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What changed in FIRST UNITED CORP/MD/'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of FIRST UNITED CORP/MD/'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+250 added−276 removedSource: 10-K (2025-03-20) vs 10-K (2024-03-15)

Top changes in FIRST UNITED CORP/MD/'s 2024 10-K

250 paragraphs added · 276 removed · 193 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

39 edited+6 added−5 removed95 unchanged
Biggest changeIn 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. ​ 6 ​ Table of Contents ​ ​ 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 ​ ​ ​ ​ ​ ​ ​ 7 ​ Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ 8 ​ Table of Contents ​ 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.
Biggest changeIn 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. ​ 6 ​ Table of Contents ​ The following tables set forth deposit data for the Maryland and West Virginia Counties in which the Bank maintains offices as of June 30, 2024, the most recent date for which comparative information is available. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Offices ​ Deposits ​ Market ​ (in Market) (in thousands) Share Allegany County, Maryland: ​ ​ ​ ​ ​ ​ ​ First United Bank & Trust ​ 2 ​ $ 275,668 ​ 32.41% Manufacturers and Traders Trust Company ​ 5 ​ ​ 266,681 ​ 31.35% Truist Bank ​ 3 ​ ​ 205,293 ​ 24.13% Dollar Bank, Federal Savings Bank ​ 2 ​ ​ 68,508 ​ 8.05% Somerset Trust Company ​ 2 ​ ​ 34,560 ​ 4.06% Source: FDIC Deposit Market Share Report ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Frederick County, Maryland: ​ ​ ​ ​ ​ ​ ​ PNC Bank, National Association ​ 12 ​ $ 1,667,193 ​ 25.61% Truist Bank ​ 10 ​ ​ 1,130,320 ​ 17.36% Bank Of America, National Association ​ 4 ​ ​ 819,279 ​ 12.59% Manufacturers and Traders Trust Company ​ 6 ​ ​ 532,555 ​ 8.18% Sandy Spring Bank ​ 3 ​ ​ 509,958 ​ 7.83% Woodsboro Bank ​ 5 ​ ​ 418,066 ​ 6.42% Middletown Valley Bank ​ 3 ​ ​ 356,121 ​ 5.47% Capital One, National Association ​ 2 ​ ​ 328,168 ​ 5.04% ACNB Bank ​ 4 ​ ​ 280,402 ​ 4.31% First United Bank & Trust ​ 3 ​ ​ 197,817 ​ 3.04% Wells Fargo Bank, National Association ​ 1 ​ ​ 162,321 ​ 2.49% Fulton Bank, National Association ​ 1 ​ ​ 38,927 ​ 0.60% WesBanco Bank, Inc. ​ 1 ​ ​ 28,576 ​ 0.44% JP Morgan Chase Bank, National Association ​ 1 ​ ​ 21,461 ​ 0.33% Presidential Bank, FSB ​ 1 ​ ​ 16,312 ​ 0.25% Woodforest National Bank ​ 1 ​ ​ 2,866 ​ 0.04% Source: FDIC Deposit Market Share Report ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Garrett County, Maryland: ​ ​ ​ ​ ​ ​ ​ First United Bank & Trust ​ 5 ​ $ 480,344 ​ 61.65% Manufacturers and Traders Trust Company ​ 2 ​ ​ 121,677 ​ 15.62% Clear Mountain Bank ​ 1 ​ ​ 78,612 ​ 10.08% Truist Bank ​ 1 ​ ​ 65,683 ​ 8.43% Somerset Trust Company ​ 1 ​ ​ 26,180 ​ 3.36% Miners & Merchants Bank ​ 1 ​ ​ 6,667 ​ 0.86% Source: FDIC Deposit Market Share Report ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Washington County, Maryland: ​ ​ ​ ​ ​ ​ ​ Fulton Bank, National Association ​ 6 ​ ​ 611,999 ​ 18.68% Truist Bank ​ 5 ​ ​ 609,900 ​ 18.62% Manufacturers and Traders Trust Company ​ 9 ​ ​ 606,652 ​ 18.52% Middletown Valley Bank ​ 3 ​ ​ 531,858 ​ 16.25% PNC Bank, National Association ​ 3 ​ ​ 336,517 ​ 10.27% First United Bank & Trust ​ 4 ​ ​ 161,346 ​ 4.93% CNB Bank, Inc. ​ 4 ​ ​ 140,010 ​ 4.27% United Bank ​ 2 ​ ​ 129,102 ​ 3.94% Orrstown Bank ​ 1 ​ ​ 75,468 ​ 2.30% Bank of Charles Town ​ 1 ​ ​ 30,237 ​ 0.92% Farmers and Merchants Trust Company of Chambersburg ​ 1 ​ ​ 19,112 ​ 0.58% Ameriserv Financial Bank ​ 1 ​ ​ 17,579 ​ 0.54% Jefferson Security Bank ​ 1 ​ ​ 5,782 ​ 0.18% Source: FDIC Deposit Market Share Report ​ ​ ​ ​ ​ ​ ​ 7 ​ Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Berkeley County, West Virginia: ​ ​ ​ ​ ​ ​ ​ United Bank ​ 4 ​ $ 527,752 ​ 27.45% Truist Bank 3 ​ 385,855 20.07% City National Bank of West Virginia ​ 4 ​ ​ 245,889 ​ 12.79% Burke & Herbert Bank & Trust Company ​ 3 ​ ​ 191,606 ​ 9.97% First United Bank & Trust ​ 3 ​ ​ 158,572 ​ 8.25% Jefferson Security Bank ​ 2 ​ ​ 151,787 ​ 7.89% CNB Bank, Inc. ​ 3 ​ ​ 139,835 ​ 7.27% Bank of Charles Town ​ 2 ​ ​ 117,288 ​ 6.10% Woodforest National Bank ​ 1 ​ ​ 4,080 ​ 0.21% Source: FDIC Deposit Market Share Report ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mineral County, West Virginia: ​ ​ ​ ​ ​ ​ ​ First United Bank & Trust ​ 2 ​ $ 137,657 ​ 39.37% Manufacturers and Traders Trust Company ​ 2 ​ ​ 83,020 ​ 23.74% Truist Bank ​ 1 ​ ​ 68,750 ​ 19.66% The Grant County Bank ​ 1 ​ ​ 42,510 ​ 12.16% FNB Bank, Inc. ​ 1 ​ ​ 17,728 ​ 5.07% Source: FDIC Deposit Market Share Report ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Monongalia County, West Virginia: ​ ​ ​ ​ ​ ​ ​ MVB Bank, Inc. ​ 2 ​ $ 1,260,947 ​ 28.62% United Bank ​ 6 ​ ​ 1,141,970 ​ 25.92% The Huntington National Bank ​ 6 ​ ​ 645,035 ​ 14.64% Clear Mountain Bank ​ 3 ​ ​ 363,260 ​ 8.24% Truist Bank ​ 3 ​ ​ 316,718 ​ 7.19% PNC Bank, National Association ​ 2 ​ ​ 204,868 ​ 4.65% WesBanco Bank, Inc. ​ 3 ​ ​ 200,271 ​ 4.55% First United Bank & Trust ​ 3 ​ ​ 134,157 ​ 3.04% Citizens Bank of Morgantown, Inc. ​ 1 ​ ​ 41,666 ​ 0.95% First Exchange Bank ​ 2 ​ ​ 34,437 ​ 0.78% Burke & Herbert Bank & Trust Company ​ 1 ​ ​ 34,151 ​ 0.78% JP Morgan Chase Bank, National Association ​ 1 ​ ​ 25,012 ​ 0.57% City National Bank of West Virginia ​ 1 ​ ​ 3,336 ​ 0.07% Source: FDIC Deposit Market Share Report ​ ​ ​ ​ ​ ​ ​ ​ ​ 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.
