FIRST UNITED CORP/MD/

Previous wording

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

Current wording

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

Previous wording

First United Corporation is a Maryland corporation chartered in 1985 and a financial holding company registered with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended, that elected financial holding company status in 2021. The Corporation’s primary business is serving as the parent company of First United Bank & Trust, a Maryland trust company (the “Bank”), First United Statutory Trust I (“Trust I”) and First United Statutory Trust II (“Trust II” and together with Trust I, “the Trusts”), both Connecticut statutory business trusts. The Trusts were formed for the purpose of selling trust preferred securities that qualified as Tier 1 capital. The Bank has two consumer finance company subsidiaries- OakFirst Loan Center, Inc., a West Virginia corporation, and OakFirst Loan Center, LLC, a Maryland limited liability company – and two subsidiaries that it uses to hold real estate acquired through foreclosure or by deed in lieu of foreclosure – First OREO Trust, a Maryland statutory trust, and FUBT OREO I, LLC, a Maryland limited liability company (“OREO I”). OREO I was dissolved on July 1, 2025. In addition, the Bank owns 99.9% of the limited partnership interests in Liberty Mews Limited Partnership, a Maryland limited partnership formed for the purpose of acquiring, developing and operating low-income housing units in Garrett County, Maryland, and a 99.9% non-voting membership interest in MCC FUBT Fund, LLC, an Ohio limited liability company formed for the purpose of acquiring, developing and operating low-income housing units in Allegany County, Maryland.

Current wording

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

Previous wording

At June 30, 2025, the Corporation’s total assets were $2.0 billion, net loans were $1.5 billion, and deposits were $1.6 billion. Shareholders’ equity at June 30, 2025 was $191.1 million.

Current wording

At September 30, 2025, the Corporation’s total assets were $2.0 billion, net loans were $1.5 billion, and deposits were $1.7 billion. Shareholders’ equity at September 30, 2025 was $199.1 million.

Previous wording

Consolidated net income was $6.0 million for the second quarter of 2025, or $0.92 per basic and diluted share, compared to $4.9 million, or $0.75 per basic and diluted share, for the second quarter of 2024. Net income for the first six months of 2025 was $11.8 million, or $1.82 per basic share and $1.81 per diluted common share, compared to $8.6 million, or $1.31 per basic and diluted share, for the same period of 2024.

Current wording

Consolidated net income was $6.9 million for the third quarter of 2025, or $1.07 per basic and diluted share, compared to $5.8 million, or $0.89 per basic and diluted share, for the third quarter of 2024. Net income for the first nine months of 2025 was $18.7 million, or $2.89 per basic share and $2.88 per diluted common share, compared to $14.4 million, or $2.20 per basic and diluted share, for the same period of 2024.

Previous wording

The $1.1 million increase in quarterly net income when compared to the second quarter of 2024 was primarily driven by a $1.5 million increase in net interest income, a $0.3 million decrease in provision for credit loss, and a $0.2 million increase in non-interest income, partially offset by increases in non-interest expense of $0.6 million and income tax expense of $0.4 million. Comparing the second quarter of 2025 to the same period of 2024, interest and fees on loans increased by $2.1 million due to from the repricing of adjustable-rate loans and growth in our loan portfolio. Interest expense increased by $0.3 million when comparing year-over-year quarterly expense as increased funding was offset by reductions in deposit rates and borrowing costs.

Current wording

The $1.2 million increase in quarterly net income when compared to the third quarter of 2024 was primarily driven by a $2.2 million increase in net interest income and a $0.3 million increase in non-interest income, partially offset by increases in provision expense of $0.2 million, non-interest expense of $0.7 million and income tax expense of $0.4 million. Comparing the third quarter of 2025 to the same period of 2024, interest and fees on loans increased by $2.0 million primarily due to the repricing of adjustable-rate loans and new production booked at higher rates. Quarterly interest expense increased by $0.3 million on a year-over-year basis. This increase was attributable to growth in our municipal deposit balances, offset slightly by reduced interest expense on short-term borrowings related to the repayment of $40.0 million in Bank Term Funding Program (“BTFP”) balances in September 2024. Other operating income increased by $0.3 million due to increases in wealth management income and net gains as a result of an investment sale transaction. Other operating expenses increased by $0.7 million due to a $0.4 million increase in salaries and benefit expenses, a $0.2 million increase in professional services, and a $0.2 million increase in data processing costs. These increases were offset by slight reductions in equipment, other real estate owned (“OREO”) and investor relations expenses.

