10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For quarterly period ended March 31, 2017

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _______________ to ________________

Commission file number 0-14237

First United Corporation

(Exact name of registrant as specified in its charter)

Maryland	52-1380770
(State or other jurisdiction of	(I. R. S. Employer Identification No.)
incorporation or organization)

19 South Second Street, Oakland, Maryland	21550-0009
(Address of principal executive offices)	(Zip Code)

(800) 470-4356

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company þ
Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act. ¨

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 7,052,630 shares of common stock, par value $.01 per share, as of April 30, 2017.

INDEX TO QUARTERLY REPORT

FIRST UNITED CORPORATION

PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (unaudited)	3
	Consolidated Statement of Financial Condition – March 31, 2017 and December 31, 2016	3
	Consolidated Statement of Operations - for the three months ended March 31, 2017 and 2016	4
	Consolidated Statement of Comprehensive Income – for the three months ended March 31, 2017 and 2016	5
	Consolidated Statement of Changes in Shareholders’ Equity - for the three months ended March 31, 2017 and year ended December 31, 2016	6
	Consolidated Statement of Cash Flows - for the three months ended March 31, 2017 and 2016	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	47
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	67
Item 4.	Controls and Procedures	67
PART II.	OTHER INFORMATION	68
Item 1.	Legal Proceedings	68
Item 1A.	Risk Factors	68
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3.	Defaults upon Senior Securities	68
Item 4.	Mine Safety Disclosures	68
Item 5.	Other Information	68
Item 6.	Exhibits	68
SIGNATURES		69
EXHIBIT INDEX		70

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FIRST UNITED CORPORATION

Consolidated Statement of Financial Condition

(In thousands, except per share and percentage data)

	March 31,			December 31,
	2017			2016
	(Unaudited)
Assets
Cash and due from banks	$	60,749		$	60,707
Interest bearing deposits in banks		2,089			2,603
Cash and cash equivalents		62,838			63,310
Investment securities – available-for-sale (at fair value)		136,937			140,000
Investment securities – held to maturity (fair value $98,916 at March 31, 2017 and $97,981 at December 31, 2016)		98,019			97,169
Restricted investment in bank stock, at cost		5,204			5,209
Loans		894,532			891,926
Allowance for loan losses		(11,583	)		(9,918	)
Net loans		882,949			882,008
Premises and equipment, net		28,155			27,160
Goodwill and other intangible assets, net		11,004			11,004
Bank owned life insurance		41,277			40,968
Deferred tax assets		19,001			19,337
Other real estate owned		11,002			10,910
Accrued interest receivable and other assets		23,048			21,115
Total Assets	$	1,319,434		$	1,318,190
Liabilities and Shareholders’ Equity
Liabilities:
Non-interest bearing deposits	$	239,292		$	219,158
Interest bearing deposits		787,576			795,071
Total deposits		1,026,868			1,014,229
Short-term borrowings		35,269			36,000
Long-term borrowings		120,929			131,737
Accrued interest payable and other liabilities		21,484			22,526
Total Liabilities		1,204,550			1,204,492
Shareholders’ Equity:
Preferred stock – no par value; Authorized 2,000 shares of which 30 shares of Series A, $1,000 per share liquidation preference, 9% cumulative, issued and outstanding 10 shares at March 31, 2017 and 20 shares at December 31, 2016		10,000			20,000
Common Stock – par value $.01 per share; Authorized 25,000 shares; issued and outstanding 7,053 shares at March 31, 2017 and 6,269 at December 31, 2016		71			63
Surplus		31,411			22,178
Retained earnings		94,362			92,922
Accumulated other comprehensive loss		(20,960	)		(21,465	)
Total Shareholders’ Equity		114,884			113,698
Total Liabilities and Shareholders’ Equity	$	1,319,434		$	1,318,190

See accompanying notes to the consolidated financial statements

3

FIRST UNITED CORPORATION

Consolidated Statement of Operations

(In thousands, except per share data)

	Three months ended
	March 31,
	2017			2016
	(Unaudited)
Interest income
Interest and fees on loans	$	9,652		$	9,558
Interest on investment securities
Taxable		1,300			1,555
Exempt from federal income tax		231			235
Total investment income		1,531			1,790
Other		144			90
Total interest income		11,327			11,438
Interest expense
Interest on deposits		768			804
Interest on short-term borrowings		16			13
Interest on long-term borrowings		1,174			1,212
Total interest expense		1,958			2,029
Net interest income		9,369			9,409
Provision for loan losses		609			568
Net interest income after provision for loan losses		8,760			8,841
Other operating income
Net gains		5			216
Service charges		735			766
Trust department		1,515			1,417
Debit card income		544			475
Bank owned life insurance		309			319
Brokerage commissions		213			287
Other		136			124
Total other income		3,452			3,388
Total other operating income		3,457			3,604
Other operating expenses
Salaries and employee benefits		5,340			5,311
FDIC premiums		84			414
Equipment		640			635
Occupancy		621			639
Data processing		765			649
Professional Services		253			300
Other real estate owned		174			84
Other		1,567			1,865
Total other operating expenses		9,444			9,897
Income before income tax expense		2,773			2,548
Provision for income tax expense		793			677
Net Income		1,980			1,871
Accumulated preferred stock dividends		(540	)		(675	)
Net Income Available to Common Shareholders	$	1,440		$	1,196
Basic and diluted net income per common share	$	0.22		$	0.19
Weighted average number of basic and diluted shares outstanding		6,530			6,255

See accompanying notes to the consolidated financial statements

4

FIRST UNITED CORPORATION

Consolidated Statement of Comprehensive Income

(In thousands)

	Three months ended
	March 31,
	2017		2016
Comprehensive Income (in thousands)	(Unaudited)
Net Income	$	1,980	$	1,871
Other comprehensive income, net of tax and reclassification adjustments:
Net unrealized gains/(losses) on investments with OTTI		98		(921	)
Net unrealized gains on all other AFS securities		78		434
Net unrealized gains on HTM securities		61		143
Net unrealized gains/(losses) on cash flow hedges		52		(331	)
Net unrealized gains/(losses) on pension		194		(213	)
Net unrealized gains on SERP		22		15
Other comprehensive income/(loss), net of tax		505		(873	)
Comprehensive income	$	2,485	$	998

See accompanying notes to the consolidated financial statements

5

FIRST UNITED CORPORATION

Consolidated Statement of Changes in Shareholders’ Equity

(In thousands)

	Preferred Stock			Common Stock		Surplus		Retained Earnings			Accumulated  Other Comprehensive Loss			Total Shareholders' Equity
	(Unaudited)
Balance at January 1, 2016	$	30,000		$	63	$	21,986	$	87,666		$	(18,944	)	$	120,771
Net income									7,281						7,281
Other comprehensive loss												(2,521	)		(2,521	)
Stock based compensation							192								192
Preferred stock redemption		(10,000	)												(10,000	)
Preferred stock dividends paid									(2,025	)					(2,025	)
Balance at December 31, 2016		20,000			63		22,178		92,922			(21,465	)		113,698
Net income									1,980						1,980
Other comprehensive income												505			505
Stock based compensation							37								37
Common stock issued					8		9,196								9,204
Preferred stock redemption		(10,000	)												(10,000	)
Preferred stock dividends paid									(540	)					(540	)
Balance at March 31, 2017	$	10,000		$	71	$	31,411	$	94,362		$	(20,960	)	$	114,884

See accompanying notes to the consolidated financial statements

6

FIRST UNITED CORPORATION

Consolidated Statement of Cash Flows

(In thousands)

	Three months ended
	March 31,
	2017			2016
	(Unaudited)
Operating activities
Net income	$	1,980		$	1,871
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		609			568
Depreciation		459			426
Stock compensation		37			48
Gain on sales of other real estate owned		(30	)		(67	)
Write-downs of other real estate owned		70			9
Gain on loan sales		(15	)		(12	)
Loss on disposal of fixed assets		1			2
Net amortization of investment securities discounts and premiums- AFS		109			16
Net amortization of investment securities discounts and premiums- HTM		30			0
Losses/(gains) on sales of investment securities – available-for-sale		9			(206	)
Amortization of deferred loan fees		(385	)		(122	)
(Increase)/decrease in accrued interest receivable and other assets		(1,933	)		1,162
Decrease in deferred tax benefit		336			927
Decrease in accrued interest payable and other liabilities		(831	)		(161	)
Earnings on bank owned life insurance		(309	)		(319	)
Net cash provided by operating activities		137			4,142
Investing activities
Proceeds from maturities/calls of investment securities available-for-sale		3,554			11,901
Proceeds from maturities/calls of investment securities held-to-maturity		1,997			4,039
Proceeds from sales of investment securities available-for-sale		3,830			10,771
Purchases of investment securities available-for-sale		(4,145	)		(8,300	)
Purchases of investment securities held-to-maturity		(2,877	)		0
Proceeds from sales of other real estate owned		147			950
Proceeds from loan sales		2,021			1,801
Proceeds from disposal of fixed assets		1			0
Net decrease in FHLB stock		5			23
Net increase in loans		(3,450	)		(23,626	)
Purchases of premises and equipment		(1,456	)		(650	)
Net cash used in by investing activities		(373	)		(3,091	)
Financing activities
Net increase in deposits		12,639			17,036
Preferred stock dividends paid		(540	)		(675	)
Preferred stock redemption		(10,000	)		(10,000	)
Proceeds from sale of common stock		9,349			0
Rights Offering costs		(145	)		0
Net decrease in short-term borrowings		(731	)		(6,274	)
Payments on long-term borrowings		(10,808	)		(18	)
Net cash (used in)/provided by financing activities		(236	)		69
(Decrease)/increase in cash and cash equivalents		(472	)		1,120
Cash and cash equivalents at beginning of the year		63,310			52,141
Cash and cash equivalents at end of period	$	62,838		$	53,261
Supplemental information
Interest paid	$	1,896		$	2,003
Non-cash investing activities:
Transfers from loans to other real estate owned	$	279		$	151

See accompanying notes to the consolidated financial statements

7

FIRST UNITED CORPORATION

NoteS to Consolidated Financial Statements (UNAUDITED)

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements of First United Corporation and its consolidated subsidiaries, including First United Bank & Trust (the “Bank”), have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, as required by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 270, Interim Reporting, and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all the information and footnotes required for annual financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring items, have been included. Operating results for the three-month period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the full year or for any future interim period. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016. For purposes of comparability, certain prior period amounts have been reclassified to conform to the 2017 presentation. Such reclassifications had no impact on net income or equity.

As used in these notes, the term “the Corporation” refers to First United Corporation and, unless the context clearly requires otherwise, its consolidated subsidiaries.

Note 2 – Earnings Per Common Share

Basic earnings per common share is derived by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period and does not include the effect of any potentially dilutive common stock equivalents. Diluted earnings per share is derived by dividing net income available to common shareholders by the weighted-average number of shares outstanding, adjusted for the dilutive effect of outstanding common stock equivalents. There were no common stock equivalents at March 31, 2017 or March 31, 2016.

The following tables set forth the calculation of basic and diluted earnings per common share for the three-month periods ended March 31, 2017 and 2016:

	Three months ended March 31,
	2017							2016
				Average		Per Share					Average		Per Share
(in thousands, except for per share amount)	Income			Shares		Amount		Income			Shares		Amount
Basic and Diluted Earnings Per Share:
Net income	$	1,980						$	1,871
Preferred stock dividends		(540	)						(675	)
Net income available to common shareholders	$	1,440			6,530	$	0.22		1,196			6,255	$	0.19

8

Note 3 – Net Gains

The following table summarizes the gain/(loss) activity for the three-month periods ended March 31, 2017 and 2016:

	Three months ended
	March 31,
(in thousands)	2017			2016
Net gains/(losses):
Available-for-sale securities:
Realized gains	$	8		$	277
Realized losses		(17	)		(71	)
Gain on sale of consumer loans		15			12
Loss on disposal of fixed assets		(1	)		(2	)
Net gains	$	5		$	216

Note 4 – Cash and Cash Equivalents

Cash and due from banks, which represents vault cash in the retail offices and invested cash balances at the Federal Reserve and other correspondent banks, is carried at cost which approximates fair value.

	March 31,		December 31,
(in thousands)	2017		2016
Cash and due from banks, weighted average interest rate of 0.56% (at March 31, 2017)	$	60,749	$	60,707

Interest bearing deposits in banks, which represent funds invested at a correspondent bank, are carried at cost which approximates fair value and, as of March 31, 2017 and December 31, 2016, consisted of daily funds invested at the Federal Home Loan Bank (“FHLB”) of Atlanta and Merchants and Traders (“M&T”).

	March 31,		December 31,
(in thousands)	2017		2016
FHLB daily investments, interest rate of 0.72% (at March 31, 2017)	$	1,075	$	1,590
M&T daily investments, interest rate of 0.15% (at March 31, 2017)		1,014		1,013
	$	2,089	$	2,603

Note 5 – Investments

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

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

9

The following table shows a comparison of amortized cost and fair values of investment securities at March 31, 2017 and December 31, 2016:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI in AOCI
March 31, 2017
Available for Sale:
U.S. government agencies	$	25,000	$	0	$	703	$	24,297	$	0
Commercial mortgage-backed agencies		51,321		0		927		50,394		0
Collateralized mortgage obligations		19,670		11		370		19,311		0
Obligations of states and political subdivisions		22,423		322		167		22,578		0
Collateralized debt obligations		27,790		0		7,433		20,357		(3,797	)
Total available for sale	$	146,204	$	333	$	9,600	$	136,937	$	(3,797	)
Held to Maturity:
U.S. government agencies	$	15,772	$	518	$	0	$	16,290	$	0
Residential mortgage-backed agencies		51,515		145		348		51,312		0
Commercial mortgage-backed agencies		17,509		252		0		17,761		0
Collateralized mortgage obligations		4,593		0		102		4,491		0
Obligations of states and political subdivisions		8,630		517		85		9,062		0
Total held to maturity	$	98,019	$	1,432	$	535	$	98,916	$	0
December 31, 2016
Available for Sale:
U.S. government agencies	$	25,000	$	0	$	747	$	24,253		0
Commercial mortgage-backed agencies		52,978		1		757		52,222		0
Collateralized mortgage obligations		19,953		13		399		19,567		0
Obligations of states and political subdivisions		23,700		255		251		23,704		0
Collateralized debt obligations		27,930		0		7,676		20,254		(3,961	)
Total available for sale	$	149,561	$	269	$	9,830	$	140,000	$	(3,961	)
Held to Maturity:
U.S. government agencies	$	15,738	$	512	$	0	$	16,250	$	0
Residential mortgage-backed agencies		50,384		160		279		50,265		0
Commercial mortgage-backed agencies		17,584		248		0		17,832		0
Collateralized mortgage obligations		4,833		0		149		4,684		0
Obligations of states and political subdivisions		8,630		490		170		8,950		0
Total held to maturity	$	97,169	$	1,410	$	598	$	97,981	$	0

Proceeds from sales of available for sale securities and the realized gains and losses are as follows:

	Three months ended
	March 31,
(in thousands)	2017		2016
Proceeds	$	3,830	$	10,771
Realized gains		8		277
Realized losses		17		71

10

The following table shows the Corporation’s investment securities with gross unrealized losses and fair values at March 31, 2017 and December 31, 2016, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:

	Less than 12 months				12 months or more
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2017
Available for Sale:
U.S. government agencies	$	24,297	$	703	$	0	$	0
Commercial mortgage-backed agencies		50,394		927		0		0
Collateralized mortgage obligations		18,445		370		0		0
Obligations of states and political subdivisions		6,660		104		2,979		63
Collateralized debt obligations		0		0		20,357		7,433
Total available for sale	$	99,796	$	2,104	$	23,336	$	7,496
Held to Maturity:
Residential mortgage-backed agencies	$	22,960	$	348	$	0	$	0
Collateralized mortgage obligations		4,491		102		0		0
Obligations of states and political subdivisions		2,420		85		0		0
Total held to maturity	$	29,871	$	535	$	0	$	0

December 31, 2016
Available for Sale:
U.S. government agencies	$	24,253	$	747	$	0	$	0
Commercial mortgage-backed agencies		51,604		757		0		0
Collateralized mortgage obligations		14,706		399		0		0
Obligations of states and political subdivisions		8,079		160		2,934		91
Collateralized debt obligations		0		0		20,254		7,676
Total available for sale	$	98,642	$	2,063	$	23,188	$	7,767
Held to Maturity:
Residential mortgage-backed agencies	$	20,899	$	279	$	0	$	0
Commercial mortgage-backed agencies		4,684		149		0		0
Obligations of states and political subdivisions		2,335		170		0		0
Total held to maturity	$	27,918	$	598	$	0	$	0

Management systematically evaluates securities for impairment on a quarterly basis. Based upon application of accounting guidance for subsequent measurement in ASC Topic 320 (ASC Section 320-10-35), management assesses whether (a) the Corporation has the intent to sell a security being evaluated and (b) it is more likely than not that the Corporation will be required to sell the security prior to its anticipated recovery. If neither applies, then declines in the fair values of securities below their cost that are considered other-than-temporary declines are split into two components. The first is the loss attributable to declining credit quality. Credit losses are recognized in earnings as realized losses in the period in which the impairment determination is made. The second component consists of all other losses, which are recognized in other comprehensive loss. In estimating other than temporary impairment (“OTTI”) losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) adverse conditions specifically related to the security, an industry, or a geographic area, (3) the historic and implied volatility of the fair value of the security, (4) changes in the rating of the security by a rating agency, (5) recoveries or additional declines in fair value subsequent to the balance sheet date, (6) failure of the issuer of the security to make scheduled interest or principal payments, and (7) the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future. Management also monitors cash flow projections for securities that are considered beneficial interests under the guidance of ASC Subtopic 325-40, Investments – Other – Beneficial Interests in Securitized Financial Assets, (ASC Section 325-40-35). Further discussion about the evaluation of securities for impairment can be found in Item 2 of Part I of this report under the heading “Investment Securities”.

11

Management believes that the valuation of certain securities is a critical accounting policy that requires significant estimates in preparation of the Corporation’s consolidated financial statements. Management utilizes an independent third party to prepare both the impairment valuations and fair value determinations for the Corporation’s collateralized debt obligation (“CDO”) portfolio consisting of pooled trust preferred securities. Based on management’s review of the assumptions and results of the third-party review, it believes that the valuations are adequate at March 31, 2017.

U.S. Government Agencies – Available for Sale – There were four U.S. government agencies in an unrealized loss position for less than 12 months as of March 31, 2017. The securities are of investment grade and the Corporation does not intend to sell them, and it is not more than likely than not that the Corporation will be required to sell them before recovery of their amortized cost basis, which may be at maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at March 31, 2017. There were no U.S. government agency investments in an unrealized loss position for more than 12 months as of March 31, 2017.

Commercial Mortgage-Backed Agencies – Available for Sale – There were 10 commercial mortgage-backed agencies in an unrealized loss position for less than 12 months as of March 31, 2017. The securities are of the highest investment grade and the Corporation has the intent and ability to hold the investments to maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at March 31, 2017. There were no commercial mortgage-backed agencies in an unrealized loss position for more than 12 months as of March 31, 2017.

Collateralized Mortgage Obligations – Available for Sale – There were four collateralized mortgage obligations in an unrealized loss position for less than 12 months as of March 31, 2017. The securities are of the highest investment grade and the Corporation has the intent and ability to hold the investments to maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at March 31, 2017. There were no collateralized mortgage obligations in an unrealized loss position for more than 12 months as of March 31, 2017.

Obligations of State and Political Subdivisions – Available for Sale – There were three obligations of state and political subdivisions that have been in an unrealized loss position for less than 12 months and two securities that have been in an unrealized loss position for 12 months or more at March 31, 2017. These investments are of investment grade as determined by the major rating agencies and management reviews the ratings of the underlying issuers and performs an in-depth credit analysis on the securities. Management believes that this portfolio is well-diversified throughout the United States, and all bonds continue to perform according to their contractual terms. The Corporation does not intend to sell these investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at March 31, 2017.

Collateralized Debt Obligations – Available for Sale - The $7.4 million in unrealized losses greater than 12 months at March 31, 2017 relates to 1 pooled trust preferred securities that are included in the CDO portfolio. See Note 9 for a discussion of the methodology used by management to determine the fair values of these securities. Based upon a review of credit quality and the cash flow tests performed by the independent third party, management determined that there were no securities that had credit-related non-cash OTTI charges during the first three months of 2017. The unrealized losses on the remaining securities in the portfolio are primarily attributable to continued depression in marketability, liquidity and the current economic environment.

U.S. Government Agencies – Held to Maturity – There were no U.S. government agencies in an unrealized loss position as of March 31, 2017.

Residential Mortgage-Backed Agencies – Held to Maturity - Nineteen residential mortgage-backed agencies have been in an unrealized loss position for less than 12 months as of March 31, 2017. The securities are of the highest investment grade and the Corporation has the intent and ability to hold the investments to maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at March 31, 2017. There were no mortgage-backed agency investments in an unrealized loss position for more than 12 months as of March 31, 2017.

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Commercial Mortgage-Backed Agencies – Held to Maturity - There were no collateralized mortgage-backed agency investments in an unrealized loss position as of March 31, 2017.

Collateralized Mortgage Obligations – Held to Maturity – There was one collateralized mortgage obligation in an unrealized loss position for less than 12 months as of March 31, 2017. The security is of the highest investment grade and the Corporation has the intent and ability to hold the investment to maturity. Accordingly, management does not consider this investment to be other-than-temporarily impaired at March 31, 2017. There were no collateralized mortgage obligations in a loss position for more than 12 months as of March 31, 2017.

Obligations of State and Political Subdivisions – Held to Maturity –There was one obligation of state and political subdivisions that has been in an unrealized loss for less than 12 months. This bond is a Tax Increment Fund (TIF) bond. Management performs an in-depth credit analysis on this security. The Corporation has the intent and ability to hold the investment to maturity. Accordingly, management does not consider this investment to be other-than-temporarily impaired at March 31, 2017. No obligations of state and political subdivisions securities have been in an unrealized loss position for more than 12 months as of March 31, 2017.

The following tables present a cumulative roll-forward of the amount of non-cash OTTI charges related to credit losses which have been recognized in earnings for the trust preferred securities in the CDO portfolio held and not intended to be sold for the three-month periods ended March 31, 2017 and 2016:

	Three months ended March 31,
(in thousands)	2017			2016
Balance of credit-related OTTI at January 1	$	3,124		$	3,133
Reduction for increases in cash flows expected to be collected		(2	)		(36	)
Balance of credit-related OTTI at March 31	$	3,122		$	3,097

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The amortized cost and estimated fair value of securities by contractual maturity at March 31, 2017 are shown in the following table. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

	March 31, 2017
(in thousands)	Amortized Cost		Fair Value
Contractual Maturity
Available for sale:
Due after one year through five years	$	10,662	$	10,541
Due after five years through ten years		18,687		18,174
Due after ten years		45,864		38,517
		75,213		67,232
Commercial mortgage-backed agencies		51,321		50,394
Collateralized mortgage obligations		19,670		19,311
Total available for sale	$	146,204	$	136,937
Held to Maturity:
Due after five years through ten years	$	15,772	$	16,290
Due after ten years		8,630		9,062
		24,402		25,352
Residential mortgage-backed agencies	$	51,515	$	51,312
Commercial mortgage-backed agencies		17,509		17,761
Collateralized mortgage obligations		4,593		4,491
Total held to maturity	$	98,019	$	98,916

Note 6 – Restricted Investment in Bank Stock

Restricted stock, which represents required investments in the common stock of the FHLB of Atlanta, Atlantic Community Bankers Bank (“ACBB”) and Community Bankers Bank (“CBB”), is carried at cost and is considered a long-term investment.

Management evaluates the restricted stock for impairment in accordance with ASC Industry Topic 942, Financial Services – Depository and Lending- (ASC Section 942-325-35). Management’s evaluation of potential impairment is based on management’s assessment of the ultimate recoverability of the cost of the restricted stock rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability is influenced by criteria such as (a) the significance of the decline in net assets of the issuing bank as compared to the capital stock amount for that bank and the length of time this situation has persisted, (b) commitments by the issuing bank to make payments required by law or regulation and the level of such payments in relation to the operating performance of that bank, and (c) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the issuing bank. Management has evaluated the restricted stock for impairment and believes that no impairment charge is necessary as of March 31, 2017.

The Corporation recognizes dividends received on its restricted stock investments on a cash basis. For the three months ended March 31, 2017, dividends of $67,219 were recognized in earnings. For the comparable period of 2016, dividends of $67,758 were recognized in earnings.

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Note 7 – Loans and Related Allowance for Loan Losses

The following table summarizes the primary segments of the loan portfolio at March 31, 2017 and December 31, 2016:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Total
March 31, 2017
Individually evaluated for impairment	$	14,054	$	2,420	$	290	$	4,090	$	0	$	20,854
Collectively evaluated for impairment	$	280,727	$	104,988	$	74,303	$	389,898	$	23,762	$	873,678
Total loans	$	294,781	$	107,408	$	74,593	$	393,988	$	23,762	$	894,532
December 31, 2016
Individually evaluated for impairment	$	17,210	$	2,525	$	290	$	3,975	$	0	$	24,000
Collectively evaluated for impairment	$	280,749	$	101,757	$	72,056	$	389,441	$	23,923	$	867,926
Total loans	$	297,959	$	104,282	$	72,346	$	393,416	$	23,923	$	891,926

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

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

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as bankruptcy, repossession, or death occurs to raise awareness of a possible credit event. The Bank’s Commercial Loan Officers are responsible for the timely and accurate risk rating of the loans in the commercial segments at origination and on an ongoing basis. The Bank’s experienced Credit Quality and Loan Review Departments perform an annual review of all commercial relationships of $500,000 or greater. Confirmation of the appropriate risk grade is included as part of the review process on an ongoing basis. The Credit Quality and Loan Review Departments continually review and assess loans within the portfolio. In addition, the Bank engages an external consultant to conduct loan reviews on at least an annual basis. Generally, the external consultant reviews commercial relationships greater than $1,000,000 and/or criticized non-consumer loans greater than $500,000. Detailed reviews, including plans for resolution, are performed on loans classified as Substandard on a quarterly basis. Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

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The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention and Substandard within the internal risk rating system at March 31, 2017 and December 31, 2016:

(in thousands)	Pass		Special Mention		Substandard		Total
March 31, 2017
Commercial real estate
Non owner-occupied	$	137,837	$	9,083	$	9,881	$	156,801
All other CRE		125,049		207		12,724		137,980
Acquisition and development
1-4 family residential construction		15,630		0		0		15,630
All other A&D		90,503		62		1,213		91,778
Commercial and industrial		73,029		43		1,521		74,593
Residential mortgage
Residential mortgage - term		312,279		0		7,481		319,760
Residential mortgage - home equity		72,849		0		1,379		74,228
Consumer		23,630		0		132		23,762
Total	$	850,806	$	9,395	$	34,331	$	894,532
December 31, 2016
Commercial real estate
Non owner-occupied	$	137,181	$	10,620	$	9,357	$	157,158
All other CRE		125,720		3,121		11,960		140,801
Acquisition and development
1-4 family residential construction		15,845		0		0		15,845
All other A&D		87,135		65		1,237		88,437
Commercial and industrial		70,613		593		1,140		72,346
Residential mortgage
Residential mortgage - term		308,734		113		7,618		316,465
Residential mortgage - home equity		75,710		0		1,241		76,951
Consumer		23,794		0		129		23,923
Total	$	844,732	$	14,512	$	32,682	$	891,926

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. A loan is considered to be past due when a payment remains unpaid 30 days past its contractual due date. For all loan segments, the accrual of interest is discontinued when principal or interest is delinquent for 90 days or more unless the loan is well-secured and in the process of collection. All non-accrual loans are considered to be impaired. Interest payments received on non-accrual loans are applied as a reduction of the loan principal balance. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. The Corporation’s policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition.

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The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans at March 31, 2017 and December 31, 2016:

(in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days+ Past Due		Total Past Due and Accruing		Non-Accrual		Total Loans
March 31, 2017
Commercial real estate
Non owner-occupied	$	150,968	$	229	$	126	$	0	$	355	$	5,478	$	156,801
All other CRE		134,089		0		273		0		273		3,618		137,980
Acquisition and development
1-4 family residential construction		15,630		0		0		0		0		0		15,630
All other A&D		91,626		102		0		0		102		50		91,778
Commercial and industrial		74,558		0		25		10		35		0		74,593
Residential mortgage
Residential mortgage - term		316,129		1,887		208		84		2,179		1,452		319,760
Residential mortgage - home equity		72,983		718		158		74		950		295		74,228
Consumer		23,584		127		23		28		178		0		23,762
Total	$	879,567	$	3,063	$	813	$	196	$	4,072	$	10,893	$	894,532
December 31, 2016
Commercial real estate
Non owner-occupied	$	150,595	$	182	$	0	$	0	$	182	$	6,381	$	157,158
All other CRE		134,931		40		0		0		40		5,830		140,801
Acquisition and development
1-4 family residential construction		15,845		0		0		0		0		0		15,845
All other A&D		88,353		0		39		0		39		45		88,437
Commercial and industrial		72,324		9		2		11		22		0		72,346
Residential mortgage
Residential mortgage - term		310,721		517		3,376		312		4,205		1,539		316,465
Residential mortgage - home equity		75,558		974		198		70		1,242		151		76,951
Consumer		23,662		186		48		27		261		0		23,923
Total	$	871,989	$	1,908	$	3,663	$	420	$	5,991	$	13,946	$	891,926

Non-accrual loans totaled $10.9 million at March 31, 2017 compared to $13.9 million at December 31, 2016. The decrease in non-accrual balances at March 31, 2017 was primarily due to paydowns of $2.5 million on one large relationship. Non-accrual loans which have been subject to a partial charge-off totaled $7.8 million at March 31, 2017 compared to $11.1 million at December 31, 2016. Loans secured by 1-4 family residential real estate properties in the process of foreclosure were $.3 million at March 31, 2017 and $.5 million at December 31, 2016.

Accruing loans past due 30 days or more decreased to .46% of the loan portfolio at March 31, 2017, compared to .67% at December 31, 2016. The decrease for the first three months of 2017 was due primarily to improvements in the residential mortgage and home equity portfolios.

An allowance for loan losses (“ALL”) is maintained to absorb losses from the loan portfolio. The ALL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans.

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The Bank’s methodology for determining the ALL is based on the requirements of ASC Section 310-10-35, Receivables-Overall-Subsequent Measurement, for loans individually evaluated for impairment and ASC Subtopic 450-20, Contingencies-Loss Contingencies, for loans collectively evaluated for impairment, as well as the Interagency Policy Statement on the Allowance for Loan and Lease Losses and other bank regulatory guidance. The total of the two components represents the allocated portion of the Bank’s ALL. In the second quarter of 2015, management determined that it would be prudent to establish an unallocated portion of the ALL to protect the Bank from other risks associated with the loan portfolio that may not be specifically identifiable.

The following table summarizes the primary segments of the ALL at March 31, 2017 and December 31, 2016, segregated by the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Unallocated		Total
March 31, 2017
Individually evaluated for impairment	$	1,795	$	38	$	0	$	117	$	0	$	0	$	1,950
Collectively evaluated for impairment	$	3,772	$	845	$	936	$	3,385	$	195	$	500	$	9,633
Total ALL	$	5,567	$	883	$	936	$	3,502	$	195	$	500	$	11,583
December 31, 2016
Individually evaluated for impairment	$	177	$	40	$	0	$	43	$	0	$	0	$	260
Collectively evaluated for impairment	$	3,736	$	831	$	858	$	3,545	$	188	$	500	$	9,658
Total ALL	$	3,913	$	871	$	858	$	3,588	$	188	$	500	$	9,918

Management uses the following methodology for determining impairment on consumer and commercial loans. All nonaccrual loans and all loans designated as “troubled debt restructures” (TDRs) are considered to be impaired. Additionally, an impairment evaluation is performed on any account which meets the following criteria: commercial loans which are risk related substandard with a balance greater than or equal to $500,000 OR which are part of relationship which is $750,000 or greater AND which are 60 days or greater delinquent. For those loans which are not classified as nonaccrual or troubled debt restructures, a judgment is made as to the likelihood that contractual principal and interest will be collected. Loans are considered to be impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods: (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs. The method is selected on a loan-by-loan basis, with management primarily utilizing the fair value of collateral method. A valuation grid for impaired loans is used to determine when or how collateral values are to be updated based on size and collateral dependency for commercial loans and foreclosure status for consumer loans. If an updated appraisal has not been received and reviewed in time for the determination of estimated fair value at quarter (or year) end, or if the appraisal is found to be deficient following the Corporation’s internal appraisal review process and re-ordered, then the estimated fair value of the collateral is determined by adjusting the existing appraisal by the appropriate percentage from an internally prepared appraisal discount grid. This grid considers the age of a third party appraisal and the geographic region where the collateral is located. The discount rates in the appraisal discount grid are updated periodically to reflect the most current knowledge that management has available, including the results of current appraisals. A specific allocation of the ALL is recorded if there is any deficiency in collateral value determined by comparing the estimated fair value to the recorded investment of the loan. When updated appraisals are received and reviewed, adjustments are made to the specific allocation as needed.

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

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary at March 31, 2017 and December 31, 2016:

	Impaired Loans with Specific Allowance				Impaired Loans with No Specific Allowance		Total Impaired Loans
(in thousands)	Recorded Investment		Related Allowances		Recorded Investment		Recorded Investment		Unpaid Principal Balance
March 31, 2017
Commercial real estate
Non owner-occupied	$	5,607	$	1,641	$	251	$	5,858	$	8,831
All other CRE		432		154		7,764		8,196		8,809
Acquisition and development
1-4 family residential construction		0		0		582		582		582
All other A&D		244		38		1,594		1,838		2,112
Commercial and industrial		0		0		290		290		2,504
Residential mortgage
Residential mortgage - term		445		50		3,349		3,794		4,124
Residential mortgage – home equity		144		67		152		296		331
Consumer		0		0		0		0		0
Total impaired loans	$	6,872	$	1,950	$	13,982	$	20,854	$	27,293
December 31, 2016
Commercial real estate
Non owner-occupied	$	131	$	23	$	6,635	$	6,766	$	9,372
All other CRE		432		154		10,012		10,444		11,057
Acquisition and development
1-4 family residential construction		0		0		582		582		628
All other A&D		245		40		1,698		1,943		2,213
Commercial and industrial		0		0		290		290		2,504
Residential mortgage
Residential mortgage - term		61		43		3,763		3,824		4,249
Residential mortgage – home equity		0		0		151		151		168
Consumer		0		0		0		0		0
Total impaired loans	$	869	$	260	$	23,131	$	24,000	$	30,191

The reduction in impaired loans with no specific allowance was due to the paydown of a large non-accrual loan in the all other CRE portfolio and the movement of loan balances to impaired loans with a specific allowance due to a specific allocation placed on a large participation loan on a mall in Pennsylvania.

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

The classes described above, which are based on the Federal call code assigned to each loan, provide the starting point for the ALL analysis. Management tracks the historical net charge-off activity (full and partial charge-offs, net of full and partial recoveries) at the call code level. A historical charge-off factor is calculated utilizing a defined number of consecutive historical quarters. Consumer pools currently utilize a rolling 12 quarters, while Commercial pools currently utilize a rolling eight quarters.

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“Pass” rated credits are segregated from “Criticized” credits for the application of qualitative factors. “Pass” pools for commercial and residential real estate are further segmented based upon the geographic location of the underlying collateral. There are seven geographic regions utilized – six that represent the Bank’s lending footprint and a seventh for all out-of-market credits. Different economic environments and resultant credit risks exist in each region that are acknowledged in the assignment of qualitative factors. Loans in the criticized pools, which possess certain qualities or characteristics that may lead to collection and loss issues, are closely monitored by management and subject to additional qualitative factors.

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

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

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The following tables present the activity in the ALL for the three-month periods ended March 31, 2017 and 2016:

(in thousands)	Commercial Real Estate			Acquisition and  Development			Commercial and Industrial			Residential Mortgage			Consumer			Unallocated		Total
ALL balance at January 1, 2017	$	3,913		$	871		$	858		$	3,588		$	188		$	500	$	9,918
Charge-offs		(429	)		(18	)		(33	)		(148	)		(84	)		0		(712	)
Recoveries		5			11			1,455			220			77			0		1,768
Provision		2,078			19			(1,344	)		(158	)		14			0		609
ALL balance at March 31, 2017	$	5,567		$	883		$	936		$	3,502		$	195		$	500	$	11,583
ALL balance at January 1, 2016	$	2,580		$	4,129		$	722		$	3,785		$	206		$	500	$	11,922
Charge-offs		(211	)		0			(53	)		(90	)		(84	)		0		(438	)
Recoveries		0			100			30			32			42			0		204
Provision		931			(482	)		59			32			28			0		568
ALL balance at March 31, 2016	$	3,300		$	3,747		$	758		$	3,759		$	192		$	500	$	12,256

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

As indicated in the table above, provision expense for the first quarter of 2017 was primarily driven by a specific allocation placed on a large participation loan on a mall in Pennsylvania in the CRE portfolio, offset by a net recovery of $1.3 million in the C&I portfolio relating to a prior charge-off on a loan to an ethanol plant.

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

	Three months ended						Three months ended
	March 31, 2017						March 31, 2016
(in thousands)	Average investment		Interest income recognized on an accrual basis		Interest income recognized on  a cash basis		Average investment		Interest income recognized on an accrual basis		Interest income recognized on  a cash basis
Commercial real estate
Non owner-occupied	$	6,366	$	6	$	0	$	1,597	$	6	$	0
All other CRE		9,320		53		0		13,093		37		0
Acquisition and development
1-4 family residential construction		582		6		0		700		8		0
All other A&D		1,891		23		0		3,869		24		0
Commercial and industrial		290		3		0		1,071		9		0
Residential mortgage
Residential mortgage - term		4,018		33		0		4,519		39		4
Residential mortgage – home equity		224		0		0		298		0		0
Consumer		0		0		0		0		0		0
Total	$	22,691	$	124	$	0	$	25,147	$	123	$	4

21

In the normal course of business, the Bank modifies loan terms for various reasons. These reasons may include as a retention strategy, remaining competitive in the current interest rate environment, and re-amortizing or extending a loan term to better match the loan’s payment stream with the borrower’s cash flows. A modified loan is considered to be a troubled debt restructuring (“TDR”) when the Bank has determined that the borrower is troubled (i.e., experiencing financial difficulties). The Bank evaluates the probability that the borrower will be in payment default on any of its debt obligations in the foreseeable future without modification. To make this determination, the Bank performs a global financial review of the borrower and loan guarantors to assess their current ability to meet their financial obligations.

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

All loans designated as TDRs are considered impaired loans and may be in either accruing or non-accruing status. The Bank’s policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition. Accordingly, the accrual of interest is discontinued when principal or interest is delinquent for 90 days or more unless the loan is well-secured and in the process of collection. If the loan was accruing at the time of the modification, then it continues to be in accruing status subsequent to the modification. Non-accrual TDRs may return to accruing status when there has been sufficient payment performance for a period of at least six months. TDRs are considered to be in payment default if, subsequent to modification, the loans are transferred to non-accrual status or to foreclosure. Loans may be removed from being reported as a TDR in the calendar year following the modification if the interest rate at the time of modification was consistent with the interest rate for a loan with comparable credit risk and the loan has performed according to its modified terms for at least six months.

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

The following tables present the volume and recorded investment at the time of modification of TDRs by class and type of modification that occurred during the periods indicated:

	Temporary Rate Modification				Extension of Maturity				Modification of Payment and Other Terms
(in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Three months ended March 31, 2017
Commercial real estate
Non owner-occupied		0	$	0		0	$	0		0	$	0
All other CRE		0		0		0		0		0		0
Acquisition and development
1-4 family residential construction		0		0		0		0		0		0
All other A&D		0		0		1		244		0		0
Commercial and industrial		0		0		0		0		0		0
Residential mortgage
Residential mortgage – term		0		0		1		259		0		0
Residential mortgage – home equity		0		0		0		0		0		0
Consumer		0		0		0		0		0		0
Total		0	$	0		2	$	503		0	$	0

22

	Temporary Rate Modification				Extension of Maturity				Modification of Payment and Other Terms
(in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Three months ended March 31, 2016
Commercial real estate
Non owner-occupied		0	$	0		0	$	0		0	$	0
All other CRE		0		0		1		203		0		0
Acquisition and development
1-4 family residential construction		0		0		0		0		0		0
All other A&D		0		0		0		0		0		0
Commercial and industrial		0		0		0		0		1		486
Residential mortgage
Residential mortgage – term		0		0		0		0		1		72
Residential mortgage – home equity		0		0		0		0		0		0
Consumer		0		0		0		0		0		0
Total		0	$	0		1	$	203		2	$	558

During the three months ended March 31, 2017, there were no new TDRs and two existing TDRs which had reached their original modification maturity were re-modified. These re-modifications did not impact the ALL. During the three months ended March 31, 2017, there were no payment defaults.

