10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

        For quarterly period ended June 30, 2021

◻    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 incorporation or organization)	(I. R. S. Employer Identification No.)
19 South Second Street, Oakland, Maryland	21550-0009
(Address of principal executive offices)	(Zip Code)

(800) 470-4356

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock	FUNC	Nasdaq Stock Market

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 ☑  No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑   No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 ☑	Smaller Reporting Company ☑
Emerging Growth Company ◻

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting 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 ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 6,614,604 shares of common stock, par value $.01 per share, as of July 31, 2021.

INDEX TO QUARTERLY REPORT

FIRST UNITED CORPORATION

		Page
PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements (unaudited)	3
	Consolidated Statement of Financial Condition – June 30, 2021 and December 31, 2020	3
	Consolidated Statement of Operations – for the three and six months ended June 30, 2021 and 2020	4
	Consolidated Statement of Comprehensive Loss – for the three and six months ended June 30, 2021 and 2020	6
	Consolidated Statement of Changes in Shareholders’ Equity – for three and six months ended June 30, 2021 and 2020	8
	Consolidated Statement of Cash Flows – for the six months ended June 30, 2021 and 2020	9
	Notes to Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	69
Item 4.	Controls and Procedures	70
PART II. OTHER INFORMATION		71
Item 1.	Legal Proceedings	71
Item 1A.	Risk Factors	71
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	71
Item 3.	Defaults upon Senior Securities	71
Item 4.	Mine Safety Disclosures	71
Item 5.	Other Information	71
Item 6.	Exhibits	72
SIGNATURES		73

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

First United Corporation and Subsidiaries

Consolidated Statement of Financial Condition

(In thousands, except share data - Unaudited)

	June 30, 2021		December 31, 2020
Assets
Cash and due from banks	$	190,949	$	146,673
Interest bearing deposits in banks		3,473		2,759
Cash and cash equivalents		194,422		149,432
Investment securities – available for sale (at fair value)		242,013		226,885
Investment securities – held to maturity (fair value $75,574 at June 30, 2021 and $77,612 at December 31, 2020)		65,683		68,263
Restricted investment in bank stock, at cost		3,658		4,468
Loans held for sale		1,443		3,546
Loans		1,145,343		1,167,812
Unearned fees		(2,458)		(1,730)
Allowance for loan losses		(17,068)		(16,486)
Net loans		1,125,817		1,149,596
Premises and equipment, net		35,988		36,863
Goodwill		11,004		11,004
Bank owned life insurance		44,553		43,974
Deferred tax assets		7,849		7,972
Other real estate owned, net		6,756		9,386
Operating lease asset		2,414		2,408
Accrued interest receivable and other assets		22,206		19,617
Total Assets	$	1,763,806	$	1,733,414
Liabilities and Shareholders’ Equity
Liabilities:
Non-interest bearing deposits	$	497,736	$	420,427
Interest bearing deposits		958,375		1,001,939
Total deposits		1,456,111		1,422,366
Short-term borrowings		49,406		49,160
Long-term borrowings		100,929		100,929
Operating lease liability		2,945		2,958
Accrued interest payable and other liabilities		22,867		26,044
Dividends payable		992		910
Total Liabilities		1,633,250		1,602,367
Shareholders’ Equity:
Common Stock – par value $0.01 per share; Authorized 25,000,000 shares; issued and outstanding 6,614,604 shares at June 30, 2021 and 6,992,911 at December 31, 2020		66		70
Surplus		23,422		30,149
Retained earnings		135,536		129,691
Accumulated other comprehensive loss		(28,468)		(28,863)
Total Shareholders’ Equity		130,556		131,047
Total Liabilities and Shareholders’ Equity	$	1,763,806	$	1,733,414

See accompanying notes to the consolidated financial statements

3

First United Corporation and Subsidiaries

Consolidated Statement of Operations

(In thousands, except per share data)

	Six Months Ended
	June 30,
	2021		2020
	(Unaudited)
Interest income
Interest and fees on loans	$	25,829	$	26,252
Interest on investment securities
Taxable		1,984		2,652
Exempt from federal income tax		543		533
Total investment income		2,527		3,185
Other		142		283
Total interest income		28,498		29,720
Interest expense
Interest on deposits		2,145		3,482
Interest on short-term borrowings		50		49
Interest on long-term borrowings		1,304		1,646
Total interest expense		3,499		5,177
Net interest income		24,999		24,543
Provision for loan losses		665		4,821
Net interest income after provision for loan losses		24,334		19,722
Other operating income
Net gains on investments, available for sale		154		47
Net gains on investments, held to maturity		—		60
Gains on sale of residential mortgage loans		860		746
Gains/(losses) on disposal of fixed assets		16		(18)
Net gains		1,030		835
Other Income
Service charges on deposit accounts		817		992
Other service charges		432		322
Trust department		4,275		3,484
Debit card income		1,723		1,314
Bank owned life insurance		579		588
Brokerage commissions		625		479
Other		612		254
Total other income		9,063		7,433
Total other operating income		10,093		8,268
Other operating expenses
Salaries and employee benefits		10,495		10,866
FDIC premiums		366		203
Equipment		1,805		1,893
Occupancy		1,418		1,493
Data processing		1,601		2,025
Marketing		279		283
Professional services		2,661		1,904
Contract labor		333		300
Line rentals		483		438
Other real estate owned		(610)		(3)
Investor relations		430		1,106
Settlement expense		3,300		—
Other		1,398		1,924
Total other operating expenses		23,959		22,432
Income before income tax expense		10,468		5,558
Provision for income tax expense		2,635		1,233
Net Income	$	7,833	$	4,325
Basic net income per share	$	1.15	$	0.62
Diluted net income per share	$	1.15	$	0.62
Weighted average number of basic shares outstanding		6,803		7,018
Weighted average number of diluted shares outstanding		6,808		7,032
Dividends declared per common share	$	0.30	$	0.26

See accompanying notes to the consolidated financial statements

4

First United Corporation and Subsidiaries

Consolidated Statement of Operations

(In thousands, except per share data)

	Three Months Ended
	June 30,
	2021		2020
	(Unaudited)
Interest income
Interest and fees on loans	$	13,097	$	13,413
Interest on investment securities
Taxable		994		1,344
Exempt from federal income tax		268		273
Total investment income		1,262		1,617
Other		77		74
Total interest income		14,436		15,104
Interest expense
Interest on deposits		999		1,612
Interest on short-term borrowings		26		21
Interest on long-term borrowings		648		815
Total interest expense		1,673		2,448
Net interest income		12,763		12,656
Provision for loan losses		555		2,167
Net interest income after provision for loan losses		12,208		10,489
Other operating income
Net gains on investments, available for sale		154		47
Net gains on investments, held to maturity		—		60
Gains on sale of residential mortgage loans		272		687
Gains on disposal of fixed assets		16		—
Net gains		442		794
Other Income
Service charges on deposit accounts		412		377
Other service charges		221		32
Trust department		2,034		1,731
Debit card income		913		680
Bank owned life insurance		293		285
Brokerage commissions		357		202
Other		91		118
Total other income		4,321		3,425
Total other operating income		4,763		4,219
Other operating expenses
Salaries and employee benefits		5,507		4,943
FDIC premiums		183		160
Equipment		954		967
Occupancy		693		746
Data processing		875		973
Marketing		133		153
Professional services		1,491		1,181
Contract labor		185		149
Line rentals		268		221
Other real estate owned		(198)		(3)
Investor relations		306		1,013
Other		635		924
Total other operating expenses		11,032		11,427
Income before income tax expense		5,939		3,281
Provision for income tax expense		1,536		711
Net Income	$	4,403	$	2,570
Basic net income per common share	$	0.66	$	0.37
Diluted net income per common share	$	0.66	$	0.37
Weighted average number of basic shares outstanding		6,609		6,974
Weighted average number of diluted shares outstanding		6,615		6,992
Dividends declared per common share	$	0.15	$	0.13

See accompanying notes to the consolidated financial statements

5

First United Corporation and Subsidiaries

Consolidated Statement of Comprehensive Loss

(In thousands)

	Six Months Ended
	June 30,
	2021		2020
Comprehensive Income	(Unaudited)
Net Income	$	7,833	$	4,325
Other comprehensive income/(loss), net of tax and reclassification adjustments:
Net unrealized gains/(losses) on investments with OTTI		1,773		(1,506)
Net unrealized (losses)/gains on all other AFS securities		(3,281)		1,992
Net unrealized gains on HTM securities		79		494
Net unrealized gains/(losses) on cash flow hedges		371		(1,044)
Net unrealized gains/(losses) on pension		1,343		(1,516)
Net unrealized gains on SERP		110		68
Other comprehensive income/(loss), net of tax		395		(1,512)
Comprehensive income	$	8,228	$	2,813

	Three Months Ended
	June 30,
	2021		2020
Comprehensive Income (in thousands)	(Unaudited)
Net Income	$	4,403	$	2,570
Other comprehensive income, net of tax and reclassification adjustments:
Net unrealized gains/(losses) on investments with OTTI		1,544		(281)
Net unrealized gains on all other AFS securities		1,921		608
Net unrealized gains on HTM securities		34		441
Net unrealized losses on cash flow hedges		(34)		(81)
Net unrealized gains on pension		1,210		3,399
Net unrealized gains on SERP		55		34
Other comprehensive income, net of tax		4,730		4,120
Comprehensive income	$	9,133	$	6,690

See accompanying notes to the consolidated financial statements

6

First United Corporation and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity

(In thousands, except per share data)

	Common Stock		Surplus		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
Balance at January 1, 2021	$	70	$	30,149	$	129,691	$	(28,863)	$	131,047
Net income						3,430				3,430
Other comprehensive loss								(4,335)		(4,335)
Stock based compensation				50						50
Common stock issued - 2,956 shares				46						46
Common stock dividend declared - $0.15 per share						(1,049)				(1,049)
Balance at March 31, 2021	$	70	$	30,245	$	132,072	$	(33,198)	$	129,189
Net income						4,403				4,403
Other comprehensive income								4,730		4,730
Stock based compensation				296						296
Common stock issued - 3,261 shares				56						56
Common stock repurchase - 400,000 shares		(4)		(7,175)						(7,179)
Common stock dividend declared - $0.15 per share						(939)				(939)
Balance at June 30, 2021	$	66	$	23,422	$	135,536	$	(28,468)	$	130,556

See accompanying notes to the consolidated financial statements

7

First United Corporation and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity

(In thousands, except per share data)

	Common Stock		Surplus		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
Balance at January 1, 2020	$	71	$	32,359	$	119,481	$	(25,971)	$	125,940
Net income						1,755				1,755
Other comprehensive loss								(5,632)		(5,632)
Stock based compensation				98						98
Common stock issued - 2,167 shares				52						52
Stock repurchase - 145,291 shares		(1)		(2,753)						(2,754)
Common stock dividend declared - $0.13 per share						(910)				(910)
Balance at March 31, 2020	$	70	$	29,756	$	120,326	$	(31,603)	$	118,549
Net income						2,570				2,570
Other comprehensive income								4,120		4,120
Stock based compensation				71						71
Common stock issued - 3,465 shares				47						47
Common stock dividend declared - $0.13 per share						(904)				(904)
Balance at June 30, 2020	$	70	$	29,874	$	121,992	$	(27,483)	$	124,453

See accompanying notes to the consolidated financial statements

8

First United Corporation and Subsidiaries

Consolidated Statement of Cash Flows

(In thousands)

	Six Months Ended
	June 30,
	2021		2020
	(Unaudited)
Operating activities
Net income	$	7,833	$	4,325
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		665		4,821
Depreciation		1,632		1,625
Stock based compensation		402		169
Gains on sales of other real estate owned		(596)		(21)
Write-(ups)\downs of other real estate owned		(160)		39
Originations of loans held for sale		(20,744)		(34,298)
Proceeds from sale of loans held for sale		23,707		30,511
Gains from sale of loans held for sale		(860)		(746)
(Gains)/losses on disposal of fixed assets		(16)		18
Net amortization of investment securities discounts and premiums- AFS		516		62
Net amortization of investment securities discounts and premiums- HTM		168		96
Gains on sales/calls of investment securities – AFS		(154)		(47)
Gain on calls of investment securities – HTM		—		(60)
Earnings on Bank owned life insurance		(579)		(588)
Amortization of deferred loan fees		(1,979)		(1,269)
Operating lease asset		(6)		143
Decrease/(increase) in accrued interest receivable and other assets		(502)		(3,581)
Deferred tax (benefit)/expense		(22)		1
Operating lease liability		(13)		(151)
Increase in accrued interest payable and other liabilities		(2,670)		1,778
Net cash provided by operating activities		6,622		2,827
Investing activities
Proceeds from maturities/calls of investment securities - AFS		27,285		22,327
Proceeds from maturities/calls of investment securities - HTM		8,744		38,601
Proceeds from sales of investment securities - AFS		13,687		1,080
Purchases of investment securities - AFS		(58,516)		(37,664)
Purchases of investment securities - HTM		(6,332)		(18,633)
Proceeds from sales of other real estate owned		3,386		204
Proceeds from disposal of fixed assets		—		—
Net decrease/(increase) in restricted stock		810		(53)
Net decrease/(increase) in loans		45,193		(132,649)
Purchases of loans		(20,100)		—
Purchases of premises and equipment		(741)		(1,254)
Net cash provided by/(used in) investing activities		13,416		(128,041)
Financing activities
Net increase in deposits		33,745		209,537
Issuance of common stock		46		99
Cash dividends on common stock		(1,906)		(1,830)
Net increase/(decrease) in short-term borrowings		246		(12,727)
Stock repurchase		(7,179)		(2,754)
Net cash provided by financing activities		24,952		192,325
Increase in cash and cash equivalents		44,990		67,111
Cash and cash equivalents at beginning of the year		149,432		49,979
Cash and cash equivalents at end of period	$	194,422	$	117,090
Supplemental information
Interest paid	$	3,561	$	5,206
Taxes paid	$	3,487	$	75
Non-cash investing activities:
Transfers from loans to other real estate owned	$	—	$	21

See accompanying notes to the consolidated financial statements

9

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. Certain prior period balances have been reclassified to conform to the current period presentation. Operating results for the three and six month periods ended June 30, 2021 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, 2020.

As used in these notes, the terms “the Corporation” “we”, “us”, and “our” refer to First United Corporation and, unless the context clearly requires otherwise, its consolidated subsidiaries.

The Corporation has evaluated events and transactions occurring subsequent to the statement of financial condition date of June 30, 2021 for items that should potentially be recognized or disclosed in these financial statements.

Note 2 – COVID-19

The COVID-19 pandemic has adversely impacted our business and financial results and that of many of our customers, and the ultimate impact will depend on future developments, which are highly uncertain, cannot be predicted, and are largely outside of our control, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic. The COVID-19 pandemic has created extensive disruptions to the global and U.S. economies and to the lives of individuals throughout the world. Governments, businesses, and the public are taking unprecedented actions to contain the spread of COVID-19 and to mitigate its effects, including closures of businesses and schools, fiscal and monetary stimulus, and legislation designed to deliver financial aid and other relief. While the scope, duration, and full effects of COVID-19 are not fully known, the pandemic and the efforts to contain it have disrupted global economic activity, adversely affected the functioning of financial markets, impacted market interest rates, increased economic and market uncertainty, and disrupted trade and supply chains.