Previous wording

Other operating income, including net gains, for the second quarter of 2025 increased by $0.2 million when compared to the same period of 2024. This increase was driven by a $0.1 million increase in wealth management income, reflecting higher market valuations and expanded relationships with both new and existing clients. Additionally, gains on sales of residential mortgages increased by $0.1 million due to growth in production year-over-year.

Current wording

Other operating income, including net gains, for the third quarter of 2025 increased by $0.3 million when compared to the same period of 2024. This increase was driven by a $0.2 million increase in wealth management income, reflecting higher market valuations and expanded relationships with both new and existing clients. Additionally, $0.1 million in net gains from the sale of available-for-sale investments was recognized in the third quarter of 2025.

Previous wording

Other operating income for the six months ended June 30, 2025 increased by $0.3 million when compared to the same period of 2024. This was attributable to a $0.2 million increase in wealth management income, driven by improving market conditions, increased annuity sales and growth in new and existing customer relationships. Gains on sales of residential mortgages increased by $0.1 million. Service charge and debit card income were both stable when comparing the first six months of 2025 to the same period of 2024.

Current wording

Other operating income for the nine months ended September 30, 2025 increased by $0.6 million when compared to the same period of 2024. This increase was attributable to a $0.4 million increase in wealth management income, driven by improving market conditions, increased annuity sales and growth in new and existing customer relationships. Gains on sales of residential mortgages increased by $0.1 million and gains on sales of investment securities increased by $0.1 million. Service charge and debit card income were both stable when comparing the first nine months of 2025 to the same period of 2024.

Previous wording

Operating expenses increased by $0.6 million in the second quarter of 2025 when compared to the second quarter of 2024. Net other real estate owned (“OREO”) expenses increased by $0.2 million due to a $0.1 million gain on the sale of OREO property in the second quarter of 2024 and an increase in costs associated with one OREO property in the second quarter of 2025. Data processing fees increased by $0.2 million and professional services expenses increased by $0.1 million. Salaries and employee benefits increased by $0.1 million due to a $0.3 million increase in salary expense related to normal merit increases effective April 1, 2025, partially offset by decreases in employee life and health insurance expense due to reduced health claims.

Current wording

Operating expenses increased by $0.7 million in the third quarter of 2025 when compared to the third quarter of 2024. Salaries and employee benefits increased by $0.4 million due to a $0.4 million increase in salary expense related to normal merit increases effective April 1, 2025 and increased staffing levels as an effort to build out our West region and a $0.1 million increase in incentive expense, partially offset by decreases in employee life and health insurance expense due to decreased claims. Additionally, data processing and professional services expenses each increased by $0.2 million year-over-year.

Previous wording

For the six months ended June 30, 2025, non-interest expense increased by $0.3 million when compared to the six months ended June 30, 2024. Salaries and employee benefits increased by $0.2 million due to normal merit increases effective April 1, 2025, increases in stock compensation expense as a result of increased stock prices and 401K expenses offset by reduced life and health insurance costs related to reduced claims in 2025. Net OREO expenses increased by $0.2 million due to a $0.1 million gain on the sale of OREO in 2024 as well as one-time expense associated with an OREO property recorded in the second quarter of 2025, increases of $0.1 million in marketing and professional services and an increase in data processing expenses of $0.4 million. These increases were partially offset by a $0.7 million decrease in occupancy and equipment expenses related to accelerated depreciation expense recognized in the first quarter of 2024 related to branch closures.

Current wording

For the nine months ended September 30, 2025, non-interest expense increased by $1.0 million when compared to the nine months ended September 30, 2024. Salaries and employee benefits increased by $0.7 million related to normal merit increases effective April 1, 2025, increased salary expense as a result of increased staffing levels as we continue to expand our West region, increases in incentives, and 401K expenses offset by reduced life and health insurance costs related to reduced claims in 2025. Net OREO expenses increased by $0.1 million. Data processing expenses increased by $0.5 million primarily due to increased software agreements and professional services expenses increased by $0.3 million as a result of increased audit fees. These increases were partially offset by a $0.8 million decrease in occupancy and equipment expenses related to accelerated depreciation expense recognized in the first quarter of 2024 related to branch closures.