During the three months ended March 31, 2016, there were two new TDRs. In addition, one existing TDR which had reached its original modification maturity was re-modified. A $2,387 reduction of the ALL resulted from a change to the impairment evaluation of two loans from evaluated collectively to being evaluated individually. During the three months ended March 31, 2016, there were no payment defaults.

Note 8 – Other Real Estate Owned

The following table presents the components of other real estate owned (“OREO”) at March 31, 2017 and December 31, 2016:

(in thousands)	March 31, 2017		December 31, 2016
Commercial real estate	$	4,028	$	3,803
Acquisition and development		5,757		5,944
Residential mortgage		1,217		1,163
Total OREO	$	11,002	$	10,910

The following table presents the activity in the OREO valuation allowance for the three-month periods ended March 31, 2017 and 2016:

	For the Three Months Ended
	March 31,
(in thousands)	2017			2016
Balance beginning of period	$	3,535		$	4,430
Fair value write-down		70			9
Sales of OREO		(289	)		(615	)
Balance at end of period	$	3,316		$	3,824

23

The following table presents the components of OREO expenses, net, for the three-month periods ended March 31, 2017 and 2016:

	For the Three Months Ended
	March 31,
(in thousands)	2017			2016
Gains on real estate, net	$	(30	)	$	(67	)
Fair value write-down, net		70			9
Expenses, net		169			169
Rental and other income		(35	)		(27	)
Total OREO expense, net	$	174		$	84

Note 9 – Fair Value of Financial Instruments

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

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

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

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

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

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

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

24

Management believes that the Corporation’s valuation techniques are appropriate and consistent with the techniques used by other market participants. However, the use of different methodologies and assumptions could result in a different estimate of fair values at the reporting date. The valuation techniques used by the Corporation to measure, on a recurring and non-recurring basis, the fair value of assets as of March 31, 2017 are discussed in the paragraphs that follow.

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

The fair value of investments is determined using a market approach. As of March 31, 2017, the U.S. Government agencies, residential and commercial mortgage-backed securities, collateralized mortgage obligations, and state and political subdivisions bonds segments are classified as Level 2 within the valuation hierarchy. Their fair values were determined based upon market-corroborated inputs and valuation matrices, which were obtained through third party data service providers or securities brokers through which the Corporation has historically transacted both purchases and sales of investment securities.

The CDO segment, which consists of pooled trust preferred securities issued by banks, thrifts and insurance companies, is classified as Level 3 within the valuation hierarchy. At March 31, 2017, the Corporation owned 12 pooled trust preferred securities with an amortized cost of $27.8 million and a fair value of $20.4 million. The market for these securities at March 31, 2017 is not active and markets for similar securities are also not active. The inactivity was evidenced first by a significant widening of the bid-ask spread in the brokered markets in which these securities trade and then by a significant decrease in the volume of trades relative to historical levels. The new issue market is also inactive, as few CDOs have been issued since 2007. There are currently very few market participants who are willing to effect transactions in these securities. The market values for these securities or any securities other than those issued or guaranteed by the U.S. Department of the Treasury (the “Treasury”) are depressed relative to historical levels. Therefore, in the current market, a low market price for a particular bond may only provide evidence of stress in the credit markets in general rather than being an indicator of credit problems with a particular issue. Given the conditions in the current debt markets and the absence of observable transactions in the secondary and new issue markets, management has determined that (a) the few observable transactions and market quotations that are available are not reliable for the purpose of obtaining fair value at March 31, 2017, (b) an income valuation approach technique (i.e. present value) that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs will be equally or more representative of fair value than a market approach, and (c) the CDO segment is appropriately classified within Level 3 of the valuation hierarchy because management determined that significant adjustments were required to determine fair value at the measurement date.

Management relies on an independent third party to prepare both the evaluations of OTTI as well as the fair value determinations for its CDO portfolio. Management believes that the valuations are adequately reflected at March 31, 2017.

The approach used by the third party to determine fair value involved several steps, which included detailed credit and structural evaluation of each piece of collateral in each bond, projection of default, recovery and prepayment/amortization probabilities for each piece of collateral in the bond, and discounted cash flow modeling. The discount rate methodology used by the third party combines a baseline current market yield for comparable corporate and structured credit products with adjustments based on evaluations of the differences found in structure and risks associated with actual and projected credit performance of each CDO being valued.  Currently, the only active and liquid trading market that exists is for stand-alone trust preferred securities, with a limited market for highly-rated CDO securities that are more senior in the capital structure than the securities in the CDO portfolio.  Therefore, adjustments to the baseline discount rate are also made to reflect the additional leverage found in structured instruments.

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

25

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

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

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of March 31, 2017 and December 31, 2016, the significant unobservable inputs used in the fair value measurements were as follows:

(in thousands)	Fair Value at March 31, 2017		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale	$	20,357	Discounted Cash Flow	Discount Rate	Range of LIBOR+ 4.50% to 5.50%
Non-recurring:
Impaired Loans	$	5,401	Market Comparable Properties	Marketability Discount	10.0% - 15.1% (1) (weighted avg 10.0%)
Other Real Estate Owned	$	30	Market Comparable Properties	Marketability Discount	15%

(in thousands)		Fair Value at December 31, 2016	Valuation Technique		Significant Unobservable Inputs	Significant  Unobservable Input Value
Recurring:
Investment Securities – available for sale	$	20,254		Discounted Cash Flow	Discount Rate	Range of LIBOR+ 4.5% to 5.5%
Non-recurring:
Impaired Loans	$	14,537		Market Comparable Properties	Marketability Discount	4.6% - 31.0% (1)  (weighted avg 6.5%)
Other Real Estate Owned	$	1,201		Market Comparable Properties	Marketability Discount	15%

NOTE:

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

26

For assets measured at fair value on a recurring and non-recurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2017 and December 31, 2016 are as follows:

			Fair Value Measurements at March 31, 2017 Using
	Assets Measured at  Fair Value		Quoted Prices in Active Markets for Identical Assets	Significant  Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	03/31/2017		(Level 1)	(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	24,297		$	24,297
Commercial mortgage-backed agencies	$	50,394		$	50,394
Collateralized mortgage obligations	$	19,311		$	19,311
Obligations of states and political subdivisions	$	22,578		$	22,578
Collateralized debt obligations	$	20,357				$	20,357
Financial Derivatives	$	786		$	786	$
Non-recurring:
Impaired loans	$	5,401				$	5,401
Other real estate owned	$	30				$	30

			Fair Value Measurements at December 31, 2016 Using
	Assets Measured at  Fair Value		Quoted Prices in Active Markets for Identical Assets	Significant Other Observable  Inputs		Significant Unobservable Inputs
(in thousands)	12/31/2016		(Level 1)	(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	24,253		$	24,253
Commercial mortgage-backed agencies	$	52,222		$	52,222
Collateralized mortgage obligations	$	19,567		$	19,567
Obligations of states and political subdivisions	$	23,704		$	23,704
Collateralized debt obligations	$	20,254				$	20,254
Financial Derivative	$	700				$	700
Non-recurring:
Impaired loans	$	14,537				$	14,537
Other real estate owned	$	1,201				$	1,201

There were no transfers of assets between any of the fair value hierarchy for the three-month periods ended March 31, 2017 and 2016.

27

The following tables show a reconciliation of the beginning and ending balances for fair valued assets measured on a recurring basis using Level 3 significant unobservable inputs for the three-month periods ended March 31, 2017 and 2016:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In thousands)	Investment Securities  Available for Sale
Beginning balance January 1, 2017	$	20,254
Total gains realized/unrealized:
Included in other comprehensive income		103
Ending balance March 31, 2017	$	20,357

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(in thousands)	Investment Securities Available for Sale			Cash Flow Hedge
Beginning balance January 1, 2016	$	22,211		$	(66	)
Total (losses)/gains realized/unrealized:
Included in other comprehensive loss		(2,679	)		33
Ending balance March 31, 2016	$	19,532		$	(33	)

Gains (realized and unrealized) included in earnings for the periods identified above are reported in the Consolidated Statement of Operations in Other Operating Income. There were no gains or losses included in earnings attributable to the change in realized/unrealized gains or losses related to the assets for the three- month periods ended March 31, 2017 and 2016.

The disclosed fair values may vary significantly between institutions based on the estimates and assumptions used in the various valuation methodologies. The derived fair values are subjective in nature and involve uncertainties and significant judgment. Therefore, they cannot be determined with precision. Changes in the assumptions could significantly impact the derived estimates of fair value. Disclosure of non-financial assets such as buildings as well as certain financial instruments such as leases is not required. Accordingly, the aggregate fair values presented do not represent the underlying value of the Corporation.

The following methods and assumptions were used by the Corporation to estimate its fair value disclosures for financial instruments:

Cash and due from banks: The carrying amounts as reported in the statement of financial condition for cash and due from banks approximate their fair values.

Interest bearing deposits in banks: The carrying amount of interest bearing deposits approximates their fair values.

Securities held to maturity: Investments in debt securities classified as held to maturity are measured subsequently at amortized cost in the statement of financial position.

Restricted investment in bank stock: The carrying value of stock issued by the FHLB of Atlanta, ACBB and CBB approximates fair value based on the redemption provisions of the stock.

Loans (excluding impaired loans with specific loss allowances): For variable-rate loans that re-price frequently or “in one year or less”, and with no significant change in credit risk, fair values are based on carrying values. Fair values for fixed-rate loans that do not re-price frequently are estimated using a discounted cash flow calculation that applies current market interest rates being offered on the various loan products.

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Deposits: The fair values disclosed for demand deposits (e.g., interest and non-interest checking, savings, and certain types of money market accounts, etc.) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on the various certificates of deposit to the cash flow stream.

Borrowed funds: The fair value of the Bank’s FHLB borrowings and junior subordinated debt is calculated based on the discounted value of contractual cash flows, using rates currently existing for borrowings with similar remaining maturities. The carrying amounts of federal funds purchased and securities sold under agreements to repurchase approximate their fair values.

Accrued interest: The carrying amount of accrued interest receivable and payable approximates their fair values.

Off-balance-sheet financial instruments: In the normal course of business, the Bank makes commitments to extend credit and issues standby letters of credit. The Bank expects most of these commitments to expire without being drawn upon; therefore, the commitment amounts do not necessarily represent future cash requirements. Due to the uncertainty of cash flows and difficulty in the predicting the timing of such cash flows, fair values were not estimated for these instruments.

The following tables present fair value information about financial instruments, whether or not recognized in the Consolidated Statement of Financial Condition, for which it is practicable to estimate that value. The actual carrying amounts and estimated fair values of the Corporation’s financial instruments that are included in the Consolidated Statement of Financial Condition are as follows:

29

	March 31, 2017				Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable  Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	60,749	$	60,749	$	60,749
Interest bearing deposits in banks		2,089		2,089		2,089
Investment securities - AFS		136,937		136,937			$	116,580	$	20,357
Investment securities - HTM		98,019		98,916				89,854		9,062
Restricted bank stock		5,204		5,204				5,204
Loans, net		882,949		887,746						887,746
Financial derivatives		786		786				786
Accrued interest receivable		3,471		3,471				3,471
Financial Liabilities:
Deposits – non-maturity		790,115		790,115				790,115
Deposits – time deposits		236,753		241,750				241,750
Short-term borrowed funds		35,269		35,269				35,269
Long-term borrowed funds		120,929		122,120				122,120
Accrued interest payable		442		442				442
Off balance sheet financial instruments		0		0		0

30

	December 31, 2016				Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable  Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	60,707	$	60,707	$	60,707
Interest bearing deposits in banks		2,603		2,603		2,603
Investment securities - AFS		140,000		140,000			$	119,746	$	20,254
Investment securities - HTM		97,169		97,981				89,031		8,950
Restricted bank stock		5,209		5,209				5,209
Loans, net		882,008		886,712						886,712
Financial derivative		700		700				700
Accrued interest receivable		3,862		3,862				3,862
Financial Liabilities:
Deposits- non-maturity		773,120		773,120				773,120
Deposits- time deposits		241,110		245,762				245,762
Short-term borrowed funds		36,000		36,000				36,000
Long-term borrowed funds		131,737		133,397				133,397
Accrued interest payable		380		380				380
Off balance sheet financial instruments		0		0		0

Loans are measured using a discounted cash flow method. The significant unobservable inputs used in the Level 3 fair value measurements of the Corporation’s loans included in the tables above are calculated based on the Corporation’s internal new volume rate.

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Note 10 – Accumulated Other Comprehensive Loss

The following table presents the changes in each component of accumulated other comprehensive loss for the 12 months ended December 31, 2016 and the three-month period ended March 31, 2017:

(in thousands)	Investment securities- with OTTI AFS			Investment securities- all other AFS			Investment securities- HTM			Cash Flow Hedge			Pension Plan			SERP			Total
Accumulated OCL, net:
Balance - January 1, 2016	$	(1,942	)	$	(2,024	)	$	(1,971	)	$	(39	)	$	(12,663	)	$	(305	)	$	(18,944	)
Other comprehensive income/(loss) before reclassifications		(421	)		(929	)		0			461			(2,086	)		(466	)		(3,441	)
Amounts reclassified from accumulated other comprehensive loss		(5	)		(265	)		617			0			517			56			920
Balance - December 31, 2016	$	(2,368	)	$	(3,218	)	$	(1,354	)	$	422		$	(14,232	)	$	(715	)	$	(21,465	)
Other comprehensive income before reclassifications		100			73			0			52			32			0			257
Amounts reclassified from accumulated other comprehensive loss		(2	)		5			61			0			162			22			248
Balance – March 31, 2017	$	(2,270	)	$	(3,140	)	$	(1,293	)	$	474		$	(14,038	)	$	(693	)	$	(20,960	)

32

The following tables present the components of comprehensive income for the three-month periods ended March 31, 2017 and 2016:

Components of Comprehensive Income (in thousands)	Before Tax Amount			Tax (Expense) Benefit			Net
For the three months ended March 31, 2017
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	166		$	(66	)	$	100
Less:  accretable yield recognized in income		2			0			2
Net unrealized gains on investments with OTTI		164			(66	)		98
Available for sale securities – all other:
Unrealized holding gains		122			(49	)		73
Less:  losses recognized in income		(9	)		4			(5	)
Net unrealized gains on all other AFS securities		131			(53	)		78
Held to maturity securities:
Unrealized holding gains		0			0			0
Less:  amortization recognized in income		(101	)		40			(61	)
Net unrealized gains on HTM securities		101			(40	)		61
Cash flow hedges:
Unrealized holding gains		86			(34	)		52
Pension Plan:
Unrealized net actuarial gain		53			(21	)		32
Less: amortization of unrecognized loss		(264	)		105			(159	)
Less: amortization of transition asset		0			0			0
Less: amortization of prior service costs		(3	)		0			(3	)
Net pension plan liability adjustment		320			(126	)		194
SERP:
Unrealized net actuarial loss		0			0			0
Less: amortization of unrecognized loss		(37	)		14			(23	)
Less: amortization of prior service costs		1			0			1
Net SERP liability adjustment		36			(14	)		22
Other comprehensive income	$	838		$	(333	)	$	505

33

Components of Comprehensive Income (in thousands)	Before Tax  Amount			Tax (Expense) Benefit			Net
For the three months ended March 31, 2016
Available for sale (AFS) securities with OTTI:
Unrealized holding losses	$	(1,496	)	$	597		$	(899	)
Less:  accretable yield recognized in income		36			(14	)		22
Net unrealized losses on investments with OTTI		(1,532	)		611			(921	)
Available for sale securities – all other:
Unrealized holding gains		929			(371	)		558
Less:  gains recognized in income		206			(82	)		124
Net unrealized gains on all other AFS securities		723			(289	)		434
Held to maturity securities:
Unrealized holding gains		0			0			0
Less:  amortization recognized in income		(237	)		94			(143	)
Net unrealized gains on HTM securities		237			(94	)		143
Cash flow hedges:
Unrealized holding losses		(551	)		220			(331	)
Pension Plan:
Unrealized net actuarial loss		(571	)		228			(343	)
Less: amortization of unrecognized loss		(212	)		85			(127	)
Less: amortization of transition asset		0			0			0
Less: amortization of prior service costs		(3	)		0			(3	)
Net pension plan liability adjustment		(356	)		143			(213	)
SERP:
Unrealized net actuarial loss		0			0			0
Less: amortization of unrecognized loss		(19	)		8			(11	)
Less: amortization of prior service costs		(5	)		1			(4	)
Net SERP liability adjustment		24			(9	)		15
Other comprehensive loss	$	(1,455	)	$	582		$	(873	)

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The following table presents the details of amount reclassified from accumulated other comprehensive loss for the three-month periods ended March 31, 2017 and 2016:

Amounts Reclassified from Accumulated Other Comprehensive Loss (in thousands)	For the Three months ended March 31, 2017			For the Three months ended March 31, 2016			Affected Line Item in the  Statement Where Net Income is Presented
Unrealized gains and losses on investment securities with OTTI:
Accretable yield	$	2		$	36		Interest income on taxable investment securities
Taxes		0			(14	)	Tax expense
	$	2		$	22		Net of tax
Unrealized gains and losses on available for sale investment securities - all others:
(Losses)/gains on sales	$	(9	)	$	206		Net gains
Taxes		4			(82	)	Tax benefit/(expense)
	$	(5	)	$	124		Net of tax
Unrealized losses on held to maturity securities:
Amortization	$	(101	)	$	(237	)	Interest income on taxable investment securities
Taxes		40			94		Tax benefit
	$	(61	)	$	(143	)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss		(264	)		(212	)	Salaries and employee benefits
Amortization of transition asset		0			0		Salaries and employee benefits
Amortization of prior service costs		(3	)		(3	)	Salaries and employee benefits
Taxes		105			85		Tax benefit
	$	(162	)	$	(130	)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized loss		(37	)		(19	)	Salaries and employee benefits
Amortization of prior service costs		1			(5	)	Salaries and employee benefits
Taxes		14			9		Tax benefit
	$	(22	)	$	(15	)	Net of tax
Total reclassifications for the period	$	(248	)	$	(142	)	Net of tax

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Note 11 – Junior Subordinated Debentures and Restrictions on Dividends

First United Corporation is the parent company to three statutory trust subsidiaries - First United Statutory Trust I and First United Statutory Trust II, both of which are Connecticut statutory trusts (“Trust I” and “Trust II”, respectively), and First United Statutory Trust III, a Delaware statutory trust (“Trust III” and, together with Trust I and Trust II, the “Trusts”). The Trusts were formed for the purposes of selling preferred securities to investors and using the proceeds to purchase junior subordinated debentures from First United Corporation (“TPS Debentures”) that would qualify as regulatory capital.

In March 2004, Trust I and Trust II issued preferred securities with an aggregate liquidation amount of $30.0 million to third-party investors and issued common equity with an aggregate liquidation amount of $.9 million to First United Corporation. Trust I and Trust II used the proceeds of these offerings to purchase an equal amount of TPS Debentures, as follows:

$20.6 million—floating rate payable quarterly based on three-month LIBOR plus 275 basis points (3.90% at March 31, 2017), maturing in 2034, became redeemable five years after issuance at First United Corporation’s option.

$10.3 million—floating rate payable quarterly based on three-month LIBOR plus 275 basis points (3.90% at March 31, 2017) maturing in 2034, became redeemable five years after issuance at First United Corporation’s option.

In December 2009, Trust III issued 9.875% fixed-rate preferred securities with an aggregate liquidation amount of approximately $7.0 million to private investors and issued common securities to First United Corporation with an aggregate liquidation amount of approximately $.2 million. Trust III used the proceeds of the offering to purchase approximately $7.2 million of 9.875% fixed-rate TPS Debentures. Interest on these TPS Debentures are payable quarterly, and the TPS Debentures mature in 2040 but are redeemable five years after issuance at First United Corporation’s option.

In January 2010, Trust III issued an additional $3.5 million of 9.875% fixed-rate preferred securities to private investors and issued common securities to First United Corporation with an aggregate liquidation amount of $.1 million. Trust III used the proceeds of the offering to purchase $3.6 million of 9.875% fixed-rate TPS Debentures. Interest on these TPS Debentures is payable quarterly, and the TPS Debentures mature in 2040 but are redeemable five years after issuance at First United Corporation’s option.

In March 2017, the Corporation repaid all of the outstanding TPS Debentures issued to and held by Trust III, and Trust III in turn redeemed all of its outstanding securities from its security holders. The $10.8 million repayment was consummated following the Corporation’s common stock rights offering that closed on March 20, 2017. See Note 19 for further details on the Rights offering.

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

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Note 12 – Preferred Stock

On January 30, 2009, pursuant to the Troubled Asset Repurchase Program Capital Purchase Program adopted by the Treasury, First United Corporation issued to the Treasury 30,000 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A, having no par value, (the “Series A Preferred Stock”), and a Warrant to purchase 326,323 shares of common stock at an exercise price of $13.79 per share, for an aggregate consideration of $30 million. The proceeds from this transaction qualify as Tier 1 capital and the Warrant qualified as tangible common equity.

On December 4, 2014, the Treasury sold all of its shares of Series A Preferred Stock to third-party investors. On May 26, 2015, First United Corporation repurchased the warrant from the Treasury for $120,786, which is included in other expense. The warrant was canceled and as a result of the repurchase, the Treasury has no remaining equity investment in First United Corporation.

On February 14, 2016, First United Corporation redeemed 10,000 shares of the Series A Preferred Stock, having an aggregate liquidation amount of $10.0 million, on a pro rata basis from each of the holders.

On March 21, 2017, an additional 10,000 shares of the Series A Preferred Stock, having an aggregate liquidation amount of $10.0 million were redeemed, on a pro rata basis from each of the holders.

The terms of the Series A Preferred Stock call for the payment, if declared by the Corporation’s Board of Directors, of cash dividends on February 15^th, May 15^th, August 15^th and November 15^th of each year. The holders of the Series A Preferred Stock are entitled to receive, if and when declared by the Board of Directors, out of assets legally available for payment, cumulative cash dividends at a rate per annum of 9% per share of Series A Preferred Stock on a liquidation amount of $1,000 per share with respect to each dividend period from and after February 15, 2014. Under the terms of the Series A Preferred Stock, First United Corporation may, at its option and after consulting with the Reserve Bank, redeem shares of Series A Preferred Stock, in whole or in part, at any time and from time to time, for cash at a per share amount equal to the sum of the liquidation preference per share plus any accrued and unpaid dividends to but excluding the redemption date.

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Note 13 – Borrowed Funds

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

(Dollars in thousands)	Three months ended March 31, 2017			Year ended December 31, 2016
Securities sold under agreements to repurchase:
Outstanding at end of period	$	35,269		$	36,000
Weighted average interest rate at end of period		0.18	%		0.16	%
Maximum amount outstanding as of any month end	$	35,269		$	39,456
Average amount outstanding	$	32,628		$	30,899
Approximate weighted average rate during the period		0.20	%		0.19	%

At March 31, 2017, the repurchase agreements were secured by $ 48.0 million in investment securities issued by government related agencies. A minimum of 102% of fair value is pledged against account balances.

The following is a summary of long-term borrowings with original maturities exceeding one year:

	March 31,		December 31,
(in thousands)	2017		2016
FHLB advances, bearing fixed interest at rates ranging from 1.54% to 3.69% at March 31, 2017	$	90,000	$	90,007
Junior subordinated debt, bearing variable interest rate of 3.90% at March 31, 2017		30,929		30,929
Junior subordinated debt, bearing fixed interest rate of 0.00% at March 31, 2017		0		10,801
Total long-term debt	$	120,929	$	131,737

At March 31, 2017, the long-term FHLB advances were secured by $252.4 million in loans.

The contractual maturities of all long-term borrowings are as follows:

	March 31, 2017						December 31, 2016
(in thousands)	Fixed Rate		Floating Rate		Total		Total
Due in 2018	$	20,000	$	0	$	20,000	$	20,000
Due in 2019		20,000		0		20,000		20,000
Due in 2020		30,000		0		30,000		30,000
Due in 2021		20,000		0		20,000		20,000
Thereafter		0		30,929		30,929		41,737
Total long-term debt	$	90,000	$	30,929	$	120,929	$	131,737

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Note 14 – Employee Benefit Plans

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

Pension	For the Three months ended
	March 31,
(in thousands)	2017			2016
Service cost	$	70		$	76
Interest cost		413			435
Expected return on assets		(751	)		(673	)
Amortization of transition asset		0			0
Amortization of net actuarial loss		264			212
Amortization of prior service cost		3			3
Net pension (credit)/expense included in employee benefits	$	(1	)	$	53

SERP	For the Three months ended
	March 31,
(in thousands)	2017			2016
Service cost	$	26		$	25
Interest cost		72			62
Amortization of recognized loss		37			19
Amortization of prior service cost		(1	)		5
Net SERP expense included in employee benefits	$	134		$	111

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

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

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

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

The Corporation will assess the need for future annual contributions to the pension plan based upon its funded status and an evaluation of the future benefits to be provided thereunder. A contribution of $3.0 million was made to the pension plan during the first quarter of 2017. The Corporation expects to fund the annual projected benefit payments for the SERP from operations.

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On January 9, 2015, the Corporation and members of management who do not participate in the SERP entered into participation agreements under the Deferred Compensation Plan, each styled as a SERP Alternative Participation Agreement (the “Participation Agreement”).  Pursuant to each Participation Agreement, the Corporation agreed, for each Plan Year (as defined in the Deferred Compensation Plan) in which it determines that it has been Profitable (as defined in the Participation Agreement), to make a discretionary contribution to the participant’s Employer Account in an amount equal to 15% of the participant’s base salary level for such Plan Year, with the first Plan Year being the year ending December 31, 2015.  The Participation Agreement provides that the participant will become 100% vested in the amount maintained in his or her Employer Account upon the earliest to occur of the following events: (a) Normal Retirement (as defined in the Participation Agreement); (b)  Separation from Service (as defined in the Participation Agreement) following a Change of Control (as defined in the Deferred Compensation Plan) and subsequent Triggering Event (as defined in the Participation Agreement); (c) Separation from Service due to a Disability (as defined in the Participation Agreement); (d) with respect to a particular award of Employer Contribution Credits, the participant’s completion of two consecutive Years of Service (as defined in the Participation Agreement) immediately following the Plan Year for which such award was made; or (e) death.  Notwithstanding the foregoing, however, a participant will lose entitlement to the amount maintained in his or her Employer Account in the event employment is terminated for Cause (as defined in the Participation Agreement).  In addition, the Participation Agreement conditions entitlement to the amounts held in the Employer Account on the participant (1) refraining from engaging in Competitive Employment (as defined in the Participation Agreement) for three years following his or her Separation from Service, (2) refraining from injurious disclosure of confidential information concerning the Corporation, and (3) remaining available, at the Corporation’s reasonable request, to provide at least six hours of transition services per month for 12 months following his or her Separation from Service (except in the case of death or Disability), except that only item (2) will apply in the event of a Separation from Service following a Change of Control and subsequent Triggering Event. 

In January 2016, the Board of Directors of First United Corporation approved a discretionary contribution in the amount of $63,500 for two employees. Expense for the first three months of 2017 for the Participation Agreement was $7,943. In January 2017, the Board of Directors of First United Corporation approved a discretionary contribution in the amount of $112,708 for four employees. Expense for the first three months of 2017 for the Participation Agreement was $14,089.

Note 15 – Equity Compensation Plan Information

At the 2007 Annual Meeting of Shareholders, First United Corporation’s shareholders approved the First United Corporation Omnibus Equity Compensation Plan (the “Omnibus Plan”), which authorizes the issuance of up to 185,000 shares of common stock pursuant to the grant of stock options, stock appreciation rights, stock awards, stock units, performance units, dividend equivalents, and other stock-based awards to employees or directors.

On June 18, 2008, the Board of Directors of First United Corporation adopted a Long-Term Incentive Program (the “LTIP”). This program was adopted as a sub-plan of the Omnibus Plan to reward participants for increasing shareholder value, align executive interests with those of shareholders, and serve as a retention tool for key executives. Under the LTIP, participants are granted shares of restricted common stock of First United Corporation. The amount of an award is based on a specified percentage of the participant’s salary as of the date of grant. These shares will vest if the Corporation meets or exceeds certain performance thresholds.

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

Stock-based awards were made to non-employee directors in May 2016 pursuant to First United Corporation’s director compensation policy. Each director receives an annual retainer of 1,000 shares of First United Corporation common stock, plus $10,000 to be paid, at the director’s election, in cash or additional shares of common stock. In 2016, a total of 14,384 fully-vested shares of common stock were issued to directors, which had a fair market value of $10.34. Director stock compensation expense was $37,183 for the three months ended March 31, 2017 and $35,889 for the three months ended March 31, 2016.

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Note 16 – Letters of Credit and Off Balance Sheet Liabilities

The Corporation does not issue any guarantees that would require liability recognition or disclosure other than the standby letters of credit issued by the Bank.  Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.  Generally, the Bank’s letters of credit are issued with expiration dates within one year.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  The Bank generally holds collateral and/or personal guarantees supporting these commitments.  The Bank had $1.6 million of outstanding standby letters of credit each of at March 31, 2017 and December 31, 2016. Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payment required by the letters of credit.  Management does not believe that the amount of the liability associated with guarantees under standby letters of credit outstanding at March 31, 2017 and December 31, 2016 is material.

Note 17 – Derivative Financial Instruments

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

In July 2009, the Corporation entered into three interest rate swap contracts totaling $20.0 million notional amount, hedging future cash flows associated with floating rate trust preferred debt. The final contract matured on June 17, 2016, ending the agreement.

In March 2016, the Corporation entered into four new interest rate swap contracts totaling $30.0 million notional amount, hedging future cash flows associated with floating rate trust preferred debt. These contracts are a three-year $5.0 million contract maturing June 17, 2019, a five-year $5.0 million contract maturing March 17, 2021, a seven-year $5.0 million contract maturing March 17, 2023 and a 10-year $15.0 million contract maturing March 17, 2026.

The fair value of the interest rate swap contracts was $.8 million and $.7 million at March 31, 2017 and December 31, 2016, respectively.

For the three months ended March 31, 2017, the Corporation recorded an increase in the value of the derivatives of $86 thousand and the related deferred tax of $34 thousand in net accumulated other comprehensive loss to reflect the effective portion of cash flow hedges. ASC Subtopic 815-30 requires this amount to be reclassified to earnings if the hedge becomes ineffective or is terminated. There was no hedge ineffectiveness recorded for the three months ending March 31, 2017. The Corporation does not expect any losses relating to these hedges to be reclassified into earnings within the next 12 months.

Interest rate swap agreements are entered into with counterparties that meet established credit standards and the Corporation believes that the credit risk inherent in these contracts is not significant as of March 31, 2017.

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The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the three- months ended March 31, 2017 and 2016.

Derivative in Cash Flow Hedging
Relationships

(in thousands)	Amount of gain recognized in OCI on derivative (effective portion)			Amount of gain or (loss) reclassified from accumulated OCI into income (effective portion) (a)		Amount of gain or (loss) recognized in income or derivative (ineffective portion and amount excluded from effectiveness testing) (b)
Interest rate contracts:
Three months ended:
March 31, 2017	$	52		$	0	$	0
March 31, 2016		(331	)		0		0

Notes:

(a) Reported as interest expense

(b) Reported as other income

Note 18 – Variable Interest Entities (VIE)

As noted in Note 11, First United Corporation created the Trusts for the purposes of raising regulatory capital through the sale of mandatorily redeemable preferred capital securities to third party investors and common equity interests to First United Corporation. The Trusts are considered Variable Interest Entities (“VIEs”), but are not consolidated because First United Corporation is not the primary beneficiary of the Trusts. At March 31, 2017, the Corporation reported all of the $30.9 million of TPS Debentures issued in connection with these offerings as long-term borrowings and it reported its $.9 million equity interest in the Trusts as “Other Assets”.

In November 2009, the Bank became a 99.99% limited partner in Liberty Mews Limited Partnership (“Liberty Mews”), a Maryland limited partnership formed for the purpose of acquiring, developing and operating low-income housing units in Garrett County, Maryland. The Partnership was financed with a total of $10.6 million of funding, including a $6.1 million equity contribution from the Bank as the limited partner. Liberty Mews used the proceeds from these sources to purchase the land and construct a 36-unit low income housing rental complex at a total cost of $10.6 million. The total assets of Liberty Mews were approximately $8.8 million at March 31, 2017 and December 31, 2016.

As of December 31, 2011, the Bank had made contributions to Liberty Mews totaling $6.1 million. The project was completed in June 2011, and the Bank is entitled to $8.4 million in federal investment tax credits over a 10-year period as long as certain qualifying hurdles are maintained. The Bank will also receive the benefit of tax operating losses from Liberty Mews to the extent of its capital contribution. The investment in Liberty Mews assists the Bank in achieving its community reinvestment initiatives.

Because Liberty Mews is considered to be a VIE, management performed an analysis to determine whether its involvement with the Partnership would lead it to determine that it must consolidate Liberty Mews. In performing its analysis, management evaluated the risks creating the variability in the Partnership and identified which activities most significantly impact the VIE’s economic performance. Finally, it examined each of the variable interest holders to determine which, if any, of the holders was the primary beneficiary based on their power to direct the most significant activities and their obligation to absorb potentially significant losses of Liberty Mews.

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The Bank, as a limited partner, generally has no voting rights. The Bank is not in any way involved in the daily management of Liberty Mews and has no other rights that provide it with the power to direct the activities that most significantly impact Liberty Mews’s economic performance, which are to develop and operate the housing project in such a manner that complies with specific tax credit guidelines. As a limited partner, there is no recourse to the Bank by the creditors of Liberty Mews. The tax credits that result from the Bank’s investment in Liberty Mews are generally subject to recapture should the partnership fail to comply with the applicable government regulations. The Bank has not provided any financial or other support to Liberty Mews beyond its required capital contributions and does not anticipate providing such support in the future. Management currently believes that no material losses are probable as a result of the Bank’s investment in Liberty Mews.

On the basis of management’s analysis, the general partner is deemed to be the primary beneficiary of Liberty Mews. Because the Bank is not the primary beneficiary, Liberty Mews has not been included in the Corporation’s consolidated financial statements.

The Corporation accounts for the Bank’s investment in Liberty Mews utilizing the effective yield method under guidance that applies specifically to investments in limited partnerships that operate qualified affordable housing projects. Under the effective yield method, the investor recognizes tax credits as they are allocated and amortizes the initial cost of the investment to provide a constant effective yield over the period that tax credits are allocated to the investor. The effective yield is the internal rate of return on the investment, based on the cost of the investment and the guaranteed tax credits allocated to the investor. The tax credit allocated, net of the amortization of the investment in the limited partnership, is recognized in the income statement as a component of income taxes attributable to continuing operations.

The Corporation’s tax expense for the three months ended March 31, 2017 was approximately $.1 million lower as a result of the impact of the tax credits and the tax losses relating to the partnership.

At March 31, 2017 and December 31, 2016, the Corporation included its total investment in Liberty Mews in “Other Assets” in its Consolidated Statement of Financial Condition. As of March 31, 2017, the Bank’s commitment in Liberty Mews was fully funded. The following table presents details of the Bank’s involvement with Liberty Mews at the dates indicated:

	March 31,		December 31,
(in thousands)	2017		2016
Investment in LIHTC Partnership
Carrying amount on Balance Sheet of:
Investment (Other Assets)	$	3,061	$	3,223
Maximum exposure to loss		3,061		3,223

Note 19 – Common Stock Rights Offering

On March 20, 2017, First United Corporation completed a common stock rights offering to existing shareholders in which it sold an aggregate of 783,626 shares of common stock at a subscription price of $11.93 per share, resulting in aggregate gross proceeds of approximately $9.4 million (the “Rights Offering”). Net proceeds from the Rights Offering amounted to approximately $9.2 million, reflecting $144,667 in offering-related expenses. The Corporation used the proceeds to partially offset the redemption of $10.0 million of Series A Preferred Stock and the full repayment of $10.8 million of junior subordinated debentures, both of which were completed in March 2017.

Note 20 – Assets and Liabilities Subject to Enforceable Master Netting Arrangements

Interest Rate Swap Agreements (“Swap Agreements”)

The Corporation has entered into interest rate swap agreements to modify the re-pricing characteristics of certain interest-bearing liabilities as a part of managing interest rate risk. The swap agreements have been designated as cash flow hedges, and accordingly, the fair value of the interest rate swap contracts is reported in Other Liabilities on the Consolidated Statement of Financial Condition. The swap agreements were entered into with a third party financial institution. The Corporation is party to master netting arrangements with its financial institution counterparty; however, the Corporation does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral, in the form of cash and investment securities, are pledged by the Corporation as the counterparty with net liability positions in accordance with contract thresholds. See Note 17 to the Consolidated Financial Statements for more information.

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Securities Sold Under Agreements to Repurchase (“Repurchase Agreements”)

The Bank enters into agreements under which it sells interests in U.S. securities to certain customers subject to an obligation to repurchase, and on the part of the customers to resell, such interests. Under these arrangements, the Bank may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing arrangements (i.e. secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a liability in the Consolidated Statement of Condition, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. There is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. In addition, as the Bank does not enter into reverse repurchase agreements, there is no such offsetting to be done with the repurchase agreements. The right of setoff for a repurchase agreement resembles a secured borrowing, whereby the collateral would be used to settle the fair value of the repurchase agreement should the Bank be in default (i.e. fails to repurchase the U.S. securities on the maturity date of the agreement). The investment security collateral, maintained at 102% of the borrowing, is held by a third party financial institution in the counterparty’s custodial account.

The following table presents the liabilities subject to an enforceable master netting arrangement or repurchase agreements at March 31, 2017 and December 31, 2016.

									Gross Amounts Not Offset in the Statement of Condition
(In thousands)	Gross Amounts of Recognized Liabilities			Gross Amounts Offset in the Statement of Condition		Net Amounts of Liabilities Presented in the Statement of Condition			Financial Instruments			Cash Collateral Pledged		Net Amount
March 31, 2017
Interest Rate Swap Agreements	$	(786	)	$	0	$	(786	)	$	786		$	0	$	0
Repurchase Agreements	$	35,269		$	0	$	35,269		$	(35,269	)	$	0	$	0
December 31, 2016
Interest Rate Swap Agreements	$	(700	)	$	0	$	(700	)	$	700		$	0	$	0
Repurchase Agreements	$	36,000		$	0	$	36,000		$	(36,000	)	$	0	$	0

Note 21 – Adoption of New Accounting Standards and Effects of New Accounting Pronouncements

In March 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-08, Receivables- Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchases Callable Debt Securities. ASU 2017-08 amends guidance on the amortization period of premiums on certain purchases callable debt securities. The amendments shorten the amortization period of premiums on certain purchases callable debt securities to the earliest call date. ASU 2017-08 is effective for public business entities that are SEC filers for annual periods beginning after December 15, 2018, and interim periods within those annual periods, for public entities that are not SEC filers for annual periods beginning after December 15, 2019 and for all other entities for annual periods beginning after December 15, 2020 with early adoption permitted. The Corporation is evaluating the provisions of ASU 2017-08 but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations.

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In March 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. ASU 2017-07 requires an entity to present net periodic pension cost and net periodic postretirement benefit cost as a net amount that may be capitalized as part of an asset when appropriate. ASU 2017-07 is effective for public business entities that are SEC filers for annual periods beginning after December 15, 2017, and interim periods within those annual periods, for public entities that are not SEC filers for annual periods beginning after December 15, 2018 and for all other entities for annual periods beginning after December 15, 2019 with early adoption permitted. The Corporation is evaluating the provisions of ASU 2017-07 but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations.

In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-04, Intangibles- Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating step 2 from the goodwill impairment test. Instead, if “the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.” The ASU does not change the qualitative assessment, however, it removes the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform step 2 of the goodwill impairment test. ASU 2017-04 is effective for public business entities that are SEC filers for annual periods beginning after December 15, 2019, and interim periods within those annual periods, for public entities that are not SEC filers for annual periods beginning after December 15, 2020 and for all other entities for annual periods beginning after December 15, 2021 with early adoption permitted. The Corporation is evaluating the provisions of ASU 2017-04 but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations.

