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Employee Benefit Plans | 12 Months Ended
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Dec. 31, 2023
Employee Benefit Plans [Abstract] |
Employee Benefit Plans | 15. Employee Benefit Plans First United Corporation sponsors a noncontributory defined benefit Pension Plan (the “Pension Plan”) covering the employees who were hired prior to the freeze and others who were grandfathered into the Pension 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 Pension 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 (i) their ages, at their closest birthday, plus (ii) 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 will be managed through discretionary contributions to the First United Corporation 401(k) Profit Sharing Plan (the “401(k) Plan”). During 2001, the Bank established an unfunded Defined Benefit Supplemental Executive Retirement Plan (“Defined Benefit SERP”). 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. The benefit obligation activity for both the Pension Plan and 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. 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: (i) Normal Retirement (as defined in the Contribution Agreement); (ii) 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); (iii) Separation from Service due to a Disability (as defined in the Contribution Agreement); (iv) with respect to a particular award of Employer Contribution Credits, the participant’s completion of two consecutive Years of Service (as defined in the Contribution Agreement) immediately following the Plan Year for which such award was made; or (v) death. Notwithstanding the foregoing, however, a participant will 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 (a) refraining from engaging in Competitive Employment (as defined in the Contribution Agreement) for three years following his or her Separation from Service, (b) refraining from injurious disclosure of confidential information concerning the Corporation, and (c) 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 (b) 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 $50,628 of related compensation expense for 2022 related to these contributions. In January 2022, the Board of Directors approved discretionary contributions to three participants totaling $103,689. The Corporation recorded $51,844 of related compensation expense for both 2023 and 2022 related to these contributions. In January 2023, the Board of Directors approved discretionary contributions to three participants totaling $108,184. The Corporation recorded $54,092 of related compensation expense for 2023. Each discretionary contribution has a two year vesting period. The following tables summarize benefit obligation and funded status, plan asset activity, components of net pension cost, and weighted average assumptions for the Pension Plan and the Defined Benefit SERP: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Pension | ​ | Defined Benefit SERP
(in thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Change in Benefit Obligation | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Obligation at the beginning of the year | ​ | $ | 40,184 | ​ | $ | 54,931 | ​ | $ | 7,194 | ​ | $ | 10,395
Service cost | ​ | ​ | 25 | ​ | ​ | 57 | ​ | ​ | 102 | ​ | ​ | 165
Interest cost | ​ | ​ | 2,050 | ​ | ​ | 1,535 | ​ | ​ | 367 | ​ | ​ | 286
Change in discount rate and mortality assumptions | ​ | ​ | 314 | ​ | ​ | (11,930) | ​ | ​ | — | ​ | ​ | —
Actuarial losses/(gains) | ​ | ​ | 144 | ​ | ​ | (736) | ​ | ​ | 2,450 | ​ | ​ | (3,316)
Benefits paid | ​ | ​ | (2,103) | ​ | ​ | (3,673) | ​ | ​ | (336) | ​ | ​ | (336)
Obligation at the end of the year | ​ | ​ | 40,614 | ​ | ​ | 40,184 | ​ | ​ | 9,777 | ​ | ​ | 7,194
Change in Plan Assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value at the beginning of the year | ​ | ​ | 48,185 | ​ | ​ | 59,696 | ​ | ​ | — | ​ | ​ | —
Actual return on plan assets | ​ | ​ | 5,740 | ​ | ​ | (7,838) | ​ | ​ | — | ​ | ​ | —
Employer contribution | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 336 | ​ | ​ | 336
Benefits paid | ​ | ​ | (2,103) | ​ | ​ | (3,673) | ​ | ​ | (336) | ​ | ​ | (336)
Fair value at the end of the year | ​ | ​ | 51,822 | ​ | ​ | 48,185 | ​ | ​ | — | ​ | ​ | —
Funded/(Unfunded) Status | ​ | $ | 11,208 | ​ | $ | 8,001 | ​ | $ | (9,777) | ​ | $ | (7,194)
​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Pension | ​ | Defined Benefit SERP
(in thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Components of Net Pension Cost | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Service cost | ​ | $ | 25 | ​ | $ | 57 | ​ | $ | 102 | ​ | $ | 165