Congress, the President, and the Board of Governors of the Federal Reserve System (the “Federal Reserve”) have taken several actions designed to cushion the economic fallout. Most notably, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), a $2 trillion legislative package, was signed into law at the end of March 2020. The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors, such as by providing funds for loans under the Paycheck Protection Program (the “PPP”) administered by the Small Business Administration (the “SBA”). Section 4013 of the CARES Act, “Temporary Relief from Troubled Debt Restructurings,” provides banks the option to temporarily suspend certain requirements under U.S. GAAP related to trouble debt restructurings (“TDRs”) for a limited period of time to account for the effects of COVID-19. Additionally, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Economic Aid Act”) was enacted on December 27, 2020 and provided for a second round of PPP loans. The PPP Extension Act of 2021, which was enacted on March 30, 2021, extended the PPP application deadline to May 31, 2021 and provided the SBA with additional time to process applications through June 30, 2021.  Also, the Consolidated Appropriations Act (the “CAA”) passed on December 27, 2020, which, among other things, extended the provisions of Section 4013 of the CARES Act to January 1, 2022. The Federal Reserve also took actions to mitigate the economic impact of the COVID-19 pandemic, including cutting the federal funds rate 150 basis points and targeting a 0 to 25 basis point rate. In addition to the general impact of the COVID-19 pandemic, certain provisions of the CARES Act as well as other legislative and regulatory relief efforts are expected to have a material impact on the Company’s operations.  

During the first six months of 2021, we continued to assist our business customers with the PPP loan forgiveness process and to originate additional PPP loans. We remained diligent in protecting our associates and customers from the lingering effects of

10

the pandemic, delaying opening our lobbies until April 1, 2021.  Many of our sales and support employees continue to work remotely as we have adjusted to a hybrid work environment.  We have continued to monitor our market areas, maintaining travel protocols and utilizing safety precautions while continuing to provide full banking services to our customers.

Paycheck Protection Program

The Corporation actively participated in the PPP.  On January 19, 2021, the SBA implemented a second round of funding for PPP loans.   The Corporation originated $66.1 million in PPP loans during the first six months of 2021, consisting of 870 loans with an average loan size of $80 thousand. New PPP loans are no longer available.  A total of 1,174 loans totaling $148.5 million were originated in 2020.  As of June 30, 2021, approximately $140.5 million have been forgiven with a remaining balance of $74.1 million.

COVID Modifications

While the COVID-19 pandemic has had an impact on most industries, some have been more affected than others.  In accordance with Section 4013 of the CARES Act and related regulatory pronouncements, we have not accounted for modifications of loans affected by the pandemic as troubled debt restructurings nor have we designated them as past due or nonaccrual.  

As of July 16, 2021, there were six commercial loans totaling $7.3 million in total loan modifications related to the real estate rental and health care sectors.  These loans are scheduled to return to contractual payment terms within the next quarter.

Note 3 – 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, such as restricted stock units (“RSUs”). At June 30, 2021, there were RSUs relating to 7,073 time-vested shares of common stock outstanding. There were no anti-dilutive shares at June 30, 2021 or 2020.

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The following tables set forth the calculation of basic and diluted earnings per common share for the six and three months periods ended June 30, 2021 and 2020:

	Six months ended June 30,
	2021					2020
			Average	Per Share				Average	Per Share
(in thousands, except for per share amount)	Income		Shares	Amount		Income		Shares	Amount
Basic Earnings Per Share:
Net income	$	7,833	6,803	$	1.15	$	4,325	7,018	$	0.62
Diluted Earnings Per Share:
Net income	$	7,833	6,808	$	1.15	$	4,325	7,032	$	0.62

	Three months ended June 30,
	2021					2020
			Average	Per Share				Average	Per Share
(in thousands, except for per share amount)	Income		Shares	Amount		Income		Shares	Amount
Basic Earnings Per Share:
Net income	$	4,403	6,609	$	0.66	$	2,570	6,974	$	0.37
Diluted Earnings Per Share:
Net income	$	4,403	6,615	$	0.66	$	2,570	6,992	$	0.37

12

Note 4 – Investments

The following table shows a comparison of amortized cost and fair values of investment securities at June 30, 2021 and December 31, 2020:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI in AOCL
June 30, 2021
Available for Sale:
U.S. government agencies	$	59,703	$	367	$	1,949	$	58,121	$	—
Residential mortgage-backed agencies		32,027		—		545		31,482		—
Commercial mortgage-backed agencies		54,361		306		477		54,190		—
Collateralized mortgage obligations		73,559		144		1,547		72,156		—
Obligations of states and political subdivisions		9,417		417		—		9,834		—
Collateralized debt obligations		18,579		—		2,349		16,230		(1,415)
Total available for sale	$	247,646	$	1,234	$	6,867	$	242,013	$	(1,415)
Held to Maturity:
Residential mortgage-backed agencies	$	35,595	$	879	$	327	$	36,147	$	—
Commercial mortgage-backed agencies		9,747		397		—		10,144		—
Collateralized mortgage obligations		118		1		—		119		—
Obligations of states and political subdivisions		20,223		8,941		—		29,164		—
Total held to maturity	$	65,683	$	10,218	$	327	$	75,574	$	—
December 31, 2020
Available for Sale:
U.S. government agencies	$	75,856	$	899	$	322	$	76,433	$	—
Residential mortgage-backed agencies		22,999		—		100		22,899		—
Commercial mortgage-backed agencies		32,549		529		36		33,042		—
Collateralized mortgage obligations		70,372		266		1		70,637		—
Obligations of states and political subdivisions		10,144		470		—		10,614		—
Collateralized debt obligations		18,544		—		5,284		13,260		(3,839)
Total available for sale	$	230,464	$	2,164	$	5,743	$	226,885	$	(3,839)
Held to Maturity:
Residential mortgage-backed agencies	$	34,597	$	1,173	$	38	$	35,732	$	—
Commercial mortgage-backed agencies		11,716		587		—		12,303		—
Collateralized mortgage obligations		1,348		58		—		1,406		—
Obligations of states and political subdivisions		20,602		7,569		—		28,171		—
Total held to maturity	$	68,263	$	9,387	$	38	$	77,612	$	—

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The following table shows the Corporation’s investment securities with gross unrealized losses and fair values at June 30, 2021 and December 31, 2020, 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		Number of Investments	Fair Value		Unrealized Losses		Number of Investments
June 30, 2021
Available for Sale:
U.S. government agencies	$	34,409	$	1,949	6	$	—	$	—	—
Residential mortgage-backed agencies		31,481		545	3		—		—	—
Commercial mortgage-backed agencies		24,748		477	3		—		—	—
Collateralized mortgage obligations		65,230		1,547	7		—		—	—
Collateralized debt obligations		—		—	—		16,230		2,349	9
Total available for sale	$	155,868	$	4,518	19	$	16,230	$	2,349	9
Held to Maturity:
Residential mortgage-backed agencies		8,268		327	3		—		—	—
Total held to maturity	$	8,268	$	327	3	$	—	$	—	—
December 31, 2020
Available for Sale:
U.S. government agencies	$	39,611	$	322	7	$	—	$	—	—
Residential mortgage-backed agencies		22,899		100	2		—		—	—
Commercial mortgage-backed agencies		16,034		36	1		—		—	—
Collateralized mortgage obligations		39,628		1	4		—		—	—
Collateralized debt obligations		—		—	—		13,260		5,284	9
Total available for sale	$	118,172	$	459	14	$	13,260	$	5,284	9
Held to Maturity:
Residential mortgage-backed agencies	$	2,973	$	38	1	$	—	$	—	—
Total held to maturity	$	2,973	$	38	1	$	—	$	—	—

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 the anticipated recovery of any decline in fair value. If neither applies, then any decline in the fair value below the security’s cost that is considered an other-than-temporary decline is split into two components. The first component 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).

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. 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 OTTI charges during the first six months of 2021 or 2020.

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The Corporation believes that the investment securities that were in an unrealized loss position at June 30, 2021 do not represent other-than-temporary impairment. The Corporation does not intend to sell, nor is it anticipated that the Corporation will be required to sell, any of its impaired investment securities at a loss.

The following tables present a cumulative roll-forward of the amount of non-cash OTTI charges related to credit losses that have been recognized in earnings for the trust preferred securities held in the CDO portfolio during the six month and three month periods ended June 30, 2021 and 2020 that the Corporation does not intend to sell:

	Six Months Ended
	June 30,
(in thousands)	2021		2020
Balance of credit-related OTTI at January 1	$	2,244	$	2,446
Reduction for increases in cash flows expected to be collected		(101)		(101)
Balance of credit-related OTTI at June 30	$	2,143	$	2,345

	Three Months Ended
	June 30,
(in thousands)	2021		2020
Balance of credit-related OTTI at April 1	$	2,194	$	2,396
Reduction for increases in cash flows expected to be collected		(51)		(51)
Balance of credit-related OTTI at June 30	$	2,143	$	2,345

The amortized cost and estimated fair value of securities by contractual maturity at June 30, 2021 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.

	June 30, 2021
(in thousands)	Amortized Cost		Fair Value
Contractual Maturity
Available for Sale:
Due after one year through five years	$	4,411	$	4,489
Due after five years through ten years		10,063		10,238
Due after ten years		73,225		69,458
		87,699		84,185
Residential mortgage-backed agencies		32,027		31,482
Commercial mortgage-backed agencies		54,361		54,190
Collateralized mortgage obligations		73,559		72,156
Total available for sale	$	247,646	$	242,013
Held to Maturity:
Due after ten years	$	20,223	$	29,164
Residential mortgage-backed agencies		35,595		36,147
Commercial mortgage-backed agencies		9,747		10,144
Collateralized mortgage obligations		118		119
Total held to maturity	$	65,683	$	75,574

15

Note 5 – Loans and Related Allowance for Loan Losses

The following table summarizes the primary segments of the loan portfolio at June 30, 2021 and December 31, 2020:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Total
June 30, 2021
Individually evaluated for impairment	$	7,494	$	858	$	—	$	2,918	$	—	$	11,270
Collectively evaluated for impairment		354,447		130,772		229,852		361,490		57,512		1,134,073
Total loans	$	361,941	$	131,630	$	229,852	$	364,408	$	57,512	$	1,145,343
December 31, 2020
Individually evaluated for impairment	$	3,330	$	842	$	—	$	3,185	$	102	$	7,459
Collectively evaluated for impairment		365,846		116,119		266,745		375,985		35,658		1,160,353
Total loans	$	369,176	$	116,961	$	266,745	$	379,170	$	35,760	$	1,167,812

The commercial and industrial portfolio in the table above includes $74.1 million and $114.0 million of PPP loans at June 30, 2021 and December 31, 2020, respectively, which are 100% guaranteed by the SBA, and no allowance for loan loss (“ALL”) has been assigned to them.

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 June 30, 2021 and December 31, 2020:

(in thousands)	Pass		Special Mention		Substandard		Total
June 30, 2021
Commercial real estate
Non owner-occupied	$	171,876	$	10,255	$	6,340	$	188,471
All other CRE		164,282		2,531		6,657		173,470
Acquisition and development
1-4 family residential construction		20,179		—		—		20,179
All other A&D		110,998		—		453		111,451
Commercial and industrial		212,138		6,132		11,582		229,852
Residential mortgage
Residential mortgage - term		298,413		—		5,556		303,969
Residential mortgage - home equity		59,655		—		784		60,439
Consumer		57,420		—		92		57,512
Total	$	1,094,961	$	18,918	$	31,464	$	1,145,343
December 31, 2020
Commercial real estate
Non owner-occupied	$	178,670	$	5,526	$	6,322	$	190,518
All other CRE		166,504		5,664		6,490		178,658
Acquisition and development
1-4 family residential construction		18,920		—		—		18,920
All other A&D		97,648		17		376		98,041
Commercial and industrial		245,185		8,867		12,693		266,745
Residential mortgage
Residential mortgage - term		309,177		283		6,117		315,577
Residential mortgage - home equity		62,804		—		789		63,593
Consumer		35,648		3		109		35,760
Total	$	1,114,556	$	20,360	$	32,896	$	1,167,812

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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 June 30, 2021 and December 31, 2020:

(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
June 30, 2021
Commercial real estate
Non owner-occupied	$	183,896	$	—	$	—	$	—	$	—	$	4,575	$	188,471
All other CRE		172,913		—		—		—		—		557		173,470
Acquisition and development
1-4 family residential construction		20,179		—		—		—		—		—		20,179
All other A&D		111,045		—		—		5		5		401		111,451
Commercial and industrial		229,754		98		—		—		98		—		229,852
Residential mortgage
Residential mortgage - term		301,002		588		874		224		1,686		1,281		303,969
Residential mortgage - home equity		59,889		79		—		—		79		471		60,439
Consumer		57,280		124		64		44		232				57,512
Total	$	1,135,958	$	889	$	938	$	273	$	2,100	$	7,285	$	1,145,343
December 31, 2020
Commercial real estate
Non owner-occupied	$	190,510	$	—	$	—	$	—	$	—	$	8	$	190,518
All other CRE		177,360		408		—		—		408		890		178,658
Acquisition and development
1-4 family residential construction		18,920		—		—		—		—		—		18,920
All other A&D		97,660		5		—		10		15		366		98,041
Commercial and industrial		266,708		37		—		—		37		—		266,745
Residential mortgage
Residential mortgage - term		312,500		63		670		710		1,443		1,634		315,577
Residential mortgage - home equity		63,036		80		63		—		143		414		63,593
Consumer		35,473		230		26		4		260		27		35,760
Total	$	1,162,167	$	823	$	759	$	724	$	2,306	$	3,339	$	1,167,812

The current status of commercial and industrial loans includes $74.1 million and $114.0 million of PPP loans at June 30, 2021 and December 31, 2020, respectively.

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Non-accrual loans that have been subject to partial charge-offs totaled $0.5 million at June 30, 2021 and $0.2 million at December 31, 2020.  Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $0.6 million at June 30, 2021 and $0.4 million at December 31, 2020.  Foreclosure and repossession activities were temporarily suspended as a result of COVID-19. As a percentage of the loan portfolio, accruing loans past due 30 days or more increased slightly to 0.19%, including PPP loans, or 0.20% excluding PPP loans, compared to 0.17% at June 30, 2020 and 0.20% at December 31, 2020. 

The following table summarizes the primary segments of the ALL at June 30, 2021 and December 31, 2020, 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
June 30, 2021
Individually evaluated for impairment	$	230	$	—	$	—	$	20	$	—	$	—	$	250
Collectively evaluated for impairment	$	5,445	$	2,500	$	2,944	$	4,839	$	590	$	500	$	16,818
Total ALL	$	5,675	$	2,500	$	2,944	$	4,859	$	590	$	500	$	17,068
December 31, 2020
Individually evaluated for impairment	$	4	$	13	$	—	$	40	$	—	$	—	$	57
Collectively evaluated for impairment	$	5,539	$	2,326	$	2,584	$	5,110	$	370	$	500	$	16,429
Total ALL	$	5,543	$	2,339	$	2,584	$	5,150	$	370	$	500	$	16,486

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.