In August 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses the following eight specific cash flow issues: (a) debt prepayment or debt extinguishment costs; (b) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (c) contingent consideration payments made after a business combination; (d) proceeds from the settlement of insurance claims; (e) proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)); (f) distributions received from equity method investees; (g) beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The amendments in this Update apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230.ASU 2016-15 is effective for public business entities for annual periods beginning after December 15, 2017, and interim periods within those annual periods, and for all other entities for annual periods beginning after December 15, 2018 and interim periods within annual periods beginning after December 15, 2019 with early adoption permitted. The Corporation is evaluating the provisions of ASU 2016-15 but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale (“AFS”) debt securities and provides for a simplified accounting model for purchases financial assets with credit deterioration since their origination. The new model referred to as current expected credit losses (“CECL”) model, will apply to: (a) financial assets subject to credit losses and measured at amortized cost, and (b) certain off-balance sheet credit exposures. This includes loans, held to maturity debt securities, loan commitments, financial guarantees and net investments in leases as well as reinsurance and trade receivables. The estimate of expected credit losses (“ECL”) should consider historical information, current information, and supportable forecasts, including estimates of prepayments. ASU 2016-13 is effective for public business entities for annual periods beginning after December 15, 2019, and interim periods within those annual periods, and for all other entities for annual periods beginning after December 15, 2020 and interim periods within annual periods beginning after December 15, 2018 with early adoption permitted. Management currently intends to adopt the guidance on January 1, 2020 and is assessing the impact of this guidance on the Corporation’s financial condition and results of operations. Management has formed a focus group consisting of multiple members from areas including credit, finance, and information systems. The focus group is evaluating the requirements of the new standard and the impact it will have on our processes. The Corporation is still in the process of determining the impact on the Corporation’s financial condition or results of operations.

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In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 introduces amendments intended to simplify the accounting for stock compensation. ASU 2016-09 requires all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity should also recognize excess tax benefits, and assess the need for a valuation allowance, regardless of whether the benefit reduces taxes payable in the current period. The ASU also requires excess tax benefits be classified along with other income tax cash flows as an operating activity in the statement of cash flows. ASU 2016-09 is effective for public business entities for annual periods beginning after December 15, 2016, and interim periods within those annual periods, and for all other entities for annual periods beginning after December 15, 2017 and interim periods within annual periods beginning after December 15, 2018 with early adoption permitted. The Corporation is evaluating the provisions of ASU 2016-09, but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 is intended to improve financial reporting about leasing transactions by requiring organizations that lease assets – referred to as “lessees” – to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Under the new guidance, a lessee will be required to recognize assets and liabilities related to certain operating leases on the balance sheet. The amendments will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 applies to all public business entities for annual and interim periods after December 15, 2018, and for all other entities for annual periods beginning after December 15, 2019 and interim periods beginning after December 15, 2020 with early adoption permitted. Management is currently assessing the impact of the new guidance but expects to report higher assets and liabilities as a result of including additional leases on the consolidated balance sheet.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10). The update requires all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The update also requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the update eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement for to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measure at amortized cost on the balance sheet for public entities. For public business entities, the amendments are effective for annual periods beginning after December 15, 2017, including interim periods within the annual period, and for all other entities, effective for annual periods beginning after December 15, 2018 and interim periods within annual periods beginning after December 15, 2019. Early application is permitted. The Corporation is evaluating the provisions of ASU 2016-01, but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which establishes a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate, construction and software industries. ASU 2014-09 specifies that an entity shall recognize revenue when, or as, the entity satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when, or as, the customer obtains control of the asset. Entities are required to disclose qualitative and quantitative information on the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Because the guidance does not apply to revenue associated with financial instruments, including loans and securities, the new guidance is not expected to have a material impact on the components of the consolidated statement of income related to financial instruments, including securities gains/losses and interest income. However, we do believe the new standard will result in new disclosure requirements. The Corporation is currently evaluating this guidance on other components of non-interest income such as service charges, payment processing fees, trust services fees, and brokerage services fees. The new guidance is not expected to have a material impact on the Corporation’s financial condition or results of operations.

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Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

The following discussion and analysis is intended as a review of material changes in and significant factors affecting the financial condition and results of operations of First United Corporation and its consolidated subsidiaries for the periods indicated. This discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and the notes thereto contained in Item 1 of Part I of this report. Unless the context clearly suggests otherwise, references in this report to “us”, “we”, “our”, and “the Corporation” are to First United Corporation and its consolidated subsidiaries.

FORWARD-LOOKING STATEMENTS

This report may contain forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Readers of this report should be aware of the speculative nature of “forward-looking statements.” Statements that are not historical in nature, including those that include the words “anticipate”, “estimate”, “should”, “expect”, “believe”, “intend”, and similar expressions, are based on current expectations, estimates and projections about, among other things, the industry and the markets in which we operate, and they are not guarantees of future performance. Whether actual results will conform to expectations and predictions is subject to known and unknown risks and uncertainties, including risks and uncertainties discussed in this report; general economic, market, or business conditions; changes in interest rates, deposit flow, the cost of funds, and demand for loan products and financial services; changes in our competitive position or competitive actions by other companies; changes in the quality or composition of our loan and investment portfolios; our ability to manage growth; changes in laws or regulations or policies of federal and state regulators and agencies; and other circumstances beyond our control. Consequently, all of the forward-looking statements made in this report are qualified by these cautionary statements, and there can be no assurance that the actual results anticipated will be realized, or if substantially realized, will have the expected consequences on our business or operations. These and other risks are discussed in detail in the periodic reports that First United Corporation files with the Securities and Exchange Commission (the “SEC”) (see Item 1A of Part II of this report for further information). Except as required by applicable laws, we do not intend to publish updates or revisions of any forward-looking statements we make to reflect new information, future events or otherwise.

FIRST UNITED CORPORATION

First United Corporation is a Maryland corporation chartered in 1985 and a bank holding company registered with the Board of Governors of the Federal Reserve System (the “FRB”) under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). 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”), both Connecticut statutory business trusts, and First United Statutory Trust III, a Delaware statutory business trust (“Trust III” and together with Trust I and Trust II, the “Trusts”). The Trusts were formed for the purpose of selling trust preferred securities that qualified as Tier 1 capital. The Bank has four wholly-owned subsidiaries: OakFirst Loan Center, Inc., a West Virginia finance company; OakFirst Loan Center, LLC, a Maryland finance company (collectively, the “OakFirst Loan Centers”), First OREO Trust, a Maryland statutory trust, and FUBT OREO I, LLC, a Maryland company, both formed for the purposes of servicing and disposing of the real estate that the Bank acquires through foreclosure or by deed in lieu of foreclosure. The Bank also 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.

At March 31, 2017, the Corporation had total assets of $1.3 billion, net loans of $882.9 million, and deposits of $1.0 billion. Shareholders’ equity at March 31, 2017 was $114.9 million.

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

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ESTIMATES AND CRITICAL ACCOUNTING POLICIES

This discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. (See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of Part II of First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016). On an on-going basis, management evaluates estimates, including those related to loan losses and intangible assets, other-than-temporary impairment (“OTTI”) of investment securities, income taxes, fair value of investments and pension plan assumptions. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the consolidated financial statements.

Management does not believe that any material changes in our critical accounting policies have occurred since December 31, 2016.

Allowance for Loan Losses

One of our most important accounting policies is that related to the monitoring of the loan portfolio. A variety of estimates impact the carrying value of the loan portfolio, including the calculation of the allowance for loan losses (the “ALL”), the valuation of underlying collateral, the timing of loan charge-offs and the placement of loans on non-accrual status. The ALL is established and maintained at a level that management believes is adequate to cover losses resulting from the inability of borrowers to make required payment on loans. Estimates for loan losses are arrived at by analyzing risks associated with specific loans and the loan portfolio, current and historical trends in delinquencies and charge-offs, and changes in the size and composition of the loan portfolio. The analysis also requires consideration of the economic climate and outlook, including the economic conditions specific to Western Maryland and Northeastern West Virginia, changes in lending rates, political conditions, and legislation impacting the banking industry. Because the calculation of the ALL relies on management’s estimates and judgments relating to inherently uncertain events, actual results may differ from management’s estimates.

Goodwill and Other Intangible Assets

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Intangibles - Goodwill and Other, establishes standards for the amortization of acquired intangible assets and impairment assessment of goodwill.  The $11.0 million recorded as goodwill at March 31, 2017 is primarily related to the Bank’s 2003 acquisition of Huntington National Bank branches and is not subject to periodic amortization. 

Goodwill arising from business combinations represents the value attributable to unidentifiable intangible elements in the business acquired. Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Impairment testing requires that the fair value of each of the Corporation’s reporting units be compared to the carrying amount of its net assets, including goodwill.  If the estimated current fair value of the reporting unit exceeds its carrying value, no additional testing is required and an impairment loss is not recorded. Otherwise, additional testing is performed, and to the extent such additional testing results in a conclusion that the carrying value of goodwill exceeds its implied fair value, an impairment loss is recognized.

Our goodwill relates to value inherent in the banking business, and that value is dependent upon our ability to provide quality, cost effective services in a highly competitive local market.  This ability relies upon continuing investments in processing systems, the development of value-added service features and the ease of use of our services.  As such, goodwill value is ultimately supported by revenue that is driven by the volume of business transacted.  A decline in earnings as a result of a lack of growth or the inability to deliver cost effective services over sustained periods can lead to impairment of goodwill, which could adversely impact earnings in future periods.  ASC Topic 350 requires an annual evaluation of goodwill for impairment.  The determination of whether or not these assets are impaired involves significant judgments and estimates. 

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Accounting for Income Taxes

We account for income taxes in accordance with ASC Topic 740, Income Taxes. Under this guidance, deferred taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates that will apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

Management regularly reviews the carrying amount of the Corporation’s net deferred tax assets to determine if the establishment of a valuation allowance is necessary. If management determines, based on the available evidence, that it is more likely than not that all or a portion of our net deferred tax assets will not be realized in future periods, then a deferred tax valuation allowance will be established. Consideration is given to various positive and negative factors that could affect the realization of the deferred tax assets. In evaluating this available evidence, management considers, among other things, historical performance, expectations of future earnings, the ability to carry back losses to recoup taxes previously paid, length of statutory carry forward periods, experience with utilization of operating loss and tax credit carry forwards not expiring, tax planning strategies and timing of reversals of temporary differences. Significant judgment is required in assessing future earnings trends and the timing of reversals of temporary differences. Management’s evaluation is based on current tax laws as well as management’s expectations of future performance.

Management expects that our adherence to the required accounting guidance may result in increased volatility in quarterly and annual effective income tax rates because of changes in judgment or measurement including changes in actual and forecasted income before taxes, tax laws and regulations, and tax planning strategies.

Other-Than-Temporary Impairment of Investment Securities

Management systematically evaluates securities for impairment on a quarterly basis. Based upon application of accounting guidance for subsequent measurement in ASC Topic 320, Investments – Debt and Equity Securities (Section 320-10-35), management assesses whether (a) the Corporation has the intent to sell a security being evaluated and (b) it is more likely than not that the Corporation will be required to sell the security prior to its anticipated recovery. If neither applies, then declines in the fair values of securities below their cost that are considered other-than-temporary declines are split into two components. The first is the loss attributable to declining credit quality. Credit losses are recognized in earnings as realized losses in the period in which the impairment determination is made. The second component consists of all other losses, which are recognized in other comprehensive loss. In estimating OTTI losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) adverse conditions specifically related to the security, an industry, or a geographic area, (3) the historic and implied volatility of the fair value of the security, (4) changes in the rating of the security by a rating agency, (5) recoveries or additional declines in fair value subsequent to the balance sheet date, (6) failure of the issuer of the security to make scheduled interest or principal payments, and (7) the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future. Management also monitors cash flow projections for securities that are considered beneficial interests under the guidance of ASC Subtopic 325-40, Investments – Other – Beneficial Interests in Securitized Financial Assets, (ASC Section 325-40-35). This process is described more fully in the Investment Securities section of the Consolidated Balance Sheet Review.

Fair Value of Investments

We have determined the fair value of our investment securities in accordance with the requirements of ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements required under other accounting pronouncements. The Corporation measures the fair market values of its investments based on the fair value hierarchy established in Topic 820. The determination of fair value of investments and other assets is discussed further in Note 9 to the consolidated financial statements presented elsewhere in this report.

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Pension Plan Assumptions

Our pension plan costs are calculated using actuarial concepts, as discussed within the requirements of ASC Topic 715, Compensation – Retirement Benefits. Pension expense and the determination of our projected pension liability are based upon two critical assumptions: (a) the discount rate; and (b) the expected return on plan assets. We evaluate each of these critical assumptions annually. Other assumptions impact the determination of pension expense and the projected liability including the primary employee demographics, such as retirement patterns, employee turnover, mortality rates, and estimated employer compensation increases. These factors, along with the critical assumptions, are carefully reviewed by management each year in consultation with our pension plan consultants and actuaries. Further information about our pension plan assumptions, the plan’s funded status, and other plan information is included in Note 14 to the consolidated financial statements presented elsewhere in this report.

RECENT DEVELOPMENT

On November 7, 2016, the Corporation announced that it had filed a Registration Statement on Form S-1 (the “Registration Statement”) with the SEC in connection with a proposed common stock rights offering (the “Rights Offering”). On February 8, 2017, the Registration Statement was declared effective by the SEC. Shortly thereafter, the Corporation distributed, at no charge and on a pro-rata basis, non-transferable rights to purchase an aggregate of 783,626 shares of the Corporation’s common stock at a subscription price of $11.93 per share. Rights were distributed to each person who held shares of the common stock as of 5:00 p.m., Eastern Standard Time, on November 28, 2016. The offering period expired at 5:00 pm on March 17, 2017. The Rights Offering, which was fully subscribed by rights holders, was closed on March 20, 2017. In the Rights Offering, the Corporation sold an aggregate of 783,626 shares of common stock (all of the offered shares) at $11.93 per share for aggregate gross proceeds of approximately $9.4 million. After accounting for $144,667 in offering-related expenses, net proceeds from the Rights Offering were approximately $9.2 million, which the Corporation used to offset the impact of the redemption of $10.0 million of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A (“Series A Preferred Stock”), and repayment of $10.8 million of its junior subordinated debentures (“TPS Debentures”) issued to and held by Trust III, both of which also occurred in March 2017.

SELECTED FINANCIAL DATA

The following table sets forth certain selected financial data for the three-month periods ended March 31, 2017 and 2016 and is qualified in its entirety by the detailed information and unaudited financial statements, including the notes thereto, included elsewhere in this quarterly report.

	As of or for the Three months ended March 31,
	2017			2016
Per Share Data
Basic and diluted net income per common share	$	0.22		$	0.19
Basic and diluted book value per common share	$	14.87		$	14.57
Significant Ratios
Return on Average Assets (a)		0.61	%		0.57	%
Return on Average Equity (a)		7.00	%		6.52	%
Average Equity to Average Assets		8.71	%		8.71	%

 Note: ^(a) Annualized

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RESULTS OF OPERATIONS

Overview

Consolidated net income available to common shareholders was $1.4 million for the first three months of 2017, compared to $1.2 million for the same period of 2016. Basic and diluted net income per common share for the first three months of 2017 were both $.22, compared to basic and diluted net income per common share of $.19 for the same period of 2016. The increase in earnings was primarily due to a decrease of $.5 million in other operating expenses, specifically a decrease of $.3 million in Federal Deposit Insurance Corporation (“FDIC”) premiums, a decrease of $.1 million in preferred stock dividends due to the redemption of $10.0 million of Series A Preferred Stock in February 2016 and a decrease of $.3 million in other expenses related to a reserve for a litigation claim in the first quarter of 2016. These decreases were offset by reduced income from gains on the investment portfolio when compared to the first quarter of 2016 as well as increased data processing expenses related to the implementation of new services and increased other real estate owned (“OREO”) expenses for valuation write-downs, taxes and legal expenses. The net interest margin for the first three months of 2017, the year ended December 31, 2016 and the first three months of 2016, on a fully tax equivalent (“FTE”) basis, was 3.27%, 3.19% and 3.23%, respectively.

The provision for loan losses was $.6 million for both the three months ended March 31, 2017 and the three months ended March 31, 2016. Provision expense for the first quarter of 2017 was primarily driven by a specific allocation placed on a large participation loan on a mall in Pennsylvania, offset by a net recovery of $1.3 million relating to a prior charge-off on a loan to an ethanol plant as compared to provision expense for the first quarter of 2016 for increased loan growth. Specific allocations have been made for impaired loans where management has determined that the collateral supporting the loans is not adequate to cover the loan balance, and the qualitative factors affecting the ALL have been adjusted based on the current economic environment and the characteristics of the loan portfolio.

Net interest income was stable comparing the three months ended March 31, 2017 and March 31, 2016. Interest income comparing these periods was down $.1 million due to reduced investment income of $.3 million offset by increases of $.1 million in interest on loans and $.1 million in other interest income.

Interest expense on our interest-bearing liabilities decreased by $.1 million during the three months ended March 31, 2017 when compared to the same period of 2016 due to a $30.0 million reduction on interest-bearing liabilities, which resulted from the reduction of the average balance of long-term borrowings related to the payoff of a $15.0 million FHLB advance in December 2016.

Other operating income decreased $.2 million during the first three months of 2017 when compared to the same period of 2016. This decrease was primarily attributable to a $.2 million decrease in the net gains on sales of investment securities and a decrease in brokerage commissions, offset slightly by increased trust department income and debit card income.

Operating expenses decreased $.5 million in the first three months of 2017 when compared to the same period of 2016. This was due primarily a $.3 million decrease in FDIC premiums and a $.3 million decrease in other miscellaneous expenses relating to reserves for a litigation claim in the first quarter of 2016, offset by an increase of $.1 million in data processing expenses relating to the implementation of new services.

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Net Interest Income

Net interest income is the largest source of operating revenue and is the difference between the interest earned on interest-earning assets and the interest expense incurred on 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. FTE income is determined 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.

The following table sets 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 three-month periods ended March 31, 2017 and 2016:

	Three months ended March 31,
	2017								2016
(dollars in thousands)	Average Balance			Interest		Average Yield/Rate			Average Balance			Interest		Average Yield/Rate
Assets
Loans	$	892,594		$	9,657		4.39	%	$	888,748		$	9,566		4.33	%
Investment Securities:
Taxable		217,883			1,300		2.42	%		239,979			1,555		2.61	%
Non taxable		17,122			370		8.76	%		24,248			376		6.24	%
Total		235,005			1,670		2.88	%		264,227			1,931		2.94	%
Federal funds sold		42,203			75		0.72	%		27,189			22		0.32	%
Interest-bearing deposits with other banks		2,370			2		0.34	%		1,526			1		0.18	%
Other interest earning assets		5,209			67		5.22	%		5,904			67		4.56	%
Total earning assets		1,177,381			11,471		3.95	%		1,187,594			11,587		3.92	%
Allowance for loan losses		(10,319	)							(12,059	)
Non-earning assets		150,107								145,605
Total Assets	$	1,317,169							$	1,321,140
Liabilities and Shareholders’ Equity
Interest-bearing demand deposits	$	168,622		$	27		0.06	%	$	181,040		$	52		0.12	%
Interest-bearing money markets		232,341			101		0.19	%		230,625			66		0.11	%
Savings deposits		152,636			43		0.11	%		143,677			41		0.11	%
Time deposits:
Less than $100k		117,524			287		0.99	%		132,054			337		1.03	%
$100k or more		119,033			310		1.06	%		118,218			308		1.05	%
Short-term borrowings		32,706			16		0.20	%		30,514			13		0.17	%
Long-term borrowings		130,771			1,174		3.64	%		147,529			1,212		3.30	%
Total interest-bearing liabilities		953,633			1,958		0.84	%		983,657			2,029		0.83	%
Non-interest-bearing deposits		226,929								201,326
Other liabilities		21,884								21,051
Shareholders’ Equity		114,723								115,106
Total Liabilities and Shareholders’ Equity	$	1,317,169							$	1,321,140
Net interest income and spread				$	9,513		3.11	%				$	9,558		3.09	%
Net interest margin							3.27	%							3.23	%

Note:

(1) The above table reflects the average rates earned or paid stated on an FTE basis assuming a 35% tax rate. Non-GAAP interest income on a fully taxable equivalent was $144 and $150, respectively.

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

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

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Net interest income, on an FTE basis, decreased $45 thousand (.47%) during the first three months of 2017 over the same period in 2016 due to a $.1 million (1.00%) decrease in interest income, offset by a $71 thousand (3.50%) decrease in interest expense. The net interest margin for the first three months of 2017 was 3.27% compared to 3.23% for the first three months of 2016.

Comparing the first three months of 2017 to the same period of 2016, the slight decrease in interest income was due to a decrease of $.3 million in interest income on investments. This decrease was due primarily to the decrease in average investment balances of $29.2 million. The decrease in the balances of the investment portfolio was primarily due to using the scheduled cashflow for loan funding throughout 2016, offset by an increase in interest income on loans due to a $3.8 million increase in average loans and an increase in the rate earned of 6 basis points.

Interest expense decreased slightly ($116 thousand) during the first three months of 2017 when compared to the same period of 2016 due to a decrease of $30.0 million on our average balance of interest-bearing liabilities. This decrease was primarily due to the reduction of long-term borrowings from the payoff of a $15.0 million FHLB advance at its maturity in December 2016 and a reduction of $13.7 million in higher cost certificates of deposit.

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 three-month periods ended March 31, 2017 and 2016:

	2017 Compared to 2016
(in thousands and tax equivalent basis)	Volume			Rate			Net
Interest Income:
Loans	$	169			(78	)		91
Taxable Investments		(535	)		280			(255	)
Non-taxable Investments		(624	)		618			(6	)
Federal funds sold		108			(55	)		53
Other interest earning assets		8			(7	)		1
Total interest income		(874	)		758			(116	)
Interest Expense:
Interest-bearing demand deposits		(8	)		(17	)		(25	)
Interest-bearing money markets		3			32			35
Savings deposits		10			(8	)		2
Time deposits less than $100		(144	)		94			(50	)
Time deposits $100 or more		9			(7	)		2
Short-term borrowings		4			(1	)		3
Long-term borrowings		(610	)		572			(38	)
Total interest expense		(736	)		665			(71	)
Net interest income	$	(138	)	$	93		$	(45	)

Note:

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

Provision for Loan Losses

The provision for loan losses was $.6 million for both the three months ended March 31, 2017 and 2016.  Provision expense for the first quarter of 2017 was related to a specific allocation placed on a large participation loan on a mall in Pennsylvania, offset by net recoveries including a $1.3 million recovery on a prior charge-off on a loan to an ethanol plant. Provision expense for the first quarter of 2016 was related to increased loan growth. Management strives to ensure that the ALL reflects a level commensurate with the risk inherent in our loan portfolio.

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Other Operating Income

Other operating income, exclusive of gains, increased $64 thousand during the first three months of 2017 when compared to the same period of 2016. This increase was primarily attributable to increases in trust department and debit card income, offset slightly by decreases in service charges, primarily NSF income, and decreased brokerage commissions.

Net gains of $5 thousand were reported in other income for the first three months of 2017 compared to net gains of $.2 million during the same period of 2016. The decrease resulted from the absence of sales of investment securities in the first quarter of 2017.

The following table shows the major components of other operating income for the three-month periods ended March 31, 2017 and 2016, exclusive of net gains:

	Income as % of Total Other Operating Income
	For the Three months ended
	March 31,
	2017			2016
Service charges		21	%		23	%
Trust department		44	%		42	%
Debit card Income		16	%		14	%
Bank owned life insurance		9	%		9	%
Brokerage commissions		6	%		8	%
Other income		4	%		4	%
		100	%		100	%

Other Operating Expenses

Operating expenses decreased $.5 million in the first three months of 2017 when compared to the same period of 2016. This was due primarily by a $.3 million decrease in FDIC premiums and a $.3 million decrease in other miscellaneous expenses, relating to a reserve for a litigation claim in the first quarter of 2016, offset by an increase of $.1 million in data processing expenses due to the implementation of new services.

The composition of other operating expenses for the three-month periods ended March 31, 2017 and 2016 is illustrated in the following table.

	Expense as % of Total Other Operating Expenses
	For the Three months ended
	March 31,
	2017			2016
Salaries and employee benefits		53	%		54	%
FDIC premiums		3	%		4	%
Occupancy, equipment and data processing		20	%		19	%
Professional Services		3	%		3	%
Other real estate owned		2	%		1	%
Other		19	%		19	%
		100	%		100	%

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Provision for Income Taxes

In reporting interim financial information, income tax provisions should be determined under the procedures set forth in ASC Topic 740, Income Taxes (Section 740-270-30). This guidance provides that at the end of each interim period, an entity should make its best estimate of the effective tax rate expected to be applicable for the full fiscal year. The rate so determined should be used in providing for income taxes on a current year-to-date basis. The effective tax rate should reflect anticipated investment tax credits, capital gains rates, and other available tax planning alternatives. In arriving at this effective tax rate, however, no effect should be included for the tax related to significant, unusual or extraordinary items that will be separately reported or reported net of their related tax effect in reports for the interim period or for the fiscal year.

The effective tax rate for the first three months of 2017 was 28.6%, compared to an effective tax rate of 26.6% for the first three months of 2016. Our effective income tax rates differed from the 35% federal statutory rate due to the effects of tax-exempt income on loans, securities and bank-owned life insurance, as well as the low income housing tax credits.

FINANCIAL CONDITION

Balance Sheet Overview

When compared to December 31, 2016, total assets at March 31, 2017 remained stable at $1.3 billion. During the first three months of 2017, cash and interest-bearing deposits in other banks decreased $.5 million, the investment portfolio decreased $2.2 million and gross loans increased $2.6 million. Total liabilities remained steady at $1.2 million. Long-term borrowings decreased by $10.8 million due to the repayment in that amount of junior subordinated debentures following the Rights Offering. Comparing March 31, 2017 to December 31, 2016, shareholders’ equity increased $1.1 million as a result of $9.2 million in net proceeds from the Rights Offering and earnings of $1.4 million during the first three months of 2017, offset by the redemption of $10.0 million of outstanding shares of Series A Preferred Stock in March 2017.

Loan Portfolio

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

(dollars in thousands)	March 31, 2017				December 31, 2016
Commercial real estate	$	294,781	33	%	$	297,959	33	%
Acquisition and development		107,408	12	%		104,282	12	%
Commercial and industrial		74,593	8	%		72,346	8	%
Residential mortgage		393,988	44	%		393,416	44	%
Consumer		23,762	3	%		23,923	3	%
Total Loans	$	894,532	100	%	$	891,926	100	%

Comparing March 31, 2017 to December 31, 2016, outstanding loans increased by $2.6 million (.29%). Commercial real estate (“CRE”) loans decreased $3.2 million due primarily to the paydown of $2.5 million on one large non-accrual loan. Acquisition and development (“A&D”) loans increased $3.1 million. Commercial and industrial (“C&I”) loans increased $2.2 million. Residential mortgages increased slightly due to continued activity in the 1-4 family residential loans offset by payoffs of home equity balances. The consumer portfolio decreased slightly by $.2 million from scheduled amortization. Approximately 38% of the commercial loan portfolio was collateralized by real estate at March 31, 2017, compared to 39% at December 31, 2016.

Risk Elements of Loan Portfolio

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

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(dollars in thousands)	March 31, 2017		% of Applicable Portfolio			December 31, 2016		% of Applicable Portfolio
Non-accrual loans:
Commercial real estate	$	9,096		3.09	%	$	12,211		4.10	%
Acquisition and development		50		0.05	%		45		0.01	%
Commercial and industrial		0		0.00	%		0		0.00	%
Residential mortgage		1,747		0.06	%		1,690		0.40	%
Consumer		0		0.00	%		0		0.00	%
Total non-accrual loans	$	10,893		1.22	%	$	13,946		1.56	%
Accruing Loans Past Due 90 days or more:
Commercial real estate	$	0				$	0
Acquisition and development		0					0
Commercial and industrial		10					11
Residential mortgage		158					382
Consumer		28					27
Total loans past due 90 days or more	$	196				$	420
Total non-accrual and accruing loans past due 90 days or more	$	11,089				$	14,366
Restructured Loans (TDRs):
Performing	$	7,168				$	7,336
Non-accrual (included above)		1,858					1,987
Total TDRs	$	9,026				$	9,323
Other real estate owned	$	11,002				$	10,910
Impaired loans without a valuation allowance	$	13,982				$	23,131
Impaired loans with a valuation allowance		6,872					869
Total impaired loans	$	20,854				$	24,000
Valuation allowance related to impaired loans	$	1,950				$	260

Performing loans considered to be impaired (including performing troubled debt restructurings, or TDRs), as defined and identified by management, amounted to $10.3 million at March 31, 2017 and December 31, 2016. Loans are identified as impaired when, based on current information and events, management determines that we will be unable to collect all amounts due according to contractual terms. These loans consist primarily of A&D loans and CRE loans. The fair values are generally determined based upon independent third party appraisals of the collateral or discounted cash flows based upon the expected proceeds. Specific allocations have been made where management believes there is insufficient collateral to repay the loan balance if liquidated and there is no secondary source of repayment available.

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The following table presents the details of impaired loans that are TDRs by class at March 31, 2017 and December 31, 2016:

	March 31, 2017				December 31, 2016
(in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Performing
Commercial real estate
Non owner-occupied		3	$	381		3	$	385
All other CRE		3		3,009		3		3,044
Acquisition and development
1-4 family residential construction		1		582		1		582
All other A&D		2		1,789		2		1,898
Commercial and industrial		0		0		0		0
Residential mortgage
Residential mortgage – term		9		1,407		9		1,427
Residential mortgage – home equity		0		0		0		0
Consumer		0		0		0		0
Total performing		18	$	7,168		18	$	7,336
Non-accrual
Commercial real estate
Non owner-occupied		0	$	0		0	$	0
All other CRE		3		1,593		3		1,594
Acquisition and development
1-4 family residential construction		0		0		0		0
All other A&D		0		0		0		0
Commercial and industrial		0		0		0		0
Residential mortgage
Residential mortgage – term		2		265		3		393
Residential mortgage – home equity		0		0		0		0
Consumer		0		0		0		0
Total non-accrual		5		1,858		6		1,987
Total TDRs		23	$	9,026		24	$	9,323

The level of TDRs decreased $.3 million during the three months ended March 31, 2017. There was one non-accrual loan totaling $.1 million that paid off during the three months ended March 31, 2017. Additionally, $.2 million in net principal payments were received during the same time period.

Allowance and Provision for Loan Losses

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

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

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The following table presents a summary of the activity in the ALL for the three months ended March 31:

(dollars in thousands)	2017			2016
Balance, January 1	$	9,918		$	11,922
Charge-offs:
Commercial real estate		(429	)		(211	)
Acquisition and development		(18	)		0
Commercial and industrial		(33	)		(53	)
Residential mortgage		(148	)		(90	)
Consumer		(84	)		(84	)
Total charge-offs		(712	)		(438	)
Recoveries:
Commercial real estate		5			0
Acquisition and development		11			100
Commercial and industrial		1,455			30
Residential mortgage		220			32
Consumer		77			42
Total recoveries		1,768			204
Net credit recoveries/(losses)		1,056			(234	)
Provision for loan losses		609			568
Balance at end of period	$	11,583		$	12,256
Allowance for loan losses to gross loans outstanding (as %)		1.29	%		1.36	%
Net (recoveries)/charge-offs to average loans outstanding during the period, annualized (as %)		-0.47	%		0.11	%

The ALL increased to $11.6 million at March 31, 2017, from $9.9 million at December 31, 2016. The provision for loan losses for the first three months of 2017 remained stable at $.6 million when compared to the first three months of 2016. Net recoveries of $1.1 million were recorded for the three months ended March 31, 2017 compared to $.2 million in net charge-offs for the three months ended March 31, 2016. The ratio of the ALL to loans outstanding was 1.29% at March 31, 2017, 1.11% at December 31, 2016, and 1.36% at March 31, 2016.

The ratio of net recoveries to average loans for the three months ended March 31, 2017 was an annualized .47%, compared to an annualized net charge-off rate of .11% for the same period in 2016 and .57% for the year ended December 31, 2016. The CRE portfolio had an annualized net charge-off rate as of March 31, 2017 of .57% compared to 1.80% as of December 31, 2016. The A&D loans had an annualized net charge-off rate as of March 31, 2017 of .03% compared to an annualized net recovery rate of .98% as of December 31, 2016. The C&I loans had a net recovery rate of 7.75% as of March 31, 2017 compared to a net charge-off rate of .69% as of December 31, 2016. The improvement was due to a $1.3 million recovery recorded in the first quarter of 2017 on a loan to an ethanol plant that had been charged-off in a prior period. The residential mortgage ratios were a net recovery rate of .07% as of March 31, 2017 compared to a net charge-off rate of .07% as of December 31, 2016, and the consumer loan ratios were net charge-off rates of .12% and .77% as of March 31, 2017 and December 31, 2016, respectively.

Management believes that the ALL at March 31, 2017 is adequate to provide for probable losses inherent in our loan portfolio. Amounts that will be recorded for the provision for loan losses in future periods will depend upon trends in the loan balances, including the composition of the loan portfolio, changes in loan quality and loss experience trends, potential recoveries on previously charged-off loans and changes in other qualitative factors. Management also applies interest rate risk, collateral value and debt service sensitivity analyses to the Commercial real estate loan portfolio and obtains new appraisals on specific loans under defined parameters to assist in the determination of the periodic provision for loan losses.

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Investment Securities

At March 31, 2017, the total amortized cost basis of the available-for-sale investment portfolio was $146.2 million, compared to a fair value of $136.9 million. Unrealized gains and losses on securities available-for-sale are reflected in accumulated other comprehensive loss, a component of shareholders’ equity. The amortized cost basis of the held to maturity portfolio was $98.0 million, compared to a fair value of $98.9 million.

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

	March 31, 2017							December 31, 2016
	Amortized		Fair Value		FV as %			Amortized		Fair Value		FV as %
(dollars in thousands)	Cost		(FV)		of Total			Cost		(FV)		of Total
Securities Available-for-Sale:
U.S. government agencies	$	25,000	$	24,297		18	%	$	25,000	$	24,253		17	%
Commercial mortgage-backed agencies		51,321		50,394		37	%		52,978		52,222		37	%
Collateralized mortgage obligations		19,670		19,311		14	%		19,953		19,567		14	%
Obligations of state and political subdivisions		22,423		22,578		16	%		23,700		23,704		17	%
Collateralized debt obligations		27,790		20,357		15	%		27,930		20,254		15	%
Total available for sale	$	146,204	$	136,937		100	%	$	149,561	$	140,000		100	%
Securities Held to Maturity:
U.S. government agencies	$	15,772	$	16,290		16	%	$	15,738	$	16,250		17	%
Residential mortgage-backed agencies		51,515		51,312		52	%		50,384		50,265		51	%
Commercial mortgage-backed agencies		17,509		17,761		18	%		17,584		17,832		18	%
Collateralized mortgage obligations		4,593		4,491		5	%		4,833		4,684		5	%
Obligations of state and political subdivisions		8,630		9,062		9	%		8,630		8,950		9	%
Total held to maturity	$	98,019	$	98,916		100	%	$	97,169	$	97,981		100	%

Total investment securities available-for-sale decreased $3.1 million since December 31, 2016. This decline during the first three months was due to calls on investments. At March 31, 2017, the securities classified as available-for-sale included a net unrealized loss of $9.3 million, which represents the difference between the fair value and amortized cost of securities in the portfolio.

As discussed in Note 9 to the consolidated financial statements presented elsewhere in this report, the Corporation measures fair market values based on the fair value hierarchy established in ASC Topic 820, Fair Value Measurements and Disclosures. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Level 3 prices or valuation techniques require inputs that are both significant to the valuation assumptions and are not readily observable in the market (i.e. supported with little or no market activity). These Level 3 instruments are valued based on both observable and unobservable inputs derived from the best available data, some of which is internally developed, and considers risk premiums that a market participant would require.

Approximately $116.6 million of the available-for-sale portfolio was valued using Level 2 pricing and had net unrealized gains of $1.9 million at March 31, 2017. The remaining $20.4 million of the securities available-for-sale represents the entire CDO portfolio, which was valued using significant unobservable inputs (Level 3 assets). The $7.4 million in net unrealized losses associated with this portfolio relates to 12 pooled trust preferred securities that comprise the CDO portfolio. Net unrealized losses of $3.8 million represent non-credit related OTTI charges on eight of the securities, while $3.6 million of unrealized losses relates to four securities which have had no credit related OTTI.

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The following table provides a summary of the trust preferred securities in the CDO portfolio and the credit status of these securities as of March 31, 2017:

Level 3 Investment Securities Available for Sale

(Dollars in Thousands)

Investment Description		First United Level 3 Investments								Security Credit Status
Deal	Class	Amortized Cost		Fair Market  Value		Unrealized Gain/(Loss)			Lowest Credit Rating	Original collateral		Deferrals/ Defaults as % of Original Collateral			Performing Collateral		Collateral Support			Collateral Support as % of Performing Collateral			Number of Performing Issuers/Total Issuers
Preferred Term Security XI*	B-1		1,345		955		(390	)	C		635,775		14.08	%		372,925		(19,295	)		-5.17	%		43	/53
Preferred Term Security XVIII*	C		1,971		1,230		(741	)	C		676,565		14.83	%		364,686		(4,486	)		-1.23	%		48	/62
Preferred Term Security XVIII	C		2,821		1,846		(975	)	C		676,565		14.83	%		364,686		(4,486	)		-1.23	%		48	/62
Preferred Term Security XIX*	C		1,807		1,482		(325	)	C		700,535		5.42	%		514,606		15,601			3.03	%		54	/61
Preferred Term Security XIX*	C		1,075		889		(186	)	C		700,535		5.42	%		514,606		15,601			3.03	%		54	/61
Preferred Term Security XIX*	C		2,478		2,074		(404	)	C		700,535		5.42	%		514,606		15,601			3.03	%		54	/61
Preferred Term Security XIX*	C		1,076		889		(187	)	C		700,535		5.42	%		514,606		15,601			3.03	%		54	/61
Preferred Term Security XXII*	C-l		1,528		1,149		(379	)	C		1,386,600		14.79	%		921,324		20,038			2.17	%		65	/83
Preferred Term Security XXII*	C-l		3,822		2,872		(950	)	C		1,386,600		14.79	%		921,324		20,038			2.17	%		65	/83
Preferred Term Security XXIII	C-l		1,867		1,108		(759	)	C		1,467,000		16.84	%		852,201		46,984			5.51	%		85	/101
Preferred Term Security I-P-IV	B-1		3,000		2,199		(801	)	CCC-		325,000		0.00	%		140,750		38,848			27.60	%		15	/15
Preferred Term Security I-P-IV	B-1		5,000		3,664		(1,336	)	CCC-		325,000		0.00	%		140,750		38,848			27.60	%		15	/15
Total Level 3 Securities Available for Sale			27,790		20,357		(7,433	)

* Security has been deemed other-than-temporarily impaired and loss has been recognized in accordance with ASC Section 320-10-35.

The terms of the debentures underlying trust preferred securities allow the issuer of the debentures to defer interest payments for up to 20 quarters, and, in such case, the terms of the related trust preferred securities allow their issuers to defer dividend payments for up to 20 quarters. Some of the issuers of the trust preferred securities in our investment portfolio have defaulted and/or deferred payments ranging from 0.00% to 16.84% of the total collateral balances underlying the securities. The securities were designed to include structural features that provide investors with credit enhancement or support to provide default protection by subordinated tranches. These features include over-collateralization of the notes or subordination, excess interest or spread which will redirect funds in situations where collateral is insufficient, and a specified order of principal payments. There are securities in our portfolio that are under-collateralized, which does represent additional stress on our tranche. However, in these cases, the terms of the securities require excess interest to be redirected from subordinate tranches as credit support, which provides additional support to our investment.

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

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The market for these securities as of March 31, 2017 is not active and markets for similar securities are also not active. The inactivity was evidenced first by a significant widening of the bid-ask spread in the brokered markets in which these securities trade and then by a significant decrease in the volume of trades relative to historical levels. The new issue market is also inactive, as no new CDOs have been issued since 2007. There are currently very few market participants who are willing to effect transactions in these securities. The market values for these securities, or any securities other than those issued or guaranteed by the U.S. Department of the Treasury (the “Treasury”), are very depressed relative to historical levels. Therefore, in the current market, a low market price for a particular bond may only provide evidence of stress in the credit markets in general rather than being an indicator of credit problems with a particular issue. Given the conditions in the current debt markets and the absence of observable transactions in the secondary and new issue markets, management has determined that (a) the few observable transactions and market quotations that are available are not reliable for the purpose of obtaining fair value at March 31, 2017, (b) an income valuation approach technique (i.e. present value) that maximizes the use of relevant unobservable inputs and minimizes the use of observable inputs will be equally or more representative of fair value than a market approach, and (c) the CDO segment is appropriately classified within Level 3 of the valuation hierarchy because management determined that significant adjustments were required to determine fair value at the measurement date.

Management relies on an independent third party to prepare both the evaluations of OTTI and the fair value determinations for the CDO portfolio. Management does not believe that there were any material differences in the OTTI evaluations and pricing between December 31, 2016 and March 31, 2017.

