10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

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

For the fiscal year ended December 31, 2023

or

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

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

Securities registered pursuant to Section 12(g) of the Act:  None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ◻   No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ◻   No ☑

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 such shorter period 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 smaller reporting company, or an emerging growth company. See the definitions of “accelerated filer”, “large accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act). :

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 standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the registrant’s outstanding voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $85,737,171.

The number of shares of the registrant’s common stock outstanding as of February 29, 2024: 6,643,161.

Documents Incorporated by Reference

Portions of the registrant’s definitive proxy statement for the 2024 Annual Meeting of Shareholders to be filed with the SEC pursuant to Regulation 14A are incorporated by reference into Part III of this Annual Report on Form 10-K.

First United Corporation

Table of Contents

FORWARD LOOKING STATEMENTS		3
PART I
ITEM 1.	Business	4
ITEM 1A.	Risk Factors	16
ITEM 1B.	Unresolved Staff Comments	31
ITEM 1C	Cybersecurity	31
ITEM 2.	Properties	33
ITEM 3.	Legal Proceedings	33
ITEM 4.	Mine Safety Disclosures	33
PART II
ITEM 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	34
ITEM 6.	Reserved	34
ITEM 7.	Management’s Discussion and Analysis of Financial Condition & Results of Operations	35
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	61
ITEM 8.	Financial Statements and Supplementary Data	62
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	126
ITEM 9A.	Controls and Procedures	126
ITEM 9B.	Other Information	128
ITEM 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	128
PART III
ITEM 10.	Directors, Executive Officers and Corporate Governance	128
ITEM 11.	Executive Compensation	128
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	128
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	129
ITEM 14.	Principal Accountant Fees and Services	129
PART IV
ITEM 15.	Exhibits and Financial Statement Schedules	130
ITEM 16.	Form 10-K Summary	132
SIGNATURES		133

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As used in this annual report, the terms “the Corporation”, “we”, “us”, and “our” mean First United Corporation and unless the context clearly suggests otherwise, its consolidated subsidiaries.

FORWARD LOOKING STATEMENTS

This annual report contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Such statements include projections, predictions, expectations or statements as to beliefs or future events or results or refer to other matters that are not historical facts. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking statements contained in this annual report are based on various factors and were derived using numerous assumptions. In some cases, you can identify these forward-looking statements by words like “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “intend”, “believe”, “estimate”, “predict”, “potential”, or “continue” or the negative of those words and other comparable words. You should be aware that those statements reflect only our predictions. If known or unknown risks or uncertainties should materialize, or if underlying assumptions should prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected. You should bear this in mind when reading this annual report and not place undue reliance on these forward-looking statements. Factors that might cause such differences include, but are not limited to:

● market, economic, operational, liquidity, credit, and interest rate risks associated with our business;

● changes in market rates and prices may adversely impact the value of securities, loans, deposits and other financial instruments and the interest rate sensitivity of our balance sheet;

● our liquidity requirements could be adversely affected by changes in our assets and liabilities;

● the effect of legislative or regulatory developments, including changes in laws concerning taxes, banking, securities, insurance and other aspects of the financial services industry;

● competitive factors among financial services organizations, including product and pricing pressures and our ability to attract, develop and retain qualified banking professionals;

● the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board (the “FASB”), the Securities and Exchange Commission (the “SEC”), and other regulatory agencies;

● the effect of fiscal and governmental policies of the United States federal government; and

● the effect of any epidemic.

You should also consider carefully the risk factors discussed in Item 1A of Part I of this annual report, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements and could materially and adversely affect our business, operating results and financial condition. The risks discussed in this annual report are factors that, individually or in the aggregate, could cause our actual results to differ materially from expected and historical results. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider such disclosures to be a complete discussion of all potential risks or uncertainties.

The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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PART I

ITEM 1. BUSINESS

General

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

At December 31, 2023, we had total assets of $1.9 billion, net loans of $1.4 billion and deposits of $1.6 billion. Shareholders’ equity at December 31, 2023 was $161.9 million.

The Corporation maintains an Internet website 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.

Banking Products and Services

The Bank operates 26 banking offices, one customer service center and 33 Automated Teller Machines (“ATMs”) in Allegany County, Frederick County, Garrett County, and Washington County in Maryland, and in Mineral County, Berkeley County, Monongalia County and Harrison County in West Virginia. The Bank is an independent community bank providing a complete range of retail and commercial banking services to businesses and individuals in its market areas. Services offered are essentially the same as those offered by the regional institutions that compete with the Bank and include checking, savings, money market deposit accounts, and certificates of deposit, business loans, personal loans, mortgage loans, lines of credit, and consumer-oriented retirement accounts including individual retirement accounts (“IRAs”) and employee benefit accounts. In addition, the Bank provides full brokerage services through a networking arrangement with Cetera Investment Services, LLC., a full-service broker-dealer. The Bank also provides safe deposit and night depository facilities, insurance products and trust services. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”).

Lending Activities

Our lending activities are conducted through the Bank. Since 2010, the Bank has not originated any new loans through the OakFirst Loan Centers and their sole activity is servicing existing loans.

The Bank’s commercial loans are primarily secured by real estate, commercial equipment, vehicles or other assets of the borrower. Repayment is often dependent on the successful business operations of the borrower and may be affected by adverse conditions in the local economy or real estate market. The financial condition and cash flow of commercial borrowers is therefore carefully analyzed during the loan approval process, and continues to be monitored throughout the duration of the loan by obtaining business financial statements, personal financial statements and income tax returns. The

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frequency of this ongoing analysis depends upon the size and complexity of the credit and collateral that secures the loan. It is also the Bank’s general policy to obtain personal guarantees from the principals of the commercial loan borrowers.

Commercial real estate (“CRE”) loans are primarily those secured by land for residential and commercial development, agricultural purpose properties, service industry buildings such as restaurants and motels, retail buildings and general purpose business space. The Bank attempts to mitigate the risks associated with these loans through low loan to value ratio standards, thorough financial analyses, and management’s knowledge of the local economy in which the Bank lends.

The risk of loss associated with CRE construction lending is controlled through conservative underwriting procedures such as loan to value ratios of 80% or less, obtaining additional collateral when prudent, analysis of cash flows, and closely monitoring construction projects to control disbursement of funds on loans.

The Bank’s residential mortgage portfolio is distributed between variable and fixed rate loans. Some loans are booked at fixed rates to meet the Bank’s requirements under the federal Community Reinvestment Act (the “CRA”) or to complement our asset liability mix. Other fixed rate residential mortgage loans are originated in a brokering capacity on behalf of other financial institutions, for which the Bank receives a fee. As with any consumer loan, repayment is dependent on the borrower’s continuing financial stability, which can be adversely impacted by factors such as job loss, divorce, illness, or personal bankruptcy. Residential mortgage loans exceeding an internal loan-to-value ratio require private mortgage insurance. Title insurance protecting the Bank’s lien priority, as well as fire and casualty insurance, is also required.  During 2022, residential mortgage loans at higher rates were booked as in-house portfolio loans.  During the latter half of 2023, the Bank made the strategic decision to shift the lending of residential mortgage loans to the secondary market.

Home equity lines of credit, included within the residential mortgage portfolio, are secured by the borrower’s home and can be drawn on at the discretion of the borrower. These lines of credit are at variable interest rates.

The Bank also provides residential real estate construction loans to builders and individuals for single family dwellings. Residential construction loans are usually granted based upon “as completed” appraisals and are secured by the property under construction. Site inspections are performed to determine pre-specified stages of completion before loan proceeds are disbursed. These loans typically have maturities of six to twelve months and may have a fixed or variable rate. Permanent financing for individuals offered by the Bank includes fixed and variable rate loans with five, seven or ten-year adjustable rate mortgages.

A variety of other consumer loans are also offered to customers, including indirect and direct auto loans, student loans, and other secured and unsecured lines of credit and term loans.

An allowance for credit losses (“ACL”) is maintained to provide for probable losses from our lending activities. A complete discussion of the factors considered in determination of the ACL is included in Item 7 of Part II of this report.

Deposit Activities

The Bank offers a full array of deposit products including checking, savings and money market accounts, regular and IRA certificates of deposit, Christmas Savings accounts, College Savings accounts, and Health Savings accounts. The Bank also offers the Certificate of Deposit Account Registry Service^®, or CDARS^®, program to municipalities, businesses, and consumers through which the Bank provides access to multi-million-dollar certificates of deposit and the IntraFi Cash Service^®, or ICS^®, program to municipalities, businesses, and consumers through which the Bank provides access to multi-million-dollar savings and demand deposits. Both programs are FDIC-insured. In addition, we offer our commercial customers packages which include Treasury Management, Cash Sweep and various checking opportunities.

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Information about our income from and assets related to our banking business may be found in the Consolidated Statements of Financial Condition and the Consolidated Statements of Income and the related notes thereto included in Item 8 of Part II of this annual report.

Wealth Management

The Bank’s Trust Department offers a full range of trust services, including personal trust, investment agency accounts, charitable trusts, retirement accounts including IRA roll-overs, 401(k) accounts and defined benefit plans, estate administration and estate planning.

At December 31, 2023 and 2022, the total market value of assets under the supervision of the Bank’s Trust Department was approximately $1.5 billion and $1.0 billion, respectively. Trust Department revenues for these years may be found in the Consolidated Statements of Income under the heading “Other operating income”, which is contained in Item 8 of Part II of this annual report.

COMPETITION

The banking business, in all of its phases, is highly competitive. Within our market areas, we compete with commercial banks, (including local banks and branches or affiliates of other larger banks), savings and loan associations and credit unions for loans and deposits, with consumer finance companies for loans, and with other financial institutions for various types of products and services, including trust services. There is also competition for commercial and retail banking business from banks and financial institutions located outside our market areas and on the internet.

The primary factors in competing for deposits are interest rates, personalized services, the quality and range of financial services, convenience of office locations and office hours. The primary factors in competing for loans are interest rates, loan origination fees, the quality and range of lending services and personalized services.

To compete with other financial services providers, we rely principally upon local promotional activities, personal relationships established by officers, directors and employees with customers, and specialized services tailored to meet customers’ needs. In those instances in which we are unable to accommodate customers’ needs, we attempt to arrange for those services to be provided by other financial services providers with which we have a relationship.

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The following tables set forth deposit data for the Maryland and West Virginia Counties in which the Bank maintains offices as of June 30, 2023, the most recent date for which comparative information is available.

	Offices	Deposits		Market
	(in Market)	(in thousands)		Share
Allegany County, Maryland:
Manufacturers & Traders Trust Company	5	$	251,493	31.82%
First United Bank & Trust	3		220,832	27.94%
Truist Bank	3		210,264	26.60%
Dollar Bank, Federal Savings Bank	2		75,600	9.56%
Somerset Trust Company	2		32,295	4.08%
Source: FDIC Deposit Market Share Report
Frederick County, Maryland:
PNC Bank NA	13	$	1,736,987	26.42%
Truist Bank	10		1,179,142	17.93%
Bank Of America NA	4		796,096	12.11%
Manufacturers & Traders Trust Company	6		520,131	7.91%
Sandy Spring Bank	3		462,455	7.03%
Woodsboro Bank	5		382,066	5.81%
Capital One, NA	2		373,274	5.68%
Middletown Valley Bank	4		346,755	5.27%
ACNB Bank	4		321,095	4.88%
First United Bank & Trust	4		205,475	3.13%
Wells Fargo Bank NA	1		163,221	2.48%
Fulton Bank National Association	1		39,282	0.60%
WesBanco Bank, Inc.	1		38,762	0.59%
Presidential Bank, FSB	1		6,755	0.10%
Woodforest National Bank	1		3,292	0.06%
Source: FDIC Deposit Market Share Report
Garrett County, Maryland:
First United Bank & Trust	5	$	617,916	68.06%
Manufacturers & Traders Trust Company	2		118,849	13.09%
Clear Mountain Bank	1		73,259	8.07%
Truist Bank	1		67,228	7.40%
Somerset Trust Company	1		23,815	2.62%
Miners & Merchants Bank	1		6,876	0.76%
Source: FDIC Deposit Market Share Report
Washington County, Maryland:
Truist Bank	5	$	710,137	21.70%
Fulton Bank National Association	6		622,767	19.03%
Manufacturers & Traders Trust Company	9		589,355	18.01%
Middletown Valley Bank	3		475,267	14.52%
PNC Bank NA	3		344,013	10.51%
First United Bank & Trust	4		151,841	4.64%
CNB Bank, Inc.	3		139,552	4.26%
United Bank	2		127,026	3.88%
Orrstown Bank	1		49,463	1.51%
Bank of Charles Town	1		33,444	1.02%
Ameriserv Financial Bank	1		17,218	0.53%
Jefferson Security Bank	1		6,442	0.20%
Farmers and Merchants Trust Company of Chambersburg	1		6,153	0.19%
Source: FDIC Deposit Market Share Report

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Berkeley County, West Virginia:
United Bank	4	$	494,548	26.97%
Truist Bank	3		380,686	20.76%
City National Bank of West Virginia	4		235,097	12.82%
Summit Community Bank, Inc.	3		181,210	9.88%
First United Bank & Trust	3		151,393	8.26%
Jefferson Security Bank	2		143,803	7.84%
CNB Bank, Inc.	3		130,447	7.11%
Bank of Charles Town	2		111,907	6.10%
Woodforest National Bank	1		4,374	0.26%
Source: FDIC Deposit Market Share Report
Harrison County, West Virginia:
Truist Bank	3	$	563,939	26.60%
MVB Bank, Inc.	2		345,424	16.29%
The Huntington National Bank	3		315,065	14.86%
WesBanco Bank, Inc.	5		305,449	14.41%
JP Morgan Chase Bank, NA	1		253,060	11.94%
Harrison County Bank	4		140,313	6.62%
City National Bank of West Virginia	2		52,885	2.49%
Clear Mountain Bank	1		30,707	1.45%
BC Bank, Inc.	1		27,055	1.28%
West Union Bank	1		24,796	1.17%
Summit Community Bank	1		21,568	1.02%
Peoples Bank	1		17,090	0.81%
Freedom Bank, Inc	1		16,681	0.79%
First United Bank & Trust	1		6,235	0.27%
Source: FDIC Deposit Market Share Report
Mineral County, West Virginia:
First United Bank & Trust	2	$	118,018	36.64%
Manufacturers & Traders Trust Company	2		78,816	24.47%
Truist Bank	1		67,279	20.89%
Grant County Bank	1		39,482	12.26%
FNB Bank, Inc.	1		18,470	5.74%
Source: FDIC Deposit Market Share Report
Monongalia County, West Virginia:
MVB Bank, Inc.	2	$	1,269,013	29.70%
United Bank	6		1,038,394	24.30%
The Huntington National Bank	6		635,131	14.87%
Clear Mountain Bank	3		352,898	8.26%
Truist Bank	3		330,870	7.74%
WesBanco Bank, Inc.	3		195,767	4.58%
PNC Bank NA	2		191,859	4.49%
First United Bank & Trust	4		122,948	2.88%
Citizens Bank of Morgantown, Inc.	1		41,348	0.97%
Summit Community Bank, Inc.	1		39,412	0.92%
First Exchange Bank	2		35,999	0.84%
JP Morgan Chase Bank, NA	1		15,898	0.37%
City National Bank of West Virginia	1		2,979	0.08%
Source: FDIC Deposit Market Share Report

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For further information about competition in our market areas, see the Risk Factor entitled “We operate in a competitive environment, and our inability to effectively compete could adversely and materially impact our financial condition and results of operations” in Item 1A of Part I of this annual report.

SUPERVISION AND REGULATION

The following is a summary of the material regulations and policies applicable to the Corporation and its subsidiaries and is not intended to be a comprehensive discussion.  Changes in applicable laws and regulations may have a material effect on our business.

General

The Corporation is registered with the Federal Reserve as a financial holding company under the BHC Act and, as such, is subject to the supervision, examination and reporting requirements of the BHC Act and the regulations of the Federal Reserve.  As a publicly-traded company whose common stock, par value $0.01 per share (the “Common Stock”), is registered under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and listed on The NASDAQ Global Select Market, the Corporation is also subject to regulation and supervision by the SEC and The NASDAQ Stock Market, LLC (“NASDAQ”).

The Bank is a Maryland trust company subject to the banking laws of Maryland and to regulation by the Maryland Department of Labor’s Office of Financial Regulation (the “Maryland OFR”), who is required by statute to make at least one examination in each calendar year (or at 18-month intervals if the Maryland OFR determines that an examination is unnecessary in a particular calendar year).  The Bank also has offices in West Virginia, and the operations of these offices are subject to various West Virginia laws.  As a member of the FDIC, the Bank is also subject to certain provisions of federal laws and regulations regarding deposit insurance and activities of insured state-chartered banks, including those that require examination by the FDIC.  In addition to the foregoing, there are a myriad of other federal and state laws and regulations that affect, or govern the business of banking, including consumer lending, deposit-taking, and trust operations.

All non-bank subsidiaries of the Corporation are subject to examination by the FRB, and, as affiliates of the Bank, are subject to examination by the FDIC and the Maryland OFR. In addition, OakFirst Loan Center, Inc. is subject to licensing and regulation by the West Virginia Division of Banking, and OakFirst Loan Center, LLC is subject to licensing and regulation by the Maryland OFR.  

Regulation of Bank Holding Companies

The Corporation and its affiliates are subject to the provisions of Section 23A and Section 23B of the Federal Reserve Act.  Section 23A limits the amount of loans or extensions of credit to, and investments in, the Corporation and its non-bank affiliates by the Bank.  Section 23B requires that transactions between the Bank and the Corporation and its non-bank affiliates be on terms and under circumstances that are substantially the same as with non-affiliates.

Under FRB policy, the Corporation is expected to act as a source of strength to the Bank, and the FRB may charge the Corporation with engaging in unsafe and unsound practices for failure to commit resources to a subsidiary bank when required.  This support may be required at times when the bank holding company may not have the resources to provide the support.  Under the prompt corrective action provisions, if a controlled bank is undercapitalized, then the regulators could require the bank holding company to guarantee the bank’s capital restoration plan.  In addition, if the FRB believes that a bank holding company’s activities, assets or affiliates represent a significant risk to the financial safety, soundness or stability of a controlled bank, then the FRB could require the bank holding company to terminate the activities, liquidate the assets or divest the affiliates. The regulators may require these and other actions in support of controlled banks even if such actions are not in the best interests of the bank holding company or its stockholders.  Because the Corporation is a bank holding company, it is viewed as a source of financial and managerial strength for any controlled depository institutions, like the Bank.

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In addition, under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”), depository institutions insured by the FDIC can be held liable for any losses incurred by, or reasonably anticipated to be incurred by, the FDIC in connection with (i) the default of a commonly controlled FDIC-insured depository institution or (ii) any assistance provided by the FDIC to a commonly controlled FDIC-insured depository institution in danger of default.  Accordingly, in the event that any insured subsidiary of the Corporation causes a loss to the FDIC, other insured subsidiaries of the Corporation could be required to compensate the FDIC by reimbursing it for the estimated amount of such loss.  Such cross guaranty liabilities generally are superior in priority to obligations of a financial institution to its shareholders and obligations to other affiliates.

Regulation of Financial Holding Companies

In 2021, the Corporation elected to become a financial holding company, which allows it to engage in certain activities, and own shares or control of certain entities, that are in addition to those permissible for an entity that is a bank holding company only.  The provisions of the BHC Act relating to financial holding companies and the regulations promulgated thereunder require the Bank to remain “well capitalized” and “well managed”.  The capital requirement is discussed below under the heading, “Prompt Corrective Action”.  The Bank will be considered to be well managed so long as it achieves a CAMEL composite rating of at least “2” as a result of its most recent examination and at least a “satisfactory” management rating (if such rating is given).  If the Bank were to fail to meet either of these requirements, then the Corporation would be required to enter into an agreement with the FRB that would address the remediation of the condition that led to the failure.  During the term of that agreement, which is typically 180 days but can be extended at the discretion of the FRB, the Corporation would be prohibited from commencing any additional activity or acquiring control or shares of any company that would otherwise be permissible for a financial holding company under Section 4(k) of the BHC Act.  If the Corporation were to fail to correct that condition by the expiration of the agreement’s term, then the FRB could order the Corporation to divest its ownership of the Bank or, alternatively, terminate all financial holding company activities.  For so long as the Corporation remains a financial holding company, the Bank must also maintain a Satisfactory or better rating under the Community Reinvestment Act (the “CRA”).  During any period that the Bank fails to satisfy this requirement, the Corporation is prohibited from commencing any additional activity or acquiring control or shares of any company that would otherwise be permissible for a financial holding company under Section 4(k) of the BHC Act.  The Bank currently satisfies all of the foregoing conditions.

Federal Banking Regulation

Federal banking regulators, such as the FRB and the FDIC, may prohibit the institutions over which they have supervisory authority from engaging in activities or investments that the agencies believe are unsafe or unsound banking practices.  Federal banking regulators have extensive enforcement authority over the institutions they regulate to prohibit or correct activities that violate law, regulation or a regulatory agreement or which are deemed to be unsafe or unsound practices.  Enforcement actions may include the appointment of a conservator or receiver, the issuance of a cease and desist order, the termination of deposit insurance, the imposition of civil money penalties on the institution, its directors, officers, employees and institution-affiliated parties, the issuance of directives to increase capital, the issuance of formal and informal agreements, the removal of or additions to restrictions on directors, officers, employees and institution-affiliated parties, and the enforcement of any such mechanisms through restraining orders or other court actions.

The Bank is subject to certain restrictions on extensions of credit to executive officers, directors, and principal shareholders or any related interest of such persons, which generally require that such credit extensions be made on substantially the same terms as those available to persons who are not related to the Bank and not involve more than the normal risk of repayment.  Other laws tie the maximum amount that may be loaned to any one customer and its related interests to capital levels.

As part of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), each federal banking regulator adopted non-capital safety and soundness standards for institutions under its authority.  These standards include internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, and compensation, fees and benefits.  An institution that fails to meet those standards may be

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required by the agency to develop a plan acceptable to meet the standards.  Failure to submit or implement such a plan may subject the institution to regulatory sanctions.  We believe that the Bank meets substantially all standards that have been adopted.  FDICIA also imposes capital standards on insured depository institutions.

The CRA requires the FDIC, in connection with its examination of financial institutions within its jurisdiction, to evaluate the record of those financial institutions in meeting the credit needs of their communities, including low and moderate income neighborhoods, consistent with principles of safe and sound banking practices.  These factors are also considered by all regulatory agencies in evaluating mergers, acquisitions and applications to open a branch or facility.  As of the date of its most recent examination report, the Bank had a CRA rating of “Satisfactory”.

The Bank is also subject to a variety of other laws and regulations with respect to the operation of its business, including, but not limited to, the TILA/RESPA Integrated Disclosure rule (“TRID”), Truth in Lending Act, the Real Estate Settlement Procedures Act, the Truth in Savings Act, the Equal Credit Opportunity Act, the Electronic Funds Transfer Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, Expedited Funds Availability (Regulation CC), Reserve Requirements (Regulation D), Privacy of Consumer Information (Regulation P), Margin Stock Loans (Regulation U), the Right To Financial Privacy Act, the Flood Disaster Protection Act, the Homeowners Protection Act, the Servicemembers Civil Relief Act, the Telephone Consumer Protection Act, the CAN-SPAM Act, the Children’s Online Privacy Protection Act, Bank Secrecy Act/Anti-Money Laundering (“BSA/AML”) and Office of Foreign Assets Control (“OFAC”).

Capital Requirements

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 below under the heading “Liquidity Management”.  As of December 31, 2023, the Bank had $140.0 million available through unsecured lines of credit with correspondent banks, $12.2 million available through a secured line of credit with the Federal Reserve Discount Window, $69.5 million available through the FFB’s Bank Term Funding Program (“BTFP”), and approximately $145.4 million available through the Federal Home Loan Bank of Atlanta (“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 and the Corporation are 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.   

Regulators may require higher capital ratios when warranted by the particular circumstances or risk profile of a given banking organization.  In the current regulatory environment, banking organizations must stay well-capitalized in order to receive favorable regulatory treatment on acquisition and other expansion activities and favorable risk-based deposit insurance assessments.  Our capital policy establishes guidelines meeting these regulatory requirements and takes into consideration current or anticipated risks as well as potential future growth opportunities.

In July 2019, the federal banking agencies adopted a final rule that simplifies compliance with certain aspects of the capital rules.  A majority of the simplifications apply solely to banking organizations that are not subject to the advanced approaches capital rule.  The rule simplified the application of regulatory capital treatment for mortgage servicing assets, certain deferred tax assets arising from temporary differences, investments in the capital of unconsolidated financial institutions, and capital issued by a consolidated subsidiary of a banking organization and held by third parties (minority interest).  In addition, the rule revised the treatment of certain acquisition, development, or construction exposures.  

As of December 31, 2023, we were in compliance with the applicable requirements.

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Additional information about our capital ratios is contained in “Consolidated Balance Sheet Review” section of Item 7 of Part II of this annual report under the heading “Capital Resources”.  

Prompt Corrective Action

The Federal Deposit Insurance Act (“FDI Act”) requires, among other things, the federal banking agencies to take “prompt corrective action” in respect of depository institutions that do not meet minimum capital requirements. The FDI Act includes the following five capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its capital levels compare with various relevant capital measures and certain other factors, as established by regulation. The relevant capital measures are the total capital ratio, the Tier 1 capital ratio and the leverage ratio.

A bank will be (i) “well capitalized” if the institution has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, and a leverage ratio of 5.0% or greater, and is not subject to any order or written directive by any such regulatory authority to meet and maintain a specific capital level for any capital measure, (ii) “adequately capitalized” if the institution has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 4.0% or greater, and a leverage ratio of 4.0% or greater and is not “well capitalized”, (iii) “undercapitalized” if the institution has a total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital ratio of less than 4.0% or a leverage ratio of less than 4.0%, (iv) “significantly undercapitalized” if the institution has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 3.0% or a leverage ratio of less than 3.0%, and (v) “critically undercapitalized” if the institution’s tangible equity is equal to or less than 2.0% of average quarterly tangible assets. An institution may be downgraded to, or deemed to be in, a capital category that is lower than indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters. A bank’s capital category is determined solely for the purpose of applying prompt corrective action regulations, and the capital category may not constitute an accurate representation of the bank’s overall financial condition or prospects for other purposes.

Following the 2010 enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), the federal banking regulators implemented the Basel III regulatory framework on bank capital adequacy, stress testing, and market liquidity risk (the “Basel III Capital Rules”).  The Basel III Capital Rules revised the prompt corrective action requirements by (i) introducing the Common Equity Tier 1 (“CET1”) ratio requirement at each level (other than critically undercapitalized), with the required CET1 ratio being 6.5% for well-capitalized status; (ii) increasing the minimum Tier 1 capital ratio requirement for each category (other than critically undercapitalized), with the minimum Tier 1 capital ratio for well-capitalized status being 8%; and (iii) eliminating the provision that permitted a bank with a composite supervisory rating of 1 but a leverage ratio of at least 3% to be deemed adequately capitalized.  

The FDI Act generally prohibits a depository institution from making any capital distributions (including payment of a dividend) or paying any management fee to its parent holding company if the depository institution would thereafter be “undercapitalized.” “Undercapitalized” institutions are subject to growth limitations and are required to submit a capital restoration plan. The agencies may not accept such a plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution’s capital. In addition, for a capital restoration plan to be acceptable, the depository institution’s parent holding company must guarantee that the institution will comply with such capital restoration plan. The bank holding company must also provide appropriate assurances of performance. The aggregate liability of the parent holding company is limited to the lesser of (i) an amount equal to 5.0% of the depository institution’s total assets at the time it became undercapitalized and (ii) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution as of the time it fails to comply with the plan. If a depository institution fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.”  Significantly undercapitalized” depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a receiver or conservator.

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The appropriate federal banking agency may, under certain circumstances, reclassify a well-capitalized insured depository institution as adequately capitalized. The FDI Act provides that an institution may be reclassified if the appropriate federal banking agency determines (after notice and opportunity for hearing) that the institution is in an unsafe or unsound condition or deems the institution to be engaging in an unsafe or unsound practice.

The appropriate agency is also permitted to require an adequately capitalized or undercapitalized institution to comply with the supervisory provisions as if the institution were in the next lower category (but not treat a significantly undercapitalized institution as critically undercapitalized) based on supervisory information other than the capital levels of the institution.

As of December 31, 2023, the Bank was “well capitalized” based on the aforementioned ratios.

Liquidity Requirements

Historically, the regulation and monitoring of bank liquidity has been addressed as a supervisory matter, without required formulaic measures. The Basel III Capital Rules require banks to measure their liquidity against specific liquidity tests that, although similar in some respects to liquidity measures historically applied by banks and regulators for management and supervisory purposes, going forward would be required by regulation. One test, referred to as the liquidity coverage ratio, is designed to ensure that the banking entity maintains an adequate level of unencumbered high-quality liquid assets equal to the entity’s expected net cash outflow for a 30-day time horizon (or, if greater, 25% of its expected total cash outflow) under an acute liquidity stress scenario. The other test, referred to as the net stable funding ratio, is designed to promote more medium- and long-term funding of the assets and activities of banking entities over a one-year time horizon. These requirements will incent banking entities to increase their holdings of securities issued by the U.S. Department of the Treasury (the “Treasury”) and other sovereign debt as a component of assets and increase the use of long-term debt as a funding source.  

Deposit Insurance

The Bank is a member of the FDIC and pays an insurance premium to the FDIC based upon its assessable deposits on a quarterly basis.  Deposits are insured up to applicable limits by the FDIC and such insurance is backed by the full faith and credit of the United States Government.

The deposit insurance limit set by law is currently $250,000.  The coverage limit is per depositor, per insured depository institution for each account ownership category.  

The Federal Deposit Insurance Reform Act of 2005, which created the DIF, gave the FDIC greater latitude in setting the assessment rates for insured depository institutions which could be used to impose minimum assessments.  The FDIC has the flexibility to adopt actual rates that are higher or lower than the total base assessment rates adopted without notice and comment, if certain conditions are met.  

In October 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rate schedules uniformly by two basis points beginning in the first quarterly assessment period of 2023.   The increased assessment was expected to improve the likelihood that the DIF reserve ratio would reach the statutory minimum of 1.35% by the statutory deadline prescribed under the FDIC’s amended restoration plan.

The FDIC is authorized to conduct examinations of and require reporting by FDIC-insured institutions.  It is also authorized to terminate a depository bank’s deposit insurance upon a finding by the FDIC that the bank’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order or condition enacted or imposed by the bank’s regulatory agency.  The termination of deposit insurance for our bank subsidiary would have a material adverse effect on our earnings, operations and financial condition.

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Bank Secrecy Act/Anti-Money Laundering

The Bank Secrecy Act (“BSA”), which is intended to require financial institutions to develop policies, procedures, and practices to prevent and deter money laundering, mandates that every national bank have a written, board-approved program that is reasonably designed to assure and monitor compliance with the BSA.

The program must, at a minimum: (i) provide for a system of internal controls to assure ongoing compliance; (ii) provide for independent testing for compliance; (iii) designate an individual responsible for coordinating and monitoring day-to-day compliance; and (iv) provide training for appropriate personnel.  In addition, state-chartered banks are required to adopt a customer identification program as part of its BSA compliance program.  State-chartered banks are also required to file Suspicious Activity Reports when they detect certain known or suspected violations of federal law or suspicious transactions related to a money laundering activity or a violation of the BSA.

In addition to complying with the BSA, the Bank is subject to the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA Patriot Act”). The USA Patriot Act is designed to deny terrorists and criminals the ability to obtain access to the United States’ financial system and has significant implications for depository institutions, brokers, dealers, and other businesses involved in the transfer of money.   The USA Patriot Act mandates that financial service companies implement additional policies and procedures and take heightened measures designed to address any or all of the following matters: customer identification programs, money laundering, terrorist financing, identifying and reporting suspicious activities and currency transactions, currency crimes, and cooperation between financial institutions and law enforcement authorities.

Dodd-Frank Act

The Dodd-Frank Act was enacted in July 2010 and significantly restructured the financial regulatory regime in the United States. Although the Dodd-Frank Act’s provisions that have received the most public attention generally have been those applying to or more likely to affect larger institutions such as banks and bank holding companies with total consolidated assets of $50 billion or more, it contains numerous other provisions that affect all financial institutions, including the Bank.  The Dodd-Frank Act established the Consumer Financial Protection Bureau (the “CFPB”), discussed below, and contains a wide variety of provisions affecting the regulation of depository institutions, including fair lending, fair debt collection practices, mortgage loan origination and servicing obligations, bankruptcy, military service member protections, use of credit reports, privacy matters, and disclosure of credit terms and correction of billing errors.  Local, state and national regulatory and enforcement agencies continue efforts to address perceived problems within the mortgage lending and credit card industries through broad or targeted legislative or regulatory initiatives aimed at lenders’ operations in consumer lending markets.  There continues to be a significant amount of legislative and regulatory activity, nationally, locally and at the state level, designed to limit certain lending practices while mandating certain servicing procedures.  Federal bankruptcy and state debtor relief and collection laws, as well as the Servicemembers Civil Relief Act affect the ability of banks, including the Bank, to collect outstanding balances.    

Moreover, the Dodd-Frank Act permits states to adopt stricter consumer protection laws and states’ attorneys general may enforce consumer protection rules issued by the CFPB.  U.S. financial regulatory agencies have increasingly used a general consumer protection statute to address unethical or otherwise bad business practices that may not necessarily fall directly under the purview of a specific banking or consumer finance law.  Prior to the Dodd-Frank Act, there was little formal guidance to provide insight to the parameters for compliance with the “unfair or deceptive acts or practices” (“UDAP”) law.  However, the UDAP provisions have been expanded under the Dodd-Frank Act to apply to “unfair, deceptive or abusive acts or practices”, which has been delegated to the CFPB for supervision.

The Dodd-Frank Act has increased, and will likely continue to increase, our regulatory compliance burdens and costs and may restrict the financial products and services that we offer to our customers in the future.  

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Mortgage Lending and Servicing

The Bank’s mortgage lending and servicing activities are subject to various laws and regulations that are enforced by the federal banking regulators and the CFPB, such as the Truth in Lending Act, the Real Estate Settlement Procedures Act, and various rules adopted thereunder, including those relating to consumer disclosures, appraisal requirements, mortgage originator compensation, prohibitions on mandatory arbitration provisions under certain circumstances, and the obligation to credit payments and provide payoff statements within certain time periods and provide certain notices prior to interest rate and payment adjustments.

The Bank is required to make a reasonable and good faith determination based on verified and documented information that a consumer applying for a mortgage loan has a reasonable ability to repay the loan according to its terms.  Qualified mortgages that are not “higher-priced” are afforded a safe harbor presumption of compliance with the ability to repay rules, while qualified mortgages that are “higher-priced” garner a rebuttable presumption of compliance with the ability to repay rules.  In general, a “qualified mortgage” is a mortgage loan without negative amortization, interest-only payments, balloon payments, or a term exceeding 30 years, where the lender determines that the borrower has the ability to repay, and where the borrower’s points and fees do not exceed 3% of the total loan amount.  “Higher-priced” mortgages must have escrow accounts for taxes and insurance and similar recurring expenses.

Consumer Lending – Military Lending Act

The Military Lending Act (the “MLA”), which was initially implemented in 2007, was amended and its coverage significantly expanded in 2015.  The Department of Defense (the “DOD”) issued a final rule under the MLA that took effect on October 15, 2015, but financial institutions were not required to take action until October 3, 2016.  The types of credit covered under the MLA were expanded to include virtually all consumer loan and credit card products (except for loans secured by residential real property and certain purchase-money motor vehicle/personal property secured transactions).  Lenders must now provide specific written and oral disclosures concerning the protections of the MLA to active duty members of the military and dependents of active duty members of the military (“covered borrowers”).  The rule imposes a 36% “Military Annual Percentage Rate” cap that includes costs associated with credit insurance premiums, fees for ancillary products, finance charges associated with the transactions, and application and participation charges.  In addition, loan terms cannot include (i) a mandatory arbitration provision, (ii) a waiver of consumer protection laws, (iii) mandatory allotments from military benefits, or (iv) a prepayment penalty.  The revised rule also prohibits “roll-over” or refinances of the same loan unless the new loan provides more favorable terms for the covered borrower.  Lenders may verify covered borrower status using a DOD database or information provided by credit bureaus.  We believe that we are in compliance with the revised rule.  

Federal Securities Laws and NASDAQ Rules

The Common Stock is registered with the SEC under Section 12(b) of the Exchange and shares of the Common Stock are listed on the NASDAQ Global Select Market.  The Corporation is subject to information reporting requirements, proxy solicitation requirements, insider trading restrictions and other requirements of the Exchange Act, including the requirements imposed under the federal Sarbanes-Oxley Act of 2002, and rules adopted by NASDAQ.  Among other things, loans to and other transactions with insiders are subject to restrictions and heightened disclosure, directors and certain committees of the Board must satisfy certain independence requirements, the Corporation must comply with certain enhanced corporate governance requirements, and various issuances of securities by the Corporation require shareholder approval.

Governmental Monetary and Credit Policies and Economic Controls

The earnings and growth of the banking industry and ultimately of the Bank are affected by the monetary and credit policies of governmental authorities, including the FRB.  An important function of the FRB is to regulate the national supply of bank credit in order to control recessionary and inflationary pressures. Among the instruments of monetary policy used by the FRB to implement these objectives are open market operations in U.S. Government securities, changes

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in the federal funds rate, changes in the discount rate of member bank borrowings, and changes in reserve requirements against member bank deposits.  These means are used in varying combinations to influence overall growth of bank loans, investments and deposits and may also affect interest rates charged on loans or paid on deposits.  The monetary policies of the FRB authorities have had a significant effect on the operating results of commercial banks in the past and are expected to continue to have such an effect in the future.  In view of changing conditions in the national economy and in the money markets, as well as the effect of actions by monetary and fiscal authorities, including the FRB, no prediction can be made as to possible future changes in interest rates, deposit levels, loan demand or their effect on our businesses and earnings.

EMPLOYEES

At December 31, 2023, we employed 338 individuals, of whom 304 were full-time employees.

ITEM 1A. RISK FACTORS

The significant risks and uncertainties related to us, our business and our securities of which we are aware are discussed below.  Investors and shareholders should carefully consider these risks and uncertainties before making investment decisions with respect to the Corporation’s securities.  Any of these factors could materially and adversely affect our business, financial condition, operating results and prospects and could negatively impact the market price of the Corporation’s securities.  If any of these risks materialize, the holders of the Corporation’s securities could lose all or part of their investments in the Corporation.  Additional risks and uncertainties that we do not yet know of, or that we currently think are immaterial, may also impair our business operations.  Investors and shareholders should also consider the other information contained in this annual report, including our financial statements and the related notes, before making investment decisions with respect to the Corporation’s securities.

Risks Relating to First United Corporation and its Affiliates

First United Corporation’s future success depends on the successful growth of its subsidiaries.

The Corporation’s primary business activity for the foreseeable future will be to act as the holding company of the Bank and its other direct and indirect subsidiaries.  Therefore, the Corporation’s future profitability will depend on the success and growth of these subsidiaries.

The Bank’s funding sources may prove insufficient to replace deposits and support our future growth.

The Bank relies on customer deposits, advances from the FHLB, lines of credit at other financial institutions and brokered funds to fund our operations.  Although the Bank has historically been able to replace maturing deposits and advances if desired, no assurance can be given that the Bank would be able to replace such funds in the future if our financial condition or the financial condition of the FHLB or market conditions were to change.  Our financial flexibility could be severely constrained and/or our cost of funds could increase if we are unable to maintain our access to funding or if financing necessary to accommodate future growth is not available at favorable interest rates.  If we are required to rely more heavily on more expensive funding sources to support future growth, then our revenues may not increase proportionately to cover our costs.  In that case, our profitability would be adversely affected.

We may need to raise capital in the future, and such capital may not be available when needed or at all.

We may need to raise capital in the future to provide it with sufficient capital resources and liquidity to meet our commitments and business needs including complying with new regulatory capital rules, particularly if our asset quality or earnings were to deteriorate significantly.  Our ability to raise capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control, and our financial condition.  Economic conditions and the loss of confidence in financial institutions may limit access to certain customary sources of capital, and increase our cost of raising capital.  No assurance can be given that such capital will be available on acceptable terms or

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at all.  Any occurrence that may limit our access to the capital markets, such as a decline in the confidence of depositors, investors or counterparties participating in the capital markets may adversely affect our capital costs and our ability to raise capital and, in turn, our liquidity. Moreover, if we need to raise capital in the future, we may have to do so when many other financial institutions are also seeking to raise capital and would have to compete with those institutions for investors.  An inability to raise additional capital on acceptable terms as and when needed could have a materially adverse effect on our business, financial condition and results of operations.

Our inability to generate liquidity in a timely manner may adversely impact our ability to satisfy obligations associated with our financing, our operations and other components of our business.

Timely access to liquidity is essential to our business, and being able to meet obligations as they come due and pay deposits when they are withdrawn is critical to ongoing operations.  If we are unable to meet our payment obligations on a daily basis, we may be subject to being placed into receivership, regardless of our capital levels.  Our primary sources of liquidity consist of cash and cash balances due from correspondent banks, excess reserves at the Federal Reserve, loan repayments, federal funds sold and other short-term investments, maturities and monetization of investment securities, cash provided by operating activities and new core deposits into the Bank.  Our ability to obtain or liquidate these primary sources of liquidity may be impacted by adverse economic conditions resulting from dynamic, complex, and other foreseen and unforeseen inter-related factors and events in the economic environment.  If we were to rely on sales proceeds from the sale of investment securities within our portfolio in order to satisfy our obligations, we may be adversely impacted by our ability to transact and settle such sales.  Sales of investment securities in an unrealized loss position would negatively affect our earnings and regulatory capital.  In addition, in order to monetize our held-to-maturity (“HTM”) securities, we expect to rely on pledging those securities for secured funding, and our liquidity may be impaired if we are unable to timely pledge those or any other securities due to lack of available funding, operational impediments or otherwise.  Our industry is susceptible to the negative impact of limited access to short-term and/or long-term sources of funds, which could result in a liquidity shortfall and/or impact our liquidity coverage ratio and could have an adverse effect on our operations, financial condition and earnings.  

Our inability to access sources of financing at terms that are favorable to us may result in an adverse effect on our business, financial condition, and results of operations.

Our liquidity could be adversely affected by any inability to access the debt or equity capital markets, liquidity or volatility in those capital markets, the decrease in value of eligible collateral or increased collateral requirements (including as a result of credit concerns for short-term borrowings), changes to our relationships with our funding providers based on real or perceived changes in our risk profile, prolonged federal government shutdowns or changes in regulations.  Additionally, our liquidity may be negatively impacted by the unwillingness or inability of the Federal Reserve to act as a lender of last resort.

Our ability  to raise additional financing depends on conditions in the capital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry, market conditions and governmental activities and on our financial condition and performance.   Accordingly, we may be unable to raise additional financing if needed or on acceptable terms.

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The value of real estate collateral may fluctuate significantly resulting in an under-collateralized loan portfolio.

The market value of real estate, particularly real estate held for investment, can fluctuate significantly in a short period of time as a result of market conditions in the geographic area in which the real estate is located.  If the value of the real estate serving as collateral for the Corporation’s loan portfolio were to decline materially, a significant part of the Corporation’s loan portfolio could become under-collateralized.  If the loans that are collateralized by real estate become troubled during a time when market conditions are declining or have declined, then, in the event of foreclosure, we may not be able to realize the amount of collateral that we anticipated at the time of originating the loan.  This could have a material adverse effect on the Corporation’s provision for credit losses and the Corporation’s operating results and financial condition.

The Corporation is subject to lending risk, and the impacts of interest rate changes could adversely impact the Corporation.

There are inherent risks associated with the Corporation’s lending activities.  These risks include, among other things, the impact of changes in interest rates and changes in the economic conditions in the markets where the Corporation operates.  Increases in interest rates and/or weakening economic conditions could adversely impact the ability of borrowers to repay outstanding loans or the value of the collateral securing these loans.  

A substantial portion of the Corporation’s loan portfolio is comprised of residential and commercial real estate loans.  The Corporation’s concentration of real estate loans may subject the Corporation to additional risk, as fluctuations in market value of collateral and difficulty monitoring income-producing property serving as a source of repayment and collateral.  Any of these or other risks relating to real estate loans could adversely affect the collection by the Corporation of the outstanding loan balances.

Interest rates and other economic conditions will impact our results of operations.

Our net income depends primarily upon our net interest income. Net interest income is the difference between interest income earned on loans, investments and other interest-earning assets and the interest expense incurred on deposits and borrowed funds. The level of net interest income is primarily a function of the average balance of our interest-earning assets, the average balance of our interest-bearing liabilities, and the spread between the yield on such assets and the cost of such liabilities. These factors are influenced by both the pricing and mix of our interest-earning assets and our interest-bearing liabilities which, in turn, are impacted by such external factors as the local economy, competition for loans and deposits, the monetary policy of the Federal Open Market Committee of the FRB, and market interest rates.

Different types of assets and liabilities may react differently, and at different times, to changes in market interest rates. We expect that we will periodically experience gaps in the interest rate sensitivities of our assets and liabilities. That means either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest-earning assets, or vice versa. When interest-bearing liabilities mature or re-price more quickly than interest-earning assets, an increase in market rates of interest could reduce our net interest income. Likewise, when interest-earning assets mature or re-price more quickly than interest-bearing liabilities, falling interest rates could reduce our net interest income. We are unable to predict changes in market interest rates, which are affected by many factors beyond our control, including inflation, deflation, recession, unemployment, money supply, domestic and international events and changes in the United States and other financial markets.

We also attempt to manage risk from changes in market interest rates, in part, by controlling the mix of interest rate sensitive assets and interest rate sensitive liabilities. However, interest rate risk management techniques are not exact. A rapid increase or decrease in interest rates could adversely affect our results of operations and financial performance.

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The majority of our business is concentrated in Maryland and West Virginia, much of which involves real estate lending, so a decline in the real estate and credit markets could materially and adversely impact our financial condition and results of operations.  

Most of the Bank’s loans are made to borrowers located in Western Maryland and Northeastern West Virginia, and many of these loans, including construction and land development loans, are secured by real estate.  Accordingly, a decline in local economic conditions would likely have an adverse impact on our financial condition and results of operations, and the impact on us would likely be greater than the impact felt by larger financial institutions whose loan portfolios are geographically diverse.  We cannot guarantee that any risk management practices we implement to address our geographic and loan concentrations will be effective to prevent losses relating to our loan portfolio.  

The Bank’s concentrations of commercial real estate loans could subject it to increased regulatory scrutiny and directives, which could force us to preserve or raise capital and/or limit future commercial lending activities.

The federal banking regulators believe that institutions that have particularly high concentrations of CRE loans within their lending portfolios face a heightened risk of financial difficulties in the event of adverse changes in the economy and CRE markets.  Accordingly, through published guidance, these regulators have directed institutions whose concentrations exceed certain percentages of capital to implement heightened risk management practices appropriate to their concentration risk.  The guidance provides that banking regulators may require such institutions to reduce their concentrations and/or maintain higher capital ratios than institutions with lower concentrations in CRE.  At December 31, 2023, our CRE concentrations were below the heightened risk management thresholds set forth in this guidance.  

The Bank may experience loan losses in excess of its allowance for credit losses, which would reduce our earnings.

The risk of credit losses on loans varies with, among other things, general economic conditions, the type of loans being made, the creditworthiness of the borrowers over the term of the loans and, in the case of collateralized loans, the value and marketability of the collateral for the loans.  Management of the Bank maintains an ACL based upon, among other things, historical experience, an evaluation of economic conditions and regular reviews of delinquencies and loan portfolio quality. Based upon such factors, management makes various assumptions and judgments about the ultimate collectability of the loan portfolio and provides the ACL based upon a percentage of the outstanding balances and for specific loans when their ultimate collectability is considered questionable.  If management’s assumptions and judgments prove to be incorrect and the ACL is inadequate to absorb future losses, or if the bank regulatory authorities require us to increase the ACL as a part of its examination process, our earnings and capital could be significantly and adversely affected.  Although management continually monitors our loan portfolio and makes determinations with respect to the ACL, future adjustments may be necessary if economic conditions differ substantially from the assumptions used or adverse developments arise with respect to our non-performing or performing loans.  Material additions to the ACL could result in a material decrease in our net income and capital; and could have a material adverse effect on our financial condition.

We depend on the accuracy and completeness of information about customers and counterparties, and inaccurate, incomplete or misleading information provided to us by these persons could cause us to suffer losses.

In deciding whether to extend credit or enter into other transactions, we rely on information furnished by or on behalf of customers and counterparties, including financial statements, credit reports and other financial information. We also rely on representations of those customers, counterparties or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports or other financial information could have a material adverse impact on our business, financial condition and results of operations.

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Our accounting estimates and risk management processes rely on analytical and forecasting models, the inadequacy of which could have a material adverse effect on our financial condition and/or results of operations.

The processes we use to estimate our ACL and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other market measures on our financial condition and results of operations, depends upon the use of analytical and forecasting models. These models reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances. Even if these assumptions are adequate, the models may prove to be inadequate or inaccurate because of other flaws in their design or their implementation, including flaws caused by failures in controls, data management, human error or from the reliance on technology. If the models we use for interest rate risk and asset-liability management are inadequate, we may incur increased or unexpected losses upon changes in market interest rates or other market measures. If the models we use for estimating our expected credit losses are inadequate, the ACL may not be sufficient to support future charge-offs. If the models we use to measure the fair value of financial instruments are inadequate, the fair value of such financial instruments may fluctuate unexpectedly or may not accurately reflect what we could realize upon sale or settlement of such financial instruments. Any such failure in our analytical or forecasting models could have a material adverse effect on our business, financial condition and results of operations.

The Bank’s lending activities subject the Bank to the risk of environmental liabilities.

A significant portion of the Bank’s loan portfolio is secured by real property.  During the ordinary course of business, the Bank may foreclose on and take title to properties securing certain loans.  In doing so, there is a risk that hazardous or toxic substances could be found on these properties.  If hazardous or toxic substances are found, the Bank may be liable for remediation costs, as well as for personal injury and property damage.  Environmental laws may require the Bank to incur substantial expenses and may materially reduce the affected property’s value or limit the Bank’s ability to use or sell the affected property.  In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase the Bank’s exposure to environmental liability.  Although the Bank has policies and procedures to perform an environmental review before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards.  The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our financial condition and results of operations.

Our investment securities are subject to market risk and credit risk that may have an adverse impact on our financial condition and results of operation.

At December 31, 2023, investment securities in our investment portfolio having a cost basis of $117.9 million and a market value of $97.2 million were classified as available-for-sale pursuant to FASB Accounting Standards Codification (“ASC”) Topic 320, Investments – Debt and Equity Securities, relating to accounting for investments.  Topic 320 requires that unrealized gains and losses in the estimated value of the available-for-sale portfolio be “marked to market” and reflected as a separate item in shareholders’ equity (net of tax) as accumulated other comprehensive loss.  There can be no assurance that future market performance of our investment portfolio will enable us to realize income from sales of securities.  Shareholders’ equity will continue to reflect the unrealized gains and losses (net of tax) of these investments.  Moreover, there can be no assurance that the market value of our investment portfolio will not decline, causing a corresponding decline in shareholders’ equity.

Several factors could affect the market value of our investment portfolio.  These include, but are not limited to, changes in interest rates or expectations of changes, the degree of volatility in the securities markets, inflation rates or expectations of inflation and the slope of the interest rate yield curve (the yield curve refers to the differences between shorter-term and longer-term interest rates; a positively sloped yield curve means shorter-term rates are lower than longer-term rates).  Also, the passage of time will affect the market values of our investment securities, in that the closer they are to maturing, the closer the market price should be to par value.  These and other factors may impact specific categories of the portfolio differently, and management cannot predict the effect these factors may have on any specific category.

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Our investment securities portfolio as a whole is exposed to credit risk associated with rating agency downgrades and defaults of the issuers of those securities.  We measure expected credit losses on our investment portfolio through our CECL estimate.  Increases to the provision for credit losses would have a negative impact on our results of operations and regulatory capital ratios.  Additionally, an insufficient CECL provision may result in additional losses that would have an adverse impact on our results of operations.  The investment portfolio’s performance, including the existence of unrealized and unrecognized losses in the portfolio, also may create reputational risk for us, particularly in conjunction with the conditions of the banking industry generally, that could result in deposit outflows or reduced access to funding, or negatively impact our ability to attract and retain prospective customers.

Impairment of goodwill and other intangible assets or deferred tax assets could require charges to earnings, which could result in a negative impact on our results of operations.

Under current accounting standards, goodwill and other intangible assets are subject to impairment tests on at least an annual basis or more frequently if an event occurs or circumstances change that reduce the fair value of a reporting unit below its carrying amount.  A decline in the price of the shares of Common Stock or occurrence of a triggering event following any of our quarterly earnings releases and prior to the filing of the periodic report for that period could, under certain circumstances, cause us to perform a goodwill impairment test and result in an impairment charge being recorded for that period which was not reflected in such earnings release.  In the event that we conclude that all or a portion of our goodwill and other intangible assets may be impaired, a non-cash charge for the amount of such impairment would be recorded to earnings.  Such a charge would have no impact on tangible capital.  At December 31, 2023, we had recorded goodwill and other intangible assets of $12.1 million, representing approximately 7.5% of shareholders’ equity.  

At December 31, 2023, our net deferred tax assets were valued at $11.1 million.  Included in that total is $2.8 million of state net operating loss carryforwards (“NOLs”) associated with separate company tax filings of the Corporation, which we do not expect to use and, thus, we have established a $2.8 million valuation allowance.  A deferred tax asset is reduced by a valuation allowance if, based on the weight of the evidence available, both negative and positive, including the recent trend of quarterly earnings, the Corporation determines that it is more likely than not that some portion or all of the total deferred tax asset will not be realized.  Moreover, our ability to utilize our net operating loss carryforwards to offset future taxable income may be significantly limited if we experience an “ownership change,” as determined under Section 382 of the Internal Revenue Code of 1986, as amended (“the Code”). If an ownership change were to occur, the limitations imposed by Section 382 of the Code could result in a portion of our net operating loss carryforwards expiring unused, thereby impairing their value. Section 382’s provisions are complex, and we cannot predict any circumstances surrounding the future ownership of the Common Stock.  Accordingly, we cannot provide any assurance that we will not experience an ownership change in the future.  

The impact of each of these impairment matters could have a material adverse effect on our business, results of operations, and financial condition.

Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our financial condition and results of operations.

Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships, and we routinely execute transactions with counterparties in the financial industry.   Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems.

Increases in bond interest rates have led to a significant decline in the fair value of investment securities.  Although the Treasury, the FDIC and the FRB have announced the BTFP  to provide up to $25 billion of loans to financial institutions secured by certain of such government-backed agency securities held by financial institutions to mititgate the risk of

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potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediate liquidity might exceed the capacity of such program.  The FRB announced in January 2024 that the BTFP will stop originating new loans on March 11, 2024, as scheduled.  The FRB also modified the terms of the program so that interest rate on reserve balances in effect on the day the loan is made.  In January 2024, prior to these announcements by the FRB, the Corporation borrowed $40.0 million through the BTFP at an interest rate of 4.87% and a maturity date in January 2025.

In addition to the risk that occurrence of such events could adversely impact our ability to engage in routine funding transactions, they could also lead to losses or defaults by us or by other institutions, either of which could have a material adverse effect on our business, results of operations and financial condition.

Increases in FDIC insurance premiums may have a material adverse effect on our results of operations.

In general, we are unable to control the amount of premiums that are required to be paid for FDIC insurance.  In October 2022, the FDIC finalized a rule to increase the assessment rate by two basis points beginning in the first quarter of 2023.  The increase in the assessment rate for banks is intended to increase the Deposit Insurance Fund (“DIF)” reserve ratio to 1.35%.  In early March 2023, the FDIC was appointed receiver for two banks, in each case due primarily to liquidity concerns at those institutions.  Promptly following these events, the federal banking regulators announced that the FDIC will use funds from the DIF to ensure that all depositors of the two failed institutions are made whole, at no cost to taxpayers.  We anticipate that the FDIC will impose special assessments on all banks to replenish the DIF.  As a result of these and/or other financial institution failures, we may be required to pay significantly higher premiums than the levels currently imposed, as well as additional special assessments or taxes, which could adversely affect earnings.  Any future increases or required repayments in FDIC insurance premiums may materially adversely affect our results of operations.

We operate in a competitive environment, and our inability to effectively compete could adversely and materially impact our financial condition and results of operations.

We operate in a competitive environment, competing for loans, deposits, and customers with commercial banks, savings associations and other financial entities.  Competition for deposits comes primarily from other commercial banks, savings associations, credit unions, money market and mutual funds and other investment alternatives.  Competition for loans comes primarily from other commercial banks, savings associations, mortgage banking firms, credit unions and other financial intermediaries.  Competition for other products, such as securities products, comes from other banks, securities and brokerage companies, and other non-bank financial service providers in our market area.  Many of these competitors are much larger in terms of total assets and capitalization, have greater access to capital markets, and/or offer a broader range of financial services than those that we offer.  In addition, banks with a larger capitalization and financial intermediaries not subject to bank regulatory restrictions have larger lending limits and are thereby able to serve the needs of larger customers.

In addition, changes to the banking laws over the last several years have facilitated interstate branching, merger and expanded activities by banks and holding companies.  For example, the federal Gramm-Leach-Bliley Act (the “GLB Act”) revised the BHC Act and repealed the affiliation provisions of the Glass-Steagall Act of 1933, which, taken together, limited the securities and other non-banking activities of any company that controls an FDIC insured financial institution.  As a result, the ability of financial institutions to branch across state lines and the ability of these institutions to engage in previously-prohibited activities are now accepted elements of competition in the banking industry.  These changes may bring us into competition with more and a wider array of institutions, which may reduce our ability to attract or retain customers.  Management cannot predict the extent to which we will face such additional competition or the degree to which such competition will impact our financial conditions or results of operations.

The banking industry is heavily regulated; significant regulatory changes could adversely affect our operations.

Our operations will be impacted by current and future legislation and by the policies established from time to time by various federal and state regulatory authorities.  The Corporation is subject to supervision by the FRB.  The Bank

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is subject to supervision and periodic examination by the Maryland OFR of Financial Regulation, the West Virginia Division of Banking, and the FDIC.  Banking regulations, designed primarily for the safety of depositors, may limit a financial institution’s growth and the return to its investors by restricting such activities as the payment of dividends, mergers with or acquisitions by other institutions, investments, loans and interest rates, interest rates paid on deposits, expansion of branch offices, and the offering of securities or trust services.  The Corporation and the Bank are also subject to capitalization guidelines established by federal law and could be subject to enforcement actions to the extent that either is found by regulatory examiners to be undercapitalized. It is not possible to predict what changes, if any, will be made to existing federal and state legislation and regulations or the effect that such changes may have on our future business and earnings prospects.  Management also cannot predict the nature or the extent of the effect on our business and earnings of future fiscal or monetary policies, economic controls, or new federal or state legislation.  Further, the cost of compliance with regulatory requirements may adversely affect our ability to operate profitably.

The Consumer Financial Protection Bureau may continue to reshape the consumer financial laws through rulemaking and enforcement of the prohibitions against unfair, deceptive and abusive business practices.  Compliance with any such change may impact our business operations.

The Consumer Financial Protection Bureau (“CFPB”) has broad rulemaking authority to administer and carry out the provisions of the Dodd-Frank Act with respect to financial institutions that offer covered financial products and services to consumers.  The CFPB has also been directed to adopt rules identifying practices or acts that are unfair, deceptive or abusive in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service.  The concept of what may be considered to be an “abusive” practice is fluid and can change based on politically-appointed leadership at the CFPB.  We have been required to dedicate significant personnel resources to address the compliance burdens imposed by the CFBP’s adoption of various rules, and the adoption of additional rules in the future would likely require us to dedicate even more resources.  

Compliance with ever-evolving federal and state laws relating to the handling of information about individuals involves significant expenditure and resources, and any failure by us or our vendors to comply may result in significant liability, negative publicity, and/or an erosion of trust, which could materially adversely affect our business, results of operations, and financial condition.

We are subject to a number of U.S. federal, state, local and foreign laws and regulations relating to consumer privacy and data protection. Under privacy protection provisions of the GLBA and its implementing regulations and guidance, we are limited in our ability to disclose certain non-public information about consumers to nonaffiliated third parties. The GLBA regulates, among other things, the use of certain information about individuals (“non-public personal information”) in the context of the provision of financial services, including by banks and other financial institutions. The GLBA includes both a “Privacy Rule”,  which imposes obligations on financial institutions relating to the use or disclosure of non-public personal information, and a “Safeguards Rule”, which imposes obligations on financial institutions and, indirectly, their service providers to implement and maintain physical, administrative and technological measures to protect the security of non-public personal financial information. Any failure to comply with the GLBA could result in substantial financial penalties and significant reputational harm.  Multiple states have recently enacted, or are expected to enact, stringent privacy laws, not all of which exempt financial institutions categorically. Many other states are currently reviewing or proposing the need for greater regulation of the collection, sharing, use and other processing of information related to individuals for marketing purposes or otherwise, and there remains increased interest at the federal level as well. Further, to comply with the varying state laws around data breaches, we must maintain adequate security measures, which require significant investments in resources and ongoing attention.  

Additionally, laws, regulations, and standards covering marketing, advertising, and other activities conducted by telephone, email, mobile devices, and the internet are or may become applicable to our business, such as the Telephone Consumer Protection Act, the CAN-SPAM Act, and similar state consumer protection and communication privacy laws.  We occasionally make telephone calls and/or send SMS text messages to customers. The actual or perceived improper calling of customer phones and/or sending of text messages may subject us to potential risks, including liabilities or claims relating to consumer protection laws such as the Telephone Consumer Protection Act. Numerous class-action suits under

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federal and state laws have been filed in recent years against companies who conduct telemarketing and/or SMS texting programs, with many resulting in multi-million-dollar settlements to the plaintiffs. Any future such litigation against us could be costly and time-consuming to defend. In particular, the Telephone Consumer Protection Act imposes significant restrictions on the ability to make telephone calls or send text messages to mobile telephone numbers without the prior consent of the person being contacted. Federal or state regulatory authorities or private litigants may claim that the notices and disclosures we provide, form of consents we obtain or our outreach practices are not adequate or violate applicable law. This may in the future result in civil claims against us. Claims that we have violated the Telephone Consumer Protection Act could be costly to litigate, whether or not they have merit, and could expose us to substantial statutory damages or costly settlements.

We also send marketing messages via email and are subject to the CAN-SPAM Act. The CAN-SPAM Act imposes certain obligations regarding the content of emails and providing opt-outs (with the corresponding requirement to honor such opt-outs promptly). While we strive to ensure that all of our marketing communications comply with the requirements set forth in the CAN-SPAM Act, any violations could result in the FTC seeking civil penalties against us.

Moreover, we are considered a “user” of consumer reports provided by consumer reporting agencies under the FCRA, as amended by the Fair and Accurate Credit Transactions Act.  FCRA regulates and protects consumer information collected by consumer reporting agencies and imposes specific obligations on “users” of consumer reports. Such obligations may include restricting the sharing of information contained in a consumer report, notifying consumers when such reports are used to make an adverse decision, and, in the context of completing employee background checks, providing a notice containing certain disclosures to the consumer and obtaining their consent.

Bank regulators and other regulations, including the Basel III Capital Rules, may require higher capital levels, impacting our ability to pay dividends or repurchase our stock.

The capital standards to which we are subject, including the standards created by the Basel III Capital Rules, may materially limit our ability to use our capital resources and/or could require us to raise additional capital by issuing additional shares of Common Stock or other equity securities.  In addition, we could experience increases in deposits and assets as a result of other depository institutions’ difficulties or failures, which would increase the capital that we are required to maintain to support such growth.  The issuance of additional equity securities to fund our capital needs could dilute existing stockholders.

A material weakness in our disclosure or internal controls could have an adverse effect on us.

The Corporation is required by the Sarbanes-Oxley Act of 2002 to establish and maintain disclosure controls and procedures and internal control over financial reporting.  These control systems are intended to provide reasonable assurance that material information relating to the Corporation is made known to our management and reported as required by the Exchange Act, to provide reasonable assurance regarding the reliability and preparation of our financial statements, and to provide reasonable assurance that fraud and other unauthorized uses of our assets are detected and prevented. We may not be able to maintain controls and procedures that are effective at the reasonable assurance level.  If that were to happen, our ability to provide timely and accurate information about the Corporation, including financial information, to investors could be compromised and our results of operations could be harmed. Moreover, if the Corporation or its independent registered public accounting firm were to identify a material weakness in any of those control systems, our reputation could be harmed and investors could lose confidence in us, which could cause the market price of the Corporation’s stock to decline and/or limit the trading market for the shares of the Common Stock.

We may not be able to keep pace with developments in technology.

We use various technologies in conducting our businesses, including telecommunication, data processing, computers, automation, internet-based banking, and debit cards.  The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. Our future success depends, in part, on our ability to address the needs of our customers by using technology to provide products and services

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that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology driven products and services or be successful in marketing these products and services to our customers. In addition, our implementation of certain new technologies, such as those related to artificial intelligence, automation and algorithms, in our business processes may have unintended consequences due to their limitations or our failure to use them effectively. In addition, cloud technologies are also critical to the operation of our systems, and our reliance on cloud technologies is growing. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse effect on our business, financial condition and results of operations.

Our operational or communications systems or infrastructure may fail or may be the subject of a breach or cyber-attack that, if successful, could adversely affect our business or disrupt business continuity.

Our business depends heavily on the use of computer systems, the Internet and other means of electronic communication and recordkeeping to process, record, and monitor client transactions and to communicate with clients and other institutions on a continuous basis.  As client, industry, public, and regulatory expectations regarding operational and information security have increased, our operational systems and infrastructure continue to be safeguarded and monitored for potential failures, disruptions, and breakdowns, whether as a result of events beyond our control or otherwise.

Our business, financial, accounting, data processing, or other operating systems and facilities may stop operating properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond our control. For example, there could be sudden increases in client transaction volume; electrical or telecommunications outages; natural disasters such as earthquakes, tornadoes, floods, and hurricanes; disease pandemics; events arising from local or larger scale political or social matters, including terrorist acts; occurrences of employee error, fraud, theft, or malfeasance; disruptions caused by technology implementation, including hardware deployment and software updates; and, as described below, cyber-attacks.

Although we have business continuity plans and other safeguards in place, our operations and communications may be adversely affected by significant and widespread disruption to our systems and infrastructure that support our businesses, clients, and teammates. While we continue to evolve and modify our business continuity plans, there can be no assurance in an escalating threat environment that they will be effective in avoiding disruption and business impacts. Our insurance may not be adequate to compensate us for all resulting losses, and the cost to obtain adequate coverage may increase for us or the industry.

Security risks for financial institutions such as ours have dramatically increased in recent years in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication, resources, and activities of hackers, terrorists, activists, industrial spies, insider bad actors, organized crime, and other external parties, including nation state actors. In addition, to access our products and services, clients may use devices and/or software that are beyond our control environment, which may provide additional avenues for attackers to gain access to confidential information. Although we have information security procedures and controls in place, our technologies, systems, networks, and clients' devices and software may become the target of cyber-attacks, information security breaches, business email compromise, or information theft that could result in the unauthorized release, gathering, monitoring, misuse, loss, change, or destruction of our or our clients' or teammates' confidential, proprietary, or other information (including personal identifying information of individuals), or otherwise disrupt our or our clients' or our third parties' business operations. U.S. financial institutions and financial service companies have reported breaches in the security of their websites or other systems, including attempts to shut down access to their networks and/or systems in an attempt to extract compensation from them to regain control. Financial institutions, including the Bank, have experienced distributed denial-of-service attacks, a sophisticated and targeted attack intended to disable or degrade internet service or to sabotage systems.

We and others in our industry are regularly the subject of attempts by attackers to gain unauthorized access to our networks, systems, and data, or to obtain, change, or destroy confidential data (including personal identifying information of individuals) through a variety of means, including computer viruses, malware, business email compromise, and

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phishing. These attacks may result in unauthorized individuals obtaining access to our confidential information or that of our clients or teammates, or otherwise accessing, compromising, damaging, or disrupting our systems or infrastructure.

We are continuously developing and enhancing our controls, processes, and practices designed to protect our systems, computers, software, data, and networks from attack, damage, or unauthorized access. This continued development and enhancement will require us to expend additional resources, including resources to investigate and remediate any information security vulnerabilities that may be detected. Despite our ongoing investments in security resources, talent, and business practices, we are unable to assure that any security measures will be effective.

If our systems and infrastructure were to be breached, compromised, damaged, or disrupted, or if we were to experience a loss of our confidential information or that of our clients or teammates, we could be subject to serious negative consequences, including disruption of our operations, damage to our reputation, a loss of trust in us on the part of our clients, vendors or other counterparties, client or teammate attrition, reimbursement or other costs, increased compliance costs, significant litigation exposure and legal liability, or regulatory fines, penalties or intervention. Any of these could materially and adversely affect our results of operations, our financial condition, and/or our share price.

A disruption, breach, or failure in the operational systems or infrastructure of our third party vendors or other service providers, including as a result of cyber-attacks, could adversely affect our business.

Third parties perform significant operational services on our behalf. These third parties with whom we do business or that facilitate our business activities, including exchanges, clearing houses, central clearing counterparties, financial intermediaries, or vendors that provide services or security solutions for our operations, could also be sources of operational and information security risk to us, including from breakdowns or failures of their own systems or capacity constraints. In particular, operating our business requires us to provide access to client, teammate, and other sensitive Company information to our contractors, consultants, and other third parties and authorized entities. Controls and oversight mechanisms are in place that are designed to limit access to this information and protect it from unauthorized disclosure, theft, and disruption. However, control systems and policies pertaining to system access are subject to errors in design, oversight failure, software failure, human error, intentional subversion, or other compromise resulting in theft, error, loss, or inappropriate use of information or systems to commit fraud, cause embarrassment to us or our executives or to gain competitive advantage. In addition, regulators expect financial institutions to be responsible for all aspects of their performance, including aspects which they delegate to third parties. If a disruption, breach, or failure in the system or infrastructure of any third party with whom we do business occurred, then our business may be materially and adversely affected in a manner similar to if our own systems or infrastructure had been compromised. As has been the case in other major system events in the U.S., our systems and infrastructure may also be attacked, compromised, or damaged as a result of, or as the intended target of, any disruption, breach, or failure in the systems or infrastructure of any third party with whom we do business.

We may be subject to claims and the costs of defensive actions, and such claims and costs could materially and adversely impact our financial condition and results of operations.

Our customers may sue us for losses due to alleged breaches of fiduciary duties, errors and omissions of employees, officers and agents, incomplete documentation, our failure to comply with applicable laws and regulations, or many other reasons.  Also, our employees may knowingly or unknowingly violate laws and regulations.  Management may not be aware of any violations until after their occurrence.  This lack of knowledge may not insulate us from liability.  Claims and legal actions will result in legal expenses and could subject us to liabilities that may reduce our profitability and hurt our financial condition

The loss of key personnel could disrupt our operations and result in reduced earnings.

Our growth and profitability will depend upon our ability to attract and retain skilled managerial, marketing and technical personnel.  Competition for qualified personnel in the financial services industry is intense, and there can be no assurance that we will be successful in attracting and retaining such personnel.  Our current executive officers provide

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valuable services based on their many years of experience and in-depth knowledge of the banking industry and the market areas we serve.  Due to the intense competition for financial professionals, these key personnel would be difficult to replace and an unexpected loss of their services could result in a disruption to the continuity of operations and a possible reduction in earnings.  

We are a community banking organization and our ability to maintain our reputation is critical to the success of our business.

We are a community banking organization, and our reputation is one of the most valuable components of our business. A key component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to expand our presence by capturing new business opportunities from existing and prospective customers in our current market and contiguous areas. As such, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and associates. If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or otherwise, our business and, therefore, our operating results may be materially adversely affected.

We could be adversely affected by risks associated with future acquisitions and expansions.

Although our core growth strategy is focused around organic growth, we may from time to time consider acquisition and expansion opportunities involving a bank or other entity operating in the financial services industry.  We cannot predict if or when we will engage in such a strategic transaction, or the nature or terms of any such transaction.  To the extent that we grow through an acquisition, we cannot assure investors that we will be able to adequately and profitably manage that growth or that an acquired business will be integrated into our existing businesses as efficiently or as timely as we may anticipate.  Acquiring another business would generally involve risks commonly associated with acquisitions, including:

● increased capital needs;

● increased and new regulatory and compliance requirements;

● implementation or remediation of controls, procedures and policies with respect to the acquired business;

● diversion of management time and focus from operation of our then-existing business to acquisition-integration challenges;

● coordination of product, sales, marketing and program and systems management functions;

● transition of the acquired business’s users and customers onto our systems;

● retention of employees from the acquired business;

● integration of employees from the acquired business into our organization;

● integration of the acquired business’s accounting, information management, human resources and other administrative systems and operations with ours;

● potential liability for activities of the acquired business prior to the acquisition, including violations of law, commercial disputes and tax and other known and unknown liabilities;

● potential increased litigation or other claims in connection with the acquired business, including claims brought by regulators, terminated employees, customers, former stockholders, vendors, or other third parties; and

● potential goodwill impairment.