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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 required at June 30, 2021 and December 31, 2020:

	Impaired Loans with Specific Allowance				Impaired Loans with No Specific Allowance		Total Impaired Loans
(in thousands)	Recorded Investment		Related Allowances		Recorded Investment		Recorded Investment (1)		Unpaid Principal Balance
June 30, 2021
Commercial real estate
Non owner-occupied	$	1,866	$	230	$	2,818	$	4,684	$	4,684
All other CRE		—		—		2,810		2,810		2,810
Acquisition and development
1-4 family residential construction		—		—		252		252		252
All other A&D		—		—		606		606		1,815
Commercial and industrial		—		—		—		—		2,214
Residential mortgage
Residential mortgage – term		440		15		2,007		2,447		2,627
Residential mortgage – home equity		46		5		425		471		503
Consumer		—		—		—		—		25
Total impaired loans	$	2,352	$	250	$	8,918	$	11,270	$	14,930
December 31, 2020
Commercial real estate
Non owner-occupied	$	111	$	4	$	8	$	119	$	119
All other CRE		—		—		3,211		3,211		3,211
Acquisition and development
1-4 family residential construction		—		—		266		266		266
All other A&D		276		13		300		576		1,724
Commercial and industrial		—		—		—		—		2,214
Residential mortgage
Residential mortgage – term		936		34		1,910		2,846		3,031
Residential mortgage – home equity		76		6		339		415		447
Consumer		—		—		26		26		51
Total impaired loans	$	1,399	$	57	$	6,060	$	7,459	$	11,063

(1) Recorded investment consists of unpaid principal balance, net of charge-offs, interest payments received applied to principal and unamortized deferred loan origination fees and cost.

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The following tables present the activity in the ALL for the six and three month periods ended June 30, 2021 and 2020:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Unallocated		Total
ALL balance at January 1, 2021	$	5,543	$	2,339	$	2,584	$	5,150	$	370	$	500	$	16,486
Charge-offs		—		(81)		—		(82)		(175)		—		(338)
Recoveries		—		110		38		29		78		—		255
Provision		132		132		322		(238)		317		—		665
ALL balance at June 30, 2021	$	5,675	$	2,500	$	2,944	$	4,859	$	590	$	500	$	17,068
ALL balance at January 1, 2020	$	2,882	$	3,674	$	1,341	$	3,828	$	312	$	500	$	12,537
Charge-offs		—		(31)		(232)		(98)		(223)		—		(584)
Recoveries		66		22		16		48		88		—		240
Provision		1,579		833		872		1,328		209		—		4,821
ALL balance at June 30, 2020	$	4,527	$	4,498	$	1,997	$	5,106	$	386	$	500	$	17,014

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Unallocated		Total
ALL balance at April 1, 2021	$	5,404	$	2,423	$	2,831	$	5,028	$	368	$	500	$	16,554
Charge-offs		—		—		—		—		(95)		—		(95)
Recoveries		—		9		2		12		31		—		54
Provision		271		68		111		(181)		286		—		555
ALL balance at June 30, 2021	$	5,675	$	2,500	$	2,944	$	4,859	$	590	$	500	$	17,068
ALL balance at April 1, 2020	$	3,816	$	4,063	$	1,682	$	4,586	$	365	$	500	$	15,012
Charge-offs		—		(16)		(131)		—		(91)		—		(238)
Recoveries		—		8		1		22		42		—		73
Provision		711		443		445		498		70		—		2,167
ALL balance at June 30, 2020	$	4,527	$	4,498	$	1,997	$	5,106	$	386	$	500	$	17,014

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.

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

	Six months ended						Six months ended
	June 30, 2021						June 30, 2020
(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	$	3,165	$	6	$	—	$	138	$	3	$	—
All other CRE		3,058		69		—		3,182		73		—
Acquisition and development
1-4 family residential construction		259		6		—		285		6		—
All other A&D		599		6		—		8,436		6		1
Commercial and industrial		—		—		—		16		—		—
Residential mortgage
Residential mortgage – term		2,672		39		5		2,477		43		—
Residential mortgage – home equity		454		—		—		709		—		3
Consumer		17		—		—		14		—		—
Total	$	10,224	$	126	$	5	$	15,257	$	131	$	4

	Three months ended						Three months ended
	June 30, 2021						June 30, 2020
(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	$	4,689	$	3	$	—	$	132	$	1	$	—
All other CRE		2,982		34		—		3,258		36		—
Acquisition and development
1-4 family residential construction		255		3		—		282		3		—
All other A&D		611		3		—		8,515		3		—
Commercial and industrial		—		—		—		9		—		—
Residential mortgage
Residential mortgage – term		2,585		19		—		2,450		21		—
Residential mortgage – home equity		474		—		—		634		—		3
Consumer		11		—		—		19		—		—
Total	$	11,607	$	62	$	—	$	15,299	$	64	$	3

The Bank modifies loan terms in the normal course of business. Among other reasons, modifications might be made in an effort to retain the loan relationship, to remain competitive in the current interest rate environment and/or to re-amortize or extend the loan’s term to better match the loan’s payment stream with the borrower’s cash flow. A modified loan is considered to be a 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.

Section 4013 of the CARES Act allows financial institutions to suspend application of certain current TDRs accounting guidance under ASC 310-40 for loan modifications related to the COVID-19 pandemic made between March 1, 2020 and the earlier of January 1, 2022 or 60 days after the end of the COVID-19 national emergency, provided certain criteria are met. This relief can

21

be applied to loan modifications for borrowers that defer or delay the payment of principal or interest, or change the interest rate on the loan and that were not more than 30 days past due as of December 31, 2019. In April 2020, federal and state banking regulators issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus to provide further interpretation of when a borrower is experiencing financial difficulty, specifically indicating that if the modification is either short-term (i.e., up to nine months) or mandated by a federal or state government in response to the COVID-19 pandemic, the borrower is not experiencing financial difficulty under ASC 310-40. The Corporation continues to prudently work with borrowers negatively impacted by the COVID-19 pandemic while managing credit risks and recognizing appropriate allowance for credit losses on its loan portfolio. See Note 2 to the financial statements included elsewhere in this report for additional information.

There were 14 loans totaling $3.8 million and $4.0 million that were classified as TDRs at June 30, 2021 and December 31, 2020, respectively.

	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
Six months ended June 30, 2021
Commercial real estate
Non owner-occupied	—	$	—	1	$	109	—	$	—
All other CRE	—		—	—		—	—		—
Acquisition and development
1-4 family residential construction	—		—	—		—	—		—
All other A&D	—		—	—		—	—		—
Commercial and industrial	—		—	—		—	—		—
Residential mortgage
Residential mortgage – term	—		—	—		—	—		—
Residential mortgage – home equity	—		—	—		—	—		—
Consumer	—		—	—		—	—		—
Total	—	$	—	1	$	109	—	$	—

	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
Six months ended June 30, 2020
Commercial real estate
Non owner-occupied	—	$	—	—	$	—	—	$	—
All other CRE	—		—	—		—	1		2,226
Acquisition and development
1-4 family residential construction	—		—	—		—	—		—
All other A&D	—		—	1		217	—		—
Commercial and industrial	—		—	—		—	—		—
Residential mortgage
Residential mortgage – term	1		46	1		230	2		245
Residential mortgage – home equity	—		—	—		—	—		—
Consumer	—		—	—		—	—		—
Total	1	$	46	2	$	447	3	$	2,471

During the six month period ended June 30, 2021, there were no new TDRs and one existing TDR that had reached its modification maturity date and was re-modified. The Bank had no significant commitments to lend additional funds to TDRs.  During

22

the six month period ended June 30, 2020, there were no new TDRs but six existing TDRs that had reached their modification maturity dates were re-modified.  These modifications did not impact the ALL.  During the six month periods ended June 30, 2021 and 2020, there were no payment defaults.

	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 June 30, 2021
Commercial real estate
Non owner-occupied	—	$	—	1	$	109	—	$	—
All other CRE	—		—	—		—	—		—
Acquisition and development
1-4 family residential construction	—		—	—		—	—		—
All other A&D	—		—	—		—	—		—
Commercial and industrial	—		—	—		—	—		—
Residential mortgage
Residential mortgage – term	—		—	—		—	—		—
Residential mortgage – home equity	—		—	—		—	—		—
Consumer	—		—	—		—	—		—
Total	—	$	—	1	$	109	—	$	—
	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 June 30, 2020
Commercial real estate
Non owner-occupied	—	$	—	—	$	—	—	$	—
All other CRE	—		—	—		—	1		2,226
Acquisition and development
1-4 family residential construction	—		—	—		—	—		—
All other A&D	—		—	1		217	—		—
Commercial and industrial	—		—	—		—	—		—
Residential mortgage
Residential mortgage – term	1		46	1		230	2		245
Residential mortgage – home equity	—		—	—		—	—		—
Consumer	—		—	—		—	—		—
Total	1	$	46	2	$	447	3	$	2,471

During the three month period ended June 30, 2021, there were no new TDRs and one existing TDR that had reached its modification maturity date and was re-modified. The Bank had no significant commitments to lend additional funds to TDR borrowers.  During the three month period ended June 30, 2020, there were no new TDRs but six existing TDRs that had reached their modification maturity dates were re-modified.  These re-modifications did not impact the ALL.  During the three months ended June 30, 2021 and 2020, there were no payment defaults under TDRs.

23

Note 6 - Other Real Estate Owned, net

The following table presents the components of other real estate owned (“OREO”) at June 30, 2021 and December 31, 2020:

(in thousands)	June 30, 2021		December 31, 2020
Commercial real estate	$	900	$	945
Acquisition and development		5,856		8,441
Residential mortgage		—		—
Total OREO, net	$	6,756	$	9,386

The following table presents the activity in the OREO valuation allowance for the six and three month periods ended June 30, 2021 and 2020:

	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands)	2021		2020		2021		2020
Balance beginning of period	$	1,010	$	1,790	$	1,004	$	1,780
Fair value adjustment		(160)		39		(164)		13
Sales of OREO		(307)		(95)		(297)		(59)
Balance at end of period	$	543	$	1,734	$	543	$	1,734

The following table presents the components of OREO (income)/expenses, net, for the six and three month periods ended June 30, 2021 and 2020:

	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands)	2021		2020		2021		2020
Gains on sale of real estate, net	$	(596)	$	(21)	$	(105)	$	(11)
Fair value adjustment, net		(160)		39		(164)		13
Expenses, net		195		65		72		31
Rental and other income		(49)		(86)		(1)		(36)
Total OREO income, net	$	(610)	$	(3)	$	(198)	$	(3)

Note 7 – Fair Value of Financial Instruments

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

24

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.

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 basis and on a non-recurring basis, the fair value of assets as of June 30, 2021 are discussed in the paragraphs that follow.

Investments – The fair value of investments is determined using a market approach. As of June 30, 2021, the U.S. Government agencies, residential and commercial mortgage-backed securities, collateralized mortgage obligations, and state and political subdivisions bonds, excluding the tax increment financing (“TIF”) bonds, were 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 TIF bonds were classified as Level 3 within the valuation hierarchy as they are not openly traded.

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 June 30, 2021, the Corporation owned nine trust preferred securities with an amortized cost of $18.6 million and a fair value of $16.2 million. At June 30, 2021, the market for these securities is not active and the markets for similar securities are also not active. Recent developments in the credit markets have had a negative impact on the market for CDOs. Specifically, as COVID-19 developed, which led to deteriorating performance of credit instruments, investors became less willing to buy a range of structured credit products. The result was massive spread-widening across a wide range of credit instruments, and for CDO bonds in particular. At present, we believe that it is not currently economically feasible to form new CDOs or restructure existing CDOs, as the market for CDO bonds has effectively disappeared. The market values for these securities or any securities other than those issued or guaranteed by the U.S. Department of 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 June 30, 2021, (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 uses 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 June 30, 2021.

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

25

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.

At June 30, 2021, these conditions had a minimal impact on the trust preferred bonds, although there has been a significant effect on several asset classes in the equity and fixed income markets related to COVID-19. Management will continue to review assumptions as they relate to the impact of COVID-19 during the remainder of the year.

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 – Fair value of the collateral dependent loans is measured based on the loan’s observable market price or the fair value of the collateral (less estimated selling costs). Collateral may be real estate and/or business assets such as equipment, inventory and/or accounts receivable. The value of business equipment, inventory and accounts receivable collateral is based on either net book value of the business’ financial statements or evaluations/appraisals obtained by the Bank.   If necessary, these values may be discounted based on management’s review and analysis.  Appraised and reported values may be discounted based on management’s historical experience, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and client’s business. Collateral dependent loans are reviewed and evaluated on at least a quarterly basis for additional individual reserve and adjusted accordingly, based on the factors identified above.

Other real estate owned – OREO included in the table below are considered impaired with specific write-downs. OREO is adjusted to fair value upon acquisition of the real estate collateral. Subsequently, OREO is carried at the lower of carrying value or fair value. The estimated fair value for OREO included in Level 3 is determined by independent market based appraisals and other available market information, less costs to sell, that may be reduced further based on market expectations or an executed sales agreement. If the fair value of the collateral deteriorates subsequent to initial recognition, the Company records the OREO as a nonrecurring Level 3 adjustment. Valuation techniques are consistent with those techniques applied in prior periods.

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For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of June 30, 2021 and December 31, 2020, the significant unobservable inputs used in the fair value measurements were as follows:

(in thousands)	Fair Value at June 30, 2021		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale	$	16,230	Discounted Cash Flow	Discount Rate	LIBOR+ 3.75%
Non-recurring:
Impaired Loans	$	2,099	Market Comparable Properties	Marketability Discount	10.0% - 15.0% (1) (weighted avg 10.5%)
Other Real Estate Owned	$	443	Market Comparable Properties	Marketability Discount	15.0%

(in thousands)	Fair Value at December 31, 2020		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale	$	13,260	Discounted Cash Flow	Discount Rate	LIBOR+ 5.25%
Non-recurring:
Impaired Loans	$	1,465	Market Comparable Properties	Marketability Discount	10.0% - 15.0% (1) (weighted avg 12.5%)
Other Real Estate Owned	$	913	Market Comparable Properties	Marketability Discount	15.0%

NOTE:

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

27

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 June 30, 2021 and December 31, 2020 were as follows:

			Fair Value Measurements at June 30, 2021 Using
			Quoted
			Prices in	Significant
	Assets/(liabilities)		Active Markets	Other		Significant
	Measured at		for Identical	Observable		Unobservable
	Fair Value		Assets	Inputs		Inputs
(in thousands)	06/30/21		(Level 1)	(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	58,121		$	58,121
Residential mortgage-backed agencies	$	31,482		$	31,482
Commercial mortgage-backed agencies	$	54,190		$	54,190
Collateralized mortgage obligations	$	72,156		$	72,156
Obligations of states and political subdivisions	$	9,834		$	9,834
Collateralized debt obligations	$	16,230				$	16,230
Financial derivatives	$	(834)		$	(834)
Non-recurring:
Impaired loans	$	2,099				$	2,099
Other real estate owned	$	443				$	443

			Fair Value Measurements at December 31, 2020 Using
			Quoted
			Prices in	Significant
	Assets/(liabilities)		Active Markets	Other		Significant
	Measured at		for Identical	Observable		Unobservable
	Fair Value		Assets	Inputs		Inputs
(in thousands)	12/31/20		(Level 1)	(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	76,433		$	76,433
Residential mortgage-backed agencies	$	22,899		$	22,899
Commercial mortgage-backed agencies	$	33,042		$	33,042
Collateralized mortgage obligations	$	70,637		$	70,637
Obligations of states and political subdivisions	$	10,614		$	10,614
Collateralized debt obligations	$	13,260				$	13,260
Financial derivatives	$	(1,320)		$	(1,320)
Non-recurring:
Impaired loans	$	1,465				$	1,465
Other real estate owned	$	913				$	913

There were no transfers of assets between any of the fair value hierarchy for the six and three month periods ended June 30, 2021 or 2020.

