​ | $ | (986) | ​ | $ | (163)
Taxable Investments | ​ | ​ | 907 | ​ | ​ | 762 | ​ | ​ | 1,669
Non-taxable Investments | ​ | ​ | 93 | ​ | ​ | (47) | ​ | ​ | 46
Federal funds sold | ​ | ​ | (90) | ​ | ​ | 270 | ​ | ​ | 180
Interest-bearing deposits | ​ | ​ | 0 | ​ | ​ | 11 | ​ | ​ | 11
Other interest earning assets | ​ | ​ | (79) | ​ | ​ | (6) | ​ | ​ | (85)
Total interest income | ​ | ​ | 1,654 | ​ | ​ | 4 | ​ | ​ | 1,658
Interest Expense: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest-bearing demand deposits | ​ | ​ | 185 | ​ | ​ | (276) | ​ | ​ | (91)
Interest-bearing money markets | ​ | ​ | (48) | ​ | ​ | 28 | ​ | ​ | (20)
Savings deposits | ​ | ​ | 9 | ​ | ​ | (2) | ​ | ​ | 7
Time deposits | ​ | ​ | (621) | ​ | ​ | (655) | ​ | ​ | (1,276)
Short-term borrowings | ​ | ​ | 8 | ​ | ​ | 11 | ​ | ​ | 19
Long-term borrowings | ​ | ​ | (1,233) | ​ | ​ | 420 | ​ | ​ | (813)
Total interest expense | ​ | ​ | (1,700) | ​ | ​ | (474) | ​ | ​ | (2,174)
Net interest income | ​ | $ | 3,354 | ​ | $ | 478 | ​ | $ | 3,832

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​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the Three months ended September 30, 2022 compared to the Three months ended September 30, 2021
(in thousands and tax equivalent basis) | ​ | Volume | ​ | Rate | ​ | Net
Interest Income: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans | ​ | $ | 915 | ​ | $ | (531) | ​ | $ | 384
Taxable Investments | ​ | ​ | 219 | ​ | ​ | 488 | ​ | ​ | 707
Non-taxable Investments | ​ | ​ | 26 | ​ | ​ | (13) | ​ | ​ | 13
Federal funds sold | ​ | ​ | (43) | ​ | ​ | 229 | ​ | ​ | 186
Interest-bearing deposits | ​ | ​ | 0 | ​ | ​ | 7 | ​ | ​ | 7
Other interest earning assets | ​ | ​ | (20) | ​ | ​ | (3) | ​ | ​ | (23)
Total interest income | ​ | ​ | 1,097 | ​ | ​ | 177 | ​ | ​ | 1,274
Interest Expense: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest-bearing demand deposits | ​ | ​ | 48 | ​ | ​ | 26 | ​ | ​ | 74
Interest-bearing money markets | ​ | ​ | (6) | ​ | ​ | 137 | ​ | ​ | 131
Savings deposits | ​ | ​ | 2 | ​ | ​ | 15 | ​ | ​ | 17
Time deposits | ​ | ​ | (140) | ​ | ​ | (193) | ​ | ​ | (333)
Short-term borrowings | ​ | ​ | 1 | ​ | ​ | 29 | ​ | ​ | 30
Long-term borrowings | ​ | ​ | (319) | ​ | ​ | 159 | ​ | ​ | (160)
Total interest expense | ​ | ​ | (414) | ​ | ​ | 173 | ​ | ​ | (241)
Net interest income | ​ | $ | 1,511 | ​ | $ | 4 | ​ | $ | 1,515

​

| (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 Loan Losses

Specific allocations have been made for impaired 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 ALL have been adjusted based on the current economic environment and the characteristics of the loan portfolio.

​

Other Income

The composition of other operating income for the nine and three month periods ended September 30, 2022 and 2021 is illustrated in the following table:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Income as % of | ​ | Income as % of
​ | ​ | Total Other Income | ​ | Total Other Income
​ | ​ | Nine Months Ended | ​ | Three Months Ended
​ | ​ | September 30, | ​ | September 30,
(in thousands) |  | 2022 |  | 2021 |  | 2022 |  | 2021
Service charges on deposit accounts | ​ | $ | 1,451 |  | 11% | ​ | $ | 1,292 |  | 10% | ​ | $ | 523 |  | 11% | ​ | $ | 475 |  | 10%
Other service charges | ​ | ​ | 686 | ​ | 5% | ​ | ​ | 664 | ​ | 5% | ​ | ​ | 241 | ​ | 5% | ​ | ​ | 232 | ​ | 5%
Trust department | ​ | ​ | 6,238 | ​ | 46% | ​ | ​ | 6,441 | ​ | 49% | ​ | ​ | 2,005 | ​ | 44% | ​ | ​ | 2,166 | ​ | 48%
Debit card income | ​ | ​ | 2,922 | ​ | 22% | ​ | ​ | 2,623 | ​ | 20% | ​ | ​ | 1,053 | ​ | 23% | ​ | ​ | 900 | ​ | 20%
Bank owned life insurance | ​ | ​ | 891 | ​ | 7% | ​ | ​ | 877 | ​ | 7% | ​ | ​ | 302 | ​ | 7% | ​ | ​ | 298 | ​ | 7%
Brokerage commissions | ​ | ​ | 805 | ​ | 6% | ​ | ​ | 854 | ​ | 6% | ​ | ​ | 272 | ​ | 6% | ​ | ​ | 229 | ​ | 5%
Other income | ​ | ​ | 406 | ​ | 3% | ​ | ​ | 431 | ​ | 3% | ​ | ​ | 208 | ​ | 4% | ​ | ​ | 223 | ​ | 5%
​ | ​ | $ | 13,399 | ​ | 100% | ​ | $ | 13,182 | ​ | 100% | ​ | $ | 4,604 | ​ | 100% | ​ | $ | 4,523 | ​ | 100%