Previous wording

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

Current wording

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

Previous wording

The tables below summarize net interest income for the six- and three-month periods ended June 30, 2025 and 2024.

Current wording

The tables below summarize net interest income for the nine- and three-month periods ended September 30, 2025 and 2024.

Previous wording

The following tables set forth the average balances, net interest income and expense, and average yields and rates of our interest-earning assets and interest-bearing liabilities for the six- and three-month periods ended June 30, 2025 and 2024:

Current wording

The following tables set forth the average balances, net interest income and expense, and average yields and rates of our interest-earning assets and interest-bearing liabilities for the nine- and three-month periods ended September 30, 2025 and 2024:

Previous wording

Net interest income, on a non-GAAP, FTE basis, increased by $1.5 million for the second quarter of 2025 when compared to the second quarter of 2024. This increase was driven by an increase of $1.8 million in interest income due to a $2.1 million increase in interest income on loans that resulted from an increase of 26 basis points in the overall yield on the loan portfolio, upward repricing of adjustable-rate loans, and an increase in average balances of $74.1 million. Interest income on Federal funds sold decreased by $0.4 million due to a decrease of 129 basis points in average rates and a decrease of $16.0 million in average balances. Interest expense increased by $0.3 million when compared to the second quarter of 2024. Interest expense paid on deposits increased by $0.4 million due to a $73.3 million increase in average balances, partially offset by a decrease of 2 basis points on the rate paid. Interest paid on short-term borrowings decreased by $0.5 million when compared to the same period of 2024 due to the repayment of the $40.0 million from the BTFP late in the third quarter of 2024. Interest paid on long-term borrowings increased by $0.4 million when compared to the second quarter of 2024 due to a $50.0 million increase in average balances, partially offset by a decrease in 100 basis points on rates paid.

Current wording

Net interest income, on a non-GAAP, FTE basis, increased by $2.2 million for the third quarter of 2025 when compared to the third quarter of 2024. This increase was driven by an increase of $2.5 million in interest income due to a $2.0 million increase in interest income on loans resulting from an increase of 25 basis points in the overall yield on the loan portfolio. This increase in yield was attributable to upward repricing of adjustable-rate loans and an increase in average balances of $68.4 million. Interest income on investment securities increased by $0.2 million due to an increase in average balances of $9.0 million and an increase in yield of 17 basis points. The increase in the investment portfolio resulted from management’s strategic decision to reinvest cashflows in the higher rate environment to increase yield on the portfolio. Interest income on Federal funds sold increased by $0.2 million due to an increase of $37.4 million in average balances, partially offset by a decrease of 147 basis points in average rates. Interest expense increased by $0.3 million when compared to the third quarter of 2024. Interest expense paid on deposits increased by $0.4 million related to a $100.5 million increase in average balances, partially offset by a decrease of 6 basis points on the rate paid. Interest paid on short-term borrowings decreased by $0.5 million when compared to the same period of 2024 due to the repayment of the $40.0 million borrowing from the BTFP late in the third quarter of 2024. Interest paid on long-term borrowings increased by

Previous wording

Comparing the six months ended June 30, 2025 to the six months ended June 30, 2024, net interest income, on a non-GAAP, FTE basis, increased by $3.7 million. Interest income increased by $3.9 million and was driven by an increase of $4.6 million on interest and fees on loans as average loan balances increased by $74.7 million and the overall yield increased by 36 basis points in correlation with upward repricing of adjustable-rate loans. Interest expense on deposits increased by $0.8 million as the average deposit balances increased by $75.3 million, driven by increases of $4.8 million in demand deposit accounts, $76.6 million in money market balances and $15.9 million in brokered time deposits, partially offset by decreases in savings balances of $16.1 million and $6.1 million in retail time deposits. Interest expense on short-term borrowings decreased by $0.9 million due to the Bank’s utilization of the BTFP program in 2024 and subsequent repayment late in the third quarter of 2024. The net interest margin for the six months ended June 30, 2025 was 3.61% compared to 3.31% for the six months ended June 30, 2024.