Interest cost | ​ | ​ | 2,050 | ​ | ​ | 1,535 | ​ | ​ | 367 | ​ | ​ | 286
Expected return on assets | ​ | ​ | (3,062) | ​ | ​ | (3,810) | ​ | ​ | — | ​ | ​ | —
Amortization of recognized loss | ​ | ​ | 998 | ​ | ​ | 1,117 | ​ | ​ | (7) | ​ | ​ | 271
Net pension (income)/expense in employee benefits | ​ | $ | 11 | ​ | $ | (1,101) | ​ | $ | 462 | ​ | $ | 722
Weighted Average Assumptions used to determine benefit obligations: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Discount rate for benefit obligations | ​ | ​ | 5.02% | ​ | ​ | 5.24% | ​ | ​ | 4.99% | ​ | ​ | 5.23%
Discount rate for net pension cost | ​ | ​ | 5.24% | ​ | ​ | 2.85% | ​ | ​ | — | ​ | ​ | —
Expected long-term return on assets | ​ | ​ | 6.50% | ​ | ​ | 6.50% | ​ | ​ | — | ​ | ​ | —
Rate of compensation increase | ​ | ​ | 3.00% | ​ | ​ | 3.00% | ​ | ​ | 3.00% | ​ | ​ | 3.00%
​ The accumulated benefit obligation for the Pension Plan was $38.3 million and $37.8 million at December 31, 2023 and 2022, respectively. The accumulated benefit obligation for the Defined Benefit SERP was $8.3 million and $6.9 million at December 31, 2023 and 2022, respectively. The investment assets of a defined benefit plan are managed with the goal of providing for retiree distributions while also supporting long-term plan obligations with a moderate level of portfolio risk. To address the variability over time of both risk and return, the plan investment strategy entails a dynamic approach to asset allocation, providing for normalized targets for major asset classes, with the ability to tactically adjust within the following specified ranges around those targets. ​
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
Asset Class |  | Normalized Target |  | Range
Cash | ​ | 2% | ​ | 0% - 20%
Fixed Income | ​ | 43% | ​ | 30% - 50%
Equities | ​ | 55% | ​ | 45% - 65%
​ Decisions regarding tactical adjustments within the above noted ranges for asset classes are based on a top down review of factors expected to have material impact on the risk and reward dynamics of the portfolio as a whole. Such factors include, but are not limited to, the following:
| ● | Anticipated domestic and international economic growth as a whole;
| ● | The position of the economy within its longer term economic cycle; and
| ● | The expected impact of economic vitality, cycle positioning, financial market risks, industry/demographic trends and political forces on the various market sectors and investment styles.
With respect to individual company securities, additional company specific matters are considered, which could include management track record and guidance, future earnings expectations, current relative price expectations and the impact of identified risks on expected performance, among others. A core equity position of large cap stocks will be maintained, with more aggressive or volatile sectors meaningfully represented in the asset mix in pursuit of higher returns. Strategic and specific investment decisions are guided by an in-house investment committee as well as a number of outside institutional resources that provide economic, industry and company data and analytics. It is management’s intent to give the Pension Plan’s investment managers flexibility with respect to investment decisions and their timing within the overall guidelines. However, certain investments require specific review and approval by management. Management is also informed of anticipated changes in nonproprietary investment managers, significant modifications of any previously approved investment, or the anticipated use of derivatives to execute investment strategies. Portfolio risk is managed in large part by a focus on diversification across multiple levels as well as an emphasis on financial strength. For example, current investment policies restrict initial investments in debt securities to be rated investment grade at the time of purchase. Also, with the exception of the highest rated securities (e.g., U.S. Treasury or government-backed agency securities), no more than 10% of the portfolio may be invested in a single entity’s securities. As a result of the previously noted approaches to controlling portfolio risk, any concentrations of risk would be associated with general systemic risks faced by industry sectors or the portfolio as a whole. Assets in the Pension Plan are valued by the Corporation’s accounting system provider who utilizes a third-party pricing service. Valuation data is based on actual market data for stocks and mutual funds (Level 1) and matrix pricing for bonds (Level 2). Cash and cash equivalents are also considered Level 1 within the fair value hierarchy. ​ At December 31, 2023 and 2022, the value of Pension Plan investments was as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