​

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Other Operating Expenses

The composition of other operating expenses for the nine and three month periods ended September 30, 2022 and 2021 is illustrated in the following table:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Expense as % of | ​ | Expense as % of
​ | ​ | Total Other Operating Expenses | ​ | Total Other Operating Expenses
​ | ​ | Nine Months Ended | ​ | Three Months Ended
​ | ​ | September 30, | ​ | September 30,
(in thousands) |  | 2022 |  | 2021 |  | 2022 |  | 2021
Salaries and employee benefits | ​ | $ | 17,891 |  | 56% | ​ | $ | 16,214 |  | 44% | ​ | $ | 6,130 |  | 59% | ​ | $ | 5,719 |  | 44%
FDIC premiums | ​ | ​ | 479 | ​ | 2% | ​ | ​ | 575 | ​ | 2% | ​ | ​ | 150 | ​ | 2% | ​ | ​ | 209 | ​ | 2%
Equipment | ​ | ​ | 3,110 | ​ | 10% | ​ | ​ | 2,837 | ​ | 8% | ​ | ​ | 1,037 | ​ | 10% | ​ | ​ | 1,032 | ​ | 8%
Occupancy expense of premises | ​ | ​ | 2,172 | ​ | 7% | ​ | ​ | 2,102 | ​ | 6% | ​ | ​ | 734 | ​ | 7% | ​ | ​ | 684 | ​ | 5%
Data processing expense | ​ | ​ | 2,516 | ​ | 8% | ​ | ​ | 2,420 | ​ | 7% | ​ | ​ | 890 | ​ | 9% | ​ | ​ | 819 | ​ | 6%
Marketing expense | ​ | ​ | 409 | ​ | 1% | ​ | ​ | 408 | ​ | 1% | ​ | ​ | 152 | ​ | 1% | ​ | ​ | 129 | ​ | 1%
Professional services | ​ | ​ | 873 | ​ | 2% | ​ | ​ | 2,872 | ​ | 8% | ​ | ​ | (211) | ​ | (2)% | ​ | ​ | 615 | ​ | 5%
Contract labor | ​ | ​ | 482 | ​ | 2% | ​ | ​ | 486 | ​ | 1% | ​ | ​ | 159 | ​ | 2% | ​ | ​ | 153 | ​ | 1%
Telephone | ​ | ​ | 365 | ​ | 1% | ​ | ​ | 606 | ​ | 2% | ​ | ​ | 112 | ​ | 1% | ​ | ​ | 123 | ​ | 1%
Other real estate owned | ​ | ​ | 375 | ​ | 1% | ​ | ​ | (460) | ​ | (1)% | ​ | ​ | 128 | ​ | 1% | ​ | ​ | 150 | ​ | 1%
Investor relations | ​ | ​ | 258 | ​ | 1% | ​ | ​ | 546 | ​ | 1% | ​ | ​ | 39 | ​ | 0% | ​ | ​ | 116 | ​ | 1%
Settlement expense | ​ | ​ | — | ​ | 0% | ​ | ​ | 3,300 | ​ | 9% | ​ | ​ | — | ​ | 0% | ​ | ​ | — | ​ | 0%
FHLB prepayment penalty | ​ | ​ | — | ​ | 0% | ​ | ​ | 2,368 | ​ | 6% | ​ | ​ | — | ​ | 0% | ​ | ​ | 2,368 | ​ | 18%
Contributions | ​ | ​ | 184 | ​ | 1% | ​ | ​ | 105 | ​ | 0% | ​ | ​ | 121 | ​ | 1% | ​ | ​ | 55 | ​ | 0%
Other | ​ | ​ | 2,437 | ​ | 8% | ​ | ​ | 2,203 | ​ | 6% | ​ | ​ | 895 | ​ | 9% | ​ | ​ | 855 | ​ | 7%
​ | ​ | $ | 31,551 | ​ | 100% | ​ | $ | 36,582 | ​ | 100% | ​ | $ | 10,336 | ​ | 100% | ​ | $ | 13,027 | ​ | 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.