The approach used by the third party to determine fair value involved several steps, which included detailed credit and structural evaluation of each piece of collateral in each bond, projection of default, recovery and prepayment/amortization probabilities for each piece of collateral in the bond, and discounted cash flow modeling. The discount rate methodology used by the third party combines a baseline current market yield for comparable corporate and structured credit products with adjustments based on evaluations of the differences found in structure and risks associated with actual and projected credit performance of each CDO being valued.  Currently, the only active and liquid trading market that exists is for stand-alone trust preferred securities, with a limited market for highly-rated CDO securities that are more senior in the capital structure than the securities in the CDO portfolio.  Therefore, adjustments to the baseline discount rate are also made to reflect the additional leverage found in structured instruments.

Based upon a review of credit quality and the cash flow tests performed by the independent third party, management determined that no securities had credit-related OTTI during the first three months of 2017.

On December 10, 2013, to implement Section 619 of the Dodd-Frank Act, the Treasury, the federal banking regulators including FDIC, and the Securities and Exchange Commission (the “SEC”) adopted the Volcker Rule. The Volcker Rule prohibits a banking institution from acquiring or retaining an “ownership interest” in a “covered fund”. A “covered fund” is (a) an entity that would be an investment company under the Investment Company Act of 1940, as amended, but for the exemptions contained in Section 3(c)(1) or Section 3(c)(7) of that Act, (b) a commodity pool with certain characteristics, and/or (c) a non-US entity with certain characteristics that is sponsored or owned by a banking entity located or organized in the US. The term “ownership interest” is defined as “any equity, partnership, or other similar interest.”

On January 14, 2014, the federal banking agencies adopted a final interim rule that exempts CDOs from the scope of the Volcker Rule if they were issued in offerings in which, among other things, the proceeds were used primarily to purchase securities issued by depository institutions and their affiliates. In connection with that final interim rule, the agencies published a non-exclusive list of exempt offerings.

Of the 12 CDOs held by the Corporation, 10 were issued in exempt offerings. The two remaining CDOs are collateralized primarily by securities issued by insurance companies and are not included in the agencies’ list of exempt offerings, which fact required management to make a determination as to whether the CDOs constituted an “ownership interest” in a “covered fund”, such that the Corporation would be required to dispose of them pursuant to the Volcker Rule. To make this determination, management conducted a thorough review of the Indentures that govern the CDOs and the other offering materials used by the issuers to offer and sell the CDOs.

The Volcker Rule defines an “ownership interest” as an equity, partnership or other similar interest. The CDOs are debt securities (promissory notes) issued by corporations that call for regularly-scheduled payments of principal and interest, with interest calculated either at a fixed-rate or at a rate that is tied to LIBOR. Accordingly, none of the CDOs represent an equity or partnership interest in the issuers. In their adopting rule release, the agencies stated that debt securities evidencing “typical extensions of credit” – those that “provide for payment of stated principal and interest calculated at a fixed rate or at a floating rate based on an index or interbank rate” – do not generally meet the definition of “other similar interest”. To be considered an “other similar interest”, a debt security must exhibit one or more of seven specified characteristics identified in the Volcker Rule on a current, future, or contingent basis.

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Based on its review, management concluded that the two CDOs evidences “typical extensions of credit” and do not exhibit any of these seven characteristics. Accordingly, management concluded that the two CDOs constitutes an “ownership interest” as defined by the Volcker Rule and that, therefore, as of December 31, 2016, the Corporation has the current intent and ability to hold these CDOs until maturity.

During the first quarter of 2014 and following the promulgation of the Volcker Rule, the fair value of the CDO portfolio improved significantly. The improvement was due to several factors including improved financial condition of the issuers, improved cash flows and a lower discount rate. As the issuers resumed payments of previously deferred interest during the quarter, cash flow projections for the securities increased. In addition, the discount rate utilized in the cash flow models was reduced as the base line current market yield for comparable corporate and structured products improved and the projected credit performance of the CDOs improved with favorable market conditions. The resulting increase in cash flow projections over the remaining life of the securities yielded a higher fair market value.

Deposits

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

(dollars in thousands)	March 31, 2017				December 31, 2016
Non-interest bearing demand deposits:
Retail	$	239,292	23.3	%	$	219,158	21.6	%
Interest-bearing deposits:
Demand		171,144	16.6	%		172,071	17.0	%
Money Market:
Retail		161,170	15.7	%		161,812	16.0	%
Brokered/ICS		61,572	6.0	%		70,425	6.9	%
Savings deposits		156,937	15.3	%		149,653	14.8	%
Time deposits less than $100,000:
Retail		116,945	11.4	%		116,651	11.5	%
Brokered/CDARS		556	0.1	%		520	0.1	%
Time deposits $100,000 or more:
Retail		115,101	11.2	%		120,341	11.9	%
Brokered/CDARS		4,151	0.4	%		3,598	0.4	%
Total Deposits	$	1,026,868	100	%	$	1,014,229	100	%

Total deposits increased $12.6 million during the first three months of 2017 when compared to deposits at December 31, 2016. During the first quarter, we continued to see increases in core deposits and reductions in certificates of deposit. Non-interest bearing deposits increased $20.1 million due to building new relationships with both consumer and commercial customers as well as increased balances on existing accounts. Traditional savings accounts increased $7.3 million due to continued growth in our Prime Saver product. Total demand deposits decreased $.9 million and total money market accounts decreased $9.5 million due to decreased balances in our ICS money market account relating to the re-allocation of cash in our trust accounts. Time deposits less than $100,000 increased $.3 million and time deposits greater than $100,000 decreased $4.7 million.

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Borrowed Funds

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

	March 31,		December 31,
(in thousands)	2017		2016
Securities sold under agreements to repurchase	$	35,269	$	36,000
Total short-term borrowings	$	35,269	$	36,000
FHLB advances	$	90,000	$	90,007
Junior subordinated debt		30,929		41,730
Total long-term borrowings	$	120,929	$	131,737

Total short-term borrowings decreased by $.7 million during the first three months of 2017 due to a decrease in our Treasury Management product. Long-term borrowings decreased by $10.8 million during the first three months of 2017 due to the repayment of $10.8 million in TPS Debentures issued to and held by Trust III in March 2017.

Liquidity Management

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

· Reliability and stability of core deposits;

· Cash flow structure and pledging status of investments; and

· Potential for unexpected loan demand.

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

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

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

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

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

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

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

63

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

Market Risk and Interest Sensitivity

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

At March 31, 2017, we were asset sensitive.

Our interest rate risk management goals are:

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

· Enable dynamic measurement and management of interest rate risk;

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

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

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

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

We evaluate the effect of a change in interest rates of +/-100 basis points to +/-400 basis points on both NII and Net Portfolio Value (“NPV”) / Economic Value of Equity (“EVE”). We concentrate on NII rather than net income as long as NII remains the significant contributor to net income.

NII modeling allows management to view how changes in interest rates will affect the spread between the yield paid on assets and the cost of deposits and borrowed funds. Unlike traditional Gap modeling, NII modeling takes into account the different degree to which installments in the same repricing period will adjust to a change in interest rates. It also allows the use of different assumptions in a falling versus a rising rate environment. The period considered by the NII modeling is the next eight quarters.

NPV / EVE modeling focuses on the change in the market value of equity. NPV / EVE is defined as the market value of assets less the market value of liabilities plus/minus the market value of any off-balance sheet positions. By effectively looking at the present value of all future cash flows on or off the balance sheet, NPV / EVE modeling takes a longer-term view of interest rate risk. This complements the shorter-term view of the NII modeling.

64

Measures of NII at risk produced by simulation analysis are indicators of an institution’s short-term performance in alternative rate environments. These measures are typically based upon a relatively brief period, usually one year. They do not necessarily indicate the long-term prospects or economic value of the institution.

Capital Resources

We require capital to fund loans, satisfy our obligations under the Bank’s letters of credit, meet the deposit withdrawal demands of the Bank’s customers, and satisfy our other monetary obligations. To the extent that deposits are not adequate to fund our capital requirements, we can rely on the funding sources identified above under the heading “Liquidity Management”. At March 31, 2017, the Bank had $70.0 million available through unsecured lines of credit with correspondent banks, $10.6 million available through a secured line of credit with the Fed Discount Window and approximately $162.4 million available through the FHLB. Management is not aware of any demands, commitments, events or uncertainties that are likely to materially affect our ability to meet our future capital requirements.

In addition to operational requirements, the Bank and the Corporation are subject to risk-based capital regulations, which were adopted and are monitored by federal banking regulators. These regulations are used to evaluate capital adequacy and require an analysis of an institution’s asset risk profile and off-balance sheet exposures, such as unused loan commitments and stand-by letters of credit.

On July 2, 2013, the FRB approved final rules that substantially amended the regulatory risk-based capital rules applicable to First United Corporation. The FDIC subsequently approved the same rules which apply to the Bank. The final rules implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act and were implemented as of March 31, 2015. 

The Basel III capital rules include new risk-based capital and leverage ratios, which will be phased in from 2015 to 2019, and which refine the definition of what constitutes “capital” for purposes of calculating those ratios. The new minimum capital level requirements applicable to the Corporation under the final rules are: (a) a new common equity Tier 1 capital ratio of 4.5%; (b) a Tier 1 capital ratio of 6% (increased from 4%); (c) a total capital ratio of 8% (unchanged from current rules); and (d) a Tier 1 leverage ratio of 4% for all institutions. The final rules also establish a “capital conservation buffer” above the new regulatory minimum capital requirements, which must consist entirely of common equity Tier 1 capital. The capital conservation buffer will be phased-in over four years beginning on January 1, 2016, as follows: the maximum buffer will be 0.625% of risk-weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter. This will result in the following minimum ratios beginning in 2019: (1) a common equity Tier 1 capital ratio of 7.0%, (2) a Tier 1 capital ratio of 8.5%, and (3) a total capital ratio of 10.5%. Under the final rules, institutions are subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.

The Basel III capital final rules also implement revisions and clarifications consistent with Basel III regarding the various components of Tier 1 capital, including common equity, unrealized gains and losses, as well as certain instruments that no longer qualify as Tier 1 capital, some of which will be phased out over time. Under the final rules, the effects of certain accumulated other comprehensive items are not excluded; however, banking organizations like the Corporation and the Bank that are not considered “advanced approaches” banking organizations may make a one-time permanent election to continue to exclude these items. The Corporation and the Bank made this election in their first quarter 2015 regulatory filings in order to avoid significant variations in the level of capital depending upon the impact of interest rate fluctuations on the fair value of the Corporation’s available-for-sale securities portfolio. Additionally, the final rules provide that small depository institution holding companies with less than $15 billion in total assets as of December 31, 2009 (which includes the Corporation) will be able to permanently include non-qualifying instruments that were issued and included in Tier 1 or Tier 2 capital prior to May 19, 2010 (such as the Corporation’s TPS Debentures) in additional Tier 1 or Tier 2 capital until they redeem such instruments or until the instruments mature.

65

The Basel III capital rules also contain revisions to the prompt corrective action framework, which is designed to place restrictions on insured depository institutions if their capital levels begin to show signs of weakness. These revisions were effective January 1, 2015. Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions are required to meet the following capital level requirements in order to qualify as “well capitalized”: (a) a new common equity Tier 1 capital ratio of 6.5%; (b) a Tier 1 capital ratio of 8% (increased from 6%); (c) a total capital ratio of 10% (unchanged from current rules); and (d) a Tier 1 leverage ratio of 5% (increased from 4%).

The Basel III capital rules set forth certain changes for the calculation of risk-weighted assets. These changes include (a) an increased number of credit risk exposure categories and risk weights; (b) an alternative standard of creditworthiness consistent with Section 939A of the Dodd-Frank Act; (c) revisions to recognition of credit risk mitigation; (d) rules for risk weighting of equity exposures and past due loans, and (e) revised capital treatment for derivatives and repo-style transactions.

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

The following table presents our capital ratios:

	March 31, 2017			December 31, 2016			Required for Capital Adequacy Purposes			Required to be Well Capitalized
Total Capital (to risk-weighted assets)
Consolidated		16.09	%		16.71	%		8.00	%		10.00	%
First United Bank & Trust		16.10	%		16.70	%		8.00	%		10.00	%
Tier 1 Capital (to risk-weighted assets)
Consolidated		14.88	%		14.76	%		6.00	%		8.00	%
First United Bank & Trust		14.85	%		15.63	%		6.00	%		8.00	%
Common Equity Tier 1 Capital (to risk-weighted assets)
Consolidated		12.12	%		10.74	%		4.50	%		6.50	%
First United Bank & Trust		14.85	%		15.63	%		4.50	%		6.50	%
Tier 1 Capital (to average assets)
Consolidated		10.99	%		10.95	%		4.00	%		5.00	%
First United Bank & Trust		10.71	%		11.11	%		4.00	%		5.00	%

Contractual Obligations, Commitments and Off-Balance Sheet Arrangements

Loan commitments are made to accommodate the financial needs of our customers. Letters of credit commit us to make payments on behalf of customers when certain specified future events occur. The credit risks inherent in loan commitments and letters of credit are essentially the same as those involved in extending loans to customers, and these arrangements are subject to our normal credit policies. Loan commitments and letters of credit totaled $117.4 million and $1.6 million, respectively, at March 31, 2017, compared to $120.8 million and $1.6 million, respectively, at December 31, 2016. We are not a party to any other off-balance sheet arrangements.

66

See Note 13 to the consolidated financial statements presented elsewhere in this report for further disclosure on Borrowed Funds. There have been no other significant changes to contractual obligations as presented at December 31, 2016.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our primary market risk is interest rate fluctuation and we have procedures in place to evaluate and mitigate this risk. This market risk and our procedures are described above in Item 2 of Part I of this report under the caption “Market Risk and Interest Sensitivity”, and in Item 7 of Part II of First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016 under the caption “Market Risk and Interest Sensitivity”. Management believes that no material changes in our procedures used to evaluate and mitigate these risks have occurred since December 31, 2016.

Item 4. Controls and Procedures

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

An evaluation of the effectiveness of these disclosure controls as of March 31, 2017 was carried out under the supervision and with the participation of management, including the CEO and the CFO. Based on that evaluation, management, including the CEO and the CFO, has concluded that our disclosure controls and procedures are, in fact, effective at the reasonable assurance level.

During the quarter ended March 31, 2017, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

67

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

The risks and uncertainties to which our financial condition and operations are subject are discussed in detail in Item 1A of Part I of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016.  Except as disclosed below, management does not believe that any material changes in our risk factors have occurred since they were last disclosed.

We could have a material write down related to our deferred tax asset as a result of a decrease in our corporate tax rate.

Since the 2016 presidential election, there has been a great deal of discussion relating to possible changes to the Internal Revenue Code of 1986, as amended, and corporate tax rates. A number of proposals for broad reform of the corporate tax system are under evaluation by various legislative and administrative bodies.  In fact, on April 26, 2017, the Trump Administration announced a comprehensive tax reform proposal that includes a reduction in the U.S. corporate income tax rate to 15.0%.  As of March 31, 2017, the balance of our net deferred tax asset was $19.0 million.  Any decrease in our corporate tax rate would result in an immediate decrease in the deferred tax asset and a related charge to earnings that could materially affect our financial results.  The Trump Administration’s proposal is at the beginning stages of negotiations and will need to be addressed by both houses of Congress. It is too early in the process to make any determination with respect to likelihood of passage.  Accordingly, management cannot assess the effect that a change in the corporate tax rate would have our operating results or financial condition at the present time.

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

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits filed or furnished with this quarterly report are listed in the Exhibit Index that follows the signatures, which index is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		FIRST UNITED CORPORATION
Date:	May 10, 2017	/s/ Carissa L. Rodeheaver
		Carissa L. Rodeheaver, CPA, CFP
		Chairman of the Board, President
		and Chief Executive Officer
		(Principal Executive Officer)
Date	May 10, 2017	/s/ Tonya K. Sturm
		Tonya K. Sturm, Senior Vice President,
		Chief Financial Officer
		(Principal Accounting Officer)

69

EXHIBIT INDEX

Exhibit	Description
31.1	Certifications of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)
31.2	Certifications of the Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)
32	Certification of the Principal Executive Officer and the Principal Accounting Office pursuant to Section 906 of the Sarbanes-Oxley Act (furnished herewith)
101.INS	XBRL Instance Document (filed herewith)
101.SCH	XBRL Taxonomy Extension Schema (filed herewith)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase (filed herewith)
101.DEF	XBRL Taxonomy Extension Definition Linkbase (filed herewith)
101.LAB	XBRL Taxonomy Extension Label Linkbase (filed herewith)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase (filed herewith)

70

EX-31.1

Exhibit 31.1

Certifications of the Principal Executive Officer

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

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

I, Carissa L. Rodeheaver, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:	May 10, 2017	/s/ Carissa L. Rodeheaver
		Carissa L. Rodeheaver, CPA, CFP
		Chairman of the Board, President
		and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certifications of the Principal Accounting Officer

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

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

I, Tonya K. Sturm, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date	May 10, 2017	/s/ Tonya K. Sturm
		Tonya K. Sturm, Senior Vice President,
		Chief Financial Officer
		(Principal Accounting Officer)

EX-32

Exhibit 32

Certification of Periodic Report

Pursuant to 18 U.S.C. § Section 1350

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

Pursuant to, and for purposes only of, 18 U.S.C. § 1350, each of the undersigned hereby certifies that (i) the Quarterly Report of First United Corporation on Form 10-Q for the quarter ended March 31, 2017 filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of First United Corporation.

Date:	May 10, 2017	/s/ Carissa L. Rodeheaver
		Carissa L. Rodeheaver, CPA, CFP
		Chairman of the Board, President
		and Chief Executive Officer
		(Principal Executive Officer)
Date:	May 10, 2017	/s/ Tonya K. Sturm
		Tonya K. Sturm, Senior Vice President,
		Chief Financial Officer
		(Principal Accounting Officer)

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	Apr. 30, 2017
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2017
Entity Registrant Name	FIRST UNITED CORP/MD/
Entity Central Index Key	0000763907
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		7,052,630
Trading Symbol	func
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1

XML

Consolidated Statement of Financial Condition - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Assets
Cash and due from banks	$ 60,749	$ 60,707
Interest bearing deposits in banks	2,089	2,603
Cash and cash equivalents	62,838	63,310
Investment securities - available-for-sale (at fair value)	136,937	140,000
Investment securities - held to maturity (fair value $98,916 at March 31, 2017 and $97,981 at December 31, 2016)	98,019	97,169
Restricted investment in bank stock, at cost	5,204	5,209
Loans	894,532	891,926
Allowance for loan losses	(11,583)	(9,918)
Net loans	882,949	882,008
Premises and equipment, net	28,155	27,160
Goodwill and other intangible assets, net	11,004	11,004
Bank owned life insurance	41,277	40,968
Deferred tax assets	19,001	19,337
Other real estate owned	11,002	10,910
Accrued interest receivable and other assets	23,048	21,115
Total Assets	1,319,434	1,318,190
Liabilities:
Non-interest bearing deposits	239,292	219,158
Interest bearing deposits	787,576	795,071
Total deposits	1,026,868	1,014,229
Short-term borrowings	35,269	36,000
Long-term borrowings	120,929	131,737
Accrued interest payable and other liabilities	21,484	22,526
Total Liabilities	1,204,550	1,204,492
Shareholders' Equity:
Preferred stock - no par value; Authorized 2,000 shares of which 30 shares of Series A, $1,000 per share liquidation preference, 9% cumulative, issued and outstanding10 shares at March 31, 2017 and 20 shares at December 31, 2016	10,000	20,000
Common Stock - par value $.01 per share;Authorized 25,000 shares; issued and outstanding 7,053 shares at March 31, 2017 and 6,269 at December 31, 2016	71	63
Surplus	31,411	22,178
Retained earnings	94,362	92,922
Accumulated other comprehensive loss	(20,960)	(21,465)
Total Shareholders' Equity	114,884	113,698
Total Liabilities and Shareholders' Equity	$ 1,319,434	$ 1,318,190

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Consolidated Statement of Financial Condition (Parenthetical) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Held-to-maturity securities, fair value	$ 98,916	$ 97,981
Preferred stock, no par value	$ 0	$ 0
Preferred Stock, Shares Authorized	2,000,000	2,000,000
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Common Stock, Shares Authorized	25,000,000	25,000,000
Common Stock, Shares, Issued	7,053,000	6,269,000
Common Stock, Shares, Outstanding	7,053,000	6,269,000
Series A Preferred Stock [Member]
Preferred Stock, Shares Authorized	30,000	30,000
Preferred Stock, Liquidation Preference Per Share	$ 1,000	$ 1,000
Preferred Stock, Shares Issued	10,000	20,000
Preferred Stock, Shares Outstanding	10,000	20,000
Preferred Stock, Dividend Rate, Percentage	9.00%	9.00%

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Consolidated Statement of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Interest income
Interest and fees on loans	$ 9,652	$ 9,558
Interest on investment securities: Taxable	1,300	1,555
Interest on investment securities: Exempt from federal income tax	231	235
Total investment income	1,531	1,790
Other	144	90
Total interest income	11,327	11,438
Interest expense
Interest on deposits	768	804
Interest on short-term borrowings	16	13
Interest on long-term borrowings	1,174	1,212
Total interest expense	1,958	2,029
Net interest income	9,369	9,409
Provision for loan losses	609	568
Net interest income after provision for loan losses	8,760	8,841
Other operating income
Net gains	5	216
Service charges	735	766
Trust department	1,515	1,417
Debit card income	544	475
Bank owned life insurance	309	319
Brokerage commissions	213	287
Other	136	124
Total other income	3,452	3,388
Total other operating income	3,457	3,604
Other operating expenses
Salaries and employee benefits	5,340	5,311
FDIC premiums	84	414
Equipment	640	635
Occupancy	621	639
Data processing	765	649
Professional Services	253	300
Other real estate owned	174	84
Other	1,567	1,865
Total other operating expenses	9,444	9,897
Income before income tax expense	2,773	2,548
Provision for income tax expense	793	677
Net Income	1,980	1,871
Accumulated preferred stock dividends	(540)	(675)
Net Income Available to Common Shareholders	$ 1,440	$ 1,196
Basic and diluted net income per common share	$ 0.22	$ 0.19
Weighted average number of basic and diluted shares outstanding	6,530	6,255

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Consolidated Statement of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Consolidated Statement of Comprehensive Income [Abstract]
Net Income	$ 1,980	$ 1,871
Other comprehensive income, net of tax and reclassification adjustments:
Net unrealized gains/(losses) on investments with OTTI	98	(921)
Net unrealized gains on all other AFS securities	78	434
Net unrealized gains on HTM securities	61	143
Net unrealized gains/(losses) on cash flow hedges	52	(331)
Net unrealized gains/(losses) on pension	194	(213)
Net unrealized gains on SERP	22	15
Other comprehensive (loss)/income, net of tax	505	(873)
Comprehensive income	$ 2,485	$ 998

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Consolidated Statement of Changes in Shareholders' Equity - USD ($) $ in Thousands	Preferred Stock [Member]	Common Stock [Member]	Surplus [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Total
Balance at Dec. 31, 2015	$ 30,000	$ 63	$ 21,986	$ 87,666	$ (18,944)	$ 120,771
Net income				7,281		7,281
Other comprehensive income (loss)					(2,521)	(2,521)
Stock based compensation			192			192
Preferred stock redemption	(10,000)					(10,000)
Preferred stock dividends paid				(2,025)		(2,025)
Balance at Dec. 31, 2016	20,000	63	22,178	92,922	(21,465)	113,698
Net income				1,980		1,980
Other comprehensive income (loss)					505	505
Stock based compensation			37			37
Common stock issued		8	9,196			9,204
Preferred stock redemption	(10,000)					(10,000)
Preferred stock dividends paid				(540)		(540)
Balance at Mar. 31, 2017	$ 10,000	$ 71	$ 31,411	$ 94,362	$ (20,960)	$ 114,884

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Consolidated Statement of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Operating activities
Net Income	$ 1,980	$ 1,871
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	609	568
Depreciation	459	426
Stock compensation	37	48
Gain on sales of other real estate owned	(30)	(67)
Write-downs of other real estate owned	70	9
Gain on loan sales	(15)	(12)
Loss on disposal of fixed assets	1	2
Net amortization of investment securities discounts and premiums- AFS	109	16
Net amortization of investment securities discounts and premiums- HTM	30	0
Losses/(gains) on sales of investment securities - available-for-sale	9	(206)
Amortization of deferred loan fees	(385)	(122)
(Increase)/decrease in accrued interest receivable and other assets	(1,933)	1,162
Decrease in deferred tax benefit	336	927
Decrease in accrued interest payable and other liabilities	(831)	(161)
Earnings on bank owned life insurance	(309)	(319)
Net cash provided by operating activities	137	4,142
Investing activities
Proceeds from maturities/calls of investment securities available-for-sale	3,554	11,901
Proceeds from maturities/calls of investment securities held-to-maturity	1,997	4,039
Proceeds from sales of investment securities available-for-sale	3,830	10,771
Purchases of investment securities available-for-sale	(4,145)	(8,300)
Purchases of investment securities held-to-maturity	(2,877)	0
Proceeds from sales of other real estate owned	147	950
Proceeds from loan sales	2,021	1,801
Proceeds from disposal of fixed assets	1	0
Net decrease in FHLB stock	5	23
Net increase in loans	(3,450)	(23,626)
Purchases of premises and equipment	(1,456)	(650)
Net cash used in by investing activities	(373)	(3,091)
Financing activities
Net increase in deposits	12,639	17,036
Preferred stock dividends paid	(540)	(675)
Preferred stock redemption	(10,000)	(10,000)
Proceeds from sale of common stock	9,349	0
Rights Offering costs	(145)	0
Net decrease in short-term borrowings	(731)	(6,274)
Payments on long-term borrowings	(10,808)	(18)
Net cash (used in)/provided by financing activities	(236)	69
(Decrease)/increase in cash and cash equivalents	(472)	1,120
Cash and cash equivalents at beginning of the year	63,310	52,141
Cash and cash equivalents at end of period	62,838	53,261
Supplemental information
Interest paid	1,896	2,003
Non-cash investing activities:
Transfers from loans to other real estate owned	$ 279	$ 151

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Basis of Presentation

3 Months Ended

Mar. 31, 2017

Basis of Presentation [Abstract]

Basis of Presentation

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements of First United Corporation and its consolidated subsidiaries, including First United Bank & Trust (the “Bank”), have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, as required by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 270, Interim Reporting, and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.  Accordingly, they do not include all the information and footnotes required for annual financial statements.  In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring items, have been included.  Operating results for the three-month period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the full year or for any future interim period.  These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016.  For purposes of comparability, certain prior period amounts have been reclassified to conform to the 2017 presentation.  Such reclassifications had no impact on net income or equity.

As used in these notes, the term “the Corporation” refers to First United Corporation and, unless the context clearly requires otherwise, its consolidated subsidiaries.

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Earnings Per Common Share

3 Months Ended

Mar. 31, 2017

Earnings Per Common Share [Abstract]

Earnings Per Common Share

Note 2 – Earnings Per Common Share

Basic earnings per common share is derived by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period and does not include the effect of any potentially dilutive common stock equivalents.  Diluted earnings per share is derived by dividing net income available to common shareholders by the weighted-average number of shares outstanding, adjusted for the dilutive effect of outstanding common stock equivalents.  There were no common stock equivalents at March 31, 2017 or  March 31, 2016.

The following tables set forth the calculation of basic and diluted earnings per common share for the three-month periods ended March 31, 2017 and 2016:

	Three months ended March 31,
	2017					2016
			Average	Per Share				Average	Per Share
(in thousands, except for per share amount)	Income		Shares	Amount		Income		Shares	Amount
Basic and Diluted Earnings Per Share:
Net income	$	1,980				$	1,871
Preferred stock dividends		(540)					(675)
Net income available to common shareholders	$	1,440	6,530	$	0.22	$	1,196	6,255	$	0.19

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Net Gains

3 Months Ended

Mar. 31, 2017

Net Gains [Abstract]

Net Gains

Note 3 – Net Gains

The following table summarizes the gain/(loss) activity for the three-month periods ended March 31, 2017 and 2016:

	Three months ended
	March 31,
(in thousands)	2017		2016
Net gains/(losses):
Available-for-sale securities:
Realized gains	$	8	$	277
Realized losses		(17)		(71)
Gain on sale of consumer loans		15		12
Loss on disposal of fixed assets		(1)		(2)
Net gains	$	5	$	216

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Cash and Cash Equivalents

3 Months Ended

Mar. 31, 2017

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents

Note 4 – Cash and Cash Equivalents

Cash and due from banks, which represents vault cash in the retail offices and invested cash balances at the Federal Reserve and other correspondent banks, is carried at cost which approximates fair value.

	March 31,		December 31,
(in thousands)	2017		2016
Cash and due from banks, weighted average interest rate of 0.56% (at March 31, 2017)	$	60,749	$	60,707

Interest bearing deposits in banks, which represent funds invested at a correspondent bank, are carried at cost which approximates fair value and, as of March 31, 2017 and December 31, 2016, consisted of daily funds invested at the Federal Home Loan Bank (“FHLB”) of Atlanta and Merchants and Traders (“M&T”).

	March 31,		December 31,
(in thousands)	2017		2016
FHLB daily investments, interest rate of 0.72% (at March 31, 2017)	$	1,075	$	1,590
M&T daily investments, interest rate of 0.15% (at March 31, 2017)		1,014		1,013
	$	2,089	$	2,603

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Investments

3 Months Ended

Mar. 31, 2017

Investments [Abstract]

Investments

Note 5 – Investments

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

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

The following table shows a comparison of amortized cost and fair values of investment securities at March 31, 2017 and December 31, 2016:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI in AOCI
March 31, 2017
Available for Sale:
U.S. government agencies	$	25,000	$	0	$	703	$	24,297	$	0
Commercial mortgage-backed agencies		51,321		0		927		50,394		0
Collateralized mortgage obligations		19,670		11		370		19,311		0
Obligations of states and political subdivisions		22,423		322		167		22,578		0
Collateralized debt obligations		27,790		0		7,433		20,357		(3,797)
Total available for sale	$	146,204	$	333	$	9,600	$	136,937	$	(3,797)
Held to Maturity:
U.S. government agencies	$	15,772	$	518	$	0	$	16,290	$	0
Residential mortgage-backed agencies		51,515		145		348		51,312		0
Commercial mortgage-backed agencies		17,509		252		0		17,761		0
Collateralized mortgage obligations		4,593		0		102		4,491		0
Obligations of states and political subdivisions		8,630		517		85		9,062		0
Total held to maturity	$	98,019	$	1,432	$	535	$	98,916	$	0
December 31, 2016
Available for Sale:
U.S. government agencies	$	25,000	$	0	$	747	$	24,253		0
Commercial mortgage-backed agencies		52,978		1		757		52,222		0
Collateralized mortgage obligations		19,953		13		399		19,567		0
Obligations of states and political subdivisions		23,700		255		251		23,704		0
Collateralized debt obligations		27,930		0		7,676		20,254		(3,961)
Total available for sale	$	149,561	$	269	$	9,830	$	140,000	$	(3,961)
Held to Maturity:
U.S. government agencies	$	15,738	$	512	$	0	$	16,250	$	0
Residential mortgage-backed agencies		50,384		160		279		50,265		0
Commercial mortgage-backed agencies		17,584		248		0		17,832		0
Collateralized mortgage obligations		4,833		0		149		4,684		0
Obligations of states and political subdivisions		8,630		490		170		8,950		0
Total held to maturity	$	97,169	$	1,410	$	598	$	97,981	$	0

Proceeds from sales of available for sale securities and the realized gains and losses are as follows:

	Three months ended
	March 31,
(in thousands)	2017		2016
Proceeds	$	3,830	$	10,771
Realized gains		8		277
Realized losses		17		71

The following table shows the Corporation’s investment securities with gross unrealized losses and fair values at March 31, 2017 and December 31, 2016, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:

	Less than 12 months				12 months or more
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2017
Available for Sale:
U.S. government agencies	$	24,297	$	703	$	0	$	0
Commercial mortgage-backed agencies		50,394		927		0		0
Collateralized mortgage obligations		18,445		370		0		0
Obligations of states and political subdivisions		6,660		104		2,979		63
Collateralized debt obligations		0		0		20,357		7,433
Total available for sale	$	99,796	$	2,104	$	23,336	$	7,496
Held to Maturity:
Residential mortgage-backed agencies	$	22,960	$	348	$	0	$	0
Collateralized mortgage obligations		4,491		102		0		0
Obligations of states and political subdivisions		2,420		85		0		0
Total held to maturity	$	29,871	$	535	$	0	$	0

December 31, 2016
Available for Sale:
U.S. government agencies	$	24,253	$	747	$	0	$	0
Commercial mortgage-backed agencies		51,604		757		0		0
Collateralized mortgage obligations		14,706		399		0		0
Obligations of states and political subdivisions		8,079		160		2,934		91
Collateralized debt obligations		0		0		20,254		7,676
Total available for sale	$	98,642	$	2,063	$	23,188	$	7,767
Held to Maturity:
Residential mortgage-backed agencies	$	20,899	$	279	$	0	$	0
Commercial mortgage-backed agencies		4,684		149		0		0
Obligations of states and political subdivisions		2,335		170		0		0
Total held to maturity	$	27,918	$	598	$	0	$	0

Management systematically evaluates securities for impairment on a quarterly basis.  Based upon application of accounting guidance for subsequent measurement in ASC Topic 320 (ASC Section 320-10-35), management assesses whether (a) the Corporation has the intent to sell a security being evaluated and (b) it is more likely than not that the Corporation will be required to sell the security prior to its anticipated recovery.  If neither applies, then declines in the fair values of securities below their cost that are considered other-than-temporary declines are split into two components.  The first is the loss attributable to declining credit quality.  Credit losses are recognized in earnings as realized losses in the period in which the impairment determination is made.  The second component consists of all other losses, which are recognized in other comprehensive loss.  In estimating other than temporary impairment (“OTTI”) losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) adverse conditions specifically related to the security, an industry, or a geographic area, (3) the historic and implied volatility of the fair value of the security, (4) changes in the rating of the security by a rating agency, (5) recoveries or additional declines in fair value subsequent to the balance sheet date, (6) failure of the issuer of the security to make scheduled interest or principal payments, and (7) the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future.  Management also monitors cash flow projections for securities that are considered beneficial interests under the guidance of ASC Subtopic 325-40, Investments – Other – Beneficial Interests in Securitized Financial Assets, (ASC Section 325-40-35).  Further discussion about the evaluation of securities for impairment can be found in Item 2 of Part I of this report under the heading “Investment Securities”.

Management believes that the valuation of certain securities is a critical accounting policy that requires significant estimates in preparation of the Corporation’s consolidated financial statements.  Management utilizes an independent third party to prepare both the impairment valuations and fair value determinations for the Corporation’s collateralized debt obligation (“CDO”) portfolio consisting of pooled trust preferred securities.  Based on management’s review of the assumptions and results of the third-party review, it believes that the valuations are adequate at March 31, 2017.

U.S. Government Agencies – Available for Sale – There were four U.S. government agencies in an unrealized loss position for less than 12 months as of March 31, 2017.  The securities are of investment grade and the Corporation does not intend to sell them, and it is not more than likely than not that the Corporation will be required to sell them before recovery of their amortized cost basis, which may be at maturity.  Accordingly, management does not consider these investments to be other-than-temporarily impaired at March 31, 2017. There were no U.S. government agency investments in an unrealized loss position for more than 12 months as of March 31, 2017.

Commercial Mortgage-Backed Agencies – Available for Sale – There were 10 commercial mortgage-backed agencies in an unrealized loss position for less than 12 months as of March 31, 2017.  The securities are of the highest investment grade and the Corporation has the intent and ability to hold the investments to maturity.  Accordingly, management does not consider these investments to be other-than-temporarily impaired at March 31, 2017.  There were no commercial mortgage-backed agencies in an unrealized loss position for more than 12 months as of March 31, 2017.

Collateralized Mortgage Obligations – Available for Sale – There were four collateralized mortgage obligations in an unrealized loss position for less than 12 months as of March 31, 2017.  The securities are of the highest investment grade and the Corporation has the intent and ability to hold the investments to maturity.  Accordingly, management does not consider these investments to be other-than-temporarily impaired at March 31, 2017.  There were no collateralized mortgage obligations in an unrealized loss position for more than 12 months as of March 31, 2017.

Obligations of State and Political Subdivisions – Available for Sale – There were three obligations of state and political subdivisions that have been in an unrealized loss position for less than 12 months and two securities that have been in an unrealized loss position for 12 months or more at March 31, 2017.  These investments are of investment grade as determined by the major rating agencies and management reviews the ratings of the underlying issuers and performs an in-depth credit analysis on the securities.  Management believes that this portfolio is well-diversified throughout the United States, and all bonds continue to perform according to their contractual terms.  The Corporation does not intend to sell these investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity.  Accordingly, management does not consider these investments to be other-than-temporarily impaired at March 31, 2017.

Collateralized Debt Obligations – Available for Sale - The $7.4 million in unrealized losses greater than 12 months at March 31, 2017 relates to  1 pooled trust preferred securities that are included in the CDO portfolio.  See Note 9 for a discussion of the methodology used by management to determine the fair values of these securities.  Based upon a review of credit quality and the cash flow tests performed by the independent third party, management determined that there were no securities that had credit-related non-cash OTTI charges during the first three months of 2017.  The unrealized losses on the remaining securities in the portfolio are primarily attributable to continued depression in marketability, liquidity and the current economic environment.

U.S. Government Agencies – Held to Maturity – There were no U.S. government agencies in an unrealized loss position as of March 31, 2017. 

Residential Mortgage-Backed Agencies – Held to Maturity - Nineteen residential mortgage-backed agencies have been in an unrealized loss position for less than 12 months as of March 31, 2017.  The securities are of the highest investment grade and the Corporation has the intent and ability to hold the investments to maturity.  Accordingly, management does not consider these investments to be other-than-temporarily impaired at March 31, 2017.  There were no mortgage-backed agency investments in an unrealized loss position for more than 12 months as of March 31, 2017.

Commercial Mortgage-Backed Agencies – Held to Maturity - There were no collateralized mortgage-backed agency investments in an unrealized loss position as of March 31, 2017.

Collateralized Mortgage Obligations – Held to Maturity – There was one collateralized mortgage obligation in an unrealized loss position for less than 12 months as of March 31, 2017.  The security is of the highest investment grade and the Corporation has the intent and ability to hold the investment to maturity.  Accordingly, management does not consider this investment to be other-than-temporarily impaired at March 31, 2017.  There were no collateralized mortgage obligations in a loss position for more than 12 months as of March 31, 2017.

Obligations of State and Political Subdivisions – Held to Maturity –There was one obligation of state and political subdivisions that has been in an unrealized loss for less than 12 months.  This bond is a Tax Increment Fund (TIF) bond.  Management performs an in-depth credit analysis on this security.  The Corporation has the intent and ability to hold the investment to maturity.  Accordingly, management does not consider this investment to be other-than-temporarily impaired at March 31, 2017.  No obligations of state and political subdivisions securities have been in an unrealized loss position for more than 12 months as of March 31, 2017. 

The following tables present a cumulative roll-forward of the amount of non-cash OTTI charges related to credit losses which have been recognized in earnings for the trust preferred securities in the CDO portfolio held and not intended to be sold for the three-month periods ended March 31, 2017 and 2016:

	Three months ended March 31,
(in thousands)	2017		2016
Balance of credit-related OTTI at January 1	$	3,124	$	3,133
Reduction for increases in cash flows expected to be collected		(2)		(36)
Balance of credit-related OTTI at March 31	$	3,122	$	3,097

The amortized cost and estimated fair value of securities by contractual maturity at March 31, 2017 are shown in the following table.  Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

	March 31, 2017
(in thousands)	Amortized Cost		Fair Value
Contractual Maturity
Available for sale:
Due after one year through five years	$	10,662	$	10,541
Due after five years through ten years		18,687		18,174
Due after ten years		45,864		38,517
		75,213		67,232
Commercial mortgage-backed agencies		51,321		50,394
Collateralized mortgage obligations		19,670		19,311
Total available for sale	$	146,204	$	136,937
Held to Maturity:
Due after five years through ten years	$	15,772	$	16,290
Due after ten years		8,630		9,062
		24,402		25,352
Residential mortgage-backed agencies	$	51,515	$	51,312
Commercial mortgage-backed agencies		17,509		17,761
Collateralized mortgage obligations		4,593		4,491
Total held to maturity	$	98,019	$	98,916

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Restricted Investment in Bank Stock

3 Months Ended

Mar. 31, 2017

Restricted Investment in Bank Stock [Abstract]

Restricted Investment in Bank Stock

Note 6 - Restricted Investment in Bank Stock

Restricted stock, which represents required investments in the common stock of the FHLB of Atlanta, Atlantic Community Bankers Bank (“ACBB”) and Community Bankers Bank (“CBB”), is carried at cost and is considered a long-term investment. 