December 31, 2023 | ​ | ​ | ​ | ​ | ​ | ​ | Fair Value Hierarchy
(in thousands) |  | Assets at Fair Value |  | % of Portfolio |  | Level 1 |  | Level 2
Cash and cash equivalents | ​ | $ | 1,217 | ​ | 2.3% | ​ | $ | 1,217 | ​ | $ | —
Fixed income securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. Government and Agencies | ​ | ​ | 5,554 | ​ | 10.7% | ​ | ​ | — | ​ | ​ | 5,554
Taxable municipal bonds and notes | ​ | ​ | 2,503 | ​ | 4.8% | ​ | ​ | — | ​ | ​ | 2,503
Corporate bonds and notes | ​ | ​ | 10,258 | ​ | 19.8% | ​ | ​ | — | ​ | ​ | 10,258
Preferred stock | ​ | ​ | 276 | ​ | 0.5% | ​ | ​ | — | ​ | ​ | 276
Fixed income mutual funds | ​ | ​ | 3,302 | ​ | 6.4% | ​ | ​ | 3,302 | ​ | ​ | —
Total fixed income | ​ | ​ | 21,893 | ​ | 42.2% | ​ | ​ | 3,302 | ​ | ​ | 18,591
Equities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Large Cap | ​ | ​ | 19,780 | ​ | 38.2% | ​ | ​ | 19,780 | ​ | ​ | —
Mid Cap | ​ | ​ | 1,500 | ​ | 2.9% | ​ | ​ | 1,500 | ​ | ​ | —
Small Cap | ​ | ​ | 4,564 | ​ | 8.8% | ​ | ​ | 4,564 | ​ | ​ | —
International | ​ | ​ | 2,868 | ​ | 5.6% | ​ | ​ | 2,868 | ​ | ​ | —
Total equities | ​ | ​ | 28,712 | ​ | 55.5% | ​ | ​ | 28,712 | ​ | ​ | —
Total market value | ​ | $ | 51,822 | ​ | 100.0% | ​ | $ | 33,231 | ​ | $ | 18,591
Note: The Large cap equities includes 194,124 shares of First United Corporation common stock at December 31, 2023 and 2022
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
December 31, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | Fair Value Hierarchy
(in thousands) |  | Assets at Fair Value |  | % of Portfolio |  | Level 1 |  | Level 2
Cash and cash equivalents | ​ | $ | 985 | ​ | 2.0% | ​ | $ | 985 | ​ | $ | —
Fixed income securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. Government and Agencies | ​ | ​ | 2,770 | ​ | 5.8% | ​ | ​ | — | ​ | ​ | 2,770
Taxable municipal bonds and notes | ​ | ​ | 4,166 | ​ | 8.6% | ​ | ​ | — | ​ | ​ | 4,166
Corporate bonds and notes | ​ | ​ | 10,575 | ​ | 21.9% | ​ | ​ | — | ​ | ​ | 10,575
Preferred stock | ​ | ​ | 474 | ​ | 1.0% | ​ | ​ | — | ​ | ​ | 474
Fixed income mutual funds | ​ | ​ | 5,454 | ​ | 11.4% | ​ | ​ | 5,454 | ​ | ​ | —
Total fixed income | ​ | ​ | 23,439 | ​ | 48.7% | ​ | ​ | 5,454 | ​ | ​ | 17,985
Equities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Large Cap | ​ | ​ | 15,743 | ​ | 32.7% | ​ | ​ | 15,743 | ​ | ​ | —
Mid Cap | ​ | ​ | 1,225 | ​ | 2.5% | ​ | ​ | 1,225 | ​ | ​ | —
Small Cap | ​ | ​ | 3,815 | ​ | 7.9% | ​ | ​ | 3,815 | ​ | ​ | —
International | ​ | ​ | 2,978 | ​ | 6.2% | ​ | ​ | 2,978 | ​ | ​ | —
Total equities | ​ | ​ | 23,761 | ​ | 49.3% | ​ | ​ | 23,761 | ​ | ​ | —
Total market value | ​ | $ | 48,185 | ​ | 100.0% | ​ | $ | 30,200 | ​ | $ | 17,985
​ As of December 31, 2023, the 25-year average return on pension portfolio assets was 6.59%, exceeding the expected long-term return of 6.50% utilized for 2023. Considering that future equity returns are partially a function of current starting valuations and the general level of interest rates, return expectations by market analysts have risen due to the large equity pullback and interest rates rising to multiyear highs. With equity valuations near historical averages and the monetary policy normalization process likely being near conclusion, it is considered appropriate to maintain the expected long-term rate of return of 6.50% for 2024. ​ Estimated cash flows related to expected future benefit payments from the Pension Plan and Defined Benefit SERP are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Pension Plan |  | Defined Benefit SERP
2024 | ​ | $ | 2,217 | ​ | $ | 336
2025 | ​ | ​ | 2,267 | ​ | ​ | 336
2026 | ​ | ​ | 2,353 | ​ | ​ | 602
2027 | ​ | ​ | 2,401 | ​ | ​ | 655
2028 | ​ | ​ | 2,524 | ​ | ​ | 643
2029-2033 | ​ | ​ | 13,450 | ​ | ​ | 3,628
​ First United Corporation made no contributions to the Pension Plan in 2023 or 2022. First United Corporation will continue to evaluate future annual contributions to the Pension Plan based upon its funded status and an evaluation of the future benefits to be provided thereunder. The Bank expects to fund the annual projected benefit payments for the Defined Benefit SERP from operations. The estimated costs that will be amortized from accumulated other comprehensive loss into net periodic pension cost during the next fiscal year are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Pension |  | Defined Benefit SERP
Net actuarial loss | ​ | $ | 811 | ​ | $ | 157
​ | ​ | $ | 811 | ​ | $ | 157
​

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