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.
Wealth Management The Bank’s wealth 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.
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.
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, technology, convenience of office locations and office hours.
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.
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 and other providers of financial services for various types of products and services, including trust services.
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.
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 11 ​ Table of Contents ​ undercapitalized” if the institution’s tangible equity is equal to or less than 2.0% of average quarterly tangible assets.
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.
Trust and brokerage 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.
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.
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 12 ​ Table of Contents ​ total cash outflow) under an acute liquidity stress scenario.
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.
The USA Patriot Act mandates that financial service companies implement additional policies and procedures 13 ​ Table of Contents ​ 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.
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.
As of December 31, 2024, 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.
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.
Commercial real estate loans are primarily those secured by land for residential and commercial development, agricultural purpose properties, service industry buildings such as restaurants, hotels and motels, retail buildings and general-purpose business space.
Among the instruments of monetary policy used by the FRB to implement these objectives are open market operations in U.S. Government securities, changes 15 ​ Table of Contents ​ in the federal funds rate, changes in the discount rate of member bank borrowings, and changes in reserve requirements against member bank deposits.
Among the instruments of monetary policy used by the FRB to implement these objectives are open market operations in U.S. Government securities, changes in the federal funds rate, changes in the discount rate of member bank borrowings, and changes in reserve requirements against member bank deposits.
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.
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 (together with OakFirst Loan Center, Inc., the “OakFirst Loan Centers”) - 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.
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.
Deposit Activities The Bank offers a full array of deposit products including checking, savings and money market accounts, regular and IRA certificates of deposit, and Health Savings accounts.
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 financial condition and cash flow of commercial borrowers is therefore carefully analyzed during the loan approval process and continues to be monitored throughout the 4 ​ Table of Contents ​ duration of the loan by obtaining business financial statements, personal financial statements and income tax returns.
The 4 ​ Table of Contents ​ 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.
The 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.
“Critically undercapitalized” institutions are subject to the appointment of a receiver or conservator. 12 ​ Table of Contents ​ The appropriate federal banking agency may, under certain circumstances, reclassify a well-capitalized insured depository institution as adequately capitalized.
“Critically undercapitalized” institutions are subject to the appointment of a receiver or conservator. The appropriate federal banking agency may, under certain circumstances, reclassify a well-capitalized insured depository institution as adequately capitalized.
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 10 ​ Table of Contents ​ required by the agency to develop a plan acceptable to meet the standards.
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 required by the agency to develop a plan acceptable to meet the standards.
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.
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 9 ​ Table of Contents ​ condition that led to the failure.
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.
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.
“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.
“Higher-priced” mortgages must have escrow accounts for taxes and insurance and similar recurring expenses. 14 ​ Table of Contents ​ 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.
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.
An allowance for credit losses (“ACL”) is maintained to provide for losses over the life of the portfolio 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.
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.
Banking Products and Services The Bank operates 22 banking offices, one customer service center and 30 Automated Teller Machines (“ATMs”) in Allegany County, Frederick County, Garrett County, and Washington County in Maryland, and in Mineral County, Berkeley County and Monongalia County in West Virginia.
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”).
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”). 10 ​ Table of Contents ​ 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.
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.
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”) up to applicable limits.
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.
The Bank also offers the Certificate of Deposit Account Registry Service ® , or CDARS ® , and the IntraFi Cash Service ® , or ICS ® , programs to municipalities, businesses, and consumers through which the Bank provides access to multi-million-dollar certificates of deposit, savings and demand deposits, respectively. Both programs are fully FDIC-insured.
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.
At December 31, 2024 and 2023, the total market value of assets under the supervision of the Bank’s wealth department was approximately $1.7 billion and $1.5 billion, respectively.
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.
The risk of loss associated with commercial real estate 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.
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. 9 ​ Table of Contents ​ 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.
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.
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. 14 ​ Table of Contents ​ 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.
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.
As of December 31, 2023, we were in compliance with the applicable requirements. 11 ​ Table of Contents ​ 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”.
In addition, the rule revised the treatment of certain acquisition, development, or construction exposures. As of December 31, 2024, we were in compliance with the applicable requirements. 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”.
The termination of deposit insurance for our bank subsidiary would have a material adverse effect on our earnings, operations and financial condition. 13 ​ Table of Contents ​ 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.
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.
EMPLOYEES At December 31, 2023, we employed 338 individuals, of whom 304 were full-time employees.
EMPLOYEES At December 31, 2024, we employed 326 individuals, of whom 291 were full-time employees.
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”).
As of December 31, 2024, the Bank had $140.0 million available through unsecured lines of credit with correspondent banks, $36.6 million available through a secured line of credit with the Federal Reserve Discount Window, and approximately $213.6 million available through the Federal Home Loan Bank of Atlanta (“FHLB”).
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.
At December 31, 2024, we had total assets of $2.0 billion, net loans of $1.5 billion and deposits of $1.6 billion. Shareholders’ equity at December 31, 2024 was $179.3 million.
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.
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.
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”.
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 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”).
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”). 8 ​ Table of Contents ​ 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).
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.
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.
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.
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.
Removed
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.
Added
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 2024, the Bank’s mortgage production was strong, as loans were booked in-house as well as eligible loans sold to the secondary market.
Removed
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).
Added
In November 2023, the FDIC issued a final rule to implement a special assessment to recover losses to the DIF as a result of bank failures that year and the FDIC’s use of the systemic risk exception to cover certain deposits that were otherwise uninsured.
Removed
In addition, the rule revised the treatment of certain acquisition, development, or construction exposures.
Added
In June 2024, due to the increased estimate of losses, the FDIC announced that it projects that the special assessment will be collected for an additional two quarters beyond the initial eight-quarter collection period at a lower rate. The special estimate was based on estimated uninsured deposits at December 31, 2022 (excluding the first $5.0 billion).
Removed
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.
Added
The Bank was exempt from this special assessment as its total uninsured deposits were below $5.0 billion. The FDIC is authorized to conduct examinations of and require reporting by FDIC-insured institutions.
Removed
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.
Added
The termination of deposit insurance for our bank subsidiary would have a material adverse effect on our earnings, operations and financial condition.
Added
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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

44 edited+3 added−17 removed135 unchanged
Biggest changeIn 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.
Biggest changeActual 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. ​ 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.
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.
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 a triggering event occurs or circumstances change that reduce the fair value of a reporting unit below its carrying amount.
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.
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 commercial real estate loans within their lending portfolios face a heightened risk of financial difficulties in the event of adverse changes in the economy and commercial real estate markets.
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. ​ 27 ​ Table of Contents ​ 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.
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; 26 ​ Table of Contents ​ ● 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. ​ 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.
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. ​ 29 ​ Table of Contents ​ 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.
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. ​ 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.
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.
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. ​ 25 ​ Table of Contents ​ 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.
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.
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 sustainability-related compliance costs could result in increases to our overall operational costs.
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 25 ​ Table of Contents ​ phishing.
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 phishing.
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. ​ 19 ​ Table of Contents ​ 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.
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. ​ 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.
The Maryland Business Combination Act generally prohibits, subject to certain limited exceptions, corporations from being involved in 30 ​ Table of Contents ​ 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.
The Maryland Business Combination Act generally prohibits, subject to certain limited exceptions, corporations from being involved in 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.
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.
Factors 27 ​ Table of Contents ​ 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.
Accordingly, we may be unable to raise additional financing if needed or on acceptable terms. ​ ​ 17 ​ Table of Contents ​ 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.