Current wording

Comparing the nine months ended September 30, 2025 to the nine months ended September 30, 2024, net interest income, on a non-GAAP, FTE basis, increased by $5.8 million. Interest income increased by $6.4 million and was driven by an increase of $6.6 million on interest and fees on loans as average loan balances increased by $72.6 million and the overall yield increased by 32 basis points in correlation with upward repricing of adjustable-rate loans. Interest expense on deposits increased by $1.2 million as the average deposit balances increased by $87.6 million, driven by increases of $6.3 million in demand deposit accounts, $73.6 million in money market balances and $24.4 million in brokered time deposits, partially offset by decreases in savings balances of $15.2 million and $1.5 million in retail time deposits. Interest expense on short-term borrowings decreased by $1.4 million due to the Bank’s utilization of the BTFP program in 2024 and subsequent repayment late in the third quarter of 2024. Long-term borrowing costs increased $0.7 million as a result of an increase of $37.3 million in Federal Home Loan Bank of Atlanta (the “FHLB”) average balances, partially offset by a decrease in rate paid of 85 basis points. The net interest margin for the nine months ended September 30, 2025 was 3.64% compared to 3.34% for the nine months ended September 30, 2024.

Previous wording

The following table sets forth an analysis of volume and rate changes in interest income and interest expense for our average interest-earning assets and average interest-bearing liabilities for the six- and three-month periods ended June 30, 2025 and 2024:

Current wording

The following table sets forth an analysis of volume and rate changes in interest income and interest expense for our average interest-earning assets and average interest-bearing liabilities for the nine- and three-month periods ended September 30, 2025 and 2024:

Previous wording

Specific allocations have been made for loans where management has determined that the collateral supporting the loans is not adequate to cover the loan balance, and the qualitative factors affecting the estimated allowance for credit losses (“ACL”) have been adjusted based on the current economic environment and the characteristics of the loan portfolio. For the first six months of 2025 and 2024, net provision expense was $1.5 million and $2.1 million, respectively. For the second quarters of 2025 and 2024, net provision expense was $0.9 million and $1.2 million. The decreased provision expense recorded in the first six months of 2025 when compared to the same period in 2024 was primarily related to $1.1 million in charge-offs related to one non-accrual commercial loan relationship that occurred in 2024.

Current wording

Specific allocations have been made for loans where management has determined that the collateral supporting the loans is not adequate to cover the loan balance, and the qualitative factors affecting the estimated allowance for credit losses (“ACL”) have been adjusted based on the current economic environment and the characteristics of the loan portfolio. For the first nine months of 2025 and 2024, net credit loss expense was $2.0 million and $2.4 million, respectively. For the third quarters of 2025 and 2024, net provision expense was $0.5 million and $0.3 million, respectively. Provision for credit losses decreased by $0.4 million due primarily to strong credit quality, lower charge-offs and lower loan growth during the first nine months of 2025 when compared to the same time period in 2024.

Previous wording

The composition of other operating income for the six- and three-month periods ended June 30, 2025 and 2024 is illustrated in the following table:

Current wording

The composition of other operating income for the nine- and three-month periods ended September 30, 2025 and 2024 is illustrated in the following table:

Previous wording

The composition of other operating expenses for the six- and three-month periods ended June 30, 2025 and 2024 is illustrated in the following table:

Current wording

The composition of other operating expenses for the nine- and three-month periods ended September 30, 2025 and 2024 is illustrated in the following table:

Previous wording

The effective income tax rates as a percentage of income for the six-month periods ended June 30, 2025 and June 30, 2024 were 24.7% and 24.3%, respectively.

Current wording

The effective income tax rates as a percentage of income for the nine-month periods ended September 30, 2025 and September 30, 2024 were 24.7% and 24.6%, respectively.

Previous wording

Total assets at June 30, 2025 were $2.0 billion, representing a $34.4 million increase since December 31, 2024. During the first six months of 2025, the investment portfolio increased by $9.6 million as bonds were purchased to gain yield in anticipation of potential declines in long-term rates. Gross loans increased by $21.7 million. Management expects stronger growth in the second half of the year due to strong loan pipelines. Other assets, including deferred taxes, premises and equipment, bank owned life insurance, pension assets, and accrued interest receivable, increased by $4.0 million.