FINANCIAL CONDITION

Balance Sheet Overview

Total assets at September 30, 2022 were $1.8 billion, representing a $51.2 million increase since June 30, 2022 and a $73.8 million increase since December 31, 2021. During the third quarter of 2022, cash and interest-bearing deposits in other banks increased by $9.1 million, the investment portfolio decreased by $7.0 million and gross loans increased by $44.3 million. Other assets including deferred taxes, premises and equipment and accrued interest receivable also increased collectively by $4.7 million.

​

Total liabilities at September 30, 2022 were $1.7 billion, representing a $52.0 million increase since June 30, 2022 and a $83.7 million increase since December 31, 2021. Total deposits increased by $26.8 million since June 30, 2022 and increased by $41.8 million since December 31, 2021. The increase in deposits during the third quarter was primarily attributable to management’s decision to bring approximately $50.0 million in trust department money market accounts back on-balance sheet as well as an increase in municipal deposit balances, which was partially offset by a $53.3 million reduction in non-interest-bearing deposits during the quarter. This decrease resulted from local businesses utilizing cash balances for large asset purchases as well as re-allocations of funds into higher yielding investment alternatives. Short term borrowings increased $32.0 million since December

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31, 2021, driven by $20.0 million in overnight borrowings and an increase in our overnight investments Treasury product of $12.0 million during the quarter. The increase in overnight borrowings at September 30, 2022 was primarily driven by the strong loan growth and a timing delay of the receipt of deposit funding from a sale of a large local business. These funds were received shortly after quarter end and were subsequently used to repay the $20.0 million in overnight borrowings in full.

​

Loan Portfolio

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

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(dollars in thousands) |  | September 30, 2022 |  | December 31, 2021
Commercial real estate | ​ | $ | 437,973 |  | 34% | ​ | $ | 374,291 |  | 32%
Acquisition and development | ​ | ​ | 83,107 | ​ | 7% | ​ | ​ | 128,077 | ​ | 11%
Commercial and industrial * | ​ | ​ | 269,004 | ​ | 21% | ​ | ​ | 180,976 | ​ | 16%
Residential mortgage | ​ | ​ | 427,093 | ​ | 33% | ​ | ​ | 404,686 | ​ | 35%
Consumer | ​ | ​ | 60,747 | ​ | 5% | ​ | ​ | 65,657 | ​ | 6%
Total Loans | ​ | $ | 1,277,924 | ​ | 100% | ​ | $ | 1,153,687 | ​ | 100%

*Includes $0.4 million of PPP loans at September 30, 2022 and $7.7 million at December 31, 2021

​

Outstanding gross loans of $1.3 billion at September 30, 2022 reflected growth of $124.2 million for the first nine months of 2022 and growth of $44.3 million for the third quarter of 2022. Since December 31, 2021, commercial real estate (“CRE”) loans increased by $63.7 million, acquisition and development (“A&D”) loans decreased by $45.0 million and commercial and industrial loans increased by $88.0 million. The growth in the CRE and commercial and industrial portfolios resulted from the of expansion of relationships with existing clients as well as new commercial clients. Residential mortgage loans increased $22.4 million related to the diminished refinance activity due to the rising interest rate environment and management’s strategic decision to book new mortgage loans at higher rates to our in-house portfolio. The consumer loan portfolio decreased by $4.9 million due to amortization of the existing portfolio offsetting new production.

​

New commercial loan production for the three months ended September 30, 2022, was approximately $114.2 million. At September 30, 2022, unfunded, committed commercial construction loans totaled approximately $41.1 million. Commercial amortization and payoffs were approximately $95.5 million through September 30, 2022.

​

New consumer mortgage loan production for the third quarter of 2022 was approximately $30.0 million with most of this production being comprised of in-house mortgages. The pipeline of in-house, portfolio loans as of September 30, 2022 consisted of $16.1 million. Production levels have slowed for residential mortgages when compared to the third quarter of 2021 because of the increasing interest rates for the first nine months of 2022.

​

Non-accrual loans totaled $1.9 million at September 30, 2022 compared to $2.5 million at December 31, 2021. The decrease in non-accrual balances at September 30, 2022 was primarily related to $0.6 million of principal pay-downs of residential mortgage and home equity loans and the movement of $0.2 million in acquisition and development loans to other real estate owned.

​

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Risk Elements of Loan Portfolio