Accordingly, we may be unable to raise additional financing if needed or on acceptable terms. ​ 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 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.
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 20 ​ Table of Contents ​ 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.
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.
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. 21 ​ Table of Contents ​ ​ 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.
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.
If we were to rely on sales proceeds from 16 ​ Table of Contents ​ 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.
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.
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 23 ​ Table of Contents ​ 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.
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. ​ 20 ​ Table of Contents ​ 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.
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. ​ 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.
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.
If management’s assumptions and judgments 18 ​ Table of Contents ​ 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.
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.
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, 22 ​ Table of Contents ​ indirectly, their service providers to implement and maintain physical, administrative and technological measures to protect the security of non-public personal financial information.
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.
Included in that total is $2.4 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 $2.6 million valuation allowance.
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.
Any of these factors could materially and adversely 15 ​ Table of Contents ​ 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.
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. ​
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. ​ 29 ​ Table of Contents ​
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.
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 sustainability 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 sustainability practices and disclosure.
Numerous class-action suits under 23 ​ Table of Contents ​ 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.
Numerous class-action suits under 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.
A rapid increase or decrease in interest rates could adversely affect our results of operations and financial performance. ​ 18 ​ Table of Contents ​ 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.
A rapid increase or decrease in interest rates could adversely affect our results of operations and financial performance. ​ 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 Maryland and West Virginia and many of these loans, including construction and land development loans, are secured by real estate.
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.
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 commercial real estate.
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.
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, the Federal Reserve Discount Window, and brokered funds to fund our operations.
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.
At December 31, 2024, our commercial real estate 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.
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.
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 charter and bylaws and Maryland law may discourage a corporate takeover. ​ The Corporation’s charter and its 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.
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.
In addition, to access our 24 ​ Table of Contents ​ 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.
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.
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 17 ​ Table of Contents ​ and borrowed funds.
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.
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. ​ 19 ​ Table of Contents ​ 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, 2024, investment securities in our investment portfolio having a cost basis of $116.1 million and a market value of $94.5 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.
The Corporation is subject to supervision by the FRB. The Bank 22 ​ Table of Contents ​ is subject to supervision and periodic examination by the Maryland OFR of Financial Regulation, the West Virginia Division of Banking, and the FDIC.
The Corporation is subject to supervision by the FRB. The Bank is subject to supervision and periodic examination by the Maryland Office of Financial Regulation, the West Virginia Division of Banking, and the FDIC.
No assurance can be given that such capital will be available on acceptable terms or 16 ​ Table of Contents ​ at all.
No assurance can be given that such capital will be available on acceptable terms or at all.
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.
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.
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.
In addition to these specific restrictions, bank regulatory agencies have the ability to prohibit proposed dividends by a financial institution which would otherwise 28 ​ Table of Contents ​ be permitted under applicable regulations if the regulatory body determines that such distribution would constitute an unsafe or unsound practice.
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.
At December 31, 2024, we had recorded goodwill and other intangible assets of $11.8 million, representing approximately 6.6% of shareholders’ equity. ​ At December 31, 2024, our net deferred tax assets were valued at $10.0 million.
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.
First, the Board of Directors is a declassified board structure. Each director serves for a one-year term, 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.
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.
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.
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.
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.
Our future success depends, in part, on our ability to address the needs of our customers by using technology to provide products and services 24 ​ Table of Contents ​ 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.
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 that will satisfy customer demands, as well as to create additional efficiencies in our operations.
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.
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 sustainability oversight and expanding mandatory and voluntary reporting, diligence, and disclosure.
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.
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 valuable services based on their many years of experience and in-depth knowledge of the banking industry and the market areas we serve.
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.
Due to divergent stakeholder views on these matters, we are at increased risk that any action, or lack thereof, concerning these matters will be perceived negatively by some stakeholders, which could negatively affect our business and reputation. ​ ​ 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.
Removed
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.
Added
In November 2023, the FDIC issued a final rule to implement a special assessment to recover losses to the DIF as a result of bank failures that year and the FDIC’s use of the systemic risk exception to cover certain deposits that were otherwise uninsured.
Removed
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 21 ​ Table of Contents ​ 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.
Added
In June 2024, due to the increased estimate of losses, the FDIC announced that it projects that the special assessment will be collected for an additional two quarters beyond the initial eight-quarter collection period at a lower rate. The special estimate was based on estimated uninsured deposits at December 31, 2022 (excluding the first $5.0 billion).
Removed
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.
Added
The Bank was exempt from this special assessment as its total uninsured deposits were below $5.0 billion; however, future increases or required repayments in FDIC insurance premiums may materially adversely affect our results of operations.
Removed
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.
Removed
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services.
Removed
Our current executive officers provide 26 ​ Table of Contents ​ valuable services based on their many years of experience and in-depth knowledge of the banking industry and the market areas we serve.
Removed
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.
Removed
Climate change presents both immediate and long-term risks to us and our customers and these risks are expected to increase over time.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
We have customers who operate in carbon-intensive industries like oil and gas that are exposed to climate risks, such as those risks 28 ​ Table of Contents ​ 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.
Removed
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.
Removed
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.
Removed
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.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

10 edited+2 added−3 removed11 unchanged
Biggest changeWe 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.
Biggest changeWe engage in regular assessments of our infrastructure, software systems, and network architecture, using internal cybersecurity experts, penetration testers, 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.
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.
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.
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.
Risk Factors. ​ 30 ​ Table of Contents ​ 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.
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.
In particular, our Information Security Officer has the necessary relevant expertise and formal training in the areas of information security and cybersecurity risk management. Our board of directors has approved management committees including the CSI Committee, which focuses on technology impact, and the Risk Management Committee, which focuses on business impact.
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 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 Managing Director of Operations and, as discussed below, regularly to 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.
The Incident Response Plan is coordinated through the Chief Operating Officer 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 CSI Committee provides quarterly reports to the Risk and Compliance 32 ​ Table of Contents ​ 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.
Our CSI Committee provides quarterly reports to the Risk and Compliance 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.
The Risk and Compliance Committee our board of directors provides a report of their activities to the full board of directors at board meetings.
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.
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 are chaired by managers and experts 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.
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 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 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.
Removed
We 31 ​ Table of Contents ​ 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.
Added
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 have optimized our vulnerability management program that scans devices every four hours, and we have strict key performance metrics to ensure vulnerabilities are remediated quickly.
Removed
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.
Added
These committees provide oversight and governance of the technology program and the information security program. There are also three technology steering committees that plan and guide technology projects in alignment with the Corporation’s strategic plan.
Removed
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.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeTotal 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. ​ 33 ​ Table of Contents ​ PART II
Biggest changeTotal rent expense on the leased offices and properties was $0.4 million in 2024. ​ ITEM 3. LEGAL PROCEEDINGS None ​ ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ​ 31 ​ Table of Contents ​ PART II
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.
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 three.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+1 added−2 removed3 unchanged
Biggest changeITEM 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.
Biggest changeITEM 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 28, 2025, issued and outstanding shares of Common Stock were held by 1,272 shareholders of record.
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.
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 FRB.
Removed
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.
Added
Issuer Repurchases Neither First United Corporation nor any of its affiliated purchasers (as defined in Rule 10b-18 promulgated under the Exchange Act) purchased any shares of Common Stock during the three-month period ended December 31, 2024. ​ ​ ​ ​ ITEM 6. [Reserved] ​
Removed
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 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

95 edited+45 added−56 removed42 unchanged
Biggest changeThese 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% ​ 56 ​ Table of Contents ​ 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.