Our failure to execute our acquisition strategy could adversely affect our business, results of operations, financial condition and future prospects risks of unknown or contingent liabilities.  

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New lines of business, products or services may subject us to additional risks.

From time to time, we implement new lines of business or offer new products and services within existing lines of business.  There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services we invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service.  Furthermore, any new line of business, new product or service and/or new technology could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business, new products or services and/or new technologies could have a material adverse effect on our business, financial condition and results of operations.

Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.

Many companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance (“ESG”) practices and disclosure. Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions and human rights. Increased ESG-related compliance costs could result in increases to our overall operational costs. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, and our stock price. New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure.

Climate change could have a material adverse impact on us and our customers.

Our business, as well as the operations and activities of our customers, could be negatively impacted by climate change. Climate change presents both immediate and long-term risks to us and our customers and these risks are expected to increase over time. Climate changes presents multi-faceted risks, including (i) operational risk from the physical effects of climate events on our facilities and other assets as well as those of our customers; (ii) credit risk from borrowers with significant exposure to climate risk; and (iii) reputational risk from stakeholder concerns about our practices related to climate change, our carbon footprint and our business relationships with customers who operate in carbon-intensive industries. Our business, reputation and ability to attract and retain employees may also be harmed if our response to climate change is perceived to be ineffective or insufficient.

Climate change exposes us to physical risk as its effects may lead to more frequent and more extreme weather events, such as prolonged droughts or flooding, tornados, hurricanes, wildfires and extreme seasonal weather; and longer-term shifts, such as increasing average temperatures, ozone depletion and rising sea levels. Such events and long-term shifts may damage, destroy or otherwise impact the value or productivity of our properties and other assets; reduce the availability of insurance; and/or disrupt our operations and other activities through prolonged outages. Such events and long-term shifts may also have a significant impact on our customers, which could amplify credit risk by diminishing borrowers' repayment capacity or collateral values, and other businesses and counterparties with whom we transact, which could have a broader impact on the economy, supply chains and distribution networks.

Climate change also exposes us to transition risks associated with the transition to a less carbon-dependent economy. Transition risks may result from changes in policies; laws and regulations; technologies; and/or market preferences to address climate change. Such changes could materially, negatively impact our business, results of operations, financial condition and/or our reputation, in addition to having a similar impact on our customers. We have customers who operate in carbon-intensive industries like oil and gas that are exposed to climate risks, such as those risks

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related to the transition to a less carbon-dependent economy, as well as customers who operate in low-carbon industries that may be subject to risks associated with new technologies. Federal and state banking regulators and supervisory authorities, investors and other stakeholders have increasingly viewed financial institutions as important in helping to address the risks related to climate change both directly and with respect to their customers, which may result in financial institutions coming under increased pressure regarding the disclosure and management of their climate risks and related lending and investment activities. Given that climate change could impose systemic risks upon the financial sector, either via disruptions in economic activity resulting from the physical impacts of climate change or changes in policies as the economy transitions to a less carbon-intensive environment, we face regulatory risk of increasing focus on our resilience to climate-related risks, including in the context of stress testing for various climate stress scenarios. Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs.

Risks Relating to First United Corporation’s Securities

The shares of Common Stock are not insured.

The shares of the Common Stock are not deposits and are not insured against loss by the FDIC or any other governmental or private agency.  

The shares of Common Stock are not heavily traded.

Shares of the Common Stock are listed on the NASDAQ Global Select Market but are not heavily traded.  Securities that are not heavily traded can be more volatile than stock trading in an active public market.  Factors such as our financial results, the introduction of new products and services by us or our competitors, changes in the financial estimates by securities analysts, market conditions within the banking industry, the general state of the securities market, general economic condition, and investor speculation as to our future plans and strategies could have a significant impact on the market price and trading volume of the shares of Common Stock.  Likewise, events that are unrelated to the Corporation but that affect the equity markets generally, such as national or international health crises, wars, political instability, the loss of investor or depositor confidence due to the failure of one or more financial institutions, and similar factors, could also have a significant impact on the market price and trading volume of the shares of Common Stock.  Management cannot predict the extent to which an active public market for shares of Common Stock will develop or be sustained in the future.  Accordingly, shareholders may not be able to sell their shares at the volumes, prices, or times that they desire.

Significant sales of shares of Common Stock, or the perception that significant sales may occur in the future, could adversely affect the market price of shares of Common Stock.

The sale of a substantial number of shares of the Common Stock could adversely affect the market price of such shares.  The availability of shares for future sale could adversely affect the prevailing market price of shares of Common Stock and could cause the market price of such shares to remain low for a substantial amount of time. In addition, the Corporation may grant equity awards under its equity compensation plans from time to time in effect, including fully-vested shares of Common Stock.  It is possible that if a significant percentage of such available shares were attempted to be sold within a short period of time, the market for the shares would be adversely affected.  Management cannot predict whether the market for shares of Common Stock could absorb a large number of attempted sales in a short period of time, regardless of the price at which they might be offered.  Even if a substantial number of sales do not occur within a short period of time, the mere existence of this “market overhang” could have a negative impact on the market for the common stock and our ability to raise capital in the future.

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The Corporation’s ability to pay dividends on the common stock is subject to the terms of the outstanding TPS Debentures, which prohibit the Corporation from paying dividends during an interest deferral period.  

In March 2004, the Corporation issued approximately $30.9 million, in the aggregate, of junior subordinated debentures (“TPS Debentures”) to the Trusts in connection with the Trusts’ sales to third party investors of $30.0 million, in the aggregate, in mandatorily redeemable preferred capital securities.  The terms of the TPS Debentures require the Corporation to make quarterly payments of interest to the Trusts, as the holders of the TPS Debentures, although the Corporation has the right to defer payments of interest for up to 20 consecutive quarterly periods, and the Corporation has exercised this deferral right in the past.  An election to defer interest payments does not constitute an event of default under the terms of the TPS Debentures.  The terms of the TPS Debentures prohibit the Corporation from declaring or paying any dividends or making other distributions on, or from repurchasing, redeeming or otherwise acquiring, any shares of its capital securities, including the common stock, if the Corporation elects to defer quarterly interest payments under the TPS Debentures.  In addition, a deferral election will require the Trusts to likewise defer the payment of quarterly dividends on their related trust preferred securities.

Applicable banking and Maryland laws impose additional restrictions on the ability of the Corporation and the Bank to pay dividends and make other distributions on their capital securities, and, in any event, the payment of dividends is at the discretion of the boards of directors of the Corporation and the Bank.  

In the past, the Corporation has funded dividends on its capital securities using cash received from the Bank, and this will likely be the case for the foreseeable future.  No assurance can be given that the Bank will be able to pay dividends to the Corporation for these purposes at times and/or in amounts requested by the Corporation.  Both federal and state laws impose restrictions on the ability of the Bank to pay dividends.  Under Maryland law, a state-chartered commercial bank may pay dividends only out of undivided profits or, with the prior approval of the Maryland Commissioner, from surplus in excess of 100% of required capital stock.  If, however, the surplus of a Maryland bank is less than 100% of its required capital stock, cash dividends may not be paid in excess of 90% of net earnings.  In addition to these specific restrictions, bank regulatory agencies have the ability to prohibit proposed dividends by a financial institution which would otherwise be permitted under applicable regulations if the regulatory body determines that such distribution would constitute an unsafe or unsound practice.  Banks that are considered “troubled institution” are prohibited by federal law from paying dividends altogether.  Notwithstanding the foregoing, shareholders must understand that the declaration and payment of dividends and the amounts thereof are at the discretion of the Corporation’s Board of Directors.  Thus, even at times when the Corporation is not prohibited from paying cash dividends on its capital securities, neither the payment of such dividends nor the amounts thereof can be guaranteed.

The Corporation’s Articles of Incorporation and Bylaws and Maryland law may discourage a corporate takeover.

The Corporation’s Amended and Restated Articles of Incorporation (the “Charter”) and its Amended and Restated Bylaws (the “Bylaws”) contain certain provisions designed to enhance the ability of the Corporation’s Board of Directors to deal with attempts to acquire control of the Corporation.  First, the Board of Directors is classified into three classes.  Directors of each class serve for staggered three-year periods, and no director may be removed except for cause, and then only by the affirmative vote of either a majority of the entire Board of Directors or a majority of the outstanding voting stock.  Although the Corporation’s board has amended the Bylaws to eliminate this classified Board structure, the declassification will not be fully phased in until after the 2024 annual meeting of shareholders.  Second, the Board has the authority to classify and reclassify unissued shares of stock of any class or series of stock by setting, fixing, eliminating, or altering in any one or more respects the preferences, rights, voting powers, restrictions and qualifications of, dividends on, and redemption, conversion, exchange, and other rights of, such securities.  The Board could use this authority, along with its authority to authorize the issuance of securities of any class or series, to issue shares having terms favorable to management or to a person or persons affiliated with or otherwise friendly to management.  In addition, the Bylaws require any shareholder who desires to nominate a director to abide by strict notice requirements.

Maryland laws include provisions that could discourage a sale or takeover of the Corporation.  The Maryland Business Combination Act generally prohibits, subject to certain limited exceptions, corporations from being involved in

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any “business combination” (defined as a variety of transactions, including a merger, consolidation, share exchange, asset transfer or issuance or reclassification of equity securities) with any “interested shareholder” for a period of five years following the most recent date on which the interested shareholder became an interested shareholder.  An interested shareholder is defined generally as a person who is the beneficial owner of 10% or more of the voting power of the outstanding voting stock of the corporation after the date on which the corporation had 100 or more beneficial owners of its stock or who is an affiliate or associate of the corporation and was the beneficial owner, directly or indirectly, of 10% percent or more of the voting power of the then outstanding stock of the corporation at any time within the two-year period immediately prior to the date in question and after the date on which the corporation had 100 or more beneficial owners of its stock.  The Maryland Control Share Acquisition Act applies to acquisitions of “control shares”, which, subject to certain exceptions, are shares the acquisition of which entitle the holder, directly or indirectly, to exercise or direct the exercise of the voting power of shares of stock of the corporation in the election of directors within any of the following ranges of voting power:  one-tenth or more, but less than one-third of all voting power; one-third or more, but less than a majority of all voting power or a majority or more of all voting power.  Control shares have limited voting rights.  Maryland banking laws provide that the Maryland Commissioner must approve certain acquisitions of the common stock of the Corporation and/or the Bank, and these laws impose penalties on persons who effect such acquisitions without approval, including a five year voting prohibition.  

Although these provisions do not preclude a sale or takeover, they may have the effect of discouraging, delaying or deferring a sale, tender offer, or takeover attempt that a shareholder might consider in his or her best interest, including those attempts that might result in a premium over the market price for the common stock.  Such provisions will also render the removal of the Board of Directors and of management more difficult and, therefore, may serve to perpetuate current management.  These provisions could potentially adversely affect the market prices of the Corporation’s securities.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 1C. Cybersecurity

Risk Management Strategy

Our risk management program is designed to identify, assess, and mitigate risks across various aspects of the Corporation, including financial, operational, reputational, and legal.  Cybersecurity is a critical component of this program, given the increasing reliance on technology and potential of cyber threats.  Our Cyber Security Initiative (“CSI”) committee led by our Information Security Officer is primarily responsible for this cybersecurity component and is a key member of the risk management organization.  The Information Security Officer reports directly to the Chief Operating Officer and, as discussed below, regularly to the Risk and Compliance Committee of our board of directors.  

Our objective for managing cybersecurity risk is to avoid or minimize the impacts of external threat events or other efforts to penetrate, disrupt or misuse our systems or information.  The structure of our information security program is designed around the Cyber Risk Institute’s cybersecurity profile designed specifically for the financial services industry, regulatory guidance, and other industry standards.  In addition, we leverage certain industry and government associations, third-party benchmarking, audits, and threat intelligence feeds to facilitate and promote program effectiveness.  Our Information Security Officer, along with key members of our risk team, regularly collaborate with peer banks, industry groups, and policymakers to discuss cybersecurity trends and issues and identify best practices.  The information security program is periodically reviewed by such personnel with the goal of addressing changing threats and conditions.

We employe an in-depth, layered, defensive strategy that embraces a “trust by design” philosophy when designing new products, services, and technology.  We leverage people, processes, and technology as part of our efforts to manage and maintain cybersecurity controls.  We also employe a variety of preventative and detective tools designed to monitor, block, and provide alerts regarding suspicious activity, as well as to report on suspected advanced persistent threats.  We

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have established processes and systems designed to mitigate cyber risk, including regular and on-going education and training for employees, preparedness simulations and tabletop exercises, and recovery and resilience tests.  We engage in regular assessments of our infrastructure, software systems, and network architecture, using internal cybersecurity experts and third-party specialists.  We also maintain a third-party risk management program designed to identify, assess, and manage risks, including cybersecurity risks, associated with external service providers and our supply chain.  We also actively monitor our email gateways for malicious phishing email campaigns and monitor remote connections as a significant portion of our workforce has the option to work remotely.  We leverage internal and external auditors and independent external partners to periodically review our processes, systems, and controls, including with respect to our information security program, to assess their design and operating effectiveness and make recommendations to strengthen our risk management program.

We maintain an Incident Response Plan that provides a documented framework for responding to actual or potential cybersecurity incidents, including timely notification of and escalation to the appropriate Board-approved management committees, as discussed further below, and the Risk and Compliance Committee of our board of directors.  The Incident Response Plan is coordinated through the Management Director of Information Technology and key members of management are embedded into the Plan by its design. The Incident Response Plan facilitates coordination across multiple parts of our organization and is evaluated at least annually.

Notwithstanding our defensive measures and processes, the threat posed by cyber-attacks is severe.  Our internal systems, processes, and controls are designed to mitigate loss from cyber-attacks and, while we have experienced cybersecurity incidents in the past, to date, risks from cybersecurity threats have not materially affected our Company.  For further discussion of risks from cybersecurity threats, see the section captioned “A disruption, breach, or failure in the operational systems or infrastructure of our third party vendors or other service providers, including as a result of cyber-attacks, could adversely affect our business” in Item 1A.  Risk Factors.

Governance

Our Information Security Officer is accountable for managing our enterprise information security processes and procedures and delivering our information security program.  The responsibilities of this department include cybersecurity risk assessment, incident response, vulnerability assessment, threat intelligence, identity access governance, third-party risk management, and business resilience.  The foregoing responsibilities are covered on a day-to-day basis by a first line of defense function, and our second line of defense function, including the CSI Committee, provides guidance, oversight, monitoring, and challenge of the first line’s activities.  The Committee as a whole, consists of information security professionals with varying degrees of education and experience  as well as Information Technology professionals, and audit and fraud professionals.  Individuals within the Committee are generally subject to professional education and certification requirements.  In particular, our Information Security Officer has substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management.

Our board of directors has approved management commitess including the CSI Committee, which focuses on technology impact, and the Management Risk Committee, which focuses on business impact.  These committees provide oversight and governance of the technology program and the information security program.  These committees are chaired by managers within the Corporation and include the Chief Operating Officer, as well as his direct reports and other key departmental managers from throughout the entire company.  These committees generally meet regularly to provide oversight of the risk management strategy, standards, policies, practices, controls, and mitigation to facilitate timely information and monitoring efforts.  The Information Security Officer reports summaries of key issues, including significant cybersecurity and/or privacy incidents, discussed at committee meetings and the actions taken to the Risk and Compliance Committee of our board of directors on a quarterly basis (or more frequently as may be required by the Incident Response Plan).

The Risk and Compliance Committee of our board of directors is responsible for overseeing our information security and technology programs, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks.  Our CSI Committee provides quarterly reports to the Risk and Compliance

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Committee of our board of directors regarding the information security program and the technology program, key enterprise cybersecurity initiatives, and other matters relating to cybersecurity processes.  The Risk and Compliance Committee of our board of directors reviews and approves our information security and technology budgets and strategies annually.  Additionally, the Risk and Compliance Committee of our board of directors reviews our cyber security risk profile on a regular basis.  The Risk and Compliance Committee our board of directors provides a report of their activities to the full board of directors at board meetings.

ITEM 2. PROPERTIES

The headquarters of the Corporation and the Bank occupies approximately 29,000 square feet at 19 South Second Street, Oakland, Maryland, and a 30,000 square feet operations center located at 12892 Garrett Highway, Oakland Maryland. These premises are owned by the Corporation. The Bank owns 19 of its banking offices and leases seven. Total rent expense on the leased offices and properties was $0.5 million in 2023.  In November 2023, the Corporation announced the closure of four of its leased banking offices.

ITEM 3. LEGAL PROCEEDINGS

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Shares of the Corporation’s common stock are listed on the NASDAQ Global Select Market under the symbol “FUNC”. As of February 29, 2024, thres issued and outstanding shares of Common Stock were held by 1,315 shareholders of record.

The ability of the Corporation to declare dividends is limited by federal banking laws and Maryland corporation laws. Subject to these and the terms of its other securities, including the TPS Debentures, the payment of dividends on the shares of common stock and the amounts thereof are at the discretion of the Corporation’s board of directors. Cash dividends are typically declared on a quarterly basis. When paid, dividends to shareholders are dependent on the ability of the Corporation’s subsidiaries, especially the Bank, to declare dividends to the Corporation. Like the Corporation, the Bank’s ability to declare and pay dividends is subject to limitations imposed by federal and Maryland banking and Maryland corporation laws. A complete discussion of these and other dividend restrictions is contained in Item 1A of Part I of this annual report under the heading “Risks Relating to First United Corporation’s Securities” and in Note 3 to the Consolidated Financial Statements, both of which are incorporated herein by reference. Accordingly, there can be no assurance that dividends will be declared on the shares of common stock in any future fiscal quarter.

The Corporation’s Board of Directors periodically evaluates the Corporation’s dividend policy, both internally and in consultation with the Federal Reserve.

Issuer Repurchases

Pursuant to the SEC’s Regulation S-K Compliance and Disclosure Interpretation 106.01, the information required by this Item pursuant to Item 201(d) of Regulation S-K relating to securities authorized for issuance under the Corporation’s equity compensation plans is located in Item 12 of Part III of this annual report and is incorporated herein by reference.

Issuer Purchases of Equity Securities
Period	Total Number of Shares (or Units) Purchased (1)		Average Price Paid per Share (or Unit)	Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
					805,702	(1)
October 2023	40,300	$	16.35	40,300	765,402
November 2023	11,500		17.30	11,500	753,902
December 2023	11,000		18.69	11,000	742,902
Total	62,800	$	16.79	62,800	742,902

(1) All shares were purchased in open-market transactions pursuant to First United Corporation's stock repurchase plan that was initially adopted effective August 18, 2023.  The plan authorized the repurchase of up to 825,000 shares of common stock of First United Corporation.  The plan authorizes the repurchases to be conducted through open market or private transactions at such times and in such amounts per transaction as the Chairman and Chief Executive Officer of First United Corporation determines to be appropriate.

ITEM 6. [Reserved]

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and notes thereto for the years ended December 31, 2023 and 2022, which are included in Item 8 of Part II of this annual report.

Overview

First United Corporation is a financial holding company that, through the Bank and its non-bank subsidiaries, provides an array of financial products and services primarily to customers in four Western Maryland counties and four Northeastern West Virginia counties. Its principal operating subsidiary is the Bank, which consists of a community banking network of 26 branch offices located throughout its market areas. Our primary sources of revenue are interest income earned from our loan and investment securities portfolios and fees earned from financial services provided to customers.

For the year ended December 31, 2023, net income was $15.1 million on a GAAP basis, inclusive of a $3.3 million, net of tax, loss on the sale of securities and $0.5 million, net of tax, in increased expenses related to announced branch closures that occurred on February 29, 2024, and $18.8 million on a non-GAAP basis compared to GAAP and non-GAAP basis income of $25.0 million in 2022.  The year-over-year $10.0 million decrease in GAAP net income was driven by an increase in total operating expenses of $7.1 million.  Salaries and employee benefits increased by $3.4 due primarily to increased salary expense of $2.0 million related to new hires, the competitive environment for labor and merit increases effective April 1, 2023, increased health insurance costs of $1.0 million associated with unusually high claims and decreases of $0.4 in deferred loan costs. Occupancy and equipment expense increased by $0.7 million due primarily to accelerated depreciation and lease termination expenses associated with the announced branch closures that occurred on February 29, 2024, data processing expense increased by $0.5 million due to the implementation of new technology, and FDIC assessments increased by $0.4 million.  Other miscellaneous expenses, such as loan service fees, dues and licenses, check fraud expenses, employee benefit plan expense, and miscellaneous expenses increased by $2.0 million and professional fees increased by $0.6 million due to the $0.8 million cash receipt related to reimbursement of litigation expenses that were previously expensed and was credited to expenses in 2022.  Provision for credit losses increased by $2.2 million when compared to prior year due to increased loan growth during 2023 and qualitative factors with the implementation of Accounting Standards Update 2016-13:  Financial Instruments- Credit Losses (“CECL”).  Net losses on available-for-sale (“AFS”) securities increased by $4.2 million when compared to prior year due to the sale of securities in the fourth quarter of 2023.  Net interest income decreased by $0.8 million due to compression of the net interest margin as experienced industry-wide during 2023.  These increases were partially offset by increases in gains on sales of mortgages of $0.3 million, service charges on deposit accounts of $0.2 million, and $0.1 million increase in debit card income.  Income taxes were down by $3.7 million when comparing the two periods due primarily to reductions in pre-tax income.

The provision for credit losses was $1.6 million for the year ended December 31, 2023 and a credit of $0.6 million for the year ended December 31, 2022.  Net charge-offs of $0.9 million were recorded for the year ended December 31, 2023, compared to $0.7 million for 2022. The ratio of the ACL to loans outstanding was 1.24% at December 31, 2023 compared to 1.14% at December 31, 2022.  

Other operating income, including net losses/gains on sales of mortgage loans and sales of investment securities, decreased by approximately $3.6 million when compared to 2022.  This decrease was primarily related to a $4.2 million loss recognized through the sale of  AFS investment securities as part of a strategic balance sheet restructuring in the fourth quarter of 2023. This loss was partially offset by a $0.2 million in increases in service charges on deposit accounts, $0.1 million increase in wealth management income, and $0.3 million increase in gains on sales of residential mortgages.

Other operating expenses increased $7.1 million compared to the year ended December 31, 2022.  Salaries and employee benefits increased by $3.4 due primarily to increased salary expense of $2.0 million related to new hires, the competitive environment for labor and merit increases effective April 1, 2023, increased health insurance costs of $1.0 million associated with unusually high claims and decreases of $0.4 in deferred loan costs. Occupancy and equipment

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expense increased by $0.7 million due to the expenses related to the branch closures, data processing expense increased by $0.5 million as a result of the implementation of a new sales management system, and FDIC assessments increased by $0.4 million.  Professional fees increased by $0.6 million related to increased audit expenses in correlation to the new CECL implementation and increased legal and professional expenses due to the receipt of an $0.8 million in proceeds credited to expense in 2022 related to reimbursement of legal and professional expenses previously recorded. Other miscellaneous expenses increased by $2.0 million primarily driven by increased check fraud related expenses of $0.5 million, increased employee benefit costs of $1.1 million, increased escrow account fees due to the rising rate environment, miscellaneous loan fees and an increase of $0.2 million in fees associated with the Intrafi Cash Service (“ICS”) product.

Outstanding loans of $1.4 billion at December 31, 2023 reflected growth of $127.2 million in 2023.  Since December 31, 2022, commercial real estate loans increased by $34.9 million, acquisition and development loans increased by $6.5 million and commercial and industrial loans increased by $29.2 million.  Growth in the commercial portfolios was driven by increased activity with existing clients as well as cultivating new business relationships.  Residential mortgage loans increased $55.5 million related to management’s strategic decision to book new mortgage loans at higher rates to our in-house portfolio during the first half  of 2023 and then shifted production to sales in the secondary market during the second half of 2023. The consumer loan portfolio increased slightly by $1.2 million.  

Net interest income, on a non-GAAP, fully-taxable equivalent (“FTE”) basis, decreased by $1.1 million in 2023 compared to 2022.  Interest expense on deposits increased by $16.0 million due to an increase in balances of $102.3 million and an increase in yield of 141 basis points.  Interest expense on long-term borrowings increased $3.5 million related to $80.0 million in Federal Home Loan Bank (“FHLB”) borrowings obtained during the first quarter of 2023 and an increase in interest rates on variable rate trust preferred borrowings.  The increased interest expense resulted in an overall increase of 151 basis points on interest bearing liabilities.   This increase was partially offset by an increase of $18.4 million in interest income.   The yield on earning assets increased 78 basis points to 4.63% in 2023 compared to 3.85% in 2022 in correlation with the rising interest rate environment, new loans booked at higher rates as well as adjustable rate loans repricing.  The net interest margin was 3.26% in 2023 compared to 3.56% in 2022.

Comparing the year ended December 31, 2023 with the year ended December 31, 2022, interest income increased by $18.4 million.  Interest and fees on loans increased by $15.1 million and investment income increased by $0.2 million. Excess cash balances during 2023 were invested at the Fed Funds rate, which also positively affected interest income for the year ended December 31, 2023 when compared to 2022.  Increases in loan interest income stemmed from the growth of core loans at higher rates in 2023.  The rate earned on the loan portfolio increased by 74 basis points when comparing the year ended December 31, 2023 to the year ended December 31, 2022.

Total deposits at December 31, 2023 decreased by $19.8 million when compared to December 31, 2022.  In March 2023, the Corporation obtained $61.1 million in new brokered deposits.  In August 2023, the Corporation obtained $30.0 million of brokered deposits to pre-fund the maturity of a $30.4 million brokered certificate of deposit that matured in September 2023.  In December 2023, $30.6 million in brokered deposits matured and were repaid.  In addition, retail certificates of deposit increased by $45.0 million due primarily to a promotional nine-month certificate of deposit product offered in 2023.  Interest-bearing demand deposits increased by $23.2 million and money market accounts increased by $20.5 million due to a shift in the deposit portfolio mix from non-interest-bearing accounts to interest-bearing accounts including the ICS product to ensure full FDIC insurance.  These increases were offset by decreases in non-interest-bearing deposits of $78.9 million and savings accounts of $59.5 million due to the shift to interest-bearing demand deposit accounts, two relationships having large, planned deposit withdrawals totaling $39.5 million during 2023 to fund business activity, the effects of consumer and commercial spending and the competitive market for deposits.  

Estimates and Critical Accounting Policies

This discussion and analysis of our financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities.

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(See Note 1 to the Consolidated Financial Statements.)  On an on-going basis, management evaluates estimates and bases those estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Corporation identifies the following critical accounting policies may affect our more significant judgments and estimates used in the preparation of the Consolidated Financial Statements.

Allowance for Credit Losses

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

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

Management believes it uses relevant information available to make determinations about the ACL and it has established the existing allowance in accordance with GAAP.  However, the determination of the ACL requires significant judgment, and estimates of expected credit losses in the loan portfolio can vary from the amounts actually observed.  While management uses available information to recognize expected credit losses, future additions to the ACL may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes to the interest rate environment which may directly impact prepayment and curtailment rate assumptions, and changes in the financial conditions of borrowers.

The ACL”base case” model is derived from various economic forecasts provided by widely recognized sources.  Management evaluates the variability of market conditions by examining the peak and trough of economic cycles.  These peaks and troughs are used to stress the base case model to develop a range of potential outcomes.  Management then determines the appropriate reserve through an evaluation of these various outcomes relative to current economic conditions and known risks in the portfolio.

The ACL is also discussed below in Item 7 under the heading “Allowance for Credit Losses” and in Note 5 to the Consolidated Financial Statements.

Liquidity Sources

As of December 31, 2023, the Corporation had approximately $140.0 million in unsecured lines of credit with its correspondent banks, $12.2 million available through a secured line of credit with the Federal Reserve Discount Window, and approximately $145.4 million of secured borrowings with the FHLB.   The Corporation also had approximately $69.5 million available through the BTFP offered by the Federal Reserve.  Additionally, the Corporation has access to the brokered certificates of deposit market.

Capital

The Corporation’s and the Bank’s capital ratios are strong, and both institutions are considered to be well-capitalized by applicable regulatory measures

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Adoption of New Accounting Standards and Effects of New Accounting Pronouncements

Note 1 to the Consolidated Financial Statements discusses new accounting pronouncements that, when adopted, could affect our future consolidated financial statements.

CONSOLIDATED STATEMENT OF INCOME REVIEW

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 an 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 it is not materially different than the corresponding GAAP disclosure.

The table below summarizes net interest income for 2023 and 2022.

	GAAP				Non-GAAP - FTE
(in thousands)	2023		2022		2023		2022
Interest income	$	81,156	$	62,422	$	81,783	$	63,362
Interest expense		24,286		4,789		24,286		4,789
Net interest income	$	56,870	$	57,633	$	57,497	$	58,573
Net interest margin %		3.22%		3.50%		3.26%		3.56%

Net interest income, on a non-GAAP, FTE basis, decreased by $1.1 million (1.8%) during the year ended December 31, 2023 when compared to the year ended December 31, 2022, driven by a $19.5 million (407.1%) increase in interest expense, which was partially offset by an increase in interest income of $18.4 million (29.1%).  The net interest margin, on an FTE basis, decreased to 3.26% for the year ended December 31, 2023 from 3.56% for the year ended December 31, 2022.  

Comparing the year ended December 31, 2023 with the year ended December 31, 2022, interest income increased by $18.4 million. Interest and fees on loans increased by $15.1 million investment income increased by of $0.2 million.  The increase in interest on loans was primarily due to an increase of $116.7 million in average loan balance in 2023 compared to 2022.  The rate earned on the loan portfolio increased by 74 basis points when comparing the year ended December 31, 2023 to the year ended December 31, 2022.  The increase in investment income was due to the 20 basis point increase in yield during 2023, which was partially offset by the $21.1 million reduction in average balances.  Other interest income increased by $3.1 million during 2023 primarily due to a 397 basis point increase in interest income of funds held at the Federal Reserve as well as an increase of $20.9 million in average balances.

The increase in interest expense for 2023 was driven by an an increase in interest expense on deposits of $16.0 million due to an increase in balances of $102.3 million and an increase in yield of 141 basis points.  Interest expense on long-term borrowings increased $3.5 million related to $80.0 million in FHLB borrowings obtained during the first quarter of 2023 and an increase in interest rates on variable rate trust preferred borrowings.  The increased interest expense resulted in an overall increase of 151 basis points on interest bearing liabilities.  

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As shown below, the composition of total interest income between 2023 and 2022 remained relatively stable.

	% of Total Interest Income
	2023	2022
Interest and fees on loans	86%	87%
Interest on investment securities	10%	12%
Other	5%	1%

The following table sets forth the average balances, net interest income and expense, and average yields and rates for our interest-earning assets and interest-bearing liabilities for 2023 and 2022:

Distribution of Assets, Liabilities and Shareholders’ Equity

Interest Rates and Interest Differential – Tax Equivalent Basis

	For the Years Ended December 31
	2023						2022
(in thousands)	Average Balance		Interest		Average Yield/ Rate		Average Balance		Interest		Average Yield/ Rate
Assets
Loans	$	1,340,118	$	69,631	5.20	%	$	1,223,388	$	54,513	4.46	%
Investment Securities:
Taxable		335,888		7,173	2.14	%		348,516		6,252	1.79	%
Non taxable		18,471		1,279	6.92	%		26,952		1,981	7.35	%
Total		354,359		8,452	2.39	%		375,468		8,233	2.19	%
Federal funds sold		65,131		3,409	5.23	%		44,207		555	1.26	%
Interest-bearing deposits with other banks		2,585		93	3.60	%		3,061		24	0.78	%
Other interest earning assets		4,048		198	4.89	%		1,027		37	3.60	%
Total earning assets		1,766,241		81,783	4.63	%		1,647,151		63,362	3.85	%
Allowance for loan losses		(16,561)						(15,568)
Non-earning assets		199,474						170,128
Total Assets	$	1,949,154					$	1,801,711
Liabilities and Shareholders’ Equity
Interest-bearing demand deposits	$	362,070	$	4,814	1.33	%	$	301,183	$	855	0.28	%
Interest-bearing money markets		333,274		8,672	2.60	%		312,978		1,256	0.40	%
Savings deposits		219,516		240	0.11	%		250,624		154	0.06	%
Time deposits - Retail		141,921		2,872	2.02	%		138,865		961	0.69	%
Time deposits - Brokered		49,209		2,600	5.28	%		—		—	—	%
Short-term borrowings		47,968		147	0.31	%		63,182		112	0.18	%
Long-term borrowings		94,271		4,941	5.24	%		30,929		1,451	4.69	%
Total interest-bearing   liabilities		1,248,229		24,286	1.95	%		1,097,761		4,789	0.44	%
Non-interest-bearing deposits		512,496						533,096
Other liabilities		32,320						33,169
Shareholders’ Equity		156,109						137,685
Total Liabilities and Shareholders’ Equity	$	1,949,154					$	1,801,711
Net interest income and spread			$	57,497	2.68	%			$	58,573	3.41	%
Net interest margin					3.26	%					3.56	%

Notes:

(1) The above table reflects the average rates earned or paid stated on an FTE basis assuming a tax rate of 21% for 2023 and 2022. Non-GAAP interest income on an FTE basis for the years ended December 31, 2023 and 2022 were $626 and $940, respectively.

(2) The average balances of non-accrual loans for the years ended December 31, 2023 and 2022, which were reported in the average loan balances for these years, were $3,171 and $2,120, respectively.

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

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

The following table sets forth an analysis of volume and rate changes in interest income and interest expense of our average interest-earning assets and average interest-bearing liabilities for 2023 and 2022. This table distinguishes between the changes related to average outstanding balances (changes in volume created by holding the interest rate

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constant) and the changes related to average interest rates (changes in interest income or expense attributed to average rates created by holding the outstanding balance constant).

Interest Variance Analysis (1)

	2023 Compared to 2022
(in thousands and tax equivalent basis)	Volume		Rate		Net
Interest Income:
Loans	$	5,206	$	9,912	$	15,118
Taxable Investments		(226)		1,147		921
Non-taxable Investments		(623)		(79)		(702)
Federal funds sold		263		2,591		2,854
Interest-bearing deposits		(4)		73		69
Other interest earning assets		109		52		161
Total interest income		4,725		13,696		18,421
Interest Expense:
Interest-bearing demand deposits		170		3,789		3,959
Interest-bearing money markets		81		7,335		7,416
Savings deposits		(19)		105		86
Time deposits - Retail		21		1,890		1,911
Time deposits - Brokered		2,600		—		2,600
Short-term borrowings		(27)		62		35
Long-term borrowings		2,971		519		3,490
Total interest expense		5,797		13,700		19,497
Net interest income	$	(1,072)	$	(4)	$	(1,076)

Note:

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

Provision for Credit Losses

The provision for credit losses was $1.6 million for the year ended December 31, 2023 and a credit of $0.6 million for the year ended December 31, 2022.  Net charge-offs of $0.9 million were recorded for the year ended December 31, 2023, compared to net charge-offs of $0.7 million for 2022. The ratio of the ACL to loans outstanding was 1.24% at December 31, 2023 compared to an ALL 1.14% at December 31, 2022.  The ACL reflects a level commensurate with the risk inherent in our loan portfolio.  

For periods prior to the adoption of the CECL standard, we recognized credit losses on loans that were collectively evaluated for impairment based on an incurred loss approach, which limited our measurement of credit losses to credit events that were estimated to have already occurred.  Effective January 1, 2023, we adopted CECL, which replaced the incurred loss impairment model with an expected loss model.   Our CECL methodology introduced a modified discounted cash flow methodology based on expected cash flow changes in the future.  

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Other Operating Income

The following table shows the major components of other operating income for the past two years, exclusive of net gains, and the percentage changes during these years:

(in thousands)	2023		2022		% Change
Service charges on deposit accounts	$	2,198	$	1,981	10.95%
Other service charges		929		925	0.43%
Trust department income		8,282		8,244	0.46%
Debit card income		4,101		3,958	3.61%
Bank owned life insurance		1,261		1,196	5.43%
Brokerage commissions		1,160		1,049	10.58%
Other income		400		525	(23.81)%
Total other operating income	$	18,331	$	17,878	2.53%

Other operating income, exclusive of gains, increased $0.5 million during the year ended December 31, 2023 when compared to the same period of 2022.  The increase was primarily a result of a increase of $0.2 million in service charges on deposit accounts, an increase of $0.1 million in wealth management income, and a $0.1 million increase in debit card income.

Net losses of $3.9 million were reported for the year ended December 31, 2023 compared to net gains of $0.2 million for the same period in 2022.   The Corporation recognized a $4.2 millon loss in the sale of AFS investment securities as part of the balance sheet restructuring in the fourth quarter of 2023.  This loss was partially offset by an increase of $0.3 million in gains on sale of residential mortgages.

The following table shows the components of net losses for the year ended December 31, 2023 and net gains for the year ended December 31, 2022.

(in thousands)	2023		2022
Net gains/(losses):
Available-for-sale securities:
Realized gains from sales and calls	$	—	$	3
Realized losses from sales and calls		(4,214)		—
Held-to-Maturity:
Realized gains on calls		—		91
Gains on sale of loans held for sale		381		45
(Loss)/Gain on disposal of fixed assets		(29)		33
Net (losses)/gains	$	(3,862)	$	172

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Other Operating Expense

The following table compares the major components of other operating expense for 2023 and 2022:

(in thousands)	2023		2022		% Change
Salaries and employee benefits	$	27,503	$	24,130	13.98%
FDIC premiums		992		636	55.97%
Equipment		4,356		4,163	4.64%
Occupancy		3,445		2,906	18.55%
Data processing		3,980		3,444	15.56%
Marketing		762		543	40.33%
Professional services		2,160		1,538	40.44%
Contract labor		643		618	4.05%
Line rentals		466		482	(3.32)%
Total OREO (income)/expenses, net		(89)		590	(115.08)%
Investor relations		345		300	15.00%
Contributions		229		288	(20.49)%
Other expenses		5,451		3,491	56.14%
Total other operating expense	$	50,243	$	43,129	16.49%

Other operating expenses increased $7.1 million for the year ended December 31, 2023 when compared to 2022.  Salaries and employee benefits increased by $3.4 due primarily to increased salary expense of $2.0 million related to new hires, the competitive environment for labor and merit increases effective April 1, 2023, increased health insurance costs of $1.0 million associated with unusually high claims and decreases of $0.4 in deferred loan costs. Occupancy and equipment expense increased by $0.7 million due to the expenses related to the announced branch closures that occurred on February 29, 2024, data processing expense increased by $0.5 million as a result of the implementation of a new sales management system, and FDIC assessments increased by $0.4 million.  Professional fees increased by $0.6 million related to increased audit expenses in correlation to the new CECL implementation and increased legal and professional expenses due to the receipt of an $0.8 million in proceeds credited to expense in 2022 related to previously expensed legal and professional fees. Other miscellaneous expenses increased by $2.0 million primarily driven by increased check fraud related expenses of $0.5 million, increased employee benefit costs of $1.1 million, increased escrow account fees due to the rising rate environment, miscellaneous loan fees and an increase of $0.2 million in fees associated with the ICS product.

Applicable Income Taxes

We recognized a tax expense of $4.4 million in 2023, compared to a tax expense of $8.1 million in 2022. See the discussion under “Income Taxes” in Note 13 to the Consolidated Financial Statements presented elsewhere in this annual report for a detailed analysis of our deferred tax assets and liabilities.  Our effective income tax rates as a percentage of income for the years ended December 31, 2023 and December 31, 2022 were 22.7% and 24.5%, respectively.  The decrease in the tax rate for the 2023 period was primarily related to a new low-income housing tax credit investment in 2022 that began generating tax credits during the fourth quarter of 2022.  This tax credit will continue through 2032.

At December 31, 2023, the Corporation had Maryland Net Operating Losses (“NOLs”) of $39.1 million for which a deferred tax asset of $2.6 million has been recorded. There was also a Maryland state interest expense carryforward of $3.5 million, for which a deferred tax asset of $0.2 million has been recorded.  There has been and continues to be a full valuation allowance on these NOLs and interest expense deferred tax assets, based on management’s belief that it is more likely than not that these NOLs will not be realized prior to the expiration of their carry-forward periods because the Corporation will not generate sufficient taxable income in the future to fully utilize the NOLs. The valuation allowance was $2.8 million and $2.9 million at December 31, 2023 and 2022, respectively.

We have concluded that no valuation allowance is deemed necessary for our remaining federal and state deferred tax assets at December 31, 2023, as it is more likely than not that they will be realized based on the expected reversal of

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deferred tax liabilities, the generation of future income sufficient to realize the deferred tax assets as they reverse, and the ability to implement tax planning strategies to prevent the expiration of any carry-forward periods.

GAAP and Non-GAAP measures

The following tables sets forth certain selected financial data for the years ended December 31, 2023 and 2022 under generally accepted accounting principles (“GAAP”) (as reported) and non-GAAP.  A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed in the most directly comparable measure calculated and presented in accordance with GAAP in the United States.  The Corporation’s management believes the presentation of non-GAAP financial measures provide investors with a greater understanding of the Corporation’s operating results in addition to the results measured in accordance with GAAP.  While management uses these non-GAAP measures in its analysis of the Corporation’s performance, this information should not be viewed as a substitute for financial results determined in accordance with GAAP or considered to be more important than financial results determined in accordance with GAAP.

The following non-GAAP financial measures exclude losses on the sale of AFS securities and accelerated depreciation and lease termination expenses related to announced branch closures that occurred on February 29, 2024.

	For the year ended
	December 31,
	2023			2022
Per Share Data
Basic net income per common share - as reported	$	2.25		$	3.77
Basic net income per common share - non-GAAP		2.81			3.77
Diluted net income per common share - as reported	$	2.25		$	3.76
Diluted net income per common share - non-GAAP		2.81			3.76
Significant Ratios:
Return on Average Assets (a) - as reported		0.77	%		1.39	%
Loss on sale of AFS securities, accelerated depreciation and lease termination expenses, net of income tax effect		0.19			—
Adjusted Return on Average Assets (a) (non-GAAP)		0.96	%		1.39	%
Return on Average Equity (a) - as reported		9.65	%		18.19	%
Loss on sale of AFS securities, accelerated depreciation and lease termination expenses, net of income tax effect		2.40			—
Adjusted Return on Average Equity (a) (non-GAAP)		12.05	%		18.19	%

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	Year Ended
	2023		2022
(in thousands, except for per share amount)
Net income - as reported	$	15,060	$	25,048
Adjustments:
Loss on sale of securities		4,214		—
Accelerated depreciation and lease termination expenses		623		—
Income tax effect of adjustment		(1,097)		—
Adjusted net income (non-GAAP)	$	18,800	$	25,048
Basic earnings per share - as reported	$	2.25	$	3.77
Adjustments:
Loss on sale of securities		0.63		—
Accelerated depreciation and lease termination expenses		0.09		—
Income tax effect of adjustment		(0.16)		—
Adjusted basic earnings per share (non-GAAP)	$	2.81	$	3.77
Diluted earnings per share - as reported	$	2.81	$	3.76

CONSOLIDATED BALANCE SHEET REVIEW

Overview

Total assets at December 31, 2023 increased by $57.7 million, or 3.1%, when compared to December 31, 2022.  During the year, cash balances decreased by $24.6 million, investment securities decreased by $50.1 million and gross loans increased by $127.2 million.  In the first quarter of 2023, management made the strategic decision to obtain $61.1 million in brokered certificates of deposit and $80.0 million of FHLB borrowings to strengthen on-balance sheet liquidity in light of the disruption in the banking industry.  $30.0 million of the brokered deposits were repaid in September 2023 and during the third quarter, in anticipation of increasing rates, management pre-funded the $30.7 million of brokered deposits set to mature in the fourth quarter of 2023 at the same rate in order to maintain cash balances and control interest expense.   Investment in FHLB stock increased by $4.2 million during the year related to the borrowings obtained in the first quarter.  Other assets, including OREO, deferred taxes, premises and equipment, and accrued interest receivable, increased by $3.5 million.  Total liabilities increased by $47.6 million since December 31, 2022.  Total deposits decreased by $19.8 million during the year.  Interest-bearing demand deposits and money market accounts increased by $23.2 million and $20.5 million, respectively, due to a shift in the deposit portfolio mix from non-interest-bearing deposits to interest-bearing accounts including the ICS product to ensure full FDIC insurance coverage, where balances grew by approximately $104.0 million.  These increases were offset by decreases in non-interest-bearing deposits of $78.9 million and savings accounts of $59.5 million as we saw businesses and consumers utilizing cash due to the rising rate and inflationary environment.  Total certificates of deposit increased by $75.0 million primarily due to an increase of $30.0 million in brokered certificates of deposits and $45.0 million in retail certificates of deposit.  Short-term borrowings decreased by $19.1 million since December 31, 2022 primarily due to one municipal customer moving funds from an overnight investment product to a non-interest bearing deposit product in 2023 as well as regular fluctuations in municipal deposit balances.  Long-term borrowings increased by $80.0 million in 2023 when compared to December 31, 2022 due to the acquisition of $80.0 million in FHLB borrowings in the first quarter of 2023.  

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As indicated below, the total interest-earning asset mix remained relatively constant at December 31, 2023 as compared to December 31, 2022. The mix for each year is illustrated below.  

	Year End Percentage of Total Assets
	2023	2022
Cash and cash equivalents	3%	4%
Net loans	73%	68%
Investments	16%	20%

The year-end total liability mix has remained relatively consistent during the two-year period as illustrated below.

	Year End Percentage of Total Liabilities
	2023	2022
Total deposits	89%	93%
Total borrowings	9%	6%

Loan Portfolio

The Bank is actively engaged in originating loans to customers primarily in Allegany County, Frederick County, Garrett County, and Washington County in Maryland, and in Berkeley County, Mineral County, Monongalia County, and Harrison County in West Virginia; and the surrounding regions of West Virginia and Pennsylvania. We have policies and procedures designed to mitigate credit risk and to maintain the quality of our loan portfolio. These policies include underwriting standards for new credits as well as continuous monitoring and reporting policies for asset quality and the adequacy of the ACL. These policies, coupled with ongoing training efforts, have provided effective checks and balances for the risk associated with the lending process. Lending authority is based on the type of the loan, and the experience of the lending officer.

Commercial loans are collateralized primarily by real estate and, to a lesser extent, equipment and vehicles. Unsecured commercial loans represent an insignificant portion of total commercial loans. Residential mortgage loans are collateralized by the related property. Generally, a residential mortgage loan exceeding a specified internal loan-to-value ratio requires private mortgage insurance. Installment loans are typically collateralized, with loan-to-value ratios which are established based on the financial condition of the borrower. We also have made unsecured consumer loans to qualified borrowers meeting our underwriting standards. Additional information about our loans and underwriting policies can be found in Item 1 of Part I of this annual report under the heading “Banking Products and Services”.

The following table sets forth the composition of our loan portfolio. Historically, our policy has been to make the majority of our loan commitments in our market areas. We had no foreign loans in our portfolio as of December 31 for any of the years presented.

Summary of Loan Portfolio

The following table presents the composition of our loan portfolio as of December 31 for the past two years:

(In millions)	2023		2022
Commercial real estate	$	493.7	$	458.8
Acquisition and development		77.1		70.6
Commercial and industrial		274.6		245.4
Residential mortgage		499.9		444.4
Consumer		61.4		60.3
Total Loans	$	1,406.7	$	1,279.5

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Outstanding loans of $1.4 billion at December 31, 2023 reflected growth of $127.2 million in 2023.  Since December 31, 2022, commercial real estate loans increased by $34.9 million, acquisition and development loans increased by $6.5 million and commercial and industrial loans increased by $29.2 million.  Growth in the commercial portfolios was driven by increased activity with existing clients as well as cultivating new business relationships.  Residential mortgage loans increased $55.5 million related to management’s strategic decision to book new mortgage loans at higher rates to our in-house portfolio during the first half of 2023. The consumer loan portfolio increased slightly by $1.2 million.  

New commercial loan production for the year  ended December 31, 2023 was approximately $197.0 million.  The pipeline of commercial loans as of December 31, 2023 was approximately $22.0 million.  At December 31, 2023, unfunded, committed commercial construction loans totaled approximately $29.6 million. Commercial amortization and payoffs were approximately $434.4 million through December 31, 2023 due primarily to pay-offs of short-term commercial loans as well as normal amortizations of the commercial loan portfolio.

New residential mortgage loan production for year ended December 31, 2023 was approximately $96.6 million, with most of this production comprised of in-house loans.  The pipeline of in-house, portfolio loans as of December 31, 2023 was $7.0 million.  The residential mortgage production level declined in the fourth quarter of 2023 due to the increasing interest rates and seasonality of this line of business.  Unfunded commitments related to residential construction loans totaled $17.6 million on December 31, 2023.  Beginning in the second quarter of 2023, management began shifting more activity towards the secondary market.

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The following table presents loans in our commercial real estate portfolio by industry type.

(in thousands)	Non-owner-occupied		Owner-occupied		Multi-family		Total
Accommodations and food services	$	76,473		4,943		-	$	81,416
Administration and support, waste management, and remediation services		-		1,464		-		1,464
Agriculture, forestry, fishing and hunting		-		2,246		-		2,246
Arts, entertainment and recreation		77		3,065		-		3,142
Construction		3,452		6,307		-		9,759
Educational services		-		956		-		956
Finance and insurance		-		403		-		403
Health care and social assistance		4,832		12,124		-		16,956
Management of companies and enterprises		-		2,828		-		2,828
Manufacturing		-		6,978		-		6,978
Other services (except public services)		2,291		18,705		319		21,315
Professional, scientific and technical services		-		2,627		-		2,627
Public administration		1,530		1,086		-		2,616
Commercial rental properties		185,064		74,078		-		259,142
Residential rental properties		512		346		27,167		28,025
Student rental properties		-		-		4,861		4,861
Mixed use rental properties		151		191		17,908		18,250
Storage units		17,332		-		-		17,332
Real estate rental and leasing- other		4,709		3,702		422		8,833
Retail trade		12		3,051		-		3,063
Transportation and warehousing		-		518		-		518
Wholesale trade		135		838		-		973
Total	$	296,570	$	146,456	$	50,677	$	493,703

Our loan portfolio does not consist of any loans secured by office buildings located in major metropolitan areas or that are over four stories or any retail properties rented to major big box retail tenants.  

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The following table sets forth the maturities, based upon contractual dates, for selected loan categories as of December 31, 2023:

Maturities of Loan Portfolio at December 31, 2023

	Fixed Rate Loans
(in thousands)	Maturing Within One Year		Maturing After One Year But Within Five Years		Maturing After Five Years Within Fifteen Years		Maturing After Fifteen Years		Total
Commercial real estate	$	58,198	$	277,383	$	41,339	$	—	$	376,920
Acquisition and development		33,705		15,911		412		776		50,804
Commercial and industrial		15,063		107,990		34,006		—		157,059
Residential mortgage		7,188		34,186		44,670		92,360		178,404
Consumer		3,021		35,934		19,500		40		58,495
Total Loans	$	117,175	$	471,404	$	139,927	$	93,176	$	821,682
	Variable Rate Loans
(in thousands)	Maturing Within One Year		Maturing After One Year But Within Five Years		Maturing After Five Years Within Fifteen Years		Maturing After Fifteen Years		Total
Commercial real estate	$	11,260	$	21,415	$	76,089	$	8,019	$	116,783
Acquisition and development		3,549		9,366		13,329		12		26,256
Commercial and industrial		63,046		38,720		15,779		—		117,545
Residential mortgage		3,129		1,233		54,882		262,223		321,467
Consumer		2,868		4		62		—		2,934
Total Loans	$	83,852	$	70,738	$	160,141	$	270,254	$	584,985

Management 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 required payment is past due. A loan is considered to be past due when a scheduled payment has not been received for 30 days past its contractual due date. For all loan segments, the accrual of interest is discontinued when principal or interest is delinquent for 90 days or more unless the loan is well-secured and in the process of collection.  Interest payments received on non-accrual loans are applied as a reduction of the loan principal balance. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

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The following sets forth the amounts of non-accrual, past-due and modified loans for the past two years:

Risk Elements of Loan Portfolio

	At December 31,
(in thousands)	2023		2022
Non-accrual loans:
Commercial real estate	$	826	$	145
Acquisition and development		113		146
Residential mortgage		2,988		3,204
Consumer		29		—
Total non-accrual loans	$	3,956	$	3,495
Accruing Loans Past Due 90 days or more:
Residential mortgage	$	459	$	282
Consumer		84		25
Total accruing loans past due 90 days or more	$	543	$	307
Total non-accrual and past due 90 days or more	$	4,499	$	3,802
Modified Loans:
Performing	$	—	$	2,751
Non-accrual (included above)		—		277
Total modified loans	$	—	$	3,028
Other Real Estate Owned	$	4,493	$	4,733
Total Non-performing assets	$	8,992	$	8,535
Individually evaluated loans without a valuation allowance	$	2,963	$	6,153
Individually evaluated loans with a valuation allowance		—		345
Total individually evaluated loans	$	2,963	$	6,498
Non-accrual loans to total loans (as %)		0.28%		0.27%
Non-performing loans to total loans (as %)		0.32%		0.30%
Non-performing assets to total assets (as %)		0.47%		0.46%
Allowance for credit losses to non-accrual loans (as %)		441.86%		418.77%
Allowance for credit losses to non-performing assets (as %)		194.40%		171.48%

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The following table sets forth the percent applicable by portfolio for non-accrual loans for the past two years:

Non-Accrual Loans as a % of Applicable Portfolio

	2023		2022
Commercial real estate		0.2%		0.0%
Acquisition and development		0.1%		0.2%
Commercial and industrial		0.0%		0.0%
Residential mortgage		0.6%		0.7%
Consumer		0.0%		0.0%

We would have recognized $0.4 million in interest income for the year ended December 31, 2023 had our non-accrual loans been current and performing in accordance with their terms. During 2023, we recognized, on a cash basis, $0.3 million of interest income on non-accrual loans that paid off.

Effective January 1, 2023, the Corporation adopted the accounting guidance in ASU 2022-02, which eliminated the recognition and measurement of TDRs.  Due to the removal of the TDR designation, the Corporation evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a continuation of the existing loan.  Loan modifications to borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the above.  Therefore, the disclosures related to loan restructurings are only for modifications that directly affect cash flows.

A loan that is considered a non-accrual or modified loan may be subject to the individually evaluated loan analysis if the commitment is $0.1 million or greater; otherwise, the modified loan remains in the appropriate segment in the ACL model and associated reserves are adjusted based on changes in the discounted cash flows resulting from the modification of the modified loan.  For a discussion with respect to reserve calculations regarding individually evaluated loans, refer to the “Nonrecurring Loans” section in Note 19, Fair Value Measurements.  There were no loan modifications made to borrowers facing financial difficulties in the year ending December 31, 2023.

Allowance for Credit Losses

Effective January 1, 2023, we adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments- Credit Losses (Topic 326):  Measurement of Credit Losses on Financial Instruments, universally referred to as CECL.   In connection with our adoption of ASU 2016-13, we made changes to our loan portfolio segments to align with the methodology of CECL.  Refer to Note 5, Loans and Related Allowance for Credit Losses, for further discussion of these portfolio segments.  The adoption of ASU 2016-13 resulted in a Day 1 adjustment of $2.9 million to our ACL, including an increase of $2.0 million to the ACL for loans and $0.9 million to the ACL for unfunded commitments.  The Corporation recorded a net decrease to retained earnings of $2.2 million as of January 1, 2023 for the cumulative effect of adopting ASU 2016-13.

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

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

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Management believes it uses relevant information available to make determination about the ACL and that it has established the existing allowance in accordance with GAAP.  However, the determination of the ACL requires significant judgment, and estimates of expected credit losses in the loan portfolio can vary from the amounts actually observed.  While management uses available information to recognize expected credit losses, future additions to the ACL may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes to the interest rate environment which may directly impact prepayment and curtailment rate assumptions, and changes in the financial condition of borrowers.

The ACL “base case” model is derived from various economic forecasts provided by widely recognized sources.  Management evaluates the variability of market conditions by examining the peak and trough of economic cycles.  These peaks and troughs are used to stress the base case model to develop a range of potential outcomes.  Management then determines the appropriate reserve through an evaluation of these various outcomes relative to current economic conditions and known risks in the portfolio.   Management enhances its calculation with the use of Moody’s economic forecast data to provide additional support to substantiate its ACL.

The ACL was $17.5 million at December 31, 2023 compared to an allowance for loan loss (“ALL”) of $14.6 million at December 31, 2022. The provision for credit losses was $1.6 million for the year ended December 31, 2023, compared to a credit to provision of $0.6 million for the year ended December 31, 2022.  The provision expense recorded in 2023 was primarily related to strong loan growth and increases in qualitative risk factors related to the uncertainty of the economy, inflation levels, and rising interest rates, which was partially offset by the reduction of historical loss factors related to the strength of our overall portfolio.  Net charge-offs of $0.9 million were recorded for the year ended December 31, 2023 and $0.7 million for the year ended December 31, 2022.  The ratio of the ACL to loans outstanding was 1.24% at December 30, 2023 and 1.14% at December 31, 2022.  

The ratio of net charge-offs to average loans for the year ended December 31, 2023 was an annualized 0.07%, compared to of 0.06% for the year ended December 31, 2022. The increase in net charge-offs was primarily related to increased charge-offs in our commercial loan portfolio.  Our special assets team continues to effectively collect on charged-off loans, resulting in ongoing overall low charge-off ratios.

Accruing loans past due 30 days or more increased to 0.24%, compared to 0.16% at December 31, 2022. Non-accrual loans totaled $4.0 million at December 31, 2023 compared to $3.5 million at December 31, 2022. The increase in non-accrual balances at December 31, 2023 was primarily related to two commercial real estate loans with a combined  balance of $0.8 million added to non-accrual in 2023.  This was partially offset by reductions in principal balance of existing non-accrual loans.

The ACL at December 31, 2023 is adequate to provide for probable 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 CRE loan portfolio and obtains new appraisals on specific loans under defined parameters to assist in the determination of the periodic provision for credit losses.

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The following table presents a summary of the activity in the ACL and ALL by major loan category for the past two years.

Analysis of Activity in the Allowance for Credit/Loan Losses

	For the Years Ended December 31,
(in thousands)	2023		2022
Balance, January 1	$	14,636	$	15,955
Impact of CECL Adoption		2,066		—
Charge-offs:
Commercial real estate		(87)		—
Acquisition and development		—		(20)
Commercial and industrial		(423)		(134)
Residential mortgage		(55)		(46)
Consumer		(874)		(921)
Total charge-offs		(1,439)		(1,121)
Recoveries:
Commercial real estate		7		1
Acquisition and development		11		22
Commercial and industrial		186		93
Residential mortgage		73		184
Consumer		240		145
Total recoveries		517		445
Net credit losses		(922)		(676)
Provision/credit for credit/loan losses		1,700		(643)
Balance at end of period	$	17,480	$	14,636
Allowance for credit/loan losses to total loans (as %)		1.24%		1.14%
Net (Charge-offs)/Recoveries as a % of Average Applicable Portfolio
	2023		2022
Commercial real estate		0.0%		0.0%
Acquisition and development		0.0%		0.0%
Commercial and industrial		(0.1%)		(0.0%)
Residential mortgage		0.0%		0.0%
Consumer		(1.0%)		(1.3%)

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The following presents management’s allocation of the ACL by major loan category in comparison to that loan category’s percentage of total loans. Changes in the allocation over time reflect changes in the composition of the loan portfolio risk profile and refinements to the methodology of determining the ACL. Specific allocations in any particular category may be reallocated in the future as needed to reflect current conditions. Accordingly, the entire ACL is considered available to absorb losses in any category.

Allocation of the Allowance for Credit/Loan Losses

	For the Years Ended December 31,
(in thousands)	2023		% of Total Loans	2022		% of Total Loans
Commercial real estate	$	5,120	29%	$	6,345	43%
Acquisition and development		940	5%		979	7%
Commercial and industrial		3,717	21%		2,845	19%
Residential mortgage		6,774	39%		3,160	22%
Consumer		929	6%		877	6%
Unallocated		—	0%		430	3%
Total	$	17,480	100%	$	14,636	100%

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Investment Securities

The following table sets forth the composition of our investment securities portfolio by major category as of the indicated dates:

	At December 31,
	2023					2022
(in thousands)	Amortized Cost		Fair Value (FV)		FV As % of Total	Amortized Cost		Fair Value (FV)		FV As % of Total
Securities Available-for-Sale:
U.S. government agencies	$	7,000	$	6,034	6%	$	11,044	$	9,462	8%
Residential mortgage-backed agencies		24,781		20,563	21%		45,052		37,401	30%
Commercial mortgage-backed agencies		36,258		28,417	29%		37,393		30,732	23%
Collateralized mortgage obligations		19,725		16,356	17%		25,828		21,044	17%
Obligations of states and political subdivisions		10,486		10,312	11%		10,848		10,492	8%
Corporate bonds		1,000		778	1%		1,000		887	1%
Collateralized debt obligations		18,671		14,709	15%		18,664		15,871	13%
Total available for sale	$	117,921	$	97,169	100%	$	149,829	$	125,889	100%
Securities Held to Maturity:
U.S. treasuries	$	37,462	$	37,219	20%	$	37,204	$	35,611	18%
U.S. government agencies		68,014		57,029	31%		67,734		54,473	27%
Residential mortgage-backed agencies		29,588		26,717	14%		28,624		25,122	12%
Commercial mortgage-backed agencies		21,413		16,052	9%		22,389		17,821	9%
Collateralized mortgage obligations		53,261		43,288	24%		57,085		47,084	23%
Obligations of states and political subdivisions		4,604		4,110	2%		22,623		22,969	11%
Total held to maturity	$	214,342	$	184,415	100%	$	235,659	$	203,080	100%

Total AFS and HTM securities totaled $311.5 million at December 31, 2023, representing a $50.1 million decrease compared to December 31, 2022.   In the third quarter of 2023, management elected to redeem $17.8 million from a non-rated municipal TIF bond at par. During December of 2023, management made a strategic decision to restructure the balance sheet by selling AFS investment securities totaling $20.4 million with a book value of $24.6 million, resulting in an after-tax loss of $3.2 million.  The securities had a weighted average book yield of approximately 1.3% and a weighted average life of approximately 6.65 years.  Additional decreases in the investment portfolio were primarily related to normal principal amortization.   Proceeds from sales and principal amortization during 2023 were used primarily to enhance on-balance sheet liquidity and to fund loan growth throughout the year.

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 effect to mitigate further decline in fair market value value in a rising rate environment.  Management’s assessment of the potential included lower yielding bonds and the risk of extension in an up 300 basis point shock.

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As discussed in Note 19 to the Consolidated Financial Statements presented elsewhere in this report, we measure 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 $82.5 million of the available-for-sale portfolio was valued using Level 2 pricing and had net unrealized losses of $16.8 million at December 31, 2023. The remaining $14.7 million of the securities available-for-sale represents the entire collateralized debt obligation (“CDO”) portfolio, which was valued using significant unobservable inputs, or Level 3 pricing. The $4.0 million in net unrealized losses associated with the CDO portfolio relates to nine pooled trust preferred securities that comprise the CDO portfolio.  

The following table sets forth the contractual or estimated maturities of the components of our investment securities portfolio as of December 31, 2023 and the weighted average yields on a tax-equivalent basis.

Investment Security Maturities, Yields, and Fair Values at December 31, 2023

(in thousands)	Within 1 Year		1 Year To 5 Years		5 Years To 10 Years		Over 10 Years		Total Fair Value
Securities Available-for-Sale:
U.S. government agencies	$	—	$	4,703	$	—	$	1,331	$	6,034
Residential mortgage-backed agencies		—		—		13,404		7,159		20,563
Commercial mortgage-backed agencies		—		18,767		9,650		—		28,417
Collateralized mortgage obligations		—		1,107		7,536		7,713		16,356
Obligations of states and political subdivisions		2,640		250		1,389		6,033		10,312
Corporate bonds		—		—		778		—		778
Collateralized debt obligations		—		—		—		14,709		14,709
Total available for sale	$	2,640	$	24,827	$	32,757	$	36,945	$	97,169
Percentage of total		2.72%		25.55%		33.71%		38.02%		100.00%
Weighted average yield		2.80%		2.18%		2.07%		7.70%		4.26%
Held to Maturity:
US treasuries	$	37,219	$	—	$	—	$	—	$	37,219
U.S. government agencies		—		11,706		32,590		12,733		57,029
Residential mortgage-backed agencies		201		4,942		5,712		15,862		26,717
Commercial mortgage-backed agencies		—		7,069		8,983		—		16,052
Collateralized mortgage obligations		—		2,221		—		41,067		43,288
Obligations of states and political subdivisions		—		—		1,905		2,205		4,110
Total held to maturity	$	37,420	$	25,938	$	49,190	$	71,867	$	184,415
Percentage of total		20.29%		14.07%		26.67%		38.97%		100.00%
Weighted average yield		0.08%		1.67%		3.05%		2.62%		2.08%

The weighted average yield was calculated using historical cost balances and does not give effect to changes in fair value.

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Deposits

The following table sets forth the deposit balances by major category for 2023 and 2022:

Deposit Balances

	2023				2022
(in thousands)	Actual Balance		Percent		​ Actual Balance		Percent
Non-interest-bearing demand deposits	$	427,670		28%	$	506,613		32%
Interest-bearing deposits:
Demand		350,860		22%		327,685		21%
Money market		385,649		25%		365,192		23%
Savings deposits		191,265		12%		250,720		16%
Time deposits - retail		165,533		11%		120,523		8%
Time deposits - brokered		30,000		2%		—		0%
Total Deposits	$	1,550,977		100%	$	1,570,733		100%

Total deposits at December 31, 2023 decreased by $19.8 million when compared to December 31, 2022.  In March 2023, the Corporation obtained $61.1 million in new brokered deposits.  In August 2023, the Corporation obtained $30.0 million of brokered deposits to pre-fund the maturity of a $30.4 million brokered certificate of deposit that matured in September 2023.  In December 2023, $30.6 million in brokered deposits matured and were repaid.  In addition, retail certificates of deposit increased by $45.0 million due primarily to a promotional nine-month certificate of deposit product offered in 2023.  Interest-bearing demand deposits increased by $23.2 million and money market accounts increased by $20.5 million due to a shift in the deposit portfolio mix from non-interest-bearing accounts to interest-bearing accounts including the ICS product to ensure full FDIC insurance.  These increases were offset by decreases in non-interest-bearing deposits of $78.9 million and savings accounts of $59.5 million due to the shift to interest-bearing demand deposit accounts, two relationships having large, planned deposit withdrawals totaling $39.5 million during 2023 to fund business activity, the effects of consumer and commercial spending and the competitive market for deposits.  

The following table summarizes the percentage of deposits that are insured by deposit insurance or otherwise fully collateralized by securities compared to uninsured deposits as of December 31, 2023 and December 31, 2022.

	December 31, 2023			December 31, 2022
(in thousands)		Balance	Percent		Balance	Percent
Insured deposits	$	1,212,934	78%	$	1,076,113	69%
Uninsured but collateralized deposits		116,723	8%		153,067	10%
Uninsured and uncollateralized deposits		221,320	14%		341,553	21%
	$	1,550,977	100%	$	1,570,733	100%

The following table summarizes the percentage of deposit balances from retail customers compared to business customers as of December 31, 2023 and December 31, 2022.

	December 31, 2023			December 31, 2022
(in thousands)		Balance	Percent		Balance	Percent
Retail deposits	$	820,954	53%	$	855,014	54%
Business deposits		730,023	47%		715,719	46%
	$	1,550,977	100%	$	1,570,733	100%

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Borrowed Funds

The following shows the composition of our borrowings at December 31:

(in thousands)	2023		2022
Securities sold under agreements to repurchase	$	45,418	$	64,565
Total short-term borrowings	$	45,418	$	64,565
Long-term FHLB advances	$	80,000	$	—
Junior subordinated debentures	$	30,929	$	30,929
Total long-term borrowings	$	110,929	$	30,929
Total borrowings	$	156,347	$	95,494
Average balance (from Table 1)	$	142,239	$	94,111

The following is a summary of short-term borrowings at December 31 with original maturities of less than one year:

(in thousands)	2023		2022
Securities sold under agreements to repurchase:
Outstanding at end of year	$	45,418	$	64,565
Weighted average interest rate at year end		0.27%		0.12%
Maximum amount outstanding as of any month end	$	59,777	$	75,912
Average amount outstanding		50,498		63,182
Approximate weighted average rate during the year		0.24%		0.12%

Short-term borrowings decreased by $19.1 million when compared to December 31, 2022.  The decrease from December 31, 2022 was primarily related to one large municipal customer moving approximately $12.0 million in funds from an overnight investment sweep prodduct to a non-interest-bearing deposit product as well as regular fluctuations in other municipal customer balances.  Long-term boorowings increased by $80.0 million in 2023 due to the acquisition of $80.0 million in FHLB borrowings in the first quarter of 2023.

Management will continue to closely monitor interest rates within the context of its overall asset-liability management process. See the discussion under the heading “Interest Rate Sensitivity” in this Item 7 for further information on this topic.

At December 31, 2023, we had additional borrowing capacity with the FHLB totaling $145.4 million, an additional $140.0 million of unused lines of credit with various financial institutions, and $12.2 million of an unused secured line of credit with the Federal Reserve Discount Window.  Additionally, we had $69.5 million available through the Federal Reserve’s BTFP.  See Note 10 to the Consolidated Financial Statements presented elsewhere in this annual report for further details about our borrowings and additional borrowing capacity, which is incorporated herein by reference.

Off-Balance Sheet Arrangements

In the normal course of business, to meet the financing needs of its customers, the Bank is a party to financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit, lines of credit, and standby letters of credit. Our exposure to credit loss in the event of nonperformance by the other party to these financial instruments is represented by the contractual amount of the instruments. 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 use the same credit policies in making commitments and conditional obligations

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as we do for on-balance sheet instruments. We generally require collateral or other security to support the financial instruments with credit risk. The amount of collateral or other security is determined based on management’s credit evaluation of the counterparty. We evaluate each customer’s creditworthiness on a case-by-case basis.

Loan commitments and letters of credit totaled $232.3 million and $11.0 million, respectively, at December 31, 2023. Management does not believe that any of the foregoing arrangements have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. We are not a party to any other off-balance sheet arrangements. See Note 18 to the Consolidated Financial Statements presented elsewhere in this annual report for additional information on these arrangements.

Capital Resources

We require capital to fund loans, satisfy our obligations under the Bank’s letters of credit, meet the deposit withdraw 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 below under the heading “Liquidity Management”.  At December 31, 2023, the Bank had $140.0 million available through unsecured lines of credit with correspondent banks, $12.2 million available through a secured line of credit with the Federal Reserve Discount Window and approximately $145.4 million available through the FHLB.  Additionally, we had $69.5 million available through the Federal Reserve’s BTFP.  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 and the Corporation are 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. Detailed information about these capital regulations and their requirements is set forth in the “Supervision and Regulation” section of Item 1 of Part I of this annual report under the heading “Capital Requirements”.

At December 31, 2023, the Corporation’s total risk-based capital ratio was 15.64% and the Bank’s total risk-based capital ratio was 14.05%, both of which were well above the regulatory minimum of 8%. The total risk-based capital ratios of the Corporation and the Bank at December 31, 2022 were 16.12% and 14.37%, respectively.  

At December 31, 2023, the most recent notification from the regulators categorizes the Corporation and the Bank as “well capitalized” under the regulatory framework for prompt corrective action. See Note 3 to the Consolidated Financial Statements presented elsewhere in this annual report for additional information regarding regulatory capital ratios.

Liquidity Management

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

● Reliability and stability of core deposits;

● Cash flow structure and pledging status of investments; and

● Potential for unexpected loan demand.

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

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

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

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

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

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

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

● Secured line of credit with the FRB BTFP for use in borrowing funds up to 365 days using US government agency bonds as collateral.

The following table presents sources of liquidity available to the Corporation as of December 31, 2023.

(in thousands)		Total Availability		Amount Used		Net Availability
Internal Sources
Excess cash	$	28,513	$	-	$	28,513
Unpledged securities		62,036		-		62,036
External Sources
Federal Reserve (discount window)		12,223		-		12,223
Correspondent unsecured lines of credit		140,000		-		140,000
FHLB		227,938		82,500		145,438
Bank Term Funding Program*		69,476		-		69,476
	$	540,186	$	82,500	$	457,686
*Bank Term Funding Program has been established and eligible securities with a total par balance of $69.5 million have been pledged to the program as of December 31, 2023. In January 2024, the Company borrowed $40.0 million from the Bank Term Funding Program to enhance on-balance sheet liquidity.

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

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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 December 31, 2023, we were asset sensitive.