Current wording

Total assets at September 30, 2025 were $2.0 billion, representing a $51.0 million increase since December 31, 2024. During the first nine months of 2025, the investment portfolio increased by $8.9 million as bonds were purchased to lock in yield in anticipation of potential declines in long-term rates. Gross loans increased by $16.0 million as new production during the nine months of 2025 was mitigated by amortization and increased payoffs. Other assets, including deferred taxes, premises and equipment, bank owned life insurance, pension assets, accrued trust income receivable, and accrued interest receivable, increased by $11.3 million.

Previous wording

Total liabilities at June 30, 2025 were $1.8 billion, representing a $22.6 million increase since December 31, 2024. Total deposits increased by $39.4 million when compared to December 31, 2024 due primarily to $50.0 million in new brokered deposits that were obtained in January 2025 to fund the repayment of the $50.0 million in overnight borrowings that were outstanding at December 31, 2024. Savings and money market accounts increased by $25.4 million and retail time deposits increased by $3.9 million. Interest-bearing demand deposits, primarily our ICS product, decreased by $39.1 million due primarily to seasonal fluctuations in municipal deposit accounts, and non-interest-bearing deposits decreased by $1.0 million due to increased spending by businesses and consumers related to inflation. Short-term borrowings decreased by $14.5 million due to a change in balances of $20.9 million in overnight borrowings, partially offset by an increase in balances of the overnight investment sweep product.

Current wording

Total liabilities at September 30, 2025 were $1.8 billion, representing a $31.1 million increase since December 31, 2024. Total deposits increased by $104.1 million when compared to December 31, 2024. The increase in deposits was primarily driven by $50.0 million in new brokered time deposits obtained in January 2025 to fund the repayment of the $50.0 million in overnight borrowings outstanding at December 31, 2024. In addition, savings and money market accounts increased by $42.0 million, retail time deposits increased by $9.7 million, and non-interest-bearing deposits increased by $3.2 million. Interest-bearing demand deposits, primarily our ICS product, decreased slightly by $0.8 million due primarily to seasonal fluctuations in municipal deposit accounts. Short-term borrowings decreased by $45.2 million due to the purchase of the brokered time deposit discussed above, which was partially offset by increases in the overnight investment sweep product. Long-term borrowings decreased by $25.0 million due to the full repayment of a matured $25.0 million Federal Home Loan Bank borrowing in September 2025.

Previous wording

Outstanding loans of $1.5 billion at June 30, 2025 reflected a $21.7 million increase since December 31, 2024. Since December 31, 2024, commercial real estate loans increased by $24.4 million, acquisition and development loans increased by $3.6 million, commercial and industrial loans decreased by $6.1 million, residential mortgage loans increased by $3.2 million, and consumer loans decreased by $3.4 million.

Current wording

Outstanding loans of $1.5 billion at September 30, 2025 reflected a $16.0 million increase since December 31, 2024. Since December 31, 2024, commercial real estate loans increased by $28.1 million, acquisition and development loans decreased by $1.3 million, commercial and industrial loans decreased by $8.5 million, residential mortgage loans increased by $2.5 million, and consumer loans decreased by $4.8 million.

Previous wording

New consumer mortgage loan production for the second quarter of 2025 was approximately $19.2 million, with most of this production comprised of in-house mortgages. The pipeline of in-house, portfolio loans as of June 30, 2025 was $11.4 million. Unfunded commitments related to residential construction loans totaled $10.0 million at June 30, 2025.

Current wording

New consumer mortgage loan production for the third quarter of 2025 was approximately $20.8 million, most of which was comprised of in-house mortgages booked to our portfolio. The pipeline of in-house, portfolio loans as of September 30, 2025 was $23.0 million. Unfunded commitments related to residential construction loans totaled $12.1 million at September 30, 2025.

Previous wording

Non-accrual loans totaled $3.8 million at June 30, 2025 compared to $4.9 million at December 31, 2024. The decrease in non-accrual balances at June 30, 2025 was related to principal reductions and a payoff of a residential mortgage loan.

Current wording

Non-accrual loans totaled $3.8 million at September 30, 2025 compared to $4.9 million at December 31, 2024. The decrease in non-accrual balances at September 30, 2025 was related to principal paydowns and the charge-off of $0.5 million related to a non-accrual commercial and industrial relationship that was recorded during the third quarter of 2025.