Biggest changeThe Bank has worked closely with customers as these retail CDs mature to transition them to other deposit and wealth management products offered by the Bank. ​ 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, 2024 and December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 (in thousands) ​ ​ Balance ​ Percent ​ ​ Balance ​ Percent Insured deposits ​ $ 1,192,182 ​ 76% ​ $ 1,212,934 ​ 78% Uninsured but collateralized deposits ​ ​ 77,369 ​ 5% ​ ​ 116,723 ​ 8% Uninsured and uncollateralized deposits ​ ​ 305,278 ​ 19% ​ ​ 221,320 ​ 14% ​ ​ $ 1,574,829 ​ 100% ​ $ 1,550,977 ​ 100% ​ The following table summarizes the percentage of deposit balances from retail customers compared to business customers as of December 31, 2024 and December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 (in thousands) ​ ​ Balance ​ Percent ​ ​ Balance ​ Percent Retail deposits ​ $ 798,664 ​ 51% ​ $ 820,954 ​ 53% Business deposits ​ ​ 776,165 ​ 49% ​ ​ 730,023 ​ 47% ​ ​ $ 1,574,829 ​ 100% ​ $ 1,550,977 ​ 100% 51 ​ Table of Contents ​ ​ Borrowed Funds The following shows the composition of our borrowings at December 31: ​ ​ ​ ​ ​ ​ ​ (in thousands) 2024 2023 Overnight borrowings at Federal Reserve Discount Window ​ $ 50,000 ​ $ — Securities sold under agreements to repurchase ​ $ 15,409 ​ $ 45,418 Total short-term borrowings ​ $ 65,409 ​ $ 45,418 ​ ​ ​ ​ ​ ​ ​ Long-term FHLB advances ​ $ 90,000 ​ $ 80,000 Junior subordinated debentures ​ $ 30,929 ​ $ 30,929 Total long-term borrowings ​ $ 120,929 ​ $ 110,929 ​ ​ ​ ​ ​ ​ ​ Total borrowings ​ $ 186,338 ​ $ 156,347 ​ ​ ​ ​ ​ ​ ​ Average balance (from Table 1) ​ $ 150,657 ​ $ 142,239 ​ The following is a summary of short-term borrowings at December 31 with original maturities of less than one year: ​ ​ ​ ​ ​ ​ ​ (in thousands) 2024 2023 Overnight borrowings, weighted average interest rate of 4.50% at December 31, 2024 ​ $ 50,000 ​ $ — Securities sold under agreements to repurchase: ​ ​ ​ ​ ​ ​ Outstanding at end of year ​ $ 15,409 ​ $ 45,418 Weighted average interest rate at year end ​ ​ 0.24% ​ ​ 0.27% Maximum amount outstanding as of any month end ​ $ 44,415 ​ $ 59,777 Average amount outstanding ​ ​ 29,085 ​ ​ 50,498 Approximate weighted average rate during the year ​ ​ 0.26% ​ ​ 0.24% ​ Short-term borrowings increased by $20.0 million when compared to December 31, 2023 due to an increase of $50.0 million in overnight borrowings from the Federal Reserve, offset by a shift of approximately $22.0 million in overnight investment sweep balances into FDIC insured accounts due to management’s strategy to release pledging of investment securities for municipalities to provide additional liquidity.
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.
Allowance for Credit Losses- Loans 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.
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.
CONSOLIDATED STATEMENT OF INCOME REVIEW Net Interest Income Net interest income is our largest source of operating revenue and 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.
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.
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.
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.
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.
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.
Determination of an appropriate ACL is inherently complex and requires the use of significant and highly subjective estimates. The reasonableness of the ACL is reviewed quarterly by management. Management believes that it uses relevant information available to make determinations about the ACL and that it has established the existing allowance in accordance with GAAP.
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.
Amounts that will be recorded for the provision for credit 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.
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.
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 three 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.
Its principal operating subsidiary is the Bank, which consists of a community banking network of 22 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.
(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.
(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 2024 and 2023.
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.
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, 2024 and 2023, which are included in Item 8 of Part II of this annual report.
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.
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, 2024, we were asset sensitive.
This table distinguishes between the changes related to average outstanding balances (changes in volume created by holding the interest rate 39 ​ Table of Contents ​ 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).
This table distinguishes between the changes related to average outstanding balances (changes in volume created by holding the interest rate 36 ​ Table of Contents ​ 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).
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.
The following table sets forth the contractual or estimated maturities of the components of our investment securities portfolio as of December 31, 2024 and the weighted average yields on a tax-equivalent basis.
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.
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.
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. 50 ​ Table of Contents ​ 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.
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. Management believes that it uses relevant information available to make determination about the ACL and that it has established the existing allowance in accordance with GAAP.
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 59 ​ Table of Contents ​ be impacted by changes in the prevailing level of interest rates.
Many factors, including economic and financial conditions, movements in interest rates and consumer preferences affect the difference between the interest earned on our assets and the interest paid on our liabilities. Interest rate sensitivity refers to the degree that earnings will be impacted by changes in the prevailing level of interest rates.
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.
See the discussion under “Income Taxes” in Note 12 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, 2024 and December 31, 2023 were 24.5% and 22.7%, respectively.
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.
The Corporation recognized a $4.2 million loss in the sale of AFS investment securities as part of the balance sheet restructuring in the fourth quarter of 2023.
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.
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 eligible investment securities as collateral. ● Brokered deposits, including CDs and money market funds, provide a method to generate deposits quickly.
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.
The Corporation’s management believes that the presentation of non-GAAP financial measures provides investors with a greater understanding of the Corporation’s operating results in addition to the results measured in accordance with GAAP.
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.
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 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 remaining $14.7 million of the AFS securities represents the 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.
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.
Provision for Credit Losses The provision for credit losses was $2.9 million for the year ended December 31, 2024 and $1.7 million for the year ended December 31, 2023. Net charge-offs of $2.2 million were recorded for the year ended December 31, 2024 compared to net charge-offs of $0.9 million for 2023.
Net charge-offs of $0.9 million were recorded for the year ended December 31, 2023, compared to $0.7 million for 2022.
Net charge-offs of $2.2 million were recorded for the year ended December 31, 2024, compared to $0.9 million for 2023.
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 increase was primarily related to a $4.2 million loss recognized through the sale of available-for-sale (“AFS”) investment securities as part of a strategic balance sheet restructuring in the fourth quarter of 2023.
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.
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 $79.8 million of the AFS portfolio was valued using Level 2 pricing and had net unrealized losses of $17.7 million at December 31, 2024.
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, 2024, the Corporation’s total risk-based capital ratio was 15.92% and the Bank’s total risk-based capital ratio was 14.59%, 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, 2023 were 15.64% and 14.05%, respectively.
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.
The mix for each year is illustrated below. ​ ​ ​ ​ ​ ​ ​ Year End Percentage of Total Assets ​ 2024 2023 Cash and cash equivalents ​ 4% ​ 3% Net loans ​ 74% ​ 73% Investments ​ 14% ​ 16% ​ ​ The year-end total liability mix has remained stable during the two-year period as illustrated below. ​ ​ ​ ​ ​ ​ ​ ​ Year End Percentage of Total Liabilities ​ 2024 2023 Total deposits ​ 88% ​ 89% Total borrowings ​ 10% ​ 9% ​ 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, and Monongalia County, in West Virginia; and the surrounding regions of Maryland, West Virginia, Virginia and Pennsylvania.
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.
Net charge-offs of $2.2 million were recorded for the year ended December 31, 2024 and $0.9 million for the year ended December 31, 2023.
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.
Commercial amortization and payoffs were approximately $114.1 million through December 31, 2024 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, 2024 was approximately $73.5 million, with most of this production comprised of in-house loans.