Management evaluates the restricted stock for impairment in accordance with ASC Industry Topic 942, Financial Services – Depository and Lending- (ASC Section 942-325-35).  Management’s evaluation of potential impairment is based on management’s assessment of the ultimate recoverability of the cost of the restricted stock rather than by recognizing temporary declines in value.  The determination of whether a decline affects the ultimate recoverability is influenced by criteria such as (a) the significance of the decline in net assets of the issuing bank as compared to the capital stock amount for that bank and the length of time this situation has persisted, (b) commitments by the issuing bank to make payments required by law or regulation and the level of such payments in relation to the operating performance of that bank, and (c) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the issuing bank. Management has evaluated the restricted stock for impairment and believes that no impairment charge is necessary as of March 31, 2017.

The Corporation recognizes dividends received on its restricted stock investments on a cash basis.  For the three months ended March 31, 2017, dividends of $67,219were recognized in earnings.  For the comparable period of 2016, dividends of $67,758were recognized in earnings. 

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Loans and Related Allowance for Loan Losses

3 Months Ended

Mar. 31, 2017

Loans and Related Allowance for Loan Losses [Abstract]

Loans and Related Allowance for Loan Losses

Note 7 – Loans and Related Allowance for Loan Losses

The following table summarizes the primary segments of the loan portfolio at March 31, 2017 and December 31, 2016:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Total
March 31, 2017
Individually evaluated for impairment	$	14,054	$	2,420	$	290	$	4,090	$	0	$	20,854
Collectively evaluated for impairment	$	280,727	$	104,988	$	74,303	$	389,898	$	23,762	$	873,678
Total loans	$	294,781	$	107,408	$	74,593	$	393,988	$	23,762	$	894,532
December 31, 2016
Individually evaluated for impairment	$	17,210	$	2,525	$	290	$	3,975	$	0	$	24,000
Collectively evaluated for impairment	$	280,749	$	101,757	$	72,056	$	389,441	$	23,923	$	867,926
Total loans	$	297,959	$	104,282	$	72,346	$	393,416	$	23,923	$	891,926

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

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

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight.  Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as bankruptcy, repossession, or death occurs to raise awareness of a possible credit event.  The Bank’s Commercial Loan Officers are responsible for the timely and accurate risk rating of the loans in the commercial segments at origination and on an ongoing basis.  The Bank’s experienced Credit Quality and Loan Review Departments perform an annual review of all commercial relationships of $500,000 or greater.  Confirmation of the appropriate risk grade is included as part of the review process on an ongoing basis.  The Credit Quality and Loan Review Departments continually review and assess loans within the portfolio.  In addition, the Bank engages an external consultant to conduct loan reviews on at least an annual basis. Generally, the external consultant reviews commercial relationships greater than $1,000,000 and/or criticized non-consumer loans greater than $500,000.  Detailed reviews, including plans for resolution, are performed on loans classified as Substandard on a quarterly basis.  Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance. 

The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention and Substandard within the internal risk rating system at March 31, 2017 and December 31, 2016:

(in thousands)	Pass		Special Mention		Substandard		Total
March 31, 2017
Commercial real estate
Non owner-occupied	$	137,837	$	9,083	$	9,881	$	156,801
All other CRE		125,049		207		12,724		137,980
Acquisition and development
1-4 family residential construction		15,630		0		0		15,630
All other A&D		90,503		62		1,213		91,778
Commercial and industrial		73,029		43		1,521		74,593
Residential mortgage
Residential mortgage - term		312,279		0		7,481		319,760
Residential mortgage - home equity		72,849		0		1,379		74,228
Consumer		23,630		0		132		23,762
Total	$	850,806	$	9,395	$	34,331	$	894,532
December 31, 2016
Commercial real estate
Non owner-occupied	$	137,181	$	10,620	$	9,357	$	157,158
All other CRE		125,720		3,121		11,960		140,801
Acquisition and development
1-4 family residential construction		15,845		0		0		15,845
All other A&D		87,135		65		1,237		88,437
Commercial and industrial		70,613		593		1,140		72,346
Residential mortgage
Residential mortgage - term		308,734		113		7,618		316,465
Residential mortgage - home equity		75,710		0		1,241		76,951
Consumer		23,794		0		129		23,923
Total	$	844,732	$	14,512	$	32,682	$	891,926

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due.  A loan is considered to be past due when a payment remains unpaid 30 days past its contractual due date.  For all loan segments, the accrual of interest is discontinued when principal or interest is delinquent for 90 days or more unless the loan is well-secured and in the process of collection.  All non-accrual loans are considered to be impaired.  Interest payments received on non-accrual loans are applied as a reduction of the loan principal balance.  Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.  The Corporation’s policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition. 

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans at March 31, 2017 and December 31, 2016:

(in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days+ Past Due		Total Past Due and Accruing		Non-Accrual		Total Loans
March 31, 2017
Commercial real estate
Non owner-occupied	$	150,968	$	229	$	126	$	0	$	355	$	5,478	$	156,801
All other CRE		134,089		0		273		0		273		3,618		137,980
Acquisition and development
1-4 family residential construction		15,630		0		0		0		0		0		15,630
All other A&D		91,626		102		0		0		102		50		91,778
Commercial and industrial		74,558		0		25		10		35		0		74,593
Residential mortgage
Residential mortgage - term		316,129		1,887		208		84		2,179		1,452		319,760
Residential mortgage - home equity		72,983		718		158		74		950		295		74,228
Consumer		23,584		127		23		28		178		0		23,762
Total	$	879,567	$	3,063	$	813	$	196	$	4,072	$	10,893	$	894,532
December 31, 2016
Commercial real estate
Non owner-occupied	$	150,595	$	182	$	0	$	0	$	182	$	6,381	$	157,158
All other CRE		134,931		40		0		0		40		5,830		140,801
Acquisition and development
1-4 family residential construction		15,845		0		0		0		0		0		15,845
All other A&D		88,353		0		39		0		39		45		88,437
Commercial and industrial		72,324		9		2		11		22		0		72,346
Residential mortgage
Residential mortgage - term		310,721		517		3,376		312		4,205		1,539		316,465
Residential mortgage - home equity		75,558		974		198		70		1,242		151		76,951
Consumer		23,662		186		48		27		261		0		23,923
Total	$	871,989	$	1,908	$	3,663	$	420	$	5,991	$	13,946	$	891,926

Non-accrual loans totaled $10.9million at March 31, 2017 compared to $13.9million at December 31, 2016.  The decrease in non-accrual balances at March 31, 2017 was primarily due to paydowns of $2.5 million on one large relationship.  Non-accrual loans which have been subject to a partial charge-off totaled $7.8million at March 31, 2017 compared to $11.1million at December 31, 2016.  Loans secured by 1-4 family residential real estate properties in the process of foreclosure were $.3million at March 31, 2017 and $.5million at December 31, 2016. 

Accruing loans past due 30 days or more decreased to .46% of the loan portfolio at March 31, 2017, compared to .67% at December 31, 2016.  The decrease for the first three months of 2017 was due primarily to improvements in the residential mortgage and home equity portfolios.

An allowance for loan losses (“ALL”) is maintained to absorb losses from the loan portfolio.  The ALL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans.

The Bank’s methodology for determining the ALL is based on the requirements of ASC Section 310-10-35, Receivables-Overall-Subsequent Measurement, for loans individually evaluated for impairment and ASC Subtopic 450-20, Contingencies-Loss Contingencies, for loans collectively evaluated for impairment, as well as the Interagency Policy Statement on the Allowance for Loan and Lease Losses and other bank regulatory guidance.   The total of the two components represents the allocated portion of the Bank’s ALL.  In the second quarter of 2015, management determined that it would be prudent to establish an unallocated portion of the ALL to protect the Bank from other risks associated with the loan portfolio that may not be specifically identifiable.

The following table summarizes the primary segments of the ALL at March 31, 2017 and December 31, 2016, segregated by the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment: 

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer			Unallocated	Total
March 31, 2017
Individually evaluated for impairment	$	1,795	$	38	$	0	$	117	$	0	$	0	$	1,950
Collectively evaluated for impairment	$	3,772	$	845	$	936	$	3,385	$	195	$	500	$	9,633
Total ALL	$	5,567	$	883	$	936	$	3,502	$	195	$	500	$	11,583
December 31, 2016
Individually evaluated for impairment	$	177	$	40	$	0	$	43	$	0	$	0	$	260
Collectively evaluated for impairment	$	3,736	$	831	$	858	$	3,545	$	188	$	500	$	9,658
Total ALL	$	3,913	$	871	$	858	$	3,588	$	188	$	500	$	9,918

Management uses the following methodology for determining impairment on consumer and commercial loans.  All nonaccrual loans and all loans designated as “troubled debt restructures” (TDRs) are considered to be impaired.  Additionally, an impairment evaluation is performed on any account which meets the following criteria:  commercial loans which are risk related substandard with a balance greater than or equal to $500,000 OR which are part of relationship which is $750,000 or greater AND which are 60 days or greater delinquent.  For those loans which are not classified as nonaccrual or troubled debt restructures, a judgment is made as to the likelihood that contractual principal and interest will be collected.  Loans are considered to be impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. 

Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods: (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs.  The method is selected on a loan-by-loan basis, with management primarily utilizing the fair value of collateral method.  A valuation grid for impaired loans is used to determine when or how collateral values are to be updated based on size and collateral dependency for commercial loans and foreclosure status for consumer loans. If an updated appraisal has not been received and reviewed in time for the determination of estimated fair value at quarter (or year) end, or if the appraisal is found to be deficient following the Corporation’s internal appraisal review process and re-ordered, then the estimated fair value of the collateral is determined by adjusting the existing appraisal by the appropriate percentage from an internally prepared appraisal discount grid.  This grid considers the age of a third party appraisal and the geographic region where the collateral is located.  The discount rates in the appraisal discount grid are updated periodically to reflect the most current knowledge that management has available, including the results of current appraisals.  A specific allocation of the ALL is recorded if there is any deficiency in collateral value determined by comparing the estimated fair value to the recorded investment of the loan. When updated appraisals are received and reviewed, adjustments are made to the specific allocation as needed.

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

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary at March 31, 2017 and December 31, 2016:

		Impaired Loans with Specific Allowance				Impaired Loans with No Specific Allowance		Total Impaired Loans
(in thousands)		Recorded Investment		Related Allowances		Recorded Investment		Recorded Investment		Unpaid Principal Balance
March 31, 2017
Commercial real estate
Non owner-occupied	$	5,607	$	1,641	$	251	$	5,858	$	8,831
All other CRE		432		154		7,764		8,196		8,809
Acquisition and development
1-4 family residential construction		0		0		582		582		582
All other A&D		244		38		1,594		1,838		2,112
Commercial and industrial		0		0		290		290		2,504
Residential mortgage
Residential mortgage - term		445		50		3,349		3,794		4,124
Residential mortgage – home equity		144		67		152		296		331
Consumer		0		0		0		0		0
Total impaired loans	$	6,872	$	1,950	$	13,982	$	20,854	$	27,293
December 31, 2016
Commercial real estate
Non owner-occupied	$	131	$	23	$	6,635	$	6,766	$	9,372
All other CRE		432		154		10,012		10,444		11,057
Acquisition and development
1-4 family residential construction		0		0		582		582		628
All other A&D		245		40		1,698		1,943		2,213
Commercial and industrial		0		0		290		290		2,504
Residential mortgage
Residential mortgage - term		61		43		3,763		3,824		4,249
Residential mortgage – home equity		0		0		151		151		168
Consumer		0		0		0		0		0
Total impaired loans	$	869	$	260	$	23,131	$	24,000	$	30,191

The reduction in impaired loans with no specific allowance was due to the paydown of a large non-accrual loan in the all other CRE portfolio and the movement of loan balances to impaired loans with a specific allowance due to a specific allocation placed on a large participation loan on a mall in Pennsylvania.

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

The classes described above, which are based on the Federal call code assigned to each loan, provide the starting point for the ALL analysis.  Management tracks the historical net charge-off activity (full and partial charge-offs, net of full and partial recoveries) at the call code level.  A historical charge-off factor is calculated utilizing a defined number of consecutive historical quarters. Consumer pools currently utilize a rolling 12 quarters, while Commercial pools currently utilize a rolling eight quarters. 

“Pass” rated credits are segregated from “Criticized” credits for the application of qualitative factors. “Pass” pools for commercial and residential real estate are further segmented based upon the geographic location of the underlying collateral.  There are seven geographic regions utilized – six that represent the Bank’s lending footprint and a seventh for all out-of-market credits.  Different economic environments and resultant credit risks exist in each region that are acknowledged in the assignment of qualitative factors.  Loans in the criticized pools, which possess certain qualities or characteristics that may lead to collection and loss issues, are closely monitored by management and subject to additional qualitative factors.

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

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

The following tables present the activity in the ALL for the three-month periods ended March 31, 2017 and 2016:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer			Unallocated	Total
ALL balance at January 1, 2017	$	3,913	$	871	$	858	$	3,588	$	188	$	500	$	9,918
Charge-offs		(429)		(18)		(33)		(148)		(84)		0		(712)
Recoveries		5		11		1,455		220		77		0		1,768
Provision		2,078		19		(1,344)		(158)		14		0		609
ALL balance at March 31, 2017	$	5,567	$	883	$	936	$	3,502	$	195	$	500	$	11,583
ALL balance at January 1, 2016	$	2,580	$	4,129	$	722	$	3,785	$	206	$	500	$	11,922
Charge-offs		(211)		0		(53)		(90)		(84)		0		(438)
Recoveries		0		100		30		32		42		0		204
Provision		931		(482)		59		32		28		0		568
ALL balance at March 31, 2016	$	3,300	$	3,747	$	758	$	3,759	$	192	$	500	$	12,256

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

As indicated in the table above,provision expense for the first quarter of 2017 was primarily driven by a specific allocation placed on a large participation loan on a mall in Pennsylvania in the CRE portfolio, offset by a net recovery of $1.3 million in the C&I portfolio relating to a prior charge-off on a loan to an ethanol plant.

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

	Three months ended						Three months ended
	March 31, 2017						March 31, 2016
(in thousands)	Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis		Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis
Commercial real estate
Non owner-occupied	$	6,366	$	6	$	0	$	1,597	$	6	$	0
All other CRE		9,320		53		0		13,093		37		0
Acquisition and development
1-4 family residential construction		582		6		0		700		8		0
All other A&D		1,891		23		0		3,869		24		0
Commercial and industrial		290		3		0		1,071		9		0
Residential mortgage
Residential mortgage - term		4,018		33		0		4,519		39		4
Residential mortgage – home equity		224		0		0		298		0		0
Consumer		0		0		0		0		0		0
Total	$	22,691	$	124	$	0	$	25,147	$	123	$	4

In the normal course of business, the Bank modifies loan terms for various reasons.  These reasons may include as a retention strategy, remaining competitive in the current interest rate environment, and re-amortizing or extending a loan term to better match the loan’s payment stream with the borrower’s cash flows.  A modified loan is considered to be a troubled debt restructuring (“TDR”) when the Bank has determined that the borrower is troubled (i.e., experiencing financial difficulties). The Bank evaluates the probability that the borrower will be in payment default on any of its debt obligations in the foreseeable future without modification. To make this determination, the Bank performs a global financial review of the borrower and loan guarantors to assess their current ability to meet their financial obligations.

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

All loans designated as TDRs are considered impaired loans and may be in either accruing or non-accruing status.  The Bank’s policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition.  Accordingly, the accrual of interest is discontinued when principal or interest is delinquent for 90 days or more unless the loan is well-secured and in the process of collection.  If the loan was accruing at the time of the modification, then it continues to be in accruing status subsequent to the modification. Non-accrual TDRs may return to accruing status when there has been sufficient payment performance for a period of at least six months.  TDRs are considered to be in payment default if, subsequent to modification, the loans are transferred to non-accrual status or to foreclosure.  Loans may be removed from being reported as a TDR in the calendar year following the modification if the interest rate at the time of modification was consistent with the interest rate for a loan with comparable credit risk and the loan has performed according to its modified terms for at least six months.

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

The following tables present the volume and recorded investment at the time of modification ofTDRs by class and type of modification that occurred during the periods indicated:

	Temporary Rate Modification			Extension of Maturity			Modification of Payment and Other Terms
(in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Three months ended March 31, 2017
Commercial real estate
Non owner-occupied	0	$	0	0	$	0	0	$	0
All other CRE	0		0	0		0	0		0
Acquisition and development
1-4 family residential construction	0		0	0		0	0		0
All other A&D	0		0	1		244	0		0
Commercial and industrial	0		0	0		0	0		0
Residential mortgage
Residential mortgage – term	0		0	1		259	0		0
Residential mortgage – home equity	0		0	0		0	0		0
Consumer	0		0	0		0	0		0
Total	0	$	0	2	$	503	0	$	0

	Temporary Rate Modification			Extension of Maturity			Modification of Payment and Other Terms
(in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Three months ended March 31, 2016
Commercial real estate
Non owner-occupied	0	$	0	0	$	0	0	$	0
All other CRE	0		0	1		203	0		0
Acquisition and development
1-4 family residential construction	0		0	0		0	0		0
All other A&D	0		0	0		0	0		0
Commercial and industrial	0		0	0		0	1		486
Residential mortgage
Residential mortgage – term	0		0	0		0	1		72
Residential mortgage – home equity	0		0	0		0	0		0
Consumer	0		0	0		0	0		0
Total	0	$	0	1	$	203	2	$	558

During the three months ended March 31, 2017, there were no new TDRs andtwo existing TDRs which had reached their original modification maturity were re-modified.  These re-modifications did not impact the ALL.  During the three months ended March 31, 2017, there were no payment defaults.

During the three months ended March 31, 2016, there were two new TDRs.  In addition, one existing TDR which had reached its original modification maturity was re-modified.  A $2,387 reduction of the ALL resulted from a change to the impairment evaluation of two loans from evaluated collectively to being evaluated individually.  During the three months ended March 31, 2016, there were no payment defaults.

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Other Real Estate Owned

3 Months Ended

Mar. 31, 2017

Other Real Estate Owned [Abstract]

Other Real Estate Owned

Note 8 - Other Real Estate Owned

The following table presents the components of other real estate owned (“OREO”) at March 31, 2017 and December 31, 2016:

(in thousands)	March 31, 2017		December 31, 2016
Commercial real estate	$	4,028	$	3,803
Acquisition and development		5,757		5,944
Residential mortgage		1,217		1,163
Total OREO	$	11,002	$	10,910

The following table presents the activity in the OREO valuation allowance for the three-month periods ended March 31, 2017 and 2016:

	For the Three Months Ended
	March 31,
(in thousands)	2017		2016
Balance beginning of period	$	3,535	$	4,430
Fair value write-down		70		9
Sales of OREO		(289)		(615)
Balance at end of period	$	3,316	$	3,824

The following table presents the components of OREO expenses, net, for the three-month periods ended March 31, 2017 and 2016:

	For the Three Months Ended
	March 31,
(in thousands)	2017		2016
Gains on real estate, net	$	(30)	$	(67)
Fair value write-down, net		70		9
Expenses, net		169		169
Rental and other income		(35)		(27)
Total OREO expense, net	$	174	$	84

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2017

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

Note 9 – Fair Value of Financial Instruments

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

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

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

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

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

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

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

Management believes that the Corporation’s valuation techniques are appropriate and consistent with the techniques used by other market participants.  However, the use of different methodologies and assumptions could result in a different estimate of fair values at the reporting date.  The valuation techniques used by the Corporation to measure, on a recurring and non-recurring basis, the fair value of assets as of March 31, 2017 are discussed in the paragraphs that follow. 

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

The fair value of investments is determined using a market approach.  As of March 31, 2017, the U.S. Government agencies, residential and commercial mortgage-backed securities, collateralized mortgage obligations, and state and political subdivisions bonds segments are classified as Level 2 within the valuation hierarchy.  Their fair values were determined based upon market-corroborated inputs and valuation matrices, which were obtained through third party data service providers or securities brokers through which the Corporation has historically transacted both purchases and sales of investment securities.

The CDO segment, which consists of pooled trust preferred securities issued by banks, thrifts and insurance companies, is classified as Level 3 within the valuation hierarchy.  At March 31, 2017, the Corporation owned 12 pooled trust preferred securities with an amortized cost of $27.8 million and a fair value of $20.4 million. The market for these securities at March 31, 2017 is not active and markets for similar securities are also not active.  The inactivity was evidenced first by a significant widening of the bid-ask spread in the brokered markets in which these securities trade and then by a significant decrease in the volume of trades relative to historical levels.  The new issue market is also inactive, as few CDOs have been issued since 2007.  There are currently very few market participants who are willing to effect transactions in these securities.  The market values for these securities or any securities other than those issued or guaranteed by the U.S. Department of the Treasury (the “Treasury”) are depressed relative to historical levels.  Therefore, in the current market, a low market price for a particular bond may only provide evidence of stress in the credit markets in general rather than being an indicator of credit problems with a particular issue.  Given the conditions in the current debt markets and the absence of observable transactions in the secondary and new issue markets, management has determined that (a) the few observable transactions and market quotations that are available are not reliable for the purpose of obtaining fair value at March 31, 2017, (b) an income valuation approach technique (i.e. present value) that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs will be equally or more representative of fair value than a market approach, and (c) the CDO segment is appropriately classified within Level 3 of the valuation hierarchy because management determined that significant adjustments were required to determine fair value at the measurement date.

Management relies on an independent third party to prepare both the evaluations of OTTI as well as the fair value determinations for its CDO portfolio. Management believes that the valuations are adequately reflected at March 31, 2017.

The approach used by the third party to determine fair value involved several steps, which included detailed credit and structural evaluation of each piece of collateral in each bond, projection of default, recovery and prepayment/amortization probabilities for each piece of collateral in the bond, and discounted cash flow modeling. The discount rate methodology used by the third party combines a baseline current market yield for comparable corporate and structured credit products with adjustments based on evaluations of the differences found in structure and risks associated with actual and projected credit performance of each CDO being valued.  Currently, the only active and liquid trading market that exists is for stand-alone trust preferred securities, with a limited market for highly-rated CDO securities that are more senior in the capital structure than the securities in the CDO portfolio.  Therefore, adjustments to the baseline discount rate are also made to reflect the additional leverage found in structured instruments.

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

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

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

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of March 31, 2017 and December 31, 2016, the significant unobservable inputs used in the fair value measurements were as follows:

(in thousands)		Fair Value at March 31, 2017	Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale	$	20,357	Discounted Cash Flow	Discount Rate	Range of LIBOR+ 4.50% to 5.50%
Non-recurring:
Impaired Loans	$	5,401	Market Comparable Properties	Marketability Discount	10.0% - 15.1%(1)               (weighted avg 10.0%)
Other Real Estate Owned	$	30	Market Comparable Properties	Marketability Discount	15%
(in thousands)		Fair Value at December 31, 2016	Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale	$	20,254	Discounted Cash Flow	Discount Rate	Range of LIBOR+ 4.5% to 5.5%
Non-recurring:
Impaired Loans	$	14,537	Market Comparable Properties	Marketability Discount	4.6% - 31.0% (1)               (weighted avg 6.5%)
Other Real Estate Owned	$	1,201	Market Comparable Properties	Marketability Discount	15%

NOTE:

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

For assets measured at fair value on a recurring and non-recurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2017 and December 31, 2016 are as follows:

			Fair Value Measurements at March 31, 2017 Using
		Assets Measured at Fair Value	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)		03/31/2017	(Level 1)		(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	24,297		$	24,297
Commercial mortgage-backed agencies	$	50,394		$	50,394
Collateralized mortgage obligations	$	19,311		$	19,311
Obligations of states and political subdivisions	$	22,578		$	22,578
Collateralized debt obligations	$	20,357				$	20,357
Financial Derivatives	$	786		$	786	$
Non-recurring:
Impaired loans	$	5,401				$	5,401
Other real estate owned	$	30				$	30

			Fair Value Measurements at December 31, 2016 Using
		Assets Measured at Fair Value	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)		12/31/2016	(Level 1)		(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	24,253		$	24,253
Commercial mortgage-backed agencies	$	52,222		$	52,222
Collateralized mortgage obligations	$	19,567		$	19,567
Obligations of states and political subdivisions	$	23,704		$	23,704
Collateralized debt obligations	$	20,254				$	20,254
Financial Derivative	$	700				$	700
Non-recurring:
Impaired loans	$	14,537				$	14,537
Other real estate owned	$	1,201				$	1,201

There were no transfers of assets between any of the fair value hierarchy for the three-month periods ended March 31, 2017 and 2016.

The following tables show a reconciliation of the beginning and ending balances for fair valued assets measured on a recurring basis using Level 3 significant unobservable inputs for the three-month periods ended March 31, 2017 and 2016:

		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In thousands)		Investment Securities Available for Sale
Beginning balance January 1, 2017	$	20,254
Total gains realized/unrealized:
Included in other comprehensive income		103
Ending balance March 31, 2017	$	20,357

		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(in thousands)		Investment Securities Available for Sale		Cash Flow Hedge
Beginning balance January 1, 2016	$	22,211	$	(66)
Total (losses)/gains realized/unrealized:
Included in other comprehensive loss		(2,679)		33
Ending balance March 31, 2016	$	19,532	$	(33)

Gains (realized and unrealized) included in earnings for the periods identified above are reported in the Consolidated Statement of Operations in Other Operating Income.  There were no gains or losses included in earnings attributable to the change in realized/unrealized gains or losses related to the assets for the three- month periods ended March 31, 2017 and 2016.

The disclosed fair values may vary significantly between institutions based on the estimates and assumptions used in the various valuation methodologies.  The derived fair values are subjective in nature and involve uncertainties and significant judgment. Therefore, they cannot be determined with precision. Changes in the assumptions could significantly impact the derived estimates of fair value.  Disclosure of non-financial assets such as buildings as well as certain financial instruments such as leases is not required.  Accordingly, the aggregate fair values presented do not represent the underlying value of the Corporation.

The following methods and assumptions were used by the Corporation to estimate its fair value disclosures for financial instruments:

Cash and due from banks:  The carrying amounts as reported in the statement of financial condition for cash and due from banks approximate their fair values.

Interest bearing deposits in banks:  The carrying amount of interest bearing deposits approximates their fair values.

Securities held to maturity:Investments in debt securities classified as held to maturity are measured subsequently at amortized cost in the statement of financial position.

Restricted investment in bank stock:  The carrying value of stock issued by the FHLB of Atlanta, ACBB and CBB approximates fair value based on the redemption provisions of the stock.

Loans (excluding impaired loans with specific loss allowances):  For variable-rate loans that re-price frequently or “in one year or less”, and with no significant change in credit risk, fair values are based on carrying values.  Fair values for fixed-rate loans that do not re-price frequently are estimated using a discounted cash flow calculation that applies current market interest rates being offered on the various loan products.

Deposits:  The fair values disclosed for demand deposits (e.g., interest and non-interest checking, savings, and certain types of money market accounts, etc.) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts).  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on the various certificates of deposit to the cash flow stream.

Borrowed funds: The fair value of the Bank’s FHLB borrowings and junior subordinated debt is calculated based on the discounted value of contractual cash flows, using rates currently existing for borrowings with similar remaining maturities.  The carrying amounts of federal funds purchased and securities sold under agreements to repurchase approximate their fair values.

Accrued interest:  The carrying amount of accrued interest receivable and payable approximates their fair values.

Off-balance-sheet financial instruments:  In the normal course of business, the Bank makes commitments to extend credit and issues standby letters of credit.  The Bank expects most of these commitments to expire without being drawn upon; therefore, the commitment amounts do not necessarily represent future cash requirements.  Due to the uncertainty of cash flows and difficulty in the predicting the timing of such cash flows, fair values were not estimated for these instruments. 

The following tables present fair value information about financial instruments, whether or not recognized in the Consolidated Statement of Financial Condition, for which it is practicable to estimate that value. The actual carrying amounts and estimated fair values of the Corporation’s financial instruments that are included in the Consolidated Statement of Financial Condition are as follows:

	March 31, 2017					Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	60,749	$	60,749	$	60,749
Interest bearing deposits in banks		2,089		2,089		2,089
Investment securities - AFS		136,937		136,937			$	116,580	$	20,357
Investment securities - HTM		98,019		98,916				89,854		9,062
Restricted bank stock		5,204		5,204				5,204
Loans, net		882,949		887,746						887,746
Financial derivatives		786		786				786
Accrued interest receivable		3,471		3,471				3,471
Financial Liabilities:
Deposits – non-maturity		790,115		790,115				790,115
Deposits – time deposits		236,753		241,750				241,750
Short-term borrowed funds		35,269		35,269				35,269
Long-term borrowed funds		120,929		122,120				122,120
Accrued interest payable		442		442				442
Off balance sheet financial instruments		0		0		0

	December 31, 2016					Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	60,707	$	60,707	$	60,707
Interest bearing deposits in banks		2,603		2,603		2,603
Investment securities - AFS		140,000		140,000			$	119,746	$	20,254
Investment securities - HTM		97,169		97,981				89,031		8,950
Restricted bank stock		5,209		5,209				5,209
Loans, net		882,008		886,712						886,712
Financial derivative		700		700				700
Accrued interest receivable		3,862		3,862				3,862
Financial Liabilities:
Deposits- non-maturity		773,120		773,120				773,120
Deposits- time deposits		241,110		245,762				245,762
Short-term borrowed funds		36,000		36,000				36,000
Long-term borrowed funds		131,737		133,397				133,397
Accrued interest payable		380		380				380
Off balance sheet financial instruments		0		0		0

Loans are measured using a discounted cash flow method.  The significant unobservable inputs used in the Level 3 fair value measurements of the Corporation’s loans included in the tables above are calculated based on the Corporation’s internal new volume rate.

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Accumulated Other Comprehensive Loss

3 Months Ended

Mar. 31, 2017

Accumulated Other Comprehensive Loss [Abstract]

Accumulated Other Comprehensive Loss

Note 10 – Accumulated Other Comprehensive Loss

The following table presents the changes in each component of accumulated other comprehensive loss for the 12 months ended December 31, 2016 and the three-month period ended March 31, 2017:

(in thousands)	Investment securities- with OTTI AFS		Investment securities- all other AFS			Investment securities- HTM	Cash Flow Hedge		Pension Plan		SERP		Total
Accumulated OCL, net:
Balance - January 1, 2016	$	(1,942)	$	(2,024)	$	(1,971)	$	(39)	$	(12,663)	$	(305)	$	(18,944)
Other comprehensive income/(loss) before reclassifications		(421)		(929)		0		461		(2,086)		(466)		(3,441)
Amounts reclassified from accumulated other comprehensive loss		(5)		(265)		617		0		517		56		920
Balance - December 31, 2016	$	(2,368)	$	(3,218)	$	(1,354)	$	422	$	(14,232)	$	(715)	$	(21,465)
Other comprehensive income before reclassifications		100		73		0		52		32		0		257
Amounts reclassified from accumulated other comprehensive loss		(2)		5		61		0		162		22		248
Balance – March 31, 2017	$	(2,270)	$	(3,140)	$	(1,293)	$	474	$	(14,038)	$	(693)	$	(20,960)

The following tables present the components of comprehensive income for the three-month periods ended March 31, 2017 and 2016:

Components of Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the three months ended March 31, 2017
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	166	$	(66)	$	100
Less:  accretable yield recognized in income		2		0		2
Net unrealized gains on investments with OTTI		164		(66)		98
Available for sale securities – all other:
Unrealized holding gains		122		(49)		73
Less:  losses recognized in income		(9)		4		(5)
Net unrealized gains on all other AFS securities		131		(53)		78
Held to maturity securities:
Unrealized holding gains		0		0		0
Less:  amortization recognized in income		(101)		40		(61)
Net unrealized gains on HTM securities		101		(40)		61
Cash flow hedges:
Unrealized holding gains		86		(34)		52
Pension Plan:
Unrealized net actuarial gain		53		(21)		32
Less: amortization of unrecognized loss		(264)		105		(159)
Less: amortization of transition asset		0		0		0
Less: amortization of prior service costs		(3)		0		(3)
Net pension plan liability adjustment		320		(126)		194
SERP:
Unrealized net actuarial loss		0		0		0
Less: amortization of unrecognized loss		(37)		14		(23)
Less: amortization of prior service costs		1		0		1
Net SERP liability adjustment		36		(14)		22
Other comprehensive income	$	838	$	(333)	$	505

Components of Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the three months ended March 31, 2016
Available for sale (AFS) securities with OTTI:
Unrealized holding losses	$	(1,496)	$	597	$	(899)
Less:  accretable yield recognized in income		36		(14)		22
Net unrealized losses on investments with OTTI		(1,532)		611		(921)
Available for sale securities – all other:
Unrealized holding gains		929		(371)		558
Less:  gains recognized in income		206		(82)		124
Net unrealized gains on all other AFS securities		723		(289)		434
Held to maturity securities:
Unrealized holding gains		0		0		0
Less:  amortization recognized in income		(237)		94		(143)
Net unrealized gains on HTM securities		237		(94)		143
Cash flow hedges:
Unrealized holding losses		(551)		220		(331)
Pension Plan:
Unrealized net actuarial loss		(571)		228		(343)
Less: amortization of unrecognized loss		(212)		85		(127)
Less: amortization of transition asset		0		0		0
Less: amortization of prior service costs		(3)		0		(3)
Net pension plan liability adjustment		(356)		143		(213)
SERP:
Unrealized net actuarial loss		0		0		0
Less: amortization of unrecognized loss		(19)		8		(11)
Less: amortization of prior service costs		(5)		1		(4)
Net SERP liability adjustment		24		(9)		15
Other comprehensive loss	$	(1,455)	$	582	$	(873)

The following table presents the details of amount reclassified from accumulated other comprehensive loss for the three-month periods ended March 31, 2017 and 2016:

Amounts Reclassified from Accumulated Other Comprehensive Loss (in thousands)	For the Three months ended March 31, 2017		For the Three months ended March 31, 2016		Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on investment securities with OTTI:
Accretable yield	$	2	$	36	Interest income on taxable investment securities
Taxes		0		(14)	Tax expense
	$	2	$	22	Net of tax
Unrealized gains and losses on available for sale investment securities - all others:
(Losses)/gains on sales	$	(9)	$	206	Net gains
Taxes		4		(82)	Tax benefit/(expense)
	$	(5)	$	124	Net of tax
Unrealized losses on held to maturity securities:
Amortization	$	(101)	$	(237)	Interest income on taxable investment securities
Taxes		40		94	Tax benefit
	$	(61)	$	(143)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss		(264)		(212)	Salaries and employee benefits
Amortization of transition asset		0		0	Salaries and employee benefits
Amortization of prior service costs		(3)		(3)	Salaries and employee benefits
Taxes		105		85	Tax benefit
	$	(162)	$	(130)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized loss		(37)		(19)	Salaries and employee benefits
Amortization of prior service costs		1		(5)	Salaries and employee benefits
Taxes		14		9	Tax benefit
	$	(22)	$	(15)	Net of tax
Total reclassifications for the period	$	(248)	$	(142)	Net of tax

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Junior Subordinated Debentures and Restrictions on Dividends

3 Months Ended

Mar. 31, 2017

Junior Subordinated Debentures and Restrictions on Dividends [Abstract]

Junior Subordinated Debentures and Restrictions on Dividends

Note 11 – Junior Subordinated Debentures and Restrictions on Dividends

First United Corporation is the parent company to three statutory trust subsidiaries - First United Statutory Trust I and First United Statutory Trust II, both of which are Connecticut statutory trusts (“Trust I” and “Trust II”, respectively), and First United Statutory Trust III, a Delaware statutory trust (“Trust III” and, together with Trust I and Trust II, the “Trusts”).  The Trusts were formed for the purposes of selling preferred securities to investors and using the proceeds to purchase junior subordinated debentures from First United Corporation (“TPS Debentures”) that would qualify as regulatory capital.

In March 2004, Trust I and Trust II issued preferred securities with an aggregate liquidation amount of $30.0 million to third-party investors and issued common equity with an aggregate liquidation amount of $.9 million to First United Corporation.  Trust I and Trust II used the proceeds of these offerings to purchase an equal amount of TPS Debentures, as follows: 

$20.6 million—floating rate payable quarterly based on three-month LIBOR plus 275 basis points (3.90% at March 31, 2017), maturing in 2034, became redeemable five years after issuance at First United Corporation’s option.

$10.3 million--floating rate payable quarterly based on three-month LIBOR plus 275 basis points (3.90% at March 31, 2017) maturing in 2034, became redeemable five years after issuance at First United Corporation’s option.

In December 2009, Trust III issued 9.875% fixed-rate preferred securities with an aggregate liquidation amount of approximately $7.0 million to private investors and issued common securities to First United Corporation with an aggregate liquidation amount of approximately $.2 million.  Trust III used the proceeds of the offering to purchase approximately $7.2 million of 9.875% fixed-rate TPS Debentures.  Interest on these TPS Debentures are payable quarterly, and the TPS Debentures mature in 2040 but are redeemable five years after issuance at First United Corporation’s option.

In January 2010, Trust III issued an additional $3.5 million of 9.875% fixed-rate preferred securities to private investors and issued common securities to First United Corporation with an aggregate liquidation amount of $.1 million.  Trust III used the proceeds of the offering to purchase $3.6 million of 9.875% fixed-rate TPS Debentures.  Interest on these TPS Debentures is payable quarterly, and the TPS Debentures mature in 2040 but are redeemable five years after issuance at First United Corporation’s option.

In March 2017, the Corporation repaid all of the outstanding TPS Debentures issued to and held by Trust III, and Trust III in turn redeemed all of its outstanding securities from its security holders.  The $10.8 million repayment was consummated following the Corporation’s common stock rights offering that closed on March 20, 2017.  See Note 19 for further details on the Rights offering.

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

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Preferred Stock

3 Months Ended

Mar. 31, 2017

Preferred Stock / Common Stock Rights Offering [Abstract]

Preferred Stock

Note 12 – Preferred Stock

On January 30, 2009, pursuant to the Troubled Asset Repurchase Program Capital Purchase Program adopted by the Treasury, First United Corporation issued to the Treasury 30,000 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A, having no par value, (the “Series A Preferred Stock”), and a Warrant to purchase 326,323 shares of common stock at an exercise price of $13.79 per share, for an aggregate consideration of $30 million.  The proceeds from this transaction qualify as Tier 1 capital and the Warrant qualified as tangible common equity. 

On December 4, 2014, the Treasury sold all of its shares of Series A Preferred Stock to third-party investors.  On May 26, 2015, First United Corporation repurchased the warrant from the Treasury for $120,786, which is included in other expense.  The warrant was canceled and as a result of the repurchase, the Treasury has no remaining equity investment in First United Corporation. 

On February 14, 2016, First United Corporation redeemed 10,000 shares of the Series A Preferred Stock, having an aggregate liquidation amount of $10.0 million, on a pro rata basis from each of the holders. 

On March 21, 2017, an additional 10,000 shares of the Series A Preferred Stock, having an aggregate liquidation amount of $10.0 million were redeemed, on a pro rata basis from each of the holders.

The terms of the Series A Preferred Stock call for the payment, if declared by the Corporation’s Board of Directors, of cash dividends on February 15th, May 15th, August 15th and November 15th of each year.  The holders of the Series A Preferred Stock are entitled to receive, if and when declared by the Board of Directors, out of assets legally available for payment, cumulative cash dividends at a rate per annum of 9% per share of Series A Preferred Stock on a liquidation amount of $1,000 per share with respect to each dividend period from and after February 15, 2014.  Under the terms of the Series A Preferred Stock, First United Corporation may, at its option and after consulting with the Reserve Bank, redeem shares of Series A Preferred Stock, in whole or in part, at any time and from time to time, for cash at a per share amount equal to the sum of the liquidation preference per share plus any accrued and unpaid dividends to but excluding the redemption date. 

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Borrowed Funds

3 Months Ended

Mar. 31, 2017

Borrowed Funds [Abstract]

Borrowed Funds

Note 13 – Borrowed Funds

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

(Dollars in thousands)	Three months ended March 31, 2017		Year ended December 31, 2016
Securities sold under agreements to repurchase:
Outstanding at end of period	$	35,269	$	36,000
Weighted average interest rate at end of period		0.18%		0.16%
Maximum amount outstanding as of any month end	$	35,269	$	39,456
Average amount outstanding	$	32,628	$	30,899
Approximate weighted average rate during the period		0.20%		0.19%

At March 31, 2017, the repurchase agreements were secured by $ 48.0million in investment securities issued by government related agencies.  A minimum of 102% of fair value is pledged against account balances.

The following is a summary of long-term borrowings with original maturities exceeding one year:

	March 31,		December 31,
(in thousands)	2017		2016
FHLB advances, bearing fixed interest at rates ranging from 1.54% to 3.69% at March 31, 2017	$	90,000	$	90,007
Junior subordinated debt, bearing variable interest rate of 3.90% at March 31, 2017		30,929		30,929
Junior subordinated debt, bearing fixed interest rate of 0.00% at March 31, 2017		0		10,801
Total long-term debt	$	120,929	$	131,737

At March 31, 2017, the long-term FHLB advances were secured by $252.4million in loans.