Our interest rate risk management goals are:

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

● Enable dynamic measurement and management of interest rate risk;

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

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

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

In order 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 -400 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 earned 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.

60

Based on the simulation analysis performed at December 31, 2023 and 2022, management estimated the following changes in net interest income, assuming the indicated rate changes:

(in thousands)	2023		2022
+400 basis points	$	4,464	$	1,112
+300 basis points	$	3,353	$	225
+200 basis points	$	2,255	$	173
+100 basis points	$	1,155	$	121
-100 basis points	$	(1,280)	$	(776)
-200 basis points	$	(3,102)	$	(3,165)
-300 basis points	$	(5,249)	$	(7,382)
-400 basis points	$	(8,086)	$	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.

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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, the Corporation is not required to provide the information contemplated by this item.  See Item 7 of Part II of this report under the heading “Market Risk and Interest Sensitivity” for a discussion of the Corporation’s primary market risk.

61

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

	Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 173)	63
Consolidated Statements of Financial Condition at December 31, 2023 and 2022	65
Consolidated Statements of Income for the years ended December 31, 2023 and 2022	66
Consolidated Statements of Comprehensive Income for the years ended December 31, 2023 and 2022	67
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2023 and 2022	68
Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022	69
Notes to Consolidated Financial Statements for the years ended December 31, 2023 and 2022	70

62

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and the Board of Directors of First United Corporation

Oakland, Maryland

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial condition of First United Corporation (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for credit losses effective January 1, 2023 due to the adoption of Financial Accounting Standards Board (FASB) Accounting Standards Codification No. 326, Financial Instruments - Credit Losses (ASC 326). The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles. The adoption of the new credit loss standard and its subsequent application is also related to the critical audit matter communicated below.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.  Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

63

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.  The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses on Loans – Reasonable and Supportable Forecasts and Assumptions

In accordance with Accounting Standards Update (the “ASU”) 2016-13, Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the Company adopted Accounting Standards Codification (“ASC”) 326 as of January 1, 2023 as described in Notes 1 and 5 of the consolidated financial statements using the modified retrospective method. See also explanatory paragraph above.  The ASU requires the Company's loan portfolio, measured at amortized cost, to be presented at the net amount expected to be collected. Estimates of expected credit losses for loans are based on evaluation of the size of the portfolio, current risk characteristics, past events, current conditions, reasonable and supportable forecasts of future economic conditions and prepayment experience.  The Company disclosed the impact of adoption of this standard on January 1, 2023 with an increase of $2.0 million to the allowance for credit losses on loans. The Company recorded a $2.2 million decrease to retained earnings for the cumulative effect adjustment upon adoption. Provision expense for the year ending December 31, 2023 was $1.6 million and the allowance for credit losses as of December 31, 2023 was $17.5 million.

The Company’s methodology for estimating the allowance for credit losses on loans includes quantitative and qualitative components of the calculation. The quantitative analysis includes using a discounted cash flow (DCF) model for determining the allowance for credit losses. Management leverages economic projections from a third party source for its forecasts over the forecast period.  Economic forecast models include but are not limited to unemployment, the Consumer Price Index, the Housing Affordability Index, and Gross State Product (“loss drivers”). These forecasts are assumed to revert to the long-term average and are utilized in the model to estimate the probability of default and the loss given default, which vary over time. Forecast and reversion periods as well as the selection and application of economic forecast models are considered assumptions applied by management. Based on management’s review and analysis of internal, external, and model risks, management may adjust the quantitative model output with qualitative adjustments. Management developed a qualitative framework in which maximum loss rates are established considering economic forecasts that serve as the basis for determining the reasonableness of the quantitative model’s output and necessary adjustments.

We determined that auditing the forecasts and assumptions, including the development of quantitative forecast models using the loss drivers, was a critical audit matter as it involved significant judgment by management, which led especially a high degree of auditor judgment and subjectivity and increased audit effort, including the involvement of specialists to obtain audit evidence related to the forecasts.

The primary procedures performed to address this critical audit matter included the following:

● Tested the effectiveness of the Company’s controls that addressed the following:

o Development of the forecast models that are used to determine the quantitative component and used in determining the basis for qualitative adjustments.

o Relevance and reliability of reasonable and supportable forecast data and the reasonableness of significant model assumptions input into the model.

● Use of specialists to test development of the forecast models that are used to determine the quantitative component and used in determining the basis for qualitative adjustments.

● Evaluated the reasonableness of reasonable and supportable economic forecasts and the significant model assumptions, including the relevance and reliability of data used in the model.

/s/  Crowe LLP

We have served as the Company's auditor since 2021.

Washington, D.C.

March 15, 2024

64

First United Corporation and Subsidiaries

Consolidated Statements of Financial Condition

(In thousands, except per share amounts)

	December 31,
	2023		2022
Assets
Cash and due from banks	$	48,343	$	72,720
Interest bearing deposits in banks		1,410		1,595
Cash and cash equivalents		49,753		74,315
Investment securities – available-for-sale (at fair value)		97,169		125,889
Investment securities – held to maturity, net of allowance for credit losses of $45 and $0, respectively (fair value of $184,415 at December 31, 2023 and $203,080 at December 31, 2022)		214,297		235,659
Restricted investment in bank stock, at cost		5,250		1,027
Loans held for sale (at lower of cost or fair value)		443		—
Loans		1,406,667		1,279,494
Unearned fees		(340)		(174)
Allowance for credit losses		(17,480)		(14,636)
Net loans		1,388,847		1,264,684
Premises and equipment, net		31,459		34,948
Goodwill and other intangibles		12,103		12,433
Bank owned life insurance		47,607		46,346
Deferred tax assets		11,133		10,605
Other real estate owned		4,493		4,733
Right of use assets		1,367		1,898
Pension Asset		11,208		8,001
Accrued interest receivable		7,487		6,051
Other assets		23,244		21,580
Total Assets	$	1,905,860	$	1,848,169
Liabilities and Shareholders’ Equity
Liabilities:
Non-interest bearing deposits	$	427,670	$	506,613
Interest bearing deposits		1,123,307		1,064,120
Total deposits		1,550,977		1,570,733
Short-term borrowings		45,418		64,565
Long-term borrowings		110,929		30,929
Operating lease liability		1,556		2,373
SERP deferred compensation		9,777		7,194
Allowance for credit losses on unfunded commitments		873		133
Accrued interest payable		612		151
Other liabilities		22,515		19,099
Dividends payable		1,330		1,199
Total Liabilities		1,743,987		1,696,376
Shareholders’ Equity:
Common Stock – par value $0.01 per share;   Authorized 25,000,000 shares; issued and outstanding 6,639,888 shares at December 31, 2023 and 6,666,428 shares at December 31, 2022		66		67
Surplus		23,734		24,409
Retained earnings		173,900		166,343
Accumulated other comprehensive loss		(35,827)		(39,026)
Total Shareholders’ Equity		161,873		151,793
Total Liabilities and Shareholders’ Equity	$	1,905,860	$	1,848,169

See notes to consolidated financial statement

65

First United Corporation and Subsidiaries

Consolidated Statements of Income

(In thousands, except per share data)

	Year Ended
	December 31,
	2023		2022
Interest income
Interest and fees on loans	$	69,569	$	54,448
Interest on investment securities
Taxable		7,173		6,252
Exempt from federal income tax		714		1,106
Total investment income		7,887		7,358
Other		3,700		616
Total interest income		81,156		62,422
Interest expense
Interest on deposits		19,198		3,226
Interest on short-term borrowings		147		112
Interest on long-term borrowings		4,941		1,451
Total interest expense		24,286		4,789
Net interest income		56,870		57,633
Credit loss expense
Credit loss expense/(credit)- loans		1,700		(643)
Credit loss expense- debt securities held to maturity		45		—
Credit loss (credit)/expense- unfunded commitments		(125)		16
Total credit loss expense/(credit)		1,620		(627)
Net interest income after provision for credit losses		55,250		58,260
Other operating income
Net (losses)/gains on investments, available for sale		(4,214)		3
Net gains on investment, held to maturity		—		91
Net gains on sales of residential mortgage loans		381		45
Net (losses)/gains on disposal of fixed assets		(29)		33
Net (losses)/gains		(3,862)		172
Service charges on deposit accounts		2,198		1,981
Other service charges		929		925
Trust department		8,282		8,244
Debit card income		4,101		3,958
Bank owned life insurance		1,261		1,196
Brokerage commissions		1,160		1,049
Other		400		525
Total other income		18,331		17,878
Total other operating income		14,469		18,050
Other operating expenses
Salaries and employee benefits		27,503		24,130
FDIC premiums		992		636
Equipment		4,356		4,163
Occupancy		3,445		2,906
Data processing		3,980		3,444
Marketing		762		543
Professional services		2,160		1,538
Contract labor		643		618
Line rentals		466		482
Total OREO (income)/expense, net		(89)		590
Investor relations		345		300
Contributions		229		288
Other		5,451		3,491
Total other operating expenses		50,243		43,129
Income before income tax expense	$	19,476	$	33,181
Provision for income tax expense		4,416		8,133
Net Income	$	15,060	$	25,048
Basic net income per share	$	2.25	$	3.77
Diluted net income per share	$	2.25	$	3.76
Weighted average number of basic shares outstanding		6,686		6,650
Weighted average number of diluted shares outstanding		6,701		6,661

See notes to consolidated financial statements

66

First United Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands)

	Year Ended
	December 31,
Comprehensive Income	2023		2022
Net Income	$	15,060	$	25,048
Other comprehensive income, net of tax and reclassification adjustments
Available for sale securities:
Unrealized holding losses on investments with credit related impairment		(845)		(835)
Reclassification adjustment for gains realized in income		202		202
Other comprehensive losses on investments with credit related impairment		(1,047)		(1,037)
Unrealized holding gains/(losses) on all other AFS investments		83		(22,792)
Unrealized holding losses on securities transferred from available for sale to held to maturity		—		8,328
Reclassification adjustment for (losses)/gains realized in income		(4,214)		3
Other comprehensive income/(losses) on all other AFS investments		4,297		(14,467)
Held to maturity securities:
Unrealized holding losses on securities transferred to held to maturity		—		(8,328)
Reclassification adjustment for gains realized in income		—		91
Reclassification adjustment for amortization realized in income		(682)		(841)
Other comprehensive income/(losses) on HTM investments		682		(7,578)
Cash flow hedges:
Unrealized holding (losses)/gains on cash flow hedges		(310)		1,521
Other comprehensive (loss)/gain on cash flow hedges		(310)		1,521
Pension plan liability:
Unrealized holding gains on pension plan liability		2,180		931
Reclassification adjustment for amortization of unrecognized loss realized in income		(998)		(1,117)
Other comprehensive income on pension plan liability		3,178		2,048
SERP liability:
Unrealized holding (gains)/losses on SERP liability		(2,448)		3,307
Reclassification adjustment for amortization of unrecognized income/(loss) realized in income		7		(271)
Other comprehensive (losses)/gains on SERP liability		(2,455)		3,578
Other comprehensive income/(loss) before income tax		4,345		(15,935)
Income tax (credit)/expense related to other comprehensive income		(1,146)		4,223
Other comprehensive income/(loss), net of tax		3,199		(11,712)
Comprehensive Income	$	18,259	$	13,336

See notes to consolidated financial statements

67

First United Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(In thousands, except number of shares)

	Common Stock		Surplus		Retained Earnings		Accumulated Other Comprehensive Loss, net of tax		Total Shareholders' Equity
Balance at January 1, 2022	$	66		23,661		145,487		(27,314)		141,900
Net income						25,048				25,048
Other comprehensive loss, net of tax								(11,712)		(11,712)
Common stock issued - 45,473 shares		1		216						217
Common stock dividend declared - $0.63 per share						(4,192)				(4,192)
Stock based compensation				532						532
Balance at December 31, 2022		67		24,409		166,343		(39,026)		151,793
Adoption of ASC 326- Financial Instruments- Credit Losses						(2,155)				(2,155)
Net income						15,060				15,060
Other comprehensive income, net of tax								3,199		3,199
Common stock issued- 55,558 shares				293						293
Common stock dividend declared - $0.80 per share						(5,348)				(5,348)
Stock based compensation				527						527
Stock repurchase- 82,098 shares		(1)		(1,495)						(1,496)
Balance at December 31, 2023	$	66	$	23,734	$	173,900	$	(35,827)	$	161,873

See notes to consolidated financial statements

68

First United Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

	Year Ended
	December 31,
	2023		2022
Operating activities
Net income	$	15,060	$	25,048
Adjustments to reconcile net income to net cash provided by operating activities:
Provision/(credit) for credit losses		1,620		(627)
Depreciation		3,799		3,077
Stock based compensation		527		532
Amortization of intangible assets		330		219
Gains on sales of other real estate owned, net		(599)		—
Write-downs of other real estate owned		23		—
Origination of loans held for sale		(4,832)		(1,401)
Proceeds from sales of loans held for sale		4,770		1,513
Gains on sales of loans held for sale		(381)		(45)
Losses/(gains) on disposal of fixed assets, net		29		(33)
Net (accretion)/amortization of investment securities discounts and premiums- AFS		(51)		83
Net accretion of investment securities discounts and premiums- HTM		(805)		(850)
Net losses on sales of investment securities – available-for-sale		4,214		—
Net gain on calls of investment securities – available-for-sale		—		(3)
Net gains on investment securities – held to maturity		—		(91)
Amortization of deferred loan fees		(98)		(150)
Deferred tax (benefit)/expense		(889)		595
Earnings on bank owned life insurance		(1,261)		(1,196)
Amortization of operating lease right of use assets		787		349
Amortization of operating lease liabilities		(1,073)		(388)
(Increase)/decrease in accrued interest receivable and other assets		(4,932)		648
Increase/(decrease) in accrued interest payable and other liabilities		6,232		(737)
Net cash provided by operating activities		22,470		26,543
Investing activities
Proceeds from maturities/calls of investment securities available-for-sale		7,497		14,248
Proceeds from maturities/calls of investment securities held-to-maturity		26,110		16,263
Proceeds from sales of investment securities available-for-sale		20,249		1,023
Purchases of investment securities available-for-sale		—		(17,652)
Purchases of investment securities held-to-maturity		(3,988)		(55,686)
Proceeds from sales of other real estate owned		1,041		—
Proceeds from disposal of fixed assets		14		281
Net (increase)/decrease in FHLB stock		(4,223)		2
Net increase in loans		(128,056)		(126,707)
Acquisition of mortgage company		—		(600)
Purchases of premises and equipment		(353)		(3,576)
Net cash used in investing activities		(81,709)		(172,404)
Financing activities
Net (decrease)/increase in deposits		(19,756)		101,359
Proceeds from issuance of common stock		293		217
Cash dividends paid on common stock		(5,217)		(3,986)
Net (decrease)/increase in short-term borrowings		(19,147)		6,866
Stock repurchase		(1,496)		—
Proceeds from long-term borrowings		80,000		—
Net cash provided by financing activities		34,677		104,456
Decrease in cash and cash equivalents		(24,562)		(41,405)
Cash and cash equivalents at beginning of the year		74,315		115,720
Cash and cash equivalents at end of period	$	49,753	$	74,315
Supplemental information
Interest paid	$	23,825	$	4,775
Taxes paid	$	6,126	$	7,508
Non-cash investing activities:
Transfers from loans to other real estate owned	$	225	$	256
Transfers from securities available for sale to held-to-maturity	$	—	$	139,036

See notes to consolidated financial statements

69

First United Corporation and Subsidiaries

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Business

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

First United Corporation and its subsidiaries operate principally in four counties in Western Maryland and four counties in West Virginia.

As used in these Notes, the terms “the Corporation”, “we”, “us”, and “our” mean First United Corporation and, unless the context clearly suggests otherwise, its consolidated subsidiaries.

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”).  All significant intercompany transactions and accounts have been eliminated.  Certain reclassifications have been made to prior year amounts to conform with current year classifications.  In the opinion of management, all adjustments (all of which are normal recurring in nature) that are necessary for a fair statement are reflected in the consolidated financial statements.

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 of the Corporation include the accounts of First United Corporation, the Bank, the OakFirst Loan Centers, First OREO Trust and FUBT OREO I, LLC. All significant inter-company accounts and transactions have been eliminated.

Significant Concentrations of Credit Risk

Most of the Corporation’s relationships are with customers located in Western Maryland and Northeastern West Virginia. At December 31, 2023, approximately 5%, or $77.1 million, of total loans were secured by real estate acquisition, construction and development projects, with $77.0 million performing according to their contractual terms and

70

$0.1 million considered to be individually evaluated loans based on management’s concerns about the borrowers’ ability to comply with present repayment terms. The $0.1 million in individually evaluated loans were all classified as non-accrual as of December 31, 2023.  Additionally, loans collateralized by commercial rental properties represented 21% of the total loan portfolio as of December 31, 2023. Note 4 discusses the types of securities in which the Corporation invests and Note 5 discusses the Corporation’s lending activities.

Investments

The investment portfolio is classified and accounted for based on the guidance of Accounting Standards Codification (“ASC”) Topic 320, Investments – Debt and Equity Securities. Securities bought and held principally for the purpose of selling them in the near term are classified as trading account securities and reported at fair value with unrealized gains and losses included in net gains/losses in other operating income. Securities purchased with the intent and ability to hold the securities to maturity are classified as held-to-maturity securities and are recorded at amortized cost. All other investment securities are classified as available-for-sale. These securities are held for an indefinite period of time and may be sold in response to changing market and interest rate conditions or for liquidity purposes as part of our overall asset/liability management strategy. Available-for-sale securities are reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of other comprehensive income included in the consolidated statement of comprehensive income, net of applicable income taxes.

The amortized cost of debt securities is adjusted for the amortization of premiums to the first call date, if applicable, or to maturity, and for the accretion of discounts to maturity, or, in the case of mortgage-backed securities, over the estimated life of the security. Such amortization and accretion is included in interest income from investments. Interest and dividends are included in interest income from investments. Gains and losses on the sale of securities are recorded using the specific identification method.

The Corporation adopted Accounting Standards Codification (“ASC “) 326 using the prospective transition approach for debt securities for which other than temporary impairment (“OTTI”) had been recognized prior to January 1, 2023, such as available-for-sale (“AFS”) collateralized debt obligations.  As a result, the amortized cost basis for such debt securities remained the same before and after the effective date of ASC 326.  The effective interest rate on these debt securities was not changed.  Amounts previously written off are recognized in other comprehensive income (“OCI”) as of January 1, 2023 relating to improvements in cash flows expected to be collected are accreted into income over the remaining life of the asset.  Recoveries of amounts previously written off relating to improvements in cash flows after January 1, 2023 are recorded in earnings when received.

The Corporation utilizes ASC 326 to evaluate its AFS and HTM debt security portfolio for expected credit losses.  For AFS debt securities in an unrealized loss position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis.  If either criteria is met, the security’s amortized cost basis is written down to fair value through income.  For AFS debt securities that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted from credit losses or other factors.  In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.  If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security.  If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.  Any impairment that has not been recorded through an ACL is recognized in other comprehensive income, as a non-credit-related impairment.

The Corporation has made the policy election to exclude accrued interest from the amortized cost basis of available-for-sale debt securities and report accrued interest separately in other assets in the Consolidated Balance Sheets.  Available-for-sale debt securities are placed on nonaccrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due.  Accrued interest receivable is reversed against interest income when

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a security is placed on nonaccrual status.  Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable.

The Corporation separately evaluates its HTM investment securities for any credit losses.  The Corporation pools like securities and calculates expected credit losses through an estimate based on a security’s credit rating, which is recognized as part of the allowance for credit losses for held-to-maturity securities and is included in the balance of investment securities held to maturity on the Consolidated Balance Sheets.  If the Corporation determines that a security indicates evidence of deteriorated credit quality, the security is individually evaluated and a discounted cash flow analysis is performed and compared to the amortized cost basis.

Restricted Investment in Bank Stock

The Corporation owns non-marketable equity securities in a combination of the Federal Home Loan Bank (“FHLB”) of Atlanta, Atlantic Community Bankers Bank and Community Banker’s Bank.  These securities are carried at cost, classified as restricted securities, and periodically evaluated for impairment based on ultimate recovery of par value.

The Corporation recognizes dividend income on a cash basis. For the years ended December 31, 2023 and December 31, 2022, dividends of $198,457 and $36,558, respectively, were recorded in other operating income.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or full repayment by the borrower are reported at their unpaid principal balance outstanding, adjusted for any deferred fees or costs pertaining to origination. Loans that management has the intent to sell are reported at the lower of cost or fair value determined on an individual basis.  There were $0.4 million in loans held for sale at December 31, 2023.  No loans were held for sale at December 31, 2022.

The segments of the Bank’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance. The commercial real estate (“CRE”) loan segment is further disaggregated into two classes. Non-owner occupied CRE loans, which include loans secured by non-owner occupied nonfarm nonresidential properties, generally have a greater risk profile than all other CRE loans, which include loans secured by farmland, multifamily structures and owner-occupied commercial structures. The acquisition and development (“A&D”) loan segment is further disaggregated into two classes. One-to-four family residential construction loans are generally made to individuals for the acquisition of and/or construction on a lot or lots on which a residential dwelling is to be built. All other A&D loans are generally made to developers or investors for the purpose of acquiring, developing and constructing residential or commercial structures. These loans have a higher risk profile because the ultimate buyer, once development is completed, is generally not known at the time of the A&D loan. The commercial and industrial (“C&I”) loan segment consists of loans made for the purpose of financing the activities of commercial customers. The residential mortgage loan segment is further disaggregated into two classes: amortizing term loans, which are primarily first liens, and home equity lines of credit, which are generally second liens. The consumer loan segment consists primarily of installment loans (direct and indirect), student loans and overdraft lines of credit connected with customer deposit accounts.

Management uses a 10-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due are considered Substandard. Only the portion of a specific allocation of the allowance for credit losses is associated with a pending event that could trigger loss in the short term is classified in the Doubtful category.  It is possible for a loan to be classified as Substandard in the internal risk rating system, but not be

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individually evaluated under GAAP, due to the broader reach of “well-defined weaknesses” in the application of the Substandard definition.

Interest and Fees on Loans

Interest on loans (other than those on non-accrual status) is recognized based upon the principal amount outstanding.  Loan fees in excess of the costs incurred to originate the loan are recognized as income over the life of the loan utilizing either the interest method or the straight-line method, depending on the type of loan. Generally, fees on loans with a specified maturity date, such as residential mortgages, are recognized using the interest method. Loan fees for lines of credit are recognized using the straight-line method.

A loan is considered to be past due when a payment has not been received for 30 days past its contractual due date. For all loan segments, the accrual of interest is discontinued when principal or interest is delinquent for 90 days or more unless the loan is well-secured and in the process of collection.  Loans that are on a current payment status or past due less than 90 days may be classified as nonaccrual if repayment in full of principal and/or interest is unlikely.  Interest payments received on non-accrual loans are applied as a reduction of the loan principal balance. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Generally, consumer installment loans are not placed on non-accrual status, but are charged off after they are 120 days contractually past due. Loans other than consumer installment loans are charged-off based on an evaluation of the facts and circumstances of each individual loan.

Allowance for Credit Losses

An allowance for credit loss (“ACL”) is mainained to absorb losses from the Corporation’s financial assets in accordance with ASC 326:  Financial Instruments- Credit Losses.

Allowance for Credit Losses Policy

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

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

Management believes it uses relevant information available to make determinations about the ACL and that it has established the existing allowance in accordance with GAAP.  However, the determination of the ACL requires significant judgment, and estimates of expected losses in the loan portfolio can vary significantly from the amounts actually observed.  While management uses available information to recognize losses, future additions to the ACL may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes to the interest rate environment which may directly impact prepayment and curtailment rate assumptions, and changes in the financial condition of borrowers.

The adoption of CECL accounting did not result in a significant change to any other credit risk management and monitoring processes, including identification of past due or delinquent borrowers, nonaccrual practices, assessment of modified loans, or charge-off policy.  

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Held-to-Maturity Securities

Management measures expected credit losses on HTM debt securities on a collective basis by major security type.  Management has elected not to measure an ACL for accrued interest on securities. The estimate of expected credit losses considers historical credit loss information tha tis adjusted for current conditions and reasonable and supportable forecasts.  

Management classifies the held-to-maturity portfolio into the following major security types:  securities issued by U.S. government issues and agencies (including U.S. treasuries, agency bonds, and U.S. guaranteed residential mortgage-backed securities, commercial mortgage-backed securities, and collateralized mortgage obligations), rated municipal securities, and unrated municipal securities.   Securities that are issued or explicitly or implicitely guaranteed by the U.S. government are hghly rated by major rating agencies and have a long history of no credit losses.  Rated municipal securities are evaluated based on credit rating by major rating agencies and financial performance.   Non-rated securities are evaluated internally based on financial performance and expected future cash flows.

Available-for-Sale Securities

For AFS debt securities in an unrealized loss position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery to its amortized cost basis.  If either criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income.  For debt securities AFS that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted rom credit losses or other factors.  In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.  If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected rom the security are compared to the amortized cost basis of the security.  If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.  Any impairment that has not been recorded through the ACL is recognized in other comprehensive income.

The Corporation adopted Accounting Standards Codification (“ASC “) 326 using the prospective transition approach for debt securities for which other than temporary impairment (“OTTI”) had been recognized prior to January 1, 2023, such as available-for-sale (“AFS”) collateralized debt obligations.  As a result, the amortized cost basis for such debt securities remained the same before and after the effective date of ASC 326.  The effective interest rate on these debt securities was not changed.  Amounts previously written off are recognized in other comprehensive income (“OCI”) as of January 1, 2023 relating to improvements in cash flows expected to be collected are accreted into income over the remaining life of the asset.  Recoveries of amounts previously written off relating to improvements in cash flows after January 1, 2023 are recorded in earnings when received.

Loans

An ACL is maintained as a valuation account that is deducted from the Corporation’s loan porfolio’s amortized cost basis to present the net amount expected to be collected on the loans.  Loan are charged off against the ACL when management believes the uncollectibility of a loan balance is confirmed.  Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.  

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.  Historical credit loss experience provides the basis or the estimation of expected credit losses.  Adjustments to historical loss information are made for differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental condition, such as changes in unemployment rates, property values, or other relevant factors.

Management evaluates individual loans in all of the commercial segments for possible impairment if the loan is greater than $500,000 or is part of a relationship that is greater than $750,000 and (i) is either in non-accrual status or (ii) is

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risk-rated Substandard and is greater than 60 days past due. Loans are considered to be individually evaluated when, based on current information and events, they no longer share the same risk characteristics of other loans within our portfolio. Factors considered by management in evaluating loans include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Bank does not separately evaluate individual consumer and residential mortgage loans, unless such loans are part of larger relationship that is individually evaluated; otherwise loans in these segments are considered individually evaluated when they are classified as non-accrual.

Once the determination has been made that a loan is individually evaluated, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods: (i) the present value of expected future cash flows discounted at the loan’s effective interest rate; (ii) the loan’s observable market price; or (iii) the fair value of the collateral less selling costs. The method is selected on a loan-by-loan basis, with management utilizing the fair value of collateral or the discounted cash flow method for the analyses. If the fair value of the collateral less selling costs method is utilized for collateral securing loans in the commercial segments, then an updated external appraisal is ordered on the collateral supporting the loan if the loan balance is greater than $500,000 and the existing appraisal is greater than 18 months old. If the loan balance is less than $500,000, then the estimated fair value of the collateral is determined by adjusting the existing appraisal by the appropriate percentage from an internally prepared appraisal discount grid. This grid considers the age of a third-party appraisal and the geographic region where the collateral is located in order to discount an appraisal. The discount rates in the appraisal discount grid are updated at least annually to reflect the most current knowledge that management has available, including the results of current appraisals. If there is a delay in receiving an updated appraisal or if the appraisal is found to be deficient in our internal appraisal review process and re-ordered, the Bank continues to use a discount factor from the appraisal discount grid based on the collateral location and current appraisal age in order to determine the estimated fair value. If the general market conditions in that geographic market have changed considerably, the property has deteriorated or perhaps lost an income stream, or a recent appraisal for a similar property indicates a significant change, then management may adjust the fair value indicated by the existing appraisal until a new appraisal is obtained. A specific allocation of the ACL is recorded if there is any deficiency in collateral value determined by comparing the estimated fair value to the recorded investment of the loan. When updated appraisals are received and reviewed, adjustments are made to the specific allocation as needed.  

A loan that is considered a non-accrual or modified loan may be subject to the individually evaluated loan analysis if the commitment is $0.1 million or greater; otherwise, the modified loan remains in the appropriate segment in the ACL model and associated reserves are adjusted based on changes in the discounted cash flows resulting from the modification of the modified loan.  For a discussion with respect to reserve calculations regarding individually evaluated loans, refer to the “Nonrecurring Loans” section in Note 5, Fair Value Measurements.  There were no loan modifications to borrowers facing financial difficulties for the year ending December 31, 2023.

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

Loan Commitments and Allowance for Credit Loss on Unfunded Commitments

Financial instruments include unfunded commitments such as commitments to make loans and commercial letters of credit issued to meet customer financing needs.  The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for unfunded commitments commitments is represented by the contractual amount of those instruments.  Such financial instruments are recorded when they are funded.

The Corporation records a reserve for unfunded commitments (“RUC”) on unfunded commitments through a charge to provision for credit loss expense in the Corporation’s Consolidated Statement of Income.  The RUC on unfunded commitments is estimated by loan segment at each balance sheet date under the CECL model using the same

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methodologies as portfolio loans, taking into consideration the likelihood that funding will occur, and is included in the RUC on the Corporation’s Consolidated Balance Sheet.

Loan Modifications

In situations where, for economic or legal reasons related to a borrower’s financial condition, management may grant a concession to the borrower that it would not otherwise consider, the related loan is classified as a modified loan.  Management strives to identify borrowers in financial difficulty early and work with them to modify the loan to more affordable terms before their loan reaches nonaccrual status.  The Corporation modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay, or interest rate reductions.  When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.  These concessions are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral.   See Note 5 for more detail related to the accounting of modified loans.

Premises and Equipment

Land is carried at cost. Premises and equipment are carried at cost, less accumulated depreciation. The provision for depreciation for financial reporting has been made by using the straight-line method based on the estimated useful lives of the assets, which range from 10 to 31.5 years for buildings and 3 to 20 years for furniture and equipment.

Goodwill and Other Intangible Assets

Goodwill represents the excess purchase price paid over the fair value of the net assets acquired in a business combination. Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Impairment testing requires that the fair value of each of the Corporation’s reporting units be compared to the carrying amount of the reporting unit’s net assets, including goodwill. If the fair values of the reporting units exceed their book values, no write-down of recorded goodwill is required. If the fair value of a reporting unit is less than book value, an expense may be required to write-down the related goodwill to the proper carrying value. Any impairment would be realized through a reduction of goodwill or the intangible and an offsetting charge to non-interest expense. Annually, the Corporation performs an impairment test of goodwill as of December 31 of each year. During the year, any triggering event that occurs may affect goodwill and could require an impairment assessment. Determining the fair value of a reporting unit requires the Corporation to use a degree of subjectivity. The Corporation's annual impairment test of goodwill and other intangible assets did not identify any impairment.

Accounting guidance provides the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

Other intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset, or liability. Other intangible assets have finite lives and are reviewed for impairment annually. At December 31, 2023, other intangible assets included $0.6 million for the purchase of certain assets from a wealth company and $0.5 million for the purchase of certain assets of a mortgage company.  These assets are amortized over their estimated useful lives either on a straight-line or sum-of-the-years basis over varying periods that initially did not exceed 5 years.

Bank-Owned Life Insurance (“BOLI”)

BOLI policies are recorded at their cash surrender values. Changes in the cash surrender values are recorded as other operating income.

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Other Real Estate Owned (“OREO”)

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less the cost to sell at the date of foreclosure, with any losses charged to the ACL, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Changes in the valuation allowance, sales gains and losses, and revenue and expenses from holding and operating properties are all included in net expenses from other real estate owned.

Income Taxes

First United Corporation and its subsidiaries file a consolidated federal income tax return. Income taxes are accounted for using the asset and liability method. Under the asset and liability method, the deferred tax liability or asset is determined based on the difference between the financial statement and tax bases of assets and liabilities (temporary differences) and is measured at the enacted tax rates that will be in effect when these differences reverse. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.  Deferred tax expense is determined by the change in the net liability or asset for deferred taxes adjusted for changes in any deferred tax asset valuation allowance, or reserve.  This reserve was based on the portion of the tax asset for which it is more likely than not that a tax benefit will not be realized by the Corporation.

A tax provision is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.  The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examinations for tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

State corporate income tax returns are filed annually. Federal and state returns may be selected for examination by the Internal Revenue Service and the states where we file, subject to statutes of limitations. At any given point in time, the Corporation may have several years of filed tax returns that may be selected for examination or review by taxing authorities.

Interest and penalties on income taxes are recognized as a component of income tax expense.

Defined Benefit Plans

The defined benefit pension plan and supplemental executive retirement plan are accounted for in accordance with ASC Topic 715, Compensation – Retirement Benefits. Under the provisions of Topic 715, the defined benefit pension plan and the supplemental executive retirement plan are recognized as liabilities in the Consolidated Statement of Financial Condition, and unrecognized net actuarial losses, prior service costs and a net transition asset are recognized as a separate component of other comprehensive loss, net of tax. Actuarial gains and losses in excess of 10 percent of the greater of plan assets or the pension benefit obligation are amortized over a blend of future service of active employees and life expectancy of inactive participants. Refer to Note 15 for a further discussion of the pension plan and supplemental executive retirement plan obligations.

Statement of Cash Flows

Cash and cash equivalents are defined as cash and due from banks and interest-bearing deposits in banks in the Consolidated Statements of Cash Flows.  Cash flows are reported for customer loan and deposit transactions and interest-bearing deposits in banks.

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Trust Assets and Income

Assets held in an agency or fiduciary capacity are not the Bank’s assets and, accordingly, are not included in the Consolidated Statements of Financial Condition. Income from the Bank’s trust department represents fees charged to customers and recognized through revenue recognition.  Refer to Note 21 for further discussion.

Business Segments

The Corporation operates in two segments, as defined by ASC Topic 280, Segment Reporting:  community banking and trust and investment services. The Corporation, both in its entirety and by its business segments, is managed and evaluated on an ongoing basis by First United Corporation’s Board of Directors and executive management.   Refer to Note 22 for further discussion.

Stock Repurchases

Under the Maryland General Corporation Law, shares of capital stock that are repurchased are cancelled and treated as authorized but unissued shares. When a share of capital stock is repurchased, the payment of the repurchase price reduces stated capital by the par value of that share (currently, $0.01 for common stock), and any excess over par value reduces capital surplus. In 2023, the Corporation repurchased 82,098 shares of common stock at a weighted average price of $16.79 per share.  The Corporation did not repurchase shares of common stock during 2022.  

Recent Accounting Pronouncements

Newly Adopted Pronouncements in 2023

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326):  Measurement of Credit Losses on Financial Instruments, universally referred to as CECL.  The amendments in ASU, 2016-13 among other things, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.  Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.  Many of the loss estimation techniques applied previously are still permitted, although the inputs to those techniques changed to reflect the full amount of expected credit losses.  In addition, ASU 2016-13 amends the accounting for credit losses on purchased financial assets with credit deterioration.  For periodic report filers that are smaller reporting companies, such as the Corporation, ASU 2016-13 was effective as of January 1, 2023.

As part of its process of adopting the CECL accounting method, management implemented a third party software solution and determined the appropriate loan segments, methodologies, model assumptions and qualitative components.  Our CECL model includes portfolio loan segmentation based upon similar risk characteristics and both a quantitative and qualitative component of the calculation which incorporates a forecasting component of certain economic variables.  Our implementation plan also includes the assessment and documentation of appropriate processes, policies and internal controls.  Management had a third party independent consultant review and validate our CECL model.

In addition, ASU 2016-13 amends the accounting for credit losses on certain debt securities.  The Corporation did not record any allowance for credit losses (“ACL”) on its debt securities as a result of adopting this ASU.

The ultimate impact of adopting ASU 2016-13, and at each subsequent reporting period, is highly dependent on credit quality, macroeconomic forecasts and conditions, compensation of our loan portfolio, and other management judgments.  The Corporation adopted ASU 2016-13 using the modified retrospective method.  Results beginning after January 1, 2023 are presented under ASU 2016-13, while prior period amounts continue to be reported in accordance with previously applicable GAAP.  We made the accounting policy election to not measure an ACL for accrued interest receivables for loans and securities.  Accrued interest deemed uncollectible will be written off through interest income.

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The following table illustrates the day-one impact of adopting ASU 2016-13.

		January 1, 2023
(in thousands)		As Reported Under ASU 2016-13		Pre ASU 2016-13		Impact of ASU 2016-13 Adoption
Assets
Allowance for credit losses on loans
Commercial real estate	$	5,202	$	6,345	$	(1,143)
Acquisition and development		964		979		(15)
Commercial and industrial		4,179		2,845		1,334
Residentail mortgage		5,272		3,160		2,112
Consumer		1,085		877		208
Unallocated		-		430		(430)
Allowance for Credit Losses on Loans	$	16,702	$	14,636	$	2,066
Assets:
Investment securities- available for sale (at fair value)	$	125,889	$	125,889	$	-
Investment securities- held to maturity		245,659		245,659		-
Total loans held for investments, net		1,262,792		1,264,858		(2,066)
Net deferred tax asset		11,381		10,605		776
Liabilities:
Life-of-loss reserve on unfunded loan commitments	$	998	$	133	$	865
Equity:
Retained earnings	$	149,638	$	151,793	$	(2,155)

In connection with our adoption of ASU 2016-13, we made changes to our loan portfolio segments to align with the methodology of CECL.  Refer to Note 5, Loans and Related Allowance for Credit Losses, for further discussion of these portfolio segments.  The adoption of ASU 2016-13 resulted in a Day 1 adjustment of $2.9 million to our ACL, including an increase of $2.0 million to the ACL for loans and $0.9 million to the ACL for unfunded commitments.  The Corporation did not record any ACL on its available-for-sale or held-to-maturity investments upon adoption of ASC 326.  The Corporation recorded a net decrease to retained earnings of $2.2 million as of January 1, 2023 for the cumulative effect of adopting ASU 2016-13.  

In March 2022, FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326):  Troubled Debt Restructurings and Vintage Disclosures.  ASU 2022-02, which eliminates the troubled debt restructuring (“TDR”) accounting model for creditors that have adopted ASU 2016-13.  Due to the removal of the TDR accounting model, all loan modifications were evaluated to determine if they resulted in a new loan or a continuation of the existing loan.  The amendments in ASU 2022-02 also required that entities disclose current-period gross charge-offs by year of origination for loans and leases.  The amendments in ASU 2022-02 were effective January 1, 2023.  This change did not have a material effect on our consolidated financial statements.  Refer to Note 5, Loans and Related Allowance for Credit Losses for disclosures for debtors experiencing financial difficulty and for vintage disclosures related to gross charge-offs by loan segment by year of origination.

Recently issued but not yet effective Accounting Pronouncements

In March 2020, FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848):  Facilitation of Reference Rate Reform on Financial Reporting.”  The amendments in ASU 2020-04 provide optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting.  The amendments provide optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from the London Interbank Offered Rate (“LIBOR”) toward new interest rate benchmarks.  Modified contracts that meet certain scope guidance are eligible

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for relief from these modification accounting requirements in GAAP.  The optional guidance generally allows for the modified contract to be accounted for as a continuation of the existing contract and does not require contract remeasurement at the modification date or reassessment of a previous accounting determination.  The amendments in  ASU 2020-04 are effective for all entities between March 12, 2020 and December 31, 2022.  In December 2022, FASB issued ASU No. 2022-06: “Reference Rate Reform (Topic 848):  Deferral of the Sunset Date of Topic 848.”  The amendments in ASU 2020-06 defer the sunset date for applying the reference rate reform relief by two years to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

The Corporation has identified all known LIBOR exposures, created a plan to address the exposures, and continues to communicate with all stakeholders to transition to alternative reference rates.   As of December 31, 2023, the Corporation has no financial instruments tied to LIBOR and does not anticipate that the transition related to ASU 2020-04 will have a significant impact on our financial statements.

In November 2023, FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280); Improvement to Reportable Segment Disclosures.”  ASU 2023-07 expands segment disclosure requirements for public entities to require disclosure of significant segment expense and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.  ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within the fiscal years beginning after December 15, 2024.  Early adoption is permitted.  ASU 2023-07 is not expected to have a significant impact on our financial statements.

In December 2023, FASB issued ASU No. 2023-09, “Income Taxes (Topic 740):  Improvements to Income Tax Disclosures.”  ASU 2023-09 requires public business entities to disclose in their rate reconciliation table additional categories of information about Federal, state, and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold.  ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by Federal, state, and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things.  ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. ASU 2023-09 is not expected to have a significant impact on our financial statements.

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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. There were no anti-dilutive shares at December 31, 2023 or 2022.

The following table sets forth the calculation of basic and diluted earnings per common share for the years ended December 31, 2023 and 2022:

	2023					2022
			Average	Per Share				Average	Per Share
(in thousands, except for per share amount)	Income		Shares	Amount		Income		Shares	Amount
Basic Earnings Per Share:
Net income	$	15,060	6,686	$	2.25	$	25,048	6,650	$	3.77
Diluted Earnings Per Share:
Restricted stock units			15					11
Net income	$	15,060	6,701	$	2.25	$	25,048	6,661	$	3.76

3. Regulatory Capital Requirements

Banks and holding companies are subject to regulatory capital requirements administered by federal banking agencies.  Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices.  Capital amounts and classifications are also subject to qualitative judgments by regulators.  Failure to meet capital requirements can initiate regulatory action.  The net unrealized gain or loss on available for sale securities is included in computing regulatory capital.  Management believes that, as of December 31, 2023, the Corporation and Bank met all capital adequacy requirements to which they are subject.  

Prompt corrective action regulations provide five classifications:  well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition.  If adequately capitalized, regulatory approval is required to accept brokered deposits.  If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.  As of December 31, 2023, the most recent regulatory notification categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.  There are no conditions or events since that notification that management believes have changed the Bank’s category.

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The following table presents First United Bank & Trust’s capital ratios for years ended December 31, 2023 and 2022:

	Actual			For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Provisions
(in thousands)	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2023
Total Capital (to risk-weighted assets)		207,767	14.05%		118,292	8.00%		147,865	10.00%
Tier 1 Capital (to risk-weighted assets)		189,370	12.81%		88,719	6.00%		118,292	8.00%
Common Equity Tier 1 Capital (to risk-weighted assets)		189,370	12.81%		66,540	4.50%		96,112	6.50%
Tier 1 Capital (to average assets)		189,370	9.92%		76,233	4.00%		95,291	5.00%
	Actual			For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Provisions
(in thousands)	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2022
Total Capital (to risk-weighted assets)		196,442	14.37%		109,396	8.00%		136,745	10.00%
Tier 1 Capital (to risk-weighted assets)		181,673	13.29%		82,047	6.00%		109,396	8.00%
Common Equity Tier 1 Capital (to risk-weighted assets)		181,673	13.29%		61,535	4.50%		88,884	6.50%
Tier 1 Capital (to average assets)		181,673	10.01%		72,354	4.00%		90,443	5.00%

Federal and state banking regulations place certain restrictions on the amount of dividends paid and loans or advances made by the Bank to First United Corporation. The total amount of dividends that may be paid at any date is generally limited to the retained earnings of the Bank, and loans or advances are limited to 10% of the Bank’s capital stock and surplus on a secured basis. In addition, dividends paid by the Bank to First United Corporation would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements.

We adopted CECL effective January 1, 2023 and elected not to implement the regulatory agencies’ capital transition and opted to record the impact to our capital ratios immediately upon implementation.  Effective with the implementation of CECL, a $2.2 million adjustment, net of tax, was made to retained earnings.  The adjustment did not have a material impact to our capital ratios.

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4. Investment Securities

The following table shows a comparison of amortized cost and fair values of investment securities at December 31, 2023 and 2022:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
December 31, 2023
Available for Sale:
U.S. government agencies	$	7,000	$	—	$	966	$	—	$	6,034
Residential mortgage-backed agencies		24,781		—		4,218		—		20,563
Commercial mortgage-backed agencies		36,258		—		7,841		—		28,417
Collateralized mortgage obligations		19,725		—		3,369		—		16,356
Obligations of states and political subdivisions		10,486		15		189		—		10,312
Corporate Bonds		1,000		—		222		—		778
Collateralized debt obligations		18,671		—		3,962		—		14,709
Total available for sale	$	117,921	$	15	$	20,767	$	—	$	97,169
(in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value		Allowance for Credit Losses
December 31, 2023
Held to Maturity:
U.S. treasuries	$	37,462	$	—	$	243	$	37,219	$	—
U.S. government agencies		68,014		—		10,985		57,029		—
Residential mortgage-backed agencies		29,588		42		2,913		26,717		—
Commercial mortgage-backed agencies		21,413		—		5,361		16,052		—
Collateralized mortgage obligations		53,261		—		9,973		43,288		—
Obligations of states and political subdivisions		4,604		177		671		4,110		45
Total held to maturity	$	214,342	$	219	$	30,146	$	184,415	$	45

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(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
December 31, 2022
Available for Sale:
U.S. government agencies	$	11,044	$	—	$	1,582	$	9,462
Residential mortgage-backed agencies		45,052		—		7,651		37,401
Commercial mortgage-backed agencies		37,393		—		6,661		30,732
Collateralized mortgage obligations		25,828		—		4,784		21,044
Obligations of states and political subdivisions		10,848		4		360		10,492
Corporate Bonds		1,000		—		113		887
Collateralized debt obligations		18,664		—		2,793		15,871
Total available for sale	$	149,829	$	4	$	23,944	$	125,889
(in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value
December 31, 2022
Held to Maturity:
U.S. treasuries	$	37,204	$	—	$	1,593	$	35,611
U.S. government agencies		67,734		—		13,261		54,473
Residential mortgage-backed agencies		28,624		1		3,503		25,122
Commercial mortgage-backed agencies		22,389		—		4,568		17,821
Collateralized mortgage obligations		57,085		—		10,001		47,084
Obligations of states and political subdivisions		22,623		946		600		22,969
Total held to maturity	$	235,659	$	947	$	33,526	$	203,080

Proceeds from sales and calls of available-for-sale securities and the realized gains and losses for the years ended December 31, 2023 and 2022 are as follows:

(in thousands)	2023		2022
Proceeds	$	20,249	$	1,023
Gross realized gains		—		3
Gross realized losses		4,214		—

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The following table shows the Corporation’s securities with gross unrealized and unrecognized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized position, at December 31, 2023 and 2022:

	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, 2023
Available for Sale:
U.S. government agencies	$	—	$	—	—	$	6,034	$	966	2
Residential mortgage-backed agencies		—		—	—		20,563		4,218	3
Commercial mortgage-backed agencies		—		—	—		28,417		7,841	8
Collateralized mortgage obligations		—		—	—		16,356		3,369	9
Obligations of states and political subdivisions		1,445		20	2		6,668		169	3
Corporate Bonds		—		—	—		778		222	1
Collateralized debt obligations		—		—	—		14,709		3,962	9
Total available for sale	$	1,445	$	20	2	$	93,525	$	20,747	35
	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrecognized Losses		Number of Investments	Fair Value		Unrecognized Losses		Number of Investments
December 31, 2023
Held to Maturity:
U.S. treasuries	$	—	$	—	—	$	37,219	$	243	4
U.S. government agencies		—		—	—		57,029		10,985	9
Residential mortgage-backed agencies		—		—	—		22,613		2,913	35
Commercial mortgage-backed agencies		—		—	—		16,052		5,361	2
Collateralized mortgage obligations		—		—	—		43,288		9,973	8
Obligations of states and political subdivisions		—		—	—		2,205		671	1
Total held to maturity	$	—	$	—	—	$	178,406	$	30,146	59

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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, 2022
Available for Sale:
U.S. government agencies	$	4,598	$	402	1	$	4,865	$	1,180	2
Residential mortgage-backed agencies		—		—	—		37,401		7,651	5
Commercial mortgage-backed agencies		4,044		455	3		26,688		6,206	6
Collateralized mortgage obligations		1,600		210	5		19,444		4,574	5
Obligations of states and political subdivisions		8,906		360	7		—		—	—
Corporate Bonds		887		113	1
Collateralized debt obligations		—		—	—		15,871		2,793	9
Total available for sale	$	20,035	$	1,540	17	$	104,269	$	22,404	27
	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrecognized Losses		Number of Investments	Fair Value		Unrecognized Losses		Number of Investments
December 31, 2022
Held to Maturity:
U.S. treasuries	$	—	$	—	—	$	35,611	$	1,593	4
U.S. government agencies		38,883		9,617	7		15,591		3,644	2
Residential mortgage-backed agencies		16,893		1,425	29		8,138		2,078	7
Commercial mortgage-backed agencies		17,821		4,568	3		—		—	—
Collateralized mortgage obligations		47,083		10,001	8		—		—	—
Obligations of states and political subdivisions		2,269		600	1		—		—	—
Total held to maturity	$	122,949	$	26,211	48	$	59,340	$	7,315	13

As of December 31, 2023, the Corporation recorded ACL of approximately $45,000 related to one bond in the HTM security portfolio.  There was no ACL related to its AFS or HTM security portfolio at December 31, 2022.

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The amortized cost and estimated fair value of securities by contractual maturity at December 31, 2023 are shown in the following table. Actual maturities will 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.

(in thousands)	Amortized Cost		Fair Value
Contractual Maturity
Available for sale:
Due in one year or less	$	2,670	$	2,640
Due after one year through five years		5,250		4,952
Due after five years through ten years		2,410		2,168
Due after ten years		26,827		22,073
		37,157		31,833
Residential mortgage-backed agencies		24,781		20,563
Commercial mortgage-backed agencies		36,258		28,417
Collateralized mortgage obligations		19,725		16,356
Total available for sale	$	117,921	$	97,169
Held to Maturity:
Due in one year or less	$	37,462	$	37,219
Due after one year through five years		12,500		11,706
Due after five years through ten years		40,456		34,495
Due after ten years		19,662		14,938
		110,080		98,358
Residential mortgage-backed agencies		29,588		26,717
Commercial mortgage-backed agencies		21,413		16,052
Collateralized mortgage obligations		53,261		43,288
Total held to maturity	$	214,342	$	184,415

At December 31, 2023 and 2022, AFS investment securities with a fair value of $50.5 million and $49.7 million, respectively, and HTM investment securities with a book value of $141.8 million and $165.9 million were pledged as permitted or required to secure public deposits, for securities sold under agreements to repurchase as required or permitted by law and as collateral for borrowing capacity.

5. Loans and Related Allowance for Credit Losses

The following table summarizes the primary segments of the loan portfolio as of December 31, 2023 and December 31, 2022:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Total
December 31, 2023
Individually evaluated for impairment	$	826	$	—	$	—	$	2,137	$	—	$	2,963
Collectively evaluated for impairment		492,877		77,060		274,604		497,734		61,429		1,403,704
Total loans	$	493,703	$	77,060	$	274,604	$	499,871	$	61,429	$	1,406,667
December 31, 2022
Individually evaluated for impairment	$	2,262	$	356	$	—	$	3,880	$	—	$	6,498
Collectively evaluated for impairment		456,569		70,240		245,396		440,531		60,260		1,272,996
Total loans	$	458,831	$	70,596	$	245,396	$	444,411	$	60,260	$	1,279,494

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In the ordinary course of business, executive officers and directors of the Corporation, including their families and companies in which certain directors are principal owners, were loan customers of the Bank. Changes in the dollar amount of loans outstanding to officers, directors and their associates were as follows for the year ended December 31:

(in thousands)	2023
Balance at January 1	$	3,302
Loans or advances		481
Repayments		(937)
Balance at December 31	$	2,846

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 following table presents the classes of the loan portfolio at December 31, 2023 and December 31, 2022, summarized by the aging categories of performing loans and non-accrual loans.

(in thousands)	Current		30-59 Day Past Due		60-89 Days Past Due		90 Days+ Past Due		Total Past Due and still accruing		Non- Accrual		Total Loans
December 31, 2023
Commercial real estate
Non owner-occupied	$	296,343	$	—	$	—	$	—	$	—	$	227	$	296,570
All other CRE		196,123		411		—		—		411		599		197,133
Acquisition and development
1-4 family residential construction		18,224		—		—		—		—		—		18,224
All other A&D		58,723		—		—		—		—		113		58,836
Commercial and industrial		274,465		120		19		—		139		—		274,604
Residential mortgage
Residential mortgage - term		433,878		130		717		384		1,231		2,720		437,829
Residential mortgage – home equity		61,021		520		158		75		753		268		62,042
Consumer		60,576		463		277		84		824		29		61,429
Total	$	1,399,353	$	1,644	$	1,171	$	543	$	3,358	$	3,956	$	1,406,667
December 31, 2022
Commercial real estate
Non owner-occupied	$	269,971	$	—	$	—	$	—	$	—	$	87	$	270,058
All other CRE		188,715		—		—		—		—		58		188,773
Acquisition and development
1-4 family residential construction		19,637		—		—		—		—		—		19,637
All other A&D		50,813		—		—		—		—		146		50,959
Commercial and industrial		245,342		54		—		—		54		—		245,396
Residential mortgage
Residential mortgage - term		380,502		31		722		239		992		2,893		384,387
Residential mortgage – home equity		59,223		399		48		43		490		311		60,024
Consumer		59,789		363		83		25		471		—		60,260
Total	$	1,273,992	$	847	$	853	$	307	$	2,007	$	3,495	$	1,279,494

Non-accrual loans that have been subject to partial charge-offs totaled $0.1 million at December 31, 2023 and 2022.  Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $1.8 million at December 31, 2023.  There were no loans in the process of foreclosure at December 31, 2022.  

Effective January 1, 2023, the Corporation adopted the accounting guidance in ASU 2022-02, which eliminated the recognition and measurement of TDRs.  Due to the removal of the TDR designation, the Corporation evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a continuation of the existing loan.  Loan modifications to borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal

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forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the above.  Therefore, the disclosures related to loan restructurings are only for modifications that directly affect cash flows.

A loan that is considered a non-accrual or modified loan may be subject to the individually evaluated loan analysis if the commitment is $0.1 million or greater; otherwise, the modified loan remains in the appropriate segment in the ACL model and associated reserves are adjusted based on changes in the discounted cash flows resulting from the modification of the modified loan.  For a discussion with respect to reserve calculations regarding individually evaluated loans, refer to the “Nonrecurring Loans” section in Note 5, Fair Value Measurements.  There were no loan modifications made to borrowers facing financial difficulties in the year ending December 31, 2023.

The Corporation maintains an ACL at a level determined to be adequate to absorb expected credit losses associated with the Corporation’s financial instruments over the life of those instruments as of the balance sheet date.  The Corporation develops and documents a systematic ACL methodology based on the following portfolio segments: (i) commercial real estate, (ii) acquisition and development, (iii) commercial and industrial, (iv) residential mortgage, and (v) consumer.  The Corporation’s loan portfolio is segmented by homogeneous loan types that behave similarly to economic cycles.  The segmentation in the CECL model is different from the segmentation in the Incurred Loss model.  The following is a discussion of the key risks by portfolio segment that management assesses in preparing the ACL.

Commercial Real Estate- loans are secured by commercial purpose real estate, including both owner occupied properties and properties obtained for investment purposes, such as hotels, strip malls and apartments.  Operations of the individual projects as well as global cash flows of the debtors are the primary source of repayment of these loans.  The condition of the local economy is an important indicator of risk, but there are more specific risks depending on the collateral type as well as the business.

Acquisition and Development- loans include both commercial and consumer.  Commercial loans are made to finance construction of buildings or other structures, as well as to finance the acquisition and development of raw land for various purposes.  While the risk of these loans is generally confined to the construction period, if there are problems, the project may not be completed, and as such, may not provide sufficient cash flow on its own to service the debt or have sufficient value in a liquidation to cover the outstanding principal.  The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the type of project and the experience and resources of the developer.  Consumer loans are made for the construction of residential homes for which a binding sales contract exists and generally are for a period of time sufficient to complete construction.  Residential construction loans to individuals generally provide for the payment of interest only during the construction phase.  Credit risk for residential real estate construction loans can arise from construction delays, cost overruns, failure of the contractor to complete the project to specifications and economic conditions that could impact demand for supply of the property being constructed.

Commercial and Industrial- loans are made to operating companies or manufacturers for the purpose of production, operating capacity, accounts receivable, inventory or equipment financing.  Cash flow from the operations of the borrower is the primary source of repayment for these loans.  The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the industry of the borrower.  Collateral for these types of loans often do not have sufficient value in a distressed or liquidation scenario to satisfy the outstanding debt.  These loans are also made to local municipalities for various purposes including refinancing existing obligations, infrastructure up-fit and expansion, or to purchase new equipment.  The primary repayment source for local municipalities include the tax base of the municipality, specific revenue streams related to the infrastructure financed, and other business operations of the municipal authority.  The health and stability of state and local economies directly impacts each municipality’s tax basis and are important indicators of risk for this segment.  The ability of each municipality to increase taxes and fees to offset service requirements give this type of loan a very low risk profile in the continuum of the Corporation’s loan portfolio.

Residential mortgage- loans are secured by first and second liens such as home equity lines of credit and 1-4 family residential mortgages.  The primary source of repayment for these loans is the income of the borrower.  The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment.  

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The state of the local housing market can also have a significant impact on this segment because low demand and/or declining home values can limit the ability of borrowers to sell a property and satisfy debt.

Consumer- loans are made to individuals and may be either secured by assets other than 1-4 family residences or unsecured.  This segment includes automobile loans and unsecured loans and lines of credit.  The primary source of repayment for these loans is the income and assets of the borrower.  The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment.  The value of the collateral, if there is any, is less likely to be a source of repayment due to less certain collateral values.

The following table presents the amortized cost basis of collateral-dependent individually evaluated loans as of December 31, 2023:

	December 31, 2023
(in thousands)	Real Estate		Non-Accrual Loans with No Allowance
Commercial real estate	$	826	$	826
Residential mortgage		2,137		2,137
Total Loans	$	2,963	$	2,963

Effective January 1, 2023, the Corporation adopted the accounting guidance in ASU 2022-02, which eliminates the recognition and measurement of a TDR.  Due to the removal of the TDR designation, the Corporation evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a continuation of the existing loan.  Loan modifications to borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contracted cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the listed modifications.  Therefore, the disclosures related to loan restructurings are only for modifications that directly affect cash flows.  

A loan that is considered a modified loan may be subject to the individually evaluated loan analysis if the commitment is $0.1 million or greater; otherwise, the modified loan remains in the appropriate segment of the ACL model and associated reserves are adjusted based on changes in the discounted cash flows resulting from the modification of the modified loan.  As of December 31, 2023, there were no modified loans that were classified as individually evaluated loans.

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The following tables present the activity in the ACL and ALL for the years ended December 31, 2023 and 2022:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Unallocated		Total
Beginning balance at January 1, 2023 prior to adoption of ASC 326	$	6,345	$	979	$	2,845	$	3,160	$	877	$	430	$	14,636
Impact of adopting ASC 326		(1,143)		(15)		1,334		2,112		208		(430)		2,066
Loan charge-offs		(87)		—		(423)		(55)		(874)		—		(1,439)
Recoveries collected		7		11		186		73		240		—		517
Credit loss (credit)/expense		(2)		(35)		(225)		1,484		478		—		1,700
ACL balance at December 31, 2023	$	5,120	$	940	$	3,717	$	6,774	$	929	$	—	$	17,480
ALL balance at January 1, 2022	$	6,032	$	2,615	$	2,460	$	3,484	$	934	$	430	$	15,955
Charge-offs		—		(20)		(134)		(46)		(921)		—		(1,121)
Recoveries		1		22		93		184		145		—		445
Loan loss expense/(credit)		312		(1,638)		426		(462)		719		—		(643)
ALL balance at December 31, 2022	$	6,345	$	979	$	2,845	$	3,160	$	877	$	430	$	14,636

The Corporation’s methodology for estimating the ACL includes:

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

Specific Analysis.  A specific reserve analysis is applied to certain individually evaluated loans.  These loans are evaluated quarterly generally based on collateral value, observable market value or the present value of expected future cash flows.  A specific reserve is established if the fair value is less than the loan balance.  A charge-off is recognized when the loss is quantifiable.  Individually evaluated loans not specifically analyzed reside in the Quantitative Analysis.

Quantitative Analysis.  The Corporation elected to use discounted cash flows.  Economic forecasts include but are not limited to unemployment, the Consumer Price Index, the Housing Affordability Index, and Gross State Product.  These forecasts are assumed to revert to the long term average and are utilized in the model to estimate the probability of default and the loss given default is the estimated loss rate, which varies over time.  The estimated loss rate is applied within the appropriate periods in the cash flow model to determine the net present value.  Net present value is also impacted by assumption related to the duration between default and recovery.  The reserve is based on the difference between the summation of the principal balances taking amortized costs into consideration and the summation of the net present values.

Qualitative Analysis.  Based on management’s review and analysis of internal, external and model risks, management may adjust the model output.  Management reviews the peaks and troughs of the model’s calibrations, taking into account economic forecasts to develop guardrails that serve as the basis for determining the reasonableness of the model’s output and makes adjustments as necessary.  This process challenges unexpected variability resulting from outputs beyond the model’s calibrations that appear to be unreasonable.  Management also enhances the calculation through the use of Moody’s economic forecast data in its calculation. Additionally, management may adjust the economic forecast if it is incompatible with known market conditions based on management’s experience and perspective.

The ACL is based on estimates, and actual losses may vary from current estimates.  Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ACL that is representative of the risk found in the components of the portfolio at any given date.

91

Credit Quality Indicators:

The Corporation’s portfolio grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all.  The Corporation’s internal credit risk grading system is based on debt service coverage, collateral values and other subjective factors.  Mortgage and consumer loans are defaulted to pass grade until a loan migrates to past due status.  

The Corporation has a loan review policy and annual scope report that details the level of loan review for loans in a given year.  The annual loan review provides the Credit Risk Committee with an independent analysis of the following:  (i) credit quality of the loan portfolio, (ii) compliance with loan policy, (iii) adequacy of documentation in credit files and (iv) validity of risk ratings.  

The Corporation’s internally assigned grades are as follows:

Pass-  The Corporation uses six grades of pass, including its watch rating.  Generally, a pass rating indicates that the loan is currently performing and is of high quality.

Special Mention- Assets with potential weaknesses that warrant management’s close attention and if left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date.

Substandard-  Assets that are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any.  Assets so classified have a well-defined weakness, or weaknesses that jeopardize the liquidation of the debt.  Such assets are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful- Assets with all weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.

Loss- Assets considered of such little value that its continuance on the books is not warranted.  This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical to defer writing off this basically worthless asset even though partial recovery may be affected in the future.

The ability of borrowers to repay commercial loans is dependent upon the success of their business and general economic conditions.  Due to the greater potential for loss within our commercial portfolio, we monitor the commercial loan portfolio through an internal risk rating system.  Loan risk ratings are assigned based upon the creditworthiness of the borrower and are reviewed on an ongoing basis according to our internal policies.  Loans rated special mention or substandard have potential or well-defined weaknesses not generally found in high quality, performing loans, and require attention from management to limit loss.

92

The following tables present loan balances by year of origination and internally assigned risk ratings for our portfolio segments as of dates presented:

															Total
											2018 and				Portfolio
(in thousands)	2023		2022		2021		2020		2019		Prior		Revolving		Loans
December 31, 2023
Commercial real estate:
Non-owner-occupied
Pass	$	23,511	$	65,878	$	30,332	$	54,270	$	40,575	$	65,134	$	1,138	$	280,838
Special Mention		—		—		—		—		—		4,331		—		4,331
Substandard		—		—		—		—		—		11,401		—		11,401
Total non-owner occupied		23,511		65,878		30,332		54,270		40,575		80,866		1,138		296,570
Current period gross charge-offs		—		—		—		—		—		87		—		87
All other CRE
Pass		30,130		27,379		27,042		20,691		22,879		60,054		4,495		192,670
Special Mention		—		—		—		644		—		—		—		644
Substandard		—		—		—		—		1,847		1,372		600		3,819
Total all other CRE		30,130		27,379		27,042		21,335		24,726		61,426		5,095		197,133
Current period gross charge-offs		—		—		—		—		—		—		—		—
Acquisition and development:
1-4 family residential construction
Pass		13,745		3,446		—		—		—		—		1,033		18,224
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total acquisition and development		13,745		3,446		—		—		—		—		1,033		18,224
Current period gross charge-offs		—		—		—		—		—		—		—		—
All other A&D
Pass		12,184		25,099		2,966		3,046		1,301		9,946		4,181		58,723
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		113		—		113
Total all other A&D		12,184		25,099		2,966		3,046		1,301		10,059		4,181		58,836
Current period gross charge-offs		—		—		—		—		—		—		—		—
Commercial and industrial:
Pass		52,004		66,559		24,387		11,753		8,872		10,052		78,992		252,619
Special Mention		558		—		—		—		—		—		—		558
Substandard		—		9,352		1,854		6,806		98		837		2,480		21,427
Total commercial and industrial		52,562		75,911		26,241		18,559		8,970		10,889		81,472		274,604
Current period gross charge-offs		100		103		35		166		—		19		—		423
Residential mortgage:
Residential mortgage - term
Pass		51,625		94,723		88,835		38,228		25,375		130,402		1,577		430,765
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		138		929		17		98		5,825		57		7,064
Total residential mortgage - term		51,625		94,861		89,764		38,245		25,473		136,227		1,634		437,829
Current period gross charge-offs		—		—		—		—		—		13		—		13
Residential mortgage - home equity
Pass		1,127		4,657		864		475		286		489		53,467		61,365
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		38		—		16		623		677
Total residential mortgage - home equity		1,127		4,657		864		513		286		505		54,090		62,042
Current period gross charge-offs		—		—		—		—		—		42		—		42
Consumer:
Pass		18,299		10,616		6,361		2,206		510		20,365		2,873		61,230
Special Mention		—		—		—		—		—		—		—		—
Substandard		14		35		113		23		6		2		6		199
Total consumer		18,313		10,651		6,474		2,229		516		20,367		2,879		61,429
Current period gross charge-offs		236		223		74		8		4		329		—		874
Total Portfolio Loans
Pass		202,625		298,357		180,787		130,669		99,798		296,442		147,756		1,356,434
Special Mention		558		—		—		644		—		4,331		—		5,533
Substandard		14		9,525		2,896		6,884		2,049		19,566		3,766		44,700
Total Portfolio Loans	$	203,197	$	307,882	$	183,683	$	138,197	$	101,847	$	320,339	$	151,522	$	1,406,667
Current YTD Period:
Current period gross charge-offs	$	336	$	326	$	109	$	174	$	4	$	490	$	—	$	1,439

93

															Total
											2017 and				Portfolio
(in thousands)	2022		2021		2020		2019		2018		Prior		Revolving		Loans
December 31, 2022
Commercial real estate:
Non-owner-occupied
Pass	$	67,429	$	31,710	$	48,421	$	41,221	$	19,414	$	42,069	$	1,570	$	251,834
Special Mention		—		—		—		—		—		6,289		—		6,289
Substandard		—		—		—		—		—		11,935		—		11,935
Total non-owner occupied		67,429		31,710		48,421		41,221		19,414		60,293		1,570		270,058
Current period gross charge-offs		—		—		—		—		—		—		—		—
All other CRE
Pass		24,655		26,947		22,906		27,213		8,873		67,691		4,790		183,075
Special Mention		—		1,111		—		—		—		—		—		1,111
Substandard		—		—		—		3,006		—		357		1,224		4,587
Total all other CRE		24,655		28,058		22,906		30,219		8,873		68,048		6,014		188,773
Current period gross charge-offs		—		—		—		—		—		—		—		—
Acquisition and development:
1-4 family residential construction
Pass		15,629		1,453		151		—		—		210		2,194		19,637
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total acquisition and development		15,629		1,453		151		—		—		210		2,194		19,637
Current period gross charge-offs		—		—		—		—		—		20		—		20
All other A&D
Pass		18,733		4,979		9,755		1,408		558		12,961		2,419		50,813
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		146		—		146
Total all other A&D		18,733		4,979		9,755		1,408		558		13,107		2,419		50,959
Current period gross charge-offs		—		—		—		—		—		—		—		—
Commercial and industrial:
Pass		83,608		30,451		15,982		12,707		5,013		9,528		63,668		220,957
Special Mention		—		2,555		—		—		—		338		2,134		5,027
Substandard		8,923		—		7,167		173		634		311		2,204		19,412
Total commercial and industrial		92,531		33,006		23,149		12,880		5,647		10,177		68,006		245,396
Current period gross charge-offs		—		97		34		3		—		—		—		134
Residential mortgage:
Residential mortgage - term
Pass		64,930		93,665		42,784		27,120		14,132		133,397		2,306		378,334
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		16		237		143		5,634		23		6,053
Total residential mortgage - term		64,930		93,665		42,800		27,357		14,275		139,031		2,329		384,387
Current period gross charge-offs		—		—		—		—		—		28		—		28
Residential mortgage - home equity
Pass		5,739		957		538		328		97		478		51,232		59,369
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		44		—		21		40		550		655
Total residential mortgage - home equity		5,739		957		582		328		118		518		51,782		60,024
Current period gross charge-offs		—		—		—		—		12		6		—		18
Consumer:
Pass		16,748		10,495		3,845		1,596		687		24,096		2,654		60,121
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		92		27		9		7		—		4		139
Total consumer		16,748		10,587		3,872		1,605		694		24,096		2,658		60,260
Current period gross charge-offs		36		494		18		37		11		40		—		636
Total Portfolio Loans
Pass		297,471		200,657		144,382		111,593		48,774		290,430		130,833		1,224,140
Special Mention		—		3,666		—		—		—		6,627		2,134		12,427
Substandard		8,923		92		7,254		3,425		805		18,423		4,005		42,927
Total Portfolio Loans	$	306,394	$	204,415	$	151,636	$	115,018	$	49,579	$	315,480	$	136,972	$	1,279,494
Current YTD Period:
Current period gross charge-offs	$	36	$	591	$	52	$	40	$	23	$	94	$	—	$	836

94

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.