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 ratio of the ACL to loans outstanding was 1.23% at December 31, 2024 and 1.24% at December 31, 2023. ​ The ratio of net charge-offs to average loans for the year ended December 31, 2024 was an annualized 0.16% compared to 0.07% for the year ended December 31, 2023.
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.
Liquidity Sources As of December 31, 2024, the Corporation had approximately $140.0 million in unsecured lines of credit with its correspondent banks, $36.6 million available through a secured line of credit with the Federal Reserve Discount Window, and approximately $213.6 million of secured borrowings with the FHLB.
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.
Non-GAAP interest income on an FTE basis for the years ended December 31, 2024 and 2023 were $229 and $627, respectively. (2) The average balances of non-accrual loans for the years ended December 31, 2024 and 2023, which were reported in the average loan balances for these years, were $8,471 and $3,171, 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 42 ​ Table of Contents ​ 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.
We have concluded that no valuation allowance is deemed necessary for our remaining federal and state deferred tax assets at December 31, 2024, as it is more likely than not that they will be realized based on the expected reversal of 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. ​ 39 ​ Table of Contents ​ GAAP and Non-GAAP Measures The following tables sets forth certain selected financial data for the years ended December 31, 2024 and 2023 under GAAP (as reported) and non-GAAP.
The valuation allowance was $2.8 million and $2.9 million at December 31, 2023 and 2022, respectively.
The valuation allowance was $2.6 million and $2.8 million at December 31, 2024 and 2023, respectively.
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.
The ratio of the ACL to loans outstanding was 1.23% at December 31, 2024 compared to 1.24% at December 31, 2023. ​ Other operating income, including net gains/(losses) on sales of mortgage loans and sales of investment securities, increased by approximately $5.4 million when compared to 2023.
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. 36 ​ Table of Contents ​ (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.
(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.
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 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 43 ​ Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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.
The following non-GAAP financial measures exclude losses on the sale of AFS securities in 2023 and accelerated depreciation and lease termination expenses related to the branch closures that occurred on February 29, 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ ​ December 31, ​ ​ 2024 2023 Per Share Data ​ ​ ​ ​ ​ ​ ​ Basic net income per common share - as reported ​ $ 3.15 ​ $ 2.25 ​ Basic net income per common share - non-GAAP ​ ​ 3.21 ​ ​ 2.81 ​ Diluted net income per common share - as reported ​ $ 3.15 ​ $ 2.25 ​ Diluted net income per common share - non-GAAP ​ ​ 3.21 ​ ​ 2.81 ​ ​ ​ ​ ​ ​ ​ ​ ​ Significant Ratios: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on Average Assets - as reported ​ ​ 1.06 % ​ 0.77 % Loss on sale of AFS securities, net of income tax effect ​ ​ — ​ ​ 0.17 ​ Accelerated depreciation and lease termination expenses, net of income tax effect ​ ​ 0.02 ​ ​ 0.02 ​ Adjusted Return on Average Assets (non-GAAP) ​ ​ 1.08 % ​ 0.96 % ​ ​ ​ ​ ​ ​ ​ ​ Return on Average Equity - as reported ​ ​ 12.16 % ​ 9.65 % Loss on sale of AFS securities, net of income tax effect ​ ​ — ​ ​ 2.09 ​ Accelerated depreciation and lease termination expenses, net of income tax effect ​ ​ 0.26 ​ ​ 0.31 ​ Adjusted Return on Average Equity (non-GAAP) ​ ​ 12.42 % ​ 12.05 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 40 ​ Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended (in thousands, except for per share amount) ​ 2024 2023 Net income - as reported ​ $ 20,569 ​ $ 15,060 Adjustments: ​ ​ ​ ​ ​ ​ Loss on sale of securities ​ ​ — ​ ​ 4,214 Accelerated depreciation and lease termination expenses ​ ​ 562 ​ ​ 623 Income tax effect of adjustment ​ ​ (137) ​ ​ (1,097) Adjusted net income (non-GAAP) ​ $ 20,994 ​ $ 18,800 ​ ​ ​ ​ ​ ​ ​ Basic and diluted earnings per share - as reported ​ $ 3.15 ​ $ 2.25 Adjustments: ​ ​ ​ ​ ​ ​ Loss on sale of securities ​ ​ — ​ ​ 0.63 Accelerated depreciation and lease termination expenses ​ ​ 0.08 ​ ​ 0.09 Income tax effect of adjustment ​ ​ (0.02) ​ ​ (0.16) Adjusted basic and diluted earnings per share (non-GAAP) ​ $ 3.21 ​ $ 2.81 ​ CONSOLIDATED BALANCE SHEET REVIEW Overview Total assets at December 31, 2024 were $2.0 billion, representing a $67.2 million increase since December 31, 2023.
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 45 ​ Table of Contents ​ Outstanding loans of $1.4 billion at December 31, 2023 reflected growth of $127.2 million in 2023.
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) 2024 2023 Commercial real estate ​ $ 526.4 ​ $ 493.7 Acquisition and development ​ ​ 95.3 ​ ​ 77.1 Commercial and industrial ​ ​ 287.5 ​ ​ 274.6 Residential mortgage ​ ​ 518.8 ​ ​ 499.9 Consumer ​ ​ 52.8 ​ ​ 61.4 Total Loans ​ $ 1,480.8 ​ $ 1,406.7 42 ​ Table of Contents ​ Outstanding loans of $1.5 billion at December 31, 2024 reflected growth of $74.1 million in 2024.
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%) ​ ​ 52 ​ Table of Contents ​ The following presents management’s allocation of the ACL by major loan category in comparison to that loan category’s percentage of total loans.
Analysis of Activity in the Allowance for Credit Losses ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, (in thousands) 2024 2023 Balance, January 1 ​ $ 17,480 ​ $ 14,636 Impact of CECL Adoption ​ ​ — ​ ​ 2,066 Charge-offs: ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ — ​ ​ (87) Commercial and industrial ​ ​ (1,610) ​ ​ (423) Residential mortgage ​ ​ (45) ​ ​ (55) Consumer ​ ​ (1,369) ​ ​ (874) Total charge-offs ​ ​ (3,024) ​ ​ (1,439) Recoveries: ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ 82 ​ ​ 7 Acquisition and development ​ ​ 52 ​ ​ 11 Commercial and industrial ​ ​ 212 ​ ​ 186 Residential mortgage ​ ​ 75 ​ ​ 73 Consumer ​ ​ 364 ​ ​ 240 Total recoveries ​ ​ 785 ​ ​ 517 Net credit losses ​ ​ (2,239) ​ ​ (922) Provision for credit losses ​ ​ 2,929 ​ ​ 1,700 Balance at end of period ​ $ 18,170 ​ $ 17,480 ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses to total loans (as %) ​ ​ 1.23% ​ ​ 1.24% ​ ​ ​ ​ ​ ​ ​ Net (Charge-offs)/Recoveries as a % of Average Applicable Portfolio ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 Commercial real estate ​ ​ 0.0% ​ ​ 0.0% Acquisition and development ​ ​ 0.1% ​ ​ 0.0% Commercial and industrial ​ ​ (0.5%) ​ ​ (0.1%) Residential mortgage ​ ​ 0.0% ​ ​ 0.0% Consumer ​ ​ (1.9%) ​ ​ (1.0%) ​ ​ 48 ​ Table of Contents ​ The following presents management’s allocation of the ACL by major loan category in comparison to that loan category’s percentage of total loans.
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.
The period considered by the NII modeling is the next eight quarters. 55 ​ Table of Contents ​ 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.
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 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.
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.