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

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(dollars in thousands) |  | September 30, 2022 |  | % of Applicable Portfolio |  | December 31, 2021 |  | % of Applicable Portfolio
Non-accrual loans: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | $ | 63 | ​ | 0.01% | ​ | $ | 81 | ​ | 0.02%
Acquisition and development | ​ | ​ | 152 | ​ | 0.18% | ​ | ​ | 390 | ​ | 0.30%
Commercial and industrial | ​ | ​ | — | ​ | 0.00% | ​ | ​ | 90 | ​ | 0.05%
Residential mortgage | ​ | ​ | 1,684 | ​ | 0.39% | ​ | ​ | 1,901 | ​ | 0.47%
Consumer | ​ | ​ | 44 | ​ | 0.07% | ​ | ​ | — | ​ | 0.00%
Total non-accrual loans | ​ | $ | 1,943 | ​ | 0.15% | ​ | $ | 2,462 | ​ | 0.21%
Accruing Loans Past Due 90 days or more: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | $ | 88 | ​ | ​ | ​ | $ | — | ​ | ​
Residential mortgage | ​ | ​ | 452 | ​ | ​ | ​ | ​ | 148 | ​ | ​
Consumer | ​ | ​ | 29 | ​ | ​ | ​ | ​ | 152 | ​ | ​
Total loans past due 90 days or more | ​ | $ | 569 | ​ | ​ | ​ | $ | 300 | ​ | ​
Total non-accrual and accruing loans past due 90 days or more | ​ | $ | 2,512 | ​ | ​ | ​ | $ | 2,762 | ​ | ​
Restructured Loans (TDRs): | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Performing | ​ | $ | 2,815 | ​ | ​ | ​ | $ | 2,997 | ​ | ​
Non-accrual (included above) | ​ | ​ | 284 | ​ | ​ | ​ | ​ | 300 | ​ | ​
Total TDRs | ​ | $ | 3,099 | ​ | ​ | ​ | $ | 3,297 | ​ | ​
Other real estate owned | ​ | $ | 4,733 | ​ | ​ | ​ | $ | 4,477 | ​ | ​
Total Non-performing assets | ​ | $ | 7,245 | ​ | ​ | ​ | $ | 7,239 | ​ | ​
Impaired loans without a valuation allowance | ​ | ​ | 4,726 | ​ | ​ | ​ | ​ | 5,248 | ​ | ​
Impaired loans with a valuation allowance | ​ | ​ | 287 | ​ | ​ | ​ | ​ | 480 | ​ | ​
Total impaired loans | ​ | $ | 5,013 | ​ | ​ | ​ | $ | 5,728 | ​ | ​
Valuation allowance related to impaired loans | ​ | $ | 30 | ​ | ​ | ​ | $ | 64 | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-accrual loans to total loans (as %) | ​ | ​ | 0.15% | ​ | ​ | ​ | ​ | 0.21% | ​ | ​
Non-performing loans to total loans (as %) | ​ | ​ | 0.20% | ​ | ​ | ​ | ​ | 0.24% | ​ | ​
Non-performing assets to total assets (as %) | ​ | ​ | 0.40% | ​ | ​ | ​ | ​ | 0.42% | ​ | ​
Allowance for loan losses to non-accrual loans (as %) | ​ | ​ | 799.85% | ​ | ​ | ​ | ​ | 648.05% | ​ | ​
Allowance for loan losses to non-performing assets (as %) | ​ | ​ | 214.51% | ​ | ​ | ​ | ​ | 220.40% | ​ | ​

​

Performing loans considered to be impaired (including performing troubled debt restructurings, or TDRs), as defined and identified by management, amounted to $3.1 million at September 30, 2022 and $3.0 million at December 31, 2021. Loans are identified as impaired when, based on current information and events, management determines that we will be unable to collect all amounts due according to contractual terms. These loans consist primarily of A&D loans and CRE loans. The fair values are generally determined based upon independent third-party appraisals of the collateral or discounted cash flows based upon the expected proceeds. Specific allocations have been made where management believes there is insufficient collateral to repay the loan balance if liquidated and there is no secondary source of repayment available.

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The following table presents the details of impaired loans that are TDRs by class at September 30, 2022 and December 31, 2021:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, 2022 | ​ | December 31, 2021
​ | ​ | Number of | ​ | Recorded | ​ | Number of | ​ | Recorded
(dollars in thousands) |  | Contracts |  | Investment |  | Contracts |  | Investment
Performing | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | 1 | ​ | ​ | 102 | ​ | 1 | ​ | $ | 106
All other CRE | ​ | 2 | ​ | ​ | 2,059 | ​ | 2 | ​ | ​ | 2,178
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | 1 | ​ | ​ | 217 | ​ | 1 | ​ | ​ | 239
All other A&D | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Commercial and industrial | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage – term | ​ | 6 | ​ | ​ | 437 | ​ | 6 | ​ | ​ | 474
Residential mortgage – home equity | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Consumer | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Total performing | ​ | 10 | ​ | $ | 2,815 | ​ | 10 | ​ | $ | 2,997
Non-accrual | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | — | ​ | $ | — | ​ | — | ​ | $ | —
All other CRE | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
All other A&D | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Commercial and industrial | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage – term | ​ | 2 | ​ | ​ | 284 | ​ | 2 | ​ | ​ | 300
Residential mortgage – home equity | ​ | — | ​ | ​ | ​ | ​ | — | ​ | ​ | —
Consumer | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Total non-accrual | ​ | 2 | ​ | ​ | 284 | ​ | 2 | ​ | ​ | 300
Total TDRs | ​ | 12 | ​ | $ | 3,099 | ​ | 12 | ​ | $ | 3,297

​

The level of TDRs was $3.1 million at September 30, 2022 compared to $3.3 million at December 31, 2021, with a slight reduction due to payments made during the first nine months of 2022. There were no new TDRs during the first nine months of 2022.