The following tables present loan balances by year of origination segregated by performing and non-performing loans for the periods presented:

															Total
											2018 and				Portfolio
(in thousands)	2023		2022		2021		2020		2019		Prior		Revolving		Loans
December 31, 2023
Commercial real estate:
Non-owner-occupied
Performing	$	23,511	$	65,878	$	30,332	$	54,270	$	40,575	$	80,639	$	1,138	$	296,343
Nonperforming		—		—		—		—		—		227		—		227
Total non-owner occupied		23,511		65,878		30,332		54,270		40,575		80,866		1,138		296,570
All other CRE
Performing		30,130		27,379		27,042		21,335		24,726		60,827		5,095		196,534
Nonperforming		—		—		—		—		—		599		—		599
Total all other CRE		30,130		27,379		27,042		21,335		24,726		61,426		5,095		197,133
Acquisition and development:
1-4 family residential construction
Performing		13,745		3,446		—		—		—		—		1,033		18,224
Nonperforming		—		—		—		—		—		—		—		—
Total acquisition and development		13,745		3,446		—		—		—		—		1,033		18,224
All other A&D
Performing		12,184		25,099		2,966		3,046		1,301		9,946		4,181		58,723
Nonperforming		—		—		—		—		—		113		—		113
Total all other A&D		12,184		25,099		2,966		3,046		1,301		10,059		4,181		58,836
Commercial and industrial:
Performing		52,562		75,911		26,241		18,559		8,970		10,889		81,472		274,604
Nonperforming		—		—		—		—		—		—		—		—
Total commercial and industrial		52,562		75,911		26,241		18,559		8,970		10,889		81,472		274,604
Residential mortgage:
Residential mortgage - term
Performing		51,625		94,722		89,629		38,245		25,375		133,526		1,603		434,725
Nonperforming		—		139		135		—		98		2,701		31		3,104
Total residential mortgage - term		51,625		94,861		89,764		38,245		25,473		136,227		1,634		437,829
Residential mortgage - home equity
Performing		1,127		4,657		864		475		286		488		53,802		61,699
Nonperforming		—		—		—		38		—		17		288		343
Total residential mortgage - home equity		1,127		4,657		864		513		286		505		54,090		62,042
Consumer:
Performing		18,304		10,616		6,405		2,229		516		20,367		2,879		61,316
Nonperforming		9		35		69		—		—		—		—		113
Total consumer		18,313		10,651		6,474		2,229		516		20,367		2,879		61,429
Total Portfolio Loans
Performing		203,188		307,708		183,479		138,159		101,749		316,682		151,203		1,402,168
Nonperforming		9		174		204		38		98		3,657		319		4,499
Total Portfolio Loans	$	203,197	$	307,882	$	183,683	$	138,197	$	101,847	$	320,339	$	151,522	$	1,406,667

95

															Total
											2017 and				Portfolio
(in thousands)	2022		2021		2020		2019		2018		Prior		Revolving		Loans
December 31, 2022
Commercial real estate:
Non-owner-occupied
Performing	$	67,429	$	31,710	$	48,421	$	41,221	$	19,414	$	60,206	$	1,570	$	269,971
Nonperforming		—		—		—		—		—		87		—		87
Total non-owner occupied		67,429		31,710		48,421		41,221		19,414		60,293		1,570		270,058
All other CRE
Performing		24,655		28,058		22,906		30,219		8,873		67,990		6,014		188,715
Nonperforming		—		—		—		—		—		58		—		58
Total all other CRE		24,655		28,058		22,906		30,219		8,873		68,048		6,014		188,773
Acquisition and development:
1-4 family residential construction
Performing		15,629		1,453		151		—		—		210		2,194		19,637
Nonperforming		—		—		—		—		—		—		—		—
Total acquisition and development		15,629		1,453		151		—		—		210		2,194		19,637
All other A&D
Performing		18,733		4,979		9,755		1,408		558		12,962		2,419		50,814
Nonperforming		—		—		—		—		—		145		—		145
Total all other A&D		18,733		4,979		9,755		1,408		558		13,107		2,419		50,959
Commercial and industrial:
Performing		92,531		33,006		23,149		12,880		5,647		10,177		68,006		245,396
Nonperforming		—		—		—		—		—		—		—		—
Total commercial and industrial		92,531		33,006		23,149		12,880		5,647		10,177		68,006		245,396
Residential mortgage:
Residential mortgage - term
Performing		64,930		93,665		42,800		27,120		14,198		136,228		2,313		381,254
Nonperforming		—		—		—		237		77		2,803		16		3,133
Total residential mortgage - term		64,930		93,665		42,800		27,357		14,275		139,031		2,329		384,387
Residential mortgage - home equity
Performing		5,739		957		538		328		115		478		51,515		59,670
Nonperforming		—		—		44		—		3		40		267		354
Total residential mortgage - home equity		5,739		957		582		328		118		518		51,782		60,024
Consumer:
Performing		16,748		10,581		3,872		1,605		694		24,077		2,658		60,235
Nonperforming		—		6		—		—		—		19		—		25
Total consumer		16,748		10,587		3,872		1,605		694		24,096		2,658		60,260
Total Portfolio Loans
Performing		306,394		204,409		151,592		114,781		49,499		312,328		136,689		1,275,692
Nonperforming		—		6		44		237		80		3,152		283		3,802
Total Portfolio Loans	$	306,394	$	204,415	$	151,636	$	115,018	$	49,579	$	315,480	$	136,972	$	1,279,494

96

6. Other Real Estate Owned

The following table presents the components of OREO, net of related valuation allowance, as of December 31, 2023 and 2022:

(in thousands)	2023		2022
Acquisition and development	$	4,281	$	4,670
Residential mortgage		212		63
Total OREO	$	4,493	$	4,733

The following table presents the activity in the OREO valuation allowance for the years ended December 31, 2023 and 2022:

(in thousands)	2023		2022
Balance January 1	$	453	$	453
Fair value write-downs, net		23		—
Sales of OREO		(163)		—
Balance December 31	$	313	$	453

The following table presents the components of OREO expenses, net, for the years ended December 31, 2023 and 2022:

(in thousands)	2023		2022
Gains on real estate, net	$	(599)	$	—
Fair value write-down		23		—
Expenses, net		491		595
Rental and other income		(4)		(5)
Total OREO (income)/expense, net	$	(89)	$	590

7. Premises and Equipment

The following table presents the components of premises and equipment at December 31, 2023 and 2022:

(in thousands)	2023		2022
Land	$	7,745	$	7,753
Land improvements		1,384		1,548
Premises		34,922		35,972
Furniture and equipment		18,873		20,117
		62,924		65,390
Less accumulated depreciation		(31,465)		(30,442)
Total	$	31,459	$	34,948

The Corporation recorded depreciation expense of $3.8 million and $3.1 million for the years ended December 31, 2023 and 2022, respectively.  

8. Leases

Substantially all of the leases in which the Corporation is the lessee are comprised of real estate property for branches, ATM locations, and office equipment with terms extending through 2030. All of the Corporation’s leases are classified as operating leases. The present value of lease payments is reported as a lease liability and right of use asset on the Corporation’s Consolidated Statement of Financial Condition.

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The following table represents the Consolidated Statements of Financial Condition classification of the Corporation’s right-of-use assets and lease liabilities. The Corporation elected not to include short-term leases (i.e., leases with remaining terms of 12 months or less), or equipment leases that were deemed immaterial on the Consolidated Statement of Financial Condition.

(in thousands)	December 31, 2023		December 31, 2022
Lease Right-of Use Assets
Operating lease right-of-use assets	$	1,367	$	1,898
Lease Liabilities
Operating lease liabilities	$	1,556	$	2,373

In calculating the present value of the lease payments, the Corporation has utilized its incremental borrowing rate based on electing the original lease term to account for each lease component.

The following table presents the weighted-average lease term and discount rate for operating leases at December 31, 2023:

	December 31, 2023	December 31, 2022
Weighted-average remaining lease term
Operating leases	5.33 years	6.17 years
Weighted-average discount rate
Operating leases	5.16%	5.00%

The Corporation elected, for all classes of underlying assets, to separate lease and non-lease components. Total operating lease expense was $0.6 million and $0.5 million for the years ended December 31, 2023 and December 31, 2022, respectively.  Short-term lease expense was approximately $20 thousand for the year ended December 31, 2023 and 2022.

In the fourth quarter of 2023, the Bank announced the closure of four of its branches with an effective closing date of February 29, 2024.   In conjunction with the announced branch closures, the Bank recognized accelerated lease expense of approximately $0.1 million in 2023.

Future minimum payments for operating leases with initial or remaining terms of one year or more at December 31, 2023 were as follows:

(in thousands)	Amount
2024	$	368
2025		356
2026		283
2027		285
2028		240
Thereafter		270
Total future minimum lease payments		1,802
Amounts representing interest		(246)
Present value of net future minimum lease payments	$	1,556

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9. Deposits

The following table summarizes deposits as of December 31, 2023 and 2022:

(in thousands)	December 31, 2023			December 31, 2022
		Balance	Percent		Balance	Percent
Non-Interest-bearing deposits:	$	427,670	28%	$	506,613	32%
Interest-bearing deposits:
Demand		350,860	22%		327,685	21%
Money market		385,649	25%		365,192	23%
Savings deposits		191,265	12%		250,720	16%
Time deposits- retail		165,533	11%		120,523	8%
Time deposits- brokered		30,000	2%		—	0%
Total Deposits	$	1,550,977	100%	$	1,570,733	100%

Time deposits that meet or exceed the FDIC insurance limit of $250,000 at December 31, 2023 and 2022 were $48.8 million and $37.5 million, respectively.  At December 31, 2023 and 2022, $0.4 million and $0.3 million, respectively, of deposit overdrafts were re-classified as loans.

The following is a summary of the scheduled maturities of all time deposits maturing within years ended  December 31:

(in thousands)	Time deposits- brokered		Time deposits- retail
2024	$	30,000	$	146,683
2025		—		13,990
2026		—		4,154
2027		—		491
2028		—		170
Thereafter		—		45
Total	$	30,000	$	165,533

In the ordinary course of business, executive officers and directors of the Corporation, including their families and companies in which certain directors are principal owners, were deposit customers of the Bank. At December 31, 2023, executive officers and directors had approximately $17.2 million in deposits with the Bank compared to $14.0 million at December 31, 2022.

10. Borrowed Funds

The following is a summary of short-term borrowings at December 31, 2023 and 2022 with original maturities of less than one year:

(in thousands)	2023		2022
Securities sold under agreements to repurchase:
Outstanding at end of year	$	45,418	$	64,565
Weighted average interest rate at year end		0.27%		0.12%
Maximum amount outstanding as of any month end	$	59,777	$	75,912
Average amount outstanding	$	50,498	$	63,182
Approximate weighted average rate during the year		0.24%		0.12%

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Repurchase agreements were secured by $61.6 million in investment securities at December 31, 2023 and $74.6 million at December 31, 2022.

The following is a summary of long-term borrowings at December 31, 2023 and 2022 with original maturities exceeding one year:

(in thousands)	2023		2022
FHLB advances bearing fixed interest rates ranging from 4.53% to 4.69% at December 31, 2023	$	80,000	$	—
Junior subordinated debt	$	30,929	$	30,929
Total long-term debt	$	110,929	$	30,929

In March 2004, Trust I and Trust II issued preferred securities with an aggregate liquidation amount of $30.0 million to third-party investors and issued common equity with an aggregate liquidation amount of $0.9 million to First United Corporation. These Trusts used the proceeds of these offerings to purchase an equal amount of TPS Debentures, as follows:

$20.6 million—floating rate payable quarterly based on three-month Secured Overnight Financing Rate (“SOFR”) plus 275 basis points (8.39% at December 31, 2023), maturing in 2034, became redeemable five years after issuance at First United Corporation’s option.

$10.3 million--floating rate payable quarterly based on three-month SOFR plus 275 basis points (8.39% at December 31, 2023) maturing in 2034, became redeemable five years after issuance at First United Corporation’s option.

The TPS Debentures issued to each of the Trusts represent the sole assets of that Trust, and payments of the TPS Debentures by First United Corporation are the only sources of cash flow for the Trust. First United Corporation has the right, without triggering a default, to defer interest on all of the TPS Debentures for up to 20 quarterly periods, in which case distributions on the preferred securities will also be deferred. Should this occur, the Corporation may not pay dividends or distributions on, or repurchase, redeem or acquire any shares of its capital stock.

The contractual maturities of the FHLB advances outstanding at December 31, 2023 are March 15, 2024 and September 13, 2024.  The contractual maturities of the junior subordinated debt outstanding at December 31, 2023 is 2034.

The Bank has a borrowing capacity agreement with the FHLB in an amount equal to 30% of the Bank’s assets. The available line of credit equaled $571.4  million at December 31, 2023 and $544.1 million at December 31, 2022. This line of credit, which can be used for both short and long-term funding, can only be utilized to the extent of available collateral. The line is secured by certain qualified mortgage, commercial and home equity loans as follows (in thousands):

1-4 family mortgage loans	$	144,572
Commercial loans		52,753
Multi-family loans		11,453
Home equity loans		19,160
Total available borrowing capacity		227,938
Less: borrowings and letters of credit outstanding		(82,500)
	$	145,438

The Bank also has various unsecured lines of credit totaling $140.0 million with various financial institutions and a $12.2 million secured line with the Federal Reserve to meet daily liquidity requirements.Additionally, the Bank had $69.5 million in available in a secured line of credit with the FRB through the BTFP.  At December 31, 2023 and 2022, there were no borrowings under these credit facilities.

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11. Goodwill and Other Intangible Assets

The gross carrying amounts and accumulated amortization of intangible assets and goodwill are presented at December 31, 2023 and 2022 in the following table:

	December 31, 2023							December 31, 2022
(in thousands)	Gross Carrying Amount			Accumulated Amortization	Net Carrying Amount		Weighted Average Remaining Life	Gross Carrying Amount			Accumulated Amortization	Net Carrying Amount		Weighted Average Remaining Life
Amortizing intangible assets:
Intangible assets associated with purchase of wealth portfolio	$	1,048	$	419	$	629	3.00 years	$	1,048	$	209	$	839	4.00 years
Intangible assets associated with acquisition of mortgage company		600		130		470	3.92 years		600		10		590	4.92 years
Total Other intangibles	$	1,648	$	549	$	1,099	3.38 years	$	1,648	$	219	$	1,429	4.38 years
Goodwill	$	11,004			$	11,004		$	11,004			$	11,004

The following table presents the estimated future amortization expense for amortizing intangible assets within the years ending December 31:

(in thousands)	Amount
2024	$	330
2025		330
2026		330
2027		109
Total amortizing intangible assets	$	1,099

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12. Accumulated Other Comprehensive Loss (“AOCL”)

The following table presents the changes in each component of accumulated other comprehensive loss for the years ended December 31, 2023 and 2022:

(in thousands)	Investment securities- with credit related impairment AFS		Investment securities- all other AFS		Investment securities- HTM		Cash Flow Hedge		Pension Plan		SERP		Total
Accumulated OCL, net:
Balance - January 1, 2022	$	(949)	$	(5,749)	$	(134)	$	(319)	$	(18,108)	$	(2,055)	$	(27,314)
Other comprehensive income/(loss) before reclassifications		(614)		(10,629)		(6,120)		1,116		684		2,430		(13,133)
Amounts reclassified from accumulated   other comprehensive loss		(148)		(2)		551		—		821		199		1,421
Balance - December 31, 2022	$	(1,711)	$	(16,380)	$	(5,703)	$	797	$	(16,603)	$	574	$	(39,026)
Other comprehensive (loss)/income before reclassifications		(622)		61		—		(228)		1,605		(1,802)		(986)
Amounts reclassified from accumulated   other comprehensive loss		(149)		3,102		502		—		735		(5)		4,185
Balance - December 31, 2023	$	(2,482)	$	(13,217)	$	(5,201)	$	569	$	(14,263)	$	(1,233)	$	(35,827)

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The following tables present the components of other comprehensive (loss)/income for the years ended December 31, 2023 and 2022:

Components of Other Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the year ended December 31, 2023
Available for sale (AFS) securities with credit-related impairment
Unrealized holding losses	$	(845)	$	223	$	(622)
Less: accretable yield recognized in income		202		(53)		149
Net unrealized losses on investments with credit-related impairment		(1,047)		276		(771)
Available for sale securities – all other:
Unrealized holding gains		83		(22)		61
Less: losses recognized in income		(4,214)		1,112		(3,102)
Net unrealized gains on all other AFS securities		4,297		(1,134)		3,163
Held to maturity securities:
Unrealized holding losses on securities transferred to held to maturity		—		—		—
Less: amortization recognized in income		(682)		180		(502)
Net unrealized gains on HTM securities		682		(180)		502
Cash flow hedges:
Unrealized holding losses		(310)		82		(228)
Net unrealized losses on cash flow hedges		(310)		82		(228)
Pension Plan:
Unrealized net actuarial gain		2,180		(575)		1,605
Less: amortization of unrecognized loss		(998)		263		(735)
Net pension plan liability adjustment		3,178		(838)		2,340
SERP:
Unrealized net actuarial loss		(2,448)		646		(1,802)
Less: amortization of unrecognized loss		7		(2)		5
Net SERP liability adjustment		(2,455)		648		(1,807)
Other comprehensive income	$	4,345	$	(1,146)	$	3,199

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Components of Other Comprehensive Loss (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the year ended December 31, 2022
Available for sale (AFS) securities with credit related impairment:
Unrealized holding losses	$	(835)	$	221	$	(614)
Less: accretable yield recognized in income		202		(54)		148
Net unrealized losses on investments with credit related impairment		(1,037)		275		(762)
Available for sale securities – all other:
Unrealized holding losses		(22,792)		6,043		(16,749)
Unrealized holding losses on securities transferred from available for sale to held to maturity		8,328		(2,208)		6,120
Less: gains recognized in income		3		(1)		2
Net unrealized losses on all other AFS securities		(14,467)		3,836		(10,631)
Held to maturity securities:
Unrealized holding losses on securities transferred to held to maturity		(8,328)		2,208		(6,120)
Less: gains recognized in income		91		(24)		67
Less: amortization recognized in income		(841)		223		(618)
Net unrealized losses on HTM securities		(7,578)		2,009		(5,569)
Cash flow hedges:
Unrealized holding gains		1,521		(405)		1,116
Net unrealized gains on cash flow hedges		1,521		(405)		1,116
Pension Plan:
Unrealized net actuarial gain		931		(247)		684
Less: amortization of unrecognized loss		(1,117)		296		(821)
Net pension plan liability adjustment		2,048		(543)		1,505
SERP:
Unrealized net actuarial gain		3,307		(877)		2,430
Less: amortization of unrecognized loss		(271)		72		(199)
Net SERP liability adjustment		3,578		(949)		2,629
Other comprehensive loss	$	(15,935)	$	4,223	$	(11,712)

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The following tables present the details of accumulated other comprehensive loss components for the years ended December 31, 2023 and 2022:

Details of Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Loss		Affected Line Item in the Statement
(in thousands)	2023		Where Net Income is Presented
Net unrealized losses on investment securities with credit related impairment:
Accretable Yield	$	202	Interest income on taxable investment securities
Taxes		(53)	Provision for income tax expense
	$	149	Net of tax
Net unrealized losses on available for sale   investment securities - all other:
Loss on sales	$	(4,214)	Net gains
Taxes		1,112	Provision for income tax expense
	$	(3,102)	Net of tax
Net unrealized gains on held to maturity   investment securities:
Amortization	$	(682)	Interest income on taxable investment securities
Taxes		180	Provision for income tax expense
	$	(502)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss	$	(998)	Other expense
Taxes		263	Provision for income tax expense
	$	(735)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized loss	$	7	Other expense
Taxes		(2)	Provision for income tax expense
	$	5	Net of tax
Total reclassifications for the period	$	(4,185)	Net of tax

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Details of Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss		Affected Line Item in the Statement
(in thousands)	2022		Where Net Income is Presented
Net unrealized losses on investment securities with credit related impairment:
Accretable Yield	$	202	Interest income on taxable investment securities
Taxes		(54)	Provision for income tax expense
	$	148	Net of tax
Net unrealized gains on available for sale   investment securities - all other:
Gains on sales	$	3	Net gains
Taxes		(1)	Provision for income tax expense
	$	2	Net of tax
Net unrealized gains on held to maturity   investment securities:
Amortization	$	(841)	Interest income on taxable investment securities
Gains recognized		91	Provision for income tax expense
Taxes		199	Net of tax
	$	(551)
Net pension plan liability adjustment:			Other expense
Amortization of unrecognized loss	$	(1,117)	Other expense
Taxes		296	Net of tax
	$	(821)
Net SERP liability adjustment:			Other expense
Amortization of unrecognized loss	$	(271)	Other expense
Taxes		72	Net of tax
	$	(199)	Net of tax
Total reclassifications for the period	$	(1,421)

13. Income Taxes

The provision for income taxes consists of the following for the years ended December 31, 2023 and 2022:

(in thousands)	2023		2022
Current Tax expense:
Federal	$	4,002	$	5,504
State		1,303		2,034
	$	5,305	$	7,538
Deferred tax (benefit)/expense:
Federal	$	(774)	$	339
State		(115)		256
	$	(889)	$	595
Income tax expense for the year	$	4,416	$	8,133

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The reconciliation between the statutory federal income tax rate and effective income tax rate for the years ended December 31, 2023 and 2022 is as follows:

	2023		2022
Federal statutory rate		21.0%		21.0%
Tax-exempt income on securities and loans		(0.8)		(0.8)
Tax-exempt BOLI income		(1.3)		(0.8)
State income tax, net of federal tax benefit		4.7		5.6
Tax credits		(0.8)		(0.4)
Other		(0.1)		(0.1)
		22.7%		24.5%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Corporation’s temporary differences as of December 31, 2023 and 2022 are as follows:

(in thousands)	2023		2022
Deferred tax assets:
Allowance for credit losses	$	4,855	$	3,880
Deferred fees		96		54
Deferred compensation		1,285		1,163
Federal and state tax loss carry forwards		2,776		2,873
Unrealized loss on investment securities		7,356		8,419
SERP		2,622		1,948
Lease liability		362		471
Low income housing		439		511
Other than temporary impairment on investment securities		464		520
Other real estate owned		83		120
Other		392		133
Total deferred tax assets		20,730		20,092
Valuation allowance		(2,776)		(2,873)
Total deferred tax assets less valuation allowance		17,954		17,219
Deferred tax liabilities:
Goodwill and other intangibles		(2,762)		(2,736)
Lease right-of-use asset		(282)		(418)
Pension		(2,958)		(2,121)
Depreciation		(403)		(921)
Derivative contract		(200)		(283)
Other		(216)		(135)
Total deferred tax liabilities		(6,821)		(6,614)
Net deferred tax assets	$	11,133	$	10,605

In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income of the appropriate character (for example, ordinary income or capital gain) within the carry-back or carry-forward period available under the tax law during the periods in which temporary differences are deductible. The Corporation has considered future market growth, forecasted earnings, future taxable income, and feasible and permissible tax planning strategies in determining whether it will be able to realize the deferred tax asset. If the Corporation were to determine that it will not be able to realize a portion of its net deferred tax asset in the future for which there is currently no valuation allowance, an adjustment to the net deferred tax asset would be charged to earnings in the period such determination was made. Conversely, if the Corporation were to make a

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determination that it is more likely than not that the deferred tax assets for which there is a valuation allowance will be realized, the related valuation allowance would be reduced and a benefit would be recorded.

At December 31, 2023, the Corporation had Maryland net operating losses (“NOLs”) and other MD carryforwards of $39.1 million for which a deferred tax asset of $2.8 million has been recorded. There has been and continues to be a full valuation allowance on these NOLs based on management’s belief that it is more likely than not that these NOLs will not be realized prior to the expiration of their carry-forward periods because the Corporation will not generate sufficient taxable income in the future to fully utilize the NOLs. The valuation allowance was $2.8 million at December 31, 2023 and $2.9 million at December 31, 2022.

The Corporation and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states jurisdictions. The 2018-2020 tax years remain open under the standard statute of limitations. Also, with few exceptions, the Corporation is no longer subject to state income tax examinations for tax years before 2020.

Any interest and penalties on income tax assessments or income tax refunds are recognized in the Consolidated Statements of Income as a components of interest expense (income) and other operating expense. There were no amounts of accrued tax-related interest and penalties at December 31, 2023 and 2022. Furthermore, there were no net interest and penalties related to unrecognized tax benefits for the periods presented.

14. Equity Compensation Plans

At the 2018 Annual Meeting of Shareholders, First United Corporation’s shareholders approved the First United Corporation 2018 Equity Compensation Plan (the “Equity Plan”) which authorizes the issuance of up to 325,000 shares of common stock to employees, directors, and qualifying consultants pursuant to stock options, stock appreciation rights, stock awards, dividend equivalents, and other stock-based awards.

The Corporation complies with the provisions of ASC Topic 718, Compensation- Stock Compensation, in measuring and disclosing stock compensation cost.  The measurement objective in ASC Paragraph 718-10-30-6 requires public companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award.  The cost is recognized in expense over the period in which an employee is required to provide service in exchange for the award (the vesting period).

Pursuant to First United Corporation’s director compensation policy, each director receives an annual retainer of 1,000 shares of First United Corporation common stock, plus $15,000 to be paid, at the director’s election, in cash or additional shares of common stock.  In May 2023, a total of 16,931 fully vested shares of common stock were issued to directors, which had a grant date fair value of $13.23 per share.  In May 2022, a total of 14,940 fully vested shares of common stock were issued to directors, which had a grant date fair value of $18.92 per share.  In January 2023, a total of 333 fully vested shares of common stock were issued to a new director, which had a grant date fair value of $19.36 per share.  In October 2023, a total of 852 fully vested shares of common stock were issued to a new director, which had a grant date fair value of $16.26 per share.  Director stock compensation expense was $255,937 for the year ended December 31, 2023 and $266,920 for the year ended December 31, 2022.

Employee stock compensation was $33,279 and $79,464 for the years ended December 31, 2023 and 2022, respectively.

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.

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The RSUs granted to each of the foregoing officers consist of (i) a performance vesting award for a three year performance period and (ii) a time-vesting award that will vest ratably over a three year period. Target performance levels were set based on the annual budget which supports the Corporation’s long-term objective of achieving high performance as compared to peers. Threshold performance is the minimum level of acceptable performance as defined by the Committee and maximum performance represented a level potentially achievable under ideal circumstances. Achievement of the threshold performance level would result in each executive participant earning a payout at 50% of his or her respective target award opportunity. Achievement of the target performance level would result in the executive participant earning the target award and achievement at or above the maximum performance level would result in the executive participant earning 150% of the target opportunity. Actual results for any goal that falls between performance levels would be interpolated to calculate a proportionate award. For the performance period ending December 31, 2022, the RSUs performance goals are based on earnings per share for the year ending December 31, 2022 and growth in tangible book value per share during the performance period. For the performance period ending December 31, 2023, the RSUs performance goals are based on earnings per share for the year ending December 31, 2023 and growth in tangible book value per share during the performance period.  For the performance period ending December 31, 2024, the RSUs performance goals are based on earnings per share for the year ending December 31, 2024 and growth in tangible book value per share during the performance period.  For the performance period ending December 31, 2025, the RSUs performance goals are based on earnings per share for the year ended December 31, 2025 and growth in tangible book value per share during the performance period.

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

In the first quarter of 2020, RSUs were granted relating to (i) 9,791 performance-vesting shares (target level) for the performance period ending December 31, 2021 (the “2019 LTIP year”) and (ii) 10,143 performance-vesting shares and 5,070 time-vesting shares (target level) for the performance period ending December 31, 2022 (the “2020 LTIP year”).  Each RSU had a grant date fair market value of $12.54 per share of common stock underlying the RSU.  The time-vesting RSUs will vest ratably over a three-year period that began on March 26, 2021.  On March 9, 2022, 14,688 shares subject to RSUs granted for the 2019 LTIP year were issued at maximum performance level. On March 8, 2023, 15,216 shares subject to RSUs granted for the 2020 LTIP year were issued at maximum performance.  On March 26, 2021, 1,690 of the 5,070 time-vesting shares were issued to participants.  On March 28, 2022, 1,688  shares of the 3,380 remaining time-vesting shares were issued to participants.  On March 26, 2023, 1,692 shares of the remaining time-vesting shares were issued to participants.  Stock compensation expense was $15,896 for the year ended December 31, 2023, and $73,816 for the year ended December 31, 2022.  All compensation expense related to the 2019 LTIP year was recognized as of March 31, 2022.  All compensation expense related to the 2020 LTIP plans was recognized as of March 31, 2023.

In May 2021, RSUs relating to 7,389 performance-vesting shares and 3,693 time-vesting shares (target level) for plan year 2021 were granted, which had a grant date fair market value of $17.93 per share of common stock underlying each RSU.  The performance period for the performance-vesting RSUs is the three-year period ending December 31, 2023.  The time-vesting RSUs will vest ratably over a three-year period beginning on May 5, 2022. On May 5, 2022, 1,230 shares of the 3,693 time-vesting RSUs were issued to participants.  On May 5, 2023, 1,230 shares of the remaining 2,463 time-vesting shares were issued to the participants.  Net stock compensation (credit)/expense was ($51,555) and $66,285 for the years ended December 2023 and 2022.  Unrecognized compensation expense as of December 31, 2023 related to unvested units was $7,365.

In March 2022, RSUs relating to 8,096 performance-vesting shares and 6,238 time-vesting shares (target level) for plan year 2022 were granted, which had a grant date fair market value of $21.88 per share of common stock underlying each RSU.  The performance period for the performance-vesting RSUs is the three-year period ending December 31, 2024.  The time-vesting RSUs will vest ratably over a three year period beginning on March 9, 2023.  On March 9, 2023, 2,079 shares of the 6,238 time-vesting RSUs were issued to participants. Stock compensation expense was $104,580 and $78,436

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for the years ended December 31, 2023 and 2022, respectively.  Unrecognized compensation expense as of December 31, 2023 related to unvested units was $130,726.

In March 2023, RSUs relating to 10,214 performance-vesting shares and 7,920 time-vesting shares (target level) for plan year 2023 were granted, which had a grant date fair market value of $18.25 per share of common stock underlying each RSU.  The performance period for the performance-vesting RSUs is the three year period ending December 31, 2025.  The time-vesting RSUs will vest ratably over a three-year period beginning on March 15, 2024. Stock compensation expense was $82,755 for  the year ended Decmber 31, 2023.  Unrecognized compensation expense as of December 31, 2023 related to unvested units was $248,264.

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

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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.

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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.

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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.

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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

16. 401(k) Profit Sharing Plan

In furtherance of First United Corporation’s belief that every employee should have the ability to accrue retirement benefits, it adopted the 401(k) Profit Sharing Plan, which is available to all employees, including executive officers. Employees are automatically entered in the plan on the first of the month following completion of 30 days of service to First United Corporation and/or its subsidiaries. Employees have the opportunity to opt out of participation or change their deferral amounts under the plan at any time. In addition to contributions by participants, the plan contemplates employer matching and the potential of discretionary contributions to the accounts of participants. First United Corporation believes that matching contributions encourage employees to participate and thereby plan for their post-retirement financial future. Beginning with the 2008 plan year, First United Corporation enhanced the match formula to 100% on the first 1% of salary reduction and 50% on the next 5% of salary reduction. This match is accrued for all participants, including executive officers, immediately upon entering the plan on the first day of the month following the completion of 30 days of employment.  Additionally, First United Corporation accrued a non-elective employer contribution during 2023 for all employees other than employees who participate in the Defined Benefit SERP and Defined Contribution SERP and those employees meeting the age plus service requirement in the Pension Plan equal to 4.0% of each employee’s salary, and 0.5% of each employee’s salary hired before January 1, 2010, which will be paid in the first quarter of 2024. The employee must be a plan participant and be actively employed on the last day of the plan year to share in the discretionary profit sharing contribution, except in the case of death, disability, or retirement of the participant.  Expense charged to operations for the 401(k) Plan was $1.4 million in 2023 and $1.3 million in 2022.

17. Federal Reserve Requirements

The Bank is required to maintain cash reserves with the Federal Reserve Bank of Richmond based on specified deposit liabilities. Effective March 26, 2020, the FRB reduced reserve requirement ratios to 0%. This action eliminated reserve requirements for all depository institutions.

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18. Contractual Obligations, Commitments and Contingent Liabilities

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.  At December 31, 2023, no large capital obligations are anticipated.

Commitments

Loan commitments are made to accommodate the financial needs of our customers. Loan commitments have credit risk essentially the same as that involved in extending loans to customers and are subject to normal credit policies. Commitments to extend credit generally have fixed expiration dates, may require payment of a fee, and contain cancellation clauses in the event of an adverse change in the customer’s credit quality.

Commitments to extend credit in the form of consumer, commercial and business as of December 31, 2023 and December 31, 2022 are as follows:

(in thousands)	2023		2022
Residential mortgage - home equity	$	72,080	$	70,845
Residential mortgage - construction		17,684		25,499
Commercial		160,196		153,235
Consumer - personal credit lines		4,186		4,323
Standby letters of credit		11,037		14,325
Total	$	265,183	$	268,227

We do not issue any guarantees that would require liability recognition or disclosure other than the standby letters of credit issued by the Bank. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party to support contractual obligations and to ensure job performance. Generally, the Bank’s letters of credit are issued with expiration dates within one year. Historically, most letters of credit expire unfunded, and therefore, cash requirements are substantially less than the total commitment. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank generally holds collateral and/or personal guarantees supporting letters of credit.

19. 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

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liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of inputs that may be used to measure fair value under the hierarchy are as follows:

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

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

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

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

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

The fair value of investments available-for-sale is determined using a market approach. At December 31, 2023 and 2022, the U.S. Government agencies and treasuries, residential and commercial mortgage-backed securities, and municipal bonds segments are classified as Level 2 within the valuation hierarchy. Their fair values were determined based upon market-corroborated inputs and valuation matrices, which were obtained through third party data service providers or securities brokers through which we have historically transacted both purchases and sales of investment securities.

Derivative financial instruments (cash flow hedge) – The Corporation’s open derivative positions are interest rate swap agreements. Those classified as Level 2 open derivative positions are valued using externally developed pricing models based on observable market inputs provided by a third party and validated by management.  The Corporation has considered counterparty credit risk in the valuation of its interest rate swap assets.

Individually evaluated loans – Loans included in the table below are those that are considered individually evaluated with a specific allocation or with partial charge-offs, based upon the guidance of the loan impairment subsection of the Receivables Topic, ASC Section 310-10-35, under which the Corporation has measured impairment generally based on the fair value of the loan’s collateral. Fair value consists of the loan balance less its valuation allowance and is generally determined based on independent third-party appraisals of the collateral or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values based upon the lowest level of input that is significant to the fair value measurements.

Equity investments- Equity investments included in the table below are considered are recorded with a write-down to fair value recorded in other operating expenses.  Fair value of the equity investment was based on an independent third-party valuation 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.

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

For assets and liabilities measured at fair value on a recurring and non-recurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2023 and 2022 are as follows:

			Fair Value Measurements at
			December 31, 2023 Using
			(in Thousands)
	Assets & Liabilities Measured at		Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs		Significant Unobservable Inputs
Description	12/31/23		(Level 1)	(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	6,034		$	6,034
Residential mortgage-backed agencies	$	20,563		$	20,563
Commercial mortgage-backed agencies	$	28,417		$	28,417
Collateralized mortgage obligations	$	16,356		$	16,356
Obligations of states and political subdivisions	$	10,312		$	10,312
Corporate bonds	$	778		$	778
Collateralized debt obligations	$	14,709				$	14,709
Financial derivative	$	756		$	756
Non-recurring:
Individually evaluated loans	$	—				$	—
Equity investments	$	3,087				$	3,087
Other real estate owned	$	4,443				$	4,443
			Fair Value Measurements at
			December 31, 2022 Using
			(in Thousands)
	Assets & Liabilities Measured at		Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs		Significant Unobservable Inputs
Description	12/31/22		(Level 1)	(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. treasuries	$	9,462		$	9,462
U.S. government agencies	$	37,401		$	37,401
Residential mortgage-backed agencies	$	30,732		$	30,732
Commercial mortgage-backed agencies	$	21,044		$	21,044
Collateralized mortgage obligations	$	10,492		$	10,492
Obligations of states and political subdivisions	$	887		$	887
Collateralized debt obligations	$	15,871				$	15,871
Financial derivative	$	1,068		$	1,068
Non-recurring:
Individually evaluated loans	$	211				$	211
Equity investment	$	1,796				$	1,796
Other real estate owned	$	—				$	—

There were no transfers of assets between any of the levels of the fair value hierarchy for the years ended December 31, 2023 or December 31, 2022.

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For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of December 31, 2023 and 2022, the significant unobservable inputs used in the fair value measurements were as follows:

(in thousands)	Fair Value at December 31, 2023		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale - CDO	$	14,709	Discounted Cash Flow	Discount Rate	Range of low to mid 500 and low to mid 600
Non-recurring:
Equity Investments	$	3,087	Market Method	Revenue Multiples	2.8x
Other Real Estate Owned	$	4,443	Market Comparable Properties	Marketability Discount	5.0% to 15.0% (weighted avg 5.9%)

(in thousands)	Fair Value at December 31, 2022		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities –  available for sale - CDO	$	15,871	Discounted Cash Flow	Discount Rate	Range of low to mid 300 and low to high 400
Non-recurring:
Individually Evaluated Loans	$	211	Market Comparable Properties	Marketability Discount	10.0% to 15.0%
Equity Investment	$	1,796	Market Method	Revenue Multiples	2.8x
Other Real Estate Owned	$	—	Market Comparable Properties	Marketability Discount

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

The following tables show a reconciliation of the beginning and ending balances for fair valued assets measured using Level 3 significant unobservable inputs for the years ended December 31, 2023 and 2022:

		Fair Value Measurement Using Unobservable Inputs (Level 3)
(in thousands)		Investment Securities Available for Sale
Beginning balance January 1, 2023	$	15,871
Total gains/(losses) realized/unrealized:
Included in other comprehensive income		(1,162)
Ending balance December 31, 2023	$	14,709
		Fair Value Measurement Using Unobservable Inputs (Level 3)
(in thousands)		Investment Securities Available for Sale
Beginning balance January 1, 2022	$	17,192
Total gains/(losses) realized/unrealized:
Included in other comprehensive income		(1,321)
Ending balance December 31, 2022	$	15,871

Gains and losses (realized and unrealized) included in earnings for the periods above are reported in the Consolidated Statement of Income in other operating income.

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The fair values disclosed 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.

The following table presents fair value information about financial instruments, whether or not recognized in the 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 statement of financial condition are as follows:

	December 31, 2023				Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	48,343	$	48,343	$	48,343
Interest bearing deposits in banks		1,410		1,410		1,410
Investment securities - AFS		97,169		97,169			$	82,460	$	14,709
Investment securities - HTM		214,297		184,415				182,510		1,905
Restricted bank stock		5,250		N/A
Loans, net		1,388,847		1,319,456						1,319,456
Financial derivative		778		778				778
Accrued interest receivable		7,487		7,487				828		6,659
Financial Liabilities:
Deposits – non-maturity		1,355,444		1,355,444				1,355,444
Deposits – time deposits		195,533		193,337				193,337
Short-term borrowed funds		45,418		45,418				45,418
Long-term borrowed funds		110,929		110,809				110,809
Accrued interest payable		612		612				612

	December 31, 2022				Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	72,720	$	72,720	$	72,720
Interest bearing deposits in banks		1,595		1,595		1,595
Investment securities - AFS		125,889		125,889			$	110,018	$	15,871
Investment securities - HTM		235,659		203,080				182,380		20,700
Restricted bank stock		1,027		N/A
Loans, net		1,264,684		1,177,702						1,177,702
Financial derivative		1,068		1,068				1,068
Accrued interest receivable		6,051		6,051				933		5,118
Financial Liabilities:
Deposits – non-maturity		1,450,210		1,450,210				1,450,210
Deposits – time deposits		120,523		120,083				120,083
Financial derivative		—		—				—
Short-term borrowed funds		64,565		64,565				64,565
Long-term borrowed funds		30,929		30,909				30,909
Accrued interest payable		151		151				151

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20. 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 December 31, 2023, $15.0 million notional amount remains.   The interest rate swap creates an effective fixed interest rate of 4.6450% on the $15.0 million notional amount of the Corporation’s junior subordination debt until the interest rate swap’s maturity in March 2026.

The fair value of the interest rate swap contracts was $0.8 million and $1.1 million at December 31, 2023 and December 31, 2022, respectively.

For the year ended December 31, 2023, the Corporation recorded a decrease in the value of the derivatives of $0.3 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 year ended December 31, 2023. The Corporation does not expect any material losses relating to these hedges to be reclassified into earnings within the next 12 months.

Interest rate swap agreements are entered into with counterparties that meet established credit standards and the Corporation believes that the credit risk inherent in these contracts is not significant at December 31, 2023.

The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the years ended December 31, 2023 and December 31, 2022.

Derivative in Cash Flow Hedging Relationships

(in thousands)	Amount of (loss)/gain recognized in OCI on derivative (effective portion)		Amount of gain or (loss) reclassified from accumulated OCI into income (effective portion) (1)		Amount of gain or (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing) (2)
Interest rate contracts:
December 31, 2023	$	(228)	$	—	$	—
December 31, 2022	$	1,116	$	—	$	—

Notes:

(1) Reported as interest expense

(2) Reported as other income

21. 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.

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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.

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 in-scope and out-of-scope of ASC Topic 606, for the years ended December 31, 2023 and 2022.

	Year Ended
	December 31,
(in thousands)	2023		2022
Noninterest income
In-scope of Topic 606:
Service charges on deposit accounts	$	2,198	$	1,981
Other service charges		929		925
Trust department		8,282		8,244
Debit card income		4,101		3,958
Brokerage commissions		1,160		1,049
Noninterest income (in-scope of Topic 606)		16,670		16,157
Noninterest income (out-of-scope of Topic 606)		1,661		1,721
Total Noninterest Income	$	18,331	$	17,878

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22. Segment Reporting

Currently, the Corporation conducts business in two operating segments:  (i) Community Banking and (ii) Trust and Investment Services.  The accounting policies of the segments are the same as those described in the summary of significant accounting policies provided earlier in this report.

Business activity for the operating segments are as follows:

Community Banking:  The Community Banking segment is conducted through the Bank and involves delivering a broad range of financial products and services, including various loan and deposit products, to consumer, business, and not-for-profit customers.  Parent company income and assets are included in the Community Banking segment, as the majority of parent company functions are related to this segment.  Major revenue sources include net interest income, gains on sales of mortgage loans, and service charges on deposit accounts.  Expenses include personnel, occupancy, marketing, equipment, and other expenses.  Non-cash charges other than depreciation of fixed assets were immaterial for the years  ended December 31, 2023 and 2022.

Trust and Investment Services:  The Trust and Investment Services segment is conducted through the Bank and offers corporate trustee services, trust and estate administration, IRA administration and custody services.  Revenues for this segment is generated from administration, service and custody fees, as well as management fees that are derived from Assets Under Management.  Expenses include personnel, occupancy, marketing, equipment, and other expenses.   Non-cash charges associated with amortization of intangibles were approximately $208,000 for the years ending December 31, 2023 and 2022.

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Information for the operating segments for the years ended December 31, 2023 and 2022 are presented in the following tables:

		December 31, 2023
			Trust and
	Community		Investment
(in thousands)	Banking		Services		Total
Interest income	$	81,156	$	—	$	81,156
Interest expense		24,286		—		24,286
Credit loss expense		1,620		—		1,620
Non-interest income		5,027		9,442		14,469
Non-interest expense		45,098		5,145		50,243
Income before income taxes and intercompany fees		15,179		4,297		19,476
Intercompany management fee income (expense)		12		(12)		—
Income before income taxes		15,191		4,285		19,476
Income tax expense		3,514		902		4,416
Net income	$	11,677	$	3,383	$	15,060
		December 31, 2022
			Trust and
	Community		Investment
(in thousands)	Banking		Services		Total
Interest income	$	62,422	$	—	$	62,422
Interest expense		4,789		—		4,789
Loan loss credit		(627)		—		(627)
Non-interest income		8,757		9,293		18,050
Non-interest expense		38,435		4,694		43,129
Income before income taxes and intercompany fees		28,582		4,599		33,181
Intercompany management fee income (expense)		12		(12)		—
Income before income taxes		28,594		4,587		33,181
Income tax expense		7,168		965		8,133
Net income	$	21,426	$	3,622	$	25,048

Total non-fiduciary assets of the trust and investment services segment were $0.7 million (including $0.6 million in intangible assets) at December 31, 2023 and $0.9 million (including $0.8 million in intangible assets) at December 31, 2022.  All other assets (including goodwill of $11.0 million as of December 31 2023 and 2022 and other intangible assets of $0.5 million and $0.6 million as of December 31, 2023 and 2022, respectively) were held by the community banking segment.

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23. Parent Company Only Financial Information

Condensed Statements of Financial Condition

	December 31,
(in thousands)	2023		2022
Assets
Cash	$	9,739	$	11,296
Investment securities- Available for Sale (at fair value)		13,591		14,603
Investment in bank subsidiary		164,878		153,245
Investment in non-bank subsidiaries		929		929
Other assets		9,794		8,273
Total Assets	$	198,931	$	188,346
Liabilities and Shareholders' Equity
Accrued interest and other liabilities	$	4,799	$	4,425
Dividends payable		1,330		1,199
Junior subordinated debt		30,929		30,929
Shareholders' equity		161,873		151,793
Total Liabilities and Shareholders' Equity	$	198,931	$	188,346

Condensed Statements of Income

	Year Ended
	December 31,
(in thousands)	2023		2022
Income:
Dividend income from bank subsidiary	$	6,130	$	14,995
Interest income on investments		1,715		780
Other income		75		63
Total other income		1,790		843
Total Income		7,920		15,838
Expenses:
Interest expense		1,950		1,451
Other expenses		715		249
Total Expenses		2,665		1,700
Income before income taxes and equity in undistributed net income of subsidiaries		5,255		14,138
Applicable income tax benefit		213		194
Net income before equity in undistributed net income of subsidiaries		5,468		14,332
Equity in undistributed net income of subsidiaries:
Bank		9,592		10,716
Net Income	$	15,060	$	25,048

Condensed Statements of Comprehensive Income

	Year Ended
	December 31,
Components of Comprehensive Income (in thousands)	2023		2022
Net Income	$	15,060	$	25,048
Unrealized losses on AFS Securities, net of tax		(771)		(954)
Unrealized (losses)/gains on cash flow hedges, net of tax		(228)		1,116
Other comprehensive (loss)/income, net of tax		(999)		162
Comprehensive income	$	14,061	$	25,210

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Condensed Statements of Cash Flows

	Year Ended
	December 31,
(in thousands)	2023		2022
Operating Activities
Net Income	$	15,060	$	25,048
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of subsidiaries		(9,592)		(10,716)
Increase in other assets		(1,280)		(448)
Increase in accrued interest payable and other liabilities		273		655
Stock compensation		527		532
Net cash provided by operating activities		4,988		15,071
Financing Activities
Proceeds from issuance of common stock		293		217
Repurchase of common stock		(1,495)		—
Cash dividends on common stock		(5,343)		(4,192)
Net cash used in financing activities		(6,545)		(3,975)
Increase in cash and cash equivalents		(1,557)		11,096
Cash and cash equivalents at beginning of year		11,296		200
Cash and cash equivalents at end of year	$	9,739	$	11,296

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

The Corporation maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Corporation’s reports filed under the Exchange Act with the SEC, such as this annual report, is recorded, processed, summarized and reported within the time periods specified in those rules and forms, and that such information is accumulated and communicated to the Corporation’s management, including the principal executive officer (“PEO”) and the 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 also is 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, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

This annual report does not include an integrated audit report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to audit by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company (a non-accelerated filer) to provide only management’s report in this annual report.

An evaluation of the effectiveness of these disclosure controls and procedures as of December 31, 2023 was carried out under the supervision and with the participation of the Corporation’s management, including the PEO and the PFO. Based on that evaluation, the Corporation’s management, including the PEO and the PFO, has concluded that the Corporation’s disclosure controls and procedures are, in fact, effective at the reasonable assurance level.

As required by Section 404 of the Sarbanes-Oxley Act of 2002, management has performed an evaluation and testing of the Corporation’s internal control over financial reporting as of December 31, 2023. Management’s report on the Corporation’s internal control over financial reporting is included on the following page.

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Management’s Report on Internal Control Over Financial Reporting

The Board of Directors and Shareholders

First United Corporation

First United Corporation’s management is responsible for establishing and maintaining adequate internal control over financial reporting. This internal control system was designed to provide reasonable assurance to management and the Board of Directors as to the reliability of First United Corporation’s financial reporting and the preparation and presentation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States, as well as to safeguard assets from unauthorized use or disposition.

An internal control system, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements in the financial statements or the unauthorized use or disposition of First United Corporation’s assets. Also, projections of any evaluation of effectiveness of internal controls to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.

Management assessed the effectiveness of First United Corporation’s internal control over financial reporting as of December 31, 2023, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control--Integrated Framework (2013 Framework). Based on this assessment and on the foregoing criteria, management has concluded that, as of December 31, 2023, First United Corporation’s internal control over financial reporting is effective.

Dated:	March 15, 2024
/s/ Carissa L. Rodeheaver		/s/ Tonya K. Sturm
Carissa L. Rodeheaver, CPA		Tonya K. Sturm
Chairman of the Board, President		Senior Vice President and
And Chief Executive Officer		Chief Financial Officer
(Principal Executive Officer)		(Principal Financial Officer)

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ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION

Not Applicable

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The Corporation has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) applicable to its principal executive officer, principal financial officer, principal accounting officer, or controller, or persons performing similar functions.  A copy of the Code of Ethics is available free of charge upon request to Mr. Jason B. Rush, Senior Vice President and Chief Operating Officer, First United Corporation, c/o First United Bank & Trust, 19 S. Second Street, Oakland, MD 21550. This Code of Ethics is also available on the Investor Relations page of the Corporation’s website at https://s25.q4cdn.com/317318878/files/doc_downloads/2022/01/Senior-Financial-Officer-Code-of-Business-Conduct-and-Ethics.pdf

The Corporation has adopted an Insider Trading Policy that applies to directors and executive officers of the Corporatiin and its Subsidiaries.   See Exhibit 19.1:  First United Corporation Insider Trading Policy.

All other information required by this item is incorporated herein by reference to the following sections of the Corporation’s definitive Proxy Statement for the 2024 Annual Meeting of Shareholders to be filed with the SEC pursuant to Regulation 14A (the “2024 Proxy Statement”):

● Election of Directors (Proposal 1);

● Continuing Directors;

● Qualifications of Director Nominees and Current Directors;

● Executive Officers;

● Delinquent Section 16(a) Reports; and

● Corporate Governance and Related Matters (under Committees of the Board - Audit Committee).

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference to the sections of the 2024 Proxy Statement entitled “Director Compensation” and “Executive Compensation” (excluding the information under the subheading “Pay Versus Performance”).

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

At the 2018 Annual Meeting of Shareholders, the Corporation’s shareholders approved the First United Corporation 2018 Equity Compensation Plan (the “Equity Plan”), which authorizes the grant of stock options, stock appreciation rights, stock awards, dividend equivalents, and other stock-based awards. Subject to the anti-dilution provisions of the Equity Plan, the maximum number of shares for which awards may be granted to any one participant in

128

any calendar year is 20,000 shares, without regard to whether an award is paid in cash or shares. The following table contains information as of December 31, 2023 regarding securities that are authorized for issuance under the Equity Plan:

	Number of securities to be issued upon exercise of outstanding options, warrants, and rights		Weighted-average exercise price of outstanding options, warrants, and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Plan Category	(a)		(b)	(c)
Equity compensation plans approved by security holders	27,467	(1)	N/A	154,038	(2)
Equity compensation plans not approved by security holders	—		N/A	N/A
Total	27,467		N/A	154,038

Notes:

(1) As of December 31, 2023, no options, warrants, or rights have been granted under the Equity Plan. Unexercised equity awards outstanding as of December 31, 2023 consist of time vesting and performance vesting restricted stock units (“RSUs”). The amounts shown in column (a)

(2) Performance vesting RSUs and assume that such RSUs will vest based on the achievement of the maximum performance levels applicable thereto.  The amounts shown in column (a) would be 9,154 or 18,310 if only the RSUs’ threshold performance levels or target performance levels, respectively, were to be achieved.

(3) The amounts shown in column (c) take into account 13,312 shares subject to time vesting RSUs that have been granted but have not yet vested.

All other information required by this item is incorporated herein by reference to the section of the 2024 Proxy Statement entitled “Beneficial Ownership of Common Stock by Principal Shareholders and Management”.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated herein by reference to the sections of the 2024 Proxy Statement entitled “Certain Relationships and Related Transactions” and “Corporate Governance and Related Matters” (“Director Independence”).

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated herein by reference to the section of the 2024 Proxy Statement entitled “Audit Fees and Services”.

129

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1), (2) and (c)  Financial Statements.

Reports of Independent Registered Public Accounting Firms

Consolidated Statement of Financial Condition as of December 31, 2023 and 2022

Consolidated Statement of Income for the years ended December 31, 2023 and 2022

Consolidated Statement of Comprehensive Income for the years ended December 31, 2023 and 2022

Consolidated Statement of Changes in Shareholders’ Equity for the years ended December 31, 2023 and 2022

Consolidated Statement of Cash Flows for the years ended December 31, 2023 and 2022

Notes to Consolidated Financial Statements for the years ended December 31, 2023 and 2022

(a)(3) and (b)  Exhibits.

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

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Exhibit	Description
3.1(i)	Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to First United Corporation’s Quarterly Report on Form 10-Q for the period ended June 30, 1998)
3.1(ii)	Articles of Amendment to Articles of Amendment and Restatement of First United Corporation (incorporated by reference to Exhibit 3.1 to First United Corporation’s Current Report on Form 8-K filed on June 3, 2021
3.2	First United Corporation Bylaws as Amended and Restated on November 17, 2021 (incorporated by reference to Exhibit 3.1 to First United Corporation’s Current Report on Form 8-K filed on November 19, 2021.)
4.1	Certificate of Notice, including the Certificate of Designations incorporated therein, relating to the Fixed Rate Cumulative Perpetual Preferred Stock, Series A (incorporated by reference Exhibit 4.1 to First United Corporation’s Form 8-K filed on February 2, 2009)
4.2	Sample Stock Certificate for Series A Preferred Stock for the Series A Preferred Stock (incorporated by reference Exhibit 4.3 to First United Corporation’s Form 8-K filed on February 2, 2009)
10.1	First United Bank & Trust Amended and Restated Defined Benefit Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.1 to First United Corporation’s Current Report on Form 8-K filed on February 1, 2019)
10.2	Form of Amended and Restated Participation Agreement under the Defined Benefit Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.2 to First United Corporation’s Current Report on Form 8-K filed on February 1, 2019)
10.3	Form of Endorsement Split Dollar Agreement between the Bank and each of William B. Grant, Robert W. Kurtz, Jeannette R. Fitzwater, Phillip D. Frantz, Eugene D. Helbig, Jr., Steven M. Lantz, Robin M. Murray, Carissa L. Rodeheaver, and Frederick A. Thayer, IV (incorporated by reference to Exhibit 10.3 to First United Corporation’s Quarterly Report on Form 10-Q for the period ended September 30, 2003)
10.4	Amended and Restated First United Corporation Executive and Director Deferred Compensation Plan (incorporated by reference to Exhibit 10.1 to First United Corporation’s Current Report on Form 8-K filed on November 24, 2008)
10.5	Form of Amended and Restated First United Corporation Defined Contribution SERP Agreement (incorporated by reference to Exhibit 10.5 to First United Corporation’s annual report on Form 10-K for the year ended December 31, 2019)
10.6	Amended and Restated First United Corporation Change in Control Severance Plan (incorporated by reference to Exhibit 10.5 to First United Corporation’s Current Report on Form 8-K filed on June 23, 2008)
10.7	Amended and Restated Agreement Under the First United Corporation Change in Control Severance Plan, dated as of January 8, 2021 (incorporated by reference to Exhibit 10.1 to First United Corporation’s Current Report on Form 8-K filed on January 8, 2021)
10.8	First United Corporation 2018 Equity Compensation Plan (incorporated by reference to Exhibit 10.1 to First United Corporation’s Current Report on Form 8-K filed on May 21, 2019)
10.9	First United Corporation Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to First United Corporation’s Current Report on Form 8-K filed on March 16, 2020)
10.10	Appendix A to the First United Corporation Long-Term Incentive Plan (incorporated by reference to Exhibit 10.2 of the Corporation’s Current Report on Form 8-K filed on March 15, 2022)
10.11	First United Corporation Short-Term Incentive Plan (incorporated by reference to Exhibit 10.2 to First United Corporation’s Current Report on Form 8-K filed on March 16, 2020)
10.12	Appendix A to the First United Corporation Short-Term Incentive Plan (incorporated by reference to Exhibit 10.1 of the Corporation’s Current Report on Form 8-K filed on March 15, 2022)*
10.13	Form of Restricted Stock Unit Award Agreement (Performance-Vesting) (incorporated by reference to Exhibit 10.1 to First United Corporation’s Current Report on Form 8-K filed on March 27, 2020, Film No. 20747391)
10.14	Form of Restricted Stock Unit Award Agreement (Time-Vesting) (incorporated by reference to Exhibit 10.2 to First United Corporation’s Current Report on Form 8-K filed on March 27, 2020, Film No. 20747391)
10.15	Stock Purchase Agreement, dated as of April 16, 2021, by and between First United Corporation and Driver Opportunity Partners I LP (incorporated by reference to Exhibit 10.1 to First United Corporation’s Current Report on Form 8-K filed on April 19, 2021)

131

10.16	Cooperation and Settlement Agreement, dated as of April 16, 2021, by and between First United Corporation, Driver Opportunity Partners I LP and other parties named therein (incorporated by reference to Exhibit 10.2 to First United Corporation’s Current Report on Form 8-K filed on April 19, 2021)
19.1 21	First United Corporation Insider Trading Policy Subsidiaries (filed herewith)
23.1	Consent of Crowe LLP, Independent Registered Public Accounting Firm (filed herewith)
31.1	Certifications of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)
31.2	Certifications of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)
32.1	Certifications pursuant to Section 906 of the Sarbanes-Oxley Act (furnished herewith)
97	Incentive Compensation Recovery Policy
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 Annual Report on Form 10K for the year ended December 31, 2022, formatted in Inline XBRL, included within the Exhibit 101 attachments (filed herewith).

* Portions of Exhibit 10.12, identified in brackets, were excluded because they were immaterial and would have likely caused competitive harm to the Corporation if publicly disclosed.  Such information will be disclosed in “Executive Compensation” section of the 2024 Proxy Statement.

ITEM 16. FORM 10-K SUMMARY

None

132

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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:	March 15, 2024	By:	/s/ Carissa L. Rodeheaver
			Carissa L. Rodeheaver, CPA
			Chairman of the Board, President
			and Chief Executive Officer
			(Principal Executive Officer)
Date:	March 15, 2024	By:	/s/ Tonya K. Sturm
			Tonya K. Sturm,
			Senior Vice President and
			Chief Financial Officer,
			(Principal Financial Officer
			and Principal Accounting Officer)

133

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated.

/s/ John F. Barr	/s/ Brian R. Boal
John F. Barr – Director	Brian R. Boal - Director
March 15, 2024	March 15, 2024
/s/ Sanu Chadha	/s/ Christy DiPietro
Sanu Chadha - Director	Christy DiPietro– Director
March 15, 2024	March 15, 2024
/s/ Kevin R. Hessler	/s/ Patricia Milon
Kevin R. Hessler- Director	Patricia Milon– Director
March 15, 2024	March 15, 2024
/s/ Beth E. Moran	/s/ Carissa L. Rodeheaver
Beth E. Moran – Director	Carissa L. Rodeheaver – Director, President
March 15, 2024	and Chief Executive Officer
	March 15, 2024
/s/ I. Robert Rudy	/s/ Marisa A. Shockley
I. Robert Rudy - Director	Marisa A. Shockley - Director
March 15, 2024	March 15, 2024
/s/ H. Andrew Walls, III	/s/ Tonya K. Sturm
H. Andrew Walls, III - Director	Tonya K. Sturm – Senior Vice President and
March 15, 2024	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer) March 15, 2024

134

EX-19.1

Exhibit 19.1

First United Corporation

Statement of Company Policy

Regarding Insider Trading

Securities Trades by First United Corporation's Directors, Officers and Employees

First United Corporation, Inc., a Maryland corporation ("First United" or the "Corporation") has adopted the following policy regarding trading by its personnel in First United securities. It applies to all directors, officers, and employees of the Corporation and its subsidiaries.

The Need for A Policy Statement

This Policy Statement has been developed:

●To educate all First United personnel;

●To set forth guidelines for courses of action;

●To protect First United and all its personnel against legal liability; and

●To preserve the reputation of First United and its personnel for integrity and ethical conduct.

Because First United is a public company, transactions in the Corporation's securities are subject to the Federal securities laws and regulations adopted by the United States Securities and Exchange Commission (the "SEC"). These laws and regulations make it illegal for an individual to buy or sell securities of the Corporation while aware of "inside information." The SEC takes insider trading very seriously and devotes significant resources to uncovering the activity and to prosecuting offenders. Liability may extend not only to the individuals who trade on "insider information," but also to their "tippers." The Corporation and "controlling persons" of the Corporation may also be liable for violations by the Corporation's employees.

In addition to responding to the statutes and regulations, we are adopting this policy to avoid even the appearance of improper conduct on the part of anyone employed by or associated with First United (not just so-called "insiders").

The Consequences

The consequences of insider trading violations can be severe:

For individuals who trade on inside information (or tip information to others):

●A civil penalty of up to three times the profit gained, or loss avoided;

●A criminal fine (no matter how small the profit) of up to $1.0 million; and

●A jail term of up to ten (10) years.

These penalties can apply even if the individual is not a member of the Board of Directors or an officer of First United. Moreover, if an employee violates our insider trading policy, First United's imposed sanctions, including dismissal for cause, could result from failing to comply with the Corporation's policy or procedures.

For a publicly held company (as well as possibly any supervisory person) that fails to take appropriate steps to prevent illegal trading:

● A civil penalty of the greater of $1.0 million or three times the profit gained, or loss avoided as a result of the employee's violation; and

● A criminal penalty of up to $2.5 million.

Any of the above consequences, even an SEC investigation that does not result in prosecution, can tarnish one's reputation and irreparably damage a career.

Our Policy

If any member of the Board of Directors of First United, any officer of First United, or any employee of First United is aware of material non-public information relating to First United, it is First United's policy that neither that person nor any related persons may buy or sell securities of First United or engage in any other action to take advantage of, or pass on to others, that information.

This policy also applies with equal force to information relating to any other company, including our customers or suppliers, obtained by a member of the Board of Directors, an officer or an employee of the Corporation during his or her service to or employment by the Corporation.

Transactions that may be necessary or justifiable for independent reasons (such as the need to raise money for an emergency expenditure) are no exception. Even the appearance of an improper transaction must be avoided to preserve our reputation for adhering to the highest standards of conduct.

Material Non-Public Information. Material non-public information is any information that:

Is not generally known to the public, and which, if publicly known, would likely affect either the market price of First United securities or a person's decision to buy, sell or hold First United securities.

Examples. Common examples of information that will frequently be regarded as material are:

● Projections of future growth;

● Earnings or losses;

● News of a pending or proposed merger, acquisition or tender offer;

● An important financing transaction;

● The proposed offering of additional securities;

● Changes in management;

● Financial liquidity problems; and

● Internal financial information which departs from what the market would expect.

Either positive or negative information may be material. We emphasize that this list is merely illustrative.

Twenty-Twenty Hindsight. Remember, if your securities transactions become the subject of scrutiny, they will be viewed after-the-fact with the benefit of hindsight. As a result, before engaging in any transaction, you should carefully consider how SEC regulators and others might view your transaction in hindsight.

Transactions by Family Members. These restrictions also apply to your immediate family members,

that is, any spouse, parent, child or sibling, and others living in your household. Employees are expected to be responsible for the compliance of members of their immediate family and personal household with this Policy Statement. This means that, to the extent such family/household members intend to trade in First United securities, they need to comply with regularly-scheduled and other black-out periods applicable to their household members who are Company personnel. SEC regulations now specifically provide that any material non-public information about the Corporation communicated to an immediate family member is considered to have been communicated under a duty of trust or confidence; any trading in First United securities by such family members while they are aware of such information may, therefore, violate insider trading laws and regulations.

Tipping Information to Others. Whether the information is proprietary information about First United or information that could have an impact on our stock price, First United personnel must not pass the information on to others. The above penalties apply, whether or not you derive any monetary benefit from another person's actions. Insider information is often inadvertently disclosed or overheard in casual, social conversations. Care must be taken to avoid such disclosures.

When Information is Public. Because First United's shareholders and the investing public should be afforded time to receive information and to act upon it, as a general rule you should not engage in any transactions until at least the beginning of the second business day after the information has been released. Thus, if an announcement were made on a Monday, Wednesday generally would be the earliest day on which you should trade. If an announcement were made on a Friday, Tuesday generally would be the earliest day on which you should trade. However, if the information released is complex, it may be necessary to allow additional time for the information to be absorbed by investors. In such circumstances, you will be notified by the CFO who will act as our "Policy Administrator," regarding a suitable waiting period before trading.

Prevention of Insider Trading by Others. If you become aware of a potential insider trading violation, you must immediately advise our Policy Administrator. You should also take steps, where appropriate, to prevent persons under your supervision and/or control from using inside information for trading purposes. Moreover, Company-imposed sanctions, including dismissal for cause, could result if an employee fails to comply with this Policy Statement.

Confidentiality. Serious problems could impact the Corporation by the unauthorized disclosure of internal information about First United, whether or not for the purpose of facilitating improper trading

in the securities of First United. First United's Directors and all other personnel should not discuss internal company matters or developments with anyone outside of the Corporation, except as required in the performance of regular corporate duties.

This prohibition applies specifically (but not exclusively) to inquiries about the Corporation that may be made by the financial press, investment analysts or others in the financial community. It is important that all such communications on behalf of the Corporation be through an appropriately designated officer under carefully controlled circumstances. Unless you are expressly authorized to the contrary, if you receive any inquiries of this nature, you should decline comment and refer the inquirer to the Chief Executive Officer or the Chief Financial Officer.

Additional Prohibited Transactions Because we believe it is generally improper and inappropriate for the Corporation's personnel to engage in short-term or speculative transactions involving the Corporation's securities, it is our policy that members of the Board of Directors, officers, and employees and their immediate family/household members should not engage in any of the following activities with respect to First United securities:

● Trading in the Corporation's securities on a short-term basis. Any shares of First United's common stock purchased in the open market should be held for a minimum of six months and ideally longer.

● Short sales of the Corporation's securities.

● Use of the Corporation's securities to secure a margin or other loan, except in limited cases with the prior written approval of the Policy Administrator.

Trading Procedures Applying to all Company Personnel

While it is never permissible to trade based on material non-public information, we are implementing the following procedures to help prevent inadvertent violations and avoid even the appearance of an improper

transaction (which could result, for example, where an employee engages in a trade while unaware of a pending major development).

Prohibited Periods for Trading. All members of the Board of Directors, officers, and employees of the Corporation and their immediate family/household members are prohibited from trading in any securities of the Corporation during the following periods:

● Prior to the public announcement of material information and until the beginning of the second business day after the day the Corporation has made a public announcement of material

information, including earnings releases (if the information released is complex or not disclosed in a press release, it may be necessary to extend this period, in which case the Policy Administrator will notify you of the waiting period); and

● The Corporation may from time to time require all Company personnel or selected Company personnel with access to material non-public information to refrain from trading during other specified periods when significant developments or announcements are anticipated.

You will be notified by e-mail or electronic bulletin board when you may not trade in the Corporation's securities as a result of a recent public announcement of material information or during periods when significant developments or announcements are anticipated. Of course, even during periods when trading is permitted, no one should trade in the Corporation's securities if he or she possesses material nonpublic information.

Special Procedures Applying to Members of the Board of Directors, Senior Management and Financial Team Members

The following members of management constitute the "Senior Management" of the Corporation: Chief Executive Officer; Chief Financial Officer; and Executive Management. The Chief Executive Officer, Chief Financial Officer and the Controller, constitute the Financial Team Members of the Corporation.

Prohibited Periods for Trading. Members of the Board of Directors, Senior Management and Financial Team Members are prohibited from trading in First United securities during the following periods:

The periods from 14 days prior to the close of each fiscal quarter until the beginning of the second business day after the release of the Corporation's financial results for each quarter and, in the case of the fourth quarter, financial results for the year end; and

● Any other periods as determined by the Corporation.

Pre-Clearance of Trades by Directors and Officers

It is advisable that all transactions in First United securities (acquisitions, dispositions, transfers, etc.), including the execution of trading plans, by members of the Board of Directors and Senior Management should be pre-cleared in advance by the Policy Administrator. Please note that such pre-clearance does not provide the director or officer with immunity from investigation or suit, for which it is the responsibility of the individual to comply with the Federal securities and regulations.

Exception for Trading Plans

Notwithstanding the restrictions and prohibitions on trading in First United securities as set forth in this Policy Statement, persons subject to this Policy Statement are permitted to effect transactions in Company securities pursuant to approved trading plans established under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended ("Trading Plans"), including transactions during the prohibited periods discussed in the Policy Statement. Rule 10b5-1 requires that these transactions be made pursuant to a plan that was established

while the person was not in possession of material non-public information. Any director, officer, employee, or their immediate family/household members seeking to establish a Trading Plan in First United securities should contact the Policy Administrator.

Company Assistance

Any person who has any questions about a specific transaction(s) or this Policy Statement in general may obtain additional guidance from the Policy Administrator. Remember, however, the ultimate responsibility for adhering to the Policy Statement and avoiding improper transactions rests with you. In this regard, it is imperative that you use your best judgment.

EX-21

Exhibit 21

Direct Subsidiary of First United Corporation

First United Bank & Trust, a Maryland corporation (the “Bank”)

First United Statutory Trust I, a Connecticut statutory business trust

First United Statutory Trust II, a Connecticut statutory business trust

Direct Subsidiary of the Bank

OakFirst Loan Center, LLC, a Maryland limited liability company

OakFirst Loan Center, Inc., a West Virginia corporation

Liberty Mews Limited Partnership, a Maryland limited partnership

MCC FUBT Fund, LLC an Ohio limited liability company

First OREO Trust, a Maryland statutory trust

FUBT OREO I, LLC, a Maryland limited liability company

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statement No. 333-225133 on Form S-8 and 333-180514 on Form S-3 of First United Corporation of our report dated March 15, 2024, relating to the consolidated financial statements appearing in this Annual Report on Form 10-K.

/s/  Crowe LLP

Washington, D.C.

March 15, 2024

EX-31.1

Exhibit 31.1

Certifications of Principal Executive Officer

Pursuant to Securities Exchange Act Rules 13a-1 and 15d-14

As adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Carissa L. Rodeheaver, certify that:

1. I have reviewed this annual report on Form 10-K of First United Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2024	/s/ Carissa L. Rodeheaver
	Carissa L. Rodeheaver, CPA
	Chairman of the Board, President
	and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certifications of the Principal Financial Officer

Pursuant to Securities Exchange Act Rules 13a-1 and 15d-14

As adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Tonya K. Sturm, certify that:

1. I have reviewed this annual report on Form 10-K of First United Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2024	/s/ Tonya K. Sturm
	Tonya K. Sturm,
	Senior Vice President,
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

Certification of Periodic Report

Pursuant to 18 U.S.C. Section 1350

As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to, and for purposes only of, 18 U.S.C. § 1350, each of the undersigned hereby certifies that (i) the Annual Report of First United Corporation on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the “Report”) fully complies with the  requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of First United Corporation.

Date: March 15, 2024	/s/ Carissa L. Rodeheaver
	Carissa L. Rodeheaver, CPA
	Chairman of the Board, President
	and Chief Executive Officer
	(Principal Executive Officer)
Date: March 15, 2024	/s/ Tonya K. Sturm
	Tonya K. Sturm,
	Senior Vice President,
	Chief Financial Officer
	(Principal Financial Officer)

EX-97

Exhibit 97

First United Corporation

Incentive Compensation Recovery Policy

As required by Rule 10D-1 adopted by the Securities and Exchange Commission (the “SEC”) and Rule 5608 of the Rules of The Nasdaq Stock Market (“Nasdaq”), the Board of Directors (the “Board”) of First United Corporation (the “Corporation”) has adopted this Incentive Compensation Recovery Policy (this “Policy”).  

I.Effective Date.  The effective date of this Policy is November 8, 2023.  

II. Covered Compensation.  This Policy applies to all Incentive-Based Compensation (as defined below) received by an individual:  (a) after beginning service as an Executive Officer (as defined below); (b) who served as an Executive Officer at any time during the performance period for the Incentive-Based Compensation in question; (c) while the Corporation has a class of securities listed on a national securities exchange or a national securities association, such as Nasdaq; and (d) during the three (3) completed fiscal years immediately preceding the date that the Corporation is required to prepare an accounting restatement as described below.  In addition to these last three (3) completed fiscal years, this Policy also applies to any transition period (that results from a change in the Corporation’s fiscal year) within or immediately following those three (3) completed fiscal years.  However, a transition period between the last day of the Corporation’s previous fiscal year end and the first day of its new fiscal year that comprises a period of nine (9) to 12 months will be deemed a completed fiscal year.

● “Incentive-Based Compensation” means all compensation that is granted, earned, or vested based wholly or in part upon the attainment of a Financial Reporting Measure (as defined below). The amount of compensation subject to this Policy is the amount of incentive-based compensation received that exceeds the amount of Incentive-Based Compensation that otherwise would have been received had it been determined based on the restated amounts and will be computed without regard to any taxes paid. For Incentive-Based Compensation based on stock price or total shareholder return, where the amount of erroneously awarded compensation is not subject to mathematical recalculation directly from the information in an accounting restatement:  (i) the amount must be based on a reasonable estimate of the effect of the accounting restatement on the stock price or total shareholder return upon which the incentive-based compensation was received; and (ii) the Corporation must maintain documentation of the determination of that reasonable estimate and provide such documentation to Nasdaq.

● “Financial Reporting Measure” means a measure that is determined and presented in accordance with the accounting principles used in preparing the Corporation’s financial statements, and any other measure that is derived wholly or in part from such measure.  Stock price and total shareholder return are each a Financial Reporting Measure.  A measure need not be presented within the financial statements or included in a filing with the SEC for it to be deemed a Financial Reporting Measure.

● Incentive-Based Compensation is deemed “received” for purposes of this Policy in the Corporation’s fiscal period during which the financial reporting measure specified in the Incentive-Based Compensation award is attained, even if the

payment or grant of the Incentive-Based Compensation occurs after the end of that period.

III. Definition of Executive Officer.  For purposes of this Policy, the term “Executive Officer” includes the Corporation’s president, principal financial officer, principal accounting officer (or if there is no such accounting officer, the controller), any vice-president of the Corporation in charge of a principal business unit, division, or function (such as sales, administration, or finance), any other officer who performs a significant policy-making function, or any other person who performs similar significant policy-making functions for the Corporation. Executive officers of the Corporation’s subsidiaries, including First United Bank & Trust, will be deemed to be Executive Officers for purposes of this Policy if they perform such significant policy-making functions for the Corporation.  The identities of the Corporation’s Executive Officers for purposes of this Policy will be consistent with, and no less inclusive than, the list of executive officers identified by the Corporation for purposes of disclosing information about executive officers in its Annual Reports on Form 10-K and/or its definitive proxy statements for annual meeting of shareholders pursuant to Item 401(b) of the SEC’s Regulation S-K.  