Net income for the year ended December 31, 2023 was 32 ​ Table of Contents ​ inclusive of a $3.3 million loss, net of tax, on the sale of securities and $0.5 million, net of tax, in increased expenses related to announced branch closures and adjusted net income was $18.8 million on a non-GAAP basis. ​ The provision for credit losses was $2.9 million for the year ended December 31, 2024 and $1.7 million for the year ended December 31, 2023.
Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. 48 ​ Table of Contents ​ 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% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 49 ​ Table of Contents ​ 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.
Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. 44 ​ Table of Contents ​ 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) 2024 2023 Non-accrual loans: ​ ​ ​ ​ ​ ​ Commercial real estate ​ $ 656 ​ $ 826 Acquisition and development ​ ​ 82 ​ ​ 113 Commercial and industrial ​ ​ 1,838 ​ ​ — Residential mortgage ​ ​ 2,181 ​ ​ 2,988 Consumer ​ ​ 174 ​ ​ 29 Total non-accrual loans ​ $ 4,931 ​ $ 3,956 Accruing Loans Past Due 90 days or more: ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ 317 ​ ​ — Residential mortgage ​ $ 573 ​ $ 459 Consumer ​ ​ 28 ​ ​ 84 Total accruing loans past due 90 days or more ​ $ 918 ​ $ 543 Total non-accrual and past due 90 days or more ​ $ 5,849 ​ $ 4,499 Other repossessed assets ​ ​ 2,802 ​ ​ 55 Other real estate owned ​ ​ 3,062 ​ ​ 4,493 Total Non-performing assets ​ $ 11,713 ​ $ 9,047 Modified Loans: ​ ​ ​ ​ ​ ​ Performing ​ $ 1,006 ​ $ — Total modified loans ​ $ 1,006 ​ $ — Individually evaluated loans without a valuation allowance ​ $ 4,432 ​ $ 2,963 Total individually evaluated loans ​ $ 4,432 ​ $ 2,963 ​ ​ ​ ​ ​ ​ ​ Non-accrual loans to total loans (as %) ​ ​ 0.33% ​ ​ 0.28% Non-performing loans to total loans (as %) ​ ​ 0.39% ​ ​ 0.32% Non-performing assets to total assets (as %) ​ ​ 0.59% ​ ​ 0.47% Allowance for credit losses to non-accrual loans (as %) ​ ​ 368.49% ​ ​ 441.86% Allowance for credit losses to non-performing assets (as %) ​ ​ 155.13% ​ ​ 193.21% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 45 ​ Table of Contents ​ 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 Commercial real estate ​ ​ 0.1% ​ ​ 0.2% Acquisition and development ​ ​ 0.1% ​ ​ 0.1% Commercial and industrial ​ ​ 0.6% ​ ​ 0.0% Residential mortgage ​ ​ 0.4% ​ ​ 0.6% Consumer ​ ​ 0.3% ​ ​ 0.0% ​ We would have recognized $0.8 million and $0.4 million in interest income for the years ended December 31, 2024 and 2023, respectively, had our non-accrual loans been current and performing in accordance with their terms.
Our CECL methodology introduced a modified discounted cash flow methodology based on expected cash flow changes in the future. ​ 40 ​ Table of Contents ​ 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.
Our CECL methodology introduced a modified discounted cash flow methodology based on expected cash flow changes in the future. ​ 37 ​ Table of Contents ​ 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) 2024 2023 % Change Service charges on deposit accounts ​ $ 2,220 ​ $ 2,198 ​ 1.00% Other service charges ​ ​ 887 ​ ​ 929 ​ (4.52)% Trust department income ​ ​ 9,094 ​ ​ 8,282 ​ 9.80% Debit card income ​ ​ 4,065 ​ ​ 4,101 ​ (0.88)% Bank owned life insurance ​ ​ 1,345 ​ ​ 1,261 ​ 6.66% Brokerage commissions ​ ​ 1,449 ​ ​ 1,160 ​ 24.91% Other income ​ ​ 351 ​ ​ 400 ​ (12.25)% Total other operating income ​ $ 19,411 ​ $ 18,331 ​ 5.89% ​ Other operating income, exclusive of gains, increased by $1.1 million for the year ended December 31, 2024 when compared to the same period of 2023.
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. ​ 51 ​ Table of Contents ​ The following table presents a summary of the activity in the ACL and ALL by major loan category for the past two years.
Management also applies interest rate risk, collateral value and debt service sensitivity analyses to the commercial real estate loan portfolio and obtains new appraisals on specific loans under defined parameters to assist in the determination of the periodic provision for credit losses.
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.
At December 31, 2024, the Bank had $140.0 million available through unsecured lines of credit with correspondent banks, $36.6 million net available through a secured line of credit with the Federal Reserve Discount Window and approximately $213.6 million net available through the FHLB.
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%).
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 2024 and 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ GAAP ​ Non-GAAP - FTE (in thousands) 2024 2023 2024 2023 Interest income ​ $ 91,993 ​ $ 81,156 ​ $ 92,222 ​ $ 81,783 Interest expense ​ ​ 32,015 ​ ​ 24,286 ​ ​ 32,015 ​ ​ 24,286 Net interest income ​ $ 59,978 ​ $ 56,870 ​ $ 60,207 ​ $ 57,497 Net interest margin % ​ ​ 3.36% ​ ​ 3.22% ​ ​ 3.38% ​ ​ 3.26% ​ Net interest income, on a non-GAAP, FTE basis, increased by $2.7 million (4.7%) during the year ended December 31, 2024 when compared to the year ended December 31, 2023, driven by a $10.4 million (12.8%) increase in interest income, which was partially offset by an increase in interest expense of $7.7 million (31.8%).
They do not necessarily indicate the long-term prospects or economic value of the institution. 60 ​ Table of Contents ​ 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.
Based on the simulation analysis performed at December 31, 2024 and 2023, management estimated the following changes in net interest income, assuming the indicated rate changes: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2024 2023 +400 basis points ​ $ 5,722 ​ $ 4,464 +300 basis points ​ $ 5,300 ​ $ 3,353 +200 basis points ​ $ 4,253 ​ $ 2,255 +100 basis points ​ $ 2,391 ​ $ 1,155 -100 basis points ​ $ (2,851) ​ $ (1,280) -200 basis points ​ $ (5,424) ​ $ (3,102) -300 basis points ​ $ (8,080) ​ $ (5,249) -400 basis points ​ $ (11,151) ​ $ (8,086) ​ 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.
The increased interest expense resulted in an overall increase of 151 basis points on interest bearing liabilities. ​ ​ 38 ​ Table of Contents ​ 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.