28

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 six and three month periods ended June 30, 2021 and 2020:

	Fair Value Measurements
	Using Significant Unobservable Inputs
	(Level 3)
	Investment Securities
(in thousands)	Available for Sale
Beginning balance January 1, 2021	$	13,260
Total losses realized/unrealized:
Included in other comprehensive income		2,970
Ending balance June 30, 2021	$	16,230

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(in thousands)	Investment Securities Available for Sale
Beginning balance April 1, 2021	$	13,649
Total gains realized/unrealized:
Included in other comprehensive income		2,581
Ending balance June 30, 2021	$	16,230

	Fair Value Measurements
	Using Significant Unobservable Inputs
	(Level 3)
	Investment Securities
(in thousands)	Available for Sale
Beginning balance January 1, 2020	$	14,354
Total losses realized/unrealized:
Included in other comprehensive loss		(2,402)
Ending balance June 30, 2020	$	11,952

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(in thousands)	Investment Securities Available for Sale
Beginning balance April 1, 2020	$	12,380
Total losses realized/unrealized:
Included in other comprehensive income		(428)
Ending balance June 30, 2020	$	11,952

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 six and three month periods ended June 30, 2021 or 2020.

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.

29

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:

	June 30, 2021				Fair Value Measurements
					Quoted
					Prices in		Significant
					Active Markets		Other		Significant
					for Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	190,949	$	190,949	$	190,949
Interest bearing deposits in banks		3,473		3,473		3,473
Investment securities - AFS		242,013		242,013			$	225,783	$	16,230
Investment securities - HTM		65,683		75,574				46,410		29,164
Restricted bank stock		3,658		3,658				3,658
Loans, net		1,125,817		1,121,938						1,121,938
Accrued interest receivable		5,201		5,201				765		4,436
Financial Liabilities:
Deposits - non-maturity		1,256,597		1,256,597				1,256,597
Deposits - time deposits		199,514		201,160				201,160
Financial derivatives		834		834				834
Short-term borrowed funds		49,406		49,406				49,406
Long-term borrowed funds		100,929		103,176				103,176
Accrued interest payable		329		329				329
Off balance sheet financial instruments		—		—		—

	December 31, 2020				Fair Value Measurements
					Quoted
					Prices in		Significant
					Active Markets		Other		Significant
					for Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	146,673	$	146,673	$	146,673
Interest bearing deposits in banks		2,759		2,759		2,759
Investment securities - AFS		226,885		226,885			$	213,625	$	13,260
Investment securities - HTM		68,263		77,612				49,442		28,170
Restricted bank stock		4,468		4,468				4,468
Loans, net		1,149,596		1,150,186						1,150,186
Accrued interest receivable		6,241		6,241				6,241
Financial Liabilities:
Deposits - non-maturity		1,194,140		1,194,140				1,194,140
Deposits - time deposits		228,226		231,241				231,241
Financial derivative		1,320		1,320				1,320
Short-term borrowed funds		49,160		49,160				49,160
Long-term borrowed funds		100,929		104,825				104,825
Accrued interest payable		391		391				391
Off balance sheet financial instruments		—		—		—

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Note 8 – 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, 2020, the three months ended March 31, 2021, and the three months ended June 30, 2021:

	Investment		Investment
	securities-		securities-		Investment
	with OTTI		all other		securities-		Cash Flow		Pension
(in thousands)	AFS		AFS		HTM		Hedge		Plan		SERP		Total
Accumulated OCL, net:
Balance - January 1, 2020	$	(2,542)	$	(853)	$	(899)	$	(85)	$	(20,417)	$	(1,175)	$	(25,971)
Other comprehensive income/(loss) before reclassifications		(587)		1,291		—		(869)		(3,262)		(625)		(4,052)
Amounts reclassified from accumulated other comprehensive loss		(148)		(463)		584		—		1,049		138		1,160
Balance - December 31, 2020	$	(3,277)	$	(25)	$	(315)	$	(954)	$	(22,630)	$	(1,662)	$	(28,863)
Other comprehensive income/(loss) before reclassifications		266		(5,202)		—		405		(139)		—		(4,670)
Amounts reclassified from accumulated other comprehensive loss		(37)		—		45		—		272		55		335
Balance - March 31, 2021	$	(3,048)	$	(5,227)	$	(270)	$	(549)	$	(22,497)	$	(1,607)	$	(33,198)
Other comprehensive income/(loss) before reclassifications		1,581		2,034		—		(34)		938		—		4,519
Amounts reclassified from accumulated other comprehensive loss		(37)		(113)		34		—		272		55		211
Balance - June 30, 2021	$	(1,504)	$	(3,306)	$	(236)	$	(583)	$	(21,287)	$	(1,552)	$	(28,468)

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The following tables present the components of other comprehensive income/(loss) for the six and three month periods ended June 30, 2021 and 2020:

	Before		Tax
Components of Other Comprehensive Income	Tax		(Expense)
(in thousands)	Amount		Benefit		Net
For the six months ended June 30, 2021
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	2,523	$	(676)	$	1,847
Less: accretable yield recognized in income		101		(27)		74
Net unrealized gains on investments with OTTI		2,422		(649)		1,773
Available for sale securities – all other:
Unrealized holding losses		(4,327)		1,159		(3,168)
Less: gains recognized in income		154		(41)		113
Net unrealized losses on all other AFS securities		(4,481)		1,200		(3,281)
Held to maturity securities:
Less: gains recognized in income		—		—		—
Less: amortization recognized in income		(108)		29		(79)
Net unrealized gains on HTM securities		108		(29)		79
Cash flow hedges:
Unrealized holding gains		507		(136)		371
Pension Plan:
Unrealized net actuarial gain		1,090		(291)		799
Less: amortization of unrecognized loss		(744)		200		(544)
Net pension plan liability adjustment		1,834		(491)		1,343
SERP:
Unrealized net actuarial loss		—		—		—
Less: amortization of unrecognized loss		(150)		40		(110)
Net SERP liability adjustment		150		(40)		110
Other comprehensive income	$	540	$	(145)	$	395

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	Before		Tax
Components of Other Comprehensive Loss	Tax		(Expense)
(in thousands)	Amount		Benefit		Net
For the six months ended June 30, 2020
Available for sale (AFS) securities with OTTI:
Unrealized holding losses	$	(1,956)	$	524	$	(1,432)
Less: accretable yield recognized in income		101		(27)		74
Net unrealized losses on investments with OTTI		(2,057)		551		(1,506)
Available for sale securities – all other:
Unrealized holding gains		2,767		(741)		2,026
Less: gains recognized in income		47		(13)		34
Net unrealized gains on all other AFS securities		2,720		(728)		1,992
Held to maturity securities:
Unrealized holding gains		—		—		—
Less: gains recognized in income		60		(16)		44
Less: amortization recognized in income		(735)		197		(538)
Net unrealized gains on HTM securities		675		(181)		494
Cash flow hedges:
Unrealized holding losses		(1,425)		381		(1,044)
Pension Plan:
Unrealized net actuarial loss		(2,786)		746		(2,040)
Less: amortization of unrecognized loss		(716)		192		(524)
Net pension plan liability adjustment		(2,070)		554		(1,516)
SERP:
Unrealized net actuarial loss		—		—		—
Less: amortization of unrecognized loss		(94)		25		(69)
Less: amortization of prior service costs		1		—		1
Net SERP liability adjustment		93		(25)		68
Other comprehensive loss	$	(2,064)	$	552	$	(1,512)

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Components of Other Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the three months ended June 30, 2021
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	2,160	$	(579)	$	1,581
Less: accretable yield recognized in income		51		(14)		37
Net unrealized gains on investments with OTTI		2,109		(565)		1,544
Available for sale securities – all other:
Unrealized holding gains		2,778		(744)		2,034
Less: gains recognized in income		154		(41)		113
Net unrealized gains on all other AFS securities		2,624		(703)		1,921
Held to maturity securities:
Unrealized holding gains		—		—		—
Less: amortization recognized in income		(46)		12		(34)
Net unrealized gains on HTM securities		46		(12)		34
Cash flow hedges:
Unrealized holding gains		(47)		13		(34)
Pension Plan:
Unrealized net actuarial gain		1,280		(342)		938
Less: amortization of unrecognized loss		(372)		100		(272)
Net pension plan liability adjustment		1,652		(442)		1,210
SERP:
Unrealized net actuarial loss		—		—		—
Less: amortization of unrecognized loss		(73)		18		(55)
Net SERP liability adjustment		73		(18)		55
Other comprehensive income	$	6,457	$	(1,727)	$	4,730

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Components of Other Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the three months ended June 30, 2020
Available for sale (AFS) securities with OTTI:
Unrealized holding losses	$	(333)	$	89	$	(244)
Less: accretable yield recognized in income		51		(14)		37
Net unrealized losses on investments with OTTI		(384)		103		(281)
Available for sale securities – all other:
Unrealized holding gains		877		(235)		642
Less: gains recognized in income		47		(13)		34
Net unrealized gains on all other AFS securities		830		(222)		608
Held to maturity securities:
Unrealized holding gains		—		—		—
Less: gains recognized in income		60		(16)		44
Less: amortization recognized in income		(662)		177		(485)
Net unrealized gains on HTM securities		602		(161)		441
Cash flow hedges:
Unrealized holding losses		(111)		30		(81)
Pension Plan:
Unrealized net actuarial gain		4,284		(1,147)		3,137
Less: amortization of unrecognized loss		(358)		96		(262)
Net pension plan liability adjustment		4,642		(1,243)		3,399
SERP:
Less: amortization of unrecognized loss		(47)		13		(34)
Less: amortization of prior service costs		—		—		—
Net SERP liability adjustment		47		(13)		34
Other comprehensive income	$	5,626	$	(1,506)	$	4,120

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The following table presents the details of amounts reclassified from accumulated other comprehensive loss for the six and three month periods ended June 30, 2021 and 2020:

Amounts Reclassified from	Six Months Ended
Accumulated Other Comprehensive Loss	June 30,				Affected Line Item in the Statement
(in thousands)	2021		2020		Where Net Income is Presented
Net unrealized gains on available for sale investment securities with OTTI:
Accretable yield	$	101	$	101	Interest income on taxable investment securities
Taxes		(27)		(27)	Provision for income tax expense
	$	74	$	74	Net of tax
Net unrealized gains on available for sale investment securities - all others:
Gains on sales	$	154	$	47	Net gains
Taxes		(41)		(13)	Provision for income tax expense
	$	113	$	34	Net of tax
Net unrealized losses on held to maturity securities:
Amortization	$	(108)	$	(735)	Interest income on taxable investment securities
Gains on calls		—		60	Net gains
Taxes		29		181	Provision for income tax expense
	$	(79)	$	(494)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss	$	(744)	$	(716)	Other Expense
Taxes		200		192	Provision for income tax expense
	$	(544)	$	(524)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized loss	$	(150)	$	(94)	Other Expense
Amortization of prior service costs		—		1	Salaries and employee benefits
Taxes		40		25	Provision for income tax expense
	$	(110)	$	(68)	Net of tax
Total reclassifications for the period	$	(546)	$	(978)	Net of tax

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Amounts Reclassified from	Three Months Ended
Accumulated Other Comprehensive Loss	June 30,				Affected Line Item in the Statement
(in thousands)	2021		2020		Where Net Income is Presented
Net unrealized gains on available for sale investment securities with OTTI:
Accretable Yield	$	51	$	51	Interest income on taxable investment securities
Taxes		(14)		(14)	Provision for income tax expense
	$	37	$	37	Net of tax
Net unrealized gains on available for sale investment securities - all others:
Gains on sales	$	154	$	47	Net gains
Taxes		(41)		(13)	Provision for income tax expense
	$	113	$	34	Net of tax
Net unrealized losses on held to maturity securities:
Amortization	$	(46)	$	(662)	Interest income on taxable investment securities
Gains on calls		—		60	Net gains
Taxes		12		161	Provision for income tax expense
	$	(34)	$	(441)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss	$	(372)	$	(358)	Other expense
Amortization of prior service costs		—		—	Salaries and employee benefits
Taxes		100		96	Provision for income tax expense
	$	(272)	$	(262)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized loss	$	(73)	$	(47)	Other expense
Amortization of prior service costs		—		—	Salaries and employee benefits
Taxes		18		13	Provision for income tax expense
	$	(55)	$	(34)	Net of tax
Total reclassifications for the period	$	(211)	$	(666)	Net of tax

Note 9 – Employee Benefit Plans

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

	Six Months Ended				Three Months Ended
Pension Plan	June 30,				June 30,
(in thousands)	2021		2020		2021		2020
Service cost	$	78	$	112	$	39	$	56
Interest cost		711		813		355		406
Expected return on assets		(1,785)		(1,774)		(892)		(887)
Amortization of net actuarial loss		744		716		372		358
Net pension credit included in employee benefits and other expense	$	(252)	$	(133)	$	(126)	$	(67)

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	Six Months Ended				Three Months Ended
Defined Benefit SERP	June 30,				June 30,
(in thousands)	2021		2020		2021		2020
Service cost	$	69	$	62	$	34	$	31
Interest cost		119		134		59		67
Amortization of recognized loss		151		94		76		47
Amortization of prior service cost		(1)		(1)		—		—
Net Defined Benefit SERP expense included in employee benefits and other expense	$	338	$	289	$	169	$	145

The service cost component of net periodic benefit cost is included in salaries and benefits and all other components of net periodic benefit cost are included in other expense in the Consolidated Statement of Operations for the Pension Plan and the Defined Benefit SERP.

The Pension Plan is a noncontributory defined benefit pension plan that 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 their (a) 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 Defined Benefit SERP in 2001 as an unfunded supplemental executive retirement plan. The Defined Benefit SERP is available only to a select group of management or highly compensated employees to provide supplemental retirement benefits in excess of limits imposed on qualified plans by federal tax law. Concurrent with the establishment of the Defined Benefit 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 Defined Benefit SERP benefits as well as other employee benefit costs.