The contractual maturities of all long-term borrowings are as follows:

	March 31, 2017						December 31, 2016
(in thousands)	Fixed Rate		Floating Rate		Total		Total
Due in 2018	$	20,000	$	0	$	20,000	$	20,000
Due in 2019		20,000		0		20,000		20,000
Due in 2020		30,000		0		30,000		30,000
Due in 2021		20,000		0		20,000		20,000
Thereafter		0		30,929		30,929		41,737
Total long-term debt	$	90,000	$	30,929	$	120,929	$	131,737

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Employee Benefit Plans

3 Months Ended

Mar. 31, 2017

Employee Benefit Plans [Abstract]

Employee Benefit Plans

Note 14 – Employee Benefit Plans

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

Pension	For the Three months ended
	March 31,
(in thousands)	2017		2016
Service cost	$	70	$	76
Interest cost		413		435
Expected return on assets		(751)		(673)
Amortization of transition asset		0		0
Amortization of net actuarial loss		264		212
Amortization of prior service cost		3		3
Net pension (credit)/expense included in employee benefits	$	(1)	$	53

SERP	For the Three months ended
	March 31,
(in thousands)	2017		2016
Service cost	$	26	$	25
Interest cost		72		62
Amortization of recognized loss		37		19
Amortization of prior service cost		(1)		5
Net SERP expense included in employee benefits	$	134	$	111

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

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

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

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

The Corporation will assess the need for future annual contributions to the pension plan based upon its funded status and an evaluation of the future benefits to be provided thereunder.  A contribution of $3.0 million was made to the pension plan during the first quarter of 2017.  The Corporation expects to fund the annual projected benefit payments for the SERP from operations.

On January 9, 2015, the Corporation and members of management who do not participate in the SERP entered into participation agreements under the Deferred Compensation Plan, each styled as a SERP Alternative Participation Agreement (the “Participation Agreement”).  Pursuant to each Participation Agreement, the Corporation agreed, for each Plan Year (as defined in the Deferred Compensation Plan) in which it determines that it has been Profitable (as defined in the Participation Agreement), to make a discretionary contribution to the participant’s Employer Account in an amount equal to 15% of the participant’s base salary level for such Plan Year, with the first Plan Year being the year ending December 31, 2015.  The Participation Agreement provides that the participant will become 100% vested in the amount maintained in his or her Employer Account upon the earliest to occur of the following events: (a) Normal Retirement (as defined in the Participation Agreement); (b)  Separation from Service (as defined in the Participation Agreement) following a Change of Control (as defined in the Deferred Compensation Plan) and subsequent Triggering Event (as defined in the Participation Agreement); (c) Separation from Service due to a Disability (as defined in the Participation Agreement); (d) with respect to a particular award of Employer Contribution Credits, the participant’s completion of two consecutive Years of Service (as defined in the Participation Agreement) immediately following the Plan Year for which such award was made; or (e) death.  Notwithstanding the foregoing, however, a participant will lose entitlement to the amount maintained in his or her Employer Account in the event employment is terminated for Cause (as defined in the Participation Agreement).  In addition, the Participation Agreement conditions entitlement to the amounts held in the Employer Account on the participant (1) refraining from engaging in Competitive Employment (as defined in the Participation Agreement) for three years following his or her Separation from Service, (2) refraining from injurious disclosure of confidential information concerning the Corporation, and (3) remaining available, at the Corporation’s reasonable request, to provide at least six hours of transition services per month for 12 months following his or her Separation from Service (except in the case of death or Disability), except that only item (2) will apply in the event of a Separation from Service following a Change of Control and subsequent Triggering Event. 

In January 2016, the Board of Directors of First United Corporation approved a discretionary contribution in the amount of $63,500 for two employees.  Expense for the first three months of 2017 for the Participation Agreement was $7,943.  In January 2017, the Board of Directors of First United Corporation approved a discretionary contribution in the amount of $112,708 for four employees.  Expense for the first three months of 2017 for the Participation Agreement was $14,089.

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Equity Compensation Plan Information

3 Months Ended

Mar. 31, 2017

Equity Compensation Plan Information [Abstract]

Equity Compensation Plan Information

Note 15 - Equity Compensation Plan Information

At the 2007 Annual Meeting of Shareholders, First United Corporation’s shareholders approved the First United Corporation Omnibus Equity Compensation Plan (the “Omnibus Plan”), which authorizes the issuance of up to 185,000 shares of common stock pursuant to the grant of stock options, stock appreciation rights, stock awards, stock units, performance units, dividend equivalents, and other stock-based awards to employees or directors. 

On June 18, 2008, the Board of Directors of First United Corporation adopted a Long-Term Incentive Program (the “LTIP”).  This program was adopted as a sub-plan of the Omnibus Plan to reward participants for increasing shareholder value, align executive interests with those of shareholders, and serve as a retention tool for key executives.  Under the LTIP, participants are granted shares of restricted common stock of First United Corporation.  The amount of an award is based on a specified percentage of the participant’s salary as of the date of grant.  These shares will vest if the Corporation meets or exceeds certain performance thresholds. 

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

Stock-based awards were made to non-employee directors in May 2016 pursuant to First United Corporation’s director compensation policy.  Each director receives an annual retainer of 1,000 shares of First United Corporation common stock, plus $10,000 to be paid, at the director’s election, in cash or additional shares of common stock.  In 2016, a total of 14,384 fully-vested shares of common stock were issued to directors, which had a fair market value of $10.34.  Director stock compensation expense was $37,183 for the three months ended March 31, 2017 and $35,889 for the three months ended March 31, 2016. 

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Letters of Credit and Off Balance Sheet Liabilities

3 Months Ended

Mar. 31, 2017

Letters of Credit and Off Balance Sheet Liabilities [Abstract]

Letters of Credit and Off Balance Sheet Liabilities

Note 16 – Letters of Credit and Off Balance Sheet Liabilities

The Corporation does not issue any guarantees that would require liability recognition or disclosure other than the standby letters of credit issued by the Bank.  Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.  Generally, the Bank’s letters of credit are issued with expiration dates within one year.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  The Bank generally holds collateral and/or personal guarantees supporting these commitments.  The Bank had $1.6million of outstanding standby letters of credit each of at March 31, 2017 and December 31, 2016.  Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payment required by the letters of credit.  Management does not believe that the amount of the liability associated with guarantees under standby letters of credit outstanding at March 31, 2017 and December 31, 2016 is material. 

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Derivative Financial Instruments

3 Months Ended

Mar. 31, 2017

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

Note 17 – Derivative Financial Instruments

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

In July 2009, the Corporation entered into threeinterest rate swap contracts totaling $20.0 million notional amount, hedging future cash flows associated with floating rate trust preferred debt.  The final contract matured on June 17, 2016, ending the agreement.

In March 2016, the Corporation entered into four new interest rate swap contracts totaling $30.0 million notional amount, hedging future cash flows associated with floating rate trust preferred debt.  These contracts are a three-year $5.0 million contract maturing June 17, 2019, a five-year $5.0 million contract maturing March 17, 2021, a seven-year $5.0 million contract maturing March 17, 2023 and a 10-year $15.0 million contract maturing March 17, 2026.

The fair value of the interest rate swap contracts was $.8 million and $.7 million at March 31, 2017 and December 31, 2016, respectively.

For the three months ended March 31, 2017, the Corporation recorded an increase in the value of the derivatives of $86 thousand and the related deferred tax of $34 thousand in net accumulated other comprehensive loss to reflect the effective portion of cash flow hedges.  ASC Subtopic 815-30 requires this amount to be reclassified to earnings if the hedge becomes ineffective or is terminated.  There was no hedge ineffectiveness recorded for the three months ending March 31, 2017.  The Corporation does not expect any losses relating to these hedges to be reclassified into earnings within the next 12 months.

Interest rate swap agreements are entered into with counterparties that meet established credit standards and the Corporation believes that the credit risk inherent in these contracts is not significant as of March 31, 2017.

The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the three- months ended March 31, 2017 and 2016.

Derivative in Cash Flow Hedging Relationships
(in thousands)	Amount of gain recognized in OCI on derivative (effective portion)		Amount of gain or (loss) reclassified from accumulated OCI into income (effective portion) (a)		Amount of gain or (loss) recognized in income or derivative (ineffective portion and amount excluded from effectiveness testing) (b)
Interest rate contracts:
Three months ended:
March 31, 2017	$	52	$	0	$	0
March 31, 2016		(331)		0		0

Notes:

(a) Reported as interest expense

(b) Reported as other income

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Variable Interest Entities (VIE)

3 Months Ended

Mar. 31, 2017

Variable Interest Entities (VIE) [Abstract]

Variable Interest Entities (VIE)

Note 18 – Variable Interest Entities (VIE)

As noted in Note 11, First United Corporation created the Trusts for the purposes of raising regulatory capital through the sale of mandatorily redeemable preferred capital securities to third party investors and common equity interests to First United Corporation.  The Trusts are considered Variable Interest Entities (“VIEs”), but are not consolidated because First United Corporation is not the primary beneficiary of the Trusts.  At March 31, 2017, the Corporation reported all of the $30.9 million of TPS Debentures issued in connection with these offerings as long-term borrowings and it reported its $.9 million equity interest in the Trusts as “Other Assets”. 

In November 2009, the Bank became a 99.99% limited partner in Liberty Mews Limited Partnership (“Liberty Mews”), a Maryland limited partnership formed for the purpose of acquiring, developing and operating low-income housing units in Garrett County, Maryland.  The Partnership was financed with a total of $10.6 million of funding, including a $6.1 million equity contribution from the Bank as the limited partner. Liberty Mews used the proceeds from these sources to purchase the land and construct a 36-unit low income housing rental complex at a total cost of $10.6 million.  The total assets of Liberty Mews were approximately $8.8 millionat March 31, 2017 and December 31, 2016.

As of December 31, 2011, the Bank had made contributions to Liberty Mews totaling $6.1 million.  The project was completed in June 2011, and the Bank is entitled to $8.4 million in federal investment tax credits over a 10-year period as long as certain qualifying hurdles are maintained.  The Bank will also receive the benefit of tax operating losses from Liberty Mews to the extent of its capital contribution. The investment in Liberty Mews assists the Bank in achieving its community reinvestment initiatives.

Because Liberty Mews is considered to be a VIE, management performed an analysis to determine whether its involvement with the Partnership would lead it to determine that it must consolidate Liberty Mews.  In performing its analysis, management evaluated the risks creating the variability in the Partnership and identified which activities most significantly impact the VIE’s economic performance.  Finally, it examined each of the variable interest holders to determine which, if any, of the holders was the primary beneficiary based on their power to direct the most significant activities and their obligation to absorb potentially significant losses of Liberty Mews. 

The Bank, as a limited partner, generally has no voting rights. The Bank is not in any way involved in the daily management of Liberty Mews and has no other rights that provide it with the power to direct the activities that most significantly impact Liberty Mews’s economic performance, which are to develop and operate the housing project in such a manner that complies with specific tax credit guidelines.  As a limited partner, there is no recourse to the Bank by the creditors of Liberty Mews.  The tax credits that result from the Bank’s investment in Liberty Mews are generally subject to recapture should the partnership fail to comply with the applicable government regulations.  The Bank has not provided any financial or other support to Liberty Mews beyond its required capital contributions and does not anticipate providing such support in the future. Management currently believes that no material losses are probable as a result of the Bank’s investment in Liberty Mews.

On the basis of management’s analysis, the general partner is deemed to be the primary beneficiary of Liberty Mews. Because the Bank is not the primary beneficiary, Liberty Mews has not been included in the Corporation’s consolidated financial statements.

The Corporation accounts for the Bank’s investment in Liberty Mews utilizing the effective yield method under guidance that applies specifically to investments in limited partnerships that operate qualified affordable housing projects.  Under the effective yield method, the investor recognizes tax credits as they are allocated and amortizes the initial cost of the investment to provide a constant effective yield over the period that tax credits are allocated to the investor. The effective yield is the internal rate of return on the investment, based on the cost of the investment and the guaranteed tax credits allocated to the investor.  The tax credit allocated, net of the amortization of the investment in the limited partnership, is recognized in the income statement as a component of income taxes attributable to continuing operations.

The Corporation’s tax expense for the three months ended March 31, 2017 was approximately $.1million lower as a result of the impact of the tax credits and the tax losses relating to the partnership.

At March 31, 2017 and December 31, 2016, the Corporation included its total investment in Liberty Mews in “Other Assets” in its Consolidated Statement of Financial Condition.  As of March 31, 2017, the Bank’s commitment in Liberty Mews was fully funded.  The following table presents details of the Bank’s involvement with Liberty Mews at the dates indicated:

	March 31,		December 31,
(in thousands)	2017		2016
Investment in LIHTC Partnership
Carrying amount on Balance Sheet of:
Investment (Other Assets)	$	3,061	$	3,223
Maximum exposure to loss		3,061		3,223

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Common Stock Rights Offering

3 Months Ended

Mar. 31, 2017

Preferred Stock / Common Stock Rights Offering [Abstract]

Common Stock Rights Offering

Note 19 – Common Stock Rights Offering

On March 20, 2017, First United Corporation completed a common stock rights offering to existing shareholders in which it sold an aggregate of 783,626 shares of common stock at a subscription price of $11.93 per share, resulting in aggregate gross proceeds of approximately $9.4 million (the “Rights Offering”).  Net proceeds from the Rights Offering amounted to approximately $9.2 million, reflecting $144,667 in offering-related expenses.  The Corporation used the proceeds to partially offset the redemption of $10.0 million of Series A Preferred Stock and the full repayment of $10.8 million of junior subordinated debentures, both of which were completed in March 2017.

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Assets and Liabilities Subject to Enforceable Master Netting Arrangements

3 Months Ended

Mar. 31, 2017

Assets and Liabilities Subject to Enforceable Master Netting Arrangements [Abstract]

Assets and Liabilities Subject to Enforceable Master Netting Arrangements

Note 20 – Assets and Liabilities Subject to Enforceable Master Netting Arrangements

Interest Rate Swap Agreements (“Swap Agreements”)

The Corporation has entered into interest rate swap agreements to modify the re-pricing characteristics of certain interest-bearing liabilities as a part of managing interest rate risk.  The swap agreements have been designated as cash flow hedges, and accordingly, the fair value of the interest rate swap contracts is reported in Other Liabilities on the Consolidated Statement of Financial Condition.  The swap agreements were entered into with a third party financial institution.  The Corporation is party to master netting arrangements with its financial institution counterparty; however, the Corporation does not offset assets and liabilities under these arrangements for financial statement presentation purposes.  The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract.  Collateral, in the form of cash and investment securities, are pledged by the Corporation as the counterparty with net liability positions in accordance with contract thresholds.  See Note 17 to the Consolidated Financial Statements for more information.

Securities Sold Under Agreements to Repurchase (“Repurchase Agreements”)

The Bank enters into agreements under which it sells interests in U.S. securities to certain customers subject to an obligation to repurchase, and on the part of the customers to resell, such interests.  Under these arrangements, the Bank may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank to repurchase the assets.  As a result, these repurchase agreements are accounted for as collateralized financing arrangements (i.e. secured borrowings) and not as a sale and subsequent repurchase of securities.  The obligation to repurchase the securities is reflected as a liability in the Consolidated Statement of Condition, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts.  There is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities.  In addition, as the Bank does not enter into reverse repurchase agreements, there is no such offsetting to be done with the repurchase agreements.  The right of setoff for a repurchase agreement resembles a secured borrowing, whereby the collateral would be used to settle the fair value of the repurchase agreement should the Bank be in default (i.e. fails to repurchase the U.S. securities on the maturity date of the agreement).  The investment security collateral, maintained at 102% of the borrowing, is held by a third party financial institution in the counterparty’s custodial account.

The following table presents the liabilities subject to an enforceable master netting arrangement or repurchase agreements at March 31, 2017 and December 31, 2016.

							Gross Amounts Not Offset in the Statement of Condition
(In thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Condition		Net Amounts of Liabilities Presented in the Statement of Condition		Financial Instruments		Cash Collateral Pledged		Net Amount
March 31, 2017
Interest Rate Swap Agreements	$	(786)	$	0	$	(786)	$	786	$	0	$	0
Repurchase Agreements	$	35,269	$	0	$	35,269	$	(35,269)	$	0	$	0
December 31, 2016
Interest Rate Swap Agreements	$	(700)	$	0	$	(700)	$	700	$	0	$	0
Repurchase Agreements	$	36,000	$	0	$	36,000	$	(36,000)	$	0	$	0

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Adoption of New Accounting Standards and Effects of New Accounting Pronouncements

3 Months Ended

Mar. 31, 2017

Adoption of New Accounting Standards and Effects of New Accounting Pronouncements [Abstract]

Accounting Pronouncements and Changes in Accounting Principles

Note 21 – Adoption of New Accounting Standards and Effects of New Accounting Pronouncements

In March 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-08, Receivables- Nonrefundable Fees and Other Costs (Subtopic 310-20):  Premium Amortization on Purchases Callable Debt Securities.  ASU 2017-08 amends guidance on the amortization period of premiums on certain purchases callable debt securities.  The amendments shorten the amortization period of premiums on certain purchases callable debt securities to the earliest call date.  ASU 2017-08 is effective for public business entities that are SEC filers for annual periods beginning after December 15, 2018, and interim periods within those annual periods, for public entities that are not SEC filers for annual periods beginning after December 15, 2019 and for all other entities for annual periods beginning after December 15, 2020 with early adoption permitted.  The Corporation is evaluating the provisions of ASU 2017-08 but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations.

In March 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-07, Compensation – Retirement Benefits (Topic 715):  Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.  ASU 2017-07 requires an entity to present net periodic pension cost and net periodic postretirement benefit cost as a net amount that may be capitalized as part of an asset when appropriate.ASU 2017-07 is effective for public business entities that are SEC filers for annual periods beginning after December 15, 2017, and interim periods within those annual periods, for public entities that are not SEC filers for annual periods beginning after December 15, 2018 and for all other entities for annual periods beginning after December 15, 2019 with early adoption permitted.  The Corporation is evaluating the provisions of ASU 2017-07 but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations.

In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-04, Intangibles- Goodwill and Other (Topic 350):  Simplifying the Test for Goodwill Impairment.  ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating step 2 from the goodwill impairment test.  Instead, if “the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.”  The ASU does not change the qualitative assessment, however, it removes the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform step 2 of the goodwill impairment test.  ASU 2017-04 is effective for public business entities that are SEC filers for annual periods beginning after December 15, 2019, and interim periods within those annual periods, for public entities that are not SEC filers for annual periods beginning after December 15, 2020 and for all other entities for annual periods beginning after December 15, 2021 with early adoption permitted.  The Corporation is evaluating the provisions of ASU 2017-04 but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations.

In August 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.  ASU 2016-15 addresses the following eight specific cash flow issues: (a) debt prepayment or debt extinguishment costs; (b) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (c) contingent consideration payments made after a business combination; (d) proceeds from the settlement of insurance claims; (e) proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)); (f) distributions received from equity method investees; (g) beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle.  The amendments in this Update apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230.ASU 2016-15 is effective for public business entities for annual periods beginning after December 15, 2017, and interim periods within those annual periods, and for all other entities for annual periods beginning after December 15, 2018 and interim periods within annual periods beginning after December 15, 2019 with early adoption permitted.  The Corporation is evaluating the provisions of ASU 2016-15 but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  ASU 2016-13 introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments.  It also modifies the impairment model for available-for-sale (“AFS”) debt securities and provides for a simplified accounting model for purchases financial assets with credit deterioration since their origination.  The new model referred to as current expected credit losses (“CECL”) model, will apply to: (a) financial assets subject to credit losses and measured at amortized cost, and (b) certain off-balance sheet credit exposures.  This includes loans, held to maturity debt securities, loan commitments, financial guarantees and net investments in leases as well as reinsurance and trade receivables.  The estimate of expected credit losses (“ECL”) should consider historical information, current information, and supportable forecasts, including estimates of prepayments.  ASU 2016-13 is effective for public business entities for annual periods beginning after December 15, 2019, and interim periods within those annual periods, and for all other entities for annual periods beginning after December 15, 2020 and interim periods within annual periods beginning after December 15, 2018 with early adoption permitted.  Management currently intends to adopt the guidance on January 1, 2020 and is assessing the impact of this guidance on the Corporation’s financial condition and results of operations.  Management has formed a focus group consisting of multiple members from areas including credit, finance, and information systems. The focus group is evaluating the requirements of the new standard and the impact it will have on our processes.  The Corporation is still in the process of determining the impact on the Corporation’s financial condition or results of operations.

In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.  ASU 2016-09 introduces amendments intended to simplify the accounting for stock compensation.  ASU 2016-09 requires all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement.  The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur.  An entity should also recognize excess tax benefits, and assess the need for a valuation allowance, regardless of whether the benefit reduces taxes payable in the current period.  The ASU also requires excess tax benefits be classified along with other income tax cash flows as an operating activity in the statement of cash flows.  ASU 2016-09 is effective for public business entities for annual periods beginning after December 15, 2016, and interim periods within those annual periods, and for all other entities for annual periods beginning after December 15, 2017 and interim periods within annual periods beginning after December 15, 2018 with early adoption permitted.  The Corporation is evaluating the provisions of ASU 2016-09, but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).  ASU 2016-02 is intended to improve financial reporting about leasing transactions by requiring organizations that lease assets – referred to as “lessees” – to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Under the new guidance, a lessee will be required to recognize assets and liabilities related to certain operating leases on the balance sheet.  The amendments will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases.  ASU 2016-02 applies to all public business entities for annual and interim periods after December 15, 2018, and for all other entities for annual periods beginning after December 15, 2019 and interim periods beginning after December 15, 2020 with early adoption permitted.  Management is currently assessing the impact of the new guidance but expects to report higher assets and liabilities as a result of including additional leases on the consolidated balance sheet. 

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10).  The update requires all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee).  The update also requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.  In addition, the update eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement for to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measure at amortized cost on the balance sheet for public entities.  For public business entities, the amendments are effective for annual periods beginning after December 15, 2017, including interim periods within the annual period, and for all other entities, effective for annual periods beginning after December 15, 2018 and interim periods within annual periods beginning after December 15, 2019.  Early application is permitted.  The Corporation is evaluating the provisions of ASU 2016-01, but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which establishes a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate, construction and software industries.  ASU 2014-09 specifies that an entity shall recognize revenue when, or as, the entity satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer.  An asset is transferred when, or as, the customer obtains control of the asset. Entities are required to disclose qualitative and quantitative information on the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017.  Because the guidance does not apply to revenue associated with financial instruments, including loans and securities, the new guidance is not expected to have a material impact on the components of the consolidated statement of income related to financial instruments, including securities gains/losses and interest income.  However, we do believe the new standard will result in new disclosure requirements.  The Corporation is currently evaluating this guidance on other components of non-interest income such as service charges, payment processing fees, trust services fees, and brokerage services fees.  The new guidance is not expected to have a material impact on the Corporation’s financial condition or results of operations.

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Earnings Per Common Share (Policy)

3 Months Ended

Mar. 31, 2017

Earnings Per Common Share [Abstract]

Earnings Per Common Share Policy

Basic earnings per common share is derived by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period and does not include the effect of any potentially dilutive common stock equivalents.  Diluted earnings per share is derived by dividing net income available to common shareholders by the weighted-average number of shares outstanding, adjusted for the dilutive effect of outstanding common stock equivalents.  There were no common stock equivalents at March 31, 2017 or  March 31, 2016.

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Cash and Cash Equivalents (Policy)

3 Months Ended

Mar. 31, 2017

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents

Cash and due from banks, which represents vault cash in the retail offices and invested cash balances at the Federal Reserve and other correspondent banks, is carried at cost which approximates fair value.

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Investments (Policy)

3 Months Ended

Mar. 31, 2017

Investments [Abstract]

Investments

Management systematically evaluates securities for impairment on a quarterly basis.  Based upon application of accounting guidance for subsequent measurement in ASC Topic 320 (ASC Section 320-10-35), management assesses whether (a) the Corporation has the intent to sell a security being evaluated and (b) it is more likely than not that the Corporation will be required to sell the security prior to its anticipated recovery.  If neither applies, then declines in the fair values of securities below their cost that are considered other-than-temporary declines are split into two components.  The first is the loss attributable to declining credit quality.  Credit losses are recognized in earnings as realized losses in the period in which the impairment determination is made.  The second component consists of all other losses, which are recognized in other comprehensive loss.  In estimating other than temporary impairment (“OTTI”) losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) adverse conditions specifically related to the security, an industry, or a geographic area, (3) the historic and implied volatility of the fair value of the security, (4) changes in the rating of the security by a rating agency, (5) recoveries or additional declines in fair value subsequent to the balance sheet date, (6) failure of the issuer of the security to make scheduled interest or principal payments, and (7) the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future.  Management also monitors cash flow projections for securities that are considered beneficial interests under the guidance of ASC Subtopic 325-40, Investments – Other – Beneficial Interests in Securitized Financial Assets, (ASC Section 325-40-35).  Further discussion about the evaluation of securities for impairment can be found in Item 2 of Part I of this report under the heading “Investment Securities”.

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Restricted Investment in Bank Stock (Policy)

3 Months Ended

Mar. 31, 2017

Restricted Investment in Bank Stock [Abstract]

Restricted Investment in Bank Stock

Management evaluates the restricted stock for impairment in accordance with ASC Industry Topic 942, Financial Services – Depository and Lending- (ASC Section 942-325-35).  Management’s evaluation of potential impairment is based on management’s assessment of the ultimate recoverability of the cost of the restricted stock rather than by recognizing temporary declines in value.  The determination of whether a decline affects the ultimate recoverability is influenced by criteria such as (a) the significance of the decline in net assets of the issuing bank as compared to the capital stock amount for that bank and the length of time this situation has persisted, (b) commitments by the issuing bank to make payments required by law or regulation and the level of such payments in relation to the operating performance of that bank, and (c) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the issuing bank. Management has evaluated the restricted stock for impairment and believes that no impairment charge is necessary as of March 31, 2017.

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Loans and Related Allowance for Loan Losses (Policy)

3 Months Ended

Mar. 31, 2017

Loans and Related Allowance for Loan Losses [Abstract]

Loan Status

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due.  A loan is considered to be past due when a payment remains unpaid 30 days past its contractual due date.  For all loan segments, the accrual of interest is discontinued when principal or interest is delinquent for 90 days or more unless the loan is well-secured and in the process of collection.  All non-accrual loans are considered to be impaired.  Interest payments received on non-accrual loans are applied as a reduction of the loan principal balance.  Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.  The Corporation’s policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition. 

Impaired Loans Receivable

Management uses the following methodology for determining impairment on consumer and commercial loans.  All nonaccrual loans and all loans designated as “troubled debt restructures” (TDRs) are considered to be impaired.  Additionally, an impairment evaluation is performed on any account which meets the following criteria:  commercial loans which are risk related substandard with a balance greater than or equal to $500,000 OR which are part of relationship which is $750,000 or greater AND which are 60 days or greater delinquent.  For those loans which are not classified as nonaccrual or troubled debt restructures, a judgment is made as to the likelihood that contractual principal and interest will be collected.  Loans are considered to be impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. 

Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods: (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs.  The method is selected on a loan-by-loan basis, with management primarily utilizing the fair value of collateral method.  A valuation grid for impaired loans is used to determine when or how collateral values are to be updated based on size and collateral dependency for commercial loans and foreclosure status for consumer loans. If an updated appraisal has not been received and reviewed in time for the determination of estimated fair value at quarter (or year) end, or if the appraisal is found to be deficient following the Corporation’s internal appraisal review process and re-ordered, then the estimated fair value of the collateral is determined by adjusting the existing appraisal by the appropriate percentage from an internally prepared appraisal discount grid.  This grid considers the age of a third party appraisal and the geographic region where the collateral is located.  The discount rates in the appraisal discount grid are updated periodically to reflect the most current knowledge that management has available, including the results of current appraisals.  A specific allocation of the ALL is recorded if there is any deficiency in collateral value determined by comparing the estimated fair value to the recorded investment of the loan. When updated appraisals are received and reviewed, adjustments are made to the specific allocation as needed.

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

Allowance for Loan Losses

The classes described above, which are based on the Federal call code assigned to each loan, provide the starting point for the ALL analysis.  Management tracks the historical net charge-off activity (full and partial charge-offs, net of full and partial recoveries) at the call code level.  A historical charge-off factor is calculated utilizing a defined number of consecutive historical quarters. Consumer pools currently utilize a rolling 12 quarters, while Commercial pools currently utilize a rolling eight quarters. 

“Pass” rated credits are segregated from “Criticized” credits for the application of qualitative factors. “Pass” pools for commercial and residential real estate are further segmented based upon the geographic location of the underlying collateral.  There are seven geographic regions utilized – six that represent the Bank’s lending footprint and a seventh for all out-of-market credits.  Different economic environments and resultant credit risks exist in each region that are acknowledged in the assignment of qualitative factors.  Loans in the criticized pools, which possess certain qualities or characteristics that may lead to collection and loss issues, are closely monitored by management and subject to additional qualitative factors.

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

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

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Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2017

Earnings Per Common Share [Abstract]

Basic and Diluted Earnings Per Share

The following tables set forth the calculation of basic and diluted earnings per common share for the three-month periods ended March 31, 2017 and 2016:

	Three months ended March 31,
	2017					2016
			Average	Per Share				Average	Per Share
(in thousands, except for per share amount)	Income		Shares	Amount		Income		Shares	Amount
Basic and Diluted Earnings Per Share:
Net income	$	1,980				$	1,871
Preferred stock dividends		(540)					(675)
Net income available to common shareholders	$	1,440	6,530	$	0.22	$	1,196	6,255	$	0.19

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Net Gains (Tables)

3 Months Ended

Mar. 31, 2017

Net Gains [Abstract]

Net Gains

The following table summarizes the gain/(loss) activity for the three-month periods ended March 31, 2017 and 2016:

	Three months ended
	March 31,
(in thousands)	2017		2016
Net gains/(losses):
Available-for-sale securities:
Realized gains	$	8	$	277
Realized losses		(17)		(71)
Gain on sale of consumer loans		15		12
Loss on disposal of fixed assets		(1)		(2)
Net gains	$	5	$	216

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Cash and Cash Equivalents (Tables)

3 Months Ended

Mar. 31, 2017

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents

	March 31,		December 31,
(in thousands)	2017		2016
Cash and due from banks, weighted average interest rate of 0.56% (at March 31, 2017)	$	60,749	$	60,707

Interest bearing deposits in banks, which represent funds invested at a correspondent bank, are carried at cost which approximates fair value and, as of March 31, 2017 and December 31, 2016, consisted of daily funds invested at the Federal Home Loan Bank (“FHLB”) of Atlanta and Merchants and Traders (“M&T”).

	March 31,		December 31,
(in thousands)	2017		2016
FHLB daily investments, interest rate of 0.72% (at March 31, 2017)	$	1,075	$	1,590
M&T daily investments, interest rate of 0.15% (at March 31, 2017)		1,014		1,013
	$	2,089	$	2,603

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Investments (Tables)

3 Months Ended

Mar. 31, 2017

Investments [Abstract]

Unrealized Gain (Loss) on Investments

The following table shows a comparison of amortized cost and fair values of investment securities at March 31, 2017 and December 31, 2016:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI in AOCI
March 31, 2017
Available for Sale:
U.S. government agencies	$	25,000	$	0	$	703	$	24,297	$	0
Commercial mortgage-backed agencies		51,321		0		927		50,394		0
Collateralized mortgage obligations		19,670		11		370		19,311		0
Obligations of states and political subdivisions		22,423		322		167		22,578		0
Collateralized debt obligations		27,790		0		7,433		20,357		(3,797)
Total available for sale	$	146,204	$	333	$	9,600	$	136,937	$	(3,797)
Held to Maturity:
U.S. government agencies	$	15,772	$	518	$	0	$	16,290	$	0
Residential mortgage-backed agencies		51,515		145		348		51,312		0
Commercial mortgage-backed agencies		17,509		252		0		17,761		0
Collateralized mortgage obligations		4,593		0		102		4,491		0
Obligations of states and political subdivisions		8,630		517		85		9,062		0
Total held to maturity	$	98,019	$	1,432	$	535	$	98,916	$	0
December 31, 2016
Available for Sale:
U.S. government agencies	$	25,000	$	0	$	747	$	24,253		0
Commercial mortgage-backed agencies		52,978		1		757		52,222		0
Collateralized mortgage obligations		19,953		13		399		19,567		0
Obligations of states and political subdivisions		23,700		255		251		23,704		0
Collateralized debt obligations		27,930		0		7,676		20,254		(3,961)
Total available for sale	$	149,561	$	269	$	9,830	$	140,000	$	(3,961)
Held to Maturity:
U.S. government agencies	$	15,738	$	512	$	0	$	16,250	$	0
Residential mortgage-backed agencies		50,384		160		279		50,265		0
Commercial mortgage-backed agencies		17,584		248		0		17,832		0
Collateralized mortgage obligations		4,833		0		149		4,684		0
Obligations of states and political subdivisions		8,630		490		170		8,950		0
Total held to maturity	$	97,169	$	1,410	$	598	$	97,981	$	0

Proceeds from Sales and Realized Gain and Losses

Proceeds from sales of available for sale securities and the realized gains and losses are as follows:

	Three months ended
	March 31,
(in thousands)	2017		2016
Proceeds	$	3,830	$	10,771
Realized gains		8		277
Realized losses		17		71

Gross Unrealized Losses and Fair Values of Securities

The following table shows the Corporation’s investment securities with gross unrealized losses and fair values at March 31, 2017 and December 31, 2016, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:

	Less than 12 months				12 months or more
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2017
Available for Sale:
U.S. government agencies	$	24,297	$	703	$	0	$	0
Commercial mortgage-backed agencies		50,394		927		0		0
Collateralized mortgage obligations		18,445		370		0		0
Obligations of states and political subdivisions		6,660		104		2,979		63
Collateralized debt obligations		0		0		20,357		7,433
Total available for sale	$	99,796	$	2,104	$	23,336	$	7,496
Held to Maturity:
Residential mortgage-backed agencies	$	22,960	$	348	$	0	$	0
Collateralized mortgage obligations		4,491		102		0		0
Obligations of states and political subdivisions		2,420		85		0		0
Total held to maturity	$	29,871	$	535	$	0	$	0

December 31, 2016
Available for Sale:
U.S. government agencies	$	24,253	$	747	$	0	$	0
Commercial mortgage-backed agencies		51,604		757		0		0
Collateralized mortgage obligations		14,706		399		0		0
Obligations of states and political subdivisions		8,079		160		2,934		91
Collateralized debt obligations		0		0		20,254		7,676
Total available for sale	$	98,642	$	2,063	$	23,188	$	7,767
Held to Maturity:
Residential mortgage-backed agencies	$	20,899	$	279	$	0	$	0
Commercial mortgage-backed agencies		4,684		149		0		0
Obligations of states and political subdivisions		2,335		170		0		0
Total held to maturity	$	27,918	$	598	$	0	$	0

Non-Cash OTTI Credit Losses Recognized in Earnings

The following tables present a cumulative roll-forward of the amount of non-cash OTTI charges related to credit losses which have been recognized in earnings for the trust preferred securities in the CDO portfolio held and not intended to be sold for the three-month periods ended March 31, 2017 and 2016:

	Three months ended March 31,
(in thousands)	2017		2016
Balance of credit-related OTTI at January 1	$	3,124	$	3,133
Reduction for increases in cash flows expected to be collected		(2)		(36)
Balance of credit-related OTTI at March 31	$	3,122	$	3,097

Amortized Cost and Fair Values Classified by Contractual Maturity Date

	March 31, 2017
(in thousands)	Amortized Cost		Fair Value
Contractual Maturity
Available for sale:
Due after one year through five years	$	10,662	$	10,541
Due after five years through ten years		18,687		18,174
Due after ten years		45,864		38,517
		75,213		67,232
Commercial mortgage-backed agencies		51,321		50,394
Collateralized mortgage obligations		19,670		19,311
Total available for sale	$	146,204	$	136,937
Held to Maturity:
Due after five years through ten years	$	15,772	$	16,290
Due after ten years		8,630		9,062
		24,402		25,352
Residential mortgage-backed agencies	$	51,515	$	51,312
Commercial mortgage-backed agencies		17,509		17,761
Collateralized mortgage obligations		4,593		4,491
Total held to maturity	$	98,019	$	98,916

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Loans and Related Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2017

Loans and Related Allowance for Loan Losses [Abstract]

Primary Segments of the Loan Portfolio

The following table summarizes the primary segments of the loan portfolio at March 31, 2017 and December 31, 2016:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Total
March 31, 2017
Individually evaluated for impairment	$	14,054	$	2,420	$	290	$	4,090	$	0	$	20,854
Collectively evaluated for impairment	$	280,727	$	104,988	$	74,303	$	389,898	$	23,762	$	873,678
Total loans	$	294,781	$	107,408	$	74,593	$	393,988	$	23,762	$	894,532
December 31, 2016
Individually evaluated for impairment	$	17,210	$	2,525	$	290	$	3,975	$	0	$	24,000
Collectively evaluated for impairment	$	280,749	$	101,757	$	72,056	$	389,441	$	23,923	$	867,926
Total loans	$	297,959	$	104,282	$	72,346	$	393,416	$	23,923	$	891,926

Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating

The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention and Substandard within the internal risk rating system at March 31, 2017 and December 31, 2016:

(in thousands)	Pass		Special Mention		Substandard		Total
March 31, 2017
Commercial real estate
Non owner-occupied	$	137,837	$	9,083	$	9,881	$	156,801
All other CRE		125,049		207		12,724		137,980
Acquisition and development
1-4 family residential construction		15,630		0		0		15,630
All other A&D		90,503		62		1,213		91,778
Commercial and industrial		73,029		43		1,521		74,593
Residential mortgage
Residential mortgage - term		312,279		0		7,481		319,760
Residential mortgage - home equity		72,849		0		1,379		74,228
Consumer		23,630		0		132		23,762
Total	$	850,806	$	9,395	$	34,331	$	894,532
December 31, 2016
Commercial real estate
Non owner-occupied	$	137,181	$	10,620	$	9,357	$	157,158
All other CRE		125,720		3,121		11,960		140,801
Acquisition and development
1-4 family residential construction		15,845		0		0		15,845
All other A&D		87,135		65		1,237		88,437
Commercial and industrial		70,613		593		1,140		72,346
Residential mortgage
Residential mortgage - term		308,734		113		7,618		316,465
Residential mortgage - home equity		75,710		0		1,241		76,951
Consumer		23,794		0		129		23,923
Total	$	844,732	$	14,512	$	32,682	$	891,926

Loan Portfolio Summarized by the Past Due Status

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans at March 31, 2017 and December 31, 2016:

(in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days+ Past Due		Total Past Due and Accruing		Non-Accrual		Total Loans
March 31, 2017
Commercial real estate
Non owner-occupied	$	150,968	$	229	$	126	$	0	$	355	$	5,478	$	156,801
All other CRE		134,089		0		273		0		273		3,618		137,980
Acquisition and development
1-4 family residential construction		15,630		0		0		0		0		0		15,630
All other A&D		91,626		102		0		0		102		50		91,778
Commercial and industrial		74,558		0		25		10		35		0		74,593
Residential mortgage
Residential mortgage - term		316,129		1,887		208		84		2,179		1,452		319,760
Residential mortgage - home equity		72,983		718		158		74		950		295		74,228
Consumer		23,584		127		23		28		178		0		23,762
Total	$	879,567	$	3,063	$	813	$	196	$	4,072	$	10,893	$	894,532
December 31, 2016
Commercial real estate
Non owner-occupied	$	150,595	$	182	$	0	$	0	$	182	$	6,381	$	157,158
All other CRE		134,931		40		0		0		40		5,830		140,801
Acquisition and development
1-4 family residential construction		15,845		0		0		0		0		0		15,845
All other A&D		88,353		0		39		0		39		45		88,437
Commercial and industrial		72,324		9		2		11		22		0		72,346
Residential mortgage
Residential mortgage - term		310,721		517		3,376		312		4,205		1,539		316,465
Residential mortgage - home equity		75,558		974		198		70		1,242		151		76,951
Consumer		23,662		186		48		27		261		0		23,923
Total	$	871,989	$	1,908	$	3,663	$	420	$	5,991	$	13,946	$	891,926

Primary Segments of the Allowance for Loan Loss

The following table summarizes the primary segments of the ALL at March 31, 2017 and December 31, 2016, segregated by the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment: 

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer			Unallocated	Total
March 31, 2017
Individually evaluated for impairment	$	1,795	$	38	$	0	$	117	$	0	$	0	$	1,950
Collectively evaluated for impairment	$	3,772	$	845	$	936	$	3,385	$	195	$	500	$	9,633
Total ALL	$	5,567	$	883	$	936	$	3,502	$	195	$	500	$	11,583
December 31, 2016
Individually evaluated for impairment	$	177	$	40	$	0	$	43	$	0	$	0	$	260
Collectively evaluated for impairment	$	3,736	$	831	$	858	$	3,545	$	188	$	500	$	9,658
Total ALL	$	3,913	$	871	$	858	$	3,588	$	188	$	500	$	9,918

Impaired Loans and Related Interest Income by Loan Portfolio Class

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary at March 31, 2017 and December 31, 2016:

		Impaired Loans with Specific Allowance				Impaired Loans with No Specific Allowance		Total Impaired Loans
(in thousands)		Recorded Investment		Related Allowances		Recorded Investment		Recorded Investment		Unpaid Principal Balance
March 31, 2017
Commercial real estate
Non owner-occupied	$	5,607	$	1,641	$	251	$	5,858	$	8,831
All other CRE		432		154		7,764		8,196		8,809
Acquisition and development
1-4 family residential construction		0		0		582		582		582
All other A&D		244		38		1,594		1,838		2,112
Commercial and industrial		0		0		290		290		2,504
Residential mortgage
Residential mortgage - term		445		50		3,349		3,794		4,124
Residential mortgage – home equity		144		67		152		296		331
Consumer		0		0		0		0		0
Total impaired loans	$	6,872	$	1,950	$	13,982	$	20,854	$	27,293
December 31, 2016
Commercial real estate
Non owner-occupied	$	131	$	23	$	6,635	$	6,766	$	9,372
All other CRE		432		154		10,012		10,444		11,057
Acquisition and development
1-4 family residential construction		0		0		582		582		628
All other A&D		245		40		1,698		1,943		2,213
Commercial and industrial		0		0		290		290		2,504
Residential mortgage
Residential mortgage - term		61		43		3,763		3,824		4,249
Residential mortgage – home equity		0		0		151		151		168
Consumer		0		0		0		0		0
Total impaired loans	$	869	$	260	$	23,131	$	24,000	$	30,191

Allowance for Loan Losses Summarized by Loan Portfolio Segments

The following tables present the activity in the ALL for the three-month periods ended March 31, 2017 and 2016:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer			Unallocated	Total
ALL balance at January 1, 2017	$	3,913	$	871	$	858	$	3,588	$	188	$	500	$	9,918
Charge-offs		(429)		(18)		(33)		(148)		(84)		0		(712)
Recoveries		5		11		1,455		220		77		0		1,768
Provision		2,078		19		(1,344)		(158)		14		0		609
ALL balance at March 31, 2017	$	5,567	$	883	$	936	$	3,502	$	195	$	500	$	11,583
ALL balance at January 1, 2016	$	2,580	$	4,129	$	722	$	3,785	$	206	$	500	$	11,922
Charge-offs		(211)		0		(53)		(90)		(84)		0		(438)
Recoveries		0		100		30		32		42		0		204
Provision		931		(482)		59		32		28		0		568
ALL balance at March 31, 2016	$	3,300	$	3,747	$	758	$	3,759	$	192	$	500	$	12,256

Average of Impaired Loans and Related Interest Income by Loan Portfolio Class

As indicated in the table above,provision expense for the first quarter of 2017 was primarily driven by a specific allocation placed on a large participation loan on a mall in Pennsylvania in the CRE portfolio, offset by a net recovery of $1.3 million in the C&I portfolio relating to a prior charge-off on a loan to an ethanol plant.