IV. Recovery of Erroneously Awarded Compensation.  If the Corporation is required to prepare an accounting restatement due to the material noncompliance of the Corporation with any financial reporting requirement under applicable securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period, then the Corporation shall be entitled to (and shall) recover the amount of erroneously awarded Incentive-Based Compensation (“Erroneously Awarded Compensation”).  

The Corporation’s right and obligation to recover Erroneously Awarded Compensation shall not be dependent on if or when the restated financial statements are filed.

For purposes of determining the relevant recovery period, the date that the Corporation is required to prepare an accounting restatement described in this Policy is the earlier to occur of:  (a) the date that the Board, a committee of the Board, or the officer or officers of the Corporation authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Corporation is required to prepare an accounting restatement as described in this Policy; or (b) the date that a court, regulator, or other legally authorized body directs the Corporation to prepare an accounting restatement as described in this Policy.

The Company must recover Erroneously Awarded Compensation in compliance with this Policy except to the extent that one of the exceptions identified below applies.

● The conditions of paragraphs (b)(1)(iv)(A), (B), or (C) of Nasdaq Rule 5608 are met and the Board’s Compensation Committee or, in the absence of such a committee, a majority of the independent directors serving on the Board, has made a determination that recovery would be impracticable.

Before concluding that it would be impracticable to recover any amount of Erroneously Awarded Compensation based on expense of enforcement, the Corporation must make a reasonable attempt to recover such Erroneously Awarded Compensation, document such reasonable attempt(s) to recover, and provide that documentation to Nasdaq.

● The direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recovered.

● Recovery would violate home country law where that law was adopted prior to November 28, 2022. Before concluding that it would be impracticable to recover any amount of Erroneously Awarded Compensation based on violation of home country law, the Corporation must obtain an opinion of home country counsel, acceptable to Nasdaq, that recovery would result in such a violation, and must provide such opinion to Nasdaq.

● Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the registrant, to fail to meet the requirements of 26 U.S.C. § 401(a)(13) or 26 U.S.C. § 411(a) and regulations thereunder.

The Corporation is prohibited from indemnifying any Executive Officer or former Executive Officer against the loss of Erroneously Awarded Compensation.

If and to the extent that there any conflict between the provisions of this Policy and the provisions of any compensatory plan, agreement, or other arrangement between the Corporation and/or one of its parents or subsidiaries, on the one hand, and any Executive Officer, on the other hand, the provisions of this Policy shall control.

V. Regulatory Reporting.  The Corporation shall file all disclosures with respect to this Policy in accordance with the requirements of the federal securities laws, including the disclosure required by the Corporation’s applicable SEC filings.

VI. Consent by Executive Officers.  Each individual who has received and/or is in the future granted an opportunity to receive Incentive-Based Compensation covered by this Policy shall be provided with a copy of this Policy and shall agree, as a condition to retaining or receiving such opportunity, to be bound by this Policy by signing below.  The Corporation shall retain a copy of such agreement.  

XML

Document and Entity Information - USD ($)
$ in Thousands

12 Months Ended

Dec. 31, 2023

Feb. 29, 2024

Jun. 30, 2023

Document and Entity Information [Abstract]

Document Type

10-K

Document Annual Report

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Document Period End Date

Dec. 31, 2023

Document Transition Report

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Current Fiscal Year End Date

--12-31

Entity File Number

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Entity Registrant Name

First United Corporation

Entity Incorporation, State or Country Code

MD

Entity Tax Identification Number

52-1380770

Entity Address, Address Line One

19 South Second Street

Entity Address, City or Town

Oakland

Entity Address, State or Province

MD

Entity Address, Postal Zip Code

21550-0009

City Area Code

800

Local Phone Number

470-4356

Title of 12(b) Security

Common Stock

Trading Symbol

FUNC

Security Exchange Name

NASDAQ

Entity Well-known Seasoned Issuer

No

Entity Voluntary Filers

No

Entity Current Reporting Status

Yes

Entity Interactive Data Current

Yes

Entity Filer Category

Non-accelerated Filer

Entity Small Business

true

Entity Emerging Growth Company

false

ICFR Auditor Attestation Flag

false

Entity Shell Company

false

Entity Public Float

$ 85,737,171

Entity Common Stock, Shares Outstanding

6,643,161

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Document Fiscal Year Focus

2023

Entity Central Index Key

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Amendment Flag

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Documents Incorporated by Reference

Portions of the registrant’s definitive proxy statement for the 2024 Annual Meeting of Shareholders to be filed with the SEC pursuant to Regulation 14A are incorporated by reference into Part III of this Annual Report on Form 10-K.

Auditor Name

Crowe LLP

Auditor Firm ID

173

Auditor Location

Washington, D.C.

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XML

Consolidated Statements of Financial Condition - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Assets
Cash and due from banks	$ 48,343	$ 72,720
Interest bearing deposits in banks	1,410	1,595
Cash and cash equivalents	49,753	74,315
Investment securities - available for sale (at fair value)	97,169	125,889
Investment securities - held to maturity, net of allowance for credit losses of $45 and $0, respectively (fair value of $184,415 at December 31, 2023 and $203,080 at December 31, 2022)	214,297
Investment securities - held to maturity, net of allowance for credit losses of $45 and $0, respectively (fair value of $184,415 at December 31, 2023 and $203,080 at December 31, 2022), pre ASU change		235,659
Restricted investment in bank stock, at cost	5,250	1,027
Loans held for sale	443	0
Loans	1,406,667	1,279,494
Unearned fees	(340)	(174)
Allowance for credit losses	(17,480)	(14,636)
Net loans	1,388,847	1,264,684
Premises and equipment, net	31,459	34,948
Goodwill and other intangibles	12,103	12,433
Bank owned life insurance	47,607	46,346
Deferred tax assets	11,133	10,605
Other real estate owned, net	4,493	4,733
Right of use asset	1,367	1,898
Pension asset	11,208	8,001
Accrued interest receivable	7,487	6,051
Other assets	23,244	21,580
Total Assets	1,905,860	1,848,169
Liabilities:
Non-interest bearing deposits	427,670	506,613
Interest bearing deposits	1,123,307	1,064,120
Total deposits	1,550,977	1,570,733
Short-term borrowings	45,418	64,565
Long-term borrowings	110,929	30,929
Operating lease liability	1,556	2,373
SERP deferred compensation	9,777	7,194
Allowance for credit losses on unfunded commitments	873	133
Accrued interest payable	612	151
Other Liabilities	22,515	19,099
Dividends payable	1,330	1,199
Total Liabilities	1,743,987	1,696,376
Shareholders' Equity:
Common Stock - par value $0.01 per share; Authorized 25,000,000 shares; issued and outstanding 6,639,888 shares at December 31, 2023 and 6,666,428 shares at December 31, 2022	66	67
Surplus	23,734	24,409
Retained earnings	173,900	166,343
Accumulated other comprehensive loss	(35,827)	(39,026)
Total Shareholders' Equity	161,873	151,793
Total Liabilities and Shareholders' Equity	$ 1,905,860	$ 1,848,169

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Consolidated Statements of Financial Condition (Parenthetical) - USD ($)	Dec. 31, 2023	Dec. 31, 2022
Consolidated Statement of Financial Condition [Abstract]
Held-to-maturity securities, fair value	$ 184,415,000	$ 203,080,000
Held-to-maturity securities, allowance for credit losses	$ 45,000	$ 0
Common stock, Par value	$ 0.01	$ 0.01
Common Stock, Shares Authorized	25,000,000	25,000,000
Common Stock, Shares, Issued	6,639,888	6,666,428
Common Stock, Shares, Outstanding	6,639,888	6,666,428

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Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Interest income
Interest and fees on loans	$ 69,569	$ 54,448
Interest on investment securities: Taxable	7,173	6,252
Interest on investment securities: Exempt from federal income tax	714	1,106
Total investment income	7,887	7,358
Other	3,700	616
Total interest income	81,156	62,422
Interest expense
Interest on deposits	19,198	3,226
Interest on short-term borrowings	147	112
Interest on long-term borrowings	4,941	1,451
Total interest expense	24,286	4,789
Net interest income	56,870	57,633
Credit loss (credit)/expense	1,700	(643)
Credit loss expense - debt securities held to maturity	45
Credit loss (credit)/expense- unfunded commitments	(125)	16
Total credit loss expense/(credit)	1,620	(627)
Net interest income after provision for credit losses	55,250	58,260
Other operating income
Net (losses)/gains on investments, available for sale	(4,214)	3
Net gains on investments, held to maturity		91
Net gains on sales of residential mortgage loans	381	45
Net (losses)/gains on disposal of fixed assets	(29)	33
Net (losses)/gains	(3,862)	172
Total other income	18,331	17,878
Total other operating income	14,469	18,050
Other operating expenses
Salaries and employee benefits	27,503	24,130
FDIC premiums	992	636
Equipment expense	4,356	4,163
Occupancy expense of premises	3,445	2,906
Data processing expense	3,980	3,444
Marketing expense	762	543
Professional services	2,160	1,538
Contract labor	643	618
Telephone	466	482
Total OREO (income)/expense, net	(89)	590
Investor relations	345	300
Contributions	229	288
Other	5,451	3,491
Total other operating expenses	50,243	43,129
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest, Total	19,476	33,181
Provision for income tax expense	4,416	8,133
Net Income	$ 15,060	$ 25,048
Basic net income per share	$ 2.25	$ 3.77
Diluted net income per share	$ 2.25	$ 3.76
Weighted average number of basic shares outstanding	6,686	6,650
Weighted average number of diluted shares outstanding	6,701	6,661
Dividends declared per common share	$ 0.80	$ 0.63
Service Charges on Deposit Accounts [Member]
Other operating income
Total other income	$ 2,198	$ 1,981
Other Service Charges [Member]
Other operating income
Total other income	929	925
Trust Department [Member]
Other operating income
Total other income	8,282	8,244
Debit Card Income [Member]
Other operating income
Total other income	4,101	3,958
Bank Owned Life Insurance [Member]
Other operating income
Total other income	1,261	1,196
Brokerage Commissions [Member]
Other operating income
Total other income	1,160	1,049
Other [Member]
Other operating income
Total other income	$ 400	$ 525

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Net Income (Loss)	$ 15,060	$ 25,048
Other comprehensive income/(loss), net of tax and reclassification adjustments:
Other Comprehensive Income (Loss), before Tax	4,345	(15,935)
Income tax (credit)/expense related to other comprehensive income	(1,146)	4,223
Other comprehensive income/(loss), net of tax	3,199	(11,712)
Comprehensive Income	18,259	13,336
Investment securities- with OTTI [Member]
Other comprehensive income/(loss), net of tax and reclassification adjustments:
Other Comprehensive Income (Loss), before Reclassifications, before Tax	(845)	(835)
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax	202	202
Other Comprehensive Income (Loss), before Tax	(1,047)	(1,037)
Income tax (credit)/expense related to other comprehensive income	276	275
Other comprehensive income/(loss), net of tax	(771)	(762)
Investment securities- all other [Member]
Other comprehensive income/(loss), net of tax and reclassification adjustments:
Unrealized holdings losses on securities transferred to held to maturity		8,328
Other Comprehensive Income (Loss), before Reclassifications, before Tax	83	(22,792)
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax	(4,214)	3
Other Comprehensive Income (Loss), before Tax	4,297	(14,467)
Income tax (credit)/expense related to other comprehensive income	(1,134)	3,836
Other comprehensive income/(loss), net of tax	3,163	(10,631)
Investment Securities HTM [Member]
Other comprehensive income/(loss), net of tax and reclassification adjustments:
Unrealized holdings losses on securities transferred to held to maturity		(8,328)
Other Comprehensive Income (Loss), before Reclassifications, before Tax		(8,328)
Reclassification adjustment for gains/(losses) realized in income		91
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax	(682)	(841)
Other Comprehensive Income (Loss), before Tax	682	(7,578)
Income tax (credit)/expense related to other comprehensive income	(180)	2,009
Other comprehensive income/(loss), net of tax	502	(5,569)
Investment Securities Transferred From AFS to HTM [Member]
Other comprehensive income/(loss), net of tax and reclassification adjustments:
Other Comprehensive Income (Loss), before Reclassifications, before Tax		8,328
Cash Flow Hedge (OCI) [Member]
Other comprehensive income/(loss), net of tax and reclassification adjustments:
Other Comprehensive Income (Loss), before Reclassifications, before Tax	(310)	1,521
Other Comprehensive Income (Loss), before Tax	(310)	1,521
Adjustment [Member]
Other comprehensive income/(loss), net of tax and reclassification adjustments:
Other Comprehensive Income (Loss), before Reclassifications, before Tax	2,180	931
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax	(998)	(1,117)
Other Comprehensive Income (Loss), before Tax	3,178	2,048
Accumulated SERP [Member]
Other comprehensive income/(loss), net of tax and reclassification adjustments:
Other Comprehensive Income (Loss), before Reclassifications, before Tax	(2,448)	3,307
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax	7	(271)
Other Comprehensive Income (Loss), before Tax	$ (2,455)	$ 3,578

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Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Surplus [Member]	Retained Earnings [Member] Cumulative Effect, Period of Adoption, Adjustment [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member]	Total
Balance at Dec. 31, 2021	$ 66	$ 23,661		$ 145,487	$ (27,314)		$ 141,900
Net income				25,048			25,048
Other comprehensive income (loss)					(11,712)		(11,712)
Common stock issued	1	216					217
Common stock dividend declared				(4,192)			(4,192)
Stock based compensation		532					532
Balance at Dec. 31, 2022	67	24,409	$ (2,155)	166,343	(39,026)	$ (2,155)	151,793
Net income				15,060			15,060
Other comprehensive income (loss)					3,199		3,199
Common stock issued		293					293
Common stock dividend declared				(5,348)			(5,348)
Stock based compensation		527					527
Stock repurchase	(1)	(1,495)					(1,496)
Balance at Dec. 31, 2023	$ 66	$ 23,734		$ 173,900	$ (35,827)		$ 161,873

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Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Consolidated Statement of Changes in Shareholders' Equity [Abstract]
Common stock issued, shares	55,558	45,473
Stock repurchase, shares	82,098	0
Common stock dividend declared per share	$ 0.80	$ 0.63

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Operating activities
Net income	$ 15,060	$ 25,048
Adjustments to reconcile net income to net cash provided by operating activities:
Provision/(credit) for credit losses	1,620	(627)
Depreciation	3,799	3,077
Stock based compensation	527	532
Amortization of intangible assets	330	219
Gains on sales of other real estate owned, net	(599)
Write-downs of other real estate owned	23
Originations of loans held for sale	(4,832)	(1,401)
Proceeds from sales of loans held for sale	4,770	1,513
Gains from sales of loans held for sale	(381)	(45)
Losses/(gains) on disposal of fixed assets, net	29	(33)
Net (accretion)/ amortization of investment securities discounts and premiums- AFS	(51)	83
Net accretion of investment securities discounts and premiums- HTM	(805)	(850)
Net losses on sales of investment securities - available-for-sale	4,214	(3)
Net gain on calls of investment securities - available-for-sale		(3)
Net gains on investment securities - held to maturity		(91)
Amortization of deferred loan fees	(98)	(150)
Deferred tax (benefit)/expense	(889)	595
Earnings on Bank owned life insurance	(1,261)	(1,196)
Amortization of operating lease right of use asset	787	349
Amortization of operating lease liabilities	(1,073)	(388)
(Increase)/decrease in accrued interest receivable and other assets	(4,932)	648
Increase/(decrease) in accrued interest payable and other liabilities	6,232	(737)
Net cash provided by operating activities	22,470	26,543
Investing activities
Proceeds from maturities/calls of investment securities available-for-sale	7,497	14,248
Proceeds from maturities/calls of investment securities held-to-maturity	26,110	16,263
Proceeds from sales of investment securities available-for-sale	20,249	1,023
Purchases of investment securities available-for-sale		(17,652)
Purchases of investment securities held-to-maturity	(3,988)	(55,686)
Proceeds from sales of other real estate owned	1,041
Proceeds from disposal of fixed assets	14	281
Net (increase)/decrease in FHLB stock	(4,223)	2
Net increase in loans	(128,056)	(126,707)
Acquisition of mortgage company		(600)
Purchases of premises and equipment	(353)	(3,576)
Net cash used in investing activities	(81,709)	(172,404)
Financing activities
Net (decrease)/increase in deposits	(19,756)	101,359
Proceeds from issuance of common stock	293	217
Cash dividends on common stock	(5,217)	(3,986)
Net(decrease)/increase in short-term borrowings	(19,147)	6,866
Stock repurchase	(1,496)
Proceeds from long-term borrowings	80,000
Net cash provided by financing activities	34,677	104,456
Decrease in cash and cash equivalents	(24,562)	(41,405)
Cash and cash equivalents at beginning of the year	74,315	115,720
Cash and cash equivalents at end of period	49,753	74,315
Supplemental information
Interest paid	23,825	4,775
Taxes paid	6,126	7,508
Non-cash investing activities:
Transfers from loans to other real estate owned	$ 225	256
Transfers from securities available for sale to held to maturity		$ 139,036

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2023

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

Business

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

First United Corporation and its subsidiaries operate principally in four counties in Western Maryland and four counties in West Virginia.

As used in these Notes, the terms “the Corporation”, “we”, “us”, and “our” mean First United Corporation and, unless the context clearly suggests otherwise, its consolidated subsidiaries.

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”).  All significant intercompany transactions and accounts have been eliminated.  Certain reclassifications have been made to prior year amounts to conform with current year classifications.  In the opinion of management, all adjustments (all of which are normal recurring in nature) that are necessary for a fair statement are reflected in the consolidated financial statements.

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 of the Corporation include the accounts of First United Corporation, the Bank, the OakFirst Loan Centers, First OREO Trust and FUBT OREO I, LLC. All significant inter-company accounts and transactions have been eliminated.

Significant Concentrations of Credit Risk

Most of the Corporation’s relationships are with customers located in Western Maryland and Northeastern West Virginia. At December 31, 2023, approximately 5%, or $77.1 million, of total loans were secured by real estate acquisition, construction and development projects, with $77.0 million performing according to their contractual terms and

$0.1 million considered to be individually evaluated loans based on management’s concerns about the borrowers’ ability to comply with present repayment terms. The $0.1 million in individually evaluated loans were all classified as non-accrual as of December 31, 2023.  Additionally, loans collateralized by commercial rental properties represented 21% of the total loan portfolio as of December 31, 2023. Note 4 discusses the types of securities in which the Corporation invests and Note 5 discusses the Corporation’s lending activities.

Investments

The investment portfolio is classified and accounted for based on the guidance of Accounting Standards Codification (“ASC”) Topic 320, Investments – Debt and Equity Securities. Securities bought and held principally for the purpose of selling them in the near term are classified as trading account securities and reported at fair value with unrealized gains and losses included in net gains/losses in other operating income. Securities purchased with the intent and ability to hold the securities to maturity are classified as held-to-maturity securities and are recorded at amortized cost. All other investment securities are classified as available-for-sale. These securities are held for an indefinite period of time and may be sold in response to changing market and interest rate conditions or for liquidity purposes as part of our overall asset/liability management strategy. Available-for-sale securities are reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of other comprehensive income included in the consolidated statement of comprehensive income, net of applicable income taxes.

The amortized cost of debt securities is adjusted for the amortization of premiums to the first call date, if applicable, or to maturity, and for the accretion of discounts to maturity, or, in the case of mortgage-backed securities, over the estimated life of the security. Such amortization and accretion is included in interest income from investments. Interest and dividends are included in interest income from investments. Gains and losses on the sale of securities are recorded using the specific identification method.

The Corporation adopted Accounting Standards Codification (“ASC “) 326 using the prospective transition approach for debt securities for which other than temporary impairment (“OTTI”) had been recognized prior to January 1, 2023, such as available-for-sale (“AFS”) collateralized debt obligations.  As a result, the amortized cost basis for such debt securities remained the same before and after the effective date of ASC 326.  The effective interest rate on these debt securities was not changed.  Amounts previously written off are recognized in other comprehensive income (“OCI”) as of January 1, 2023 relating to improvements in cash flows expected to be collected are accreted into income over the remaining life of the asset.  Recoveries of amounts previously written off relating to improvements in cash flows after January 1, 2023 are recorded in earnings when received.

The Corporation utilizes ASC 326 to evaluate its AFS and HTM debt security portfolio for expected credit losses.  For AFS debt securities in an unrealized loss position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis.  If either criteria is met, the security’s amortized cost basis is written down to fair value through income.  For AFS debt securities that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted from credit losses or other factors.  In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.  If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security.  If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.  Any impairment that has not been recorded through an ACL is recognized in other comprehensive income, as a non-credit-related impairment.

The Corporation has made the policy election to exclude accrued interest from the amortized cost basis of available-for-sale debt securities and report accrued interest separately in other assets in the Consolidated Balance Sheets.  Available-for-sale debt securities are placed on nonaccrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due.  Accrued interest receivable is reversed against interest income when

a security is placed on nonaccrual status.  Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable.

The Corporation separately evaluates its HTM investment securities for any credit losses.  The Corporation pools like securities and calculates expected credit losses through an estimate based on a security’s credit rating, which is recognized as part of the allowance for credit losses for held-to-maturity securities and is included in the balance of investment securities held to maturity on the Consolidated Balance Sheets.  If the Corporation determines that a security indicates evidence of deteriorated credit quality, the security is individually evaluated and a discounted cash flow analysis is performed and compared to the amortized cost basis.

Restricted Investment in Bank Stock

The Corporation owns non-marketable equity securities in a combination of the Federal Home Loan Bank (“FHLB”) of Atlanta, Atlantic Community Bankers Bank and Community Banker’s Bank.  These securities are carried at cost, classified as restricted securities, and periodically evaluated for impairment based on ultimate recovery of par value.

The Corporation recognizes dividend income on a cash basis. For the years ended December 31, 2023 and December 31, 2022, dividends of $198,457 and $36,558, respectively, were recorded in other operating income.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or full repayment by the borrower are reported at their unpaid principal balance outstanding, adjusted for any deferred fees or costs pertaining to origination. Loans that management has the intent to sell are reported at the lower of cost or fair value determined on an individual basis.  There were $0.4 million in loans held for sale at December 31, 2023.  No loans were held for sale at December 31, 2022.

The segments of the Bank’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance. The commercial real estate (“CRE”) loan segment is further disaggregated into two classes. Non-owner occupied CRE loans, which include loans secured by non-owner occupied nonfarm nonresidential properties, generally have a greater risk profile than all other CRE loans, which include loans secured by farmland, multifamily structures and owner-occupied commercial structures. The acquisition and development (“A&D”) loan segment is further disaggregated into two classes. One-to-four family residential construction loans are generally made to individuals for the acquisition of and/or construction on a lot or lots on which a residential dwelling is to be built. All other A&D loans are generally made to developers or investors for the purpose of acquiring, developing and constructing residential or commercial structures. These loans have a higher risk profile because the ultimate buyer, once development is completed, is generally not known at the time of the A&D loan. The commercial and industrial (“C&I”) loan segment consists of loans made for the purpose of financing the activities of commercial customers. The residential mortgage loan segment is further disaggregated into two classes: amortizing term loans, which are primarily first liens, and home equity lines of credit, which are generally second liens. The consumer loan segment consists primarily of installment loans (direct and indirect), student loans and overdraft lines of credit connected with customer deposit accounts.

Management uses a 10-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due are considered Substandard. Only the portion of a specific allocation of the allowance for credit losses is associated with a pending event that could trigger loss in the short term is classified in the Doubtful category.  It is possible for a loan to be classified as Substandard in the internal risk rating system, but not be

individually evaluated under GAAP, due to the broader reach of “well-defined weaknesses” in the application of the Substandard definition.

Interest and Fees on Loans

Interest on loans (other than those on non-accrual status) is recognized based upon the principal amount outstanding.  Loan fees in excess of the costs incurred to originate the loan are recognized as income over the life of the loan utilizing either the interest method or the straight-line method, depending on the type of loan. Generally, fees on loans with a specified maturity date, such as residential mortgages, are recognized using the interest method. Loan fees for lines of credit are recognized using the straight-line method.

A loan is considered to be past due when a payment has not been received for 30 days past its contractual due date. For all loan segments, the accrual of interest is discontinued when principal or interest is delinquent for 90 days or more unless the loan is well-secured and in the process of collection.  Loans that are on a current payment status or past due less than 90 days may be classified as nonaccrual if repayment in full of principal and/or interest is unlikely.  Interest payments received on non-accrual loans are applied as a reduction of the loan principal balance. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Generally, consumer installment loans are not placed on non-accrual status, but are charged off after they are 120 days contractually past due. Loans other than consumer installment loans are charged-off based on an evaluation of the facts and circumstances of each individual loan.

Allowance for Credit Losses

An allowance for credit loss (“ACL”) is mainained to absorb losses from the Corporation’s financial assets in accordance with ASC 326:  Financial Instruments- Credit Losses.

Allowance for Credit Losses Policy

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

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

Management believes it uses relevant information available to make determinations about the ACL and that it has established the existing allowance in accordance with GAAP.  However, the determination of the ACL requires significant judgment, and estimates of expected losses in the loan portfolio can vary significantly from the amounts actually observed.  While management uses available information to recognize losses, future additions to the ACL may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes to the interest rate environment which may directly impact prepayment and curtailment rate assumptions, and changes in the financial condition of borrowers.

The adoption of CECL accounting did not result in a significant change to any other credit risk management and monitoring processes, including identification of past due or delinquent borrowers, nonaccrual practices, assessment of modified loans, or charge-off policy.  

Held-to-Maturity Securities

Management measures expected credit losses on HTM debt securities on a collective basis by major security type.  Management has elected not to measure an ACL for accrued interest on securities. The estimate of expected credit losses considers historical credit loss information tha tis adjusted for current conditions and reasonable and supportable forecasts.  

Management classifies the held-to-maturity portfolio into the following major security types:  securities issued by U.S. government issues and agencies (including U.S. treasuries, agency bonds, and U.S. guaranteed residential mortgage-backed securities, commercial mortgage-backed securities, and collateralized mortgage obligations), rated municipal securities, and unrated municipal securities.   Securities that are issued or explicitly or implicitely guaranteed by the U.S. government are hghly rated by major rating agencies and have a long history of no credit losses.  Rated municipal securities are evaluated based on credit rating by major rating agencies and financial performance.   Non-rated securities are evaluated internally based on financial performance and expected future cash flows.

Available-for-Sale Securities

For AFS debt securities in an unrealized loss position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery to its amortized cost basis.  If either criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income.  For debt securities AFS that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted rom credit losses or other factors.  In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.  If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected rom the security are compared to the amortized cost basis of the security.  If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.  Any impairment that has not been recorded through the ACL is recognized in other comprehensive income.

The Corporation adopted Accounting Standards Codification (“ASC “) 326 using the prospective transition approach for debt securities for which other than temporary impairment (“OTTI”) had been recognized prior to January 1, 2023, such as available-for-sale (“AFS”) collateralized debt obligations.  As a result, the amortized cost basis for such debt securities remained the same before and after the effective date of ASC 326.  The effective interest rate on these debt securities was not changed.  Amounts previously written off are recognized in other comprehensive income (“OCI”) as of January 1, 2023 relating to improvements in cash flows expected to be collected are accreted into income over the remaining life of the asset.  Recoveries of amounts previously written off relating to improvements in cash flows after January 1, 2023 are recorded in earnings when received.

Loans

An ACL is maintained as a valuation account that is deducted from the Corporation’s loan porfolio’s amortized cost basis to present the net amount expected to be collected on the loans.  Loan are charged off against the ACL when management believes the uncollectibility of a loan balance is confirmed.  Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.  

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.  Historical credit loss experience provides the basis or the estimation of expected credit losses.  Adjustments to historical loss information are made for differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental condition, such as changes in unemployment rates, property values, or other relevant factors.

Management evaluates individual loans in all of the commercial segments for possible impairment if the loan is greater than $500,000 or is part of a relationship that is greater than $750,000 and (i) is either in non-accrual status or (ii) is

risk-rated Substandard and is greater than 60 days past due. Loans are considered to be individually evaluated when, based on current information and events, they no longer share the same risk characteristics of other loans within our portfolio. Factors considered by management in evaluating loans include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Bank does not separately evaluate individual consumer and residential mortgage loans, unless such loans are part of larger relationship that is individually evaluated; otherwise loans in these segments are considered individually evaluated when they are classified as non-accrual.

Once the determination has been made that a loan is individually evaluated, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods: (i) the present value of expected future cash flows discounted at the loan’s effective interest rate; (ii) the loan’s observable market price; or (iii) the fair value of the collateral less selling costs. The method is selected on a loan-by-loan basis, with management utilizing the fair value of collateral or the discounted cash flow method for the analyses. If the fair value of the collateral less selling costs method is utilized for collateral securing loans in the commercial segments, then an updated external appraisal is ordered on the collateral supporting the loan if the loan balance is greater than $500,000 and the existing appraisal is greater than 18 months old. If the loan balance is less than $500,000, then the estimated fair value of the collateral is determined by adjusting the existing appraisal by the appropriate percentage from an internally prepared appraisal discount grid. This grid considers the age of a third-party appraisal and the geographic region where the collateral is located in order to discount an appraisal. The discount rates in the appraisal discount grid are updated at least annually to reflect the most current knowledge that management has available, including the results of current appraisals. If there is a delay in receiving an updated appraisal or if the appraisal is found to be deficient in our internal appraisal review process and re-ordered, the Bank continues to use a discount factor from the appraisal discount grid based on the collateral location and current appraisal age in order to determine the estimated fair value. If the general market conditions in that geographic market have changed considerably, the property has deteriorated or perhaps lost an income stream, or a recent appraisal for a similar property indicates a significant change, then management may adjust the fair value indicated by the existing appraisal until a new appraisal is obtained. A specific allocation of the ACL is recorded if there is any deficiency in collateral value determined by comparing the estimated fair value to the recorded investment of the loan. When updated appraisals are received and reviewed, adjustments are made to the specific allocation as needed.  

A loan that is considered a non-accrual or modified loan may be subject to the individually evaluated loan analysis if the commitment is $0.1 million or greater; otherwise, the modified loan remains in the appropriate segment in the ACL model and associated reserves are adjusted based on changes in the discounted cash flows resulting from the modification of the modified loan.  For a discussion with respect to reserve calculations regarding individually evaluated loans, refer to the “Nonrecurring Loans” section in Note 5, Fair Value Measurements.  There were no loan modifications to borrowers facing financial difficulties for the year ending December 31, 2023.

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

Loan Commitments and Allowance for Credit Loss on Unfunded Commitments

Financial instruments include unfunded commitments such as commitments to make loans and commercial letters of credit issued to meet customer financing needs.  The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for unfunded commitments commitments is represented by the contractual amount of those instruments.  Such financial instruments are recorded when they are funded.

The Corporation records a reserve for unfunded commitments (“RUC”) on unfunded commitments through a charge to provision for credit loss expense in the Corporation’s Consolidated Statement of Income.  The RUC on unfunded commitments is estimated by loan segment at each balance sheet date under the CECL model using the same

methodologies as portfolio loans, taking into consideration the likelihood that funding will occur, and is included in the RUC on the Corporation’s Consolidated Balance Sheet.

Loan Modifications

In situations where, for economic or legal reasons related to a borrower’s financial condition, management may grant a concession to the borrower that it would not otherwise consider, the related loan is classified as a modified loan.  Management strives to identify borrowers in financial difficulty early and work with them to modify the loan to more affordable terms before their loan reaches nonaccrual status.  The Corporation modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay, or interest rate reductions.  When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.  These concessions are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral.   See Note 5 for more detail related to the accounting of modified loans.

Premises and Equipment

Land is carried at cost. Premises and equipment are carried at cost, less accumulated depreciation. The provision for depreciation for financial reporting has been made by using the straight-line method based on the estimated useful lives of the assets, which range from 10 to 31.5 years for buildings and 3 to 20 years for furniture and equipment.

Goodwill and Other Intangible Assets

Goodwill represents the excess purchase price paid over the fair value of the net assets acquired in a business combination. Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Impairment testing requires that the fair value of each of the Corporation’s reporting units be compared to the carrying amount of the reporting unit’s net assets, including goodwill. If the fair values of the reporting units exceed their book values, no write-down of recorded goodwill is required. If the fair value of a reporting unit is less than book value, an expense may be required to write-down the related goodwill to the proper carrying value. Any impairment would be realized through a reduction of goodwill or the intangible and an offsetting charge to non-interest expense. Annually, the Corporation performs an impairment test of goodwill as of December 31 of each year. During the year, any triggering event that occurs may affect goodwill and could require an impairment assessment. Determining the fair value of a reporting unit requires the Corporation to use a degree of subjectivity. The Corporation's annual impairment test of goodwill and other intangible assets did not identify any impairment.

Accounting guidance provides the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

Other intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset, or liability. Other intangible assets have finite lives and are reviewed for impairment annually. At December 31, 2023, other intangible assets included $0.6 million for the purchase of certain assets from a wealth company and $0.5 million for the purchase of certain assets of a mortgage company.  These assets are amortized over their estimated useful lives either on a straight-line or sum-of-the-years basis over varying periods that initially did not exceed 5 years.

Bank-Owned Life Insurance (“BOLI”)

BOLI policies are recorded at their cash surrender values. Changes in the cash surrender values are recorded as other operating income.

Other Real Estate Owned (“OREO”)

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less the cost to sell at the date of foreclosure, with any losses charged to the ACL, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Changes in the valuation allowance, sales gains and losses, and revenue and expenses from holding and operating properties are all included in net expenses from other real estate owned.

Income Taxes

First United Corporation and its subsidiaries file a consolidated federal income tax return. Income taxes are accounted for using the asset and liability method. Under the asset and liability method, the deferred tax liability or asset is determined based on the difference between the financial statement and tax bases of assets and liabilities (temporary differences) and is measured at the enacted tax rates that will be in effect when these differences reverse. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.  Deferred tax expense is determined by the change in the net liability or asset for deferred taxes adjusted for changes in any deferred tax asset valuation allowance, or reserve.  This reserve was based on the portion of the tax asset for which it is more likely than not that a tax benefit will not be realized by the Corporation.

A tax provision is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.  The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examinations for tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

State corporate income tax returns are filed annually. Federal and state returns may be selected for examination by the Internal Revenue Service and the states where we file, subject to statutes of limitations. At any given point in time, the Corporation may have several years of filed tax returns that may be selected for examination or review by taxing authorities.

Interest and penalties on income taxes are recognized as a component of income tax expense.

Defined Benefit Plans

The defined benefit pension plan and supplemental executive retirement plan are accounted for in accordance with ASC Topic 715, Compensation – Retirement Benefits. Under the provisions of Topic 715, the defined benefit pension plan and the supplemental executive retirement plan are recognized as liabilities in the Consolidated Statement of Financial Condition, and unrecognized net actuarial losses, prior service costs and a net transition asset are recognized as a separate component of other comprehensive loss, net of tax. Actuarial gains and losses in excess of 10 percent of the greater of plan assets or the pension benefit obligation are amortized over a blend of future service of active employees and life expectancy of inactive participants. Refer to Note 15 for a further discussion of the pension plan and supplemental executive retirement plan obligations.

Statement of Cash Flows

Cash and cash equivalents are defined as cash and due from banks and interest-bearing deposits in banks in the Consolidated Statements of Cash Flows.  Cash flows are reported for customer loan and deposit transactions and interest-bearing deposits in banks.

Trust Assets and Income

Assets held in an agency or fiduciary capacity are not the Bank’s assets and, accordingly, are not included in the Consolidated Statements of Financial Condition. Income from the Bank’s trust department represents fees charged to customers and recognized through revenue recognition.  Refer to Note 21 for further discussion.

Business Segments

The Corporation operates in two segments, as defined by ASC Topic 280, Segment Reporting:  community banking and trust and investment services. The Corporation, both in its entirety and by its business segments, is managed and evaluated on an ongoing basis by First United Corporation’s Board of Directors and executive management.   Refer to Note 22 for further discussion.

Stock Repurchases

Under the Maryland General Corporation Law, shares of capital stock that are repurchased are cancelled and treated as authorized but unissued shares. When a share of capital stock is repurchased, the payment of the repurchase price reduces stated capital by the par value of that share (currently, $0.01 for common stock), and any excess over par value reduces capital surplus. In 2023, the Corporation repurchased 82,098 shares of common stock at a weighted average price of $16.79 per share.  The Corporation did not repurchase shares of common stock during 2022.  

Recent Accounting Pronouncements

Newly Adopted Pronouncements in 2023

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326):  Measurement of Credit Losses on Financial Instruments, universally referred to as CECL.  The amendments in ASU, 2016-13 among other things, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.  Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.  Many of the loss estimation techniques applied previously are still permitted, although the inputs to those techniques changed to reflect the full amount of expected credit losses.  In addition, ASU 2016-13 amends the accounting for credit losses on purchased financial assets with credit deterioration.  For periodic report filers that are smaller reporting companies, such as the Corporation, ASU 2016-13 was effective as of January 1, 2023.

As part of its process of adopting the CECL accounting method, management implemented a third party software solution and determined the appropriate loan segments, methodologies, model assumptions and qualitative components.  Our CECL model includes portfolio loan segmentation based upon similar risk characteristics and both a quantitative and qualitative component of the calculation which incorporates a forecasting component of certain economic variables.  Our implementation plan also includes the assessment and documentation of appropriate processes, policies and internal controls.  Management had a third party independent consultant review and validate our CECL model.

In addition, ASU 2016-13 amends the accounting for credit losses on certain debt securities.  The Corporation did not record any allowance for credit losses (“ACL”) on its debt securities as a result of adopting this ASU.

The ultimate impact of adopting ASU 2016-13, and at each subsequent reporting period, is highly dependent on credit quality, macroeconomic forecasts and conditions, compensation of our loan portfolio, and other management judgments.  The Corporation adopted ASU 2016-13 using the modified retrospective method.  Results beginning after January 1, 2023 are presented under ASU 2016-13, while prior period amounts continue to be reported in accordance with previously applicable GAAP.  We made the accounting policy election to not measure an ACL for accrued interest receivables for loans and securities.  Accrued interest deemed uncollectible will be written off through interest income.

The following table illustrates the day-one impact of adopting ASU 2016-13.

		January 1, 2023
(in thousands)		As Reported Under ASU 2016-13		Pre ASU 2016-13		Impact of ASU 2016-13 Adoption
Assets
Allowance for credit losses on loans
Commercial real estate	$	5,202	$	6,345	$	(1,143)
Acquisition and development		964		979		(15)
Commercial and industrial		4,179		2,845		1,334
Residentail mortgage		5,272		3,160		2,112
Consumer		1,085		877		208
Unallocated		-		430		(430)
Allowance for Credit Losses on Loans	$	16,702	$	14,636	$	2,066
Assets:
Investment securities- available for sale (at fair value)	$	125,889	$	125,889	$	-
Investment securities- held to maturity		245,659		245,659		-
Total loans held for investments, net		1,262,792		1,264,858		(2,066)
Net deferred tax asset		11,381		10,605		776
Liabilities:
Life-of-loss reserve on unfunded loan commitments	$	998	$	133	$	865
Equity:
Retained earnings	$	149,638	$	151,793	$	(2,155)

In connection with our adoption of ASU 2016-13, we made changes to our loan portfolio segments to align with the methodology of CECL.  Refer to Note 5, Loans and Related Allowance for Credit Losses, for further discussion of these portfolio segments.  The adoption of ASU 2016-13 resulted in a Day 1 adjustment of $2.9 million to our ACL, including an increase of $2.0 million to the ACL for loans and $0.9 million to the ACL for unfunded commitments.  The Corporation did not record any ACL on its available-for-sale or held-to-maturity investments upon adoption of ASC 326.  The Corporation recorded a net decrease to retained earnings of $2.2 million as of January 1, 2023 for the cumulative effect of adopting ASU 2016-13.  

In March 2022, FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326):  Troubled Debt Restructurings and Vintage Disclosures.  ASU 2022-02, which eliminates the troubled debt restructuring (“TDR”) accounting model for creditors that have adopted ASU 2016-13.  Due to the removal of the TDR accounting model, all loan modifications were evaluated to determine if they resulted in a new loan or a continuation of the existing loan.  The amendments in ASU 2022-02 also required that entities disclose current-period gross charge-offs by year of origination for loans and leases.  The amendments in ASU 2022-02 were effective January 1, 2023.  This change did not have a material effect on our consolidated financial statements.  Refer to Note 5, Loans and Related Allowance for Credit Losses for disclosures for debtors experiencing financial difficulty and for vintage disclosures related to gross charge-offs by loan segment by year of origination.

Recently issued but not yet effective Accounting Pronouncements

In March 2020, FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848):  Facilitation of Reference Rate Reform on Financial Reporting.”  The amendments in ASU 2020-04 provide optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting.  The amendments provide optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from the London Interbank Offered Rate (“LIBOR”) toward new interest rate benchmarks.  Modified contracts that meet certain scope guidance are eligible

for relief from these modification accounting requirements in GAAP.  The optional guidance generally allows for the modified contract to be accounted for as a continuation of the existing contract and does not require contract remeasurement at the modification date or reassessment of a previous accounting determination.  The amendments in  ASU 2020-04 are effective for all entities between March 12, 2020 and December 31, 2022.  In December 2022, FASB issued ASU No. 2022-06: “Reference Rate Reform (Topic 848):  Deferral of the Sunset Date of Topic 848.”  The amendments in ASU 2020-06 defer the sunset date for applying the reference rate reform relief by two years to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

The Corporation has identified all known LIBOR exposures, created a plan to address the exposures, and continues to communicate with all stakeholders to transition to alternative reference rates.   As of December 31, 2023, the Corporation has no financial instruments tied to LIBOR and does not anticipate that the transition related to ASU 2020-04 will have a significant impact on our financial statements.

In November 2023, FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280); Improvement to Reportable Segment Disclosures.”  ASU 2023-07 expands segment disclosure requirements for public entities to require disclosure of significant segment expense and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.  ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within the fiscal years beginning after December 15, 2024.  Early adoption is permitted.  ASU 2023-07 is not expected to have a significant impact on our financial statements.

In December 2023, FASB issued ASU No. 2023-09, “Income Taxes (Topic 740):  Improvements to Income Tax Disclosures.”  ASU 2023-09 requires public business entities to disclose in their rate reconciliation table additional categories of information about Federal, state, and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold.  ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by Federal, state, and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things.  ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. ASU 2023-09 is not expected to have a significant impact on our financial statements.

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Earnings Per Common Share

12 Months Ended

Dec. 31, 2023

Earnings Per Common Share [Abstract]

Earnings Per Common Share

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. There were no anti-dilutive shares at December 31, 2023 or 2022.

The following table sets forth the calculation of basic and diluted earnings per common share for the years ended December 31, 2023 and 2022:

	2023					2022
			Average	Per Share				Average	Per Share
(in thousands, except for per share amount)	Income		Shares	Amount		Income		Shares	Amount
Basic Earnings Per Share:
Net income	$	15,060	6,686	$	2.25	$	25,048	6,650	$	3.77
Diluted Earnings Per Share:
Restricted stock units			15					11
Net income	$	15,060	6,701	$	2.25	$	25,048	6,661	$	3.76

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Regulatory Capital Requirements

12 Months Ended

Dec. 31, 2023

Regulatory Capital Requirements [Abstract]

Regulatory Capital Requirements

3. Regulatory Capital Requirements

Banks and holding companies are subject to regulatory capital requirements administered by federal banking agencies.  Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices.  Capital amounts and classifications are also subject to qualitative judgments by regulators.  Failure to meet capital requirements can initiate regulatory action.  The net unrealized gain or loss on available for sale securities is included in computing regulatory capital.  Management believes that, as of December 31, 2023, the Corporation and Bank met all capital adequacy requirements to which they are subject.  

Prompt corrective action regulations provide five classifications:  well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition.  If adequately capitalized, regulatory approval is required to accept brokered deposits.  If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.  As of December 31, 2023, the most recent regulatory notification categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.  There are no conditions or events since that notification that management believes have changed the Bank’s category.

The following table presents First United Bank & Trust’s capital ratios for years ended December 31, 2023 and 2022:

	Actual			For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Provisions
(in thousands)	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2023
Total Capital (to risk-weighted assets)		207,767	14.05%		118,292	8.00%		147,865	10.00%
Tier 1 Capital (to risk-weighted assets)		189,370	12.81%		88,719	6.00%		118,292	8.00%
Common Equity Tier 1 Capital (to risk-weighted assets)		189,370	12.81%		66,540	4.50%		96,112	6.50%
Tier 1 Capital (to average assets)		189,370	9.92%		76,233	4.00%		95,291	5.00%
	Actual			For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Provisions
(in thousands)	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2022
Total Capital (to risk-weighted assets)		196,442	14.37%		109,396	8.00%		136,745	10.00%
Tier 1 Capital (to risk-weighted assets)		181,673	13.29%		82,047	6.00%		109,396	8.00%
Common Equity Tier 1 Capital (to risk-weighted assets)		181,673	13.29%		61,535	4.50%		88,884	6.50%
Tier 1 Capital (to average assets)		181,673	10.01%		72,354	4.00%		90,443	5.00%

Federal and state banking regulations place certain restrictions on the amount of dividends paid and loans or advances made by the Bank to First United Corporation. The total amount of dividends that may be paid at any date is generally limited to the retained earnings of the Bank, and loans or advances are limited to 10% of the Bank’s capital stock and surplus on a secured basis. In addition, dividends paid by the Bank to First United Corporation would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements.

We adopted CECL effective January 1, 2023 and elected not to implement the regulatory agencies’ capital transition and opted to record the impact to our capital ratios immediately upon implementation.  Effective with the implementation of CECL, a $2.2 million adjustment, net of tax, was made to retained earnings.  The adjustment did not have a material impact to our capital ratios.

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Investments Securities

12 Months Ended

Dec. 31, 2023

Investments [Abstract]

Investments

4. Investment Securities

The following table shows a comparison of amortized cost and fair values of investment securities at December 31, 2023 and 2022:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
December 31, 2023
Available for Sale:
U.S. government agencies	$	7,000	$	—	$	966	$	—	$	6,034
Residential mortgage-backed agencies		24,781		—		4,218		—		20,563
Commercial mortgage-backed agencies		36,258		—		7,841		—		28,417
Collateralized mortgage obligations		19,725		—		3,369		—		16,356
Obligations of states and political subdivisions		10,486		15		189		—		10,312
Corporate Bonds		1,000		—		222		—		778
Collateralized debt obligations		18,671		—		3,962		—		14,709
Total available for sale	$	117,921	$	15	$	20,767	$	—	$	97,169
(in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value		Allowance for Credit Losses
December 31, 2023
Held to Maturity:
U.S. treasuries	$	37,462	$	—	$	243	$	37,219	$	—
U.S. government agencies		68,014		—		10,985		57,029		—
Residential mortgage-backed agencies		29,588		42		2,913		26,717		—
Commercial mortgage-backed agencies		21,413		—		5,361		16,052		—
Collateralized mortgage obligations		53,261		—		9,973		43,288		—
Obligations of states and political subdivisions		4,604		177		671		4,110		45
Total held to maturity	$	214,342	$	219	$	30,146	$	184,415	$	45

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
December 31, 2022
Available for Sale:
U.S. government agencies	$	11,044	$	—	$	1,582	$	9,462
Residential mortgage-backed agencies		45,052		—		7,651		37,401
Commercial mortgage-backed agencies		37,393		—		6,661		30,732
Collateralized mortgage obligations		25,828		—		4,784		21,044
Obligations of states and political subdivisions		10,848		4		360		10,492
Corporate Bonds		1,000		—		113		887
Collateralized debt obligations		18,664		—		2,793		15,871
Total available for sale	$	149,829	$	4	$	23,944	$	125,889
(in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value
December 31, 2022
Held to Maturity:
U.S. treasuries	$	37,204	$	—	$	1,593	$	35,611
U.S. government agencies		67,734		—		13,261		54,473
Residential mortgage-backed agencies		28,624		1		3,503		25,122
Commercial mortgage-backed agencies		22,389		—		4,568		17,821
Collateralized mortgage obligations		57,085		—		10,001		47,084
Obligations of states and political subdivisions		22,623		946		600		22,969
Total held to maturity	$	235,659	$	947	$	33,526	$	203,080

Proceeds from sales and calls of available-for-sale securities and the realized gains and losses for the years ended December 31, 2023 and 2022 are as follows:

(in thousands)	2023		2022
Proceeds	$	20,249	$	1,023
Gross realized gains		—		3
Gross realized losses		4,214		—

The following table shows the Corporation’s securities with gross unrealized and unrecognized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized position, at December 31, 2023 and 2022:

	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, 2023
Available for Sale:
U.S. government agencies	$	—	$	—	—	$	6,034	$	966	2
Residential mortgage-backed agencies		—		—	—		20,563		4,218	3
Commercial mortgage-backed agencies		—		—	—		28,417		7,841	8
Collateralized mortgage obligations		—		—	—		16,356		3,369	9
Obligations of states and political subdivisions		1,445		20	2		6,668		169	3
Corporate Bonds		—		—	—		778		222	1
Collateralized debt obligations		—		—	—		14,709		3,962	9
Total available for sale	$	1,445	$	20	2	$	93,525	$	20,747	35
	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrecognized Losses		Number of Investments	Fair Value		Unrecognized Losses		Number of Investments
December 31, 2023
Held to Maturity:
U.S. treasuries	$	—	$	—	—	$	37,219	$	243	4
U.S. government agencies		—		—	—		57,029		10,985	9
Residential mortgage-backed agencies		—		—	—		22,613		2,913	35
Commercial mortgage-backed agencies		—		—	—		16,052		5,361	2
Collateralized mortgage obligations		—		—	—		43,288		9,973	8
Obligations of states and political subdivisions		—		—	—		2,205		671	1
Total held to maturity	$	—	$	—	—	$	178,406	$	30,146	59

	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrealized Losses		Number of Investments	Fair Value		Unrealized Losses		Number of Investments
December 31, 2022
Available for Sale:
U.S. government agencies	$	4,598	$	402	1	$	4,865	$	1,180	2
Residential mortgage-backed agencies		—		—	—		37,401		7,651	5
Commercial mortgage-backed agencies		4,044		455	3		26,688		6,206	6
Collateralized mortgage obligations		1,600		210	5		19,444		4,574	5
Obligations of states and political subdivisions		8,906		360	7		—		—	—
Corporate Bonds		887		113	1
Collateralized debt obligations		—		—	—		15,871		2,793	9
Total available for sale	$	20,035	$	1,540	17	$	104,269	$	22,404	27
	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrecognized Losses		Number of Investments	Fair Value		Unrecognized Losses		Number of Investments
December 31, 2022
Held to Maturity:
U.S. treasuries	$	—	$	—	—	$	35,611	$	1,593	4
U.S. government agencies		38,883		9,617	7		15,591		3,644	2
Residential mortgage-backed agencies		16,893		1,425	29		8,138		2,078	7
Commercial mortgage-backed agencies		17,821		4,568	3		—		—	—
Collateralized mortgage obligations		47,083		10,001	8		—		—	—
Obligations of states and political subdivisions		2,269		600	1		—		—	—
Total held to maturity	$	122,949	$	26,211	48	$	59,340	$	7,315	13

As of December 31, 2023, the Corporation recorded ACL of approximately $45,000 related to one bond in the HTM security portfolio.  There was no ACL related to its AFS or HTM security portfolio at December 31, 2022.

The amortized cost and estimated fair value of securities by contractual maturity at December 31, 2023 are shown in the following table. Actual maturities will 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.

(in thousands)	Amortized Cost		Fair Value
Contractual Maturity
Available for sale:
Due in one year or less	$	2,670	$	2,640
Due after one year through five years		5,250		4,952
Due after five years through ten years		2,410		2,168
Due after ten years		26,827		22,073
		37,157		31,833
Residential mortgage-backed agencies		24,781		20,563
Commercial mortgage-backed agencies		36,258		28,417
Collateralized mortgage obligations		19,725		16,356
Total available for sale	$	117,921	$	97,169
Held to Maturity:
Due in one year or less	$	37,462	$	37,219
Due after one year through five years		12,500		11,706
Due after five years through ten years		40,456		34,495
Due after ten years		19,662		14,938
		110,080		98,358
Residential mortgage-backed agencies		29,588		26,717
Commercial mortgage-backed agencies		21,413		16,052
Collateralized mortgage obligations		53,261		43,288
Total held to maturity	$	214,342	$	184,415

At December 31, 2023 and 2022, AFS investment securities with a fair value of $50.5 million and $49.7 million, respectively, and HTM investment securities with a book value of $141.8 million and $165.9 million were pledged as permitted or required to secure public deposits, for securities sold under agreements to repurchase as required or permitted by law and as collateral for borrowing capacity.

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Loans and Related Allowance for Credit Losses

12 Months Ended

Dec. 31, 2023

Loans and Related Allowance for Credit Losses [Abstract]

Loans and Related Allowance for Credit Losses

5. Loans and Related Allowance for Credit Losses

The following table summarizes the primary segments of the loan portfolio as of December 31, 2023 and December 31, 2022:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Total
December 31, 2023
Individually evaluated for impairment	$	826	$	—	$	—	$	2,137	$	—	$	2,963
Collectively evaluated for impairment		492,877		77,060		274,604		497,734		61,429		1,403,704
Total loans	$	493,703	$	77,060	$	274,604	$	499,871	$	61,429	$	1,406,667
December 31, 2022
Individually evaluated for impairment	$	2,262	$	356	$	—	$	3,880	$	—	$	6,498
Collectively evaluated for impairment		456,569		70,240		245,396		440,531		60,260		1,272,996
Total loans	$	458,831	$	70,596	$	245,396	$	444,411	$	60,260	$	1,279,494

In the ordinary course of business, executive officers and directors of the Corporation, including their families and companies in which certain directors are principal owners, were loan customers of the Bank. Changes in the dollar amount of loans outstanding to officers, directors and their associates were as follows for the year ended December 31:

(in thousands)	2023
Balance at January 1	$	3,302
Loans or advances		481
Repayments		(937)
Balance at December 31	$	2,846

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 following table presents the classes of the loan portfolio at December 31, 2023 and December 31, 2022, summarized by the aging categories of performing loans and non-accrual loans.

(in thousands)	Current		30-59 Day Past Due		60-89 Days Past Due		90 Days+ Past Due		Total Past Due and still accruing		Non- Accrual		Total Loans
December 31, 2023
Commercial real estate
Non owner-occupied	$	296,343	$	—	$	—	$	—	$	—	$	227	$	296,570
All other CRE		196,123		411		—		—		411		599		197,133
Acquisition and development
1-4 family residential construction		18,224		—		—		—		—		—		18,224
All other A&D		58,723		—		—		—		—		113		58,836
Commercial and industrial		274,465		120		19		—		139		—		274,604
Residential mortgage
Residential mortgage - term		433,878		130		717		384		1,231		2,720		437,829
Residential mortgage – home equity		61,021		520		158		75		753		268		62,042
Consumer		60,576		463		277		84		824		29		61,429
Total	$	1,399,353	$	1,644	$	1,171	$	543	$	3,358	$	3,956	$	1,406,667
December 31, 2022
Commercial real estate
Non owner-occupied	$	269,971	$	—	$	—	$	—	$	—	$	87	$	270,058
All other CRE		188,715		—		—		—		—		58		188,773
Acquisition and development
1-4 family residential construction		19,637		—		—		—		—		—		19,637
All other A&D		50,813		—		—		—		—		146		50,959
Commercial and industrial		245,342		54		—		—		54		—		245,396
Residential mortgage
Residential mortgage - term		380,502		31		722		239		992		2,893		384,387
Residential mortgage – home equity		59,223		399		48		43		490		311		60,024
Consumer		59,789		363		83		25		471		—		60,260
Total	$	1,273,992	$	847	$	853	$	307	$	2,007	$	3,495	$	1,279,494

Non-accrual loans that have been subject to partial charge-offs totaled $0.1 million at December 31, 2023 and 2022.  Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $1.8 million at December 31, 2023.  There were no loans in the process of foreclosure at December 31, 2022.  

Effective January 1, 2023, the Corporation adopted the accounting guidance in ASU 2022-02, which eliminated the recognition and measurement of TDRs.  Due to the removal of the TDR designation, the Corporation evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a continuation of the existing loan.  Loan modifications to borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal

forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the above.  Therefore, the disclosures related to loan restructurings are only for modifications that directly affect cash flows.

A loan that is considered a non-accrual or modified loan may be subject to the individually evaluated loan analysis if the commitment is $0.1 million or greater; otherwise, the modified loan remains in the appropriate segment in the ACL model and associated reserves are adjusted based on changes in the discounted cash flows resulting from the modification of the modified loan.  For a discussion with respect to reserve calculations regarding individually evaluated loans, refer to the “Nonrecurring Loans” section in Note 5, Fair Value Measurements.  There were no loan modifications made to borrowers facing financial difficulties in the year ending December 31, 2023.

The Corporation maintains an ACL at a level determined to be adequate to absorb expected credit losses associated with the Corporation’s financial instruments over the life of those instruments as of the balance sheet date.  The Corporation develops and documents a systematic ACL methodology based on the following portfolio segments: (i) commercial real estate, (ii) acquisition and development, (iii) commercial and industrial, (iv) residential mortgage, and (v) consumer.  The Corporation’s loan portfolio is segmented by homogeneous loan types that behave similarly to economic cycles.  The segmentation in the CECL model is different from the segmentation in the Incurred Loss model.  The following is a discussion of the key risks by portfolio segment that management assesses in preparing the ACL.

Commercial Real Estate- loans are secured by commercial purpose real estate, including both owner occupied properties and properties obtained for investment purposes, such as hotels, strip malls and apartments.  Operations of the individual projects as well as global cash flows of the debtors are the primary source of repayment of these loans.  The condition of the local economy is an important indicator of risk, but there are more specific risks depending on the collateral type as well as the business.

Acquisition and Development- loans include both commercial and consumer.  Commercial loans are made to finance construction of buildings or other structures, as well as to finance the acquisition and development of raw land for various purposes.  While the risk of these loans is generally confined to the construction period, if there are problems, the project may not be completed, and as such, may not provide sufficient cash flow on its own to service the debt or have sufficient value in a liquidation to cover the outstanding principal.  The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the type of project and the experience and resources of the developer.  Consumer loans are made for the construction of residential homes for which a binding sales contract exists and generally are for a period of time sufficient to complete construction.  Residential construction loans to individuals generally provide for the payment of interest only during the construction phase.  Credit risk for residential real estate construction loans can arise from construction delays, cost overruns, failure of the contractor to complete the project to specifications and economic conditions that could impact demand for supply of the property being constructed.

Commercial and Industrial- loans are made to operating companies or manufacturers for the purpose of production, operating capacity, accounts receivable, inventory or equipment financing.  Cash flow from the operations of the borrower is the primary source of repayment for these loans.  The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the industry of the borrower.  Collateral for these types of loans often do not have sufficient value in a distressed or liquidation scenario to satisfy the outstanding debt.  These loans are also made to local municipalities for various purposes including refinancing existing obligations, infrastructure up-fit and expansion, or to purchase new equipment.  The primary repayment source for local municipalities include the tax base of the municipality, specific revenue streams related to the infrastructure financed, and other business operations of the municipal authority.  The health and stability of state and local economies directly impacts each municipality’s tax basis and are important indicators of risk for this segment.  The ability of each municipality to increase taxes and fees to offset service requirements give this type of loan a very low risk profile in the continuum of the Corporation’s loan portfolio.

Residential mortgage- loans are secured by first and second liens such as home equity lines of credit and 1-4 family residential mortgages.  The primary source of repayment for these loans is the income of the borrower.  The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment.  

The state of the local housing market can also have a significant impact on this segment because low demand and/or declining home values can limit the ability of borrowers to sell a property and satisfy debt.

Consumer- loans are made to individuals and may be either secured by assets other than 1-4 family residences or unsecured.  This segment includes automobile loans and unsecured loans and lines of credit.  The primary source of repayment for these loans is the income and assets of the borrower.  The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment.  The value of the collateral, if there is any, is less likely to be a source of repayment due to less certain collateral values.

The following table presents the amortized cost basis of collateral-dependent individually evaluated loans as of December 31, 2023:

	December 31, 2023
(in thousands)	Real Estate		Non-Accrual Loans with No Allowance
Commercial real estate	$	826	$	826
Residential mortgage		2,137		2,137
Total Loans	$	2,963	$	2,963

Effective January 1, 2023, the Corporation adopted the accounting guidance in ASU 2022-02, which eliminates the recognition and measurement of a TDR.  Due to the removal of the TDR designation, the Corporation evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a continuation of the existing loan.  Loan modifications to borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contracted cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the listed modifications.  Therefore, the disclosures related to loan restructurings are only for modifications that directly affect cash flows.  

A loan that is considered a modified loan may be subject to the individually evaluated loan analysis if the commitment is $0.1 million or greater; otherwise, the modified loan remains in the appropriate segment of the ACL model and associated reserves are adjusted based on changes in the discounted cash flows resulting from the modification of the modified loan.  As of December 31, 2023, there were no modified loans that were classified as individually evaluated loans.

The following tables present the activity in the ACL and ALL for the years ended December 31, 2023 and 2022:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Unallocated		Total
Beginning balance at January 1, 2023 prior to adoption of ASC 326	$	6,345	$	979	$	2,845	$	3,160	$	877	$	430	$	14,636
Impact of adopting ASC 326		(1,143)		(15)		1,334		2,112		208		(430)		2,066
Loan charge-offs		(87)		—		(423)		(55)		(874)		—		(1,439)
Recoveries collected		7		11		186		73		240		—		517
Credit loss (credit)/expense		(2)		(35)		(225)		1,484		478		—		1,700
ACL balance at December 31, 2023	$	5,120	$	940	$	3,717	$	6,774	$	929	$	—	$	17,480
ALL balance at January 1, 2022	$	6,032	$	2,615	$	2,460	$	3,484	$	934	$	430	$	15,955
Charge-offs		—		(20)		(134)		(46)		(921)		—		(1,121)
Recoveries		1		22		93		184		145		—		445
Loan loss expense/(credit)		312		(1,638)		426		(462)		719		—		(643)
ALL balance at December 31, 2022	$	6,345	$	979	$	2,845	$	3,160	$	877	$	430	$	14,636

The Corporation’s methodology for estimating the ACL includes:

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

Specific Analysis.  A specific reserve analysis is applied to certain individually evaluated loans.  These loans are evaluated quarterly generally based on collateral value, observable market value or the present value of expected future cash flows.  A specific reserve is established if the fair value is less than the loan balance.  A charge-off is recognized when the loss is quantifiable.  Individually evaluated loans not specifically analyzed reside in the Quantitative Analysis.

Quantitative Analysis.  The Corporation elected to use discounted cash flows.  Economic forecasts include but are not limited to unemployment, the Consumer Price Index, the Housing Affordability Index, and Gross State Product.  These forecasts are assumed to revert to the long term average and are utilized in the model to estimate the probability of default and the loss given default is the estimated loss rate, which varies over time.  The estimated loss rate is applied within the appropriate periods in the cash flow model to determine the net present value.  Net present value is also impacted by assumption related to the duration between default and recovery.  The reserve is based on the difference between the summation of the principal balances taking amortized costs into consideration and the summation of the net present values.

Qualitative Analysis.  Based on management’s review and analysis of internal, external and model risks, management may adjust the model output.  Management reviews the peaks and troughs of the model’s calibrations, taking into account economic forecasts to develop guardrails that serve as the basis for determining the reasonableness of the model’s output and makes adjustments as necessary.  This process challenges unexpected variability resulting from outputs beyond the model’s calibrations that appear to be unreasonable.  Management also enhances the calculation through the use of Moody’s economic forecast data in its calculation. Additionally, management may adjust the economic forecast if it is incompatible with known market conditions based on management’s experience and perspective.

The ACL is based on estimates, and actual losses may vary from current estimates.  Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ACL that is representative of the risk found in the components of the portfolio at any given date.

Credit Quality Indicators:

The Corporation’s portfolio grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all.  The Corporation’s internal credit risk grading system is based on debt service coverage, collateral values and other subjective factors.  Mortgage and consumer loans are defaulted to pass grade until a loan migrates to past due status.  

The Corporation has a loan review policy and annual scope report that details the level of loan review for loans in a given year.  The annual loan review provides the Credit Risk Committee with an independent analysis of the following:  (i) credit quality of the loan portfolio, (ii) compliance with loan policy, (iii) adequacy of documentation in credit files and (iv) validity of risk ratings.  

The Corporation’s internally assigned grades are as follows:

Pass-  The Corporation uses six grades of pass, including its watch rating.  Generally, a pass rating indicates that the loan is currently performing and is of high quality.

Special Mention- Assets with potential weaknesses that warrant management’s close attention and if left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date.

Substandard-  Assets that are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any.  Assets so classified have a well-defined weakness, or weaknesses that jeopardize the liquidation of the debt.  Such assets are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful- Assets with all weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.

Loss- Assets considered of such little value that its continuance on the books is not warranted.  This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical to defer writing off this basically worthless asset even though partial recovery may be affected in the future.

The ability of borrowers to repay commercial loans is dependent upon the success of their business and general economic conditions.  Due to the greater potential for loss within our commercial portfolio, we monitor the commercial loan portfolio through an internal risk rating system.  Loan risk ratings are assigned based upon the creditworthiness of the borrower and are reviewed on an ongoing basis according to our internal policies.  Loans rated special mention or substandard have potential or well-defined weaknesses not generally found in high quality, performing loans, and require attention from management to limit loss.

The following tables present loan balances by year of origination and internally assigned risk ratings for our portfolio segments as of dates presented:

															Total
											2018 and				Portfolio
(in thousands)	2023		2022		2021		2020		2019		Prior		Revolving		Loans
December 31, 2023
Commercial real estate:
Non-owner-occupied
Pass	$	23,511	$	65,878	$	30,332	$	54,270	$	40,575	$	65,134	$	1,138	$	280,838
Special Mention		—		—		—		—		—		4,331		—		4,331
Substandard		—		—		—		—		—		11,401		—		11,401
Total non-owner occupied		23,511		65,878		30,332		54,270		40,575		80,866		1,138		296,570
Current period gross charge-offs		—		—		—		—		—		87		—		87
All other CRE
Pass		30,130		27,379		27,042		20,691		22,879		60,054		4,495		192,670
Special Mention		—		—		—		644		—		—		—		644
Substandard		—		—		—		—		1,847		1,372		600		3,819
Total all other CRE		30,130		27,379		27,042		21,335		24,726		61,426		5,095		197,133
Current period gross charge-offs		—		—		—		—		—		—		—		—
Acquisition and development:
1-4 family residential construction
Pass		13,745		3,446		—		—		—		—		1,033		18,224
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total acquisition and development		13,745		3,446		—		—		—		—		1,033		18,224
Current period gross charge-offs		—		—		—		—		—		—		—		—
All other A&D
Pass		12,184		25,099		2,966		3,046		1,301		9,946		4,181		58,723
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		113		—		113
Total all other A&D		12,184		25,099		2,966		3,046		1,301		10,059		4,181		58,836
Current period gross charge-offs		—		—		—		—		—		—		—		—
Commercial and industrial:
Pass		52,004		66,559		24,387		11,753		8,872		10,052		78,992		252,619
Special Mention		558		—		—		—		—		—		—		558
Substandard		—		9,352		1,854		6,806		98		837		2,480		21,427
Total commercial and industrial		52,562		75,911		26,241		18,559		8,970		10,889		81,472		274,604
Current period gross charge-offs		100		103		35		166		—		19		—		423
Residential mortgage:
Residential mortgage - term
Pass		51,625		94,723		88,835		38,228		25,375		130,402		1,577		430,765
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		138		929		17		98		5,825		57		7,064
Total residential mortgage - term		51,625		94,861		89,764		38,245		25,473		136,227		1,634		437,829
Current period gross charge-offs		—		—		—		—		—		13		—		13
Residential mortgage - home equity
Pass		1,127		4,657		864		475		286		489		53,467		61,365
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		38		—		16		623		677
Total residential mortgage - home equity		1,127		4,657		864		513		286		505		54,090		62,042
Current period gross charge-offs		—		—		—		—		—		42		—		42
Consumer:
Pass		18,299		10,616		6,361		2,206		510		20,365		2,873		61,230
Special Mention		—		—		—		—		—		—		—		—
Substandard		14		35		113		23		6		2		6		199
Total consumer		18,313		10,651		6,474		2,229		516		20,367		2,879		61,429
Current period gross charge-offs		236		223		74		8		4		329		—		874
Total Portfolio Loans
Pass		202,625		298,357		180,787		130,669		99,798		296,442		147,756		1,356,434
Special Mention		558		—		—		644		—		4,331		—		5,533
Substandard		14		9,525		2,896		6,884		2,049		19,566		3,766		44,700
Total Portfolio Loans	$	203,197	$	307,882	$	183,683	$	138,197	$	101,847	$	320,339	$	151,522	$	1,406,667
Current YTD Period:
Current period gross charge-offs	$	336	$	326	$	109	$	174	$	4	$	490	$	—	$	1,439

															Total
											2017 and				Portfolio
(in thousands)	2022		2021		2020		2019		2018		Prior		Revolving		Loans
December 31, 2022
Commercial real estate:
Non-owner-occupied
Pass	$	67,429	$	31,710	$	48,421	$	41,221	$	19,414	$	42,069	$	1,570	$	251,834
Special Mention		—		—		—		—		—		6,289		—		6,289
Substandard		—		—		—		—		—		11,935		—		11,935
Total non-owner occupied		67,429		31,710		48,421		41,221		19,414		60,293		1,570		270,058
Current period gross charge-offs		—		—		—		—		—		—		—		—
All other CRE
Pass		24,655		26,947		22,906		27,213		8,873		67,691		4,790		183,075
Special Mention		—		1,111		—		—		—		—		—		1,111
Substandard		—		—		—		3,006		—		357		1,224		4,587
Total all other CRE		24,655		28,058		22,906		30,219		8,873		68,048		6,014		188,773
Current period gross charge-offs		—		—		—		—		—		—		—		—
Acquisition and development:
1-4 family residential construction
Pass		15,629		1,453		151		—		—		210		2,194		19,637
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total acquisition and development		15,629		1,453		151		—		—		210		2,194		19,637
Current period gross charge-offs		—		—		—		—		—		20		—		20
All other A&D
Pass		18,733		4,979		9,755		1,408		558		12,961		2,419		50,813
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		146		—		146
Total all other A&D		18,733		4,979		9,755		1,408		558		13,107		2,419		50,959
Current period gross charge-offs		—		—		—		—		—		—		—		—
Commercial and industrial:
Pass		83,608		30,451		15,982		12,707		5,013		9,528		63,668		220,957
Special Mention		—		2,555		—		—		—		338		2,134		5,027
Substandard		8,923		—		7,167		173		634		311		2,204		19,412
Total commercial and industrial		92,531		33,006		23,149		12,880		5,647		10,177		68,006		245,396
Current period gross charge-offs		—		97		34		3		—		—		—		134
Residential mortgage:
Residential mortgage - term
Pass		64,930		93,665		42,784		27,120		14,132		133,397		2,306		378,334
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		16		237		143		5,634		23		6,053
Total residential mortgage - term		64,930		93,665		42,800		27,357		14,275		139,031		2,329		384,387
Current period gross charge-offs		—		—		—		—		—		28		—		28
Residential mortgage - home equity
Pass		5,739		957		538		328		97		478		51,232		59,369
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		44		—		21		40		550		655
Total residential mortgage - home equity		5,739		957		582		328		118		518		51,782		60,024
Current period gross charge-offs		—		—		—		—		12		6		—		18
Consumer:
Pass		16,748		10,495		3,845		1,596		687		24,096		2,654		60,121
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		92		27		9		7		—		4		139
Total consumer		16,748		10,587		3,872		1,605		694		24,096		2,658		60,260
Current period gross charge-offs		36		494		18		37		11		40		—		636
Total Portfolio Loans
Pass		297,471		200,657		144,382		111,593		48,774		290,430		130,833		1,224,140
Special Mention		—		3,666		—		—		—		6,627		2,134		12,427
Substandard		8,923		92		7,254		3,425		805		18,423		4,005		42,927
Total Portfolio Loans	$	306,394	$	204,415	$	151,636	$	115,018	$	49,579	$	315,480	$	136,972	$	1,279,494
Current YTD Period:
Current period gross charge-offs	$	36	$	591	$	52	$	40	$	23	$	94	$	—	$	836

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past.