Previous wording

The ACL “base case” model is derived from various economic forecasts provided by widely recognized sources. Management evaluates the variability of market conditions by examining the peak and trough of economic cycles. These peaks and troughs are used to stress the base case model to develop a range of potential outcomes. Management then determines the appropriate reserve through an evaluation of these various outcomes relative to current economic conditions and known risks in the portfolio. For the period ended June 30, 2025, the range of outcomes would produce a 15% reduction or a 58% increase in reserves based on the best-case and worst-case scenarios, respectively.

Current wording

The ACL “base case” model is derived from various economic forecasts provided by widely recognized sources. Management evaluates the variability of market conditions by examining the peak and trough of economic cycles. These peaks and troughs are used to stress the base case model to develop a range of potential outcomes. Management then determines the appropriate reserve through an evaluation of these various outcomes relative to current economic conditions and known risks in the portfolio. For the nine-month period ended September 30, 2025, the range of outcomes would produce a 7% reduction or a 68% increase in reserves based on the best-case and worst-case scenarios, respectively.

Previous wording

The following table presents a summary of the activity in the ACL for the six-month periods ended June 30, 2025 and 2024:

Current wording

The following table presents a summary of the activity in the ACL for the nine-month periods ended September 30, 2025 and 2024:

Previous wording

At June 30, 2025, the total amortized cost basis of the available-for-sale investment portfolio was $122.5 million compared to a fair value of $103.6 million. Unrealized gains and losses on available-for-sale securities are reflected in accumulated other comprehensive loss, a component of shareholders’ equity. The amortized cost basis of the held to maturity portfolio was $175.0 million compared to a fair value of $148.5 million.

Current wording

At September 30, 2025, the total amortized cost basis of the available-for-sale investment portfolio was $123.2 million compared to a fair value of $105.1 million. Unrealized gains and losses on available-for-sale securities are reflected in accumulated other comprehensive loss, a component of shareholders’ equity. The amortized cost basis of the held to maturity portfolio was $172.9 million compared to a fair value of $149.1 million.

Previous wording

Total fair value of investment securities available for sale increased by $9.1 million since December 31, 2024 as cash flow from the portfolio was reinvested into securities at higher yields and to maintain balances for liquidity. At June 30, 2025, the securities classified as available-for-sale included a net unrealized loss of $18.9 million, which represents the difference between the fair value and amortized cost of securities in the portfolio.

Current wording

Total fair value of investment securities available for sale increased by $10.6 million since December 31, 2024 as cash flow from the portfolio was reinvested into securities at higher yields and to maintain balances for liquidity. At September 30, 2025, the securities classified as available-for-sale included a net unrealized loss of $18.1 million, which represents the difference between the fair value and amortized cost of securities in the portfolio.

Previous wording

Total amortized cost of securities held to maturity decreased by $0.5 million since December 31, 2024 as principal paydowns were partially offset by reinvestment in new security purchases.

Current wording

Total amortized cost of securities held to maturity decreased by $2.6 million since December 31, 2024 as principal paydowns were partially offset by reinvestment in new security purchases.

Previous wording

Approximately $88.3 million of the available-for-sale portfolio was valued using Level 2 pricing and had net unrealized losses of $15.4 million at June 30, 2025. The remaining $15.2 million of the available-for-sale securities represents the entire collateralized debt obligation portfolio, which was valued using significant unobservable inputs (Level 3 assets). The $3.5 million in net unrealized losses associated with this portfolio relates to nine pooled trust preferred securities that comprise the collateralized debt obligation portfolio.

Current wording

Approximately $89.8 million of the available-for-sale portfolio was valued using Level 2 pricing and had net unrealized losses of $14.6 million at September 30, 2025. The remaining $15.2 million of the available-for-sale securities represents the entire collateralized debt obligation portfolio, which was valued using significant unobservable inputs (Level 3 assets). The $3.5 million in net unrealized losses associated with this portfolio relates to nine pooled trust preferred securities that comprise the collateralized debt obligation portfolio.

Previous wording

Total deposits at June 30, 2025 increased by $39.4 million when compared to December 31, 2024. In January 2025, $50.0 million in brokered time deposits with an average interest rate of 4.24% were obtained to fund the repayment of $50.0 million in overnight borrowings that were outstanding at December 31, 2024. Savings and money market accounts increased by $25.4 million due primarily to the expansion of current and new relationships throughout the first six months of 2025. Non-interest-bearing checking deposits decreased by $1.0 million and interest-bearing checking deposits decreased by $39.1 million due primarily to seasonal fluctuations in municipal and commercial account balances and increased spending by businesses and consumers related to inflation. Retail time deposits increased by $3.9 million since December 31, 2024.