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

	Three months ended						Three months ended
	March 31, 2017						March 31, 2016
(in thousands)	Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis		Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis
Commercial real estate
Non owner-occupied	$	6,366	$	6	$	0	$	1,597	$	6	$	0
All other CRE		9,320		53		0		13,093		37		0
Acquisition and development
1-4 family residential construction		582		6		0		700		8		0
All other A&D		1,891		23		0		3,869		24		0
Commercial and industrial		290		3		0		1,071		9		0
Residential mortgage
Residential mortgage - term		4,018		33		0		4,519		39		4
Residential mortgage – home equity		224		0		0		298		0		0
Consumer		0		0		0		0		0		0
Total	$	22,691	$	124	$	0	$	25,147	$	123	$	4

Modification of Troubled Debt Restructuring by Class

The following tables present the volume and recorded investment at the time of modification ofTDRs by class and type of modification that occurred during the periods indicated:

	Temporary Rate Modification			Extension of Maturity			Modification of Payment and Other Terms
(in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Three months ended March 31, 2017
Commercial real estate
Non owner-occupied	0	$	0	0	$	0	0	$	0
All other CRE	0		0	0		0	0		0
Acquisition and development
1-4 family residential construction	0		0	0		0	0		0
All other A&D	0		0	1		244	0		0
Commercial and industrial	0		0	0		0	0		0
Residential mortgage
Residential mortgage – term	0		0	1		259	0		0
Residential mortgage – home equity	0		0	0		0	0		0
Consumer	0		0	0		0	0		0
Total	0	$	0	2	$	503	0	$	0

	Temporary Rate Modification			Extension of Maturity			Modification of Payment and Other Terms
(in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Three months ended March 31, 2016
Commercial real estate
Non owner-occupied	0	$	0	0	$	0	0	$	0
All other CRE	0		0	1		203	0		0
Acquisition and development
1-4 family residential construction	0		0	0		0	0		0
All other A&D	0		0	0		0	0		0
Commercial and industrial	0		0	0		0	1		486
Residential mortgage
Residential mortgage – term	0		0	0		0	1		72
Residential mortgage – home equity	0		0	0		0	0		0
Consumer	0		0	0		0	0		0
Total	0	$	0	1	$	203	2	$	558

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Other Real Estate Owned (Tables)

3 Months Ended

Mar. 31, 2017

Other Real Estate Owned [Abstract]

Schedule of Real Estate Properties

The following table presents the components of other real estate owned (“OREO”) at March 31, 2017 and December 31, 2016:

(in thousands)	March 31, 2017		December 31, 2016
Commercial real estate	$	4,028	$	3,803
Acquisition and development		5,757		5,944
Residential mortgage		1,217		1,163
Total OREO	$	11,002	$	10,910

Other Real Estate, Roll Forward

The following table presents the activity in the OREO valuation allowance for the three-month periods ended March 31, 2017 and 2016:

	For the Three Months Ended
	March 31,
(in thousands)	2017		2016
Balance beginning of period	$	3,535	$	4,430
Fair value write-down		70		9
Sales of OREO		(289)		(615)
Balance at end of period	$	3,316	$	3,824

Schedule of Components of Other Real Estate Owned Expense

The following table presents the components of OREO expenses, net, for the three-month periods ended March 31, 2017 and 2016:

	For the Three Months Ended
	March 31,
(in thousands)	2017		2016
Gains on real estate, net	$	(30)	$	(67)
Fair value write-down, net		70		9
Expenses, net		169		169
Rental and other income		(35)		(27)
Total OREO expense, net	$	174	$	84

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Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2017

Fair Value of Financial Instruments [Abstract]

Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of March 31, 2017 and December 31, 2016, the significant unobservable inputs used in the fair value measurements were as follows:

(in thousands)		Fair Value at March 31, 2017	Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale	$	20,357	Discounted Cash Flow	Discount Rate	Range of LIBOR+ 4.50% to 5.50%
Non-recurring:
Impaired Loans	$	5,401	Market Comparable Properties	Marketability Discount	10.0% - 15.1%(1)               (weighted avg 10.0%)
Other Real Estate Owned	$	30	Market Comparable Properties	Marketability Discount	15%
(in thousands)		Fair Value at December 31, 2016	Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale	$	20,254	Discounted Cash Flow	Discount Rate	Range of LIBOR+ 4.5% to 5.5%
Non-recurring:
Impaired Loans	$	14,537	Market Comparable Properties	Marketability Discount	4.6% - 31.0% (1)               (weighted avg 6.5%)
Other Real Estate Owned	$	1,201	Market Comparable Properties	Marketability Discount	15%

NOTE:

Range would include discounts taken since appraisal and estimated values

Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis

For assets measured at fair value on a recurring and non-recurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2017 and December 31, 2016 are as follows:

			Fair Value Measurements at March 31, 2017 Using
		Assets Measured at Fair Value	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)		03/31/2017	(Level 1)		(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	24,297		$	24,297
Commercial mortgage-backed agencies	$	50,394		$	50,394
Collateralized mortgage obligations	$	19,311		$	19,311
Obligations of states and political subdivisions	$	22,578		$	22,578
Collateralized debt obligations	$	20,357				$	20,357
Financial Derivatives	$	786		$	786	$
Non-recurring:
Impaired loans	$	5,401				$	5,401
Other real estate owned	$	30				$	30

			Fair Value Measurements at December 31, 2016 Using
		Assets Measured at Fair Value	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)		12/31/2016	(Level 1)		(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	24,253		$	24,253
Commercial mortgage-backed agencies	$	52,222		$	52,222
Collateralized mortgage obligations	$	19,567		$	19,567
Obligations of states and political subdivisions	$	23,704		$	23,704
Collateralized debt obligations	$	20,254				$	20,254
Financial Derivative	$	700				$	700
Non-recurring:
Impaired loans	$	14,537				$	14,537
Other real estate owned	$	1,201				$	1,201

Reconciliation of Fair Valued Assets Measured on a Recurring Basis

The following tables show a reconciliation of the beginning and ending balances for fair valued assets measured on a recurring basis using Level 3 significant unobservable inputs for the three-month periods ended March 31, 2017 and 2016:

		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In thousands)		Investment Securities Available for Sale
Beginning balance January 1, 2017	$	20,254
Total gains realized/unrealized:
Included in other comprehensive income		103
Ending balance March 31, 2017	$	20,357

		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(in thousands)		Investment Securities Available for Sale		Cash Flow Hedge
Beginning balance January 1, 2016	$	22,211	$	(66)
Total (losses)/gains realized/unrealized:
Included in other comprehensive loss		(2,679)		33
Ending balance March 31, 2016	$	19,532	$	(33)

Fair Value by Balance Sheet Grouping

The following tables present fair value information about financial instruments, whether or not recognized in the Consolidated Statement of Financial Condition, for which it is practicable to estimate that value. The actual carrying amounts and estimated fair values of the Corporation’s financial instruments that are included in the Consolidated Statement of Financial Condition are as follows:

	March 31, 2017					Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	60,749	$	60,749	$	60,749
Interest bearing deposits in banks		2,089		2,089		2,089
Investment securities - AFS		136,937		136,937			$	116,580	$	20,357
Investment securities - HTM		98,019		98,916				89,854		9,062
Restricted bank stock		5,204		5,204				5,204
Loans, net		882,949		887,746						887,746
Financial derivatives		786		786				786
Accrued interest receivable		3,471		3,471				3,471
Financial Liabilities:
Deposits – non-maturity		790,115		790,115				790,115
Deposits – time deposits		236,753		241,750				241,750
Short-term borrowed funds		35,269		35,269				35,269
Long-term borrowed funds		120,929		122,120				122,120
Accrued interest payable		442		442				442
Off balance sheet financial instruments		0		0		0

	December 31, 2016					Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	60,707	$	60,707	$	60,707
Interest bearing deposits in banks		2,603		2,603		2,603
Investment securities - AFS		140,000		140,000			$	119,746	$	20,254
Investment securities - HTM		97,169		97,981				89,031		8,950
Restricted bank stock		5,209		5,209				5,209
Loans, net		882,008		886,712						886,712
Financial derivative		700		700				700
Accrued interest receivable		3,862		3,862				3,862
Financial Liabilities:
Deposits- non-maturity		773,120		773,120				773,120
Deposits- time deposits		241,110		245,762				245,762
Short-term borrowed funds		36,000		36,000				36,000
Long-term borrowed funds		131,737		133,397				133,397
Accrued interest payable		380		380				380
Off balance sheet financial instruments		0		0		0

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Accumulated Other Comprehensive Loss (Tables)

3 Months Ended

Mar. 31, 2017

Accumulated Other Comprehensive Loss [Abstract]

Schedule of Accumulated Other Comprehensive Loss

The following table presents the changes in each component of accumulated other comprehensive loss for the 12 months ended December 31, 2016 and the three-month period ended March 31, 2017:

(in thousands)	Investment securities- with OTTI AFS		Investment securities- all other AFS			Investment securities- HTM	Cash Flow Hedge		Pension Plan		SERP		Total
Accumulated OCL, net:
Balance - January 1, 2016	$	(1,942)	$	(2,024)	$	(1,971)	$	(39)	$	(12,663)	$	(305)	$	(18,944)
Other comprehensive income/(loss) before reclassifications		(421)		(929)		0		461		(2,086)		(466)		(3,441)
Amounts reclassified from accumulated other comprehensive loss		(5)		(265)		617		0		517		56		920
Balance - December 31, 2016	$	(2,368)	$	(3,218)	$	(1,354)	$	422	$	(14,232)	$	(715)	$	(21,465)
Other comprehensive income before reclassifications		100		73		0		52		32		0		257
Amounts reclassified from accumulated other comprehensive loss		(2)		5		61		0		162		22		248
Balance – March 31, 2017	$	(2,270)	$	(3,140)	$	(1,293)	$	474	$	(14,038)	$	(693)	$	(20,960)

Components of Comprehensive Income

The following tables present the components of comprehensive income for the three-month periods ended March 31, 2017 and 2016:

Components of Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the three months ended March 31, 2017
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	166	$	(66)	$	100
Less:  accretable yield recognized in income		2		0		2
Net unrealized gains on investments with OTTI		164		(66)		98
Available for sale securities – all other:
Unrealized holding gains		122		(49)		73
Less:  losses recognized in income		(9)		4		(5)
Net unrealized gains on all other AFS securities		131		(53)		78
Held to maturity securities:
Unrealized holding gains		0		0		0
Less:  amortization recognized in income		(101)		40		(61)
Net unrealized gains on HTM securities		101		(40)		61
Cash flow hedges:
Unrealized holding gains		86		(34)		52
Pension Plan:
Unrealized net actuarial gain		53		(21)		32
Less: amortization of unrecognized loss		(264)		105		(159)
Less: amortization of transition asset		0		0		0
Less: amortization of prior service costs		(3)		0		(3)
Net pension plan liability adjustment		320		(126)		194
SERP:
Unrealized net actuarial loss		0		0		0
Less: amortization of unrecognized loss		(37)		14		(23)
Less: amortization of prior service costs		1		0		1
Net SERP liability adjustment		36		(14)		22
Other comprehensive income	$	838	$	(333)	$	505

Components of Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the three months ended March 31, 2016
Available for sale (AFS) securities with OTTI:
Unrealized holding losses	$	(1,496)	$	597	$	(899)
Less:  accretable yield recognized in income		36		(14)		22
Net unrealized losses on investments with OTTI		(1,532)		611		(921)
Available for sale securities – all other:
Unrealized holding gains		929		(371)		558
Less:  gains recognized in income		206		(82)		124
Net unrealized gains on all other AFS securities		723		(289)		434
Held to maturity securities:
Unrealized holding gains		0		0		0
Less:  amortization recognized in income		(237)		94		(143)
Net unrealized gains on HTM securities		237		(94)		143
Cash flow hedges:
Unrealized holding losses		(551)		220		(331)
Pension Plan:
Unrealized net actuarial loss		(571)		228		(343)
Less: amortization of unrecognized loss		(212)		85		(127)
Less: amortization of transition asset		0		0		0
Less: amortization of prior service costs		(3)		0		(3)
Net pension plan liability adjustment		(356)		143		(213)
SERP:
Unrealized net actuarial loss		0		0		0
Less: amortization of unrecognized loss		(19)		8		(11)
Less: amortization of prior service costs		(5)		1		(4)
Net SERP liability adjustment		24		(9)		15
Other comprehensive loss	$	(1,455)	$	582	$	(873)

Reclassification Out of Accumulated Other Comprehensive Income

The following table presents the details of amount reclassified from accumulated other comprehensive loss for the three-month periods ended March 31, 2017 and 2016:

Amounts Reclassified from Accumulated Other Comprehensive Loss (in thousands)	For the Three months ended March 31, 2017		For the Three months ended March 31, 2016		Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on investment securities with OTTI:
Accretable yield	$	2	$	36	Interest income on taxable investment securities
Taxes		0		(14)	Tax expense
	$	2	$	22	Net of tax
Unrealized gains and losses on available for sale investment securities - all others:
(Losses)/gains on sales	$	(9)	$	206	Net gains
Taxes		4		(82)	Tax benefit/(expense)
	$	(5)	$	124	Net of tax
Unrealized losses on held to maturity securities:
Amortization	$	(101)	$	(237)	Interest income on taxable investment securities
Taxes		40		94	Tax benefit
	$	(61)	$	(143)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss		(264)		(212)	Salaries and employee benefits
Amortization of transition asset		0		0	Salaries and employee benefits
Amortization of prior service costs		(3)		(3)	Salaries and employee benefits
Taxes		105		85	Tax benefit
	$	(162)	$	(130)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized loss		(37)		(19)	Salaries and employee benefits
Amortization of prior service costs		1		(5)	Salaries and employee benefits
Taxes		14		9	Tax benefit
	$	(22)	$	(15)	Net of tax
Total reclassifications for the period	$	(248)	$	(142)	Net of tax

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Borrowed Funds (Tables)

3 Months Ended

Mar. 31, 2017

Borrowed Funds [Abstract]

Summary of Short Term Borrowings

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

(Dollars in thousands)	Three months ended March 31, 2017		Year ended December 31, 2016
Securities sold under agreements to repurchase:
Outstanding at end of period	$	35,269	$	36,000
Weighted average interest rate at end of period		0.18%		0.16%
Maximum amount outstanding as of any month end	$	35,269	$	39,456
Average amount outstanding	$	32,628	$	30,899
Approximate weighted average rate during the period		0.20%		0.19%

Summary of Long Term Borrowings

The following is a summary of long-term borrowings with original maturities exceeding one year:

	March 31,		December 31,
(in thousands)	2017		2016
FHLB advances, bearing fixed interest at rates ranging from 1.54% to 3.69% at March 31, 2017	$	90,000	$	90,007
Junior subordinated debt, bearing variable interest rate of 3.90% at March 31, 2017		30,929		30,929
Junior subordinated debt, bearing fixed interest rate of 0.00% at March 31, 2017		0		10,801
Total long-term debt	$	120,929	$	131,737

Contractual Maturities Of All Long Term Borrowings

The contractual maturities of all long-term borrowings are as follows:

	March 31, 2017						December 31, 2016
(in thousands)	Fixed Rate		Floating Rate		Total		Total
Due in 2018	$	20,000	$	0	$	20,000	$	20,000
Due in 2019		20,000		0		20,000		20,000
Due in 2020		30,000		0		30,000		30,000
Due in 2021		20,000		0		20,000		20,000
Thereafter		0		30,929		30,929		41,737
Total long-term debt	$	90,000	$	30,929	$	120,929	$	131,737

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Employee Benefit Plans (Tables)

3 Months Ended

Mar. 31, 2017

Employee Benefit Plans [Abstract]

Components of the Net Periodic Pension Plan Cost

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

Pension	For the Three months ended
	March 31,
(in thousands)	2017		2016
Service cost	$	70	$	76
Interest cost		413		435
Expected return on assets		(751)		(673)
Amortization of transition asset		0		0
Amortization of net actuarial loss		264		212
Amortization of prior service cost		3		3
Net pension (credit)/expense included in employee benefits	$	(1)	$	53

SERP	For the Three months ended
	March 31,
(in thousands)	2017		2016
Service cost	$	26	$	25
Interest cost		72		62
Amortization of recognized loss		37		19
Amortization of prior service cost		(1)		5
Net SERP expense included in employee benefits	$	134	$	111

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Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2017

Derivative Financial Instruments [Abstract]

Impact of Derivative Financial Instruments

The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the three- months ended March 31, 2017 and 2016.

Derivative in Cash Flow Hedging Relationships
(in thousands)	Amount of gain recognized in OCI on derivative (effective portion)		Amount of gain or (loss) reclassified from accumulated OCI into income (effective portion) (a)		Amount of gain or (loss) recognized in income or derivative (ineffective portion and amount excluded from effectiveness testing) (b)
Interest rate contracts:
Three months ended:
March 31, 2017	$	52	$	0	$	0
March 31, 2016		(331)		0		0

Notes:

(a) Reported as interest expense

(b) Reported as other income

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Variable Interest Entities (VIE) (Tables)

3 Months Ended

Mar. 31, 2017

Variable Interest Entities (VIE) [Abstract]

Investment in LIHTC Partnership

The following table presents details of the Bank’s involvement with Liberty Mews at the dates indicated:

	March 31,		December 31,
(in thousands)	2017		2016
Investment in LIHTC Partnership
Carrying amount on Balance Sheet of:
Investment (Other Assets)	$	3,061	$	3,223
Maximum exposure to loss		3,061		3,223

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Assets and Liabilities Subject to Enforceable Master Netting Arrangements (Tables)

3 Months Ended

Mar. 31, 2017

Assets and Liabilities Subject to Enforceable Master Netting Arrangements [Abstract]

Schedule of Liabilities Subject to an Enforceable Master Netting Arrangement or Repurchase Agreements

The following table presents the liabilities subject to an enforceable master netting arrangement or repurchase agreements at March 31, 2017 and December 31, 2016.

							Gross Amounts Not Offset in the Statement of Condition
(In thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Condition		Net Amounts of Liabilities Presented in the Statement of Condition		Financial Instruments		Cash Collateral Pledged		Net Amount
March 31, 2017
Interest Rate Swap Agreements	$	(786)	$	0	$	(786)	$	786	$	0	$	0
Repurchase Agreements	$	35,269	$	0	$	35,269	$	(35,269)	$	0	$	0
December 31, 2016
Interest Rate Swap Agreements	$	(700)	$	0	$	(700)	$	700	$	0	$	0
Repurchase Agreements	$	36,000	$	0	$	36,000	$	(36,000)	$	0	$	0

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Earnings Per Common Share (Basic and Diluted Earnings Per Common Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Earnings Per Common Share [Abstract]
Net Income	$ 1,980	$ 1,871	$ 7,281
Preferred stock dividends	(540)	(675)
Net income available to common shareholders	$ 1,440	$ 1,196
Weighted average number of basic and diluted shares outstanding	6,530	6,255
Basic and diluted net income per common share	$ 0.22	$ 0.19

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Net Gains (Schedule of Net Gains) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Realized gains	$ 8	$ 277
Realized losses	(17)	(71)
Gain on sale of consumer loans	15	12
Loss on disposal of fixed assets	(1)	(2)
Available-for-sale Securities [Member]
Realized gains	8	277
Realized losses	(17)	(71)
Held-to-maturity Securities [Member]
Gain on sale of consumer loans	15	12
Loss on disposal of fixed assets	(1)	(2)
Net gains/(losses) - other	$ 5	$ 216

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Cash and Cash Equivalents (Cash and Cash Equivalents) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Cash and Cash Equivalents [Line Items]
Cash and due from banks	$ 60,749	$ 60,707
Interest bearing deposits in banks	2,089	2,603
FHLB [Member]
Cash and Cash Equivalents [Line Items]
Interest bearing deposits in banks	$ 1,075	1,590
Interest Rate	0.72%
M&T Fed Funds sold [Member]
Cash and Cash Equivalents [Line Items]
Interest bearing deposits in banks	$ 1,014	$ 1,013
Interest Rate	0.15%
Weighted Average [Member]
Cash and Cash Equivalents [Line Items]
Interest Rate	0.56%

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Investments (Narrative) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($) security	Dec. 31, 2016 USD ($)
Schedule of Investments [Line Items]
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses | $	$ 7,496	$ 7,767
US government agencies [Member]
Schedule of Investments [Line Items]
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, nature	U.S. Government Agencies – Available for Sale – There were four U.S. government agencies in an unrealized loss position for less than 12 months as of March 31, 2017. The securities are of investment grade and the Corporation does not intend to sell them, and it is not more than likely than not that the Corporation will be required to sell them before recovery of their amortized cost basis, which may be at maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at March 31, 2017. There were no U.S. government agency investments in an unrealized loss position for more than 12 months as of March 31, 2017.
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, less than one year	4
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, greater than or equal to one year	0
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses | $	$ 0	0
Held-to-maturity, Securities in Unrealized Loss Positions, Qualitative Disclosure, Nature	U.S. Government Agencies – Held to Maturity – There were no U.S. government agencies in an unrealized loss position as of March 31, 2017.
Held-to-maturity, securities in unrealized loss positions, qualitative disclosure, number of positions	0
Residential mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Held-to-maturity, Securities in Unrealized Loss Positions, Qualitative Disclosure, Nature	Residential Mortgage-Backed Agencies – Held to Maturity - Nineteen residential mortgage-backed agencies have been in an unrealized loss position for less than 12 months as of March 31, 2017. The securities are of the highest investment grade and the Corporation has the intent and ability to hold the investments to maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at March 31, 2017. There were no mortgage-backed agency investments in an unrealized loss position for more than 12 months as of March 31, 2017.
Held-to-maturity, securities in unrealized loss positions less than twelve months, qualitative disclosure, number of positions	19
Held-to-maturity, securities in unrealized loss positions greater than twelve months, qualitative disclosure, number of positions	0
Commercial mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, nature	Commercial Mortgage-Backed Agencies – Available for Sale – There were 10 commercial mortgage-backed agencies in an unrealized loss position for less than 12 months as of March 31, 2017. The securities are of the highest investment grade and the Corporation has the intent and ability to hold the investments to maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at March 31, 2017. There were no commercial mortgage-backed agencies in an unrealized loss position for more than 12 months as of March 31, 2017.
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, less than one year	10
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, greater than or equal to one year	0
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses | $	$ 0	0
Held-to-maturity, Securities in Unrealized Loss Positions, Qualitative Disclosure, Nature	Commercial Mortgage-Backed Agencies – Held to Maturity - There were no collateralized mortgage-backed agency investments in an unrealized loss position as of March 31, 2017.
Held-to-maturity, securities in unrealized loss positions, qualitative disclosure, number of positions	0
Collateralized mortgage obligations [Member]
Schedule of Investments [Line Items]
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, nature	Collateralized Mortgage Obligations – Available for Sale – There were four collateralized mortgage obligations in an unrealized loss position for less than 12 months as of March 31, 2017. The securities are of the highest investment grade and the Corporation has the intent and ability to hold the investments to maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at March 31, 2017. There were no collateralized mortgage obligations in an unrealized loss position for more than 12 months as of March 31, 2017.
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, less than one year	4
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, greater than or equal to one year	0
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses | $	$ 0	0
Held-to-maturity, Securities in Unrealized Loss Positions, Qualitative Disclosure, Nature	Collateralized Mortgage Obligations – Held to Maturity – There was one collateralized mortgage obligation in an unrealized loss position for less than 12 months as of March 31, 2017. The security is of the highest investment grade and the Corporation has the intent and ability to hold the investment to maturity. Accordingly, management does not consider this investment to be other-than-temporarily impaired at March 31, 2017. There were no collateralized mortgage obligations in a loss position for more than 12 months as of March 31, 2017.
Held-to-maturity, securities in unrealized loss positions less than twelve months, qualitative disclosure, number of positions	1
Held-to-maturity, securities in unrealized loss positions greater than twelve months, qualitative disclosure, number of positions	0
Obligations of states and political subdivisions [Member]
Schedule of Investments [Line Items]
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, nature	Obligations of State and Political Subdivisions – Available for Sale – There were three obligations of state and political subdivisions that have been in an unrealized loss position for less than 12 months and two securities that have been in an unrealized loss position for 12 months or more at March 31, 2017. These investments are of investment grade as determined by the major rating agencies and management reviews the ratings of the underlying issuers and performs an in-depth credit analysis on the securities. Management believes that this portfolio is well-diversified throughout the United States, and all bonds continue to perform according to their contractual terms. The Corporation does not intend to sell these investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at March 31, 2017.
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, less than one year	3
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, greater than or equal to one year	2
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses | $	$ 63	91
Held-to-maturity, Securities in Unrealized Loss Positions, Qualitative Disclosure, Nature	Obligations of State and Political Subdivisions – Held to Maturity –There was one obligation of state and political subdivisions that has been in an unrealized loss for less than 12 months. This bond is a Tax Increment Fund (TIF) bond. Management performs an in-depth credit analysis on this security. The Corporation has the intent and ability to hold the investment to maturity. Accordingly, management does not consider this investment to be other-than-temporarily impaired at March 31, 2017. No obligations of state and political subdivisions securities have been in an unrealized loss position for more than 12 months as of March 31, 2017.
Held-to-maturity, securities in unrealized loss positions less than twelve months, qualitative disclosure, number of positions	1
Held-to-maturity, securities in unrealized loss positions greater than twelve months, qualitative disclosure, number of positions	0
Collateralized debt obligations [Member]
Schedule of Investments [Line Items]
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, nature	Collateralized Debt Obligations – Available for Sale - The $7.4 million in unrealized losses greater than 12 months at March 31, 2017 relates to 1 pooled trust preferred securities that are included in the CDO portfolio. See Note 9 for a discussion of the methodology used by management to determine the fair values of these securities. Based upon a review of credit quality and the cash flow tests performed by the independent third party, management determined that there were no securities that had credit-related non-cash OTTI charges during the first three months of 2017. The unrealized losses on the remaining securities in the portfolio are primarily attributable to continued depression in marketability, liquidity and the current economic environment.
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, greater than or equal to one year	1
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses | $	$ 7,433	$ 7,676

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Investments (Unrealized Gain (Loss) on Investments) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Schedule of Investments [Line Items]
Amortized Cost	$ 146,204	$ 149,561
Gross Unrealized Gains	333	269
Gross Unrealized Losses	9,600	9,830
Investment securities - available-for-sale (at fair value)	136,937	140,000
OTTI in AOCI	(3,797)	(3,961)
Held-to-maturity amortized cost	98,019	97,169
Held-to-maturity Gross Unrealized Gains	1,432	1,410
Held-to-maturity gross unrealized losses	535	598
Investment securities - HTM	98,916	97,981
Held-to-maturity OTTI in AOCI	0	0
US government agencies [Member]
Schedule of Investments [Line Items]
Amortized Cost	25,000	25,000
Gross Unrealized Gains	0	0
Gross Unrealized Losses	703	747
Investment securities - available-for-sale (at fair value)	24,297	24,253
OTTI in AOCI	0	0
Held-to-maturity amortized cost	15,772	15,738
Held-to-maturity Gross Unrealized Gains	518	512
Held-to-maturity gross unrealized losses	0	0
Investment securities - HTM	16,290	16,250
Held-to-maturity OTTI in AOCI	0	0
Residential mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Held-to-maturity amortized cost	51,515	50,384
Held-to-maturity Gross Unrealized Gains	145	160
Held-to-maturity gross unrealized losses	348	279
Investment securities - HTM	51,312	50,265
Held-to-maturity OTTI in AOCI	0	0
Commercial mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Amortized Cost	51,321	52,978
Gross Unrealized Gains	0	1
Gross Unrealized Losses	927	757
Investment securities - available-for-sale (at fair value)	50,394	52,222
OTTI in AOCI	0	0
Held-to-maturity amortized cost	17,509	17,584
Held-to-maturity Gross Unrealized Gains	252	248
Held-to-maturity gross unrealized losses	0	0
Investment securities - HTM	17,761	17,832
Held-to-maturity OTTI in AOCI	0	0
Collateralized mortgage obligations [Member]
Schedule of Investments [Line Items]
Amortized Cost	19,670	19,953
Gross Unrealized Gains	11	13
Gross Unrealized Losses	370	399
Investment securities - available-for-sale (at fair value)	19,311	19,567
OTTI in AOCI	0	0
Held-to-maturity amortized cost	4,593	4,833
Held-to-maturity Gross Unrealized Gains	0	0
Held-to-maturity gross unrealized losses	102	149
Investment securities - HTM	4,491	4,684
Held-to-maturity OTTI in AOCI	0	0
Obligations of states and political subdivisions [Member]
Schedule of Investments [Line Items]
Amortized Cost	22,423	23,700
Gross Unrealized Gains	322	255
Gross Unrealized Losses	167	251
Investment securities - available-for-sale (at fair value)	22,578	23,704
OTTI in AOCI	0	0
Held-to-maturity amortized cost	8,630	8,630
Held-to-maturity Gross Unrealized Gains	517	490
Held-to-maturity gross unrealized losses	85	170
Investment securities - HTM	9,062	8,950
Held-to-maturity OTTI in AOCI	0	0
Collateralized debt obligations [Member]
Schedule of Investments [Line Items]
Amortized Cost	27,790	27,930
Gross Unrealized Gains	0	0
Gross Unrealized Losses	7,433	7,676
Investment securities - available-for-sale (at fair value)	20,357	20,254
OTTI in AOCI	$ (3,797)	$ (3,961)

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Investments (Proceeds from Sales of Securities and Realized Gains and Losses) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Investments [Abstract]
Proceeds	$ 3,830	$ 10,771
Realized gains	8	277
Realized losses	$ 17	$ 71

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Investments (Gross Unrealized Losses and Fair Values of Securities) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Schedule of Investments [Line Items]
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value	$ 99,796	$ 98,642
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	2,104	2,063
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, fair value	23,336	23,188
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	7,496	7,767
Held-to-maturity securities, continuous unrealized loss position, less than twelve months, fair value	29,871	27,918
Held-to-maturity securities, continuous unrealized loss position, less than 12 months, unrealized loss	535	598
Held-to-maturity securities, continuous unrealized loss position, twelve months or longer, fair value	0	0
Held-to-maturity securities, continuous unrealized loss position, 12 months or longer, unrealized loss	0	0
US government agencies [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value	24,297	24,253
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	703	747
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, fair value	0	0
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	0	0
Residential mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Held-to-maturity securities, continuous unrealized loss position, less than twelve months, fair value	22,960	20,899
Held-to-maturity securities, continuous unrealized loss position, less than 12 months, unrealized loss	348	279
Held-to-maturity securities, continuous unrealized loss position, twelve months or longer, fair value	0	0
Held-to-maturity securities, continuous unrealized loss position, 12 months or longer, unrealized loss	0	0
Commercial mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value	50,394	51,604
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	927	757
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, fair value	0	0
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	0	0
Held-to-maturity securities, continuous unrealized loss position, less than twelve months, fair value		4,684
Held-to-maturity securities, continuous unrealized loss position, less than 12 months, unrealized loss		149
Held-to-maturity securities, continuous unrealized loss position, twelve months or longer, fair value		0
Held-to-maturity securities, continuous unrealized loss position, 12 months or longer, unrealized loss		0
Collateralized mortgage obligations [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value	18,445	14,706
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	370	399
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, fair value	0	0
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	0	0
Held-to-maturity securities, continuous unrealized loss position, less than twelve months, fair value	4,491
Held-to-maturity securities, continuous unrealized loss position, less than 12 months, unrealized loss	102
Held-to-maturity securities, continuous unrealized loss position, twelve months or longer, fair value	0
Held-to-maturity securities, continuous unrealized loss position, 12 months or longer, unrealized loss	0
Obligations of states and political subdivisions [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value	6,660	8,079
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	104	160
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, fair value	2,979	2,934
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	63	91
Held-to-maturity securities, continuous unrealized loss position, less than twelve months, fair value	2,420	2,335
Held-to-maturity securities, continuous unrealized loss position, less than 12 months, unrealized loss	85	170
Held-to-maturity securities, continuous unrealized loss position, twelve months or longer, fair value	0	0
Held-to-maturity securities, continuous unrealized loss position, 12 months or longer, unrealized loss	0	0
Collateralized debt obligations [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value	0	0
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	0	0
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, fair value	20,357	20,254
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	$ 7,433	$ 7,676

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Investments (Non-Cash OTTI Credit Losses Recognized in Earnings) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Investments [Abstract]
Balance of credit-related OTTI, beginning	$ 3,124	$ 3,133
Reduction for increases in cash flows expected to be collected	(2)	(36)
Balance of credit-related OTTI, ending	$ 3,122	$ 3,097

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Investments (Amortized Cost and Fair Values Classified by Contractual Maturity Date) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Schedule of Investments [Line Items]
Amortized Cost: Due after one year through five years	$ 10,662
Amortized Cost: Due after five years through ten years	18,687
Amortized Cost: Due after ten years	45,864
Amortized Cost: Sub Total	75,213
Fair Value: Due after one year through five years	10,541
Fair Value: Due after five years through ten years	18,174
Fair Value: Due after ten years	38,517
Available For Sale Debt Maturities Fair Value Sub Total	67,232
Available-for-sale Securities, Amortized Cost Basis	146,204	$ 149,561
Available-for-sale Securities	136,937	140,000
Amortized Cost: Due after five years through ten years, Held to maturity	15,772
Amortized Cost: Due after ten years, Held to maturity	8,630
Amortized Cost: Total, Held to maturity	24,402
Fair Value: Due after five years through ten years, Held to maturity	16,290
Fair Value: Due after ten years, Held to maturity	9,062
Fair Value: Total, Held to maturity	25,352
Held-to-maturity securities	98,019	97,169
Held-to-maturity securities, fair value	98,916	97,981
Residential mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Held-to-maturity securities	51,515	50,384
Held-to-maturity securities, fair value	51,312	50,265
Commercial mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Available-for-sale Securities, Amortized Cost Basis	51,321	52,978
Available-for-sale Securities	50,394	52,222
Held-to-maturity securities	17,509	17,584
Held-to-maturity securities, fair value	17,761	17,832
Collateralized mortgage obligations [Member]
Schedule of Investments [Line Items]
Available-for-sale Securities, Amortized Cost Basis	19,670	19,953
Available-for-sale Securities	19,311	19,567
Held-to-maturity securities	4,593	4,833
Held-to-maturity securities, fair value	$ 4,491	$ 4,684

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Restricted Investment in Bank Stock (Narrative) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Restricted Investment in Bank Stock [Abstract]
Cash Dividends	$ 67,219	$ 67,758

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Loans and Related Allowance for Loan Losses (Narrative) (Details)	3 Months Ended		12 Months Ended
	Mar. 31, 2017 USD ($) contract	Mar. 31, 2016 USD ($) contract	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Financing Receivable, Modifications [Line Items]
Commercial amount benchmark minimum for internal annual review	$ 500,000
Commercial amount benchmark minimum for annual review by independent reviewer	1,000,000
Commercial amount benchmark minimum criticized relationships for annual review by independent reviewer	500,000
Nonaccrual loans	10,893,000		$ 13,946,000
Paydown of large relationship	2,500,000
Reduction of the ALL resulting from change in evaluation method of loans		$ 2,387
Loans in process of foreclosure	$ 300,000		$ 500,000
Accruing loans past due 30 days or greater as percent of loan portfolio	0.46%		0.67%
Total allowance for loan losses	$ 11,583,000	$ 12,256,000	$ 9,918,000	$ 11,922,000
Partial Charge Off [Member]
Financing Receivable, Modifications [Line Items]
Nonaccrual loans	$ 7,800,000		11,100,000
New TDR [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, number of contracts | contract	0	2
Pre Existing TDR Loans Remodified After Maturity [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, number of contracts | contract	2	1
Commercial real estate- non owner-occupied [Member]
Financing Receivable, Modifications [Line Items]
Nonaccrual loans	$ 5,478,000		$ 6,381,000

XML

Loans and Related Allowance for Loan Losses (Primary Segments of the Loan Portfolio) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	$ 20,854	$ 24,000
Collectively evaluated for impairment	873,678	867,926
Total Loans	894,532	891,926
Commercial and industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	290	290
Collectively evaluated for impairment	74,303	72,056
Total Loans	74,593	72,346
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	14,054	17,210
Collectively evaluated for impairment	280,727	280,749
Total Loans	294,781	297,959
Acquisition and Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	2,420	2,525
Collectively evaluated for impairment	104,988	101,757
Total Loans	107,408	104,282
Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	4,090	3,975
Collectively evaluated for impairment	389,898	389,441
Total Loans	393,988	393,416
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	23,762	23,923
Total Loans	$ 23,762	$ 23,923