The following tables present loan balances by year of origination segregated by performing and non-performing loans for the periods presented:

															Total
											2018 and				Portfolio
(in thousands)	2023		2022		2021		2020		2019		Prior		Revolving		Loans
December 31, 2023
Commercial real estate:
Non-owner-occupied
Performing	$	23,511	$	65,878	$	30,332	$	54,270	$	40,575	$	80,639	$	1,138	$	296,343
Nonperforming		—		—		—		—		—		227		—		227
Total non-owner occupied		23,511		65,878		30,332		54,270		40,575		80,866		1,138		296,570
All other CRE
Performing		30,130		27,379		27,042		21,335		24,726		60,827		5,095		196,534
Nonperforming		—		—		—		—		—		599		—		599
Total all other CRE		30,130		27,379		27,042		21,335		24,726		61,426		5,095		197,133
Acquisition and development:
1-4 family residential construction
Performing		13,745		3,446		—		—		—		—		1,033		18,224
Nonperforming		—		—		—		—		—		—		—		—
Total acquisition and development		13,745		3,446		—		—		—		—		1,033		18,224
All other A&D
Performing		12,184		25,099		2,966		3,046		1,301		9,946		4,181		58,723
Nonperforming		—		—		—		—		—		113		—		113
Total all other A&D		12,184		25,099		2,966		3,046		1,301		10,059		4,181		58,836
Commercial and industrial:
Performing		52,562		75,911		26,241		18,559		8,970		10,889		81,472		274,604
Nonperforming		—		—		—		—		—		—		—		—
Total commercial and industrial		52,562		75,911		26,241		18,559		8,970		10,889		81,472		274,604
Residential mortgage:
Residential mortgage - term
Performing		51,625		94,722		89,629		38,245		25,375		133,526		1,603		434,725
Nonperforming		—		139		135		—		98		2,701		31		3,104
Total residential mortgage - term		51,625		94,861		89,764		38,245		25,473		136,227		1,634		437,829
Residential mortgage - home equity
Performing		1,127		4,657		864		475		286		488		53,802		61,699
Nonperforming		—		—		—		38		—		17		288		343
Total residential mortgage - home equity		1,127		4,657		864		513		286		505		54,090		62,042
Consumer:
Performing		18,304		10,616		6,405		2,229		516		20,367		2,879		61,316
Nonperforming		9		35		69		—		—		—		—		113
Total consumer		18,313		10,651		6,474		2,229		516		20,367		2,879		61,429
Total Portfolio Loans
Performing		203,188		307,708		183,479		138,159		101,749		316,682		151,203		1,402,168
Nonperforming		9		174		204		38		98		3,657		319		4,499
Total Portfolio Loans	$	203,197	$	307,882	$	183,683	$	138,197	$	101,847	$	320,339	$	151,522	$	1,406,667

															Total
											2017 and				Portfolio
(in thousands)	2022		2021		2020		2019		2018		Prior		Revolving		Loans
December 31, 2022
Commercial real estate:
Non-owner-occupied
Performing	$	67,429	$	31,710	$	48,421	$	41,221	$	19,414	$	60,206	$	1,570	$	269,971
Nonperforming		—		—		—		—		—		87		—		87
Total non-owner occupied		67,429		31,710		48,421		41,221		19,414		60,293		1,570		270,058
All other CRE
Performing		24,655		28,058		22,906		30,219		8,873		67,990		6,014		188,715
Nonperforming		—		—		—		—		—		58		—		58
Total all other CRE		24,655		28,058		22,906		30,219		8,873		68,048		6,014		188,773
Acquisition and development:
1-4 family residential construction
Performing		15,629		1,453		151		—		—		210		2,194		19,637
Nonperforming		—		—		—		—		—		—		—		—
Total acquisition and development		15,629		1,453		151		—		—		210		2,194		19,637
All other A&D
Performing		18,733		4,979		9,755		1,408		558		12,962		2,419		50,814
Nonperforming		—		—		—		—		—		145		—		145
Total all other A&D		18,733		4,979		9,755		1,408		558		13,107		2,419		50,959
Commercial and industrial:
Performing		92,531		33,006		23,149		12,880		5,647		10,177		68,006		245,396
Nonperforming		—		—		—		—		—		—		—		—
Total commercial and industrial		92,531		33,006		23,149		12,880		5,647		10,177		68,006		245,396
Residential mortgage:
Residential mortgage - term
Performing		64,930		93,665		42,800		27,120		14,198		136,228		2,313		381,254
Nonperforming		—		—		—		237		77		2,803		16		3,133
Total residential mortgage - term		64,930		93,665		42,800		27,357		14,275		139,031		2,329		384,387
Residential mortgage - home equity
Performing		5,739		957		538		328		115		478		51,515		59,670
Nonperforming		—		—		44		—		3		40		267		354
Total residential mortgage - home equity		5,739		957		582		328		118		518		51,782		60,024
Consumer:
Performing		16,748		10,581		3,872		1,605		694		24,077		2,658		60,235
Nonperforming		—		6		—		—		—		19		—		25
Total consumer		16,748		10,587		3,872		1,605		694		24,096		2,658		60,260
Total Portfolio Loans
Performing		306,394		204,409		151,592		114,781		49,499		312,328		136,689		1,275,692
Nonperforming		—		6		44		237		80		3,152		283		3,802
Total Portfolio Loans	$	306,394	$	204,415	$	151,636	$	115,018	$	49,579	$	315,480	$	136,972	$	1,279,494

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Other Real Estate Owned

12 Months Ended

Dec. 31, 2023

Other Real Estate Owned, Net [Abstract]

Other Real Estate Owned, Net

6. Other Real Estate Owned

The following table presents the components of OREO, net of related valuation allowance, as of December 31, 2023 and 2022:

(in thousands)	2023		2022
Acquisition and development	$	4,281	$	4,670
Residential mortgage		212		63
Total OREO	$	4,493	$	4,733

The following table presents the activity in the OREO valuation allowance for the years ended December 31, 2023 and 2022:

(in thousands)	2023		2022
Balance January 1	$	453	$	453
Fair value write-downs, net		23		—
Sales of OREO		(163)		—
Balance December 31	$	313	$	453

The following table presents the components of OREO expenses, net, for the years ended December 31, 2023 and 2022:

(in thousands)	2023		2022
Gains on real estate, net	$	(599)	$	—
Fair value write-down		23		—
Expenses, net		491		595
Rental and other income		(4)		(5)
Total OREO (income)/expense, net	$	(89)	$	590

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Premises and Equipment

12 Months Ended

Dec. 31, 2023

Premises and Equipment [Abstract]

Premises and Equipment

7. Premises and Equipment

The following table presents the components of premises and equipment at December 31, 2023 and 2022:

(in thousands)	2023		2022
Land	$	7,745	$	7,753
Land improvements		1,384		1,548
Premises		34,922		35,972
Furniture and equipment		18,873		20,117
		62,924		65,390
Less accumulated depreciation		(31,465)		(30,442)
Total	$	31,459	$	34,948

The Corporation recorded depreciation expense of $3.8 million and $3.1 million for the years ended December 31, 2023 and 2022, respectively.  

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Leases

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

Leases

8. Leases

Substantially all of the leases in which the Corporation is the lessee are comprised of real estate property for branches, ATM locations, and office equipment with terms extending through 2030. All of the Corporation’s leases are classified as operating leases. The present value of lease payments is reported as a lease liability and right of use asset on the Corporation’s Consolidated Statement of Financial Condition.

The following table represents the Consolidated Statements of Financial Condition classification of the Corporation’s right-of-use assets and lease liabilities. The Corporation elected not to include short-term leases (i.e., leases with remaining terms of 12 months or less), or equipment leases that were deemed immaterial on the Consolidated Statement of Financial Condition.

(in thousands)	December 31, 2023		December 31, 2022
Lease Right-of Use Assets
Operating lease right-of-use assets	$	1,367	$	1,898
Lease Liabilities
Operating lease liabilities	$	1,556	$	2,373

In calculating the present value of the lease payments, the Corporation has utilized its incremental borrowing rate based on electing the original lease term to account for each lease component.

The following table presents the weighted-average lease term and discount rate for operating leases at December 31, 2023:

	December 31, 2023	December 31, 2022
Weighted-average remaining lease term
Operating leases	5.33 years	6.17 years
Weighted-average discount rate
Operating leases	5.16%	5.00%

The Corporation elected, for all classes of underlying assets, to separate lease and non-lease components. Total operating lease expense was $0.6 million and $0.5 million for the years ended December 31, 2023 and December 31, 2022, respectively.  Short-term lease expense was approximately $20 thousand for the year ended December 31, 2023 and 2022.

In the fourth quarter of 2023, the Bank announced the closure of four of its branches with an effective closing date of February 29, 2024.   In conjunction with the announced branch closures, the Bank recognized accelerated lease expense of approximately $0.1 million in 2023.

Future minimum payments for operating leases with initial or remaining terms of one year or more at December 31, 2023 were as follows:

(in thousands)	Amount
2024	$	368
2025		356
2026		283
2027		285
2028		240
Thereafter		270
Total future minimum lease payments		1,802
Amounts representing interest		(246)
Present value of net future minimum lease payments	$	1,556

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Deposits

12 Months Ended

Dec. 31, 2023

Deposits [Abstract]

Deposits

9. Deposits

The following table summarizes deposits as of December 31, 2023 and 2022:

(in thousands)	December 31, 2023			December 31, 2022
		Balance	Percent		Balance	Percent
Non-Interest-bearing deposits:	$	427,670	28%	$	506,613	32%
Interest-bearing deposits:
Demand		350,860	22%		327,685	21%
Money market		385,649	25%		365,192	23%
Savings deposits		191,265	12%		250,720	16%
Time deposits- retail		165,533	11%		120,523	8%
Time deposits- brokered		30,000	2%		—	0%
Total Deposits	$	1,550,977	100%	$	1,570,733	100%

Time deposits that meet or exceed the FDIC insurance limit of $250,000 at December 31, 2023 and 2022 were $48.8 million and $37.5 million, respectively.  At December 31, 2023 and 2022, $0.4 million and $0.3 million, respectively, of deposit overdrafts were re-classified as loans.

The following is a summary of the scheduled maturities of all time deposits maturing within years ended  December 31:

(in thousands)	Time deposits- brokered		Time deposits- retail
2024	$	30,000	$	146,683
2025		—		13,990
2026		—		4,154
2027		—		491
2028		—		170
Thereafter		—		45
Total	$	30,000	$	165,533

In the ordinary course of business, executive officers and directors of the Corporation, including their families and companies in which certain directors are principal owners, were deposit customers of the Bank. At December 31, 2023, executive officers and directors had approximately $17.2 million in deposits with the Bank compared to $14.0 million at December 31, 2022.

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Borrowed Funds

12 Months Ended

Dec. 31, 2023

Borrowed Funds [Abstract]

Borrowed Funds

10. Borrowed Funds

The following is a summary of short-term borrowings at December 31, 2023 and 2022 with original maturities of less than one year:

(in thousands)	2023		2022
Securities sold under agreements to repurchase:
Outstanding at end of year	$	45,418	$	64,565
Weighted average interest rate at year end		0.27%		0.12%
Maximum amount outstanding as of any month end	$	59,777	$	75,912
Average amount outstanding	$	50,498	$	63,182
Approximate weighted average rate during the year		0.24%		0.12%

Repurchase agreements were secured by $61.6 million in investment securities at December 31, 2023 and $74.6 million at December 31, 2022.

The following is a summary of long-term borrowings at December 31, 2023 and 2022 with original maturities exceeding one year:

(in thousands)	2023		2022
FHLB advances bearing fixed interest rates ranging from 4.53% to 4.69% at December 31, 2023	$	80,000	$	—
Junior subordinated debt	$	30,929	$	30,929
Total long-term debt	$	110,929	$	30,929

In March 2004, Trust I and Trust II issued preferred securities with an aggregate liquidation amount of $30.0 million to third-party investors and issued common equity with an aggregate liquidation amount of $0.9 million to First United Corporation. These Trusts used the proceeds of these offerings to purchase an equal amount of TPS Debentures, as follows:

$20.6 million—floating rate payable quarterly based on three-month Secured Overnight Financing Rate (“SOFR”) plus 275 basis points (8.39% at December 31, 2023), maturing in 2034, became redeemable five years after issuance at First United Corporation’s option.

$10.3 million--floating rate payable quarterly based on three-month SOFR plus 275 basis points (8.39% at December 31, 2023) maturing in 2034, became redeemable five years after issuance at First United Corporation’s option.

The TPS Debentures issued to each of the Trusts represent the sole assets of that Trust, and payments of the TPS Debentures by First United Corporation are the only sources of cash flow for the Trust. First United Corporation has the right, without triggering a default, to defer interest on all of the TPS Debentures for up to 20 quarterly periods, in which case distributions on the preferred securities will also be deferred. Should this occur, the Corporation may not pay dividends or distributions on, or repurchase, redeem or acquire any shares of its capital stock.

The contractual maturities of the FHLB advances outstanding at December 31, 2023 are March 15, 2024 and September 13, 2024.  The contractual maturities of the junior subordinated debt outstanding at December 31, 2023 is 2034.

The Bank has a borrowing capacity agreement with the FHLB in an amount equal to 30% of the Bank’s assets. The available line of credit equaled $571.4  million at December 31, 2023 and $544.1 million at December 31, 2022. This line of credit, which can be used for both short and long-term funding, can only be utilized to the extent of available collateral. The line is secured by certain qualified mortgage, commercial and home equity loans as follows (in thousands):

1-4 family mortgage loans	$	144,572
Commercial loans		52,753
Multi-family loans		11,453
Home equity loans		19,160
Total available borrowing capacity		227,938
Less: borrowings and letters of credit outstanding		(82,500)
	$	145,438

The Bank also has various unsecured lines of credit totaling $140.0 million with various financial institutions and a $12.2 million secured line with the Federal Reserve to meet daily liquidity requirements.Additionally, the Bank had $69.5 million in available in a secured line of credit with the FRB through the BTFP.  At December 31, 2023 and 2022, there were no borrowings under these credit facilities.

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Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2023

Goodwill and Other Intangible Assets [Abstract]

Goodwill and Other Intangible Assets

11. Goodwill and Other Intangible Assets

The gross carrying amounts and accumulated amortization of intangible assets and goodwill are presented at December 31, 2023 and 2022 in the following table:

	December 31, 2023							December 31, 2022
(in thousands)	Gross Carrying Amount			Accumulated Amortization	Net Carrying Amount		Weighted Average Remaining Life	Gross Carrying Amount			Accumulated Amortization	Net Carrying Amount		Weighted Average Remaining Life
Amortizing intangible assets:
Intangible assets associated with purchase of wealth portfolio	$	1,048	$	419	$	629	3.00 years	$	1,048	$	209	$	839	4.00 years
Intangible assets associated with acquisition of mortgage company		600		130		470	3.92 years		600		10		590	4.92 years
Total Other intangibles	$	1,648	$	549	$	1,099	3.38 years	$	1,648	$	219	$	1,429	4.38 years
Goodwill	$	11,004			$	11,004		$	11,004			$	11,004

The following table presents the estimated future amortization expense for amortizing intangible assets within the years ending December 31:

(in thousands)	Amount
2024	$	330
2025		330
2026		330
2027		109
Total amortizing intangible assets	$	1,099

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Accumulated Other Comprehensive Loss

12 Months Ended

Dec. 31, 2023

Accumulated Other Comprehensive Loss [Abstract]

Accumulated Other Comprehensive Loss

12. Accumulated Other Comprehensive Loss (“AOCL”)

The following table presents the changes in each component of accumulated other comprehensive loss for the years ended December 31, 2023 and 2022:

(in thousands)	Investment securities- with credit related impairment AFS		Investment securities- all other AFS		Investment securities- HTM		Cash Flow Hedge		Pension Plan		SERP		Total
Accumulated OCL, net:
Balance - January 1, 2022	$	(949)	$	(5,749)	$	(134)	$	(319)	$	(18,108)	$	(2,055)	$	(27,314)
Other comprehensive income/(loss) before reclassifications		(614)		(10,629)		(6,120)		1,116		684		2,430		(13,133)
Amounts reclassified from accumulated   other comprehensive loss		(148)		(2)		551		—		821		199		1,421
Balance - December 31, 2022	$	(1,711)	$	(16,380)	$	(5,703)	$	797	$	(16,603)	$	574	$	(39,026)
Other comprehensive (loss)/income before reclassifications		(622)		61		—		(228)		1,605		(1,802)		(986)
Amounts reclassified from accumulated   other comprehensive loss		(149)		3,102		502		—		735		(5)		4,185
Balance - December 31, 2023	$	(2,482)	$	(13,217)	$	(5,201)	$	569	$	(14,263)	$	(1,233)	$	(35,827)

The following tables present the components of other comprehensive (loss)/income for the years ended December 31, 2023 and 2022:

Components of Other Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the year ended December 31, 2023
Available for sale (AFS) securities with credit-related impairment
Unrealized holding losses	$	(845)	$	223	$	(622)
Less: accretable yield recognized in income		202		(53)		149
Net unrealized losses on investments with credit-related impairment		(1,047)		276		(771)
Available for sale securities – all other:
Unrealized holding gains		83		(22)		61
Less: losses recognized in income		(4,214)		1,112		(3,102)
Net unrealized gains on all other AFS securities		4,297		(1,134)		3,163
Held to maturity securities:
Unrealized holding losses on securities transferred to held to maturity		—		—		—
Less: amortization recognized in income		(682)		180		(502)
Net unrealized gains on HTM securities		682		(180)		502
Cash flow hedges:
Unrealized holding losses		(310)		82		(228)
Net unrealized losses on cash flow hedges		(310)		82		(228)
Pension Plan:
Unrealized net actuarial gain		2,180		(575)		1,605
Less: amortization of unrecognized loss		(998)		263		(735)
Net pension plan liability adjustment		3,178		(838)		2,340
SERP:
Unrealized net actuarial loss		(2,448)		646		(1,802)
Less: amortization of unrecognized loss		7		(2)		5
Net SERP liability adjustment		(2,455)		648		(1,807)
Other comprehensive income	$	4,345	$	(1,146)	$	3,199

Components of Other Comprehensive Loss (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the year ended December 31, 2022
Available for sale (AFS) securities with credit related impairment:
Unrealized holding losses	$	(835)	$	221	$	(614)
Less: accretable yield recognized in income		202		(54)		148
Net unrealized losses on investments with credit related impairment		(1,037)		275		(762)
Available for sale securities – all other:
Unrealized holding losses		(22,792)		6,043		(16,749)
Unrealized holding losses on securities transferred from available for sale to held to maturity		8,328		(2,208)		6,120
Less: gains recognized in income		3		(1)		2
Net unrealized losses on all other AFS securities		(14,467)		3,836		(10,631)
Held to maturity securities:
Unrealized holding losses on securities transferred to held to maturity		(8,328)		2,208		(6,120)
Less: gains recognized in income		91		(24)		67
Less: amortization recognized in income		(841)		223		(618)
Net unrealized losses on HTM securities		(7,578)		2,009		(5,569)
Cash flow hedges:
Unrealized holding gains		1,521		(405)		1,116
Net unrealized gains on cash flow hedges		1,521		(405)		1,116
Pension Plan:
Unrealized net actuarial gain		931		(247)		684
Less: amortization of unrecognized loss		(1,117)		296		(821)
Net pension plan liability adjustment		2,048		(543)		1,505
SERP:
Unrealized net actuarial gain		3,307		(877)		2,430
Less: amortization of unrecognized loss		(271)		72		(199)
Net SERP liability adjustment		3,578		(949)		2,629
Other comprehensive loss	$	(15,935)	$	4,223	$	(11,712)

The following tables present the details of accumulated other comprehensive loss components for the years ended December 31, 2023 and 2022:

Details of Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Loss		Affected Line Item in the Statement
(in thousands)	2023		Where Net Income is Presented
Net unrealized losses on investment securities with credit related impairment:
Accretable Yield	$	202	Interest income on taxable investment securities
Taxes		(53)	Provision for income tax expense
	$	149	Net of tax
Net unrealized losses on available for sale   investment securities - all other:
Loss on sales	$	(4,214)	Net gains
Taxes		1,112	Provision for income tax expense
	$	(3,102)	Net of tax
Net unrealized gains on held to maturity   investment securities:
Amortization	$	(682)	Interest income on taxable investment securities
Taxes		180	Provision for income tax expense
	$	(502)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss	$	(998)	Other expense
Taxes		263	Provision for income tax expense
	$	(735)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized loss	$	7	Other expense
Taxes		(2)	Provision for income tax expense
	$	5	Net of tax
Total reclassifications for the period	$	(4,185)	Net of tax

Details of Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss		Affected Line Item in the Statement
(in thousands)	2022		Where Net Income is Presented
Net unrealized losses on investment securities with credit related impairment:
Accretable Yield	$	202	Interest income on taxable investment securities
Taxes		(54)	Provision for income tax expense
	$	148	Net of tax
Net unrealized gains on available for sale   investment securities - all other:
Gains on sales	$	3	Net gains
Taxes		(1)	Provision for income tax expense
	$	2	Net of tax
Net unrealized gains on held to maturity   investment securities:
Amortization	$	(841)	Interest income on taxable investment securities
Gains recognized		91	Provision for income tax expense
Taxes		199	Net of tax
	$	(551)
Net pension plan liability adjustment:			Other expense
Amortization of unrecognized loss	$	(1,117)	Other expense
Taxes		296	Net of tax
	$	(821)
Net SERP liability adjustment:			Other expense
Amortization of unrecognized loss	$	(271)	Other expense
Taxes		72	Net of tax
	$	(199)	Net of tax
Total reclassifications for the period	$	(1,421)

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Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes [Abstract]

Income Taxes

13. Income Taxes

The provision for income taxes consists of the following for the years ended December 31, 2023 and 2022:

(in thousands)	2023		2022
Current Tax expense:
Federal	$	4,002	$	5,504
State		1,303		2,034
	$	5,305	$	7,538
Deferred tax (benefit)/expense:
Federal	$	(774)	$	339
State		(115)		256
	$	(889)	$	595
Income tax expense for the year	$	4,416	$	8,133

The reconciliation between the statutory federal income tax rate and effective income tax rate for the years ended December 31, 2023 and 2022 is as follows:

	2023		2022
Federal statutory rate		21.0%		21.0%
Tax-exempt income on securities and loans		(0.8)		(0.8)
Tax-exempt BOLI income		(1.3)		(0.8)
State income tax, net of federal tax benefit		4.7		5.6
Tax credits		(0.8)		(0.4)
Other		(0.1)		(0.1)
		22.7%		24.5%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Corporation’s temporary differences as of December 31, 2023 and 2022 are as follows:

(in thousands)	2023		2022
Deferred tax assets:
Allowance for credit losses	$	4,855	$	3,880
Deferred fees		96		54
Deferred compensation		1,285		1,163
Federal and state tax loss carry forwards		2,776		2,873
Unrealized loss on investment securities		7,356		8,419
SERP		2,622		1,948
Lease liability		362		471
Low income housing		439		511
Other than temporary impairment on investment securities		464		520
Other real estate owned		83		120
Other		392		133
Total deferred tax assets		20,730		20,092
Valuation allowance		(2,776)		(2,873)
Total deferred tax assets less valuation allowance		17,954		17,219
Deferred tax liabilities:
Goodwill and other intangibles		(2,762)		(2,736)
Lease right-of-use asset		(282)		(418)
Pension		(2,958)		(2,121)
Depreciation		(403)		(921)
Derivative contract		(200)		(283)
Other		(216)		(135)
Total deferred tax liabilities		(6,821)		(6,614)
Net deferred tax assets	$	11,133	$	10,605

In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income of the appropriate character (for example, ordinary income or capital gain) within the carry-back or carry-forward period available under the tax law during the periods in which temporary differences are deductible. The Corporation has considered future market growth, forecasted earnings, future taxable income, and feasible and permissible tax planning strategies in determining whether it will be able to realize the deferred tax asset. If the Corporation were to determine that it will not be able to realize a portion of its net deferred tax asset in the future for which there is currently no valuation allowance, an adjustment to the net deferred tax asset would be charged to earnings in the period such determination was made. Conversely, if the Corporation were to make a

determination that it is more likely than not that the deferred tax assets for which there is a valuation allowance will be realized, the related valuation allowance would be reduced and a benefit would be recorded.

At December 31, 2023, the Corporation had Maryland net operating losses (“NOLs”) and other MD carryforwards of $39.1 million for which a deferred tax asset of $2.8 million has been recorded. There has been and continues to be a full valuation allowance on these NOLs based on management’s belief that it is more likely than not that these NOLs will not be realized prior to the expiration of their carry-forward periods because the Corporation will not generate sufficient taxable income in the future to fully utilize the NOLs. The valuation allowance was $2.8 million at December 31, 2023 and $2.9 million at December 31, 2022.

The Corporation and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states jurisdictions. The 2018-2020 tax years remain open under the standard statute of limitations. Also, with few exceptions, the Corporation is no longer subject to state income tax examinations for tax years before 2020.

Any interest and penalties on income tax assessments or income tax refunds are recognized in the Consolidated Statements of Income as a components of interest expense (income) and other operating expense. There were no amounts of accrued tax-related interest and penalties at December 31, 2023 and 2022. Furthermore, there were no net interest and penalties related to unrecognized tax benefits for the periods presented.

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Equity Compensation Plans

12 Months Ended

Dec. 31, 2023

Equity Compensation Plan [Abstract]

Equity Compensation Plan

14. Equity Compensation Plans

At the 2018 Annual Meeting of Shareholders, First United Corporation’s shareholders approved the First United Corporation 2018 Equity Compensation Plan (the “Equity Plan”) which authorizes the issuance of up to 325,000 shares of common stock to employees, directors, and qualifying consultants pursuant to stock options, stock appreciation rights, stock awards, dividend equivalents, and other stock-based awards.

The Corporation complies with the provisions of ASC Topic 718, Compensation- Stock Compensation, in measuring and disclosing stock compensation cost.  The measurement objective in ASC Paragraph 718-10-30-6 requires public companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award.  The cost is recognized in expense over the period in which an employee is required to provide service in exchange for the award (the vesting period).

Pursuant to First United Corporation’s director compensation policy, each director receives an annual retainer of 1,000 shares of First United Corporation common stock, plus $15,000 to be paid, at the director’s election, in cash or additional shares of common stock.  In May 2023, a total of 16,931 fully vested shares of common stock were issued to directors, which had a grant date fair value of $13.23 per share.  In May 2022, a total of 14,940 fully vested shares of common stock were issued to directors, which had a grant date fair value of $18.92 per share.  In January 2023, a total of 333 fully vested shares of common stock were issued to a new director, which had a grant date fair value of $19.36 per share.  In October 2023, a total of 852 fully vested shares of common stock were issued to a new director, which had a grant date fair value of $16.26 per share.  Director stock compensation expense was $255,937 for the year ended December 31, 2023 and $266,920 for the year ended December 31, 2022.

Employee stock compensation was $33,279 and $79,464 for the years ended December 31, 2023 and 2022, respectively.

Restricted Stock Units

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

The RSUs granted to each of the foregoing officers consist of (i) a performance vesting award for a three year performance period and (ii) a time-vesting award that will vest ratably over a three year period. Target performance levels were set based on the annual budget which supports the Corporation’s long-term objective of achieving high performance as compared to peers. Threshold performance is the minimum level of acceptable performance as defined by the Committee and maximum performance represented a level potentially achievable under ideal circumstances. Achievement of the threshold performance level would result in each executive participant earning a payout at 50% of his or her respective target award opportunity. Achievement of the target performance level would result in the executive participant earning the target award and achievement at or above the maximum performance level would result in the executive participant earning 150% of the target opportunity. Actual results for any goal that falls between performance levels would be interpolated to calculate a proportionate award. For the performance period ending December 31, 2022, the RSUs performance goals are based on earnings per share for the year ending December 31, 2022 and growth in tangible book value per share during the performance period. For the performance period ending December 31, 2023, the RSUs performance goals are based on earnings per share for the year ending December 31, 2023 and growth in tangible book value per share during the performance period.  For the performance period ending December 31, 2024, the RSUs performance goals are based on earnings per share for the year ending December 31, 2024 and growth in tangible book value per share during the performance period.  For the performance period ending December 31, 2025, the RSUs performance goals are based on earnings per share for the year ended December 31, 2025 and growth in tangible book value per share during the performance period.

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

In the first quarter of 2020, RSUs were granted relating to (i) 9,791 performance-vesting shares (target level) for the performance period ending December 31, 2021 (the “2019 LTIP year”) and (ii) 10,143 performance-vesting shares and 5,070 time-vesting shares (target level) for the performance period ending December 31, 2022 (the “2020 LTIP year”).  Each RSU had a grant date fair market value of $12.54 per share of common stock underlying the RSU.  The time-vesting RSUs will vest ratably over a three-year period that began on March 26, 2021.  On March 9, 2022, 14,688 shares subject to RSUs granted for the 2019 LTIP year were issued at maximum performance level. On March 8, 2023, 15,216 shares subject to RSUs granted for the 2020 LTIP year were issued at maximum performance.  On March 26, 2021, 1,690 of the 5,070 time-vesting shares were issued to participants.  On March 28, 2022, 1,688  shares of the 3,380 remaining time-vesting shares were issued to participants.  On March 26, 2023, 1,692 shares of the remaining time-vesting shares were issued to participants.  Stock compensation expense was $15,896 for the year ended December 31, 2023, and $73,816 for the year ended December 31, 2022.  All compensation expense related to the 2019 LTIP year was recognized as of March 31, 2022.  All compensation expense related to the 2020 LTIP plans was recognized as of March 31, 2023.

In May 2021, RSUs relating to 7,389 performance-vesting shares and 3,693 time-vesting shares (target level) for plan year 2021 were granted, which had a grant date fair market value of $17.93 per share of common stock underlying each RSU.  The performance period for the performance-vesting RSUs is the three-year period ending December 31, 2023.  The time-vesting RSUs will vest ratably over a three-year period beginning on May 5, 2022. On May 5, 2022, 1,230 shares of the 3,693 time-vesting RSUs were issued to participants.  On May 5, 2023, 1,230 shares of the remaining 2,463 time-vesting shares were issued to the participants.  Net stock compensation (credit)/expense was ($51,555) and $66,285 for the years ended December 2023 and 2022.  Unrecognized compensation expense as of December 31, 2023 related to unvested units was $7,365.

In March 2022, RSUs relating to 8,096 performance-vesting shares and 6,238 time-vesting shares (target level) for plan year 2022 were granted, which had a grant date fair market value of $21.88 per share of common stock underlying each RSU.  The performance period for the performance-vesting RSUs is the three-year period ending December 31, 2024.  The time-vesting RSUs will vest ratably over a three year period beginning on March 9, 2023.  On March 9, 2023, 2,079 shares of the 6,238 time-vesting RSUs were issued to participants. Stock compensation expense was $104,580 and $78,436

for the years ended December 31, 2023 and 2022, respectively.  Unrecognized compensation expense as of December 31, 2023 related to unvested units was $130,726.

In March 2023, RSUs relating to 10,214 performance-vesting shares and 7,920 time-vesting shares (target level) for plan year 2023 were granted, which had a grant date fair market value of $18.25 per share of common stock underlying each RSU.  The performance period for the performance-vesting RSUs is the three year period ending December 31, 2025.  The time-vesting RSUs will vest ratably over a three-year period beginning on March 15, 2024. Stock compensation expense was $82,755 for  the year ended Decmber 31, 2023.  Unrecognized compensation expense as of December 31, 2023 related to unvested units was $248,264.

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Employee Benefit Plans

12 Months Ended

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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401(k) Profit Sharing Plan

12 Months Ended

Dec. 31, 2023

Employee Benefit Plans [Abstract]

401(k) Profit Sharing Plan

16. 401(k) Profit Sharing Plan

In furtherance of First United Corporation’s belief that every employee should have the ability to accrue retirement benefits, it adopted the 401(k) Profit Sharing Plan, which is available to all employees, including executive officers. Employees are automatically entered in the plan on the first of the month following completion of 30 days of service to First United Corporation and/or its subsidiaries. Employees have the opportunity to opt out of participation or change their deferral amounts under the plan at any time. In addition to contributions by participants, the plan contemplates employer matching and the potential of discretionary contributions to the accounts of participants. First United Corporation believes that matching contributions encourage employees to participate and thereby plan for their post-retirement financial future. Beginning with the 2008 plan year, First United Corporation enhanced the match formula to 100% on the first 1% of salary reduction and 50% on the next 5% of salary reduction. This match is accrued for all participants, including executive officers, immediately upon entering the plan on the first day of the month following the completion of 30 days of employment.  Additionally, First United Corporation accrued a non-elective employer contribution during 2023 for all employees other than employees who participate in the Defined Benefit SERP and Defined Contribution SERP and those employees meeting the age plus service requirement in the Pension Plan equal to 4.0% of each employee’s salary, and 0.5% of each employee’s salary hired before January 1, 2010, which will be paid in the first quarter of 2024. The employee must be a plan participant and be actively employed on the last day of the plan year to share in the discretionary profit sharing contribution, except in the case of death, disability, or retirement of the participant.  Expense charged to operations for the 401(k) Plan was $1.4 million in 2023 and $1.3 million in 2022.

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Federal Reserve Requirements

12 Months Ended

Dec. 31, 2023

Federal Reserve Requirements [Abstract]

Federal Reserve Requirements

17. Federal Reserve Requirements

The Bank is required to maintain cash reserves with the Federal Reserve Bank of Richmond based on specified deposit liabilities. Effective March 26, 2020, the FRB reduced reserve requirement ratios to 0%. This action eliminated reserve requirements for all depository institutions.

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Contractual Obligations, Commitments and Contingent Liabilities

12 Months Ended

Dec. 31, 2023

Contractual Obligations, Commitments and Contingent Liabilities [Abstract]

Contractual Obligations, Commitments and Contingent Liabilities

18. Contractual Obligations, Commitments and Contingent Liabilities

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.  At December 31, 2023, no large capital obligations are anticipated.

Commitments

Loan commitments are made to accommodate the financial needs of our customers. Loan commitments have credit risk essentially the same as that involved in extending loans to customers and are subject to normal credit policies. Commitments to extend credit generally have fixed expiration dates, may require payment of a fee, and contain cancellation clauses in the event of an adverse change in the customer’s credit quality.

Commitments to extend credit in the form of consumer, commercial and business as of December 31, 2023 and December 31, 2022 are as follows:

(in thousands)	2023		2022
Residential mortgage - home equity	$	72,080	$	70,845
Residential mortgage - construction		17,684		25,499
Commercial		160,196		153,235
Consumer - personal credit lines		4,186		4,323
Standby letters of credit		11,037		14,325
Total	$	265,183	$	268,227

We do not issue any guarantees that would require liability recognition or disclosure other than the standby letters of credit issued by the Bank. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party to support contractual obligations and to ensure job performance. Generally, the Bank’s letters of credit are issued with expiration dates within one year. Historically, most letters of credit expire unfunded, and therefore, cash requirements are substantially less than the total commitment. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank generally holds collateral and/or personal guarantees supporting letters of credit.

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Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2023

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

19. Fair Value of Financial Instruments

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

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

The Corporation measures fair values based on the fair value hierarchy established in ASC Paragraph 820-10-35-37. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or

liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of inputs that may be used to measure fair value under the hierarchy are as follows:

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

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

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

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

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

The fair value of investments available-for-sale is determined using a market approach. At December 31, 2023 and 2022, the U.S. Government agencies and treasuries, residential and commercial mortgage-backed securities, and municipal bonds segments are classified as Level 2 within the valuation hierarchy. Their fair values were determined based upon market-corroborated inputs and valuation matrices, which were obtained through third party data service providers or securities brokers through which we have historically transacted both purchases and sales of investment securities.

Derivative financial instruments (cash flow hedge) – The Corporation’s open derivative positions are interest rate swap agreements. Those classified as Level 2 open derivative positions are valued using externally developed pricing models based on observable market inputs provided by a third party and validated by management.  The Corporation has considered counterparty credit risk in the valuation of its interest rate swap assets.

Individually evaluated loans – Loans included in the table below are those that are considered individually evaluated with a specific allocation or with partial charge-offs, based upon the guidance of the loan impairment subsection of the Receivables Topic, ASC Section 310-10-35, under which the Corporation has measured impairment generally based on the fair value of the loan’s collateral. Fair value consists of the loan balance less its valuation allowance and is generally determined based on independent third-party appraisals of the collateral or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values based upon the lowest level of input that is significant to the fair value measurements.

Equity investments- Equity investments included in the table below are considered are recorded with a write-down to fair value recorded in other operating expenses.  Fair value of the equity investment was based on an independent third-party valuation report where the value was determined based on the revenue multiples of like kind information technology businesses.  These assets are included as Level 3 fair values based upon the lowest level of input that is significant to the fair value measurements.

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

For assets and liabilities measured at fair value on a recurring and non-recurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2023 and 2022 are as follows:

			Fair Value Measurements at
			December 31, 2023 Using
			(in Thousands)
	Assets & Liabilities Measured at		Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs		Significant Unobservable Inputs
Description	12/31/23		(Level 1)	(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	6,034		$	6,034
Residential mortgage-backed agencies	$	20,563		$	20,563
Commercial mortgage-backed agencies	$	28,417		$	28,417
Collateralized mortgage obligations	$	16,356		$	16,356
Obligations of states and political subdivisions	$	10,312		$	10,312
Corporate bonds	$	778		$	778
Collateralized debt obligations	$	14,709				$	14,709
Financial derivative	$	756		$	756
Non-recurring:
Individually evaluated loans	$	—				$	—
Equity investments	$	3,087				$	3,087
Other real estate owned	$	4,443				$	4,443
			Fair Value Measurements at
			December 31, 2022 Using
			(in Thousands)
	Assets & Liabilities Measured at		Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs		Significant Unobservable Inputs
Description	12/31/22		(Level 1)	(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. treasuries	$	9,462		$	9,462
U.S. government agencies	$	37,401		$	37,401
Residential mortgage-backed agencies	$	30,732		$	30,732
Commercial mortgage-backed agencies	$	21,044		$	21,044
Collateralized mortgage obligations	$	10,492		$	10,492
Obligations of states and political subdivisions	$	887		$	887
Collateralized debt obligations	$	15,871				$	15,871
Financial derivative	$	1,068		$	1,068
Non-recurring:
Individually evaluated loans	$	211				$	211
Equity investment	$	1,796				$	1,796
Other real estate owned	$	—				$	—

There were no transfers of assets between any of the levels of the fair value hierarchy for the years ended December 31, 2023 or December 31, 2022.

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of December 31, 2023 and 2022, the significant unobservable inputs used in the fair value measurements were as follows:

(in thousands)	Fair Value at December 31, 2023		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale - CDO	$	14,709	Discounted Cash Flow	Discount Rate	Range of low to mid 500 and low to mid 600
Non-recurring:
Equity Investments	$	3,087	Market Method	Revenue Multiples	2.8x
Other Real Estate Owned	$	4,443	Market Comparable Properties	Marketability Discount	5.0% to 15.0% (weighted avg 5.9%)

(in thousands)	Fair Value at December 31, 2022		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities –  available for sale - CDO	$	15,871	Discounted Cash Flow	Discount Rate	Range of low to mid 300 and low to high 400
Non-recurring:
Individually Evaluated Loans	$	211	Market Comparable Properties	Marketability Discount	10.0% to 15.0%
Equity Investment	$	1,796	Market Method	Revenue Multiples	2.8x
Other Real Estate Owned	$	—	Market Comparable Properties	Marketability Discount

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

The following tables show a reconciliation of the beginning and ending balances for fair valued assets measured using Level 3 significant unobservable inputs for the years ended December 31, 2023 and 2022:

		Fair Value Measurement Using Unobservable Inputs (Level 3)
(in thousands)		Investment Securities Available for Sale
Beginning balance January 1, 2023	$	15,871
Total gains/(losses) realized/unrealized:
Included in other comprehensive income		(1,162)
Ending balance December 31, 2023	$	14,709
		Fair Value Measurement Using Unobservable Inputs (Level 3)
(in thousands)		Investment Securities Available for Sale
Beginning balance January 1, 2022	$	17,192
Total gains/(losses) realized/unrealized:
Included in other comprehensive income		(1,321)
Ending balance December 31, 2022	$	15,871

Gains and losses (realized and unrealized) included in earnings for the periods above are reported in the Consolidated Statement of Income in other operating income.

The fair values disclosed 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.

The following table presents fair value information about financial instruments, whether or not recognized in the 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 statement of financial condition are as follows:

	December 31, 2023				Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	48,343	$	48,343	$	48,343
Interest bearing deposits in banks		1,410		1,410		1,410
Investment securities - AFS		97,169		97,169			$	82,460	$	14,709
Investment securities - HTM		214,297		184,415				182,510		1,905
Restricted bank stock		5,250		N/A
Loans, net		1,388,847		1,319,456						1,319,456
Financial derivative		778		778				778
Accrued interest receivable		7,487		7,487				828		6,659
Financial Liabilities:
Deposits – non-maturity		1,355,444		1,355,444				1,355,444
Deposits – time deposits		195,533		193,337				193,337
Short-term borrowed funds		45,418		45,418				45,418
Long-term borrowed funds		110,929		110,809				110,809
Accrued interest payable		612		612				612

	December 31, 2022				Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	72,720	$	72,720	$	72,720
Interest bearing deposits in banks		1,595		1,595		1,595
Investment securities - AFS		125,889		125,889			$	110,018	$	15,871
Investment securities - HTM		235,659		203,080				182,380		20,700
Restricted bank stock		1,027		N/A
Loans, net		1,264,684		1,177,702						1,177,702
Financial derivative		1,068		1,068				1,068
Accrued interest receivable		6,051		6,051				933		5,118
Financial Liabilities:
Deposits – non-maturity		1,450,210		1,450,210				1,450,210
Deposits – time deposits		120,523		120,083				120,083
Financial derivative		—		—				—
Short-term borrowed funds		64,565		64,565				64,565
Long-term borrowed funds		30,929		30,909				30,909
Accrued interest payable		151		151				151

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Derivative Financial Instruments

12 Months Ended

Dec. 31, 2023

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

20. 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 December 31, 2023, $15.0 million notional amount remains.   The interest rate swap creates an effective fixed interest rate of 4.6450% on the $15.0 million notional amount of the Corporation’s junior subordination debt until the interest rate swap’s maturity in March 2026.

The fair value of the interest rate swap contracts was $0.8 million and $1.1 million at December 31, 2023 and December 31, 2022, respectively.

For the year ended December 31, 2023, the Corporation recorded a decrease in the value of the derivatives of $0.3 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 year ended December 31, 2023. The Corporation does not expect any material losses relating to these hedges to be reclassified into earnings within the next 12 months.

Interest rate swap agreements are entered into with counterparties that meet established credit standards and the Corporation believes that the credit risk inherent in these contracts is not significant at December 31, 2023.

The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the years ended December 31, 2023 and December 31, 2022.

Derivative in Cash Flow Hedging Relationships

(in thousands)	Amount of (loss)/gain recognized in OCI on derivative (effective portion)		Amount of gain or (loss) reclassified from accumulated OCI into income (effective portion) (1)		Amount of gain or (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing) (2)
Interest rate contracts:
December 31, 2023	$	(228)	$	—	$	—
December 31, 2022	$	1,116	$	—	$	—

Notes:

(1) Reported as interest expense

(2) Reported as other income

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Revenue Recognition

12 Months Ended

Dec. 31, 2023

Revenue Recognition [Abstract]

Revenue Recognition

21. 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.

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 in-scope and out-of-scope of ASC Topic 606, for the years ended December 31, 2023 and 2022.

	Year Ended
	December 31,
(in thousands)	2023		2022
Noninterest income
In-scope of Topic 606:
Service charges on deposit accounts	$	2,198	$	1,981
Other service charges		929		925
Trust department		8,282		8,244
Debit card income		4,101		3,958
Brokerage commissions		1,160		1,049
Noninterest income (in-scope of Topic 606)		16,670		16,157
Noninterest income (out-of-scope of Topic 606)		1,661		1,721
Total Noninterest Income	$	18,331	$	17,878

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Segment Reporting

12 Months Ended

Dec. 31, 2023

Segment Reporting [Abstract]

Segment Reporting

22. Segment Reporting

Currently, the Corporation conducts business in two operating segments:  (i) Community Banking and (ii) Trust and Investment Services.  The accounting policies of the segments are the same as those described in the summary of significant accounting policies provided earlier in this report.

Business activity for the operating segments are as follows:

Community Banking:  The Community Banking segment is conducted through the Bank and involves delivering a broad range of financial products and services, including various loan and deposit products, to consumer, business, and not-for-profit customers.  Parent company income and assets are included in the Community Banking segment, as the majority of parent company functions are related to this segment.  Major revenue sources include net interest income, gains on sales of mortgage loans, and service charges on deposit accounts.  Expenses include personnel, occupancy, marketing, equipment, and other expenses.  Non-cash charges other than depreciation of fixed assets were immaterial for the years  ended December 31, 2023 and 2022.

Trust and Investment Services:  The Trust and Investment Services segment is conducted through the Bank and offers corporate trustee services, trust and estate administration, IRA administration and custody services.  Revenues for this segment is generated from administration, service and custody fees, as well as management fees that are derived from Assets Under Management.  Expenses include personnel, occupancy, marketing, equipment, and other expenses.   Non-cash charges associated with amortization of intangibles were approximately $208,000 for the years ending December 31, 2023 and 2022.

Information for the operating segments for the years ended December 31, 2023 and 2022 are presented in the following tables:

		December 31, 2023
			Trust and
	Community		Investment
(in thousands)	Banking		Services		Total
Interest income	$	81,156	$	—	$	81,156
Interest expense		24,286		—		24,286
Credit loss expense		1,620		—		1,620
Non-interest income		5,027		9,442		14,469
Non-interest expense		45,098		5,145		50,243
Income before income taxes and intercompany fees		15,179		4,297		19,476
Intercompany management fee income (expense)		12		(12)		—
Income before income taxes		15,191		4,285		19,476
Income tax expense		3,514		902		4,416
Net income	$	11,677	$	3,383	$	15,060
		December 31, 2022
			Trust and
	Community		Investment
(in thousands)	Banking		Services		Total
Interest income	$	62,422	$	—	$	62,422
Interest expense		4,789		—		4,789
Loan loss credit		(627)		—		(627)
Non-interest income		8,757		9,293		18,050
Non-interest expense		38,435		4,694		43,129
Income before income taxes and intercompany fees		28,582		4,599		33,181
Intercompany management fee income (expense)		12		(12)		—
Income before income taxes		28,594		4,587		33,181
Income tax expense		7,168		965		8,133
Net income	$	21,426	$	3,622	$	25,048

Total non-fiduciary assets of the trust and investment services segment were $0.7 million (including $0.6 million in intangible assets) at December 31, 2023 and $0.9 million (including $0.8 million in intangible assets) at December 31, 2022.  All other assets (including goodwill of $11.0 million as of December 31 2023 and 2022 and other intangible assets of $0.5 million and $0.6 million as of December 31, 2023 and 2022, respectively) were held by the community banking segment.

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Parent Company Only Financial Information

12 Months Ended

Dec. 31, 2023

Parent Company Only Financial Information

Parent Company Only Financial Information

23. Parent Company Only Financial Information

Condensed Statements of Financial Condition

	December 31,
(in thousands)	2023		2022
Assets
Cash	$	9,739	$	11,296
Investment securities- Available for Sale (at fair value)		13,591		14,603
Investment in bank subsidiary		164,878		153,245
Investment in non-bank subsidiaries		929		929
Other assets		9,794		8,273
Total Assets	$	198,931	$	188,346
Liabilities and Shareholders' Equity
Accrued interest and other liabilities	$	4,799	$	4,425
Dividends payable		1,330		1,199
Junior subordinated debt		30,929		30,929
Shareholders' equity		161,873		151,793
Total Liabilities and Shareholders' Equity	$	198,931	$	188,346

Condensed Statements of Income

	Year Ended
	December 31,
(in thousands)	2023		2022
Income:
Dividend income from bank subsidiary	$	6,130	$	14,995
Interest income on investments		1,715		780
Other income		75		63
Total other income		1,790		843
Total Income		7,920		15,838
Expenses:
Interest expense		1,950		1,451
Other expenses		715		249
Total Expenses		2,665		1,700
Income before income taxes and equity in undistributed net income of subsidiaries		5,255		14,138
Applicable income tax benefit		213		194
Net income before equity in undistributed net income of subsidiaries		5,468		14,332
Equity in undistributed net income of subsidiaries:
Bank		9,592		10,716
Net Income	$	15,060	$	25,048

Condensed Statements of Comprehensive Income

	Year Ended
	December 31,
Components of Comprehensive Income (in thousands)	2023		2022
Net Income	$	15,060	$	25,048
Unrealized losses on AFS Securities, net of tax		(771)		(954)
Unrealized (losses)/gains on cash flow hedges, net of tax		(228)		1,116
Other comprehensive (loss)/income, net of tax		(999)		162
Comprehensive income	$	14,061	$	25,210

Condensed Statements of Cash Flows

	Year Ended
	December 31,
(in thousands)	2023		2022
Operating Activities
Net Income	$	15,060	$	25,048
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of subsidiaries		(9,592)		(10,716)
Increase in other assets		(1,280)		(448)
Increase in accrued interest payable and other liabilities		273		655
Stock compensation		527		532
Net cash provided by operating activities		4,988		15,071
Financing Activities
Proceeds from issuance of common stock		293		217
Repurchase of common stock		(1,495)		—
Cash dividends on common stock		(5,343)		(4,192)
Net cash used in financing activities		(6,545)		(3,975)
Increase in cash and cash equivalents		(1,557)		11,096
Cash and cash equivalents at beginning of year		11,296		200
Cash and cash equivalents at end of year	$	9,739	$	11,296

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2023

Summary of Significant Accounting Policies [Abstract]

Business

Business

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

First United Corporation and its subsidiaries operate principally in four counties in Western Maryland and four counties in West Virginia.

As used in these Notes, the terms “the Corporation”, “we”, “us”, and “our” mean First United Corporation and, unless the context clearly suggests otherwise, its consolidated subsidiaries.

Basis of Presentation

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”).  All significant intercompany transactions and accounts have been eliminated.  Certain reclassifications have been made to prior year amounts to conform with current year classifications.  In the opinion of management, all adjustments (all of which are normal recurring in nature) that are necessary for a fair statement are reflected in the consolidated financial statements.

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

Principles of Consolidation

The consolidated financial statements of the Corporation include the accounts of First United Corporation, the Bank, the OakFirst Loan Centers, First OREO Trust and FUBT OREO I, LLC. All significant inter-company accounts and transactions have been eliminated.

Significant Concentrations of Credit Risk

Significant Concentrations of Credit Risk

Most of the Corporation’s relationships are with customers located in Western Maryland and Northeastern West Virginia. At December 31, 2023, approximately 5%, or $77.1 million, of total loans were secured by real estate acquisition, construction and development projects, with $77.0 million performing according to their contractual terms and

$0.1 million considered to be individually evaluated loans based on management’s concerns about the borrowers’ ability to comply with present repayment terms. The $0.1 million in individually evaluated loans were all classified as non-accrual as of December 31, 2023.  Additionally, loans collateralized by commercial rental properties represented 21% of the total loan portfolio as of December 31, 2023. Note 4 discusses the types of securities in which the Corporation invests and Note 5 discusses the Corporation’s lending activities.

Investments

Investments

The investment portfolio is classified and accounted for based on the guidance of Accounting Standards Codification (“ASC”) Topic 320, Investments – Debt and Equity Securities. Securities bought and held principally for the purpose of selling them in the near term are classified as trading account securities and reported at fair value with unrealized gains and losses included in net gains/losses in other operating income. Securities purchased with the intent and ability to hold the securities to maturity are classified as held-to-maturity securities and are recorded at amortized cost. All other investment securities are classified as available-for-sale. These securities are held for an indefinite period of time and may be sold in response to changing market and interest rate conditions or for liquidity purposes as part of our overall asset/liability management strategy. Available-for-sale securities are reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of other comprehensive income included in the consolidated statement of comprehensive income, net of applicable income taxes.

The amortized cost of debt securities is adjusted for the amortization of premiums to the first call date, if applicable, or to maturity, and for the accretion of discounts to maturity, or, in the case of mortgage-backed securities, over the estimated life of the security. Such amortization and accretion is included in interest income from investments. Interest and dividends are included in interest income from investments. Gains and losses on the sale of securities are recorded using the specific identification method.

The Corporation adopted Accounting Standards Codification (“ASC “) 326 using the prospective transition approach for debt securities for which other than temporary impairment (“OTTI”) had been recognized prior to January 1, 2023, such as available-for-sale (“AFS”) collateralized debt obligations.  As a result, the amortized cost basis for such debt securities remained the same before and after the effective date of ASC 326.  The effective interest rate on these debt securities was not changed.  Amounts previously written off are recognized in other comprehensive income (“OCI”) as of January 1, 2023 relating to improvements in cash flows expected to be collected are accreted into income over the remaining life of the asset.  Recoveries of amounts previously written off relating to improvements in cash flows after January 1, 2023 are recorded in earnings when received.

The Corporation utilizes ASC 326 to evaluate its AFS and HTM debt security portfolio for expected credit losses.  For AFS debt securities in an unrealized loss position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis.  If either criteria is met, the security’s amortized cost basis is written down to fair value through income.  For AFS debt securities that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted from credit losses or other factors.  In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.  If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security.  If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.  Any impairment that has not been recorded through an ACL is recognized in other comprehensive income, as a non-credit-related impairment.

The Corporation has made the policy election to exclude accrued interest from the amortized cost basis of available-for-sale debt securities and report accrued interest separately in other assets in the Consolidated Balance Sheets.  Available-for-sale debt securities are placed on nonaccrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due.  Accrued interest receivable is reversed against interest income when

a security is placed on nonaccrual status.  Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable.

The Corporation separately evaluates its HTM investment securities for any credit losses.  The Corporation pools like securities and calculates expected credit losses through an estimate based on a security’s credit rating, which is recognized as part of the allowance for credit losses for held-to-maturity securities and is included in the balance of investment securities held to maturity on the Consolidated Balance Sheets.  If the Corporation determines that a security indicates evidence of deteriorated credit quality, the security is individually evaluated and a discounted cash flow analysis is performed and compared to the amortized cost basis.

Restricted Investment in Bank Stock

Restricted Investment in Bank Stock

The Corporation owns non-marketable equity securities in a combination of the Federal Home Loan Bank (“FHLB”) of Atlanta, Atlantic Community Bankers Bank and Community Banker’s Bank.  These securities are carried at cost, classified as restricted securities, and periodically evaluated for impairment based on ultimate recovery of par value.

The Corporation recognizes dividend income on a cash basis. For the years ended December 31, 2023 and December 31, 2022, dividends of $198,457 and $36,558, respectively, were recorded in other operating income.

Loans and Interest and Fees on Loans

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or full repayment by the borrower are reported at their unpaid principal balance outstanding, adjusted for any deferred fees or costs pertaining to origination. Loans that management has the intent to sell are reported at the lower of cost or fair value determined on an individual basis.  There were $0.4 million in loans held for sale at December 31, 2023.  No loans were held for sale at December 31, 2022.

The segments of the Bank’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance. The commercial real estate (“CRE”) loan segment is further disaggregated into two classes. Non-owner occupied CRE loans, which include loans secured by non-owner occupied nonfarm nonresidential properties, generally have a greater risk profile than all other CRE loans, which include loans secured by farmland, multifamily structures and owner-occupied commercial structures. The acquisition and development (“A&D”) loan segment is further disaggregated into two classes. One-to-four family residential construction loans are generally made to individuals for the acquisition of and/or construction on a lot or lots on which a residential dwelling is to be built. All other A&D loans are generally made to developers or investors for the purpose of acquiring, developing and constructing residential or commercial structures. These loans have a higher risk profile because the ultimate buyer, once development is completed, is generally not known at the time of the A&D loan. The commercial and industrial (“C&I”) loan segment consists of loans made for the purpose of financing the activities of commercial customers. The residential mortgage loan segment is further disaggregated into two classes: amortizing term loans, which are primarily first liens, and home equity lines of credit, which are generally second liens. The consumer loan segment consists primarily of installment loans (direct and indirect), student loans and overdraft lines of credit connected with customer deposit accounts.

Management uses a 10-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due are considered Substandard. Only the portion of a specific allocation of the allowance for credit losses is associated with a pending event that could trigger loss in the short term is classified in the Doubtful category.  It is possible for a loan to be classified as Substandard in the internal risk rating system, but not be

individually evaluated under GAAP, due to the broader reach of “well-defined weaknesses” in the application of the Substandard definition.

Interest and Fees on Loans

Interest on loans (other than those on non-accrual status) is recognized based upon the principal amount outstanding.  Loan fees in excess of the costs incurred to originate the loan are recognized as income over the life of the loan utilizing either the interest method or the straight-line method, depending on the type of loan. Generally, fees on loans with a specified maturity date, such as residential mortgages, are recognized using the interest method. Loan fees for lines of credit are recognized using the straight-line method.

A loan is considered to be past due when a payment has not been received for 30 days past its contractual due date. For all loan segments, the accrual of interest is discontinued when principal or interest is delinquent for 90 days or more unless the loan is well-secured and in the process of collection.  Loans that are on a current payment status or past due less than 90 days may be classified as nonaccrual if repayment in full of principal and/or interest is unlikely.  Interest payments received on non-accrual loans are applied as a reduction of the loan principal balance. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Generally, consumer installment loans are not placed on non-accrual status, but are charged off after they are 120 days contractually past due. Loans other than consumer installment loans are charged-off based on an evaluation of the facts and circumstances of each individual loan.

Allowance for Credit Losses

Allowance for Credit Losses

An allowance for credit loss (“ACL”) is mainained to absorb losses from the Corporation’s financial assets in accordance with ASC 326:  Financial Instruments- Credit Losses.

Allowance for Credit Losses Policy

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

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

Management believes it uses relevant information available to make determinations about the ACL and that it has established the existing allowance in accordance with GAAP.  However, the determination of the ACL requires significant judgment, and estimates of expected losses in the loan portfolio can vary significantly from the amounts actually observed.  While management uses available information to recognize losses, future additions to the ACL may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes to the interest rate environment which may directly impact prepayment and curtailment rate assumptions, and changes in the financial condition of borrowers.

The adoption of CECL accounting did not result in a significant change to any other credit risk management and monitoring processes, including identification of past due or delinquent borrowers, nonaccrual practices, assessment of modified loans, or charge-off policy.  

Held-to-Maturity Securities

Management measures expected credit losses on HTM debt securities on a collective basis by major security type.  Management has elected not to measure an ACL for accrued interest on securities. The estimate of expected credit losses considers historical credit loss information tha tis adjusted for current conditions and reasonable and supportable forecasts.  

Management classifies the held-to-maturity portfolio into the following major security types:  securities issued by U.S. government issues and agencies (including U.S. treasuries, agency bonds, and U.S. guaranteed residential mortgage-backed securities, commercial mortgage-backed securities, and collateralized mortgage obligations), rated municipal securities, and unrated municipal securities.   Securities that are issued or explicitly or implicitely guaranteed by the U.S. government are hghly rated by major rating agencies and have a long history of no credit losses.  Rated municipal securities are evaluated based on credit rating by major rating agencies and financial performance.   Non-rated securities are evaluated internally based on financial performance and expected future cash flows.

Available-for-Sale Securities

For AFS debt securities in an unrealized loss position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery to its amortized cost basis.  If either criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income.  For debt securities AFS that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted rom credit losses or other factors.  In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.  If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected rom the security are compared to the amortized cost basis of the security.  If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.  Any impairment that has not been recorded through the ACL is recognized in other comprehensive income.

The Corporation adopted Accounting Standards Codification (“ASC “) 326 using the prospective transition approach for debt securities for which other than temporary impairment (“OTTI”) had been recognized prior to January 1, 2023, such as available-for-sale (“AFS”) collateralized debt obligations.  As a result, the amortized cost basis for such debt securities remained the same before and after the effective date of ASC 326.  The effective interest rate on these debt securities was not changed.  Amounts previously written off are recognized in other comprehensive income (“OCI”) as of January 1, 2023 relating to improvements in cash flows expected to be collected are accreted into income over the remaining life of the asset.  Recoveries of amounts previously written off relating to improvements in cash flows after January 1, 2023 are recorded in earnings when received.

Loans

An ACL is maintained as a valuation account that is deducted from the Corporation’s loan porfolio’s amortized cost basis to present the net amount expected to be collected on the loans.  Loan are charged off against the ACL when management believes the uncollectibility of a loan balance is confirmed.  Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.  

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.  Historical credit loss experience provides the basis or the estimation of expected credit losses.  Adjustments to historical loss information are made for differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental condition, such as changes in unemployment rates, property values, or other relevant factors.

Management evaluates individual loans in all of the commercial segments for possible impairment if the loan is greater than $500,000 or is part of a relationship that is greater than $750,000 and (i) is either in non-accrual status or (ii) is

risk-rated Substandard and is greater than 60 days past due. Loans are considered to be individually evaluated when, based on current information and events, they no longer share the same risk characteristics of other loans within our portfolio. Factors considered by management in evaluating loans include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Bank does not separately evaluate individual consumer and residential mortgage loans, unless such loans are part of larger relationship that is individually evaluated; otherwise loans in these segments are considered individually evaluated when they are classified as non-accrual.

Once the determination has been made that a loan is individually evaluated, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods: (i) the present value of expected future cash flows discounted at the loan’s effective interest rate; (ii) the loan’s observable market price; or (iii) the fair value of the collateral less selling costs. The method is selected on a loan-by-loan basis, with management utilizing the fair value of collateral or the discounted cash flow method for the analyses. If the fair value of the collateral less selling costs method is utilized for collateral securing loans in the commercial segments, then an updated external appraisal is ordered on the collateral supporting the loan if the loan balance is greater than $500,000 and the existing appraisal is greater than 18 months old. If the loan balance is less than $500,000, then the estimated fair value of the collateral is determined by adjusting the existing appraisal by the appropriate percentage from an internally prepared appraisal discount grid. This grid considers the age of a third-party appraisal and the geographic region where the collateral is located in order to discount an appraisal. The discount rates in the appraisal discount grid are updated at least annually to reflect the most current knowledge that management has available, including the results of current appraisals. If there is a delay in receiving an updated appraisal or if the appraisal is found to be deficient in our internal appraisal review process and re-ordered, the Bank continues to use a discount factor from the appraisal discount grid based on the collateral location and current appraisal age in order to determine the estimated fair value. If the general market conditions in that geographic market have changed considerably, the property has deteriorated or perhaps lost an income stream, or a recent appraisal for a similar property indicates a significant change, then management may adjust the fair value indicated by the existing appraisal until a new appraisal is obtained. A specific allocation of the ACL is recorded if there is any deficiency in collateral value determined by comparing the estimated fair value to the recorded investment of the loan. When updated appraisals are received and reviewed, adjustments are made to the specific allocation as needed.  

A loan that is considered a non-accrual or modified loan may be subject to the individually evaluated loan analysis if the commitment is $0.1 million or greater; otherwise, the modified loan remains in the appropriate segment in the ACL model and associated reserves are adjusted based on changes in the discounted cash flows resulting from the modification of the modified loan.  For a discussion with respect to reserve calculations regarding individually evaluated loans, refer to the “Nonrecurring Loans” section in Note 5, Fair Value Measurements.  There were no loan modifications to borrowers facing financial difficulties for the year ending December 31, 2023.

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

Loan Commitments and Allowance for Credit Loss on Unfunded Commitments

Financial instruments include unfunded commitments such as commitments to make loans and commercial letters of credit issued to meet customer financing needs.  The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for unfunded commitments commitments is represented by the contractual amount of those instruments.  Such financial instruments are recorded when they are funded.

The Corporation records a reserve for unfunded commitments (“RUC”) on unfunded commitments through a charge to provision for credit loss expense in the Corporation’s Consolidated Statement of Income.  The RUC on unfunded commitments is estimated by loan segment at each balance sheet date under the CECL model using the same

methodologies as portfolio loans, taking into consideration the likelihood that funding will occur, and is included in the RUC on the Corporation’s Consolidated Balance Sheet.

Loan Modifications

In situations where, for economic or legal reasons related to a borrower’s financial condition, management may grant a concession to the borrower that it would not otherwise consider, the related loan is classified as a modified loan.  Management strives to identify borrowers in financial difficulty early and work with them to modify the loan to more affordable terms before their loan reaches nonaccrual status.  The Corporation modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay, or interest rate reductions.  When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.  These concessions are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral.   See Note 5 for more detail related to the accounting of modified loans.

Premises and Equipment

Premises and Equipment

Land is carried at cost. Premises and equipment are carried at cost, less accumulated depreciation. The provision for depreciation for financial reporting has been made by using the straight-line method based on the estimated useful lives of the assets, which range from 10 to 31.5 years for buildings and 3 to 20 years for furniture and equipment.

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

Goodwill represents the excess purchase price paid over the fair value of the net assets acquired in a business combination. Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Impairment testing requires that the fair value of each of the Corporation’s reporting units be compared to the carrying amount of the reporting unit’s net assets, including goodwill. If the fair values of the reporting units exceed their book values, no write-down of recorded goodwill is required. If the fair value of a reporting unit is less than book value, an expense may be required to write-down the related goodwill to the proper carrying value. Any impairment would be realized through a reduction of goodwill or the intangible and an offsetting charge to non-interest expense. Annually, the Corporation performs an impairment test of goodwill as of December 31 of each year. During the year, any triggering event that occurs may affect goodwill and could require an impairment assessment. Determining the fair value of a reporting unit requires the Corporation to use a degree of subjectivity. The Corporation's annual impairment test of goodwill and other intangible assets did not identify any impairment.

Accounting guidance provides the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

Other intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset, or liability. Other intangible assets have finite lives and are reviewed for impairment annually. At December 31, 2023, other intangible assets included $0.6 million for the purchase of certain assets from a wealth company and $0.5 million for the purchase of certain assets of a mortgage company.  These assets are amortized over their estimated useful lives either on a straight-line or sum-of-the-years basis over varying periods that initially did not exceed 5 years.

Bank-Owned Life Insurance ("BOLI")

Bank-Owned Life Insurance (“BOLI”)

BOLI policies are recorded at their cash surrender values. Changes in the cash surrender values are recorded as other operating income.

Other Real Estate Owned ("OREO")

Other Real Estate Owned (“OREO”)

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less the cost to sell at the date of foreclosure, with any losses charged to the ACL, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Changes in the valuation allowance, sales gains and losses, and revenue and expenses from holding and operating properties are all included in net expenses from other real estate owned.

Income Taxes

Income Taxes

First United Corporation and its subsidiaries file a consolidated federal income tax return. Income taxes are accounted for using the asset and liability method. Under the asset and liability method, the deferred tax liability or asset is determined based on the difference between the financial statement and tax bases of assets and liabilities (temporary differences) and is measured at the enacted tax rates that will be in effect when these differences reverse. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.  Deferred tax expense is determined by the change in the net liability or asset for deferred taxes adjusted for changes in any deferred tax asset valuation allowance, or reserve.  This reserve was based on the portion of the tax asset for which it is more likely than not that a tax benefit will not be realized by the Corporation.

A tax provision is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.  The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examinations for tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

State corporate income tax returns are filed annually. Federal and state returns may be selected for examination by the Internal Revenue Service and the states where we file, subject to statutes of limitations. At any given point in time, the Corporation may have several years of filed tax returns that may be selected for examination or review by taxing authorities.

Interest and penalties on income taxes are recognized as a component of income tax expense.

Defined Benefit Plans

Defined Benefit Plans

The defined benefit pension plan and supplemental executive retirement plan are accounted for in accordance with ASC Topic 715, Compensation – Retirement Benefits. Under the provisions of Topic 715, the defined benefit pension plan and the supplemental executive retirement plan are recognized as liabilities in the Consolidated Statement of Financial Condition, and unrecognized net actuarial losses, prior service costs and a net transition asset are recognized as a separate component of other comprehensive loss, net of tax. Actuarial gains and losses in excess of 10 percent of the greater of plan assets or the pension benefit obligation are amortized over a blend of future service of active employees and life expectancy of inactive participants. Refer to Note 15 for a further discussion of the pension plan and supplemental executive retirement plan obligations.

Statement of Cash Flows

Statement of Cash Flows

Cash and cash equivalents are defined as cash and due from banks and interest-bearing deposits in banks in the Consolidated Statements of Cash Flows.  Cash flows are reported for customer loan and deposit transactions and interest-bearing deposits in banks.

Trust Assets and Income

Trust Assets and Income

Assets held in an agency or fiduciary capacity are not the Bank’s assets and, accordingly, are not included in the Consolidated Statements of Financial Condition. Income from the Bank’s trust department represents fees charged to customers and recognized through revenue recognition.  Refer to Note 21 for further discussion.

Business Segments

Business Segments

The Corporation operates in two segments, as defined by ASC Topic 280, Segment Reporting:  community banking and trust and investment services. The Corporation, both in its entirety and by its business segments, is managed and evaluated on an ongoing basis by First United Corporation’s Board of Directors and executive management.   Refer to Note 22 for further discussion.

Stock Repurchases

Stock Repurchases

Under the Maryland General Corporation Law, shares of capital stock that are repurchased are cancelled and treated as authorized but unissued shares. When a share of capital stock is repurchased, the payment of the repurchase price reduces stated capital by the par value of that share (currently, $0.01 for common stock), and any excess over par value reduces capital surplus. In 2023, the Corporation repurchased 82,098 shares of common stock at a weighted average price of $16.79 per share.  The Corporation did not repurchase shares of common stock during 2022.  

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Newly Adopted Pronouncements in 2023

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326):  Measurement of Credit Losses on Financial Instruments, universally referred to as CECL.  The amendments in ASU, 2016-13 among other things, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.  Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.  Many of the loss estimation techniques applied previously are still permitted, although the inputs to those techniques changed to reflect the full amount of expected credit losses.  In addition, ASU 2016-13 amends the accounting for credit losses on purchased financial assets with credit deterioration.  For periodic report filers that are smaller reporting companies, such as the Corporation, ASU 2016-13 was effective as of January 1, 2023.

As part of its process of adopting the CECL accounting method, management implemented a third party software solution and determined the appropriate loan segments, methodologies, model assumptions and qualitative components.  Our CECL model includes portfolio loan segmentation based upon similar risk characteristics and both a quantitative and qualitative component of the calculation which incorporates a forecasting component of certain economic variables.  Our implementation plan also includes the assessment and documentation of appropriate processes, policies and internal controls.  Management had a third party independent consultant review and validate our CECL model.

In addition, ASU 2016-13 amends the accounting for credit losses on certain debt securities.  The Corporation did not record any allowance for credit losses (“ACL”) on its debt securities as a result of adopting this ASU.

The ultimate impact of adopting ASU 2016-13, and at each subsequent reporting period, is highly dependent on credit quality, macroeconomic forecasts and conditions, compensation of our loan portfolio, and other management judgments.  The Corporation adopted ASU 2016-13 using the modified retrospective method.  Results beginning after January 1, 2023 are presented under ASU 2016-13, while prior period amounts continue to be reported in accordance with previously applicable GAAP.  We made the accounting policy election to not measure an ACL for accrued interest receivables for loans and securities.  Accrued interest deemed uncollectible will be written off through interest income.

The following table illustrates the day-one impact of adopting ASU 2016-13.

		January 1, 2023
(in thousands)		As Reported Under ASU 2016-13		Pre ASU 2016-13		Impact of ASU 2016-13 Adoption
Assets
Allowance for credit losses on loans
Commercial real estate	$	5,202	$	6,345	$	(1,143)
Acquisition and development		964		979		(15)
Commercial and industrial		4,179		2,845		1,334
Residentail mortgage		5,272		3,160		2,112
Consumer		1,085		877		208
Unallocated		-		430		(430)
Allowance for Credit Losses on Loans	$	16,702	$	14,636	$	2,066
Assets:
Investment securities- available for sale (at fair value)	$	125,889	$	125,889	$	-
Investment securities- held to maturity		245,659		245,659		-
Total loans held for investments, net		1,262,792		1,264,858		(2,066)
Net deferred tax asset		11,381		10,605		776
Liabilities:
Life-of-loss reserve on unfunded loan commitments	$	998	$	133	$	865
Equity:
Retained earnings	$	149,638	$	151,793	$	(2,155)

In connection with our adoption of ASU 2016-13, we made changes to our loan portfolio segments to align with the methodology of CECL.  Refer to Note 5, Loans and Related Allowance for Credit Losses, for further discussion of these portfolio segments.  The adoption of ASU 2016-13 resulted in a Day 1 adjustment of $2.9 million to our ACL, including an increase of $2.0 million to the ACL for loans and $0.9 million to the ACL for unfunded commitments.  The Corporation did not record any ACL on its available-for-sale or held-to-maturity investments upon adoption of ASC 326.  The Corporation recorded a net decrease to retained earnings of $2.2 million as of January 1, 2023 for the cumulative effect of adopting ASU 2016-13.  

In March 2022, FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326):  Troubled Debt Restructurings and Vintage Disclosures.  ASU 2022-02, which eliminates the troubled debt restructuring (“TDR”) accounting model for creditors that have adopted ASU 2016-13.  Due to the removal of the TDR accounting model, all loan modifications were evaluated to determine if they resulted in a new loan or a continuation of the existing loan.  The amendments in ASU 2022-02 also required that entities disclose current-period gross charge-offs by year of origination for loans and leases.  The amendments in ASU 2022-02 were effective January 1, 2023.  This change did not have a material effect on our consolidated financial statements.  Refer to Note 5, Loans and Related Allowance for Credit Losses for disclosures for debtors experiencing financial difficulty and for vintage disclosures related to gross charge-offs by loan segment by year of origination.