Interest expense on short- term borrowings increased by $1.3 million due to a $10.5 million increase in average balances and a 222-basis point increase in rate due to utilization of the BTFP in 2024. ​ 35 ​ Table of Contents ​ As shown below, the composition of total interest income between 2024 and 2023 remained relatively stable. ​ ​ ​ ​ ​ ​ ​ ​ % of Total Interest Income ​ 2024 2023 Interest and fees on loans ​ 89% ​ 86% Interest on investment securities ​ 8% ​ 10% Other ​ 3% ​ 4% ​ 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 2024 and 2023: Distribution of Assets, Liabilities and Shareholders’ Equity Interest Rates and Interest Differential – Tax Equivalent Basis ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31 ​ ​ 2024 ​ 2023 ​ (in thousands) Average Balance Interest Average Yield/ Rate Average Balance Interest Average Yield/ Rate Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 1,427,351 ​ $ 81,819 ​ 5.73 % $ 1,340,118 ​ $ 69,631 ​ 5.20 % Investment Securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ ​ 285,661 ​ ​ 6,760 ​ 2.37 % ​ 335,888 ​ ​ 7,173 ​ 2.14 % Non taxable ​ ​ 7,538 ​ ​ 375 ​ 4.97 % ​ 18,471 ​ ​ 1,279 ​ 6.92 % Total ​ ​ 293,199 ​ ​ 7,135 ​ 2.43 % ​ 354,359 ​ ​ 8,452 ​ 2.39 % Federal funds sold ​ ​ 55,117 ​ ​ 2,874 ​ 5.21 % ​ 65,131 ​ ​ 3,409 ​ 5.23 % Interest-bearing deposits with other banks ​ ​ 2,009 ​ ​ 91 ​ 4.53 % ​ 2,585 ​ ​ 93 ​ 3.60 % Other interest earning assets ​ ​ 4,565 ​ ​ 303 ​ 6.64 % ​ 4,048 ​ ​ 198 ​ 4.89 % Total earning assets ​ ​ 1,782,241 ​ ​ 92,222 ​ 5.17 % ​ 1,766,241 ​ ​ 81,783 ​ 4.63 % Allowance for credit losses ​ ​ (18,064) ​ ​ ​ ​ ​ ​ ​ (16,561) ​ ​ ​ ​ ​ ​ Non-earning assets ​ ​ 182,548 ​ ​ ​ ​ ​ ​ ​ 199,474 ​ ​ ​ ​ ​ ​ Total Assets ​ $ 1,946,725 ​ ​ ​ ​ ​ ​ $ 1,949,154 ​ ​ ​ ​ ​ ​ Liabilities and Shareholders’ Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ $ 368,725 ​ $ 6,288 ​ 1.71 % $ 362,070 ​ $ 4,814 ​ 1.33 % Interest-bearing money markets- retail ​ ​ 413,353 ​ ​ 14,287 ​ 3.46 % ​ 333,274 ​ ​ 8,672 ​ 2.60 % Interest-bearing money markets- brokered ​ ​ 55 ​ ​ 3 ​ 5.45 % ​ — ​ ​ — ​ 0.00 % Savings deposits ​ ​ 180,393 ​ ​ 183 ​ 0.10 % ​ 219,516 ​ ​ 240 ​ 0.11 % Time deposits - Retail ​ ​ 147,193 ​ ​ 4,226 ​ 2.87 % ​ 141,921 ​ ​ 2,872 ​ 2.02 % Time deposits - Brokered ​ ​ 15,697 ​ ​ 841 ​ 5.36 % ​ 49,209 ​ ​ 2,600 ​ 5.28 % Short-term borrowings ​ ​ 58,444 ​ ​ 1,477 ​ 2.53 % ​ 47,968 ​ ​ 147 ​ 0.31 % Long-term borrowings ​ ​ 92,213 ​ ​ 4,710 ​ 5.11 % ​ 94,271 ​ ​ 4,941 ​ 5.24 % Total interest-bearing liabilities ​ ​ 1,276,073 ​ ​ 32,015 ​ 2.51 % ​ 1,248,229 ​ ​ 24,286 ​ 1.95 % Non-interest-bearing deposits ​ ​ 468,137 ​ ​ ​ ​ ​ ​ ​ 512,496 ​ ​ ​ ​ ​ ​ Other liabilities ​ ​ 33,326 ​ ​ ​ ​ ​ ​ ​ 32,320 ​ ​ ​ ​ ​ ​ Shareholders’ Equity ​ ​ 169,189 ​ ​ ​ ​ ​ ​ ​ 156,109 ​ ​ ​ ​ ​ ​ Total Liabilities and Shareholders’ Equity ​ $ 1,946,725 ​ ​ ​ ​ ​ ​ $ 1,949,154 ​ ​ ​ ​ ​ ​ Net interest income and spread ​ ​ ​ ​ $ 60,207 ​ 2.66 % ​ ​ ​ $ 57,497 ​ 2.68 % Net interest margin ​ ​ ​ ​ ​ ​ ​ 3.38 % ​ ​ ​ ​ ​ ​ 3.26 % Notes: (1) The above table reflects the average rates earned or paid stated on an FTE basis assuming a tax rate of 21% for 2024 and 2023.
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.
At December 31, 2024, we had additional borrowing capacity with the FHLB totaling $213.6 million, an additional $140.0 million of unused lines of credit with correspondent financial institutions, and $36.6 million of an unused secured line of credit with the Federal Reserve Discount Window.
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.
Loan commitments and letters of credit totaled $251.3 million and $16.5 million, respectively, at December 31, 2024. 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.
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.
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 was 0.32% at December 31, 2024 compared to 0.24% at December 31, 2023. Non-accrual loans totaled $4.9 million at December 31, 2024 compared to $4.0 million at December 31, 2023.
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% ​ 53 ​ Table of Contents ​ 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.
Allocation of the Allowance for Credit Losses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, (in thousands) 2024 % of Total ACL 2023 % of Total ACL Commercial real estate ​ $ 5,272 ​ 29% ​ $ 5,120 ​ 29% Acquisition and development ​ ​ 909 ​ 5% ​ ​ 940 ​ 5% Commercial and industrial ​ ​ 4,205 ​ 23% ​ ​ 3,717 ​ 21% Residential mortgage ​ ​ 7,010 ​ 39% ​ ​ 6,774 ​ 39% Consumer ​ ​ 774 ​ 4% ​ ​ 929 ​ 6% Total ​ $ 18,170 ​ 100% ​ $ 17,480 ​ 100% ​ 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, ​ ​ 2024 ​ 2023 (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 ​ $ 6,115 ​ 6% ​ $ 7,000 ​ $ 6,034 ​ 6% Residential mortgage-backed agencies ​ ​ 24,621 ​ ​ 20,196 ​ 21% ​ ​ 24,781 ​ ​ 20,563 ​ 21% Commercial mortgage-backed agencies ​ ​ 37,205 ​ ​ 28,634 ​ 30% ​ ​ 36,258 ​ ​ 28,417 ​ 29% Collateralized mortgage obligations ​ ​ 21,069 ​ ​ 17,726 ​ 19% ​ ​ 19,725 ​ ​ 16,356 ​ 17% Obligations of states and political subdivisions ​ ​ 6,533 ​ ​ 6,209 ​ 7% ​ ​ 10,486 ​ ​ 10,312 ​ 11% Corporate bonds ​ ​ 1,000 ​ ​ 896 ​ 1% ​ ​ 1,000 ​ ​ 778 ​ 1% Collateralized debt obligations ​ ​ 18,686 ​ ​ 14,718 ​ 16% ​ ​ 18,671 ​ ​ 14,709 ​ 15% Total available for sale ​ $ 116,114 ​ $ 94,494 ​ 100% ​ $ 117,921 ​ $ 97,169 ​ 100% Securities Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. treasuries ​ $ — ​ $ — ​ 0% ​ $ 37,462 ​ $ 37,219 ​ 20% U.S. government agencies ​ ​ 68,301 ​ ​ 57,109 ​ 39% ​ ​ 68,014 ​ ​ 57,029 ​ 31% Residential mortgage-backed agencies ​ ​ 32,171 ​ ​ 28,611 ​ 20% ​ ​ 29,588 ​ ​ 26,717 ​ 14% Commercial mortgage-backed agencies ​ ​ 21,134 ​ ​ 15,340 ​ 11% ​ ​ 21,413 ​ ​ 16,052 ​ 9% Collateralized mortgage obligations ​ ​ 49,439 ​ ​ 39,715 ​ 27% ​ ​ 53,261 ​ ​ 43,288 ​ 24% Obligations of states and political subdivisions ​ ​ 4,511 ​ ​ 3,985 ​ 3% ​ ​ 4,604 ​ ​ 4,110 ​ 2% Total held to maturity ​ $ 175,556 ​ $ 144,760 ​ 100% ​ $ 214,342 ​ $ 184,415 ​ 100% 49 ​ Table of Contents ​ ​ The total fair value of AFS securities was $94.5 million and the book value of HTM securities totaled $175.6 million at December 31, 2024, representing a decrease of $2.7 million and $38.8 million, respectively, since December 31, 2023.