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

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. No contributions were made to the Pension Plan during the first three months of 2021 and a contribution of $1.0 million was made during the first three months of 2020. The Corporation expects to fund the annual projected benefit payments for the Defined Benefit SERP from operations.

On January 9, 2015, First United Corporation and members of management who do not participate in the Defined Benefit SERP entered into participation agreements under the Deferred Compensation Plan, each styled as a Defined Contribution SERP Agreement (the “Contribution Agreement”). Pursuant to each Contribution Agreement, First United Corporation agreed, for each Plan Year (as defined in the Deferred Compensation Plan) in which it determines that it has been Profitable (as defined in the Contribution Agreement), to make a discretionary contribution to the participant’s Employer Account in an amount equal to 15% of the participant’s base salary level for such Plan Year, with the first Plan Year being the year ending December 31, 2015. The Contribution Agreement provides that the participant will become 100% vested in the amount maintained in his or her Employer Account upon the earliest to occur of the following events: (a) Normal Retirement (as defined in the Contribution Agreement); (b)  Separation from Service (as defined in the Contribution Agreement) following a Change of Control (as defined in the Deferred Compensation Plan) and subsequent Triggering Event (as defined in the Contribution Agreement); (c) Separation from Service due to a Disability (as defined in the Contribution Agreement); (d) with respect to a particular award of Employer Contribution Credits, the participant’s completion of 2 consecutive Years of Service (as defined in the Contribution Agreement) immediately following the Plan Year for which such award was made; or (e) death. Notwithstanding the foregoing, however, a participant will

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lose entitlement to the amount maintained in his or her Employer Account in the event employment is terminated for Cause (as defined in the Contribution Agreement). In addition, the Contribution Agreement conditions entitlement to the amounts held in the Employer Account on the participant (1) refraining from engaging in Competitive Employment (as defined in the Contribution 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 First United Corporation’s reasonable request, to provide at least six hours of transition services per month for 12 months following his or her Separation from Service (except in the case of death or Disability), except that only item (2) will apply in the event of a Separation from Service following a Change of Control and subsequent Triggering Event.

In January 2019, the Board approved discretionary contributions to four participants totaling $123,179. The contributions had a two year vesting period that ended on December 31, 2020. In January 2020, the Board of Directors of First United Corporation approved discretionary contributions to four participants totaling $126,058. The Corporation recorded $31,514 of related compensation expense for the first six months of 2021 and 2020.  The Corporation recorded $15,757 for the second quarters of 2021 and 2020, related to these contributions. In January 2021, the Board of Directors approved discretionary contributions to three participants totaling $101,257. The Corporation recorded $25,314 of related compensation expense for the first six months of 2021 and $12,657 for the second quarter of 2021 related to these contributions. Each discretionary contribution has a two year vesting period.

Note 10 - Equity Compensation Plan Information

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

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

Stock based awards were made to non-employee directors in June 2020 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 June 2020, a total of 13,160 fully vested shares of common stock were issued to directors, which had a grant date fair market value of $14.52 per share. In July 2020, a total of 916 fully vested shares of common stock were issued to a new director, which had a grant date fair market value of $11.22 per share.  In May 2021, a total of 12,726 fully vested shares of common stock were issued to directors, which had a grant date fair value of $18.50 per share.  Director stock compensation expense was $132,860 for the six months ended June 30, 2021 and $106,681 for the six months ended June 30, 2020. Director stock compensation expense was $62,644 for the three months ended June 30, 2021 and $39,698 for the three months ended June 30, 2020.

Restricted Stock Units

On March 26, 2020, pursuant to the Corporation’s Long Term Incentive Plan (the "LTIP"), which is a sub-plan of the Equity Plan, the Compensation Committee of the Corporation’s Board of Directors (the "Committee") granted RSUs to the Corporation’s principal executive officer, its principal financial officer, and certain of its other executive officers. An RSU contemplates the issuance of shares of common stock of the Corporation if and when the RSU vests.

The RSUs granted to each of the foregoing officers consist of (a) a performance vesting award for a three year performance period ending December 31, 2021, (b) a performance vesting award for a three year performance period ending December 31, 2022, and (c) a time-vesting award that will vest ratably over a three year period beginning on March 26, 2021. Target performance levels were set based on the annual budget which supports the Company’s long-term objective of achieving high performance as compared to peers. Threshold performance is the minimum level of acceptable performance as defined by the Committee and maximum performance represented a level potentially achievable under ideal circumstances. Achievement of the threshold performance level

39

would result in each executive participant earning a payout at 50% of his or her respective target award opportunity. Achievement of the target performance level would result in the executive participant earning the target award and achievement at or above the maximum performance level would result in the executive participant earning 150% of the target opportunity. Actual results for any goal that falls between performance levels would be interpolated to calculate a proportionate award. For the performance period ending December 31, 2021, the RSUs’ performance goal is based on earnings per share for the year ending December 31, 2021. For the performance period ending December 31, 2022, the RSUs’ performance goals are based on earnings per share for the year ending December 31, 2022 and growth in tangible book value per share during the performance period. The threshold, target and maximum performance levels for these grants will be disclosed pursuant to Item 402 of Regulation S-K following the conclusion of the applicable performance period.

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

In the first quarter of 2020, RSUs relating to 19,934 performance vested shares and 5,070 time vested shares of common stock (target level) were granted, which had a grant date fair market value of $12.54 per share of common stock underlying each RSU. On March 26, 2021, 1,690 of the 5,070 time vested shares were issued to participants.  Stock compensation expense was $52,254 and $62,484 for the first six months of 2021 and 2020, respectively.  Stock compensation expense was $26,127 and $31,242 for the three month periods ended June 30, 2021 and 2020. Unrecognized compensation expense at June 30, 2021 related to unvested units was $136,300.

In May 2021, RSUs relating to 7,389 performance vested shares and 3,693 time vested shares of common stock (target level) were granted, which had a grant date fair market value of $17.93 per share of common stock underlying each RSU.  These RSUs are related to the 2021 plan granted in the second quarter of 2021. The performance vesting award for a three year performance period ending December 31, 2023, and a time-vesting award that will vest ratably over a three year period beginning on May 5, 2022. Stock compensation expense was $11,048 for the three and six month periods ended June 30, 2021.  Unrecognized compensation expense at June 30, 2021 related to unvested units was $187,806.

Note 11 – 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 loss.

In March 2016, the Corporation entered into four interest rate swap contracts totaling $30.0 million notional amount, hedging future cash flows associated with floating rate trust preferred debt. These contracts included a three year $5.0 million contract that matured on September 17, 2019, a five year $5.0 million contract that matured on March 17, 2021, a seven year $5.0 million contract that matures on March 17, 2023 and a 10 year $15.0 million contract that matures on March 17, 2026. As of June 30, 2021, $20.0 million notional amount remains.

The fair value of the interest rate swap contracts was $(834) thousand and $(1.3) million at June 30, 2021 and December 31, 2020, respectively.

For the six months ended June 30, 2021, the Corporation recorded an increase in the value of the derivatives of $485 thousand and the related deferred tax of $114 thousand in net accumulated other comprehensive loss to reflect the effective portion of cash flow hedges. ASC Subtopic 815-30 requires the net accumulated other comprehensive loss to be reclassified to earnings if the hedge becomes ineffective or is terminated. There was no hedge ineffectiveness recorded for the six months ended June 30, 2021. The Corporation does not expect any material losses relating to these hedges to be reclassified into earnings within the next 12 months.

Interest rate swap agreements are entered into with counterparties that meet established credit standards and the Corporation believes that the credit risk inherent in these contracts is not significant as of June 30, 2021.

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The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the six and three month periods ended June 30, 2021 and 2020.

Derivative in Cash Flow Hedging Relationships
					Amount of gain or
					(loss) recognized in
			Amount of gain or		income or derivative
	Amount of gain or		(loss) reclassified from		(ineffective portion
	(loss) recognized in		accumulated OCI into		and amount excluded
	OCI on derivative		income (effective		from effectiveness
(in thousands)	(effective portion)		portion) (a)		testing) (b)
Interest rate contracts:
Six months ended:
June 30, 2021	$	371	$	—	$	—
June 30, 2020		(1,044)		—		—
Three months ended:
June 30, 2021	$	(34)	$	—	$	—
June 30, 2020		(81)		—		—

Notes:

(a) Reported as interest expense

(b) Reported as other income

Note 12 – Revenue Recognition

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. Topic 606 is applicable to noninterest revenue streams such as wealth management, including trust and brokerage services, service charges on deposit accounts, interchange fee income – debit card income and gains/losses on OREO sales. Noninterest revenue streams in-scope of Topic 606 are discussed below.

Wealth Management

Trust and asset management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Corporation’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts. Optional services such as real estate sales and tax return preparation services are also available to existing trust and asset management customers. The Corporation’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered.

Service Charges on Deposit Accounts

Service charges on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. The Corporation’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account related fees are largely transactional based, and therefore, the Corporation’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

Interchange Fees – Debit and Credit Card Income

Fees, exchange, and other service charges are primarily comprised of debit and credit card income, ATM fees, merchant services income, and other service charges. Debit and credit card income is primarily comprised of interchange fees earned whenever the Corporation’s debit cards are processed through card payment networks such as Visa. ATM fees are primarily generated when a

41

Corporation cardholder uses a non-Corporation ATM or a non-Corporation cardholder uses a Corporation ATM. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Corporation’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the six and three month periods ended June 30, 2021 and June 30, 2020:

	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands)	2021		2020		2021		2020
Noninterest income
In-scope of Topic 606:
Service charges on deposit accounts	$	817	$	992	$	412	$	377
Other service charges		432		322		221		32
Trust department		4,275		3,484		2,034		1,731
Debit card income		1,723		1,314		913		680
Brokerage commissions		625		479		357		202
Noninterest income (in-scope of Topic 606)		7,872		6,591		3,937		3,022
Noninterest income (out-of-scope of Topic 606)		1,191		842		384		403
Total Noninterest Income	$	9,063	$	7,433	$	4,321	$	3,425

Note 13 – Regulatory Capital Requirements

The following table presents our capital ratios for the six months ended June 30, 2021.

	June 30, 2021		December 31, 2020		Required for Capital Adequacy Purposes		Required to be Well Capitalized
Total Capital (to risk-weighted assets)
Consolidated	15.80	%	16.08	%	8.00	%	10.00	%
First United Bank & Trust	14.92	%	15.50	%	8.00	%	10.00	%
Tier 1 Capital (to risk-weighted assets)
Consolidated	14.55	%	14.83	%	6.00	%	8.00	%
First United Bank & Trust	13.66	%	14.25	%	6.00	%	8.00	%
Common Equity Tier 1 Capital (to risk-weighted assets)
Consolidated	12.37	%	12.61	%	4.50	%	6.50	%
First United Bank & Trust	13.66	%	14.25	%	4.50	%	6.50	%
Tier 1 Capital (to average assets)
Consolidated	9.94	%	10.36	%	4.00	%	5.00	%
First United Bank & Trust	9.20	%	9.81	%	4.00	%	5.00	%

As of June 30, 2021, the Bank and the Corporation are considered “well capitalized” under the regulatory framework for prompt corrective action.   The ratios at the Bank and Consolidated levels were negatively impacted primarily due to the increased funding from the Bank to the holding company related to the settlement expenses and the stock repurchase program.  The decrease at the Corporation level is related to the stock repurchase of 400,000 shares of common stock and the reduction to capital.

First United Corporation’s stock repurchase plan was initially adopted effective January 27, 2021, which authorized the repurchase of up to 400,000 shares of common stock of First United Corporation. The plan authorizes the repurchases to be conducted through open market or private transactions at such times and in such amounts per transaction as the Chairman and Chief Executive Officer of First United Corporation determines to be appropriate.  

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On April 16, 2021 (the “Effective Date”), First United Corporation (the “Corporation”) entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Driver Opportunity Partners I LP (“Driver Partners”) under which, pursuant to the Corporation’s stock repurchase program authorized by the Corporation’s Board of Directors on January 27, 2021, the Corporation agreed to repurchase from Driver Partners 360,737 shares of the common stock, par value $0.01 per share, of the Corporation at a purchase price of $18.00 per share.

Note 14 – Assets and Liabilities Subject to Enforceable Master Netting Arrangements

Interest Rate 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 Assets or 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 12 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. government agency 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 Financial 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 assets and liabilities subject to an enforceable master netting arrangement or repurchase agreements at June 30, 2021 and December 31, 2020.

					Net Amounts		Gross Amounts
	Gross		Gross		of (Assets)/		Not Offset in the
	Amounts of		Amounts		Liabilities		Statement of Condition
	Recognized		Offset in the		Presented in				Cash
	(Assets)/		Statement of		the Statement		Financial		Collateral		Net
(in thousands)	Liabilities		Condition		of Condition		Instruments		Pledged		Amount
June 30, 2021
Interest Rate Swap Agreements	$	834	$	—	$	834	$	(834)	$	2,000	$	—
Repurchase Agreements	$	51,454	$	—	$	51,454	$	(51,454)	$	—	$	—
December 31, 2020
Interest Rate Swap Agreements	$	1,320	$	—	$	1,320	$	(1,320)	$	—	$	—
Repurchase Agreements	$	49,160	$	—	$	49,160	$	(49,160)	$	—	$	—

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Note 15 – Adoption of New Accounting Standards and Effects of New Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“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 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 should consider historical information, current information, and supportable forecasts, including estimates of prepayments. ASU 2016-13 was originally effective for SEC filers for annual periods beginning after December 15, 2019, and interim periods within those annual periods. In November 2019, the FASB approved a delay of the required implementation date of ASU No. 2016-13 for smaller reporting companies, as defined by the Securities and Exchange Commission, including the Corporation, resulting in a required implementation date for the Corporation of January 1, 2023.

Management has formed a focus group consisting of multiple members from areas, including credit, finance, loan servicing, reporting, and information systems. The Corporation is completing its data and model validation analyses, with parallel processing of our existing allowance for loan losses model with the CECL model to follow. The Corporation is currently evaluating the provisions of ASU No. 2016-13 to determine the potential impact the new standard will have on the financial condition or results of operations.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848).”  The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendment only applies to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. The ASU is effective as of March 12, 2020 through December 31, 2022. The Corporation is in the process of evaluating the impact of this standard on the loan portfolio, investment portfolio, long term debt and interest rate swaps, 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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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, as well as the audited consolidated financial statements and related notes included in First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2020.