XML

Loans and Related Allowance for Loan Losses (Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 894,532	$ 891,926
Commercial real estate- non owner-occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	156,801	157,158
Commercial real estate- all other CRE [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	137,980	140,801
Acquisition and development- 1-4 family residential construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	15,630	15,845
Acquisition and development- All other A&D [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	91,778	88,437
Commercial and industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	74,593	72,346
Residential mortgage- term [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	319,760	316,465
Residential mortgage- home equity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	74,228	76,951
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	23,762	23,923
Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	850,806	844,732
Pass [Member] | Commercial real estate- non owner-occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	137,837	137,181
Pass [Member] | Commercial real estate- all other CRE [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	125,049	125,720
Pass [Member] | Acquisition and development- 1-4 family residential construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	15,630	15,845
Pass [Member] | Acquisition and development- All other A&D [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	90,503	87,135
Pass [Member] | Commercial and industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	73,029	70,613
Pass [Member] | Residential mortgage- term [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	312,279	308,734
Pass [Member] | Residential mortgage- home equity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	72,849	75,710
Pass [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	23,630	23,794
Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	9,395	14,512
Special Mention [Member] | Commercial real estate- non owner-occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	9,083	10,620
Special Mention [Member] | Commercial real estate- all other CRE [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	207	3,121
Special Mention [Member] | Acquisition and development- 1-4 family residential construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	0	0
Special Mention [Member] | Acquisition and development- All other A&D [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	62	65
Special Mention [Member] | Commercial and industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	43	593
Special Mention [Member] | Residential mortgage- term [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	0	113
Special Mention [Member] | Residential mortgage- home equity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	0	0
Special Mention [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	0	0
Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	34,331	32,682
Substandard [Member] | Commercial real estate- non owner-occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	9,881	9,357
Substandard [Member] | Commercial real estate- all other CRE [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	12,724	11,960
Substandard [Member] | Acquisition and development- 1-4 family residential construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	0	0
Substandard [Member] | Acquisition and development- All other A&D [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	1,213	1,237
Substandard [Member] | Commercial and industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	1,521	1,140
Substandard [Member] | Residential mortgage- term [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	7,481	7,618
Substandard [Member] | Residential mortgage- home equity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	1,379	1,241
Substandard [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 132	$ 129

XML

Loans and Related Allowance for Loan Losses (Loan Portfolio Summarized by the Past Due Status) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	$ 879,567	$ 871,989
Total Past Due and Still Accruing	4,072	5,991
Non-Accrual	10,893	13,946
Total Loans	894,532	891,926
Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	3,063	1,908
Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	813	3,663
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	196	420
Commercial real estate- non owner-occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	150,968	150,595
Total Past Due and Still Accruing	355	182
Non-Accrual	5,478	6,381
Total Loans	156,801	157,158
Commercial real estate- non owner-occupied [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	229	182
Commercial real estate- non owner-occupied [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	126	0
Commercial real estate- non owner-occupied [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	0	0
Commercial real estate- all other CRE [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	134,089	134,931
Total Past Due and Still Accruing	273	40
Non-Accrual	3,618	5,830
Total Loans	137,980	140,801
Commercial real estate- all other CRE [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	0	40
Commercial real estate- all other CRE [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	273	0
Commercial real estate- all other CRE [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	0	0
Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	15,630	15,845
Total Past Due and Still Accruing	0	0
Non-Accrual	0	0
Total Loans	15,630	15,845
Acquisition and development- 1-4 family residential construction [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	0	0
Acquisition and development- 1-4 family residential construction [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	0	0
Acquisition and development- 1-4 family residential construction [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	0	0
Acquisition and development- All other A&D [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	91,626	88,353
Total Past Due and Still Accruing	102	39
Non-Accrual	50	45
Total Loans	91,778	88,437
Acquisition and development- All other A&D [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	102	0
Acquisition and development- All other A&D [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	0	39
Acquisition and development- All other A&D [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	0	0
Commercial and industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	74,558	72,324
Total Past Due and Still Accruing	35	22
Non-Accrual	0	0
Total Loans	74,593	72,346
Commercial and industrial [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	0	9
Commercial and industrial [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	25	2
Commercial and industrial [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	10	11
Residential mortgage- term [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	316,129	310,721
Total Past Due and Still Accruing	2,179	4,205
Non-Accrual	1,452	1,539
Total Loans	319,760	316,465
Residential mortgage- term [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	1,887	517
Residential mortgage- term [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	208	3,376
Residential mortgage- term [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	84	312
Residential mortgage- home equity [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	72,983	75,558
Total Past Due and Still Accruing	950	1,242
Non-Accrual	295	151
Total Loans	74,228	76,951
Residential mortgage- home equity [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	718	974
Residential mortgage- home equity [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	158	198
Residential mortgage- home equity [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	74	70
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	23,584	23,662
Total Past Due and Still Accruing	178	261
Non-Accrual	0	0
Total Loans	23,762	23,923
Consumer [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	127	186
Consumer [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	23	48
Consumer [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment Past Due	$ 28	$ 27

XML

Loans and Related Allowance for Loan Losses (Primary Segments of the Allowance for Loan Loss) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016	Dec. 31, 2015
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	$ 1,950	$ 260
Collectively evaluated for impairment	9,633	9,658
Total allowance for loan losses	11,583	9,918	$ 12,256	$ 11,922
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	1,795	177
Collectively evaluated for impairment	3,772	3,736
Total allowance for loan losses	5,567	3,913	3,300	2,580
Acquisition and Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	38	40
Collectively evaluated for impairment	845	831
Total allowance for loan losses	883	871	3,747	4,129
Commercial and industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	936	858
Total allowance for loan losses	936	858	758	722
Residential Mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	117	43
Collectively evaluated for impairment	3,385	3,545
Total allowance for loan losses	3,502	3,588	3,759	3,785
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	195	188
Total allowance for loan losses	195	188	192	206
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	500	500
Total allowance for loan losses	$ 500	$ 500	$ 500	$ 500

XML

Loans and Related Allowance for Loan Losses (Impaired Loans and Related Interest Income by Loan Portfolio Class) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	$ 6,872	$ 869
Impaired Loans with Specific Allowance: Related Allowance	1,950	260
Impaired Loans with No Specific Allowance: Recorded Investment	13,982	23,131
Total Impaired Loans: Recorded Investment	20,854	24,000
Total Impaired Loans: Unpaid Principal Balance	27,293	30,191
Commercial real estate- non owner-occupied [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	5,607	131
Impaired Loans with Specific Allowance: Related Allowance	1,641	23
Impaired Loans with No Specific Allowance: Recorded Investment	251	6,635
Total Impaired Loans: Recorded Investment	5,858	6,766
Total Impaired Loans: Unpaid Principal Balance	8,831	9,372
Commercial real estate- all other CRE [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	432	432
Impaired Loans with Specific Allowance: Related Allowance	154	154
Impaired Loans with No Specific Allowance: Recorded Investment	7,764	10,012
Total Impaired Loans: Recorded Investment	8,196	10,444
Total Impaired Loans: Unpaid Principal Balance	8,809	11,057
Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	0	0
Impaired Loans with Specific Allowance: Related Allowance	0	0
Impaired Loans with No Specific Allowance: Recorded Investment	582	582
Total Impaired Loans: Recorded Investment	582	582
Total Impaired Loans: Unpaid Principal Balance	582	628
Acquisition and development- All other A&D [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	244	245
Impaired Loans with Specific Allowance: Related Allowance	38	40
Impaired Loans with No Specific Allowance: Recorded Investment	1,594	1,698
Total Impaired Loans: Recorded Investment	1,838	1,943
Total Impaired Loans: Unpaid Principal Balance	2,112	2,213
Commercial and industrial [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	0	0
Impaired Loans with Specific Allowance: Related Allowance	0	0
Impaired Loans with No Specific Allowance: Recorded Investment	290	290
Total Impaired Loans: Recorded Investment	290	290
Total Impaired Loans: Unpaid Principal Balance	2,504	2,504
Residential mortgage- term [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	445	61
Impaired Loans with Specific Allowance: Related Allowance	50	43
Impaired Loans with No Specific Allowance: Recorded Investment	3,349	3,763
Total Impaired Loans: Recorded Investment	3,794	3,824
Total Impaired Loans: Unpaid Principal Balance	4,124	4,249
Residential mortgage- home equity [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	144	0
Impaired Loans with Specific Allowance: Related Allowance	67	0
Impaired Loans with No Specific Allowance: Recorded Investment	152	151
Total Impaired Loans: Recorded Investment	296	151
Total Impaired Loans: Unpaid Principal Balance	331	168
Consumer [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	0	0
Impaired Loans with Specific Allowance: Related Allowance	0	0
Impaired Loans with No Specific Allowance: Recorded Investment	0	0
Total Impaired Loans: Recorded Investment	0	0
Total Impaired Loans: Unpaid Principal Balance	$ 0	$ 0

XML

Loans and Related Allowance for Loan Losses (Allowance for Loan Losses Summarized by Loan Portfolio Segments) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	$ 9,918	$ 11,922
Charge-offs	(712)	(438)
Recoveries	1,768	204
Provision for loan losses	609	568
ALL Ending Balance	11,583	12,256
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	3,913	2,580
Charge-offs	(429)	(211)
Recoveries	5	0
Provision for loan losses	2,078	931
ALL Ending Balance	5,567	3,300
Acquisition and Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	871	4,129
Charge-offs	(18)	0
Recoveries	11	100
Provision for loan losses	19	(482)
ALL Ending Balance	883	3,747
Commercial and industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	858	722
Charge-offs	(33)	(53)
Recoveries	1,455	30
Provision for loan losses	(1,344)	59
ALL Ending Balance	936	758
Residential Mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	3,588	3,785
Charge-offs	(148)	(90)
Recoveries	220	32
Provision for loan losses	(158)	32
ALL Ending Balance	3,502	3,759
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	188	206
Charge-offs	(84)	(84)
Recoveries	77	42
Provision for loan losses	14	28
ALL Ending Balance	195	192
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	500	500
Charge-offs	0	0
Recoveries	0	0
Provision for loan losses	0	0
ALL Ending Balance	$ 500	$ 500

XML

Loans and Related Allowance for Loan Losses (Average of Impaired Loans and Related Interest Income by Loan Portfolio Class) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Financing Receivable, Impaired [Line Items]
Average Investment	$ 22,691	$ 25,147
Interest income recognized on an accrual basis	124	123
Interest income recognized on a cash basis	0	4
Commercial real estate- non owner-occupied [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	6,366	1,597
Interest income recognized on an accrual basis	6	6
Interest income recognized on a cash basis	0	0
Commercial real estate- all other CRE [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	9,320	13,093
Interest income recognized on an accrual basis	53	37
Interest income recognized on a cash basis	0	0
Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	582	700
Interest income recognized on an accrual basis	6	8
Interest income recognized on a cash basis	0	0
Acquisition and development- All other A&D [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	1,891	3,869
Interest income recognized on an accrual basis	23	24
Interest income recognized on a cash basis	0	0
Commercial and industrial [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	290	1,071
Interest income recognized on an accrual basis	3	9
Interest income recognized on a cash basis	0	0
Residential mortgage- term [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	4,018	4,519
Interest income recognized on an accrual basis	33	39
Interest income recognized on a cash basis	0	4
Residential mortgage- home equity [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	224	298
Interest income recognized on an accrual basis	0	0
Interest income recognized on a cash basis	0	0
Consumer [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	0	0
Interest income recognized on an accrual basis	0	0
Interest income recognized on a cash basis	$ 0	$ 0

XML

Loans and Related Allowance for Loan Losses (Modification of Troubled Debt Restructuring by Class) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($) loan	Mar. 31, 2016 USD ($) contract
Temporary Rate Modification [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Temporary Rate Modification [Member] | Commercial real estate- non owner-occupied [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Temporary Rate Modification [Member] | Commercial real estate- all other CRE [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Temporary Rate Modification [Member] | Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Temporary Rate Modification [Member] | Acquisition and development- All other A&D [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Temporary Rate Modification [Member] | Commercial and industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Temporary Rate Modification [Member] | Residential mortgage- term [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Temporary Rate Modification [Member] | Residential mortgage- home equity [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Temporary Rate Modification [Member] | Consumer [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Extended Maturity [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	2	1
Recorded Investment	$ 503	$ 203
Extended Maturity [Member] | Commercial real estate- non owner-occupied [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Extended Maturity [Member] | Commercial real estate- all other CRE [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	1
Recorded Investment	$ 0	$ 203
Extended Maturity [Member] | Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Extended Maturity [Member] | Acquisition and development- All other A&D [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	0
Recorded Investment	$ 244	$ 0
Extended Maturity [Member] | Commercial and industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Extended Maturity [Member] | Residential mortgage- term [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	0
Recorded Investment	$ 259	$ 0
Extended Maturity [Member] | Residential mortgage- home equity [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Extended Maturity [Member] | Consumer [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Modification Of Payment And Other Terms [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	2
Recorded Investment	$ 0	$ 558
Modification Of Payment And Other Terms [Member] | Commercial real estate- non owner-occupied [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Modification Of Payment And Other Terms [Member] | Commercial real estate- all other CRE [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Modification Of Payment And Other Terms [Member] | Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Modification Of Payment And Other Terms [Member] | Acquisition and development- All other A&D [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Modification Of Payment And Other Terms [Member] | Commercial and industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	1
Recorded Investment	$ 0	$ 486
Modification Of Payment And Other Terms [Member] | Residential mortgage- term [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	1
Recorded Investment	$ 0	$ 72
Modification Of Payment And Other Terms [Member] | Residential mortgage- home equity [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0
Modification Of Payment And Other Terms [Member] | Consumer [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0	0
Recorded Investment	$ 0	$ 0

XML

Other Real Estate Owned (Schedule of Real Estate Properties) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Total OREO	$ 11,002	$ 10,910
Commercial Real Estate OREO [Member]
Total OREO	4,028	3,803
Acquisition and Development [Member]
Total OREO	5,757	5,944
Residential Mortgage [Member]
Total OREO	$ 1,217	$ 1,163

XML

Other Real Estate Owned (Other Real Estate, Roll Forward) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Other Real Estate Owned [Abstract]
Beginning Balance	$ 3,535	$ 4,430
Fair value write-down	70	9
Sales of OREO	(289)	(615)
Ending Balance	$ 3,316	$ 3,824

XML

Other Real Estate Owned (Schedule of Components of OREO) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Other Real Estate Owned [Abstract]
Gain on sales of other real estate owned	$ (30)	$ (67)
Fair value write-down, net	70	9
Expenses, net	169	169
Rental and other income	(35)	(27)
Total OREO expense, net	$ 174	$ 84

XML

Fair Value of Financial Instruments (Narrative) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($) security	Dec. 31, 2016 USD ($)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Amortized Cost	$ 146,204	$ 149,561
Available-for-sale Securities	$ 136,937	140,000
Collateralized debt obligations [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Acquired Trust Preferred Securities, Number of Securities | security	12
Amortized Cost	$ 27,790	27,930
Available-for-sale Securities	$ 20,357	$ 20,254

XML

Fair Value of Financial Instruments (Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques) (Details) - Fair Value, Inputs, Level 3 [Member] - USD ($) $ in Thousands		3 Months Ended	12 Months Ended
		Mar. 31, 2017	Dec. 31, 2016
Investment Securities - available for sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring		$ 20,357	$ 20,254
Fair Value Measurements, Significant Assumptions		Discount Rate
Valuation Technique		Discounted Cash Flow
Fair Value Input, Unobservable Input Value, Description		Range of LIBOR+ 4.50% to 5.50%
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		$ 5,401	$ 14,537
Fair Value Measurements, Significant Assumptions		Marketability Discount
Valuation Technique		Market Comparable Properties
Fair Value Inputs, Comparability Adjustments, Weighted Average		10.00%	6.50%
Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		$ 30	$ 1,201
Fair Value Measurements, Significant Assumptions		Marketability Discount
Valuation Technique		Market Comparable Properties
Fair Value Inputs, Comparability Adjustments		15.00%	15.00%
Minimum [Member] | Investment Securities - available for sale [Member] | London Interbank Offered Rate (LIBOR) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		4.50%	4.50%
Minimum [Member] | Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Comparability Adjustments	[1]	10.00%	4.60%
Maximum [Member] | Investment Securities - available for sale [Member] | London Interbank Offered Rate (LIBOR) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		5.50%	5.50%
Maximum [Member] | Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Comparability Adjustments	[1]	15.10%	31.00%

[1] Range would include discounts taken since appraisal and estimated values

XML

Fair Value of Financial Instruments (Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	$ 136,937	$ 140,000
Financial Derivative	786	700
Impaired Financing Receivable, Recorded Investment	20,854	24,000
Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Financing Receivable, Recorded Investment	5,401	14,537
Other Real Estate	30	1,201
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Derivative	786	700
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Financing Receivable, Recorded Investment	5,401	14,537
Other Real Estate	30	1,201
US government agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	24,297	24,253
US government agencies [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	24,297	24,253
US government agencies [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	24,297	24,253
Commercial mortgage-backed agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	50,394	52,222
Commercial mortgage-backed agencies [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	50,394	52,222
Commercial mortgage-backed agencies [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	50,394	52,222
Collateralized mortgage obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	19,311	19,567
Collateralized mortgage obligations [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	19,311	19,567
Collateralized mortgage obligations [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	19,311	19,567
Obligations of states and political subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	22,578	23,704
Obligations of states and political subdivisions [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	22,578	23,704
Obligations of states and political subdivisions [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	22,578	23,704
Collateralized debt obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	20,357	20,254
Collateralized debt obligations [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	20,357	20,254
Collateralized debt obligations [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	20,357	20,254
Financial Derivatives [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Derivative	786	700
Financial Derivatives [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Derivative	$ 786
Financial Derivatives [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Derivative		$ 700

XML

Fair Value of Financial Instruments (Reconciliation of Fair Valued Assets Measured on a Recurring Basis) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Collateralized debt obligations [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance	$ 20,254	$ 22,211
Included in other comprehensive income	103	(2,679)
Ending Balance	$ 20,357	19,532
Interest Rate Swap [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance		(66)
Included in other comprehensive income		33
Ending balance		$ (33)

XML

Fair Value of Financial Instruments (Fair Value by Balance Sheet Grouping) (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	$ 60,749	$ 60,707
Interest bearing deposits in banks	2,089	2,603
Investment securities - AFS	136,937	140,000
Investment securities - HTM	98,916	97,981
Restricted bank stock	5,204	5,209
Loans, net	887,746	886,712
Financial derivatives	786	700
Accrued interest receivable	3,471	3,862
Deposits - non-maturity	790,115	773,120
Deposits - time deposits	241,750	245,762
Short-term borrowed funds	35,269	36,000
Long-term borrowed funds	122,120	133,397
Accrued interest payable	442	380
Off balance sheet financial instruments	0	0
Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	60,749	60,707
Interest bearing deposits in banks	2,089	2,603
Investment securities - AFS	136,937	140,000
Investment securities - HTM	98,019	97,169
Restricted bank stock	5,204	5,209
Loans, net	882,949	882,008
Financial derivatives	786	700
Accrued interest receivable	3,471	3,862
Deposits - non-maturity	790,115	773,120
Deposits - time deposits	236,753	241,110
Short-term borrowed funds	35,269	36,000
Long-term borrowed funds	120,929	131,737
Accrued interest payable	442	380
Off balance sheet financial instruments	0	0
Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	60,749	60,707
Interest bearing deposits in banks	2,089	2,603
Off balance sheet financial instruments	0	0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities - AFS	116,580	119,746
Investment securities - HTM	89,854	89,031
Restricted bank stock	5,204	5,209
Financial derivatives	786	700
Accrued interest receivable	3,471	3,862
Deposits - non-maturity	790,115	773,120
Deposits - time deposits	241,750	245,762
Short-term borrowed funds	35,269	36,000
Long-term borrowed funds	122,120	133,397
Accrued interest payable	442	380
Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities - AFS	20,357	20,254
Investment securities - HTM	9,062	8,950
Loans, net	$ 887,746	$ 886,712

XML

Accumulated Other Comprehensive Loss (Schedule of Accumulated Other Comprehensive Loss) (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Beginning balance	$ (21,465)	$ (18,944)
Other comprehensive income/(loss) before reclassifications	257	(3,441)
Amounts reclassified from accumulated other comprehensive income	248	920
Ending balance	(20,960)	(21,465)
Investment securities- with OTTI [Member]
Beginning balance	(2,368)	(1,942)
Other comprehensive income/(loss) before reclassifications	100	(421)
Amounts reclassified from accumulated other comprehensive income	(2)	(5)
Ending balance	(2,270)	(2,368)
Investment Securities -All Other AFS [Member]
Beginning balance	(3,218)	(2,024)
Other comprehensive income/(loss) before reclassifications	73	(929)
Amounts reclassified from accumulated other comprehensive income	5	(265)
Ending balance	(3,140)	(3,218)
Investment Securities HTM [Member]
Beginning balance	(1,354)	(1,971)
Other comprehensive income/(loss) before reclassifications	0	0
Amounts reclassified from accumulated other comprehensive income	61	617
Ending balance	(1,293)	(1,354)
Cash Flow Hedge (OCI) [Member]
Beginning balance	422	(39)
Other comprehensive income/(loss) before reclassifications	52	461
Amounts reclassified from accumulated other comprehensive income	0	0
Ending balance	474	422
Pension Plan [Member]
Beginning balance	(14,232)	(12,663)
Other comprehensive income/(loss) before reclassifications	32	(2,086)
Amounts reclassified from accumulated other comprehensive income	162	517
Ending balance	(14,038)	(14,232)
SERP [Member]
Beginning balance	(715)	(305)
Other comprehensive income/(loss) before reclassifications	0	(466)
Amounts reclassified from accumulated other comprehensive income	22	56
Ending balance	$ (693)	$ (715)

XML

Accumulated Other Comprehensive Loss (Components of Comprehensive Income) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Available for sale securities - all other: Net unrealized losses on all other AFS securities, Net of tax	$ 78	$ 434
Cash flow hedges: Unrealized holding gains, Before Tax	86	(551)
Cash flow hedges: Unrealized holding gains, Tax Effect	(34)	220
Cash flow hedges: Unrealized holding gains, Net of Tax	52	(331)
Unrealized net actuarial gain (loss), Net of Tax	194	(213)
Other comprehensive income, Before tax amount	838	(1,455)
Other comprehensive income, Tax (expense) benefit	(333)	582
Other comprehensive income, Net	505	(873)
Investment securities- with OTTI [Member]
Available for sale (AFS) securities with OTTI: Unrealized holding gains, Before tax amount	166	(1,496)
Available for sale (AFS) securities with OTTI: Unrealized holding gains, Tax effect	(66)	597
Available for sale (AFS) securities with OTTI: Unrealized holding gains, Net of tax	100	(899)
Available for sale (AFS) securities with OTTI: Less: accretable yield recognized in income	2	36
Available for sale (AFS) securities with OTTI: Less: accretable yield recognized in income, Tax effect	0	(14)
Other than temporary impairment losses, investments, reclassification adjustment of noncredit portion included in net income, Available for sale securities, Net of tax	2	22
Available for sale (AFS) securities with OTTI: Net unrealized gains on investments with OTTI, Before tax amount	164	(1,532)
Available for sale (AFS) securities with OTTI: Net unrealized gains on investments with OTTI, Tax effect	(66)	611
Available for sale (AFS) securities with OTTI: Net unrealized gains on investments with OTTI, Net of tax	98	(921)
Investment Securities -All Other AFS [Member]
Securities: Unrealized holding losses, Before tax	122	929
Securities: Unrealized holding losses, Tax effect	(49)	(371)
Securities: Unrealized holding losses, Net of tax	73	558
Securities: Less: gains recognized in income, Before tax	(9)	206
Securities: Less: gains recognized in income, Tax effect	4	(82)
Securities: gains recognized in income, Net of tax	(5)	124
Available for sale securities: Net unrealized losses on all other AFS securities, Before Tax	131	723
Available for sale securities: Net unrealized losses on all other AFS securities, Tax effect	(53)	(289)
Available for sale securities - all other: Net unrealized losses on all other AFS securities, Net of tax	78	434
Investment Securities HTM [Member]
Securities: Unrealized holding losses, Before tax	0	0
Securities: Unrealized holding losses, Tax effect	0	0
Securities: Unrealized holding losses, Net of tax	0	0
Securities: Less: gains recognized in income, Before tax	(101)	(237)
Securities: Less: gains recognized in income, Tax effect	40	94
Securities: gains recognized in income, Net of tax	(61)	(143)
Held to maturity securities: Net unrealized losses on all HTM securities, Before tax	101	237
Held to maturity securities: Net unrealized losses on all HTM securities, Tax	(40)	(94)
Held to maturity securities: Net unrealized losses on all HTM securities, After tax	61	143
Pension Plan [Member]
Unrealized net actuarial gain (loss), Before Tax	53	(571)
Unrealized net actuarial gain (loss), Tax Effect	(21)	228
Unrealized net actuarial gain (loss), Net of Tax	32	(343)
Net plan liability adjustment, Before Tax	320	(356)
Net plan liability adjustment, Tax Effect	(126)	143
Net plan liability adjustment, Net of Tax	194	(213)
SERP [Member]
Unrealized net actuarial gain (loss), Before Tax	0	0
Unrealized net actuarial gain (loss), Tax Effect	0	0
Unrealized net actuarial gain (loss), Net of Tax	0	0
Net plan liability adjustment, Before Tax	36	24
Net plan liability adjustment, Tax Effect	(14)	(9)
Net plan liability adjustment, Net of Tax	22	15
Amortization of unrecognized loss [Member] | Pension Plan [Member]
Less: amortization of unrecognized net gain (loss), Before Tax	(264)	(212)
Less: amortization of unrecognized net gain (loss), Tax Effect	105	85
Less: amortization of unrecognized net gain (loss), Net of Tax	(159)	(127)
Amortization of Unrecognized Gain [Member] | SERP [Member]
Less: amortization of unrecognized net gain (loss), Before Tax	(37)	(19)
Less: amortization of unrecognized net gain (loss), Tax Effect	14	8
Less: amortization of unrecognized net gain (loss), Net of Tax	(23)	(11)
Amortization of transition asset [Member] | Pension Plan [Member]
Less: amortization of transition asset, Before Tax	0	0
Less: amortization of transition asset, Tax Effect	0	0
Less: amortization of transition asset, Net of Tax	0	0
Amortization of prior service costs [Member] | Pension Plan [Member]
Less: amortization of prior service costs, Before Tax	(3)	(3)
Less: amortization of prior service costs, Tax Effect	0	0
Less: amortization of prior service costs, Net of Tax	(3)	(3)
Amortization of prior service costs [Member] | SERP [Member]
Less: amortization of prior service costs, Before Tax	1	(5)
Less: amortization of prior service costs, Tax Effect	0	1
Less: amortization of prior service costs, Net of Tax	$ 1	$ (4)

XML

Accumulated Other Comprehensive Loss (Schedule of Reclassifications From Accumulated Other Comprehensive Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax (expense) benefit	$ (793)	$ (677)
Net income	1,980	1,871	$ 7,281
Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net income	(248)	(142)
Investment securities- with OTTI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest income (expense) on investment securities: taxable	2	36
Tax (expense) benefit	0	(14)
Net income	2	22
Investment Securities -All Other AFS [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net gains/(losses) - other	(9)	206
Tax (expense) benefit	4	(82)
Net income	(5)	124
Investment Securities HTM [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest income (expense) on investment securities: taxable	(101)	(237)
Tax (expense) benefit	40	94
Net income	(61)	(143)
Pension Plan [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax (expense) benefit	105	85
Net income	(162)	(130)
Pension Plan [Member] | Amortization of unrecognized loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits	264	212
Pension Plan [Member] | Amortization of transition asset [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits	0	0
Pension Plan [Member] | Amortization of prior service costs [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits	(3)	(3)
SERP [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax (expense) benefit	14	9
Net income	(22)	(15)
SERP [Member] | Amortization of unrecognized loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits	(37)	(19)
SERP [Member] | Amortization of prior service costs [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits	$ 1	$ (5)

XML

Junior Subordinated Debentures and Restrictions on Dividends (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Trust common equity	$ 71	$ 63
Repayment of outstanding TPS debentures	$ 10,800
Preferred dividend payment terms	The terms of the Series A Preferred Stock call for the payment, if declared by the Corporation's Board of Directors, of cash dividends on February 15th, May 15th, August 15th and November 15th of each year. The holders of the Series A Preferred Stock are entitled to receive, if and when declared by the Board of Directors, out of assets legally available for payment, cumulative cash dividends at a rate per annum of 9% per share of Series A Preferred Stock on a liquidation amount of $1,000 per share with respect to each dividend period from and after February 15, 2014.
First United Statutory Trust I And II Member
Trust preferred securities	$ 30,000
Trust common equity	$ 900
Debenture issue date	2004-03
Junior Subordinated Debt [Member]
Debt instrument, interest rate, effective percentage	0.00%
Maximum allowable period of interest deferment	5 years
Junior Subordinated Debt [Member] | First United Statutory Trust I Member
Debenture issued to unconsolidated subsidiary	$ 20,600
Variable interest rate	three-month LIBOR plus 275 basis points
Debt instrument, interest rate, effective percentage	3.90%
Maturity date	2034
Earliest availability for redemption	5 years
Junior Subordinated Debt [Member] | First United Statutory Trust II Member
Debenture issued to unconsolidated subsidiary	$ 10,300
Variable interest rate	three-month LIBOR plus 275 basis points
Debt instrument, interest rate, effective percentage	3.90%
Maturity date	2034
Earliest availability for redemption	5 years
Junior Subordinated Debt [Member] | December 2009 First United Statutory Trust III Member
Trust preferred securities	$ 7,000
Trust common equity	$ 200
Debenture issue date	2009-12
Debenture issued to unconsolidated subsidiary	$ 7,200
Maturity date	2040
Earliest availability for redemption	5 years
Fixed interest rate	9.875%
Junior Subordinated Debt [Member] | January 2010 First United Statutory Trust III Member
Trust preferred securities	$ 3,500
Trust common equity	$ 100
Debenture issue date	2010-01
Debenture issued to unconsolidated subsidiary	$ 3,600
Maturity date	2040
Earliest availability for redemption	5 years
Fixed interest rate	9.875%
Junior Subordinated Debt [Member] | London Interbank Offered Rate (LIBOR) [Member] | First United Statutory Trust I Member
Basis points spread on LIBOR	2.75%
Junior Subordinated Debt [Member] | London Interbank Offered Rate (LIBOR) [Member] | First United Statutory Trust II Member
Basis points spread on LIBOR	2.75%

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Preferred Stock (Narrative) (Details) - USD ($)				3 Months Ended	12 Months Ended
	Mar. 21, 2017	Feb. 14, 2016	May 26, 2015	Mar. 31, 2017	Dec. 31, 2016	Jan. 30, 2009
Number of shares called by Warrant						326,323
Exercise price of shares called by Warrant						$ 13.79
Preferred stock, value				$ 10,000,000	$ 20,000,000
Payment for repurchase of warrant			$ 120,786
Preferred dividend payment terms				The terms of the Series A Preferred Stock call for the payment, if declared by the Corporation's Board of Directors, of cash dividends on February 15th, May 15th, August 15th and November 15th of each year. The holders of the Series A Preferred Stock are entitled to receive, if and when declared by the Board of Directors, out of assets legally available for payment, cumulative cash dividends at a rate per annum of 9% per share of Series A Preferred Stock on a liquidation amount of $1,000 per share with respect to each dividend period from and after February 15, 2014.
Shares redeemed (value)				$ 10,000,000	$ 10,000,000
Series A Preferred Stock [Member]
Preferred stock, shares issued				10,000	20,000	30,000
Preferred stock, value						$ 30,000,000
Preferred stock dividend rate				9.00%	9.00%
Preferred stock liquidation preference per share				$ 1,000	$ 1,000
Preferred stock redemption date	Mar. 21, 2017	Feb. 14, 2016
Shares redeemed (in shares)	10,000	10,000
Shares redeemed (value)	$ 10,000,000	$ 10,000,000

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Borrowed Funds (Narrative) (Details) $ in Millions	Mar. 31, 2017 USD ($)
Borrowed Funds [Abstract]
Repurchase agreements secured by available for sale securities	$ 48.0
FHLB advances secured by loans receivable	$ 252.4
Minimum fair value percentage pledged against account balances	102.00%

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Borrowed Funds (Summary of Short Term Borrowings) (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Outstanding at end of period	$ 35,269	$ 36,000
Weighted average interest rate	0.18%	0.16%
Maximum amount outstanding as of any month end	$ 35,269	$ 39,456
Average amount outstanding	$ 32,628	$ 30,899
Securities Sold under Agreements to Repurchase [Member]
Weighted average interest rate	0.20%	0.19%

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Borrowed Funds (Summary of Long Term Borrowings) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
FHLB advances	$ 90,000	$ 90,007
Junior subordinated debt, bearing variable interest rates	30,929	30,929
Junior subordinated debt, bearing fixed interest rate	0	10,801
Total long-term debt	$ 120,929	$ 131,737
Junior Subordinated Debt [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate, effective percentage, minimum	3.90%
Debt instrument, interest rate, effective percentage	0.00%
Federal Home Loan Bank Advances [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate, effective percentage, minimum	1.54%
Debt instrument, interest rate, effective percentage rate range, maximum	3.69%

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Borrowed (Contractual Maturities of All Long Term Borrowings) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Due in 2018	$ 20,000	$ 20,000
Due in 2019	20,000	20,000
Due in 2020	30,000	30,000
Due in 2021	20,000	20,000
Thereafter	30,929	41,737
Total long-term debt	120,929	$ 131,737
Fixed Rate [Member]
Debt Instrument [Line Items]
Due in 2018	20,000
Due in 2019	20,000
Due in 2020	30,000
Due in 2021	20,000
Thereafter	0
Total long-term debt	90,000
Floating Rate [Member]
Debt Instrument [Line Items]
Due in 2018	0
Due in 2019	0
Due in 2020	0
Due in 2021	0
Thereafter	30,929
Total long-term debt	$ 30,929

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Employee Benefit Plans (Components of the Net Periodic Pension Plan Cost) (Pension) (Details) - USD ($)	1 Months Ended		3 Months Ended
	Jan. 31, 2017	Jan. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Defined Benefit Plan Disclosure [Line Items]
Service cost			$ 70,000	$ 76,000
Interest cost			413,000	435,000
Expected return on assets			(751,000)	(673,000)
Amortization of transition asset			0	0
Amortization of net actuarial loss			264,000	212,000
Amortization of prior service cost			3,000	3,000
Net pension expense/(credit) included in employee benefits			$ (1,000)	$ 53,000
Discretionary contribution, percent of participant's base salary			15.00%
Two Employees [Member]
Defined Benefit Plan Disclosure [Line Items]
Employer discretionary contribution		$ 63,500
Defined benefit plan participation expense			$ 7,943
Four Employees [Member]
Defined Benefit Plan Disclosure [Line Items]
Employer discretionary contribution	$ 112,708
Defined benefit plan participation expense			$ 14,089
Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Plan modification description			Effective April 30, 2010, the Pension Plan was amended, resulting in a "soft freeze", the effect of which prohibits new entrants into the plan and ceases crediting of additional years of service after that date. Effective January 1, 2013, the Pension Plan was amended to unfreeze it for those employees for whom the sum of (a) their ages, at their closest birthday, plus (b) years of service for vesting purposes equals 80 or greater. The "soft freeze" continues to apply to all other plan participants. Pension benefits for these participants are managed through discretionary contributions to the First United Corporation 401(k) Profit Sharing Plan (the "401(k) Plan").
Employer discretionary contribution			$ 3,000,000

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Employee Benefit Plans (Components of the Net Periodic Pension Plan Cost) (SERP) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 70	$ 76
Interest cost	413	435
Amortization of prior service cost	3	3
Net pension expense/(credit) included in employee benefits	(1)	53
SERP [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	26	25
Interest cost	72	62
Amortization of recognized (gain)/ loss	37	19
Amortization of prior service cost	(1)	5
Net pension expense/(credit) included in employee benefits	$ 134	$ 111

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Equity Compensation Plan Information (Narrative) (Details) - USD ($)	1 Months Ended	3 Months Ended		12 Months Ended
	May 31, 2016	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Share-based compensation arrangement by share-based payment award, description		On June 18, 2008, the Board of Directors of First United Corporation adopted a Long-Term Incentive Program (the "LTIP"). This program was adopted as a sub-plan of the Omnibus Plan to reward participants for increasing shareholder value, align executive interests with those of shareholders, and serve as a retention tool for key executives. Under the LTIP, participants are granted shares of restricted common stock of First United Corporation. The amount of an award is based on a specified percentage of the participant's salary as of the date of grant. These shares will vest if the Corporation meets or exceeds certain performance thresholds.
Deferred compensation arrangement with individual, description		Stock-based awards were made to non-employee directors in May 2016 pursuant to First United Corporation's director compensation policy. Each director receives an annual retainer of 1,000 shares of First United Corporation common stock, plus $10,000 to be paid, at the director's election, in cash or additional shares of common stock.
Director [Member]
Issued fully-vested common stock shares				14,384
Per share fair market value of issued fully vested common stock shares				$ 10.34
Shares issued to Director	1,000
Cash paid to Director	$ 10,000
Director stock compensation expense		$ 37,183	$ 35,889
Maximum [Member]
Maximum issuance of common stock options		185,000

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Letters of Credit and Off Balance Sheet Liabilities (Narrative) (Details) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Letters of Credit and Off Balance Sheet Liabilities [Abstract]
Outstanding standby letters of credit	$ 1.6	$ 1.6

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Derivative Financial Instruments (Narrative) (Details) $ in Thousands	1 Months Ended		3 Months Ended
	Mar. 31, 2016 USD ($) contract	Jul. 31, 2009 USD ($) contract	Mar. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Derivative [Line Items]
Gain on derivative			$ 86
Deferred tax asset on gain on derivative			$ 34
Cash flow hedge ineffectiveness			0
Interest Rate Swap [Member]
Derivative [Line Items]
Interest rate swap notional amount	$ 30,000	$ 20,000
Number of interest rate swap contracts | contract	4	3
Interest rate swap fair value			$ 800	$ 700
Swap Contract - 3-Year $5 million [Member]
Derivative [Line Items]
Interest rate swap notional amount	$ 5,000
Derivative, maturity date	Jun. 17, 2019
Swap Contract - 5-Year $5 million [Member]
Derivative [Line Items]
Interest rate swap notional amount	$ 5,000
Derivative, maturity date	Mar. 17, 2021
Swap Contract - 10-Year $15 million [Member]
Derivative [Line Items]
Interest rate swap notional amount	$ 15,000
Derivative, maturity date	Mar. 17, 2026
Swap Contract- 7 year $5 Million [Member]
Derivative [Line Items]
Interest rate swap notional amount	$ 5,000
Derivative, maturity date	Mar. 17, 2023

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Derivative Financial Instruments (Impact Of Derivative Financial Instruments) (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Derivative Financial Instruments [Abstract]
Amount of gain or (loss) recognized in OCI on derivative (effective portion)		$ 52	$ (331)
Amount of gain or (loss) reclassified from accumulated OCI into income (effective portion)	[1]	0	0
Amount of gain or (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	[2]	$ 0	$ 0

[1] Reported as interest expense

[2] Reported as other income

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Variable Interest Entities (VIE) (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2011	Dec. 31, 2009	Dec. 31, 2016
Variable Interest Entity [Line Items]
Long-term Debt	$ 120,929			$ 131,737
Payments to Acquire Businesses and Interest in Affiliates		$ 6,100	$ 6,100
VIE purpose	purchase the land and construct a 36-unit low income housing rental complex
Federal investment tax credits		$ 8,400
Change in federal investment tax credits	$ (100)
Federal investment tax credit duration		10 years
Variable Interest Entity, Not Primary Beneficiary [Member]
Variable Interest Entity [Line Items]
Long-term Debt	30,900
Equity Method Investments	900
Ownership in Liberty Mews Limited Partnership			99.99%
VIE financing			$ 10,600
Construction and Development Costs			$ 10,600
Partnership total assets	$ 8,800

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Variable Interest Entities (VIE) (Investment in LIHTC Partnership) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Variable Interest Entities (VIE) [Abstract]
Investment (Other Assets)	$ 3,061	$ 3,223
Maximum exposure to loss	$ 3,061	$ 3,223

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Common Stock Rights Offering (Details) - USD ($) shares in Thousands, $ in Thousands			3 Months Ended		12 Months Ended
	Mar. 21, 2017	Feb. 14, 2016	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Shares of common stock sold in rights offering			7,053		6,269
Proceeds from common stock rights offering, gross			$ 9,349	$ 0
Offering-related expenses			145	$ 0
Preferred stock redemption			$ 10,000		$ 10,000
Series A Preferred Stock [Member]
Preferred stock redemption	$ 10,000	$ 10,000

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Assets and Liabilities Subject to Enforceable Master Netting Agreements (Schedule of Liabilities Subject to an Enforceable Master Netting Arrangement or Repurchase Agreements) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Interest Rate Swap [Member]
Gross Amounts of Recognized Liabilities	$ (786)	$ (700)
Gross Amounts Offset in the Statement of Condition	0	0
Net Amounts of Liabilities Presented in the Statement of Condition	(786)	(700)
Gross Amounts Not Offset in the Statement of Condition: Financial Instruments	786	700
Gross Amounts Not Offset in the Statement of Condition: Cash Collateral Pledged	0	0
Net amount	0	0
Repurchase Agreements [Member]
Gross Amounts of Recognized Liabilities	35,269	36,000
Gross Amounts Offset in the Statement of Condition	0	0
Net Amounts of Liabilities Presented in the Statement of Condition	35,269	36,000
Gross Amounts Not Offset in the Statement of Condition: Financial Instruments	(35,269)	(36,000)
Gross Amounts Not Offset in the Statement of Condition: Cash Collateral Pledged	0	0
Net amount	$ 0	$ 0