Allowance and Provision for Loan Losses

The ALL is maintained to absorb probable incurred credit losses from the loan portfolio. The ALL is based on management’s continuing evaluation of the quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans.

The ALL is also based on estimates, and actual losses will vary from current estimates. These estimates are reviewed quarterly, and as adjustments, either positive or negative, become necessary, a corresponding increase or decrease is made in the ALL. The methodology used to determine the adequacy of the ALL is consistent with prior years. An estimate for probable losses related to unfunded lending commitments, such as letters of credit and binding but unfunded loan commitments is also prepared. This estimate is computed in a manner similar to the methodology described above, adjusted for the probability of actually funding the commitment. The ALL decreased to $15.5 million at September 30, 2022 compared to $16.0 million at December 31, 2021.

The ratio of year-to-date net charge offs to average loans for the nine months ending September 30, 2022 was an annualized 0.06%, compared to net recoveries to average loans of 0.04% for the same period of 2021. Our special assets team continues to aggressively collect on charged-off loans.

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Management believes that the ALL at September 30, 2022 is adequate to provide for probable credit losses inherent in our loan portfolio. Amounts that will be recorded for the provision for loan losses in future periods will depend upon trends in the loan balances, including the composition of the loan portfolio, changes in loan quality and loss experience trends, potential recoveries on previously charged-off loans and changes in other qualitative factors. Management also applies interest rate risk, collateral value and debt service sensitivity analyses to the Commercial real estate loan portfolio and obtains new appraisals on specific loans under defined parameters to assist in the determination of the periodic provision for loan losses.

The following table presents a summary of the activity in the ALL for the nine months ended September 30:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(dollars in thousands) |  | 2022 |  | 2021 |
Balance, January 1 | ​ | $ | 15,955 | ​ | $ | 16,486 | ​
Charge-offs: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Acquisition and development | ​ | ​ | (20) | ​ | ​ | (85) | ​
Commercial and industrial | ​ | ​ | (134) | ​ | ​ | — | ​
Residential mortgage | ​ | ​ | (34) | ​ | ​ | (141) | ​
Consumer | ​ | ​ | (726) | ​ | ​ | (266) | ​
Total charge-offs | ​ | ​ | (914) | ​ | ​ | (492) | ​
Recoveries: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | 1 | ​ | ​ | — | ​
Acquisition and development | ​ | ​ | 21 | ​ | ​ | 172 | ​
Commercial and industrial | ​ | ​ | 92 | ​ | ​ | 511 | ​
Residential mortgage | ​ | ​ | 172 | ​ | ​ | 49 | ​
Consumer | ​ | ​ | 117 | ​ | ​ | 112 | ​
Total recoveries | ​ | ​ | 403 | ​ | ​ | 844 | ​
Net losses | ​ | ​ | (511) | ​ | ​ | 352 | ​
Provision for loan losses | ​ | ​ | 97 | ​ | ​ | 68 | ​
Balance at end of period | ​ | $ | 15,541 | ​ | $ | 16,906 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Allowance for loan losses to gross loans outstanding (as %) | ​ | ​ | 1.22 | % | ​ | 1.46 | %

​

​ | ​ | ​ | ​ | ​ | ​ | ​
Net (Charge-offs)/Recoveries as a % of Average Applicable Portfolio
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2022 | ​ | 2021
Commercial real estate | ​ | ​ | 0.00% | ​ | ​ | 0.00%
Acquisition and development | ​ | ​ | 0.00% | ​ | ​ | 0.09%
Commercial and industrial | ​ | ​ | (0.02)% | ​ | ​ | 0.29%
Residential mortgage | ​ | ​ | 0.04% | ​ | ​ | (0.03)%
Consumer | ​ | ​ | (1.28)% | ​ | ​ | (0.45)%
​ | ​ | ​ | ​ | ​ | ​ | ​

​

Investment Securities

At September 30, 2022, the total amortized cost basis of the available-for-sale investment portfolio was $151.9 million, compared to a fair value of $128.0 million. Unrealized gains and losses on securities available-for-sale are reflected in accumulated other comprehensive loss, a component of shareholders’ equity. The amortized cost basis of the held to maturity portfolio was $238.4 million, compared to a fair value of $205.7 million.