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 contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not represent historical facts, but are statements about management’s beliefs, plans and objectives about the future, as well as its assumptions and judgments concerning such beliefs, plans and objectives. These statements are evidenced by terms such as "anticipate," "estimate," "should," "expect," "believe," "intend," and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. The beliefs, plans and objectives on which forward-looking statements are based involve risks and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports that First United Corporation files with the Securities and Exchange Commission entitled "Risk Factors", including the risk factor set forth in First United Corporation’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2020 entitled, “The outbreak of the recent coronavirus (‘COVID-19’), or an outbreak of another highly infectious or contagious disease, could adversely affect the Corporation’s business, financial condition and results of operations.” and any updates thereto that might be contained in subsequent reports filed by First United Corporation. The risks and uncertainties associated with the COVID-19 pandemic and its impact on the Corporation will depend on, among other things, the length of time that the pandemic continues; the duration of  the potential imposition of further restrictions on travel in the future; the effect of the pandemic on the global, national, and local economies and on the businesses of our borrowers and their ability to make payments on their obligations; the remedial actions and stimulus measures adopted by federal, state, and local governments; and the inability of employees to work due to illness, quarantine, or government mandates.

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

At June 30, 2021, the Corporation’s total assets were $1.8 billion, net loans were $1.1 billion, and deposits were $1.5 billion. Shareholders’ equity at June 30, 2021 was $130.6 million.

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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.

COVID-19

The COVID-19 pandemic has adversely impacted our business and financial results and that of many of our customers, and the ultimate impact will depend on future developments, which are highly uncertain, cannot be predicted, and are largely outside of our control, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic. The COVID-19 pandemic has created extensive disruptions to the global and U.S. economies and to the lives of individuals throughout the world. Governments, businesses, and the public are taking unprecedented actions to contain the spread of COVID-19 and to mitigate its effects, including closures of businesses and schools, fiscal and monetary stimulus, and legislation designed to deliver financial aid and other relief. While the scope, duration, and full effects of COVID-19 are not fully known, the pandemic and the efforts to contain it have disrupted global economic activity, adversely affected the functioning of financial markets, impacted market interest rates, increased economic and market uncertainty, and disrupted trade and supply chains.

Congress, the President, and the FRB have taken several actions designed to cushion the economic fallout. Most notably, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), a $2 trillion legislative package, was signed into law at the end of March 2020. The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors, such as by providing funds for loans under the Paycheck Protection Program (the “PPP”) administered by the Small Business Administration (the “SBA”). Section 4013 of the CARES Act, “Temporary Relief from Troubled Debt Restructurings,” provides banks the option to temporarily suspend certain requirements under U.S. GAAP related to trouble debt restructurings (“TDRs”) for a limited period of time to account for the effects of COVID-19. Additionally, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Economic Aid Act”) was enacted on December 27, 2020 and provided for a second round of PPP loans. The PPP Extension Act of 2021, which was enacted on March 30, 2021, extended the PPP application deadline to May 31, 2021 and provided the SBA with additional time to process applications through June 30, 2021.  Also, the Consolidated Appropriations Act (the “CAA”) passed on December 27, 2020, which, among other things, extended the provisions of Section 4013 of the CARES Act to January 1, 2022. The Federal Reserve also took actions to mitigate the economic impact of the COVID-19 pandemic, including cutting the federal funds rate 150 basis points and targeting a 0 to 25 basis point rate. In addition to the general impact of the COVID-19 pandemic, certain provisions of the CARES Act as well as other legislative and regulatory relief efforts are expected to have a material impact on the Company’s operations.  

During the first six months of 2021, we continued to assist our business customers with the PPP loan forgiveness process and to originate additional PPP loans. We remained diligent in protecting our associates and customers from the lingering effects of the pandemic, delaying opening our lobbies until April 1, 2021.  Many of our sales and support employees continue to work remotely as we have adjusted to a hybrid work environment.  We have continued to monitor our market areas, maintaining travel protocols and utilizing safety precautions while continuing to provide full banking services to our customers.

Paycheck Protection Program

The Corporation actively participated in the PPP.  On January 19, 2021, the SBA implemented a second round of funding for PPP loans.   The Corporation originated $66.1 million in PPP loans during the first six months of 2021, consisting of 870 loans with an average loan size of $80 thousand. New PPP loans are no longer available. A total of 1,174 loans totaling $148.5 million were originated in 2020. As of June 30, 2021, approximately $140.5 million have been forgiven with a remaining balance of $74.1 million.

COVID Modifications

While the COVID-19 pandemic has had an impact on most industries, some have been more affected than others.  In accordance with Section 4013 of the CARES Act and related regulatory pronouncements, we have not accounted for modifications of loans affected by the pandemic as troubled debt restructurings nor have we designated them as past due or nonaccrual.  

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As of July 16, 2021, there were six commercial loans totaling $7.3 million in total loan modifications related to the real estate rental and health care sectors. These loans are scheduled to return to contractual payment terms within the next quarter.

Liquidity Sources

Management has reviewed its Liquidity Contingency Funding Plan in preparation of funding needs as it relates to the COVID-19 pandemic. As of June 30, 2021, the Corporation had approximately $130.0 million in unsecured lines of credit with its correspondent banks, $1.0 million with the Federal Reserve Discount Window, and approximately $122.2 million of secured borrowings with the Federal Home Loan Bank of Atlanta (“FHLB”). Additionally, the Corporation has access to the brokered certificates of deposit market.

The Corporation was eligible to access the FRB’s Paycheck Protection Program Liquidity Facility (“PPPLF”), a source providing funding using PPP loans as collateral at 100% value.  The Corporation did not use this program, which expired on July 31, 2021.

Capital

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

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SELECTED FINANCIAL DATA

The following table sets forth certain selected financial data for the six month periods ended June 30, 2021 and 2020 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 the six months ended
	June 30,
	2021			2020
Per Share Data
Basic net income per common share (1) - as reported	$	1.15		$	0.62
Basic net income per common share (1) - non-GAAP		1.52			0.62
Diluted net income per common share (1) - as reported	$	1.15		$	0.62
Diluted net income per common share (1) - non-GAAP		1.52			0.62
Basic book value per common share (1) - as reported	$	19.74		$	17.82
Basic book value per common share (1) - non-GAAP		20.12			17.01
Diluted book value per common share (1) - as reported	$	19.72		$	17.81
Diluted book value per common share (1) - non-GAAP		20.10			16.95
Significant Ratios:
Return on Average Assets (1) - as reported		0.88	%		0.57	%
Settlement expenses, net of income tax		0.30	%		—
Adjusted Return on Average Assets (1) (non-GAAP)		1.18	%		0.57	%
Return on Average Equity (1) - as reported		12.21	%		6.97	%
Settlement expenses		2.64	%		—
Income tax effect of adjustment		1.13	%		—
Adjusted Return on Average Equity (1) (non-GAAP)		15.98	%		6.97	%
Average Equity to Average Assets		7.29	%		8.15	%
Capital Ratios:
Consolidated Total Capital (to risk weighted assets) - as reported		15.80	%		16.08	%
Consolidated Total Capital (to risk weighted assets) - (non-GAAP)		16.03	%		16.08	%
Consolidated Tier 1 Capital (to risk weighted assets) - as reported		14.55	%		14.83	%
Consolidated Tier 1 Capital (to risk weighted assets) - (non-GAAP)		14.78	%		14.83	%
Consolidated Common Equity Tier 1 Capital (to risk weighted assets) - as reported		12.37	%		12.61	%
Consolidated Common Equity Tier 1 Capital (to risk weighted assets) - (non-GAAP)		12.58	%		12.61	%
Consolidated Tier 1 Capital (to average assets) - as reported		9.94	%		10.36	%
Consolidated Tier 1 Capital (to average assets) - (non-GAAP)		10.10	%		10.36	%

(1) See reconciliation of this non-GAAP financial measure provided elsewhere herein associated with settlement expenses incurred during the first quarter of 2021.

Note: ^(a) Annualized

RESULTS OF OPERATIONS

Overview

Consolidated net income was $7.8 million, inclusive of litigation settlement expenses of $3.3 million, for the six months ended June 30, 2021 compared to $4.3 million for the six months ended June 30, 2020.  Basic and diluted net income per share for

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the first six months of 2021 were both $1.15, compared to basic and diluted net income per share of $0.62 for the same period of 2020, an 85.5% increase.

The increase in earnings for the first six months of 2021 was attributable to an increase in net interest income of $0.5 million, an increase in other operating income, including gains, of $1.8 million and a decrease in provision expense of $4.2 million, partially offset by an increase in other operating expenses of $1.5 million, inclusive of the $3.3 million in litigation settlement expenses.

The provision for loan losses was $0.7 million for the six month period ended June 30, 2021 and $4.8 million for the six month period ended June 30, 2020. Net charge-offs of $83 thousand were recorded for the first six months of 2021, compared to net charge offs of $0.3 million for first six months of 2020. The higher provision expense recorded in 2021 was driven by an increase in the qualitative factors reflecting the uncertainty of the economic environment related to the COVID-19 pandemic and its impact on our borrowers. The ratio of the ALL to loans outstanding, including PPP loan balances, was 1.49% at June 30, 2021 compared to 1.43% at June 30, 2020 and 1.41% at December 31, 2020.  The ratio of ALL to loans outstanding, on a non-GAAP basis, excluding PPP loan balances of $74.1 million, was 1.59% at June 30, 2021.

Net interest income, on a non-GAAP, fully-taxable equivalent (“FTE”) basis, increased by $0.5 million (1.9%) during the six months ended June 30, 2021 when compared with the six months ended June 30, 2020, driven by a $1.7 million (32.4%) decrease in interest expense, partially offset by a decrease in interest income of $1.2 million.  The net interest margin, on a FTE basis, declined for the six months ended June 30, 2021 to 3.13% compared to 3.61% for the same period of 2020.  

The decrease in interest income was driven by a slight decrease in interest and fees on loans and reduced income on the investment portfolio. While the average balance of the investment portfolio increased by $65.8 million, bonds at higher yielding rates were called and replaced with lower yielding investments, resulting in a decrease in average yield on the investment portfolio of 118 basis points. The increase in the average balance of investments is due to a strategic decision in December 2020 to invest $70.0 million of excess cash into the investment portfolio. Significantly higher cash levels invested at an average yield on Fed Funds of 0.08% for the first six months of 2021, compared to 0.52% for the first six months of 2020, also negatively impacted the margin for the first six months of 2021. The increase in average balance of loans of $82.8 million, primarily driven by PPP loans, offset the declining yield in the portfolio leading to slightly reduced interest and fees on loans when comparing the first six months of 2021 to the first six months of 2020. The average balances of PPP loans of approximately $126.6 million generated $2.6 million of interest and fees but had a negative impact on the margin. The average loan yield was also negatively impacted by the low-rate environment, which resulted in loan production and loans repricing at lower rates. These factors resulted in a decrease of approximately 38 basis points in average loan yield when compared with the six months ended June 30, 2020.

The decrease in interest expense of $1.7 million, despite an increase in average interest-bearing liabilities of $117.9 million, was a direct result of a reduction in the cost of deposits of 28 basis points, a 3 basis point decrease in the cost of our short-term borrowings and a 67 basis point decrease in the cost of long-term borrowings. The decrease in the rate on long-term borrowings was primarily due to the restructuring of three long-term FHLB advances late in the fourth quarter of 2020 that resulted in a reduced weighted average rate of 80 basis points on the $70.0 million portfolio. The average balance on our interest-bearing money market accounts increased $49.1 million, while the rate on these accounts decreased by 43 basis points.   Average growth of $140.9 million in our non-interest-bearing accounts benefited our overall cost of deposits.

Other operating income, including net gains, increased $1.8 million for the six months ended June 30, 2021 when compared to the six months ended June 30, 2020. Gains on the sale of mortgages to the secondary market, which we have utilized in lieu of retaining long-term fixed rate loans in our portfolio, increased $0.1 million related to continued refinancing activity. Trust and brokerage income increased $0.9 million year-over-year due to continued growth in new client relationships and assets under management.  Debit card income increased $0.4 million for the six months ended June 30, 2021 when compared with the same period of 2020 as we continued to grow our deposit relationships and our customers increase use of our electronic services. Other income increased $0.4 million, due primarily to the receipt of insurance proceeds related to litigation claims recorded in the first quarter of 2021. Service charge income remained stable when comparing the six months of 2021 to the same time period of 2020.

Other operating expenses increased $1.5 million, inclusive of litigation settlement expenses, for the six months ended June 30, 2021 when compared with the same period of 2020.  Salaries and benefits decreased $0.4 million when compared to the six months of 2020, primarily due to reductions of $0.2 million in life and health insurance costs, a $0.5 million offset in salary expense

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from deferred loan origination costs primarily attributable to PPP loans and $0.1 million of reduced executive equity compensation due to a timing difference in long-term incentive grants.  These decreases were offset by an increase of $0.4 million in salaries, incentives and related payroll costs.  Federal Deposit Insurance Corporation premiums increased slightly by $0.2 million due to credits received on quarterly assessments in 2020. Equipment, occupancy and technology expenses decreased $0.6 million when compared to the six months of 2020 as we began to realize cost savings from our core processor related to a new contract negotiated in the fourth quarter of 2020. OREO expenses were a net credit in the first six months of 2021 due to $0.8 million in gains attributable to the sale of OREO properties. Professional services increased $0.8 million as a result of increased legal and professional fees, partially offset by decreased investor relations expenses related to the 2021 annual meeting of shareholders and related litigation.

Consolidated net income was $4.4 million for the second quarter of 2021 compared to $2.6 million for the second quarter of 2020.  Basic and diluted net income per common share for the second quarter of 2021 were both $0.66, compared to basic and diluted net income per common share of $0.37 for the second quarter of 2020, an 78.4% increase.

The increase in earnings for the second quarter of 2021 was due to stable net interest income (inclusive of PPP origination fee accretion), an increase in other operating income, including gains, of approximately $0.5 million, a decrease in provision expense of $1.6 million and a decrease in other operating expenses of $0.4 million.

The provision for loan losses was $0.6 million for the three month period ended June 30, 2021 and $2.2 million for the three month period ended June 30, 2020. The higher provision expense recorded in 2021 was driven by an increase in the qualitative factors reflecting the uncertainty of the economic environment related to the COVID-19 pandemic and its impact on our borrowers.

Net interest income, on a non-GAAP, FTE basis, increased $0.1 million (0.9%) during the second quarter of 2021 over the same period in 2020 and was driven by a decrease in interest expense of approximately $0.8 million (31.7%), offset by a $0.7 million (4.4%) decrease in interest income.  The net interest margin for the second quarter of 2021 was 3.15%, compared to 3.53% for the second quarter of 2020.  

Participation in the PPP, with an average outstanding loan balance of $110.7 million and a loan rate of 1.0% at June 30, 2021, negatively impacted the margin for the second quarter of 2021 by 12 basis points.  However, deferred fees of approximately $1.3 million recognized during the second quarter of 2021 positively impacted the margin by 28 basis points, with a net positive impact of 16 basis points.  Continued elevated cash levels have also negatively impacted the margin. We expect to see continued margin compression during the remainder of 2021 as deposit rates approach floors and loans continue to reprice to lower rates.