Current wording

Total deposits at September 30, 2025 increased by $104.1 million when compared to December 31, 2024. In January 2025, $50.0 million in brokered time deposits with an average interest rate of 4.24% were obtained to fund the repayment of $50.0 million in overnight borrowings that were outstanding on December 31, 2024. Savings and money market accounts increased by $42.0 million due primarily to the expansion of current and new relationships throughout the first nine months of 2025. Non-interest-bearing checking deposits increased by $3.2 million and interest-bearing checking deposits decreased by $0.8 million as we experienced seasonal fluctuations in municipal and commercial account balances and increased spending by businesses and consumers related to inflation. Retail time deposits increased by $9.7 million since December 31, 2024.

Previous wording

To manage interest sensitivity risk, management formulates guidelines regarding asset generation and pricing, funding sources and pricing, and off-balance sheet commitments. These guidelines are based on management’s outlook regarding future interest rate movements, the state of the regional and national economy, and other financial and business risk factors. Management uses computer simulations to measure the effect on net interest income of various interest rate scenarios. Key assumptions used in the computer simulations include cash flows and maturities of interest rate sensitive assets and liabilities, changes in asset volumes and pricing, and management’s capital plans. This modeling reflects interest rate changes and the related impact on net interest income over specified periods.

Current wording

To manage interest sensitivity risk, management formulates guidelines regarding asset generation and pricing, funding sources and pricing, and off-balance sheet commitments. These guidelines are based on management’s outlook regarding future interest rate movements, the state of the regional and national economy, and other financial and business risk factors. Management uses computer simulations to measure the effect on net interest income of various interest rate scenarios. Key assumptions used in

Previous wording

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

Current wording

Due to the current rate environment and changes to prepayment speeds, the Corporation became slightly less asset sensitive as of September 30, 2025 when compared to December 31, 2024. All changes in net interest income from our simulation analysis remain within our policy limits.

Previous wording

The Corporation enters into contractual obligations in the normal course of business. Among these obligations are FHLB advances and junior subordinated debentures, operating lease agreements for banking and subsidiaries’ offices and for data processing and telecommunications equipment. Comparing June 30, 2025 to December 31, 2024, short-term borrowings decreased by $14.5 million primarily due to the changes in overnight borrowings outstanding, partially offset by increases in balances of the overnight investment sweep product.

Current wording

The Corporation enters into contractual obligations in the normal course of business. Among these obligations are FHLB advances and junior subordinated debentures, operating lease agreements for banking and subsidiaries’ offices and for data processing and telecommunications equipment. Comparing September 30, 2025 to December 31, 2024, short-term borrowings decreased by $45.2 million primarily due to the repayment of $50.0 million of overnight borrowings outstanding at December 31, 2024 from the purchase of a $50.0 million brokered CD, partially offset by increases in balances of the overnight investment sweep product.

Previous wording

The increase of $19.4 million in commitments at June 30, 2025 when compared to December 31, 2024 was due to new commercial loan commitments originated during 2025. Unfunded commercial real estate construction commitments increased by $11.5 million and unfunded revolving commercial and industrial commitments increased by $10.6 million

Current wording

The increase of $1.7 million in commitments at September 30, 2025 when compared to December 31, 2024 was primarily due to new residential home equity loan commitments originated during 2025.

Previous wording

For the six-month periods ended June 30, 2025 and 2024, net credit loss expense/(credit) for off-balance sheet exposures was approximately $131,000 and ($72,000), respectively. For the three-month periods ended June 30, 2025 and 2024, net credit loss expense/(credit) for off-balance sheet exposures was approximately $132,000 and ($57,000), respectively.

Current wording

For the nine-month periods ended September 30, 2025 and 2024, net credit loss expense/(credit) for off-balance sheet exposures was approximately $118,000 and ($17,000), respectively. For the three-month periods ended September 30, 2025 and 2024, net credit loss (credit)/expense for off-balance sheet exposures was approximately ($13,000) and $55,000, respectively.