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

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, 2022 | ​ | December 31, 2021
​ | ​ | Amortized | ​ | Fair Value | ​ | FV as % | ​ | Amortized | ​ | Fair Value | ​ | FV as %
(dollars in thousands) |  | Cost |  | (FV) |  | of Total |  | Cost |  | (FV) |  | of Total
Securities Available for Sale: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. government agencies | ​ | $ | 11,052 | ​ | $ | 9,447 | ​ | 8% | ​ | $ | 69,602 | ​ | $ | 67,169 | ​ | 23%
Residential mortgage-backed agencies | ​ | ​ | 45,899 | ​ | ​ | 37,734 | ​ | 29% | ​ | ​ | 49,630 | ​ | ​ | 48,661 | ​ | 17%
Commercial mortgage-backed agencies | ​ | ​ | 37,766 | ​ | ​ | 31,611 | ​ | 25% | ​ | ​ | 51,694 | ​ | ​ | 50,868 | ​ | 19%
Collateralized mortgage obligations | ​ | ​ | 26,336 | ​ | ​ | 21,701 | ​ | 17% | ​ | ​ | 93,018 | ​ | ​ | 90,077 | ​ | 31%
Obligations of state and political subdivisions | ​ | ​ | 11,208 | ​ | ​ | 10,744 | ​ | 8% | ​ | ​ | 12,439 | ​ | ​ | 12,804 | ​ | 4%
Corporate bonds | ​ | ​ | 1,000 | ​ | ​ | 920 | ​ | 1% | ​ | ​ | — | ​ | ​ | — | ​ | —
Collateralized debt obligations | ​ | ​ | 18,648 | ​ | ​ | 15,882 | ​ | 12% | ​ | ​ | 18,609 | ​ | ​ | 17,192 | ​ | 6%
Total available for sale | ​ | $ | 151,909 | ​ | $ | 128,039 | ​ | 100% | ​ | $ | 294,992 | ​ | $ | 286,771 | ​ | 100%
Securities Held to Maturity: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. treasuries | ​ | $ | 37,140 | ​ | $ | 35,413 | ​ | 17% | ​ | $ | — | ​ | $ | — | ​ | —
U.S. government agencies | ​ | ​ | 67,665 | ​ | ​ | 54,812 | ​ | 27% | ​ | ​ | — | ​ | ​ | — | ​ | —
Residential mortgage-backed agencies | ​ | ​ | 29,536 | ​ | ​ | 25,617 | ​ | 13% | ​ | ​ | 30,634 | ​ | ​ | 30,847 | ​ | 47%
Commercial mortgage-backed agencies | ​ | ​ | 23,018 | ​ | ​ | 18,640 | ​ | 9% | ​ | ​ | 5,456 | ​ | ​ | 5,601 | ​ | 9%
Collateralized mortgage obligations | ​ | ​ | 58,462 | ​ | ​ | 48,840 | ​ | 24% | ​ | ​ | — | ​ | ​ | — | ​ | —
Obligations of state and political subdivisions | ​ | ​ | 22,624 | ​ | ​ | 22,423 | ​ | 10% | ​ | ​ | 20,169 | ​ | ​ | 28,921 | ​ | 44%
Total held to maturity | ​ | $ | 238,445 | ​ | $ | 205,745 | ​ | 100% | ​ | $ | 56,259 | ​ | $ | 65,369 | ​ | 100%

​

Total fair value of investment securities available for sale decreased by $158.7 million since December 31, 2021 due to the transfer of investments from available-for-sale to held to maturity in the first quarter 2022. At September 30, 2022, the securities classified as available-for-sale included a net unrealized loss of $23.9 million, which represents the difference between the fair value and amortized cost of securities in the portfolio.

The Corporation reassessed the classification of certain investments and effective February 1, 2022, the Corporation transferred $139.0 million of callable agencies, obligation of state and political subdivisions, and collateralized mortgage obligations from available for sale to held to maturity securities. The transfer occurred at fair value. The related unrealized loss of $8.4 million included in other comprehensive loss remained in other comprehensive loss, to be amortized out of other comprehensive loss with an offsetting entry to interest income as a yield adjustment over the remaining term of the securities. No gain or loss was recorded at the time of transfer. The transfer of these securities was completed in an effort to mitigate further decline in fair market value in a rising rate environment. Management’s assessment of the portfolio included lower yielding bonds and the risk of extension in an up 300 basis point shock.

​

As discussed in Note 6 to the consolidated financial statements presented elsewhere in this report, the Corporation measures fair market values based on the fair value hierarchy established in ASC Topic 820, Fair Value Measurements and Disclosures. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Level 3 prices or valuation techniques require inputs that are both significant to the valuation assumptions and are not readily observable in the market (i.e. supported with little or no market activity). These Level 3 instruments are valued based on both observable and unobservable inputs derived from the best available data, some of which is internally developed, and considers risk premiums that a market participant would require.

Approximately $112.2 million of the available for sale portfolio was valued using Level 2 pricing and had net unrealized losses of $21.1 million at September 30, 2022. The remaining $15.9 million of the securities available for sale represents the entire collateralized debt obligation (“CDO”) portfolio, which was valued using significant unobservable inputs (Level 3 assets). The $2.8 million in net unrealized losses associated with this portfolio relates to nine pooled trust preferred securities that comprise the CDO portfolio. Net unrealized losses of $1.7 million represent non-credit related other than temporary impairment (“OTTI”) charges on seven of the securities, while $1.1 million of unrealized losses relates to two securities which have had no credit related OTTI.