The decrease in interest income was driven by a slight decrease in interest and fees on loans and reduced income on the investment portfolio. While the average balance of the investment portfolio increased by $72.3 million, bonds at higher yielding rates were called and replaced with lower yielding investments, resulting in a decrease in average yield on the investment portfolio of 128 basis points. The increase in the average balance of investments is due to a strategic decision in December 2020 to invest $70.0 million of excess cash into the investment portfolio. Significantly higher cash levels invested also negatively impacted the margin for the second quarter of 2021 when compared to the second quarter of 2020. The increase in average balance of loans of $9.0 million, primarily driven by PPP loans, offset the declining yield in the portfolio leading to slightly reduced interest and fees on loans when comparing the second quarter of 2021 to the second quarter of 2020. The average loan yield was also negatively impacted by the low-rate environment, which resulted in loan production and loans repricing at lower rates. These factors resulted in a decrease of approximately 12 basis points in average loan yield when compared with the second quarter of 2020.

The decrease in interest expense of $0.8 million, despite an increase in average interest-bearing liabilities of $81.3 million, was a direct result of a reduction in the cost of deposits of 23 basis points, a 1 basis point decrease in the cost of our short-term borrowings and a 68 basis point decrease in the cost of long-term borrowings. The decrease in the rate on long-term borrowings is primarily due to the restructuring of three long-term FHLB advances late in the fourth quarter of 2020 that resulted in a reduced weighted average rate of 80 basis points on the $70.0 million portfolio. The average balance on our interest-bearing money market accounts increased $7.9 million, while the rate on these accounts decreased by 33 basis points.   Average growth of $105.4 million in our non-interest-bearing accounts benefited our overall cost of deposits.

Other operating income, including gains, for the second quarter of 2021 increased by approximately $0.5 million when compared with the same period of 2020.  Service charge income increased by $0.2 million during the second quarter of 2021 when compared with the second quarter of 2020.  Trust and brokerage income increased $0.5 million due to increased production and

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market values on assets under management.  Net gains decreased $0.4 million when comparing the second quarter of 2021 to the second quarter of 2020.  While the refinancing activity continued into the second quarter of 2021, the pace of activity slowed when compared to the second quarter of 2020, which resulted in reduced gains on the sale of mortgages.

Other operating expenses decreased by $0.4 million when comparing the second quarter of 2021 to the second quarter of 2020.  This decrease was driven by reduced occupancy, equipment and technology service during the second quarter of 2021 when compared with the second quarter of 2020 as we began to see reduced costs associated with our core processor due to contract negotiations during 2020. Investor relations costs decreased by $0.7 million during the second quarter of 2021 when compared with the second quarter of 2020 due to costs associated with the 2020 annual meeting of shareholders.  These changes were partially offset by increased salaries and benefits related to a reduction in deferred loan origination costs and an increase in professional services related to final legal expenses associated with litigation that was settled in April 2021.  Other miscellaneous expenses, such as contributions, consulting, Visa processing fees, office supplies, travel and lodging, schools and seminars, and business-related meals declined. Most of the expense reductions are related to limited operations as a result of the pandemic and management’s continued focus on cost savings and efficiencies. The decreases were offset by increases in mileage, line rentals and contract labor.  

The effective income tax rates as a percentage of income for the six-month periods ended June 30, 2021 and 2020 were 25.2% and 22.2%, respectively.  The increase in the tax rate was primarily due to the reduction in tax exempt income as well as the reduction in tax credits related to the expiration of a low-income housing tax credit in June 2021.

Non-GAAP Financial Measures

The Corporation believes that certain non-GAAP financial measures are meaningful because they reflect adjustments commonly made by management, investors, regulators and analysts to evaluate performance trends and the adequacy of common equity. This non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for performance and financial condition measures determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

The following table presents a reconciliation of net income and basic and diluted earnings per share (as reported) to adjusted net income and adjusted basic and diluted earnings per share excluding settlement expense:

	Six months ended June 30,
	2021		2020
(in thousands, except for per share amount)
Net income - as reported	$	7,833	$	4,325
Adjustments:
Settlement Expense		3,300		—
Income tax effect of adjustment		(735)		—
Adjusted net income (non-GAAP)	$	10,398	$	4,325
Basic and Diluted earnings per share - as reported	$	1.15	$	0.62
Adjustments:
Settlement Expense		0.47		—
Income tax effect of adjustment		(0.10)		—
Adjusted basic and diluted earnings per share (non-GAAP)	$	1.52	$	0.62

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The following table presents a reconciliation of basic and diluted book value per share (as reported) to adjusted basic and diluted book value per share excluding settlement expense:

	Six months ended June 30,
	2021		2020
(in thousands, except for per share amount)
Basic book value per share
Equity		130,556		124,453
Outstanding shares		6,615		6,984
Basic book value per share - as reported	$	19.74	$	17.82
Adjustments:
Equity without net settlement expenses		133,122		124,453
Outstanding shares		6,615		6,984
Adjusted basic book value per share (non-GAAP)	$	20.12	$	17.82
Diluted book value per share
Equity		130,556		124,453
Outstanding shares		6,622		6,989
Diluted book value per share - as reported	$	19.72	$	17.81
Adjustments:
Equity without net settlement expenses		133,122		124,453
Outstanding shares		6,622		6,989
Adjusted diluted book value per share (non-GAAP)	$	20.10	$	17.81

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The following table presents a reconciliation of capital ratios (as reported) to adjusted ratios excluding settlement expense:

	June 30, 2021			December 31, 2020
(in thousands)
Retained Earnings - as reported	$	135,536		$	129,691
Adjustments:
Settlement Expense		3,300			—
Income tax effect of adjustment		(735)			—
Adjusted Retained Earnings (non-GAAP)	$	138,101		$	129,691
Total Capital - as reported	$	192,591		$	193,391
Adjustments:
Retained Earnings adjustment		2,565			—
Changes to capital due to retained earnings adjustment		265			—
Total Capital (non-GAAP)	$	195,421		$	193,391
Average Assets used for calculation	$	1,773,016		$	1,720,809
Consolidated Tier 1 Capital (to average assets) - as reported		9.94	%		10.36	%
Consolidated Tier 1 Capital (to average assets) - non-GAAP		10.10	%		10.36	%
Total risk weighted assets used for calculation	$	1,208,706		$	1,202,877
Consolidated Total Capital (to risk weighted assets) - as reported		15.80	%		16.08	%
Consolidated Total Capital (to risk weighted assets) - (non-GAAP)		16.03	%		16.08	%
Consolidated Tier 1 Capital (to risk weighted assets) - as reported		14.55	%		14.83	%
Consolidated Tier 1 Capital (to risk weighted assets) - (non-GAAP)		14.78	%		14.83	%
Consolidated Common Equity Tier 1 Capital (to risk weighted assets) - as reported		12.37	%		12.61	%
Consolidated Common Equity Tier 1 Capital (to risk weighted assets) - (non-GAAP)		12.58	%		12.61	%

Net Interest Income

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

The table below summarizes net interest income for the six months ended June 30, 2021 and 2020.

	GAAP						Non-GAAP - FTE
	Six Months Ended						Six Months Ended
(dollars in thousands)	2021			2020			2021			2020
Interest income	$	28,498		$	29,720		$	28,971		$	30,169
Interest expense		3,499			5,177			3,499			5,177
Net interest income	$	24,999		$	24,543		$	25,472		$	24,992
Net interest margin %		3.07	%		3.54	%		3.13	%		3.61	%

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The following tables set forth the average balances, net interest income and expense, and average yields and rates of our interest-earning assets and interest-bearing liabilities for the six and three month periods ended June 30, 2021 and 2020:

	Six Months Ended
	June 30,
	2021						2020
	Average				Average		Average				Average
(dollars in thousands)	Balance		Interest		Yield/Rate		Balance		Interest		Yield/Rate
Assets
Loans	$	1,187,760	$	25,873	4.39	%	$	1,104,922	$	26,280	4.77	%
Investment Securities:
Taxable		264,525		1,984	1.51	%		198,418		2,652	2.69	%
Non taxable		25,698		972	7.63	%		25,974		954	7.39	%
Total		290,223		2,956	2.05	%		224,392		3,606	3.23	%
Federal funds sold		155,009		63	0.08	%		59,103		154	0.52	%
Interest-bearing deposits with other banks		2,980		1	0.07	%		753		7	1.90	%
Other interest earning assets		4,054		78	3.88	%		4,442		122	5.53	%
Total earning assets		1,640,026		28,971	3.56	%		1,393,612		30,169	4.33	%
Allowance for loan losses		(16,582)						(13,936)
Non-earning assets		152,853						142,354
Total Assets	$	1,776,297					$	1,522,030
Liabilities and Shareholders’ Equity
Interest-bearing demand deposits	$	208,930	$	347	0.33	%	$	169,055	$	341	0.41	%
Interest-bearing money markets		344,100		288	0.17	%		295,035		877	0.60	%
Savings deposits		212,342		46	0.04	%		167,681		101	0.12	%
Time deposits:
Less than $100k		106,506		726	1.37	%		111,854		875	1.57	%
$100k or more		114,908		738	1.30	%		132,942		1,288	1.95	%
Short-term borrowings		50,670		50	0.20	%		42,975		49	0.23	%
Long-term borrowings		100,929		1,304	2.61	%		100,929		1,646	3.28	%
Total interest-bearing liabilities		1,138,385		3,499	0.62	%		1,020,471		5,177	1.02	%
Non-interest-bearing deposits		481,803						340,904
Other liabilities		26,704						36,548
Shareholders’ Equity		129,405						124,107
Total Liabilities and Shareholders’ Equity	$	1,776,297					$	1,522,030
Net interest income and spread			$	25,472	2.94	%			$	24,992	3.31	%
Net interest margin					3.13	%					3.61	%

Note:

(1) The above table reflects the average rates earned or paid stated on an FTE basis assuming a 21% tax rate for 2021 and 2020. Non-GAAP interest income on a fully taxable equivalent was $473 and $449, 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.

Net interest income, on a non-GAAP, FTE basis, increased $0.5 million (1.9%) for the six months ended June 30, 2021 when compared with the same period of 2020, driven by a $1.7 million (32.4%) decrease in interest expense, partially offset by a decrease in interest income of $1.2 million. The net interest margin, on an FTE basis, declined for the six months ended June 30, 2021 to 3.13% compared to 3.61% for the same period of 2020.

The decrease in interest income was driven by a slight decrease in interest and fees on loans and reduced income on the investment portfolio. While the average balance of the investment portfolio increased by $65.8 million, bonds at higher yielding rates were called and replaced with lower yielding investments, resulting in a decrease in average yield on the investment portfolio

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of 118 basis points. The increase in the average balance of investments is due to a strategic decision in December 2020 to invest $70.0 million of excess cash into the investment portfolio. Significantly higher cash levels invested at an average yield on Fed Funds of 0.08% for the first six months of 2021, compared to 0.52% for the first six months of 2020, also negatively impacted the margin for the first six months of 2021. The increase in average balance of loans of $82.8 million, primarily driven by PPP loans, offset the declining yield in the portfolio leading to slightly reduced interest and fees on loans when comparing the first six months of 2021 to the first six months of 2020. The average balances of PPP loans of approximately $126.6 million generated $2.6 million of interest and fees but had a negative impact on the margin. The average loan yield was also negatively impacted by the low-rate environment, which resulted in loan production and loans repricing at lower rates. These factors resulted in a decrease of approximately 38 basis points in average loan yield when compared with the six months ended June 30, 2020.

The decrease in interest expense of $1.7 million, despite an increase in average interest-bearing liabilities of $117.9 million, was a direct result of a reduction in the cost of deposits of 28 basis points, a 3 basis point decrease in the cost of our short-term borrowings and a 68 basis point decrease in the cost of long-term borrowings. The decrease in the rate on long-term borrowings is primarily due to the restructuring of three long-term Federal Home Loan Bank advances late in the fourth quarter of 2020 that resulted in a reduced weighted average rate of 80 basis points on the $70.0 million portfolio. The average balance on our interest-bearing money market accounts increased $49.1 million, while the rate on these accounts decreased by 43 basis points.   Average growth of $140.9 million in our non-interest-bearing accounts benefited our overall cost of deposits.

	Three Months Ended
	June 30,
	2021						2020
(dollars in thousands)	Average Balance		Interest		Average Yield/Rate		Average Balance		Interest		Average Yield/Rate
Assets
Loans	$	1,173,007	$	13,119	4.49	%	$	1,164,023	$	13,424	4.61	%
Investment Securities:
Taxable		273,196		994	1.46	%		199,721		1,344	2.71	%
Non taxable		25,325		480	7.60	%		26,530		488	7.40	%
Total		298,521		1,474	1.98	%		226,251		1,832	3.26	%
Federal funds sold		174,346		39	0.09	%		73,089		15	0.08	%
Interest-bearing deposits with other banks		3,288		—	—	%		863		1	0.53	%
Other interest earning assets		3,654		38	4.17	%		4,468		58	5.23	%
Total earning assets		1,652,816		14,670	3.56	%		1,468,694		15,330	4.18	%
Allowance for loan losses		(16,758)						(15,157)
Non-earning assets		147,763						146,065
Total Assets	$	1,783,821					$	1,599,602
Liabilities and Shareholders’ Equity
Interest-bearing demand deposits	$	214,310	$	175	0.33	%	$	174,498	$	157	0.36	%
Interest-bearing money markets		328,100		118	0.14	%		320,219		374	0.47	%
Savings deposits		221,614		21	0.04	%		174,295		39	0.09	%
Time deposits:
Less than $100k		105,084		337	1.29	%		114,288		459	1.62	%
$100k or more		110,265		348	1.27	%		125,152		583	1.87	%
Short-term borrowings		51,035		26	0.20	%		40,671		21	0.21	%
Long-term borrowings		100,929		648	2.57	%		100,929		815	3.25	%
Total interest-bearing liabilities		1,131,337		1,673	0.59	%		1,050,052		2,448	0.94	%
Non-interest-bearing deposits		498,130						392,701
Other liabilities		27,085						34,152
Shareholders’ Equity		127,269						122,697
Total Liabilities and Shareholders’ Equity	$	1,783,821					$	1,599,602
Net interest income and spread			$	12,997	2.97	%			$	12,882	3.24	%
Net interest margin					3.15	%					3.53	%

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Note:

(4)The above table reflects the average rates earned or paid stated on an FTE basis assuming a 21% tax rate for 2020 and 2019. Non-GAAP interest income on a fully taxable equivalent was $234 and $226, respectively.

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

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

Net interest income, on a non-GAAP, FTE basis, increased $0.1 million (0.9%) during the second quarter of 2021 over the same period in 2020 and was driven by a decrease in interest expense of approximately $0.8 million (31.7%), offset by a $0.7 million (4.4%) decrease in interest income.  The net interest margin for the second quarter of 2021 was 3.15%, compared to 3.53% for the second quarter of 2020.  

Participation in the PPP, with an average outstanding loan balance of $110.7 million and a loan rate of 1.0%, negatively impacted the margin for the second quarter of 2021 by 12 basis points.  However, deferred fees of approximately $1.3 million recognized during the second quarter of 2021 positively impacted the margin by 28 basis points, with a net positive impact of 16 basis points.  Continued elevated cash levels have also negatively impacted the margin. We expect to see continued margin compression during the remainder of 2021 as deposit rates approach floors and loans continue to reprice to lower rates.