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.
The net interest margin, on an FTE basis, increased to 3.38% for the year ended December 31, 2024 from 3.26% for the year ended December 31, 2023. ​ Comparing the year ended December 31, 2024 with the year ended December 31, 2023, interest income increased by $10.4 million driven by an increase of $12.2 million in interest and fees on loans.
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.
The increase in interest expense for 2024 was driven by an increase in interest expense on deposits of $6.6 million due to an increase in average balances of $19.4 million and an increase in rate of 56 basis points.
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”.
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”.
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 increase was primarily a result of an increase of $1.1 million in wealth management income due to increased market values of assets under management, increased annuity sales and growth in new and existing customer relationships. ​ Net gains of $0.4 million were reported for the year ended December 31, 2024 compared to net losses of $3.9 million for the same period in 2023.
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.
We use the same credit policies in making commitments and conditional obligations 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.
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.
See Note 9 to the Consolidated Financial Statements 52 ​ Table of Contents ​ presented elsewhere in this annual report for further details about our borrowings and additional borrowing capacity, which is incorporated herein by reference.
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 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.
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 37 ​ Table of Contents ​ 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.
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.
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 ACL was $18.2 million at December 31, 2024 compared to $17.5 million at December 31, 2023. The provision for credit losses was $2.9 million for the year ended December 31, 2024 compared to $1.7 million for the year ended December 31, 2023.
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.
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.
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.
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.
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.
During 2024 and 2023, we recognized, on a cash basis, $0.2 million and $0.3 million, respectively, of interest income on non-accrual loans that paid off.
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 ​ ​ ​ 41 ​ Table of Contents ​ 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.
Gains on sales of residential mortgages were $0.4 million for the years ending December 31, 2024 and 2023. ​ The following table shows the components of net gains for the year ended December 31, 2024 and net losses for the year ended December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2024 2023 Net gains/(losses): ​ ​ ​ ​ ​ ​ Available-for-sale securities: ​ ​ ​ ​ ​ ​ Realized losses from sales and calls ​ ​ — ​ ​ (4,214) Gains on sale of loans held for sale ​ ​ 414 ​ ​ 381 Loss on disposal of fixed assets ​ ​ — ​ ​ (29) Net gains/(losses) ​ $ 414 ​ $ (3,862) ​ ​ ​ 38 ​ Table of Contents ​ Other Operating Expense The following table compares the major components of other operating expense for 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2024 2023 % Change Salaries and employee benefits ​ $ 28,029 ​ $ 27,520 ​ 1.85% FDIC premiums ​ ​ 1,070 ​ ​ 992 ​ 7.86% Equipment ​ ​ 2,675 ​ ​ 3,157 ​ (15.27)% Occupancy ​ ​ 2,878 ​ ​ 3,441 ​ (16.36)% Data processing ​ ​ 5,761 ​ ​ 5,384 ​ 7.00% Marketing ​ ​ 674 ​ ​ 833 ​ (19.09)% Professional services ​ ​ 1,948 ​ ​ 2,133 ​ (8.67)% Contract labor ​ ​ 597 ​ ​ 616 ​ (3.08)% Line rentals ​ ​ 408 ​ ​ 466 ​ (12.45)% Total OREO expenses/(income), net ​ ​ 271 ​ ​ (89) ​ 404.49% Investor relations ​ ​ 293 ​ ​ 345 ​ (15.07)% Contributions ​ ​ 234 ​ ​ 229 ​ 2.18% Other expenses ​ ​ 4,802 ​ ​ 5,216 ​ (7.94)% Total other operating expense ​ $ 49,640 ​ $ 50,243 ​ (1.20)% ​ Other operating expenses decreased by $0.6 million for the year ended December 31, 2024 when compared to 2023.
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. ​ ​ 44 ​ Table of Contents ​ As indicated below, the total interest-earning asset mix remained relatively constant at December 31, 2023 as compared to December 31, 2022.
The remainder was used to fund loan growth in the fourth quarter of 2024. ​ ​ ​ 41 ​ Table of Contents ​ As indicated below, the total interest-earning asset mix remained relatively constant at December 31, 2024 as compared to December 31, 2023.
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.
At December 31, 2024, the most recent notification from the regulators categorizes the Bank as “well capitalized” under the regulatory framework for prompt corrective action.
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.
The increase in the tax rate for the 2024 period was primarily related to changes in allocations of state income tax expense. ​ At December 31, 2024, the Corporation had Maryland Net Operating Losses (“NOLs”) of $36.3. million for which a deferred tax asset of $2.4 million has been recorded.
These measures are typically based upon a relatively brief period, usually one year.
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.
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.
The increase in interest on loans was primarily due to an increase of $87.2 million in average loan balance in 2024 when compared to 2023. The rate earned on the loan portfolio increased by 53 basis points when comparing the year ended December 31, 2024 to the year ended December 31, 2023.
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.
Investment income decreased by $1.3 million due to a $61.2 million reduction in average balances, which was partially offset by the 4-basis point increase in yield during 2024. Other interest income decreased by $0.4 million during 2024 primarily due to a $10.0 million decrease in average balances held at the Federal Reserve in 2024 when compared to 2023.
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.
The pipeline of commercial loans as of December 31, 2024 was approximately $11.5 million.
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. 58 ​ Table of Contents ​ It is our policy to manage our affairs so that liquidity needs are fully satisfied through normal Bank operations.
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.
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.
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 46 ​ Table of Contents ​ Losses, for further discussion of these portfolio segments.
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.
These deposits are strictly rate driven but often provide the most cost-effective means of funding growth. ● One Way Buy CDARS/ICS funding – a form of brokered deposits that has become a viable supplement to brokered deposits obtained directly. ​ The following table presents sources of liquidity available to the Corporation as of December 31, 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ ​ Total Availability ​ ​ Amount Used ​ ​ Net Availability Internal Sources ​ ​ ​ ​ ​ ​ ​ ​ ​ Excess cash ​ $ 62,251 ​ $ - ​ $ 62,251 Unpledged securities ​ ​ 39,865 ​ ​ - ​ ​ 39,865 External Sources ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal Reserve (discount window) ​ ​ 86,624 ​ ​ 50,000 ​ ​ 36,624 Correspondent unsecured lines of credit ​ ​ 140,000 ​ ​ - ​ ​ 140,000 FHLB ​ ​ 309,787 ​ ​ 96,214 ​ ​ 213,573 ​ ​ $ 638,527 ​ $ 146,214 ​ $ 492,313 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 54 ​ Table of Contents ​ We have adequate liquidity available to respond to current and anticipated liquidity demands and are 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.
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.
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.
Management’s assessment of the potential included lower yielding bonds and the risk of extension in an up 300 basis point shock. 54 ​ Table of Contents ​ 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 investment portfolio is primarily utilized for liquidity purposes, management of interest sensitivity and collateralization needs. ​ As discussed in Note 17 to the Consolidated Financial Statements presented elsewhere in this report, we measure fair market values based on the fair value hierarchy established in FASB’s Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures .

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 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 ​ Table of Contents ​
Biggest changeITEM 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. ​ 56 ​ Table of Contents ​

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