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Deposits

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

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(dollars in thousands) |  | September 30, 2022 |  | December 31, 2021
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-interest-bearing demand deposits | ​ | $ | 474,444 |  | 32% | ​ | $ | 501,627 | ​ | 34%
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest-bearing deposits: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Demand | ​ | ​ | 304,110 | ​ | 20% | ​ | ​ | 228,175 | ​ | 16%
Money Market | ​ | ​ | 352,757 | ​ | 23% | ​ | ​ | 339,748 | ​ | 23%
Savings deposits | ​ | ​ | 255,505 | ​ | 17% | ​ | ​ | 236,595 | ​ | 16%
Time deposits | ​ | ​ | 124,302 | ​ | 8% | ​ | ​ | 163,229 | ​ | 11%
Total Deposits | ​ | $ | 1,511,118 | ​ | 100% | ​ | $ | 1,469,374 | ​ | 100%

​

Total deposits at September 30, 2022 increased $41.7 million when compared to deposits at December 31, 2021. Non-interest-bearing deposits decreased $27.2 million, primarily due to deposit relationships moving deposits off-balance sheet to higher yielding deposit products. Interest bearing demand deposits increased $75.9 million and traditional savings accounts increased $18.9 million. Money market balances increased $13.0 million, driven primarily by management’s decision to bring trust department money market accounts back on-balance sheet in the third quarter, offset by the outflow of municipal balances into a higher rate state funding facility. Time deposits decreased $38.9 million related to maturing balances moving to more liquid accounts in anticipation of rising deposit rates as well as municipal funds moving to higher yielding alternatives.

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Borrowed Funds

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

​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | September 30, 2022 |  | December 31, 2021
Fed Funds Purchased, weighted average interest rate of 3.25% at September 30, 2022 | ​ | $ | 20,000 | ​ | $ | —
Securities sold under agreements to repurchase | ​ | $ | 69,726 | ​ | $ | 57,699
Total short-term borrowings | ​ | ​ | 89,726 | ​ | ​ | 57,699
Junior subordinated debt | ​ | ​ | 30,929 | ​ | ​ | 30,929
Total long-term borrowings | ​ | $ | 30,929 | ​ | $ | 30,929

​

Short term borrowings increased $32.0 million since December 31, 2021, driven by $20.0 million in overnight borrowings and an increase in our overnight investments Treasury product of $12.0 million during the third quarter of 2022. The increase in overnight borrowings at September 30, 2022 was primarily driven by the strong loan growth and a timing delay of the receipt of deposit funding from a large customer driven transaction. These funds were received shortly after quarter end and subsequently were repaid the $20.0 million in overnight borrowings in full.

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Liquidity Management

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

| ● | Reliability and stability of core deposits;

| ● | Cash flow structure and pledging status of investments; and

| ● | Potential for unexpected loan demand.

We actively manage our liquidity position through regular meetings of a sub-committee of executive management, known as the Treasury Team, which looks forward 12 months at 30-day intervals. The measurement is based upon the projection of funds

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sold or purchased position, along with ratios and trends developed to measure dependence on purchased funds and core growth. Monthly reviews by management and quarterly reviews by the Asset and Liability Committee under prescribed policies and procedures are designed to ensure that we will maintain adequate levels of available funds.

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

| 1. | Unsecured Fed Funds lines of credit with upstream correspondent banks (M&T Bank, Pacific Coast Banker’s Bank, PNC Financial Services, Atlantic Community Bankers Bank, Community Bankers Bank and Zions National Bank).

| 2. | Secured advances with the FHLB, which are collateralized by eligible one to four family residential mortgage loans, home equity lines of credit, commercial real estate loans, various securities and pledged cash.

| 3. | Secured line of credit with the Fed Discount Window for use in borrowing funds up to 90 days, using municipal securities as collateral.

| 4. | Brokered deposits, including CDs and money market funds, provide a method to generate deposits quickly. These deposits are strictly rate driven but often provide the most cost-effective means of funding growth.

| 5. | One Way Buy CDARS/ICS funding – a form of brokered deposits that has become a viable supplement to brokered deposits obtained directly.

​

Management believes that we have adequate liquidity available to respond to current and anticipated liquidity demands and is not aware of any trends or demands, commitments, events or uncertainties that are likely to materially affect our ability to maintain liquidity at satisfactory levels.

Market Risk and Interest Sensitivity

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

At September 30, 2022, 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

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| ● | 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 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.

Based on the simulation analysis performed at September 30, 2022 and December 31, 2021, management estimated the following changes in net interest income, assuming the indicated rate changes:

​ | ​ | ​ | ​ | ​ | ​ | ​
(Dollars in thousands) |  | September 30, 2022 | ​ | December 31, 2021
+400 basis points | ​ | $ | 12,983 | ​ | $ | 4,072
+300 basis points | ​ | $ | 9,738 | ​ | $ | 3,233
+200 basis points | ​ | $ | 6,521 | ​ | $ | 2,315
+100 basis points | ​ | $ | 3,298 | ​ | $ | 1,160
-100 basis points | ​ | $ | (3,437) | ​ | $ | (3,110)
-200 basis points | ​ | $ | (6,940) | ​ | ​ | N/A

​

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

Management believes that no material changes in our market risks, our procedures used to evaluate and mitigate those risks, or our actual or simulated sensitivity positions have occurred since December 31, 2021. Our NII simulation analysis as of December 31, 2021 is included in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2021 under the heading “Market Risk and Interest Sensitivity.