Recently issued but not yet effective Accounting Pronouncements

In March 2020, FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848):  Facilitation of Reference Rate Reform on Financial Reporting.”  The amendments in ASU 2020-04 provide optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting.  The amendments provide optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from the London Interbank Offered Rate (“LIBOR”) toward new interest rate benchmarks.  Modified contracts that meet certain scope guidance are eligible

for relief from these modification accounting requirements in GAAP.  The optional guidance generally allows for the modified contract to be accounted for as a continuation of the existing contract and does not require contract remeasurement at the modification date or reassessment of a previous accounting determination.  The amendments in  ASU 2020-04 are effective for all entities between March 12, 2020 and December 31, 2022.  In December 2022, FASB issued ASU No. 2022-06: “Reference Rate Reform (Topic 848):  Deferral of the Sunset Date of Topic 848.”  The amendments in ASU 2020-06 defer the sunset date for applying the reference rate reform relief by two years to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

The Corporation has identified all known LIBOR exposures, created a plan to address the exposures, and continues to communicate with all stakeholders to transition to alternative reference rates.   As of December 31, 2023, the Corporation has no financial instruments tied to LIBOR and does not anticipate that the transition related to ASU 2020-04 will have a significant impact on our financial statements.

In November 2023, FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280); Improvement to Reportable Segment Disclosures.”  ASU 2023-07 expands segment disclosure requirements for public entities to require disclosure of significant segment expense and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.  ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within the fiscal years beginning after December 15, 2024.  Early adoption is permitted.  ASU 2023-07 is not expected to have a significant impact on our financial statements.

In December 2023, FASB issued ASU No. 2023-09, “Income Taxes (Topic 740):  Improvements to Income Tax Disclosures.”  ASU 2023-09 requires public business entities to disclose in their rate reconciliation table additional categories of information about Federal, state, and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold.  ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by Federal, state, and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things.  ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. ASU 2023-09 is not expected to have a significant impact on our financial statements.

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2023

Summary of Significant Accounting Policies [Abstract]

Schedule of impact of adopting Topic 326

		January 1, 2023
(in thousands)		As Reported Under ASU 2016-13		Pre ASU 2016-13		Impact of ASU 2016-13 Adoption
Assets
Allowance for credit losses on loans
Commercial real estate	$	5,202	$	6,345	$	(1,143)
Acquisition and development		964		979		(15)
Commercial and industrial		4,179		2,845		1,334
Residentail mortgage		5,272		3,160		2,112
Consumer		1,085		877		208
Unallocated		-		430		(430)
Allowance for Credit Losses on Loans	$	16,702	$	14,636	$	2,066
Assets:
Investment securities- available for sale (at fair value)	$	125,889	$	125,889	$	-
Investment securities- held to maturity		245,659		245,659		-
Total loans held for investments, net		1,262,792		1,264,858		(2,066)
Net deferred tax asset		11,381		10,605		776
Liabilities:
Life-of-loss reserve on unfunded loan commitments	$	998	$	133	$	865
Equity:
Retained earnings	$	149,638	$	151,793	$	(2,155)

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Earnings Per Common Share (Tables)

12 Months Ended

Dec. 31, 2023

Earnings Per Common Share [Abstract]

Basic and Diluted Earnings Per Share

	2023					2022
			Average	Per Share				Average	Per Share
(in thousands, except for per share amount)	Income		Shares	Amount		Income		Shares	Amount
Basic Earnings Per Share:
Net income	$	15,060	6,686	$	2.25	$	25,048	6,650	$	3.77
Diluted Earnings Per Share:
Restricted stock units			15					11
Net income	$	15,060	6,701	$	2.25	$	25,048	6,661	$	3.76

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Regulatory Capital Requirements (Tables)

12 Months Ended

Dec. 31, 2023

Regulatory Capital Requirements [Abstract]

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations

	Actual			For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Provisions
(in thousands)	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2023
Total Capital (to risk-weighted assets)		207,767	14.05%		118,292	8.00%		147,865	10.00%
Tier 1 Capital (to risk-weighted assets)		189,370	12.81%		88,719	6.00%		118,292	8.00%
Common Equity Tier 1 Capital (to risk-weighted assets)		189,370	12.81%		66,540	4.50%		96,112	6.50%
Tier 1 Capital (to average assets)		189,370	9.92%		76,233	4.00%		95,291	5.00%
	Actual			For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Provisions
(in thousands)	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2022
Total Capital (to risk-weighted assets)		196,442	14.37%		109,396	8.00%		136,745	10.00%
Tier 1 Capital (to risk-weighted assets)		181,673	13.29%		82,047	6.00%		109,396	8.00%
Common Equity Tier 1 Capital (to risk-weighted assets)		181,673	13.29%		61,535	4.50%		88,884	6.50%
Tier 1 Capital (to average assets)		181,673	10.01%		72,354	4.00%		90,443	5.00%

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Investments Securities (Tables)

12 Months Ended

Dec. 31, 2023

Investments [Abstract]

Unrealized Gain (Loss) on Investments

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
December 31, 2023
Available for Sale:
U.S. government agencies	$	7,000	$	—	$	966	$	—	$	6,034
Residential mortgage-backed agencies		24,781		—		4,218		—		20,563
Commercial mortgage-backed agencies		36,258		—		7,841		—		28,417
Collateralized mortgage obligations		19,725		—		3,369		—		16,356
Obligations of states and political subdivisions		10,486		15		189		—		10,312
Corporate Bonds		1,000		—		222		—		778
Collateralized debt obligations		18,671		—		3,962		—		14,709
Total available for sale	$	117,921	$	15	$	20,767	$	—	$	97,169
(in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value		Allowance for Credit Losses
December 31, 2023
Held to Maturity:
U.S. treasuries	$	37,462	$	—	$	243	$	37,219	$	—
U.S. government agencies		68,014		—		10,985		57,029		—
Residential mortgage-backed agencies		29,588		42		2,913		26,717		—
Commercial mortgage-backed agencies		21,413		—		5,361		16,052		—
Collateralized mortgage obligations		53,261		—		9,973		43,288		—
Obligations of states and political subdivisions		4,604		177		671		4,110		45
Total held to maturity	$	214,342	$	219	$	30,146	$	184,415	$	45

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
December 31, 2022
Available for Sale:
U.S. government agencies	$	11,044	$	—	$	1,582	$	9,462
Residential mortgage-backed agencies		45,052		—		7,651		37,401
Commercial mortgage-backed agencies		37,393		—		6,661		30,732
Collateralized mortgage obligations		25,828		—		4,784		21,044
Obligations of states and political subdivisions		10,848		4		360		10,492
Corporate Bonds		1,000		—		113		887
Collateralized debt obligations		18,664		—		2,793		15,871
Total available for sale	$	149,829	$	4	$	23,944	$	125,889
(in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value
December 31, 2022
Held to Maturity:
U.S. treasuries	$	37,204	$	—	$	1,593	$	35,611
U.S. government agencies		67,734		—		13,261		54,473
Residential mortgage-backed agencies		28,624		1		3,503		25,122
Commercial mortgage-backed agencies		22,389		—		4,568		17,821
Collateralized mortgage obligations		57,085		—		10,001		47,084
Obligations of states and political subdivisions		22,623		946		600		22,969
Total held to maturity	$	235,659	$	947	$	33,526	$	203,080

Proceeds from Sales and Realized Gains and Losses

(in thousands)	2023		2022
Proceeds	$	20,249	$	1,023
Gross realized gains		—		3
Gross realized losses		4,214		—

Gross Unrealized Losses and Fair Values of Securities

	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, 2023
Available for Sale:
U.S. government agencies	$	—	$	—	—	$	6,034	$	966	2
Residential mortgage-backed agencies		—		—	—		20,563		4,218	3
Commercial mortgage-backed agencies		—		—	—		28,417		7,841	8
Collateralized mortgage obligations		—		—	—		16,356		3,369	9
Obligations of states and political subdivisions		1,445		20	2		6,668		169	3
Corporate Bonds		—		—	—		778		222	1
Collateralized debt obligations		—		—	—		14,709		3,962	9
Total available for sale	$	1,445	$	20	2	$	93,525	$	20,747	35
	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrecognized Losses		Number of Investments	Fair Value		Unrecognized Losses		Number of Investments
December 31, 2023
Held to Maturity:
U.S. treasuries	$	—	$	—	—	$	37,219	$	243	4
U.S. government agencies		—		—	—		57,029		10,985	9
Residential mortgage-backed agencies		—		—	—		22,613		2,913	35
Commercial mortgage-backed agencies		—		—	—		16,052		5,361	2
Collateralized mortgage obligations		—		—	—		43,288		9,973	8
Obligations of states and political subdivisions		—		—	—		2,205		671	1
Total held to maturity	$	—	$	—	—	$	178,406	$	30,146	59

	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrealized Losses		Number of Investments	Fair Value		Unrealized Losses		Number of Investments
December 31, 2022
Available for Sale:
U.S. government agencies	$	4,598	$	402	1	$	4,865	$	1,180	2
Residential mortgage-backed agencies		—		—	—		37,401		7,651	5
Commercial mortgage-backed agencies		4,044		455	3		26,688		6,206	6
Collateralized mortgage obligations		1,600		210	5		19,444		4,574	5
Obligations of states and political subdivisions		8,906		360	7		—		—	—
Corporate Bonds		887		113	1
Collateralized debt obligations		—		—	—		15,871		2,793	9
Total available for sale	$	20,035	$	1,540	17	$	104,269	$	22,404	27
	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrecognized Losses		Number of Investments	Fair Value		Unrecognized Losses		Number of Investments
December 31, 2022
Held to Maturity:
U.S. treasuries	$	—	$	—	—	$	35,611	$	1,593	4
U.S. government agencies		38,883		9,617	7		15,591		3,644	2
Residential mortgage-backed agencies		16,893		1,425	29		8,138		2,078	7
Commercial mortgage-backed agencies		17,821		4,568	3		—		—	—
Collateralized mortgage obligations		47,083		10,001	8		—		—	—
Obligations of states and political subdivisions		2,269		600	1		—		—	—
Total held to maturity	$	122,949	$	26,211	48	$	59,340	$	7,315	13

Amortized Cost and Fair Values Classified by Contractual Maturity Date

(in thousands)	Amortized Cost		Fair Value
Contractual Maturity
Available for sale:
Due in one year or less	$	2,670	$	2,640
Due after one year through five years		5,250		4,952
Due after five years through ten years		2,410		2,168
Due after ten years		26,827		22,073
		37,157		31,833
Residential mortgage-backed agencies		24,781		20,563
Commercial mortgage-backed agencies		36,258		28,417
Collateralized mortgage obligations		19,725		16,356
Total available for sale	$	117,921	$	97,169
Held to Maturity:
Due in one year or less	$	37,462	$	37,219
Due after one year through five years		12,500		11,706
Due after five years through ten years		40,456		34,495
Due after ten years		19,662		14,938
		110,080		98,358
Residential mortgage-backed agencies		29,588		26,717
Commercial mortgage-backed agencies		21,413		16,052
Collateralized mortgage obligations		53,261		43,288
Total held to maturity	$	214,342	$	184,415

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Loans and Related Allowance for Credit Losses (Tables)

12 Months Ended

Dec. 31, 2023

Loans And Related Allowances For Loan Losses [Abstract]

Loan Portfolio Segments

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Total
December 31, 2023
Individually evaluated for impairment	$	826	$	—	$	—	$	2,137	$	—	$	2,963
Collectively evaluated for impairment		492,877		77,060		274,604		497,734		61,429		1,403,704
Total loans	$	493,703	$	77,060	$	274,604	$	499,871	$	61,429	$	1,406,667
December 31, 2022
Individually evaluated for impairment	$	2,262	$	356	$	—	$	3,880	$	—	$	6,498
Collectively evaluated for impairment		456,569		70,240		245,396		440,531		60,260		1,272,996
Total loans	$	458,831	$	70,596	$	245,396	$	444,411	$	60,260	$	1,279,494

Changes in Dollar Amount of Loans Outstanding to Officers, Directors and their Associates

(in thousands)	2023
Balance at January 1	$	3,302
Loans or advances		481
Repayments		(937)
Balance at December 31	$	2,846

Loan Portfolio Summarized by the Past Due Status

(in thousands)	Current		30-59 Day Past Due		60-89 Days Past Due		90 Days+ Past Due		Total Past Due and still accruing		Non- Accrual		Total Loans
December 31, 2023
Commercial real estate
Non owner-occupied	$	296,343	$	—	$	—	$	—	$	—	$	227	$	296,570
All other CRE		196,123		411		—		—		411		599		197,133
Acquisition and development
1-4 family residential construction		18,224		—		—		—		—		—		18,224
All other A&D		58,723		—		—		—		—		113		58,836
Commercial and industrial		274,465		120		19		—		139		—		274,604
Residential mortgage
Residential mortgage - term		433,878		130		717		384		1,231		2,720		437,829
Residential mortgage – home equity		61,021		520		158		75		753		268		62,042
Consumer		60,576		463		277		84		824		29		61,429
Total	$	1,399,353	$	1,644	$	1,171	$	543	$	3,358	$	3,956	$	1,406,667
December 31, 2022
Commercial real estate
Non owner-occupied	$	269,971	$	—	$	—	$	—	$	—	$	87	$	270,058
All other CRE		188,715		—		—		—		—		58		188,773
Acquisition and development
1-4 family residential construction		19,637		—		—		—		—		—		19,637
All other A&D		50,813		—		—		—		—		146		50,959
Commercial and industrial		245,342		54		—		—		54		—		245,396
Residential mortgage
Residential mortgage - term		380,502		31		722		239		992		2,893		384,387
Residential mortgage – home equity		59,223		399		48		43		490		311		60,024
Consumer		59,789		363		83		25		471		—		60,260
Total	$	1,273,992	$	847	$	853	$	307	$	2,007	$	3,495	$	1,279,494

Schedule of amortized cost basis of collateral-dependent individually evaluated loans

	December 31, 2023
(in thousands)	Real Estate		Non-Accrual Loans with No Allowance
Commercial real estate	$	826	$	826
Residential mortgage		2,137		2,137
Total Loans	$	2,963	$	2,963

Allowance for Loan Losses Summarized by Loan Portfolio Segments

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Unallocated		Total
Beginning balance at January 1, 2023 prior to adoption of ASC 326	$	6,345	$	979	$	2,845	$	3,160	$	877	$	430	$	14,636
Impact of adopting ASC 326		(1,143)		(15)		1,334		2,112		208		(430)		2,066
Loan charge-offs		(87)		—		(423)		(55)		(874)		—		(1,439)
Recoveries collected		7		11		186		73		240		—		517
Credit loss (credit)/expense		(2)		(35)		(225)		1,484		478		—		1,700
ACL balance at December 31, 2023	$	5,120	$	940	$	3,717	$	6,774	$	929	$	—	$	17,480
ALL balance at January 1, 2022	$	6,032	$	2,615	$	2,460	$	3,484	$	934	$	430	$	15,955
Charge-offs		—		(20)		(134)		(46)		(921)		—		(1,121)
Recoveries		1		22		93		184		145		—		445
Loan loss expense/(credit)		312		(1,638)		426		(462)		719		—		(643)
ALL balance at December 31, 2022	$	6,345	$	979	$	2,845	$	3,160	$	877	$	430	$	14,636

Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating

															Total
											2018 and				Portfolio
(in thousands)	2023		2022		2021		2020		2019		Prior		Revolving		Loans
December 31, 2023
Commercial real estate:
Non-owner-occupied
Pass	$	23,511	$	65,878	$	30,332	$	54,270	$	40,575	$	65,134	$	1,138	$	280,838
Special Mention		—		—		—		—		—		4,331		—		4,331
Substandard		—		—		—		—		—		11,401		—		11,401
Total non-owner occupied		23,511		65,878		30,332		54,270		40,575		80,866		1,138		296,570
Current period gross charge-offs		—		—		—		—		—		87		—		87
All other CRE
Pass		30,130		27,379		27,042		20,691		22,879		60,054		4,495		192,670
Special Mention		—		—		—		644		—		—		—		644
Substandard		—		—		—		—		1,847		1,372		600		3,819
Total all other CRE		30,130		27,379		27,042		21,335		24,726		61,426		5,095		197,133
Current period gross charge-offs		—		—		—		—		—		—		—		—
Acquisition and development:
1-4 family residential construction
Pass		13,745		3,446		—		—		—		—		1,033		18,224
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total acquisition and development		13,745		3,446		—		—		—		—		1,033		18,224
Current period gross charge-offs		—		—		—		—		—		—		—		—
All other A&D
Pass		12,184		25,099		2,966		3,046		1,301		9,946		4,181		58,723
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		113		—		113
Total all other A&D		12,184		25,099		2,966		3,046		1,301		10,059		4,181		58,836
Current period gross charge-offs		—		—		—		—		—		—		—		—
Commercial and industrial:
Pass		52,004		66,559		24,387		11,753		8,872		10,052		78,992		252,619
Special Mention		558		—		—		—		—		—		—		558
Substandard		—		9,352		1,854		6,806		98		837		2,480		21,427
Total commercial and industrial		52,562		75,911		26,241		18,559		8,970		10,889		81,472		274,604
Current period gross charge-offs		100		103		35		166		—		19		—		423
Residential mortgage:
Residential mortgage - term
Pass		51,625		94,723		88,835		38,228		25,375		130,402		1,577		430,765
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		138		929		17		98		5,825		57		7,064
Total residential mortgage - term		51,625		94,861		89,764		38,245		25,473		136,227		1,634		437,829
Current period gross charge-offs		—		—		—		—		—		13		—		13
Residential mortgage - home equity
Pass		1,127		4,657		864		475		286		489		53,467		61,365
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		38		—		16		623		677
Total residential mortgage - home equity		1,127		4,657		864		513		286		505		54,090		62,042
Current period gross charge-offs		—		—		—		—		—		42		—		42
Consumer:
Pass		18,299		10,616		6,361		2,206		510		20,365		2,873		61,230
Special Mention		—		—		—		—		—		—		—		—
Substandard		14		35		113		23		6		2		6		199
Total consumer		18,313		10,651		6,474		2,229		516		20,367		2,879		61,429
Current period gross charge-offs		236		223		74		8		4		329		—		874
Total Portfolio Loans
Pass		202,625		298,357		180,787		130,669		99,798		296,442		147,756		1,356,434
Special Mention		558		—		—		644		—		4,331		—		5,533
Substandard		14		9,525		2,896		6,884		2,049		19,566		3,766		44,700
Total Portfolio Loans	$	203,197	$	307,882	$	183,683	$	138,197	$	101,847	$	320,339	$	151,522	$	1,406,667
Current YTD Period:
Current period gross charge-offs	$	336	$	326	$	109	$	174	$	4	$	490	$	—	$	1,439

															Total
											2017 and				Portfolio
(in thousands)	2022		2021		2020		2019		2018		Prior		Revolving		Loans
December 31, 2022
Commercial real estate:
Non-owner-occupied
Pass	$	67,429	$	31,710	$	48,421	$	41,221	$	19,414	$	42,069	$	1,570	$	251,834
Special Mention		—		—		—		—		—		6,289		—		6,289
Substandard		—		—		—		—		—		11,935		—		11,935
Total non-owner occupied		67,429		31,710		48,421		41,221		19,414		60,293		1,570		270,058
Current period gross charge-offs		—		—		—		—		—		—		—		—
All other CRE
Pass		24,655		26,947		22,906		27,213		8,873		67,691		4,790		183,075
Special Mention		—		1,111		—		—		—		—		—		1,111
Substandard		—		—		—		3,006		—		357		1,224		4,587
Total all other CRE		24,655		28,058		22,906		30,219		8,873		68,048		6,014		188,773
Current period gross charge-offs		—		—		—		—		—		—		—		—
Acquisition and development:
1-4 family residential construction
Pass		15,629		1,453		151		—		—		210		2,194		19,637
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total acquisition and development		15,629		1,453		151		—		—		210		2,194		19,637
Current period gross charge-offs		—		—		—		—		—		20		—		20
All other A&D
Pass		18,733		4,979		9,755		1,408		558		12,961		2,419		50,813
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		146		—		146
Total all other A&D		18,733		4,979		9,755		1,408		558		13,107		2,419		50,959
Current period gross charge-offs		—		—		—		—		—		—		—		—
Commercial and industrial:
Pass		83,608		30,451		15,982		12,707		5,013		9,528		63,668		220,957
Special Mention		—		2,555		—		—		—		338		2,134		5,027
Substandard		8,923		—		7,167		173		634		311		2,204		19,412
Total commercial and industrial		92,531		33,006		23,149		12,880		5,647		10,177		68,006		245,396
Current period gross charge-offs		—		97		34		3		—		—		—		134
Residential mortgage:
Residential mortgage - term
Pass		64,930		93,665		42,784		27,120		14,132		133,397		2,306		378,334
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		16		237		143		5,634		23		6,053
Total residential mortgage - term		64,930		93,665		42,800		27,357		14,275		139,031		2,329		384,387
Current period gross charge-offs		—		—		—		—		—		28		—		28
Residential mortgage - home equity
Pass		5,739		957		538		328		97		478		51,232		59,369
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		44		—		21		40		550		655
Total residential mortgage - home equity		5,739		957		582		328		118		518		51,782		60,024
Current period gross charge-offs		—		—		—		—		12		6		—		18
Consumer:
Pass		16,748		10,495		3,845		1,596		687		24,096		2,654		60,121
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		92		27		9		7		—		4		139
Total consumer		16,748		10,587		3,872		1,605		694		24,096		2,658		60,260
Current period gross charge-offs		36		494		18		37		11		40		—		636
Total Portfolio Loans
Pass		297,471		200,657		144,382		111,593		48,774		290,430		130,833		1,224,140
Special Mention		—		3,666		—		—		—		6,627		2,134		12,427
Substandard		8,923		92		7,254		3,425		805		18,423		4,005		42,927
Total Portfolio Loans	$	306,394	$	204,415	$	151,636	$	115,018	$	49,579	$	315,480	$	136,972	$	1,279,494
Current YTD Period:
Current period gross charge-offs	$	36	$	591	$	52	$	40	$	23	$	94	$	—	$	836

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past.

The following tables present loan balances by year of origination segregated by performing and non-performing loans for the periods presented:

															Total
											2018 and				Portfolio
(in thousands)	2023		2022		2021		2020		2019		Prior		Revolving		Loans
December 31, 2023
Commercial real estate:
Non-owner-occupied
Performing	$	23,511	$	65,878	$	30,332	$	54,270	$	40,575	$	80,639	$	1,138	$	296,343
Nonperforming		—		—		—		—		—		227		—		227
Total non-owner occupied		23,511		65,878		30,332		54,270		40,575		80,866		1,138		296,570
All other CRE
Performing		30,130		27,379		27,042		21,335		24,726		60,827		5,095		196,534
Nonperforming		—		—		—		—		—		599		—		599
Total all other CRE		30,130		27,379		27,042		21,335		24,726		61,426		5,095		197,133
Acquisition and development:
1-4 family residential construction
Performing		13,745		3,446		—		—		—		—		1,033		18,224
Nonperforming		—		—		—		—		—		—		—		—
Total acquisition and development		13,745		3,446		—		—		—		—		1,033		18,224
All other A&D
Performing		12,184		25,099		2,966		3,046		1,301		9,946		4,181		58,723
Nonperforming		—		—		—		—		—		113		—		113
Total all other A&D		12,184		25,099		2,966		3,046		1,301		10,059		4,181		58,836
Commercial and industrial:
Performing		52,562		75,911		26,241		18,559		8,970		10,889		81,472		274,604
Nonperforming		—		—		—		—		—		—		—		—
Total commercial and industrial		52,562		75,911		26,241		18,559		8,970		10,889		81,472		274,604
Residential mortgage:
Residential mortgage - term
Performing		51,625		94,722		89,629		38,245		25,375		133,526		1,603		434,725
Nonperforming		—		139		135		—		98		2,701		31		3,104
Total residential mortgage - term		51,625		94,861		89,764		38,245		25,473		136,227		1,634		437,829
Residential mortgage - home equity
Performing		1,127		4,657		864		475		286		488		53,802		61,699
Nonperforming		—		—		—		38		—		17		288		343
Total residential mortgage - home equity		1,127		4,657		864		513		286		505		54,090		62,042
Consumer:
Performing		18,304		10,616		6,405		2,229		516		20,367		2,879		61,316
Nonperforming		9		35		69		—		—		—		—		113
Total consumer		18,313		10,651		6,474		2,229		516		20,367		2,879		61,429
Total Portfolio Loans
Performing		203,188		307,708		183,479		138,159		101,749		316,682		151,203		1,402,168
Nonperforming		9		174		204		38		98		3,657		319		4,499
Total Portfolio Loans	$	203,197	$	307,882	$	183,683	$	138,197	$	101,847	$	320,339	$	151,522	$	1,406,667

															Total
											2017 and				Portfolio
(in thousands)	2022		2021		2020		2019		2018		Prior		Revolving		Loans
December 31, 2022
Commercial real estate:
Non-owner-occupied
Performing	$	67,429	$	31,710	$	48,421	$	41,221	$	19,414	$	60,206	$	1,570	$	269,971
Nonperforming		—		—		—		—		—		87		—		87
Total non-owner occupied		67,429		31,710		48,421		41,221		19,414		60,293		1,570		270,058
All other CRE
Performing		24,655		28,058		22,906		30,219		8,873		67,990		6,014		188,715
Nonperforming		—		—		—		—		—		58		—		58
Total all other CRE		24,655		28,058		22,906		30,219		8,873		68,048		6,014		188,773
Acquisition and development:
1-4 family residential construction
Performing		15,629		1,453		151		—		—		210		2,194		19,637
Nonperforming		—		—		—		—		—		—		—		—
Total acquisition and development		15,629		1,453		151		—		—		210		2,194		19,637
All other A&D
Performing		18,733		4,979		9,755		1,408		558		12,962		2,419		50,814
Nonperforming		—		—		—		—		—		145		—		145
Total all other A&D		18,733		4,979		9,755		1,408		558		13,107		2,419		50,959
Commercial and industrial:
Performing		92,531		33,006		23,149		12,880		5,647		10,177		68,006		245,396
Nonperforming		—		—		—		—		—		—		—		—
Total commercial and industrial		92,531		33,006		23,149		12,880		5,647		10,177		68,006		245,396
Residential mortgage:
Residential mortgage - term
Performing		64,930		93,665		42,800		27,120		14,198		136,228		2,313		381,254
Nonperforming		—		—		—		237		77		2,803		16		3,133
Total residential mortgage - term		64,930		93,665		42,800		27,357		14,275		139,031		2,329		384,387
Residential mortgage - home equity
Performing		5,739		957		538		328		115		478		51,515		59,670
Nonperforming		—		—		44		—		3		40		267		354
Total residential mortgage - home equity		5,739		957		582		328		118		518		51,782		60,024
Consumer:
Performing		16,748		10,581		3,872		1,605		694		24,077		2,658		60,235
Nonperforming		—		6		—		—		—		19		—		25
Total consumer		16,748		10,587		3,872		1,605		694		24,096		2,658		60,260
Total Portfolio Loans
Performing		306,394		204,409		151,592		114,781		49,499		312,328		136,689		1,275,692
Nonperforming		—		6		44		237		80		3,152		283		3,802
Total Portfolio Loans	$	306,394	$	204,415	$	151,636	$	115,018	$	49,579	$	315,480	$	136,972	$	1,279,494

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Other Real Estate Owned (Tables)

12 Months Ended

Dec. 31, 2023

Other Real Estate Owned, Net [Abstract]

Components of OREO, Net of Related Valuation Allowance

(in thousands)	2023		2022
Acquisition and development	$	4,281	$	4,670
Residential mortgage		212		63
Total OREO	$	4,493	$	4,733

Schedule of Activity in OREO Valuation Allowance

(in thousands)	2023		2022
Balance January 1	$	453	$	453
Fair value write-downs, net		23		—
Sales of OREO		(163)		—
Balance December 31	$	313	$	453

Schedule of Components of OREO Expenses, Net

(in thousands)	2023		2022
Gains on real estate, net	$	(599)	$	—
Fair value write-down		23		—
Expenses, net		491		595
Rental and other income		(4)		(5)
Total OREO (income)/expense, net	$	(89)	$	590

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Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2023

Premises and Equipment [Abstract]

Components of Premises and Equipment

(in thousands)	2023		2022
Land	$	7,745	$	7,753
Land improvements		1,384		1,548
Premises		34,922		35,972
Furniture and equipment		18,873		20,117
		62,924		65,390
Less accumulated depreciation		(31,465)		(30,442)
Total	$	31,459	$	34,948

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Leases (Tables)

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

Classification of ROU Assets and Lease Liabilities

(in thousands)	December 31, 2023		December 31, 2022
Lease Right-of Use Assets
Operating lease right-of-use assets	$	1,367	$	1,898
Lease Liabilities
Operating lease liabilities	$	1,556	$	2,373

Weighted-Average Lease Term and Discount Rate for Operating Leases

	December 31, 2023	December 31, 2022
Weighted-average remaining lease term
Operating leases	5.33 years	6.17 years
Weighted-average discount rate
Operating leases	5.16%	5.00%

Future Minimum Payments for Operating Leases

(in thousands)	Amount
2024	$	368
2025		356
2026		283
2027		285
2028		240
Thereafter		270
Total future minimum lease payments		1,802
Amounts representing interest		(246)
Present value of net future minimum lease payments	$	1,556

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Deposits (Tables)

12 Months Ended

Dec. 31, 2023

Deposits [Abstract]

Summary of Scheduled Maturities of All Time Deposits

The following is a summary of the scheduled maturities of all time deposits maturing within years ended  December 31:

(in thousands)	Time deposits- brokered		Time deposits- retail
2024	$	30,000	$	146,683
2025		—		13,990
2026		—		4,154
2027		—		491
2028		—		170
Thereafter		—		45
Total	$	30,000	$	165,533

Summary of deposit liabilities

The following table summarizes deposits as of December 31, 2023 and 2022:

(in thousands)	December 31, 2023			December 31, 2022
		Balance	Percent		Balance	Percent
Non-Interest-bearing deposits:	$	427,670	28%	$	506,613	32%
Interest-bearing deposits:
Demand		350,860	22%		327,685	21%
Money market		385,649	25%		365,192	23%
Savings deposits		191,265	12%		250,720	16%
Time deposits- retail		165,533	11%		120,523	8%
Time deposits- brokered		30,000	2%		—	0%
Total Deposits	$	1,550,977	100%	$	1,570,733	100%

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Borrowed Funds (Tables)

12 Months Ended

Dec. 31, 2023

Borrowed Funds [Abstract]

Summary of Short-term Borrowings

The following is a summary of short-term borrowings at December 31, 2023 and 2022 with original maturities of less than one year:

(in thousands)	2023		2022
Securities sold under agreements to repurchase:
Outstanding at end of year	$	45,418	$	64,565
Weighted average interest rate at year end		0.27%		0.12%
Maximum amount outstanding as of any month end	$	59,777	$	75,912
Average amount outstanding	$	50,498	$	63,182
Approximate weighted average rate during the year		0.24%		0.12%

Summary of Long-term Borrowings

(in thousands)	2023		2022
FHLB advances bearing fixed interest rates ranging from 4.53% to 4.69% at December 31, 2023	$	80,000	$	—
Junior subordinated debt	$	30,929	$	30,929
Total long-term debt	$	110,929	$	30,929

Schedule of Pledged Collateral on Line of Credit

1-4 family mortgage loans	$	144,572
Commercial loans		52,753
Multi-family loans		11,453
Home equity loans		19,160
Total available borrowing capacity		227,938
Less: borrowings and letters of credit outstanding		(82,500)
	$	145,438

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Goodwill and Other Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2023

Goodwill and Other Intangible Assets [Abstract]

Schedule of Intangible assets and Goodwill

	December 31, 2023							December 31, 2022
(in thousands)	Gross Carrying Amount			Accumulated Amortization	Net Carrying Amount		Weighted Average Remaining Life	Gross Carrying Amount			Accumulated Amortization	Net Carrying Amount		Weighted Average Remaining Life
Amortizing intangible assets:
Intangible assets associated with purchase of wealth portfolio	$	1,048	$	419	$	629	3.00 years	$	1,048	$	209	$	839	4.00 years
Intangible assets associated with acquisition of mortgage company		600		130		470	3.92 years		600		10		590	4.92 years
Total Other intangibles	$	1,648	$	549	$	1,099	3.38 years	$	1,648	$	219	$	1,429	4.38 years
Goodwill	$	11,004			$	11,004		$	11,004			$	11,004

Schedule of future amortization expense of intangible assets

(in thousands)	Amount
2024	$	330
2025		330
2026		330
2027		109
Total amortizing intangible assets	$	1,099

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Accumulated Other Comprehensive Loss (Tables)

12 Months Ended

Dec. 31, 2023

Accumulated Other Comprehensive Loss [Abstract]

Schedule of Accumulated Other Comprehensive Loss

(in thousands)	Investment securities- with credit related impairment AFS		Investment securities- all other AFS		Investment securities- HTM		Cash Flow Hedge		Pension Plan		SERP		Total
Accumulated OCL, net:
Balance - January 1, 2022	$	(949)	$	(5,749)	$	(134)	$	(319)	$	(18,108)	$	(2,055)	$	(27,314)
Other comprehensive income/(loss) before reclassifications		(614)		(10,629)		(6,120)		1,116		684		2,430		(13,133)
Amounts reclassified from accumulated   other comprehensive loss		(148)		(2)		551		—		821		199		1,421
Balance - December 31, 2022	$	(1,711)	$	(16,380)	$	(5,703)	$	797	$	(16,603)	$	574	$	(39,026)
Other comprehensive (loss)/income before reclassifications		(622)		61		—		(228)		1,605		(1,802)		(986)
Amounts reclassified from accumulated   other comprehensive loss		(149)		3,102		502		—		735		(5)		4,185
Balance - December 31, 2023	$	(2,482)	$	(13,217)	$	(5,201)	$	569	$	(14,263)	$	(1,233)	$	(35,827)

Components of Comprehensive Income

Components of Other Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the year ended December 31, 2023
Available for sale (AFS) securities with credit-related impairment
Unrealized holding losses	$	(845)	$	223	$	(622)
Less: accretable yield recognized in income		202		(53)		149
Net unrealized losses on investments with credit-related impairment		(1,047)		276		(771)
Available for sale securities – all other:
Unrealized holding gains		83		(22)		61
Less: losses recognized in income		(4,214)		1,112		(3,102)
Net unrealized gains on all other AFS securities		4,297		(1,134)		3,163
Held to maturity securities:
Unrealized holding losses on securities transferred to held to maturity		—		—		—
Less: amortization recognized in income		(682)		180		(502)
Net unrealized gains on HTM securities		682		(180)		502
Cash flow hedges:
Unrealized holding losses		(310)		82		(228)
Net unrealized losses on cash flow hedges		(310)		82		(228)
Pension Plan:
Unrealized net actuarial gain		2,180		(575)		1,605
Less: amortization of unrecognized loss		(998)		263		(735)
Net pension plan liability adjustment		3,178		(838)		2,340
SERP:
Unrealized net actuarial loss		(2,448)		646		(1,802)
Less: amortization of unrecognized loss		7		(2)		5
Net SERP liability adjustment		(2,455)		648		(1,807)
Other comprehensive income	$	4,345	$	(1,146)	$	3,199

Components of Other Comprehensive Loss (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the year ended December 31, 2022
Available for sale (AFS) securities with credit related impairment:
Unrealized holding losses	$	(835)	$	221	$	(614)
Less: accretable yield recognized in income		202		(54)		148
Net unrealized losses on investments with credit related impairment		(1,037)		275		(762)
Available for sale securities – all other:
Unrealized holding losses		(22,792)		6,043		(16,749)
Unrealized holding losses on securities transferred from available for sale to held to maturity		8,328		(2,208)		6,120
Less: gains recognized in income		3		(1)		2
Net unrealized losses on all other AFS securities		(14,467)		3,836		(10,631)
Held to maturity securities:
Unrealized holding losses on securities transferred to held to maturity		(8,328)		2,208		(6,120)
Less: gains recognized in income		91		(24)		67
Less: amortization recognized in income		(841)		223		(618)
Net unrealized losses on HTM securities		(7,578)		2,009		(5,569)
Cash flow hedges:
Unrealized holding gains		1,521		(405)		1,116
Net unrealized gains on cash flow hedges		1,521		(405)		1,116
Pension Plan:
Unrealized net actuarial gain		931		(247)		684
Less: amortization of unrecognized loss		(1,117)		296		(821)
Net pension plan liability adjustment		2,048		(543)		1,505
SERP:
Unrealized net actuarial gain		3,307		(877)		2,430
Less: amortization of unrecognized loss		(271)		72		(199)
Net SERP liability adjustment		3,578		(949)		2,629
Other comprehensive loss	$	(15,935)	$	4,223	$	(11,712)

Reclassification out of Accumulated Other Comprehensive Income

Details of Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Loss		Affected Line Item in the Statement
(in thousands)	2023		Where Net Income is Presented
Net unrealized losses on investment securities with credit related impairment:
Accretable Yield	$	202	Interest income on taxable investment securities
Taxes		(53)	Provision for income tax expense
	$	149	Net of tax
Net unrealized losses on available for sale   investment securities - all other:
Loss on sales	$	(4,214)	Net gains
Taxes		1,112	Provision for income tax expense
	$	(3,102)	Net of tax
Net unrealized gains on held to maturity   investment securities:
Amortization	$	(682)	Interest income on taxable investment securities
Taxes		180	Provision for income tax expense
	$	(502)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss	$	(998)	Other expense
Taxes		263	Provision for income tax expense
	$	(735)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized loss	$	7	Other expense
Taxes		(2)	Provision for income tax expense
	$	5	Net of tax
Total reclassifications for the period	$	(4,185)	Net of tax

Details of Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss		Affected Line Item in the Statement
(in thousands)	2022		Where Net Income is Presented
Net unrealized losses on investment securities with credit related impairment:
Accretable Yield	$	202	Interest income on taxable investment securities
Taxes		(54)	Provision for income tax expense
	$	148	Net of tax
Net unrealized gains on available for sale   investment securities - all other:
Gains on sales	$	3	Net gains
Taxes		(1)	Provision for income tax expense
	$	2	Net of tax
Net unrealized gains on held to maturity   investment securities:
Amortization	$	(841)	Interest income on taxable investment securities
Gains recognized		91	Provision for income tax expense
Taxes		199	Net of tax
	$	(551)
Net pension plan liability adjustment:			Other expense
Amortization of unrecognized loss	$	(1,117)	Other expense
Taxes		296	Net of tax
	$	(821)
Net SERP liability adjustment:			Other expense
Amortization of unrecognized loss	$	(271)	Other expense
Taxes		72	Net of tax
	$	(199)	Net of tax
Total reclassifications for the period	$	(1,421)

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2023

Income Taxes [Abstract]

Schedule of Components of Income Tax Expense

(in thousands)	2023		2022
Current Tax expense:
Federal	$	4,002	$	5,504
State		1,303		2,034
	$	5,305	$	7,538
Deferred tax (benefit)/expense:
Federal	$	(774)	$	339
State		(115)		256
	$	(889)	$	595
Income tax expense for the year	$	4,416	$	8,133

Reconciliation of Federal Income Tax Rate to Effective Income Tax Rate

	2023		2022
Federal statutory rate		21.0%		21.0%
Tax-exempt income on securities and loans		(0.8)		(0.8)
Tax-exempt BOLI income		(1.3)		(0.8)
State income tax, net of federal tax benefit		4.7		5.6
Tax credits		(0.8)		(0.4)
Other		(0.1)		(0.1)
		22.7%		24.5%

Components of Deferred Tax Assets and Liabilities

(in thousands)	2023		2022
Deferred tax assets:
Allowance for credit losses	$	4,855	$	3,880
Deferred fees		96		54
Deferred compensation		1,285		1,163
Federal and state tax loss carry forwards		2,776		2,873
Unrealized loss on investment securities		7,356		8,419
SERP		2,622		1,948
Lease liability		362		471
Low income housing		439		511
Other than temporary impairment on investment securities		464		520
Other real estate owned		83		120
Other		392		133
Total deferred tax assets		20,730		20,092
Valuation allowance		(2,776)		(2,873)
Total deferred tax assets less valuation allowance		17,954		17,219
Deferred tax liabilities:
Goodwill and other intangibles		(2,762)		(2,736)
Lease right-of-use asset		(282)		(418)
Pension		(2,958)		(2,121)
Depreciation		(403)		(921)
Derivative contract		(200)		(283)
Other		(216)		(135)
Total deferred tax liabilities		(6,821)		(6,614)
Net deferred tax assets	$	11,133	$	10,605

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Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2023

Employee Benefit Plans [Abstract]

Schedule of Net Funded Status

	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)

Components of Net Periodic Pension Plan Cost

	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%

Schedule of Target Asset Allocations

Asset Class	Normalized Target	Range
Cash	2%	0% - 20%
Fixed Income	43%	30% - 50%
Equities	55%	45% - 65%

Actual Plan Asset Allocations

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

Expected Future Benefit Payments

(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

Schedule of Amounts that Will Be Amortized from Other Comprehensive Loss

(in thousands)	Pension		Defined Benefit SERP
Net actuarial loss	$	811	$	157
	$	811	$	157

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Contractual Obligations, Commitments and Contingent Liabilities (Tables)

12 Months Ended

Dec. 31, 2023

Contractual Obligations, Commitments and Contingent Liabilities [Abstract]

Schedule of Commitments

(in thousands)	2023		2022
Residential mortgage - home equity	$	72,080	$	70,845
Residential mortgage - construction		17,684		25,499
Commercial		160,196		153,235
Consumer - personal credit lines		4,186		4,323
Standby letters of credit		11,037		14,325
Total	$	265,183	$	268,227

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Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2023

Fair Value of Financial Instruments [Abstract]

Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis

			Fair Value Measurements at
			December 31, 2023 Using
			(in Thousands)
	Assets & Liabilities Measured at		Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs		Significant Unobservable Inputs
Description	12/31/23		(Level 1)	(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	6,034		$	6,034
Residential mortgage-backed agencies	$	20,563		$	20,563
Commercial mortgage-backed agencies	$	28,417		$	28,417
Collateralized mortgage obligations	$	16,356		$	16,356
Obligations of states and political subdivisions	$	10,312		$	10,312
Corporate bonds	$	778		$	778
Collateralized debt obligations	$	14,709				$	14,709
Financial derivative	$	756		$	756
Non-recurring:
Individually evaluated loans	$	—				$	—
Equity investments	$	3,087				$	3,087
Other real estate owned	$	4,443				$	4,443
			Fair Value Measurements at
			December 31, 2022 Using
			(in Thousands)
	Assets & Liabilities Measured at		Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs		Significant Unobservable Inputs
Description	12/31/22		(Level 1)	(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. treasuries	$	9,462		$	9,462
U.S. government agencies	$	37,401		$	37,401
Residential mortgage-backed agencies	$	30,732		$	30,732
Commercial mortgage-backed agencies	$	21,044		$	21,044
Collateralized mortgage obligations	$	10,492		$	10,492
Obligations of states and political subdivisions	$	887		$	887
Collateralized debt obligations	$	15,871				$	15,871
Financial derivative	$	1,068		$	1,068
Non-recurring:
Individually evaluated loans	$	211				$	211
Equity investment	$	1,796				$	1,796
Other real estate owned	$	—				$	—

Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques

(in thousands)	Fair Value at December 31, 2023		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale - CDO	$	14,709	Discounted Cash Flow	Discount Rate	Range of low to mid 500 and low to mid 600
Non-recurring:
Equity Investments	$	3,087	Market Method	Revenue Multiples	2.8x
Other Real Estate Owned	$	4,443	Market Comparable Properties	Marketability Discount	5.0% to 15.0% (weighted avg 5.9%)

(in thousands)	Fair Value at December 31, 2022		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities –  available for sale - CDO	$	15,871	Discounted Cash Flow	Discount Rate	Range of low to mid 300 and low to high 400
Non-recurring:
Individually Evaluated Loans	$	211	Market Comparable Properties	Marketability Discount	10.0% to 15.0%
Equity Investment	$	1,796	Market Method	Revenue Multiples	2.8x
Other Real Estate Owned	$	—	Market Comparable Properties	Marketability Discount

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

Reconciliation of Fair Valued Assets Measured on a Recurring Basis

The following tables show a reconciliation of the beginning and ending balances for fair valued assets measured using Level 3 significant unobservable inputs for the years ended December 31, 2023 and 2022:

		Fair Value Measurement Using Unobservable Inputs (Level 3)
(in thousands)		Investment Securities Available for Sale
Beginning balance January 1, 2023	$	15,871
Total gains/(losses) realized/unrealized:
Included in other comprehensive income		(1,162)
Ending balance December 31, 2023	$	14,709
		Fair Value Measurement Using Unobservable Inputs (Level 3)
(in thousands)		Investment Securities Available for Sale
Beginning balance January 1, 2022	$	17,192
Total gains/(losses) realized/unrealized:
Included in other comprehensive income		(1,321)
Ending balance December 31, 2022	$	15,871

Fair Value by Balance Sheet Grouping

	December 31, 2023				Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	48,343	$	48,343	$	48,343
Interest bearing deposits in banks		1,410		1,410		1,410
Investment securities - AFS		97,169		97,169			$	82,460	$	14,709
Investment securities - HTM		214,297		184,415				182,510		1,905
Restricted bank stock		5,250		N/A
Loans, net		1,388,847		1,319,456						1,319,456
Financial derivative		778		778				778
Accrued interest receivable		7,487		7,487				828		6,659
Financial Liabilities:
Deposits – non-maturity		1,355,444		1,355,444				1,355,444
Deposits – time deposits		195,533		193,337				193,337
Short-term borrowed funds		45,418		45,418				45,418
Long-term borrowed funds		110,929		110,809				110,809
Accrued interest payable		612		612				612

	December 31, 2022				Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	72,720	$	72,720	$	72,720
Interest bearing deposits in banks		1,595		1,595		1,595
Investment securities - AFS		125,889		125,889			$	110,018	$	15,871
Investment securities - HTM		235,659		203,080				182,380		20,700
Restricted bank stock		1,027		N/A
Loans, net		1,264,684		1,177,702						1,177,702
Financial derivative		1,068		1,068				1,068
Accrued interest receivable		6,051		6,051				933		5,118
Financial Liabilities:
Deposits – non-maturity		1,450,210		1,450,210				1,450,210
Deposits – time deposits		120,523		120,083				120,083
Financial derivative		—		—				—
Short-term borrowed funds		64,565		64,565				64,565
Long-term borrowed funds		30,929		30,909				30,909
Accrued interest payable		151		151				151

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Derivative Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2023

Derivative Financial Instruments [Abstract]

Impact Of Derivative Financial Instruments

(in thousands)	Amount of (loss)/gain recognized in OCI on derivative (effective portion)		Amount of gain or (loss) reclassified from accumulated OCI into income (effective portion) (1)		Amount of gain or (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing) (2)
Interest rate contracts:
December 31, 2023	$	(228)	$	—	$	—
December 31, 2022	$	1,116	$	—	$	—

Notes:

(1) Reported as interest expense

(2) Reported as other income

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Revenue Recognition (Tables)

12 Months Ended

Dec. 31, 2023

Revenue Recognition [Abstract]

Schedule of Noninterest Income Segregated by Revenue Streams In-Scope and Out-of-Scope of Topic 606

	Year Ended
	December 31,
(in thousands)	2023		2022
Noninterest income
In-scope of Topic 606:
Service charges on deposit accounts	$	2,198	$	1,981
Other service charges		929		925
Trust department		8,282		8,244
Debit card income		4,101		3,958
Brokerage commissions		1,160		1,049
Noninterest income (in-scope of Topic 606)		16,670		16,157
Noninterest income (out-of-scope of Topic 606)		1,661		1,721
Total Noninterest Income	$	18,331	$	17,878

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Segment Reporting (Tables)

12 Months Ended

Dec. 31, 2023

Segment Reporting [Abstract]

Schedule of Segments

Information for the operating segments for the years ended December 31, 2023 and 2022 are presented in the following tables:

		December 31, 2023
			Trust and
	Community		Investment
(in thousands)	Banking		Services		Total
Interest income	$	81,156	$	—	$	81,156
Interest expense		24,286		—		24,286
Credit loss expense		1,620		—		1,620
Non-interest income		5,027		9,442		14,469
Non-interest expense		45,098		5,145		50,243
Income before income taxes and intercompany fees		15,179		4,297		19,476
Intercompany management fee income (expense)		12		(12)		—
Income before income taxes		15,191		4,285		19,476
Income tax expense		3,514		902		4,416
Net income	$	11,677	$	3,383	$	15,060
		December 31, 2022
			Trust and
	Community		Investment
(in thousands)	Banking		Services		Total
Interest income	$	62,422	$	—	$	62,422
Interest expense		4,789		—		4,789
Loan loss credit		(627)		—		(627)
Non-interest income		8,757		9,293		18,050
Non-interest expense		38,435		4,694		43,129
Income before income taxes and intercompany fees		28,582		4,599		33,181
Intercompany management fee income (expense)		12		(12)		—
Income before income taxes		28,594		4,587		33,181
Income tax expense		7,168		965		8,133
Net income	$	21,426	$	3,622	$	25,048

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Parent Company Only Financial Information (Tables)

12 Months Ended

Dec. 31, 2023

Parent Company Only Financial Information

Condensed Statement of Financial Condition

	December 31,
(in thousands)	2023		2022
Assets
Cash	$	9,739	$	11,296
Investment securities- Available for Sale (at fair value)		13,591		14,603
Investment in bank subsidiary		164,878		153,245
Investment in non-bank subsidiaries		929		929
Other assets		9,794		8,273
Total Assets	$	198,931	$	188,346
Liabilities and Shareholders' Equity
Accrued interest and other liabilities	$	4,799	$	4,425
Dividends payable		1,330		1,199
Junior subordinated debt		30,929		30,929
Shareholders' equity		161,873		151,793
Total Liabilities and Shareholders' Equity	$	198,931	$	188,346

Condensed Statement of Income

	Year Ended
	December 31,
(in thousands)	2023		2022
Income:
Dividend income from bank subsidiary	$	6,130	$	14,995
Interest income on investments		1,715		780
Other income		75		63
Total other income		1,790		843
Total Income		7,920		15,838
Expenses:
Interest expense		1,950		1,451
Other expenses		715		249
Total Expenses		2,665		1,700
Income before income taxes and equity in undistributed net income of subsidiaries		5,255		14,138
Applicable income tax benefit		213		194
Net income before equity in undistributed net income of subsidiaries		5,468		14,332
Equity in undistributed net income of subsidiaries:
Bank		9,592		10,716
Net Income	$	15,060	$	25,048

Condensed Statement of Comprehensive Income

	Year Ended
	December 31,
Components of Comprehensive Income (in thousands)	2023		2022
Net Income	$	15,060	$	25,048
Unrealized losses on AFS Securities, net of tax		(771)		(954)
Unrealized (losses)/gains on cash flow hedges, net of tax		(228)		1,116
Other comprehensive (loss)/income, net of tax		(999)		162
Comprehensive income	$	14,061	$	25,210

Condensed Cash Flow Statement

	Year Ended
	December 31,
(in thousands)	2023		2022
Operating Activities
Net Income	$	15,060	$	25,048
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of subsidiaries		(9,592)		(10,716)
Increase in other assets		(1,280)		(448)
Increase in accrued interest payable and other liabilities		273		655
Stock compensation		527		532
Net cash provided by operating activities		4,988		15,071
Financing Activities
Proceeds from issuance of common stock		293		217
Repurchase of common stock		(1,495)		—
Cash dividends on common stock		(5,343)		(4,192)
Net cash used in financing activities		(6,545)		(3,975)
Increase in cash and cash equivalents		(1,557)		11,096
Cash and cash equivalents at beginning of year		11,296		200
Cash and cash equivalents at end of year	$	9,739	$	11,296

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Summary of Significant Accounting Policies (Narrative) (Details)	12 Months Ended
	Dec. 31, 2023 USD ($) segment country $ / shares shares	Dec. 31, 2022 USD ($) $ / shares shares
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, Fee, and Loan in Process	$ 1,406,667,000	$ 1,279,494,000
Loans held for sale	443,000	0
Dividend income, operating	$ 198,457	$ 36,558
Weighted average useful life	3 years 4 months 17 days	4 years 4 months 17 days
Common stock, par or stated value per share | $ / shares	$ 0.01	$ 0.01
Number of operating segments | segment	2
Stock repurchased during period, shares | shares	82,098	0
Shares Repurchased Weighted Average Price Per Share | $ / shares	$ 16.79
Threshold commitment amount	$ 100,000
Wealth Book Business [Member]
Other intangible assets	$ 600,000
Weighted average useful life	3 years	4 years
Mortgage Company [Member]
Other intangible assets	$ 500,000
Weighted average useful life	3 years 11 months 1 day	4 years 11 months 1 day
Other Intangible Assets [Member]
Weighted average useful life	5 years
Liberty Mews Limited Partnership [Member]
Limited Liability Company (LLC) or Limited Partnership (LP), Members or Limited Partners, Ownership Interest	99.90%
MCC FUBT Fund LLC [Member]
Percentage of non voting membership interest	99.90%
Furniture and Equipment [Member]
Property, plant and equipment, useful life	20 years
Maximum [Member] | Building [Member]
Property, plant and equipment, useful life	31 years 6 months
Minimum [Member] | Building [Member]
Property, plant and equipment, useful life	10 years
Minimum [Member] | Furniture and Equipment [Member]
Property, plant and equipment, useful life	3 years
Western Maryland And Northeastern West Virginia [Member] | Loans Receivable [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, Fee, and Loan in Process	$ 77,100,000
Western Maryland And Northeastern West Virginia [Member] | Loans Receivable [Member] | Impaired [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, Fee, and Loan in Process	100,000
Western Maryland And Northeastern West Virginia [Member] | Loans Receivable [Member] | Performing Financing Receivable [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, Fee, and Loan in Process	$ 77,000,000.0
Western Maryland And Northeastern West Virginia [Member] | Loans Receivable [Member] | Geographic Concentration Risk [Member]
Concentration risk, percentage	5.00%
Western Maryland And Northeastern West Virginia [Member] | Commercial Rental Properties [Member] | Geographic Concentration Risk [Member]
Concentration risk, percentage	21.00%
MARYLAND [Member]
Number of countries in which entity operates | country	4
WEST VIRGINIA [Member]
Number of countries in which entity operates | country	4

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Summary of Significant Accounting Policies (Impact of adopting Topic 326) (Details) - USD ($) $ in Thousands	Jan. 01, 2023	Dec. 31, 2023	Dec. 31, 2022
Allowance for loan losses	$ 16,702	$ 17,480	$ 14,636
Investment securities - available for sale (at fair value)	125,889	97,169	125,889
Investment securities- held to maturity	245,659	214,342
Total loans held for investments, net	1,262,792
Deferred tax assets	11,381	11,133	10,605
Life-of-loss reserve on unfunded loan commitments	998
Retained earnings	149,638	173,900	$ 166,343
Accounting Standards Update 2016-13 [Member]
Retained earnings	(2,200)
Adjustments to ACL loans	2,900
Commercial Real Estate [Member]
Allowance for loan losses	5,202	5,120
Acquisition and Development [Member]
Allowance for loan losses	964	940
Commercial and industrial [Member]
Allowance for loan losses	4,179	3,717
Residential Mortgage [Member]
Allowance for loan losses	5,272	6,774
Consumer [Member]
Allowance for loan losses	1,085	$ 929
Unfunded Loan Commitment [Member] | Accounting Standards Update 2016-13 [Member]
Adjustments to ACL loans	900
Loans Receivable [Member] | Accounting Standards Update 2016-13 [Member]
Adjustments to ACL loans	2,000
Previously Reported [Member]
Allowance for loan losses	14,636
Investment securities - available for sale (at fair value)	125,889
Investment securities- held to maturity	245,659
Total loans held for investments, net	1,264,858
Deferred tax assets	10,605
Life-of-loss reserve on unfunded loan commitments	133
Retained earnings	151,793
Previously Reported [Member] | Commercial Real Estate [Member]
Allowance for loan losses	6,345
Previously Reported [Member] | Acquisition and Development [Member]
Allowance for loan losses	979
Previously Reported [Member] | Commercial and industrial [Member]
Allowance for loan losses	2,845
Previously Reported [Member] | Residential Mortgage [Member]
Allowance for loan losses	3,160
Previously Reported [Member] | Consumer [Member]
Allowance for loan losses	877
Previously Reported [Member] | Unallocated [Member]
Allowance for loan losses	430
Revision of Prior Period, Adjustment [Member]
Allowance for loan losses	2,066
Total loans held for investments, net	(2,066)
Deferred tax assets	776
Life-of-loss reserve on unfunded loan commitments	865
Retained earnings	(2,155)
Revision of Prior Period, Adjustment [Member] | Commercial Real Estate [Member]
Allowance for loan losses	(1,143)
Revision of Prior Period, Adjustment [Member] | Acquisition and Development [Member]
Allowance for loan losses	(15)
Revision of Prior Period, Adjustment [Member] | Commercial and industrial [Member]
Allowance for loan losses	1,334
Revision of Prior Period, Adjustment [Member] | Residential Mortgage [Member]
Allowance for loan losses	2,112
Revision of Prior Period, Adjustment [Member] | Consumer [Member]
Allowance for loan losses	208
Revision of Prior Period, Adjustment [Member] | Unallocated [Member]
Allowance for loan losses	$ (430)

XML

Earnings Per Common Share (Narrative) (Details) - shares	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Earnings Per Common Share [Abstract]
Antidilutive shares excluded from computation of earnings per share	0	0

XML

Earnings Per Common Share (Basic and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Earnings Per Common Share [Abstract]
Net Income (Loss)	$ 15,060	$ 25,048
Basic Earnings Per Share: Average Shares	6,686	6,650
Diluted Earnings Per Share: Average Shares, adjustment	15	11
Diluted Earnings Per Share: Average Shares	6,701	6,661
Basic Earnings Per Share Amount	$ 2.25	$ 3.77
Diluted Earnings Per Share Amount	$ 2.25	$ 3.76

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Regulatory Capital Requirements (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Jan. 01, 2023	Dec. 31, 2022
Percentage of Capital Stock and Surplus on Secured Basis	10.00%
Retained earnings	$ 173,900	$ 149,638	$ 166,343
Accounting Standards Update 2016-13 [Member]
Retained earnings		$ (2,200)

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Regulatory Capital Requirements (Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations) (Details) $ in Thousands	Dec. 31, 2023 USD ($)	Jan. 01, 2023 USD ($)	Dec. 31, 2022 USD ($)
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Retained earnings	$ 173,900	$ 149,638	$ 166,343
First United Bank & Trust [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Capital	$ 207,767		$ 196,442
Capital to Risk Weighted Assets	0.1405		0.1437
Capital Required for Capital Adequacy	$ 118,292		$ 109,396
Capital Required for Capital Adequacy to Risk Weighted Assets	0.0800		0.0800
Capital Required to be Well Capitalized	$ 147,865		$ 136,745
Capital Required to be Well Capitalized to Risk Weighted Assets	0.1000		0.1000
Tier 1 Risk Based Capital	$ 189,370		$ 181,673
Tier 1 Risk Based Capital to Risk Weighted Assets	0.1281		0.1329
Tier 1 Risk Based Capital Required for Capital Adequacy	$ 88,719		$ 82,047
Tier 1 Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets	0.0600		0.0600
Tier 1 Risk Based Capital Required to be Well Capitalized	$ 118,292		$ 109,396
Tier 1 Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	0.0800		0.0800
Common equity, Amount	$ 189,370		$ 181,673
Common equity, Ratio	0.1281		0.1329
Common equity, Required For Capital Adequacy Purposes, Amount	$ 66,540		$ 61,535
Common equity, Required For Capital Adequacy Purposes, Ratio	0.0450		0.0450
Common equity, Required To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 96,112		$ 88,884
Common equity, Required To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	0.0650		0.0650
Tier 1 Leverage Capital	$ 189,370		$ 181,673
Tier 1 Leverage Capital to Average Assets	0.0992		0.1001
Tier 1 Leverage Capital Required for Capital Adequacy	$ 76,233		$ 72,354
Tier 1 Leverage Capital Required for Capital Adequacy to Average Assets	0.0400		0.0400
Tier 1 Leverage Capital Required to be Well Capitalized	$ 95,291		$ 90,443
Tier 1 Leverage Capital Required to be Well Capitalized to Average Assets	0.0500		0.0500

XML

Investments Securities (Narrative) (Details) - USD ($)	Dec. 31, 2023	Dec. 31, 2022
Investments [Abstract]
Available-for-sale securities pledged as collateral	$ 50,500,000	$ 49,700,000
Held-to-maturity securities, allowance for credit losses	45,000	0
Available-for-sale securities, allowance for credit losses		0
Held to maturity securities pledged as collateral	$ 141,800,000	$ 165,900,000

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Investment Securities (Unrealized Gain (Loss) on Investments) (Details) - USD ($)	Dec. 31, 2023	Jan. 01, 2023	Dec. 31, 2022
Schedule of Investments [Line Items]
Amortized Cost	$ 117,921,000		$ 149,829,000
Gross Unrealized Gains	15,000		4,000
Gross Unrealized Losses	20,767,000		23,944,000
Allowance for Credit Losses	0
Fair Value	97,169,000	$ 125,889,000	125,889,000
Held-to-maturity securities, allowance for credit losses	45,000		0
Held-to-maturity Amortized cost	214,342,000	$ 245,659,000
Held-to-maturity Securities			235,659,000
Held-to-maturity Gross Unrealized Gains	219,000		947,000
Held-to-maturity Gross Unrealized Losses	30,146,000		33,526,000
Fair Value	184,415,000		203,080,000
US Treasury Securities [Member]
Schedule of Investments [Line Items]
Held-to-maturity Amortized cost	37,462,000
Held-to-maturity Securities			37,204,000
Held-to-maturity Gross Unrealized Losses	243,000		1,593,000
Fair Value	37,219,000		35,611,000
U.S. government agencies [Member]
Schedule of Investments [Line Items]
Amortized Cost	7,000,000		11,044,000
Gross Unrealized Losses	966,000		1,582,000
Allowance for Credit Losses	0
Fair Value	6,034,000		9,462,000
Held-to-maturity Amortized cost	68,014,000
Held-to-maturity Securities			67,734,000
Held-to-maturity Gross Unrealized Losses	10,985,000		13,261,000
Fair Value	57,029,000		54,473,000
Residential mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Amortized Cost	24,781,000		45,052,000
Gross Unrealized Losses	4,218,000		7,651,000
Allowance for Credit Losses	0
Fair Value	20,563,000		37,401,000
Held-to-maturity Amortized cost	29,588,000
Held-to-maturity Securities			28,624,000
Held-to-maturity Gross Unrealized Gains	42,000		1,000
Held-to-maturity Gross Unrealized Losses	2,913,000		3,503,000
Fair Value	26,717,000		25,122,000
Commercial mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Amortized Cost	36,258,000		37,393,000
Gross Unrealized Losses	7,841,000		6,661,000
Allowance for Credit Losses	0
Fair Value	28,417,000		30,732,000
Held-to-maturity Amortized cost	21,413,000
Held-to-maturity Securities			22,389,000
Held-to-maturity Gross Unrealized Losses	5,361,000		4,568,000
Fair Value	16,052,000		17,821,000
Collateralized mortgage obligations [Member]
Schedule of Investments [Line Items]
Amortized Cost	19,725,000		25,828,000
Gross Unrealized Losses	3,369,000		4,784,000
Allowance for Credit Losses	0
Fair Value	16,356,000		21,044,000
Held-to-maturity Amortized cost	53,261,000
Held-to-maturity Gross Unrealized Losses	9,973,000
Fair Value	43,288,000
Obligations of states and political subdivisions [Member]
Schedule of Investments [Line Items]
Amortized Cost	10,486,000		10,848,000
Gross Unrealized Gains	15,000		4,000
Gross Unrealized Losses	189,000		360,000
Allowance for Credit Losses	0
Fair Value	10,312,000		10,492,000
Held-to-maturity securities, allowance for credit losses	45,000
Held-to-maturity Amortized cost	4,604,000
Held-to-maturity Securities			22,623,000
Held-to-maturity Gross Unrealized Gains	177,000		946,000
Held-to-maturity Gross Unrealized Losses	671,000		600,000
Fair Value	4,110,000		22,969,000
Corporate Debt Securities [Member]
Schedule of Investments [Line Items]
Amortized Cost	1,000,000		1,000,000
Gross Unrealized Losses	222,000		113,000
Allowance for Credit Losses	0
Fair Value	778,000		887,000
Collateralized debt obligations [Member]
Schedule of Investments [Line Items]
Amortized Cost	18,671,000		18,664,000
Gross Unrealized Losses	3,962,000		2,793,000
Allowance for Credit Losses	0
Fair Value	$ 14,709,000		15,871,000
Held-to-maturity Securities			57,085,000
Held-to-maturity Gross Unrealized Losses			10,001,000
Fair Value			$ 47,084,000

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Investment Securities (Proceeds from Sales and Realized Gains and Losses) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Investments [Abstract]
Proceeds	$ 20,249	$ 1,023
Realized gains		$ 3
Realized losses	$ 4,214

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Investment Securities (Gross Unrealized Losses and Fair Values of Securities) (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Schedule of Investments [Line Items]
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 1,445	$ 20,035
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	$ 20	$ 1,540
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number of Investments	2	17
Available-for-Sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	$ 93,525	$ 104,269
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	$ 20,747	$ 22,404
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Investments	35	27
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value		$ 122,949
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses		26,211
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position, 12 Months or Longer, Fair Value		59,340
Held-to-Maturity Securities, Continuous Unrealized Loss Position, More than 12 Months, Unrealized Losses		$ 7,315
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number Of Investments		48
Held To Maturity Debt Securities Continuous Unrealized Loss Position 12 Months Or Longer Fair Value	$ 178,406
Held To Maturity Debt Securities Continuous Unrealized Loss Position 12 Months Or Longer Accumulated Loss	$ 30,146
Held-to-Maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Number Of Investments	59	13
US Treasury Securities [Member]
Schedule of Investments [Line Items]
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position, 12 Months or Longer, Fair Value		$ 35,611
Held-to-Maturity Securities, Continuous Unrealized Loss Position, More than 12 Months, Unrealized Losses		$ 1,593
Held To Maturity Debt Securities Continuous Unrealized Loss Position 12 Months Or Longer Fair Value	$ 37,219
Held To Maturity Debt Securities Continuous Unrealized Loss Position 12 Months Or Longer Accumulated Loss	$ 243
Held-to-Maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Number Of Investments	4	4
U.S. government agencies [Member]
Schedule of Investments [Line Items]
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value		$ 4,598
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses		$ 402
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number of Investments		1
Available-for-Sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	$ 6,034	$ 4,865
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	$ 966	$ 1,180
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Investments	2	2
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value		$ 38,883
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses		9,617
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position, 12 Months or Longer, Fair Value		15,591
Held-to-Maturity Securities, Continuous Unrealized Loss Position, More than 12 Months, Unrealized Losses		$ 3,644
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number Of Investments		7
Held To Maturity Debt Securities Continuous Unrealized Loss Position 12 Months Or Longer Fair Value	$ 57,029
Held To Maturity Debt Securities Continuous Unrealized Loss Position 12 Months Or Longer Accumulated Loss	$ 10,985
Held-to-Maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Number Of Investments	9	2
Residential mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Available-for-Sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	$ 20,563	$ 37,401
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	$ 4,218	$ 7,651
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Investments	3	5
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value		$ 16,893
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses		1,425
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position, 12 Months or Longer, Fair Value		8,138
Held-to-Maturity Securities, Continuous Unrealized Loss Position, More than 12 Months, Unrealized Losses		$ 2,078
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number Of Investments		29
Held To Maturity Debt Securities Continuous Unrealized Loss Position 12 Months Or Longer Fair Value	$ 22,613
Held To Maturity Debt Securities Continuous Unrealized Loss Position 12 Months Or Longer Accumulated Loss	$ 2,913
Held-to-Maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Number Of Investments	35	7
Commercial mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value		$ 4,044
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses		$ 455
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number of Investments		3
Available-for-Sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	$ 28,417	$ 26,688
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	$ 7,841	$ 6,206
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Investments	8	6
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value		$ 17,821
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses		$ 4,568
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number Of Investments		3
Held To Maturity Debt Securities Continuous Unrealized Loss Position 12 Months Or Longer Fair Value	$ 16,052
Held To Maturity Debt Securities Continuous Unrealized Loss Position 12 Months Or Longer Accumulated Loss	$ 5,361
Held-to-Maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Number Of Investments	2
Collateralized mortgage obligations [Member]
Schedule of Investments [Line Items]
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value		$ 1,600
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses		$ 210
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number of Investments		5
Available-for-Sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	$ 16,356	$ 19,444
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	$ 3,369	$ 4,574
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Investments	9	5
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value		$ 47,083
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses		$ 10,001
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number Of Investments		8
Held To Maturity Debt Securities Continuous Unrealized Loss Position 12 Months Or Longer Fair Value	$ 43,288
Held To Maturity Debt Securities Continuous Unrealized Loss Position 12 Months Or Longer Accumulated Loss	$ 9,973
Held-to-Maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Number Of Investments	8
Obligations of states and political subdivisions [Member]
Schedule of Investments [Line Items]
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 1,445	$ 8,906
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	$ 20	$ 360
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number of Investments	2	7
Available-for-Sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	$ 6,668
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	$ 169
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Investments	3
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value		$ 2,269
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses		$ 600
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number Of Investments		1
Held To Maturity Debt Securities Continuous Unrealized Loss Position 12 Months Or Longer Fair Value	$ 2,205
Held To Maturity Debt Securities Continuous Unrealized Loss Position 12 Months Or Longer Accumulated Loss	$ 671
Held-to-Maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Number Of Investments	1
Corporate Debt Securities [Member]
Schedule of Investments [Line Items]
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value		$ 887
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses		$ 113
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number of Investments		1
Available-for-Sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	$ 778
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	$ 222
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Investments	1
Collateralized debt obligations [Member]
Schedule of Investments [Line Items]
Available-for-Sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	$ 14,709	$ 15,871
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	$ 3,962	$ 2,793
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Investments	9	9

XML

Investment Securities (Amortized Cost and Fair Values Classified by Contractual Maturity Date) (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Jan. 01, 2023	Dec. 31, 2022
Schedule of Investments [Line Items]
Amortized Cost: Due after one year or less	$ 2,670
Amortized Cost: Due after one year through five years	5,250
Amortized Cost: Due after five years through ten years	2,410
Amortized Cost: Due after ten years	26,827
Available For Sale Debt Maturities Amortized Cost Sub Total	37,157
Fair Value: Due after one year or less	2,640
Fair Value: Due after one year through five years	4,952
Fair Value: Due after five years through ten years	2,168
Fair Value: Due after ten years	22,073
Available for sale debt maturities fair value sub total	31,833
Debt Securities, Available-for-Sale, Amortized Cost, Excluding Accrued Interest, before Allowance for Credit Loss	117,921		$ 149,829
Investment securities - available for sale (at fair value)	97,169	$ 125,889	125,889
Amortized Cost: Due one year or less, Held to maturity	37,462
Amortized Cost: Due after one year through five years, Held to maturity	12,500
Amortized Cost: Due after five years through ten years, Held to maturity	40,456
Amortized Cost: Due after ten years, Held to maturity	19,662
Amortized Cost: Total, Held to maturity	110,080
Fair Value: Due one year or less, Held to maturity	37,219
Fair Value: Due after one year through five years, Held to maturity	11,706
Fair Value: Due after five years through ten years, Held to maturity	34,495
Fair Value: Due after ten years, Held to maturity	14,938
Fair Value: Total, Held to maturity	98,358
Debt Securities, Held-to-Maturity, Excluding Accrued Interest, before Allowance for Credit Loss	214,342	$ 245,659
Held-to-maturity Securities			235,659
Held-to-maturity securities, fair value	184,415		203,080
Residential mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Debt Securities, Available-for-Sale, Amortized Cost, Excluding Accrued Interest, before Allowance for Credit Loss	24,781		45,052
Investment securities - available for sale (at fair value)	20,563		37,401
Debt Securities, Held-to-Maturity, Excluding Accrued Interest, before Allowance for Credit Loss	29,588
Held-to-maturity Securities			28,624
Held-to-maturity securities, fair value	26,717		25,122
Commercial mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Debt Securities, Available-for-Sale, Amortized Cost, Excluding Accrued Interest, before Allowance for Credit Loss	36,258		37,393
Investment securities - available for sale (at fair value)	28,417		30,732
Debt Securities, Held-to-Maturity, Excluding Accrued Interest, before Allowance for Credit Loss	21,413
Held-to-maturity Securities			22,389
Held-to-maturity securities, fair value	16,052		17,821
Collateralized mortgage obligations [Member]
Schedule of Investments [Line Items]
Debt Securities, Available-for-Sale, Amortized Cost, Excluding Accrued Interest, before Allowance for Credit Loss	19,725		25,828
Investment securities - available for sale (at fair value)	16,356		$ 21,044
Debt Securities, Held-to-Maturity, Excluding Accrued Interest, before Allowance for Credit Loss	53,261
Held-to-maturity securities, fair value	$ 43,288

XML

Loans and Related Allowance for Credit Losses (Loan Portfolio Segments) (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	$ 2,963
Individually evaluated for impairment		$ 6,498
Collectively evaluated for impairment	1,403,704
Collectively evaluated for impairment		1,272,996
Total Loans	1,406,667	1,279,494
Total Loans		1,279,494
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	826
Individually evaluated for impairment		2,262
Collectively evaluated for impairment	492,877
Collectively evaluated for impairment		456,569
Total Loans	493,703
Total Loans		458,831
Acquisition and Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment		356
Collectively evaluated for impairment	77,060
Collectively evaluated for impairment		70,240
Total Loans	77,060
Total Loans		70,596
Commercial and industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Collectively evaluated for impairment	274,604
Collectively evaluated for impairment		245,396
Total Loans	274,604	245,396
Total Loans		245,396
Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	2,137
Individually evaluated for impairment		3,880
Collectively evaluated for impairment	497,734
Collectively evaluated for impairment		440,531
Total Loans	499,871
Total Loans		444,411
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Collectively evaluated for impairment	61,429
Collectively evaluated for impairment		60,260
Total Loans	$ 61,429	60,260
Total Loans		$ 60,260

XML

Loans and Related Allowance for Credit Losses (Changes in Dollar Amount of Loans Outstanding to Officers, Directors and their Associates) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2023 USD ($)
Loans and Related Allowance for Credit Losses [Abstract]
Beginning Balance	$ 3,302
Loans or advances	481
Repayments	(937)
Ending Balance	$ 2,846

XML

Loans and Related Allowance for Credit Losses (Loan Portfolio Summarized by the Past Due Status) (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due and Accruing	$ 3,358
Total Past Due and Accruing		$ 2,007
Non-Accrual	3,956
Non-Accrual		3,495
Loans	1,406,667	1,279,494
Loans		1,279,494
Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	1,644
Loans		847
Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	1,171
Loans		853
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	543
Loans		307
Financial Asset, Not Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	1,399,353
Loans		1,273,992
Commercial real estate- non owner-occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	227
Non-Accrual		87
Loans	296,570
Loans		270,058
Commercial real estate- non owner-occupied [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	296,343
Loans		269,971
Commercial real estate- all other CRE [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due and Accruing	411
Non-Accrual	599
Non-Accrual		58
Loans	197,133
Loans		188,773
Commercial real estate- all other CRE [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	411
Commercial real estate- all other CRE [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	196,123
Loans		188,715
Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	18,224
Loans		19,637
Acquisition and development- 1-4 family residential construction [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	18,224
Loans		19,637
Acquisition and development- All other A&D [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual	113	9,755
Non-Accrual		146
Loans	58,836
Loans		50,959
Acquisition and development- All other A&D [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	58,723
Loans		50,813
Commercial and industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due and Accruing	139
Total Past Due and Accruing		54
Loans	274,604
Loans		245,396
Commercial and industrial [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	120
Loans		54
Commercial and industrial [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	19
Commercial and industrial [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	274,465
Loans		245,342
Residential mortgage- term [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due and Accruing	1,231
Total Past Due and Accruing		992
Non-Accrual	2,720
Non-Accrual		2,893
Loans	437,829
Loans		384,387
Residential mortgage- term [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	130
Loans		31
Residential mortgage- term [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	717
Loans		722
Residential mortgage- term [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	384
Loans		239
Residential mortgage- term [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	433,878
Loans		380,502
Residential mortgage- home equity [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due and Accruing	753
Total Past Due and Accruing		490
Non-Accrual	268
Non-Accrual		311
Loans	62,042
Loans		60,024
Residential mortgage- home equity [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	520
Loans		399
Residential mortgage- home equity [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	158
Loans		48
Residential mortgage- home equity [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	75
Loans		43
Residential mortgage- home equity [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	61,021
Loans		59,223
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due and Accruing	824
Total Past Due and Accruing		471
Non-Accrual	29
Loans	61,429
Loans		60,260
Consumer [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	463
Loans		363
Consumer [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	277
Loans		83
Consumer [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	84
Loans		25
Consumer [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans	$ 60,576
Loans		$ 59,789

XML

Loans and Related Allowance for Credit Losses (Collateral-dependent individually evaluated loans) (Details) $ in Thousands	Dec. 31, 2023 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Amortized cost basis of collateral-dependent individually evaluated loans	$ 2,963
Non-Accrual loans with no allowance	2,963
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Amortized cost basis of collateral-dependent individually evaluated loans	826
Non-Accrual loans with no allowance	826
Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Amortized cost basis of collateral-dependent individually evaluated loans	2,137
Non-Accrual loans with no allowance	$ 2,137

XML

Loans and Related Allowance for Credit Losses (Allowance for Loan Losses Summarized by Loan Portfolio Segments) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
ALL Beginning Balance	$ 14,636	$ 15,955
ALL Beginning Balance	14,636
Loan Charge-offs	(1,439)	(836)
Recoveries collected	517
Credit loss (credit)/expense	1,700	(643)
Charge-offs		(1,121)
Recoveries		445
Loan loss expense/(credit)		(643)
ALL Ending Balance	17,480	14,636
ALL Ending Balance		14,636
Cumulative Effect, Period of Adoption, Adjustment [Member]
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
ALL Beginning Balance	2,066
ALL Ending Balance		2,066
Commercial Real Estate [Member]
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
ALL Beginning Balance	6,345	6,032
Loan Charge-offs	(87)
Recoveries collected	7
Credit loss (credit)/expense	(2)
Recoveries		1
Loan loss expense/(credit)		312
ALL Ending Balance	5,120
ALL Ending Balance		6,345
Commercial Real Estate [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
ALL Beginning Balance	(1,143)
ALL Ending Balance		(1,143)
Acquisition and Development [Member]
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
ALL Beginning Balance	979	2,615
Recoveries collected	11
Credit loss (credit)/expense	(35)
Charge-offs		(20)
Recoveries		22
Loan loss expense/(credit)		(1,638)
ALL Ending Balance	940
ALL Ending Balance		979
Acquisition and Development [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
ALL Beginning Balance	(15)
ALL Ending Balance		(15)
Commercial and industrial [Member]
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
ALL Beginning Balance	2,845	2,460
Loan Charge-offs	(423)	(134)
Recoveries collected	186
Credit loss (credit)/expense	(225)
Charge-offs		(134)
Recoveries		93
Loan loss expense/(credit)		426
ALL Ending Balance	3,717
ALL Ending Balance		2,845
Commercial and industrial [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
ALL Beginning Balance	1,334
ALL Ending Balance		1,334
Residential Mortgage [Member]
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
ALL Beginning Balance	3,160	3,484
Loan Charge-offs	(55)
Recoveries collected	73
Credit loss (credit)/expense	1,484
Charge-offs		(46)
Recoveries		184
Loan loss expense/(credit)		(462)
ALL Ending Balance	6,774
ALL Ending Balance		3,160
Residential Mortgage [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
ALL Beginning Balance	2,112
ALL Ending Balance		2,112
Consumer [Member]
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
ALL Beginning Balance	877	934
Loan Charge-offs	(874)	(636)
Recoveries collected	240
Credit loss (credit)/expense	478
Charge-offs		(921)
Recoveries		145
Loan loss expense/(credit)		719
ALL Ending Balance	929
ALL Ending Balance		877
Consumer [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
ALL Beginning Balance	208
ALL Ending Balance		208
Unallocated [Member]
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
ALL Beginning Balance	430	430
ALL Ending Balance		430
Unallocated [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
ALL Beginning Balance	$ (430)
ALL Ending Balance		$ (430)

XML

Loans and Related Allowance for Credit Losses (Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	$ 203,197	$ 306,394
2022/2021	307,882	204,415
2021/2020	183,683	151,636
2020/2019	138,197	115,018
2019/2018	101,847	49,579
2018/2017 and Prior	320,339	315,480
Revolving	151,522	136,972
Total Loans	1,406,667	1,279,494
2023/2022	336	36
2022/2021	326	591
2021/2020	109	52
2020/2019	174	40
2019/2018	4	23
2018/2017 and Prior	490	94
Total Portfolio Loans	1,439	836
Commercial real estate- non owner-occupied [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	23,511	67,429
2022/2021	65,878	31,710
2021/2020	30,332	48,421
2020/2019	54,270	41,221
2019/2018	40,575	19,414
2018/2017 and Prior	80,866	60,293
Revolving	1,138	1,570
Total Loans	296,570	270,058
2018/2017 and Prior	87
Total Portfolio Loans	87
Commercial real estate- all other CRE [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	30,130	24,655
2022/2021	27,379	28,058
2021/2020	27,042	22,906
2020/2019	21,335	30,219
2019/2018	24,726	8,873
2018/2017 and Prior	61,426	68,048
Revolving	5,095	6,014
Total Loans	197,133	188,773
Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	13,745	15,629
2022/2021	3,446	1,453
2021/2020		151
2018/2017 and Prior		210
Revolving	1,033	2,194
Total Loans	18,224	19,637
2018/2017 and Prior		20
Total Portfolio Loans		20
Acquisition and development- All other A&D [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	12,184	18,733
2022/2021	25,099	4,979
2021/2020	2,966	9,755
2020/2019	3,046	1,408
2019/2018	1,301	558
2018/2017 and Prior	10,059	13,107
Revolving	4,181	2,419
Total Loans	58,836	50,959
Commercial and industrial [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	52,562	92,531
2022/2021	75,911	33,006
2021/2020	26,241	23,149
2020/2019	18,559	12,880
2019/2018	8,970	5,647
2018/2017 and Prior	10,889	10,177
Revolving	81,472	68,006
Total Loans	274,604	245,396
2023/2022	100
2022/2021	103	97
2021/2020	35	34
2020/2019	166	3
2018/2017 and Prior	19
Total Portfolio Loans	423	134
Residential mortgage- term [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	51,625	64,930
2022/2021	94,861	93,665
2021/2020	89,764	42,800
2020/2019	38,245	27,357
2019/2018	25,473	14,275
2018/2017 and Prior	136,227	139,031
Revolving	1,634	2,329
Total Loans	437,829	384,387
2018/2017 and Prior	13	28
Total Portfolio Loans	13	28
Residential mortgage- home equity [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	1,127	5,739
2022/2021	4,657	957
2021/2020	864	582
2020/2019	513	328
2019/2018	286	118
2018/2017 and Prior	505	518
Revolving	54,090	51,782
Total Loans	62,042	60,024
2019/2018		12
2018/2017 and Prior	42	6
Total Portfolio Loans	42	18
Consumer [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	18,313	16,748
2022/2021	10,651	10,587
2021/2020	6,474	3,872
2020/2019	2,229	1,605
2019/2018	516	694
2018/2017 and Prior	20,367	24,096
Revolving	2,879	2,658
Total Loans	61,429	60,260
2023/2022	236	36
2022/2021	223	494
2021/2020	74	18
2020/2019	8	37
2019/2018	4	11
2018/2017 and Prior	329	40
Total Portfolio Loans	874	636
Performing Financing Receivable [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	203,188	306,394
2022/2021	307,708	204,409
2021/2020	183,479	151,592
2020/2019	138,159	114,781
2019/2018	101,749	49,499
2018/2017 and Prior	316,682	312,328
Revolving	151,203	136,689
Total Loans	1,402,168	1,275,692
Performing Financing Receivable [Member] | Commercial real estate- non owner-occupied [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	23,511	67,429
2022/2021	65,878	31,710
2021/2020	30,332	48,421
2020/2019	54,270	41,221
2019/2018	40,575	19,414
2018/2017 and Prior	80,639	60,206
Revolving	1,138	1,570
Total Loans	296,343	269,971
Performing Financing Receivable [Member] | Commercial real estate- all other CRE [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	30,130	24,655
2022/2021	27,379	28,058
2021/2020	27,042	22,906
2020/2019	21,335	30,219
2019/2018	24,726	8,873
2018/2017 and Prior	60,827	67,990
Revolving	5,095	6,014
Total Loans	196,534	188,715
Performing Financing Receivable [Member] | Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	13,745	15,629
2022/2021	3,446	1,453
2021/2020		151
2018/2017 and Prior		210
Revolving	1,033	2,194
Total Loans	18,224	19,637
Performing Financing Receivable [Member] | Acquisition and development- All other A&D [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	12,184	18,733
2022/2021	25,099	4,979
2021/2020	2,966	9,755
2020/2019	3,046	1,408
2019/2018	1,301	558
2018/2017 and Prior	9,946	12,962
Revolving	4,181	2,419
Total Loans	58,723	50,814
Performing Financing Receivable [Member] | Commercial and industrial [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	52,562	92,531
2022/2021	75,911	33,006
2021/2020	26,241	23,149
2020/2019	18,559	12,880
2019/2018	8,970	5,647
2018/2017 and Prior	10,889	10,177
Revolving	81,472	68,006
Total Loans	274,604	245,396
Performing Financing Receivable [Member] | Residential mortgage- term [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	51,625	64,930
2022/2021	94,722	93,665
2021/2020	89,629	42,800
2020/2019	38,245	27,120
2019/2018	25,375	14,198
2018/2017 and Prior	133,526	136,228
Revolving	1,603	2,313
Total Loans	434,725	381,254
Performing Financing Receivable [Member] | Residential mortgage- home equity [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	1,127	5,739
2022/2021	4,657	957
2021/2020	864	538
2020/2019	475	328
2019/2018	286	115
2018/2017 and Prior	488	478
Revolving	53,802	51,515
Total Loans	61,699	59,670
Performing Financing Receivable [Member] | Consumer [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	18,304	16,748
2022/2021	10,616	10,581
2021/2020	6,405	3,872
2020/2019	2,229	1,605
2019/2018	516	694
2018/2017 and Prior	20,367	24,077
Revolving	2,879	2,658
Total Loans	61,316	60,235
Nonperforming Financing Receivable [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	9
2022/2021	174	6
2021/2020	204	44
2020/2019	38	237
2019/2018	98	80
2018/2017 and Prior	3,657	3,152
Revolving	319	283
Total Loans	4,499	3,802
Nonperforming Financing Receivable [Member] | Commercial real estate- non owner-occupied [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2018/2017 and Prior	227	87
Total Loans	227	87
Nonperforming Financing Receivable [Member] | Commercial real estate- all other CRE [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2018/2017 and Prior	599	58
Total Loans	599	58
Nonperforming Financing Receivable [Member] | Acquisition and development- All other A&D [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2018/2017 and Prior	113	145
Total Loans	113	145
Nonperforming Financing Receivable [Member] | Residential mortgage- term [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2022/2021	139
2021/2020	135
2020/2019		237
2019/2018	98	77
2018/2017 and Prior	2,701	2,803
Revolving	31	16
Total Loans	3,104	3,133
Nonperforming Financing Receivable [Member] | Residential mortgage- home equity [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2021/2020		44
2020/2019	38
2019/2018		3
2018/2017 and Prior	17	40
Revolving	288	267
Total Loans	343	354
Nonperforming Financing Receivable [Member] | Consumer [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	9
2022/2021	35	6
2021/2020	69
2018/2017 and Prior		19
Total Loans	113	25
Pass [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	202,625	297,471
2022/2021	298,357	200,657
2021/2020	180,787	144,382
2020/2019	130,669	111,593
2019/2018	99,798	48,774
2018/2017 and Prior	296,442	290,430
Revolving	147,756	130,833
Total Loans	1,356,434	1,224,140
Pass [Member] | Commercial real estate- non owner-occupied [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	23,511	67,429
2022/2021	65,878	31,710
2021/2020	30,332	48,421
2020/2019	54,270	41,221
2019/2018	40,575	19,414
2018/2017 and Prior	65,134	42,069
Revolving	1,138	1,570
Total Loans	280,838	251,834
Pass [Member] | Commercial real estate- all other CRE [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	30,130	24,655
2022/2021	27,379	26,947
2021/2020	27,042	22,906
2020/2019	20,691	27,213
2019/2018	22,879	8,873
2018/2017 and Prior	60,054	67,691
Revolving	4,495	4,790
Total Loans	192,670	183,075
Pass [Member] | Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	13,745	15,629
2022/2021	3,446	1,453
2021/2020		151
2018/2017 and Prior		210
Revolving	1,033	2,194
Total Loans	18,224	19,637
Pass [Member] | Acquisition and development- All other A&D [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	12,184	18,733
2022/2021	25,099	4,979
2021/2020	2,966	9,755
2020/2019	3,046	1,408
2019/2018	1,301	558
2018/2017 and Prior	9,946	12,961
Revolving	4,181	2,419
Total Loans	58,723	50,813
Pass [Member] | Commercial and industrial [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	52,004	83,608
2022/2021	66,559	30,451
2021/2020	24,387	15,982
2020/2019	11,753	12,707
2019/2018	8,872	5,013
2018/2017 and Prior	10,052	9,528
Revolving	78,992	63,668
Total Loans	252,619	220,957
Pass [Member] | Residential mortgage- term [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	51,625	64,930
2022/2021	94,723	93,665
2021/2020	88,835	42,784
2020/2019	38,228	27,120
2019/2018	25,375	14,132
2018/2017 and Prior	130,402	133,397
Revolving	1,577	2,306
Total Loans	430,765	378,334
Pass [Member] | Residential mortgage- home equity [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	1,127	5,739
2022/2021	4,657	957
2021/2020	864	538
2020/2019	475	328
2019/2018	286	97
2018/2017 and Prior	489	478
Revolving	53,467	51,232
Total Loans	61,365	59,369
Pass [Member] | Consumer [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	18,299	16,748
2022/2021	10,616	10,495
2021/2020	6,361	3,845
2020/2019	2,206	1,596
2019/2018	510	687
2018/2017 and Prior	20,365	24,096
Revolving	2,873	2,654
Total Loans	61,230	60,121
Special Mention [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	558
2022/2021		3,666
2020/2019	644
2018/2017 and Prior	4,331	6,627
Revolving		2,134
Total Loans	5,533	12,427
Special Mention [Member] | Commercial real estate- non owner-occupied [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2018/2017 and Prior	4,331	6,289
Total Loans	4,331	6,289
Special Mention [Member] | Commercial real estate- all other CRE [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2022/2021		1,111
2020/2019	644
Total Loans	644	1,111
Special Mention [Member] | Commercial and industrial [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	558
2022/2021		2,555
2018/2017 and Prior		338
Revolving		2,134
Total Loans	558	5,027
Substandard [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	14	8,923
2022/2021	9,525	92
2021/2020	2,896	7,254
2020/2019	6,884	3,425
2019/2018	2,049	805
2018/2017 and Prior	19,566	18,423
Revolving	3,766	4,005
Total Loans	44,700	42,927
Substandard [Member] | Commercial real estate- non owner-occupied [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2018/2017 and Prior	11,401	11,935
Total Loans	11,401	11,935
Substandard [Member] | Commercial real estate- all other CRE [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2020/2019		3,006
2019/2018	1,847
2018/2017 and Prior	1,372	357
Revolving	600	1,224
Total Loans	3,819	4,587
Substandard [Member] | Acquisition and development- All other A&D [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2018/2017 and Prior	113	146
Total Loans	113	146
Substandard [Member] | Commercial and industrial [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022		8,923
2022/2021	9,352
2021/2020	1,854	7,167
2020/2019	6,806	173
2019/2018	98	634
2018/2017 and Prior	837	311
Revolving	2,480	2,204
Total Loans	21,427	19,412
Substandard [Member] | Residential mortgage- term [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2022/2021	138
2021/2020	929	16
2020/2019	17	237
2019/2018	98	143
2018/2017 and Prior	5,825	5,634
Revolving	57	23
Total Loans	7,064	6,053
Substandard [Member] | Residential mortgage- home equity [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2021/2020		44
2020/2019	38
2019/2018		21
2018/2017 and Prior	16	40
Revolving	623	550
Total Loans	677	655
Substandard [Member] | Consumer [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023/2022	14
2022/2021	35	92
2021/2020	113	27
2020/2019	23	9
2019/2018	6	7
2018/2017 and Prior	2
Revolving	6	4
Total Loans	$ 199	$ 139

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Loans And Related Allowances For Credit Losses (Narrative) (Details) $ in Thousands	Dec. 31, 2023 USD ($) loan	Jan. 01, 2023 USD ($)	Dec. 31, 2022 USD ($)
Financing Receivable, Modifications [Line Items]
Allowance for loan losses	$ 17,480	$ 16,702	$ 14,636
Nonaccrual loans			3,495
Non-Accrual	3,956
Financing receivable excluding accrued interest subject to foreclosure			0
Threshold commitment amount	$ 100
Number of loan modifications made to borrowers facing financial difficulties | loan	0
Partial Charge Off [Member]
Financing Receivable, Modifications [Line Items]
Non-Accrual	$ 100		100
Commercial real estate- non owner-occupied [Member]
Financing Receivable, Modifications [Line Items]
Nonaccrual loans			87
Non-Accrual	227
Commercial real estate- all other CRE [Member]
Financing Receivable, Modifications [Line Items]
Nonaccrual loans			58
Non-Accrual	599
Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable excluding accrued interest subject to foreclosure	1,800
Acquisition and development- All other A&D [Member]
Financing Receivable, Modifications [Line Items]
Nonaccrual loans			146
Non-Accrual	113		9,755
Commercial and industrial [Member]
Financing Receivable, Modifications [Line Items]
Allowance for loan losses	3,717	4,179
Residential mortgage- term [Member]
Financing Receivable, Modifications [Line Items]
Nonaccrual loans			2,893
Non-Accrual	2,720
Residential mortgage- home equity [Member]
Financing Receivable, Modifications [Line Items]
Nonaccrual loans			$ 311
Non-Accrual	268
Consumer [Member]
Financing Receivable, Modifications [Line Items]
Allowance for loan losses	929	$ 1,085
Non-Accrual	$ 29

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Other Real Estate Owned (Components of OREO, Net of Related Valuation Allowance) (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Total OREO, net	$ 4,493	$ 4,733
Acquisition and Development [Member]
Total OREO, net	4,281	4,670
Residential Mortgage [Member]
Total OREO, net	$ 212	$ 63

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Other Real Estate Owned (Schedule of Activity in OREO Valuation Allowance) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Other Real Estate Owned, Net [Abstract]
Balance beginning of period	$ 453	$ 453
Fair value write-down	23
Sales of OREO	(163)
Balance at end of period	$ 313	$ 453

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Other Real Estate Owned (Schedule of Components of OREO Expenses, Net) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Other Real Estate Owned, Net [Abstract]
Gains on sale of real estate, net	$ (599)
Fair value write-down	23
Expenses, net	491	595
Rental and other income	(4)	(5)
Total OREO (income)/expense, net	$ (89)	$ 590

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Leases - (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Leases [Abstract]
Total operating lease expense	$ 600	$ 500
Accelerated operating lease expense	100
Short-term lease expense	$ 20	$ 20

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Leases - (Classification of ROU Assets and Lease Liabilities) (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Leases [Abstract]
Operating lease right-of-use assets	$ 1,367	$ 1,898
Operating lease liabilities	$ 1,556	$ 2,373

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Leases - (Weighted-Average Lease Term and Discount Rate for Operating Leases) (Details)	Dec. 31, 2023	Dec. 31, 2022
Leases [Abstract]
Weighted-average remaining lease term - Operating leases	5 years 3 months 29 days	6 years 2 months 1 day
Weighted-average discount rate - Operating leases	5.16%	5.00%

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Leases - (Future Minimum Payments for Operating Leases) (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Future minimum payments
2024	$ 368
2025	356
2026	283
2027	285
2028	240
Thereafter	270
Total future minimum lease payments	1,802
Amount representing interest	(246)
Present value of net future minimum lease payments	$ 1,556	$ 2,373

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Premises and Equipment (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Premises and Equipment [Abstract]
Depreciation expense	$ 3,799	$ 3,077

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Premises and Equipment (Components of Premises and Equipment) (Detail) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Premises and equipment	$ 62,924	$ 65,390
Less accumulated depreciation	(31,465)	(30,442)
Property, Plant and Equipment, Net, Total	31,459	34,948
Land [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment	7,745	7,753
Land Improvements [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment	1,384	1,548
Premises [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment	34,922	35,972
Furniture and Equipment [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment	$ 18,873	$ 20,117

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Deposits (Narrative) (Details) - USD ($) $ in Millions	Dec. 31, 2023	Dec. 31, 2022
Deposits [Abstract]
Time Deposits, $250,000 or More	$ 48.8	$ 37.5
Deposit Liabilities Reclassified as Loans Receivable	0.4	0.3
Related Party Deposit Liabilities	$ 17.2	$ 14.0

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Deposit (Schedule of deposit liabilities) (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Non-interest bearing deposits	$ 427,670	$ 506,613
Non-Interest bearing deposits, percentage	28.00%	32.00%
Interest bearing deposits	$ 1,123,307	$ 1,064,120
Total deposits	$ 1,550,977	$ 1,570,733
Non-Interest and Interest bearing deposits, percentage	100.00%	100.00%
Demand Deposit Liability [Member]
Interest bearing deposits	$ 350,860	$ 327,685
Interest bearing deposits, percentage	22.00%	21.00%
Money Market Liability [Member]
Interest bearing deposits	$ 385,649	$ 365,192
Interest bearing deposits, percentage	25.00%	23.00%
Savings Deposit Liability [Member]
Interest bearing deposits	$ 191,265	$ 250,720
Interest bearing deposits, percentage	12.00%	16.00%
Time Deposit Retail Liability [Member]
Interest bearing deposits	$ 165,533	$ 120,523
Interest bearing deposits, percentage	11.00%	8.00%
Time Deposit Brokered Liability [Member]
Interest bearing deposits	$ 30,000
Interest bearing deposits, percentage	2.00%	0.00%

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Deposits (Summary of Scheduled Maturities of All Time Deposits) (Details) $ in Thousands	Dec. 31, 2023 USD ($)
Time Deposit Retail Liability [Member]
2024	$ 146,683
2025	13,990
2026	4,154
2027	491
2028	170
Thereafter	45
Total	165,533
Time Deposit Brokered Liability [Member]
2024	30,000
Total	$ 30,000

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Borrowed Funds (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Repurchase agreements secured by available for sale securities	$ 50,500,000	$ 49,700,000
Loans	$ 1,406,667,000	1,279,494,000
Borrowing capacity to assets, percentage	30.00%
FHLB, available funds	$ 571,400,000	544,100,000
FHLB available credit	145,438,000
Aggregated liquidation amount	$ 66,000	67,000
Maximum Allowable Period Of Interest Deferment	20
Short-term borrowings	$ 45,418,000	64,565,000
FHLB advances	80,000,000
Bank Term Funding Program [Member]
Debt Instrument [Line Items]
Line of credit facility, available funding	69,500,000
Securities Sold under Agreements to Repurchase [Member]
Debt Instrument [Line Items]
Repurchase agreements secured by available for sale securities	61,600,000	74,600,000
Various Financial Institutions [Member]
Debt Instrument [Line Items]
Line of credit facility, available funding	140,000,000.0
Outstanding borrowings	0	$ 0
Federal Reserve Bank [Member]
Debt Instrument [Line Items]
Line of credit facility, available funding	12,200,000
First United Statutory Trust I And II [Member]
Debt Instrument [Line Items]
Aggregated liquidation amount	$ 900,000
Debenture issue date	March 2004
Trust preferred securities	$ 30,000,000.0
First United Statutory Trust I [Member] | Junior Subordinated Debt [Member]
Debt Instrument [Line Items]
Variable interest rate	three-month Secured Overnight Financing Rate (“SOFR”) plus 275 basis points
Reporting date interest rate	8.39%
Debenture issued to unconsolidated subsidiary	$ 20,600,000
Earliest availability for redemption	5 years
Maturity date	2034
First United Statutory Trust II [Member] | Junior Subordinated Debt [Member]
Debt Instrument [Line Items]
Variable interest rate	three-month SOFR plus 275 basis points
Reporting date interest rate	8.39%
Debenture issued to unconsolidated subsidiary	$ 10,300,000
Earliest availability for redemption	5 years
Maturity date	2034

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Borrowed Funds (Schedule of borrowings) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
FHLB advances	$ 80,000
Junior subordinated debt, bearing variable interest rates	$ 30,929	$ 30,929
Maximum [Member]
FHLB advances, rates	4.69%
Minimum [Member]
FHLB advances, rates	4.53%
Securities Sold under Agreements to Repurchase [Member]
Outstanding at end of year	$ 45,418	$ 64,565
Weighted average interest rate at end of period	0.27%	0.12%
Maximum amount outstanding as of any month end	$ 59,777	$ 75,912
Average amount outstanding	$ 50,498	$ 63,182
Approximate weighted average rate during the year	0.24%	0.12%

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Borrowed Funds (Summary of Long-term Borrowings) (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Junior subordinated debt, bearing variable interest rates	$ 30,929	$ 30,929
Total long-term debt	$ 110,929	$ 30,929

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Borrowed Funds (Schedule of Pledged Collateral on Line of Credit) (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Federal Home Loan Bank, Advances, General Debt Obligations, Aggregate Amount of Available	$ 227,938
Advance from Federal Home Loan Bank	(82,500)
FHLB available credit	145,438
Financing receivables, pledge as collateral	1,406,667	$ 1,279,494
1-4 family mortgage loans [Member]
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged	144,572
Commercial Real Estate [Member]
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged	52,753
Multi-family Loans [Member]
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged	11,453
Residential mortgage- home equity [Member]
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged	19,160
Financing receivables, pledge as collateral	$ 62,042

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Goodwill and Other Intangible Assets - Gross Carrying Amount (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Acquired Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 1,648	$ 1,648
Accumulated Amortization	549	219
Net Carrying Amount	1,099	1,429
Goodwill	$ 11,004	$ 11,004
Weighted average useful life	3 years 4 months 17 days	4 years 4 months 17 days
Wealth Book Business [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 1,048	$ 1,048
Accumulated Amortization	419	209
Net Carrying Amount	$ 629	$ 839
Weighted average useful life	3 years	4 years
Mortgage Company [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 600	$ 600
Accumulated Amortization	130	10
Net Carrying Amount	$ 470	$ 590
Weighted average useful life	3 years 11 months 1 day	4 years 11 months 1 day

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Goodwill and Other Intangible Assets - Estimated Amortization Expense (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Estimated amortization expense
2024	$ 330
2025	330
2026	330
2027	109
Net Carrying Amount	$ 1,099	$ 1,429

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Accumulated Other Comprehensive Loss (Schedule of Accumulated Other Comprehensive Loss) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Balance	$ 151,793	$ 141,900
Balance	161,873	151,793
Investment securities- with OTTI [Member]
Balance	(1,711)	(949)
Other comprehensive income/(loss) before reclassifications	(622)	(614)
Amounts reclassified from accumulated other comprehensive loss	(149)	(148)
Balance	(2,482)	(1,711)
Investment securities- all other [Member]
Other comprehensive income/(loss) before reclassifications	61	(16,749)
Investment securities- all other - excluding transfers [Member]
Balance	(16,380)	(5,749)
Other comprehensive income/(loss) before reclassifications	61	(10,629)
Amounts reclassified from accumulated other comprehensive loss	3,102	(2)
Balance	(13,217)	(16,380)
Investment Securities HTM [Member]
Balance	(5,703)	(134)
Other comprehensive income/(loss) before reclassifications		(6,120)
Amounts reclassified from accumulated other comprehensive loss	502	551
Balance	(5,201)	(5,703)
Accumulated Gain (Loss), Net, Cash Flow Hedge, Parent [Member]
Balance	797	(319)
Other comprehensive income/(loss) before reclassifications	(228)	1,116
Balance	569	797
Adjustment [Member] | Pension [Member]
Balance	(16,603)	(18,108)
Other comprehensive income/(loss) before reclassifications	1,605	684
Amounts reclassified from accumulated other comprehensive loss	735	821
Balance	(14,263)	(16,603)
Adjustment [Member] | SERP [Member]
Balance	574	(2,055)
Other comprehensive income/(loss) before reclassifications	(1,802)	2,430
Amounts reclassified from accumulated other comprehensive loss	(5)	199
Balance	(1,233)	574
Accumulated Other Comprehensive Loss [Member]
Balance	(39,026)	(27,314)
Other comprehensive income/(loss) before reclassifications	(986)	(13,133)
Amounts reclassified from accumulated other comprehensive loss	4,185	1,421
Balance	$ (35,827)	$ (39,026)

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Accumulated Other Comprehensive Loss (Components of Comprehensive Income) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Net unrealized gains (losses), before tax	$ 4,345	$ (15,935)
Income tax (credit)/expense related to other comprehensive income	(1,146)	4,223
Other comprehensive income/(loss), net of tax	3,199	(11,712)
Accumulated Other Comprehensive Loss [Member]
Unrealized net gains (losses), net of tax	(986)	(13,133)
Recognized gains (losses), net of tax	(4,185)	(1,421)
Other comprehensive income/(loss), net of tax	3,199	(11,712)
Investment securities- with OTTI [Member]
Unrealized holding (losses)/gains on investments	(845)	(835)
Recognized gains (losses), before tax	202	202
Net unrealized gains (losses), before tax	(1,047)	(1,037)
Unrealized tax (expense) benefit	223	221
Income tax (credit)/expense related to other comprehensive income	276	275
Unrealized net gains (losses), net of tax	(622)	(614)
Recognized gains (losses), net of tax	149	148
Other comprehensive income/(loss), net of tax	(771)	(762)
Investment securities- with OTTI [Member] | Accretable Yield in Income [Member]
Recognized gains (losses), before tax	202	202
Recognized tax (expense) benefit	(53)	(54)
Recognized gains (losses), net of tax	149	148
Investment securities- all other [Member]
Unrealized holding (losses)/gains on investments	83	(22,792)
Recognized gains (losses), before tax	(4,214)	3
Net unrealized gains (losses), before tax	4,297	(14,467)
Unrealized tax (expense) benefit	(22)	6,043
Income tax (credit)/expense related to other comprehensive income	(1,134)	3,836
Unrealized net gains (losses), net of tax	61	(16,749)
Other comprehensive income/(loss), net of tax	3,163	(10,631)
Investment securities- all other [Member] | Recognition of Gains (Losses) In Income [Member]
Recognized gains (losses), before tax	(4,214)	3
Recognized tax (expense) benefit	1,112	(1)
Recognized gains (losses), net of tax	(3,102)	2
Investment Securities HTM [Member]
Unrealized holding (losses)/gains on investments		(8,328)
Recognized gains (losses), before tax	(682)	(841)
Net unrealized gains (losses), before tax	682	(7,578)
Unrealized tax (expense) benefit		2,208
Income tax (credit)/expense related to other comprehensive income	(180)	2,009
Unrealized net gains (losses), net of tax		(6,120)
Recognized gains (losses), net of tax	(502)	(551)
Other comprehensive income/(loss), net of tax	502	(5,569)
Investment Securities HTM [Member] | Recognition of Gains (Losses) In Income [Member]
Recognized gains (losses), before tax		91
Recognized tax (expense) benefit		(24)
Recognized gains (losses), net of tax		67
Investment Securities HTM [Member] | Amortization of Recognized Income [Member]
Recognized gains (losses), before tax	(682)	(841)
Recognized tax (expense) benefit	180	223
Recognized gains (losses), net of tax	(502)	(618)
Investment Securities Transferred From AFS to HTM
Unrealized holding (losses)/gains on investments		8,328
Recognized tax (expense) benefit		(2,208)
Recognized gains (losses), net of tax		6,120
Accumulated Gain (Loss), Net, Cash Flow Hedge, Parent [Member]
Unrealized holding (losses)/gains on investments	(310)	1,521
Net unrealized gains (losses), before tax	(310)	1,521
Unrealized tax (expense) benefit	82	(405)
Income tax (credit)/expense related to other comprehensive income	82	(405)
Unrealized net gains (losses), net of tax	(228)	1,116
Other comprehensive income/(loss), net of tax	(228)	1,116
Adjustment [Member]
Unrealized holding (losses)/gains on investments	2,180	931
Recognized gains (losses), before tax	(998)	(1,117)
Net unrealized gains (losses), before tax	3,178	2,048
Adjustment [Member] | Pension [Member]
Unrealized holding (losses)/gains on investments	2,180	931
Net unrealized gains (losses), before tax	3,178	2,048
Unrealized tax (expense) benefit	(575)	(247)
Income tax (credit)/expense related to other comprehensive income	(838)	(543)
Unrealized net gains (losses), net of tax	1,605	684
Recognized gains (losses), net of tax	(735)	(821)
Other comprehensive income/(loss), net of tax	2,340	1,505
Adjustment [Member] | SERP [Member]
Unrealized holding (losses)/gains on investments	(2,448)	3,307
Recognized gains (losses), before tax		3,578
Net unrealized gains (losses), before tax	(2,455)
Unrealized tax (expense) benefit	646	(877)
Recognized tax (expense) benefit		(949)
Income tax (credit)/expense related to other comprehensive income	648
Unrealized net gains (losses), net of tax	(1,802)	2,430
Recognized gains (losses), net of tax	5	(199)
Other comprehensive income/(loss), net of tax	(1,807)	2,629
Adjustment [Member] | Amortization of Unrecognized Loss [Member] | Pension [Member]
Recognized gains (losses), before tax	(998)	(1,117)
Recognized tax (expense) benefit	263	296
Recognized gains (losses), net of tax	(735)	(821)
Adjustment [Member] | Amortization of Unrecognized Loss [Member] | SERP [Member]
Recognized gains (losses), before tax	7	(271)
Recognized tax (expense) benefit	(2)	72
Recognized gains (losses), net of tax	$ 5	$ (199)

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Accumulated Other Comprehensive Loss (Reclassification out of Accumulated Other Comprehensive Income) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest income on taxable investment securities	$ 7,173	$ 6,252
Provision for income tax expense	(4,416)	(8,133)
Net income	15,060	25,048
Reclassification out of Accumulated Other Comprehensive Loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net income	(4,185)	(1,421)
OTTI | Reclassification out of Accumulated Other Comprehensive Loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Provision for income tax expense	(53)	(54)
Net income	149	148
OTTI | Reclassification out of Accumulated Other Comprehensive Loss [Member] | Accretable Yield in Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest income on taxable investment securities	202	202
Investment securities- all other [Member] | Reclassification out of Accumulated Other Comprehensive Loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Provision for income tax expense	1,112	(1)
Net income	(3,102)	2
Investment securities- all other [Member] | Reclassification out of Accumulated Other Comprehensive Loss [Member] | Recognition of Gains (Losses) In Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net gains	(4,214)	3
Investment Securities HTM [Member] | Reclassification out of Accumulated Other Comprehensive Loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Provision for income tax expense	180	199
Net income	(502)	(551)
Investment Securities HTM [Member] | Reclassification out of Accumulated Other Comprehensive Loss [Member] | Recognition of Gains (Losses) In Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Provision for income tax expense		91
Investment Securities HTM [Member] | Reclassification out of Accumulated Other Comprehensive Loss [Member] | Amortization of Unrecognized Loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest income on taxable investment securities	(682)	(841)
Adjustment [Member] | Reclassification out of Accumulated Other Comprehensive Loss [Member] | Pension [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Provision for income tax expense	263	296
Net income	(735)	(821)
Adjustment [Member] | Reclassification out of Accumulated Other Comprehensive Loss [Member] | SERP [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Provision for income tax expense	(2)	72
Net income	5	(199)
Adjustment [Member] | Reclassification out of Accumulated Other Comprehensive Loss [Member] | Amortization of Unrecognized Loss [Member] | Pension [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Other expense	(998)	(1,117)
Adjustment [Member] | Reclassification out of Accumulated Other Comprehensive Loss [Member] | Amortization of Unrecognized Loss [Member] | SERP [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Other expense	$ 7	$ (271)

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Income Taxes (Narrative) (Details) - USD ($)	Dec. 31, 2023	Dec. 31, 2022
Income tax examination, penalties and interest accrued	$ 0	$ 0
MARYLAND [Member]
Operating loss carryforwards	39,100,000
Deferred tax assets, operating loss carryforwards, state and local	2,800,000
Operating loss carryforward, valuation allowance	$ 2,800,000	$ 2,900,000

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Income Taxes (Schedule of Components of Income Tax Expense) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Income Taxes [Abstract]
Current Tax Expense: Federal	$ 4,002	$ 5,504
Current Tax Expense: State	1,303	2,034
Current Income Tax Expense	5,305	7,538
Deferred Tax Expense: Federal	(774)	339
Deferred Tax Expense: State	(115)	256
Deferred Income Tax Expense	(889)	595
Income Tax Expense (Benefit), Total	$ 4,416	$ 8,133

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Income Taxes (Reconciliation of Federal Income Tax Rate to Effective Income Tax Rate) (Details)	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Income Taxes [Abstract]
Federal statutory rate	21.00%	21.00%
Tax-exempt income on securities and loans	(0.80%)	(0.80%)
Tax-exempt BOLI income	(1.30%)	(0.80%)
State income tax, net of federal tax benefit	4.70%	5.60%
Tax credits	(0.80%)	(0.40%)
Other	(0.10%)	(0.10%)
Effective Income Tax Rate Reconciliation, Percent, Total	22.70%	24.50%

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Income Taxes (Components of Deferred Tax Assets and Liabilities) (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Income Taxes [Abstract]
Deferred tax assets, allowance for loan losses	$ 4,855	$ 3,880
Deferred tax assets, deferred fees	96	54
Deferred tax assets, deferred compensation	1,285	1,163
Deferred tax assets, federal and state tax loss carry forwards	2,776	2,873
Deferred tax assets, unrealized loss on investment securities	7,356	8,419
Deferred tax assets, SERP	2,622	1,948
Deferred tax assets, lease liability	362	471
Deferred tax assets, low income housing tax credit	439	511
Deferred tax assets, other than temporary impairment on investment securities	464	520
Deferred tax assets, other real estate owned	83	120
Deferred tax assets, other	392	133
Total deferred tax assets	20,730	20,092
Deferred tax assets, valuation allowance	(2,776)	(2,873)
Total deferred tax assets less valuation allowance	17,954	17,219
Deferred tax liabilities, goodwill	(2,762)	(2,736)
Deferred tax liabilities, lease right-of-use asset	(282)	(418)
Pension	(2,958)	(2,121)
Deferred tax liabilities, depreciation	(403)	(921)
Derivative contract	(200)	(283)
Deferred tax liabilities, other	(216)	(135)
Total deferred tax liabilities	(6,821)	(6,614)
Net deferred tax assets	$ 11,133	$ 10,605

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Equity Compensation Plans (Details) - USD ($)										1 Months Ended							12 Months Ended
	May 05, 2023	Mar. 26, 2023	Mar. 09, 2023	Mar. 08, 2023	May 05, 2022	Mar. 28, 2022	Mar. 09, 2022	Mar. 26, 2021	Mar. 26, 2020	Oct. 31, 2023	May 31, 2023	Mar. 31, 2023	Jan. 31, 2023	May 31, 2022	Mar. 31, 2022	May 31, 2021	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Director [Member]
Amount payable to non-employee directors																	$ 15,000,000
Fully-vested shares of common stock issued																	1,000
Employees [Member]
Stock compensation expense																	$ 33,279	$ 79,464
2018 Equity Plan | Maximum [Member]
Maximum issuance of common stock options																	325,000
2018 Equity Plan | Director [Member]
Fully-vested shares of common stock issued										852	16,931		333	14,940
Fully vested shares of common stock issued, per share value										$ 16.26	$ 13.23		$ 19.36	$ 18.92
Stock compensation expense																	$ 255,937,000	$ 266,920,000
2019 Long-Term Incentive Plan
Shares-based compensation shares of common stock issued							14,688
2020 Performance Plan
Shares-based compensation shares of common stock issued				15,216
Restricted Stock Units (RSUs) | Officers [Member] | Share-based Payment Arrangement, Tranche One
Share-based compensation performance based award, percent																	50.00%
Restricted Stock Units (RSUs) | Officers [Member] | Share-based Payment Arrangement, Tranche Two
Share-based compensation performance based award, percent																	150.00%
Restricted Stock Units (RSUs) | Long-Term Incentive Plan [Member]
Shares of common stock grant date fair market value												$ 18.25			$ 21.88	$ 17.93		$ 12.54
Restricted Stock Units (RSUs) | Long-Term Incentive Plan [Member] | Year 2021 [Member]
Unrecognized compensation expense related to unvested units																	$ 7,365,000
Restricted Stock Units (RSUs) | Long-Term Incentive Plan [Member] | Year 2022 [Member]
Stock compensation expense																	104,580,000	$ 78,436,000
Unrecognized compensation expense related to unvested units																	130,726,000
Restricted Stock Units (RSUs) | Long-Term Incentive Plan [Member] | Year 2023 [Member]
Stock compensation expense																	82,755,000
Unrecognized compensation expense related to unvested units																	$ 248,264,000
Restricted Stock Units (RSUs) | Long-Term Incentive Plan [Member] | Share-based Payment Arrangement, Tranche One
Share-based compensation award vesting period									3 years
Restricted Stock Units (RSUs) | Long-Term Incentive Plan [Member] | Share-based Payment Arrangement, Tranche Two
Share-based compensation award vesting period																	3 years
Performance Vested Shares | Long-Term Incentive Plan [Member]
Share-based compensation shares of common stock granted												10,214			8,096	7,389		10,143	9,791
Time-vested Shares | Long-Term Incentive Plan [Member]
Share-based compensation shares of common stock granted	2,463		6,238		3,693	3,380		5,070				7,920			6,238	3,693		5,070
Stock compensation expense																	$ 15,896,000	$ 73,816,000
Shares-based compensation shares of common stock issued	1,230	1,692	2,079		1,230	1,688		1,690
Time-vested Shares | Long-Term Incentive Plan [Member] | Year 2021 [Member]
Stock compensation expense																	$ (51,555,000)	$ 66,285,000

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Employee Benefit Plans (Narrative) (Details)		1 Months Ended		12 Months Ended
	Jan. 31, 2022 USD ($) employee	Jan. 31, 2023 USD ($)	Jan. 31, 2021 USD ($) employee	Dec. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2024
Defined Benefit Plan Disclosure [Line Items]
Discretionary contribution as percentage of employee's base pay				15.00%
Defined benefit plan participants compensation expense				$ 1,400,000	$ 1,300,000
Scenario, Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Expected long-term return on pension portfolio assets						6.50%
Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Plan modification description				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”).
Defined Benefit Plan, Accumulated Benefit Obligation				$ 38,300,000	37,800,000
Period for average return on pension portfolio assets				25 years
Average return on pension portfolio assets				6.59%
Expected long-term return on pension portfolio assets				6.50%
Defined benefit plan, contribution by employer				$ 0	0
SERP [Member]
Defined Benefit Plan Disclosure [Line Items]
Vesting period of employer discretionary contribution			2 years	2 years
Defined Benefit Plan, Accumulated Benefit Obligation				$ 8,300,000	6,900,000
Defined benefit plan, contribution by employer				336,000	336,000
SERP [Member] | Three Participants [Member]
Defined Benefit Plan Disclosure [Line Items]
Employer discretionary contribution		$ 108,184	$ 101,257
Defined contribution plan, number of employees | employee			3
Defined benefit plan participants compensation expense				54,092	50,628
SERP [Member] | 2nd Three Participants [Member]
Defined Benefit Plan Disclosure [Line Items]
Employer discretionary contribution	$ 103,689
Defined contribution plan, number of employees | employee	3
Defined benefit plan participants compensation expense				$ 51,844	$ 51,844

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Employee Benefit Plans (Schedule of Net Funded Status) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Benefit Obligation, Beginning Balance	$ 7,194,000
Defined Benefit Plan, Benefit Obligation, Ending Balance	9,777,000	$ 7,194,000
Defined Benefit Plan, Fair Value of Plan Assets, Beginning Balance	48,185,000
Defined Benefit Plan, Fair Value of Plan Assets, Ending Balance	51,822,000	48,185,000
Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Benefit Obligation, Beginning Balance	40,184,000	54,931,000
Service Cost	25,000	57,000
Interest Cost	2,050,000	1,535,000
Change in discount rate and mortality assumptions	314,000	(11,930,000)
Actuarial loss	144,000	(736,000)
Defined Benefit Plan, Benefits Paid	(2,103,000)	(3,673,000)
Defined Benefit Plan, Benefit Obligation, Ending Balance	40,614,000	40,184,000
Defined Benefit Plan, Fair Value of Plan Assets, Beginning Balance	48,185,000	59,696,000
Defined Benefit Plan, Actual Return on Plan Assets	5,740,000	(7,838,000)
Defined Benefit Plan, Contributions by Employer	0	0
Defined Benefit Plan, Benefits Paid	(2,103,000)	(3,673,000)
Defined Benefit Plan, Fair Value of Plan Assets, Ending Balance	51,822,000	48,185,000
Defined Benefit Plan, (Unfunded)/Funded Status	11,208,000	8,001,000
SERP [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Benefit Obligation, Beginning Balance	7,194,000	10,395,000
Service Cost	102,000	165,000
Interest Cost	367,000	286,000
Change in discount rate and mortality assumptions
Actuarial loss	2,450,000	(3,316,000)
Defined Benefit Plan, Benefits Paid	(336,000)	(336,000)
Defined Benefit Plan, Benefit Obligation, Ending Balance	9,777,000	7,194,000
Defined Benefit Plan, Fair Value of Plan Assets, Beginning Balance
Defined Benefit Plan, Actual Return on Plan Assets
Defined Benefit Plan, Contributions by Employer	336,000	336,000
Defined Benefit Plan, Benefits Paid	(336,000)	(336,000)
Defined Benefit Plan, Fair Value of Plan Assets, Ending Balance
Defined Benefit Plan, (Unfunded)/Funded Status	$ (9,777,000)	$ (7,194,000)

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Employee Benefit Plans (Components of Net Periodic Pension Plan Cost) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Service Cost	$ 25	$ 57
Interest Cost	2,050	1,535
Expected return on assets	(3,062)	(3,810)
Amortization of net actuarial loss/recognized loss	998	1,117
Net pension credit included in employee benefits and other expense	$ 11	$ (1,101)
Defined Benefit Plan, Assumptions Used Calculating Benefit Obligation, Discount Rate	5.02%	5.24%
Defined Benefit Plan, Assumptions Used Calculating Net Periodic Benefit Cost, Discount Rate	5.24%	2.85%
Defined Benefit Plan, Assumptions Used Calculating Net Periodic Benefit Cost, Expected Long-term Return on Assets	6.50%	6.50%
Defined Benefit Plan, Assumptions Used Calculating Benefit Obligation, Rate of Compensation Increase	3.00%	3.00%
SERP [Member]
Defined Benefit Plan Disclosure [Line Items]
Service Cost	$ 102	$ 165
Interest Cost	367	286
Amortization of net actuarial loss/recognized loss	(7)	271
Net pension credit included in employee benefits and other expense	$ 462	$ 722
Defined Benefit Plan, Assumptions Used Calculating Benefit Obligation, Discount Rate	4.99%	5.23%
Defined Benefit Plan, Assumptions Used Calculating Benefit Obligation, Rate of Compensation Increase	3.00%	3.00%

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Employee Benefit Plans (Schedule of Target Asset Allocations) (Details)	Dec. 31, 2023
Cash and Cash Equivalents [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	2.00%
Cash and Cash Equivalents [Member] | Minimum [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	0.00%
Cash and Cash Equivalents [Member] | Maximum [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	20.00%
Fixed Income Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	43.00%
Fixed Income Securities [Member] | Minimum [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	30.00%
Fixed Income Securities [Member] | Maximum [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	50.00%
Equity Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	55.00%
Equity Securities [Member] | Minimum [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	45.00%
Equity Securities [Member] | Maximum [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	65.00%

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Employee Benefit Plans (Actual Plan Asset Allocations) (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 51,822	$ 48,185
Defined Benefit Plan, Actual Plan Asset Allocations	100.00%	100.00%
Common stock shares included in large cap equities	194,124	194,124
Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 33,231	$ 30,200
Fair Value, Inputs, Level 2 [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	18,591	17,985
Cash and Cash Equivalents [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 1,217	$ 985
Defined Benefit Plan, Actual Plan Asset Allocations	2.30%	2.00%
Cash and Cash Equivalents [Member] | Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 1,217	$ 985
Fixed Income Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 21,893	$ 23,439
Defined Benefit Plan, Actual Plan Asset Allocations	42.20%	48.70%
Fixed Income Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 3,302	$ 5,454
Fixed Income Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	18,591	17,985
U.S. Government and Agencies [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 5,554	$ 2,770
Defined Benefit Plan, Actual Plan Asset Allocations	10.70%	5.80%
U.S. Government and Agencies [Member] | Fair Value, Inputs, Level 2 [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 5,554	$ 2,770
Taxable Municipal Bonds and Notes [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 2,503	$ 4,166
Defined Benefit Plan, Actual Plan Asset Allocations	4.80%	8.60%
Taxable Municipal Bonds and Notes [Member] | Fair Value, Inputs, Level 2 [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 2,503	$ 4,166
Corporate Bonds and Notes [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 10,258	$ 10,575
Defined Benefit Plan, Actual Plan Asset Allocations	19.80%	21.90%
Corporate Bonds and Notes [Member] | Fair Value, Inputs, Level 2 [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 10,258	$ 10,575
Preferred Stock [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 276	$ 474
Defined Benefit Plan, Actual Plan Asset Allocations	0.50%	1.00%
Preferred Stock [Member] | Fair Value, Inputs, Level 2 [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 276	$ 474
Fixed Income Mutual Funds [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 3,302	$ 5,454
Defined Benefit Plan, Actual Plan Asset Allocations	6.40%	11.40%
Fixed Income Mutual Funds [Member] | Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 3,302	$ 5,454
Equity Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 28,712	$ 23,761
Defined Benefit Plan, Actual Plan Asset Allocations	55.50%	49.30%
Equity Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 28,712	$ 23,761
Large Cap [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 19,780	$ 15,743
Defined Benefit Plan, Actual Plan Asset Allocations	38.20%	32.70%
Large Cap [Member] | Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 19,780	$ 15,743
Mid Cap [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 1,500	$ 1,225
Defined Benefit Plan, Actual Plan Asset Allocations	2.90%	2.50%
Mid Cap [Member] | Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 1,500	$ 1,225
Small Cap [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 4,564	$ 3,815
Defined Benefit Plan, Actual Plan Asset Allocations	8.80%	7.90%
Small Cap [Member] | Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 4,564	$ 3,815
International [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 2,868	$ 2,978
Defined Benefit Plan, Actual Plan Asset Allocations	5.60%	6.20%
International [Member] | Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 2,868	$ 2,978

XML

Employee Benefit Plans (Expected Future Benefit Payments) (Details) $ in Thousands	Dec. 31, 2023 USD ($)
Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
2024	$ 2,217
2025	2,267
2026	2,353
2027	2,401
2028	2,524
2029-2033	13,450
SERP [Member]
Defined Benefit Plan Disclosure [Line Items]
2024	336
2025	336
2026	602
2027	655
2028	643
2029-2033	$ 3,628

XML

Employee Benefit Plans (Schedule of Amounts that Will Be Amortized from Other Comprehensive Loss) (Details) $ in Thousands	Dec. 31, 2023 USD ($)
Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined benefit plan, Net actuarial loss	$ 811
Defined benefit plan, Total	811
SERP [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined benefit plan, Net actuarial loss	157
Defined benefit plan, Total	$ 157

XML

401(k) Profit Sharing Plan (Narrative) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Defined Contribution Plan, Employer Matching Contribution, Percent of Match, First One Percent of Contributions	100.00%
Defined Contribution Plan, Employer Matching Contribution, Percent of Match, Next Five Percent of Contributions	50.00%
Defined Contribution Plan, Cost Recognized	$ 1.4	$ 1.3
Other Than SERP Hired Prior to 2010 [Member]
Defined Contribution Plan, Maximum Annual Contributions Per Employee, Percent	0.50%
Other Than SERP Hired Since Jan 1 2010 [Member]
Defined Contribution Plan, Maximum Annual Contributions Per Employee, Percent	4.00%

XML

Federal Reserve Requirements (Narrative) (Details)	Mar. 26, 2020
Federal Reserve Requirements [Abstract]
Reserve requirement ratios	0.00%

XML

Contractual Obligations, Commitments and Contingent Liabilities (Narrative) (Details)	12 Months Ended
	Dec. 31, 2023
Standby Letters of Credit [Member]
Supply Commitment [Line Items]
Letters of credit expiration period	1 year

XML

Contractual Obligations, Commitments and Contingent Liabilities (Schedule of Commitments) (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Other Commitments [Line Items]
Other Commitment	$ 265,183	$ 268,227
Residential mortgage- home equity [Member]
Other Commitments [Line Items]
Other Commitment	72,080	70,845
Residential Mortgage - Construction [Member]
Other Commitments [Line Items]
Other Commitment	17,684	25,499
Commercial Loan [Member]
Other Commitments [Line Items]
Other Commitment	160,196	153,235
Consumer Loan - Personal Credit Lines [Member]
Other Commitments [Line Items]
Other Commitment	4,186	4,323
Standby Letters of Credit [Member]
Other Commitments [Line Items]
Other Commitment	$ 11,037	$ 14,325

XML

Fair Value of Financial Instruments (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2023	Jan. 01, 2023
Fair Value of Financial Instruments [Abstract]
Credit loss expense - loans	$ (643)
Nonaccrual loans	3,495
Allowance for credit losses	(14,636)	$ (17,480)	$ (16,702)
Loans	$ 1,279,494	$ 1,406,667

XML

Fair Value of Financial Instruments (Assets And Liabilities Measured At Fair Value On A Recurring And Nonrecurring Basis) (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Jan. 01, 2023	Dec. 31, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	$ 97,169	$ 125,889	$ 125,889
Reported Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Derivative, asset	778		1,068
Individually evaluated loans	1,388,847		1,264,684
Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Derivative, asset	778		1,068
Individually evaluated loans	1,319,456		1,177,702
Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial derivative			1,068
Financial Derivative, asset	756
Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Individually evaluated loans			211
Equity Investment	3,087		1,796
Other real estate owned	4,443
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Derivative, asset	778		1,068
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial derivative			1,068
Financial Derivative, asset	756
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Individually evaluated loans	1,319,456		1,177,702
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Individually evaluated loans			211
Equity Investment	3,087		1,796
Other real estate owned	4,443
US Treasury Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities - available for sale (at fair value)			9,462
US Treasury Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities - available for sale (at fair value)			9,462
U.S. government agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	6,034		9,462
U.S. government agencies [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	6,034
Investment securities - available for sale (at fair value)			37,401
U.S. government agencies [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	6,034
Investment securities - available for sale (at fair value)			37,401
Residential mortgage-backed agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	20,563		37,401
Residential mortgage-backed agencies [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	20,563
Investment securities - available for sale (at fair value)			30,732
Residential mortgage-backed agencies [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	20,563
Investment securities - available for sale (at fair value)			30,732
Commercial mortgage-backed agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	28,417		30,732
Commercial mortgage-backed agencies [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	28,417
Investment securities - available for sale (at fair value)			21,044
Commercial mortgage-backed agencies [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	28,417
Investment securities - available for sale (at fair value)			21,044
Collateralized mortgage obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	16,356		21,044
Collateralized mortgage obligations [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	16,356
Investment securities - available for sale (at fair value)			10,492
Collateralized mortgage obligations [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	16,356
Investment securities - available for sale (at fair value)			10,492
Obligations of states and political subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	10,312		10,492
Obligations of states and political subdivisions [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	10,312
Investment securities - available for sale (at fair value)			887
Obligations of states and political subdivisions [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	10,312
Investment securities - available for sale (at fair value)			887
Corporate Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	778		887
Corporate Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	778
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	778
Collateralized debt obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	14,709		15,871
Collateralized debt obligations [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	14,709
Investment securities - available for sale (at fair value)			15,871
Collateralized debt obligations [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Securities, Available-for-Sale, Excluding Accrued Interest	$ 14,709
Investment securities - available for sale (at fair value)			$ 15,871

XML

Fair Value of Financial Instruments (Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques) (Details) - Fair Value, Inputs, Level 3 [Member] - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Fair Value, Measurements, Recurring [Member] | Investment Securities - Available for Sale [Member] | Discounted Cash Flow [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of securities	$ 14,709	$ 15,871
Fair Value, Measurements, Nonrecurring [Member] | Individually evaluated [Member] | Market Comparable Properties [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of securities		211
Fair Value, Measurements, Nonrecurring [Member] | Equity Method Investment [Member] | Measurement Input, Revenue Multiple [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of securities	$ 3,087	$ 1,796
Fair value measurements discount rate	2.80%	2.80%
Fair Value, Measurements, Nonrecurring [Member] | Other Real Estate Owned [Member] | Market Comparable Properties [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of securities	$ 4,443
Minimum [Member] | Fair Value, Measurements, Recurring [Member] | Investment Securities - Available for Sale [Member] | Discounted Cash Flow [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value measurements discount rate	500.00%	300.00%
Minimum [Member] | Fair Value, Measurements, Nonrecurring [Member] | Individually evaluated [Member] | Market Comparable Properties [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value measurements discount rate		10.00%
Minimum [Member] | Fair Value, Measurements, Nonrecurring [Member] | Other Real Estate Owned [Member] | Market Comparable Properties [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value measurements discount rate	5.00%
Maximum [Member] | Fair Value, Measurements, Recurring [Member] | Investment Securities - Available for Sale [Member] | Discounted Cash Flow [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value measurements discount rate	600.00%	400.00%
Maximum [Member] | Fair Value, Measurements, Nonrecurring [Member] | Individually evaluated [Member] | Market Comparable Properties [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value measurements discount rate		15.00%
Maximum [Member] | Fair Value, Measurements, Nonrecurring [Member] | Other Real Estate Owned [Member] | Market Comparable Properties [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value measurements discount rate	15.00%
Weighted Average [Member] | Fair Value, Measurements, Recurring [Member] | Other Real Estate Owned [Member] | Market Comparable Properties [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value measurements discount rate	5.90%

XML

Fair Value of Financial Instruments (Reconciliation Of Fair Valued Assets Measured On A Recurring Basis) (Details) - Fair Value, Inputs, Level 3 [Member] - Collateralized debt obligations [Member] - Fair Value, Measurements, Recurring [Member] - USD ($)	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance	$ 15,871,000	$ 17,192,000
Total losses realized/unrealized: Included in other comprehensive income loss	(1,162,000)	(1,321,000)
Ending balance	$ 14,709,000	$ 15,871,000

XML

Fair Value of Financial Instruments (Fair Value By Balance Sheet Grouping) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for sale	$ 443	$ 0
Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	48,343	72,720
Interest bearing deposits in banks	1,410	1,595
Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities - AFS	82,460	110,018
Investment securities - HTM	182,510	182,380
Financial derivatives	778	1,068
Accrued interest receivable	828	933
Deposits - non-maturity	1,355,444	1,450,210
Deposits - time deposits	193,337	120,083
Short-term borrowed funds	45,418	64,565
Long-term borrowed funds	110,809	30,909
Accrued interest payable	612	151
Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities - AFS	14,709	15,871
Investment securities - HTM	1,905	20,700
Loans, net	1,319,456	1,177,702
Accrued interest receivable	6,659	5,118
Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	48,343	72,720
Interest bearing deposits in banks	1,410	1,595
Investment securities - AFS	97,169	125,889
Investment securities - HTM	214,297	235,659
Restricted bank Stock	5,250	1,027
Loans, net	1,388,847	1,264,684
Financial derivatives	778	1,068
Accrued interest receivable	7,487	6,051
Deposits - non-maturity	1,355,444	1,450,210
Deposits - time deposits	195,533	120,523
Short-term borrowed funds	45,418	64,565
Long-term borrowed funds	110,929	30,929
Accrued interest payable	612	151
Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	48,343	72,720
Interest bearing deposits in banks	1,410	1,595
Investment securities - AFS	97,169	125,889
Investment securities - HTM	184,415	203,080
Loans, net	1,319,456	1,177,702
Financial derivatives	778	1,068
Accrued interest receivable	7,487	6,051
Deposits - non-maturity	1,355,444	1,450,210
Deposits - time deposits	193,337	120,083
Short-term borrowed funds	45,418	64,565
Long-term borrowed funds	110,809	30,909
Accrued interest payable	$ 612	$ 151

XML

Derivative Financial Instruments (Narrative) (Details) $ in Thousands	1 Months Ended	12 Months Ended
	Mar. 31, 2016 USD ($) contract	Dec. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)
Derivative [Line Items]
Cash flow hedge ineffectiveness		$ 100
Cash flow hedge ineffectiveness		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 at December 31, 2023.
Decrease in value on derivatives		$ 300
Accumulated Gain (Loss), Net, Cash Flow Hedge, Parent [Member]
Derivative [Line Items]
Unrealized holding (losses)/gains on investments		(310)	$ 1,521
Unrealized tax (expense) benefit		(82)	405
Interest Rate Swap Agreements [Member]
Derivative [Line Items]
Interest rate swap notional amount	$ 30,000	15,000
Number of interest rate swap contracts | contract	4
Interest rate swap fair value		$ 800	$ 1,100
Derivative, fixed interest rate		4.645%

XML

Derivative Financial Instruments (Impact Of Derivative Financial Instruments) (Details) - Interest Rate Contract [Member] - Cash Flow Hedging [Member] - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2023	Dec. 31, 2022
Derivative [Line Items]
Amount of gain (loss) recognized in OCI on derivative (effective portion) net of tax		$ (228)	$ 1,116
Amount of gain or (loss) reclassified from accumulated OCI into income (effective portion)	[1]
Amount of gain or (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	[2]

[1] Reported as interest expense

[2] Reported as other income

XML

Revenue Recognition (Schedule of Noninterest Income Segregated by Revenue Streams In-Scope and Out-of-Scope of Topic 606) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Noninterest income (in-scope of Topic 660)	$ 16,670	$ 16,157
Noninterest income (out-of-scope of Topic 660)	1,661	1,721
Total Noninterest Income	18,331	17,878
Service Charges on Deposit Accounts [Member]
Noninterest income (in-scope of Topic 660)	2,198	1,981
Total Noninterest Income	2,198	1,981
Other Service Charges [Member]
Noninterest income (in-scope of Topic 660)	929	925
Total Noninterest Income	929	925
Trust Department [Member]
Noninterest income (in-scope of Topic 660)	8,282	8,244
Total Noninterest Income	8,282	8,244
Debit Card Income [Member]
Noninterest income (in-scope of Topic 660)	4,101	3,958
Total Noninterest Income	4,101	3,958
Brokerage Commissions [Member]
Noninterest income (in-scope of Topic 660)	1,160	1,049
Total Noninterest Income	$ 1,160	$ 1,049

XML

Segment Reporting (Narrative) (Details)	12 Months Ended
	Dec. 31, 2023 USD ($) segment	Dec. 31, 2022 USD ($)
Segment Reporting Information [Line Items]
Number of operating segments | segment	2
Amortization of intangible assets	$ 330,000	$ 219,000
Goodwill	11,004,000	11,004,000
Community Banking Segment [Member]
Segment Reporting Information [Line Items]
Intangible assets	500,000	600,000
Trust and Investment Services Segment [Member]
Segment Reporting Information [Line Items]
Amortization of intangible assets	208,000	208,000
Operating Segments [Member] | Trust and Investment Services Segment [Member]
Segment Reporting Information [Line Items]
Nonfiduciary Assets	700,000	900,000
Intangible assets	$ 600,000	$ 800,000

XML

Segment Reporting (Schedule of Segments) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Segment Reporting Information [Line Items]
Interest income	$ 81,156	$ 62,422
Interest expense	24,286	4,789
Credit loss exposure	1,620	(627)
Non interest income	18,331	17,878
Non interest expense	50,243	43,129
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest, Total	19,476	33,181
Income tax expense	4,416	8,133
Net Income (Loss)	15,060	25,048
Operating Segments [Member]
Segment Reporting Information [Line Items]
Interest income	81,156	62,422
Interest expense	24,286	4,789
Credit loss exposure	1,620	(627)
Non interest income	14,469	18,050
Non interest expense	50,243	43,129
Income before income taxes and intercompany fees	19,476	33,181
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest, Total	19,476	33,181
Income tax expense	4,416	8,133
Net Income (Loss)	15,060	25,048
Operating Segments [Member] | Community Banking Segment [Member]
Segment Reporting Information [Line Items]
Interest income	81,156	62,422
Interest expense	24,286	4,789
Credit loss exposure	1,620	(627)
Non interest income	5,027	8,757
Non interest expense	45,098	38,435
Income before income taxes and intercompany fees	15,179	28,582
Intercompany management fee income (expense)	12	12
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest, Total	15,191	28,594
Income tax expense	3,514	7,168
Net Income (Loss)	11,677	21,426
Operating Segments [Member] | Trust and Investment Services Segment [Member]
Segment Reporting Information [Line Items]
Non interest income	9,442	9,293
Non interest expense	5,145	4,694
Income before income taxes and intercompany fees	4,297	4,599
Intercompany management fee income (expense)	(12)	(12)
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest, Total	4,285	4,587
Income tax expense	902	965
Net Income (Loss)	$ 3,383	$ 3,622

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Parent Company Only Financial Information (Condensed Statement of Financial Condition) (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Jan. 01, 2023	Dec. 31, 2022	Dec. 31, 2021
Cash	$ 49,753		$ 74,315
Debt Securities, Available-for-Sale, Excluding Accrued Interest	97,169	$ 125,889	125,889
Other assets	23,244		21,580
Total Assets	1,905,860		1,848,169
Dividends Payable	1,330		1,199
Shareholders' equity	161,873		151,793	$ 141,900
Total Liabilities and Shareholders' Equity	1,905,860		1,848,169
Parent Company [Member]
Cash	9,739		11,296
Debt Securities, Available-for-Sale, Excluding Accrued Interest	13,591		14,603
Investment in bank subsidiary	164,878		153,245
Investment in non-bank subsidiaries	929		929
Other assets	9,794		8,273
Total Assets	198,931		188,346
Accrued interest and other liabilities	4,799		4,425
Dividends Payable	1,330		1,199
Junior subordinated debt	30,929		30,929
Shareholders' equity	161,873		151,793
Total Liabilities and Shareholders' Equity	$ 198,931		$ 188,346

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Parent Company Only Financial Information (Condensed Statement of Income) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Interest expense	$ 24,286	$ 4,789
Other expenses	5,451	3,491
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest, Total	19,476	33,181
Applicable income tax benefit/(expense)	(4,416)	(8,133)
Net Income	15,060	25,048
Parent Company [Member]
Dividend income from bank subsidiary	6,130	14,995
Interest income on investments	1,715	780
Other income	75	63
Total other income	1,790	843
Total Income	7,920	15,838
Interest expense	1,950	1,451
Other expenses	715	249
Total Expenses	2,665	1,700
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest, Total	5,255	14,138
Applicable income tax benefit/(expense)	213	194
Net income before equity in undistributed net income of subsidiaries	5,468	14,332
Equity in undistributed net income of subsidiaries	9,592	10,716
Net Income	15,060	25,048
Parent Company [Member] | First United Bank & Trust [Member]
Equity in undistributed net income of subsidiaries	$ 9,592	$ 10,716

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Parent Company Only Financial Information (Condensed Statement of Comprehensive Income) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Net income	$ 15,060	$ 25,048
Net unrealized gains (losses), net of tax	3,199	(11,712)
Comprehensive Income	18,259	13,336
Parent Company [Member]
Net income	15,060	25,048
Unrealized losses on AFS Securities, net of tax	(771)	(954)
Unrealized losses on cash flow hedges, net of tax	(228)	1,116
Net unrealized gains (losses), net of tax	(999)	162
Comprehensive Income	$ 14,061	$ 25,210

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Parent Company Only Financial Information (Condensed Statement of Cash Flows) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Net income	$ 15,060	$ 25,048
Increase in accrued interest payable and other liabilities	6,232	(737)
Stock based compensation	527	532
Net cash provided by operating activities	22,470	26,543
Proceeds from issuance of common stock	293	217
Repurchase of common stock	(1,496)
Cash dividends on common stock	(5,217)	(3,986)
Net cash provided by financing activities	34,677	104,456
Decrease in cash and cash equivalents	(24,562)	(41,405)
Cash and cash equivalents at beginning of the year	74,315	115,720
Cash and cash equivalents at end of period	49,753	74,315
Parent Company [Member]
Net income	15,060	25,048
Equity in undistributed net income of subsidiaries	(9,592)	(10,716)
Increase in other assets	(1,280)	(448)
Increase in accrued interest payable and other liabilities	273	655
Stock based compensation	527	532
Net cash provided by operating activities	4,988	15,071
Proceeds from issuance of common stock	293	217
Repurchase of common stock	(1,495)
Cash dividends on common stock	(5,343)	(4,192)
Net cash provided by financing activities	(6,545)	(3,975)
Decrease in cash and cash equivalents	(1,557)	11,096
Cash and cash equivalents at beginning of the year	11,296	200
Cash and cash equivalents at end of period	$ 9,739	$ 11,296

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Pay vs Performance Disclosure - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Pay vs Performance Disclosure
Net Income (Loss)	$ 15,060	$ 25,048

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Insider Trading Arrangements	3 Months Ended
	Dec. 31, 2023
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false