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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”. At September 30, 2022, the Bank had $110.0 million available through unsecured lines of credit with correspondent banks, $7.4 million available through a secured line of credit with the Fed Discount Window and approximately $179.3 million available through the FHLB. 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.

In addition to operational requirements, the Bank is subject to risk-based capital regulations, which were adopted and are monitored by federal banking regulators. These regulations are used to evaluate capital adequacy and require an analysis of an institution’s asset risk profile and off-balance sheet exposures, such as unused loan commitments and stand-by letters of credit. Based on capital ratios at September 30, 2022, the Bank was considered to be well-capitalized.

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

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | September 30, 2022 |  | December 31, 2021 |  | Required for Capital Adequacy Purposes |  | Required to be Well Capitalized |
Total Capital (to risk-weighted assets) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
First United Bank & Trust | ​ | 14.49 | % | 14.97 | % | 8.00 | % | 10.00 | %
Tier 1 Capital (to risk-weighted assets) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
First United Bank & Trust | ​ | 13.36 | % | 13.72 | % | 6.00 | % | 8.00 | %
Common Equity Tier 1 Capital (to risk-weighted assets) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
First United Bank & Trust | ​ | 13.36 | % | 13.72 | % | 4.50 | % | 6.50 | %
Tier 1 Capital (to average assets) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
First United Bank & Trust | ​ | 10.33 | % | 10.00 | % | 4.00 | % | 5.00 | %

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Contractual Obligations, Commitments and Off-Balance Sheet Arrangements

Contractual Obligations

The Corporation enters into contractual obligations in the normal course of business. Among these obligations are FHLB advances and junior subordinated debentures, operating lease agreements for banking and subsidiaries’ offices and for data processing and telecommunications equipment. Comparing September 30, 2022 to December 31, 2021, short-term borrowings increased $32.0 million, driven by $20.0 million in overnight borrowings and an increase of $12.0 million during the period related to our overnight investments Treasury 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) |  | September 30, 2022 |  | December 31, 2021
Residential Mortgage - home equity | ​ | $ | 70,095 | ​ | $ | 66,874
Residential Mortgage - construction | ​ | ​ | 22,682 | ​ | ​ | 18,657
Commercial | ​ | ​ | 160,504 | ​ | ​ | 136,897
Consumer - personal credit lines | ​ | ​ | 4,375 | ​ | ​ | 4,551
Standby letters of credit | ​ | ​ | 16,040 | ​ | ​ | 15,711
Total | ​ | $ | 273,696 | ​ | $ | 242,690

​

The increase of $31.0 million in commitments at September 30, 2022 when compared to December 31, 2021 was due to new business in construction commitments in the residential mortgage and commercial portfolios.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The information required by this item is included in Item 2 of Part I of this report under the caption “Market Risk and Interest Sensitivity” and in Item 7 of Part II of First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2021 under the heading “Market Risk and Interest Sensitivity” both of which are incorporated in this Item 3 by reference.

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Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 with the SEC, such as this Quarterly Report, is recorded, processed, summarized and reported within the periods specified in those rules and forms, and that such information is accumulated and communicated to our management, including First United Corporation’s principal executive officer (“PEO”) and its principal financial officer (“PFO”), as appropriate, to allow for timely decisions regarding required disclosure. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

An evaluation of the effectiveness of these disclosure controls as of September 30, 2022 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 nine months ended September 30, 2022, 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.

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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, 2021. Management does not believe that any material changes in our risk factors have occurred since they were last disclosed except as follows.

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

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

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

​ | ​ | ​
Exhibit |  | Description
31.1 | ​ | Certifications of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)
31.2 | ​ | Certifications of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)
32 | ​ | Certification of the Principal Executive Officer and the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act (furnished herewith)
101.INS | ​ | Inline XBRL Instance Document (filed herewith)
101.SCH | ​ | Inline XBRL Taxonomy Extension Schema (filed herewith)
101.CAL | ​ | Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith)
101.DEF | ​ | Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith)
101.LAB | ​ | Inline XBRL Taxonomy Extension Label Linkbase (filed herewith)
101.PRE | ​ | Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith)
104 | ​ | The cover page of First United Corporation’s Quarterly Report on Form 10Q for the quarter ended September 31, 2022 formatted in Inline XBRL, included within the Exhibit 101 attachments (filed herewith).

* Portions of the exhibit have been omitted pursuant to Item 601(b)(10)(vi) of Regulation S-K.

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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: November 10, 2022 | /s/ Carissa L. Rodeheaver
​ | Carissa L. Rodeheaver, CPA
​ | Chairman of the Board, President and Chief Executive Officer
​ | (Principal Executive Officer)
​ | ​
​ | ​
Date: November 10, 2022 | /s/ Tonya K. Sturm
​ | Tonya K. Sturm, Senior Vice President,
​ | Chief Financial Officer
​ | (Principal Financial Officer and Principal Accounting Officer)

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