The decrease in interest income was driven by a slight decrease in interest and fees on loans and reduced income on the investment portfolio. While the average balance of the investment portfolio increased by $72.3 million, bonds at higher yielding rates were called and replaced with lower yielding investments, resulting in a decrease in average yield on the investment portfolio of 128 basis points. The increase in the average balance of investments is due to a strategic decision in December 2020 to invest $70.0 million of excess cash into the investment portfolio. Significantly higher cash levels invested also negatively impacted the margin for the second quarter of 2021 when compared to the second quarter of 2020. The increase in average balance of loans of $9.0 million, primarily driven by PPP loans, offset the declining yield in the portfolio leading to slightly reduced interest and fees on loans when comparing the second quarter of 2021 to the second quarter of 2020. The average loan yield was also negatively impacted by the low-rate environment, which resulted in loan production and loans repricing at lower rates. These factors resulted in a decrease of approximately 12 basis points in average loan yield when compared with the second quarter of 2020.

The decrease in interest expense of $0.8 million, despite an increase in average interest-bearing liabilities of $81.3 million, was a direct result of a reduction in the cost of deposits of 23 basis points, a 1 basis point decrease in the cost of our short-term borrowings and a 68 basis point decrease in the cost of long-term borrowings. The decrease in the rate on long-term borrowings is primarily due to the restructuring of three long-term Federal Home Loan Bank advances late in the fourth quarter of 2020 that resulted in a reduced weighted average rate of 80 basis points on the $70.0 million portfolio. The average balance on our interest-bearing money market accounts increased $7.9 million, while the rate on these accounts decreased by 33 basis points.   Average growth of $105.4 million in our non-interest-bearing accounts benefited our overall cost of deposits.

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The following table sets forth an analysis of volume and rate changes in interest income and interest expense for our average interest-earning assets and average interest-bearing liabilities for the six and three month periods ended June 30, 2021 and 2020:

	For the Six months ended June 30, 2021
	compared to the Six months ended June 30, 2020
(in thousands and tax equivalent basis)	Volume		Rate		Net
Interest Income:
Loans	$	1,976	$	(2,383)	$	(407)
Taxable Investments		888		(1,556)		(668)
Non-taxable Investments		(10)		28		18
Federal funds sold		251		(342)		(91)
Interest-bearing deposits		21		(27)		(6)
Other interest earning assets		(11)		(33)		(44)
Total interest income		3,115		(4,313)		(1,198)
Interest Expense:
Interest-bearing demand deposits		81		(75)		6
Interest-bearing money markets		147		(736)		(589)
Savings deposits		27		(82)		(55)
Time deposits less than $100K		(42)		(107)		(149)
Time deposits $100K or more		(176)		(374)		(550)
Short-term borrowings		9		(8)		1
Long-term borrowings		—		(342)		(342)
Total interest expense		46		(1,724)		(1,678)
Net interest income	$	3,069	$	(2,589)	$	480

	For the Three months ended June 30, 2021 compared to the Three months ended June 30, 2020
(in thousands and tax equivalent basis)	Volume		Rate		Net
Interest Income:
Loans	$	104	$	(409)	$	(305)
Taxable Investments		498		(848)		(350)
Non-taxable Investments		(22)		14		(8)
Federal funds sold		20		4		24
Interest-bearing deposits		3		(4)		(1)
Other interest earning assets		(11)		(9)		(20)
Total interest income		592		(1,252)		(660)
Interest Expense:
Interest-bearing demand deposits		36		(18)		18
Interest-bearing money markets		9		(265)		(256)
Savings deposits		11		(29)		(18)
Time deposits less than $100K		(37)		(85)		(122)
Time deposits $100K or more		(70)		(165)		(235)
Short-term borrowings		5		0		5
Long-term borrowings		—		(167)		(167)
Total interest expense		(46)		(729)		(775)
Net interest income	$	638	$	(523)	$	115

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.

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Provision for Loan Losses

The provision for loan losses was $0.7 million for the six-months ended June 30, 2021 and $4.8 million for the six-months ended June 30, 2020. Net charge-offs of $83 thousand were recorded for the first six months of 2021, compared to net charge offs of $0.3 million for first six months of 2020. The higher provision expense recorded in 2020 was driven by an increase in the qualitative factors reflecting the uncertainty of the economic environment related to the COVID-19 pandemic and its impact on our borrowers. The ratio of the ALL to loans outstanding, including PPP loan balances, was 1.49% at June 30, 2021 compared to 1.43% at June 30, 2020 and 1.41% at December 31, 2020.  The ALL to loans outstanding, on a non-GAAP basis, excluding PPP loan balances of $74.1 million, was 1.60% at June 30, 2021, and 1.55% at December 31, 2020, excluding PPP loan balances of $114.0 million. 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.

Other Income

	Income as % of						Income as % of
	Total Other Income						Total Other Income
	Six Months Ended						Three Months Ended
	June 30,						June 30,
(in thousands)	2021			2020			2021			2020
Service charges on deposit accounts	$	817	9%	$	992	13%	$	412	10%	$	377	11%
Other service charges		432	5%		322	4%		221	5%		32	1%
Trust department		4,275	47%		3,484	47%		2,034	47%		1,731	51%
Debit card income		1,723	19%		1,314	18%		913	21%		680	20%
Bank owned life insurance		579	6%		588	8%		293	7%		285	8%
Brokerage commissions		625	7%		479	7%		357	8%		202	6%
Other income		612	7%		254	3%		91	2%		118	3%
	$	9,063	100%	$	7,433	100%	$	4,321	100%	$	3,425	100%

Other Operating Expenses

The composition of other operating expenses for the six month periods ended June 30, 2021 and 2020 is illustrated in the following table:

	Expense as % of						Expense as % of
	Total Other Operating Expenses						Total Other Operating Expenses
	Six Months Ended						Three Months Ended
	June 30,						June 30,
(in thousands)	2021			2020			2021			2020
Salaries and employee benefits	$	10,495	44%	$	10,866	49%	$	5,507	50%	$	4,943	44%
FDIC premiums		366	2%		203	1%		183	2%		160	1%
Equipment		1,805	7%		1,893	8%		954	9%		967	8%
Occupancy		1,418	6%		1,493	7%		693	6%		746	7%
Data processing		1,601	7%		2,025	9%		875	8%		973	9%
Marketing		279	1%		283	1%		133	1%		153	1%
Professional services		2,661	11%		1,904	8%		1,491	14%		1,181	10%
Contract labor		333	1%		300	1%		185	2%		149	1%
Line rentals		483	2%		438	2%		268	2%		221	2%
Other real estate owned		(610)	(3)%		(3)	0%		(198)	(2)%		(3)	0%
Investor relations		430	2%		1,106	5%		306	3%		1,013	9%
Settlement expense		3,300	14%		—	0%
Other		1,398	6%		1,924	9%		635	6%		924	8%
	$	23,959	100%	$	22,432	100%	$	11,032	100%	$	11,427	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 income tax rate as a percentage of income increased to 25.2% at June 30, 2021 from 22.2% at June 30, 2020 primarily due to a reduction in tax exempt income and the reduction in low income housing tax credits that expire in June 2021.

FINANCIAL CONDITION

Balance Sheet Overview

Total assets at June 30, 2021 increased to $1.8 billion, representing a $30.4 million increase since December 31, 2020.  During the first six months of 2021, cash and interest-bearing deposits in other banks increased by $45.0 million, the investment portfolio increased by $12.5 million and gross loans decreased by $22.5 million.  The increase in cash was due to continued deposit growth, commercial loan payoffs and normal amortization, PPP loan forgiveness, and continued refinancing of balances in our mortgage portfolio. OREO balances decreased $2.6 million due to the sale of a parcel of real estate securing a large commercial participation loan in the first quarter of 2021 and the additional sales of undeveloped lots.  

Total liabilities increased by $30.9 million when compared to liabilities at December 31, 2020.  The increase in the first six months of 2021 was primarily attributable to deposit growth of $33.7 million due to stimulus programs and to growth in core relationships. Total shareholders’ equity was stable during the first six months of 2021, as net income of $7.8 million was offset by the repurchase of $7.2 million of First United Corporation common stock (400,000 shares).

Loan Portfolio

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

(dollars in thousands)	June 30, 2021			December 31, 2020
Commercial real estate	$	361,941	32%	$	369,176	32%
Acquisition and development		131,630	11%		116,961	10%
Commercial and industrial		229,852	20%		266,745	23%
Residential mortgage		364,408	32%		379,170	32%
Consumer		57,512	5%		35,760	3%
Total Loans	$	1,145,343	100%	$	1,167,812	100%

Outstanding loans of $1.1 billion at June 30, 2021 reflected a decline of $22.5 million during the first six months of 2021, which was primarily attributable to core commercial loan growth offset by PPP loan forgiveness and a decline in our mortgage loan portfolio.  Commercial real estate (“CRE”) loans decreased by $7.2 million, acquisition and development (“A&D”) loans increased by $14.7 million and commercial and industrial (“C&I”) loans decreased by $36.9 million, as newly originated PPP loans and growth in portfolio loans was offset by PPP loan forgiveness.  The growth in the commercial portfolios was offset by a decline in residential mortgage loans of $14.8 million, as refinancing activity continued during the first six months of 2021. Given the current low interest rate environment, customers prefer longer-term fixed-rate loans and we continued to utilize the secondary market rather than hold these longer-term fixed rate mortgage loans in the portfolio. The consumer loan portfolio increased by $21.8 million due to the purchase of a pool of consumer loans in an effort to deploy excess cash into higher yielding, short-term assets.  

Commercial loan production for the first six months of 2021 was approximately $89.2 million, with $39.2 million originated during the second quarter, exclusive of PPP loan production. SBA PPP loan production was approximately $64.3 million for the six months of 2021.  Commercial construction funding continues to ramp up as projects are entering their larger draw periods.  At June

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30, 2021, unfunded, committed commercial construction loans totaled approximately $22.5 million. Commercial amortization and payoffs were approximately $69.7 million through June 30, 2021, exclusive of PPP. 

Consumer mortgage loan production was approximately $57.9 million through June 30, 2021.  The production and pipeline mix of in-house, portfolio loans and investor loans remained strong as of June 30, 2021, with those loans totaling $25.0 million, consisting of $22.0 million in portfolio loans and $3.0 million in investor loans. At the end of the second quarter of 2021, management implemented special promotions for residential mortgage products to shift production towards portfolio loans and utilize excess cash balances.

Non-accrual loans totaled $7.3 million at June 30, 2021 compared to $3.3 million at December 31, 2020.  The increase in non-accrual balances at June 30, 2021 was due to the addition of two hospitality loans totaling approximately $4.5 million to non-accrual status during the first quarter of 2021.  These loans suffered reduced cash flows due to the impact of the pandemic, received modifications and were classified as substandard at December 31, 2020.  These loans have returned to their contractual payment terms but will remain on non-accrual status until the borrowers make full contractual payments for six months.

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.

(dollars in thousands)	June 30, 2021		% of Applicable Portfolio	December 31, 2020		% of Applicable Portfolio
Non-accrual loans:
Commercial real estate	$	5,132	1.42%	$	898	0.24%
Acquisition and development		401	0.30%		366	0.31%
Residential mortgage		1,752	0.48%		2,048	0.54%
Consumer		—	0.00%		27	0.08%
Total non-accrual loans	$	7,285	0.64%	$	3,339	0.29%
Accruing Loans Past Due 90 days or more:
Acquisition and development		5			10
Residential mortgage		224			710
Consumer		44			4
Total loans past due 90 days or more	$	273		$	724
Total non-accrual and accruing loans past due 90 days or more	$	7,558		$	4,063
Restructured Loans (TDRs):
Performing	$	3,535		$	3,657
Non-accrual (included above)		290			301
Total TDRs	$	3,825		$	3,958
Other real estate owned	$	6,756		$	9,386
Impaired loans without a valuation allowance	$	8,918		$	6,060
Impaired loans with a valuation allowance		2,352			1,399
Total impaired loans	$	11,270		$	7,459
Valuation allowance related to impaired loans	$	250		$	57

Performing loans considered to be impaired (including performing troubled debt restructurings, or TDRs), as defined and identified by management, amounted to $7.6 million at June 30, 2021 and $4.1 million at December 31, 2020. 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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Loans that have been modified in reliance on Section 4013 of the CARES Act and the guidance issued thereunder are not treated as TDRs. Information about these loans can be found in Notes 2 and 5 to the consolidated financial statements presented in Item 1 of Part I of this report.

The following table presents the details of impaired loans that are TDRs by class at June 30, 2021 and December 31, 2020:

	June 30, 2021			December 31, 2020
	Number of	Recorded		Number of	Recorded
(dollars in thousands)	Contracts	Investment		Contracts	Investment
Performing
Commercial real estate
Non owner-occupied	2	$	217	2	$	224
All other CRE	1		2,144	1		2,208
Acquisition and development
1-4 family residential construction	1		252	1		266
All other A&D	1		205	1		210
Commercial and industrial	—		—	—		—
Residential mortgage
Residential mortgage – term	7		717	7		749
Residential mortgage – home equity	—		—	—		—
Consumer	—		—	—		—
Total performing	12	$	3,535	12	$	3,657
Non-accrual
Commercial real estate
Non owner-occupied	—	$	—	—	$	—
All other CRE	—		—	—		—
Acquisition and development
1-4 family residential construction	—		—	—		—
All other A&D	—		—	—		—
Commercial and industrial	—		—	—		—
Residential mortgage
Residential mortgage – term	2		290	2		301
Residential mortgage – home equity	—		—	—		—
Consumer	—		—	—		—
Total non-accrual	2		290	2		301
Total TDRs	14	$	3,825	14	$	3,958

The level of TDRs was $3.8 million at June 30, 2021 compared to $4.0 million at December 31, 2020, with a slight reduction due to payments made during the first six months of 2021. There were no new TDRs during the first six months of 2021.

Allowance and Provision for Loan Losses

The ALL is maintained to absorb probable incurred credit 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 six months ended June 30:

(dollars in thousands)	2021			2020
Balance, January 1	$	16,486		$	12,537
Charge-offs:
Acquisition and development		(81)			(31)
Commercial and industrial		—			(232)
Residential mortgage		(82)			(98)
Consumer		(175)			(223)
Total charge-offs		(338)			(584)
Recoveries:
Commercial real estate		—			66
Acquisition and development		110			22
Commercial and industrial		38			16
Residential mortgage		29			48
Consumer		78			88
Total recoveries		255			240
Net credit charge-offs		(83)			(344)
Provision for loan losses		665			4,821
Balance at end of period	$	17,068		$	17,014
Allowance for loan losses to gross loans outstanding (as %)		1.49	%		1.43	%
Net credit charge-offs to average loans outstanding during the period, annualized (as %)		(0.01)	%		(0.06)	%

The ALL increased to $17.1 million at June 30, 2021 compared to $16.5 million at December 31, 2020.  The ratio of the ALL to loans outstanding, including PPP loan balances, was 1.49% at June 30, 2021 compared to 1.43% at June 30, 2020 and 1.41% at December 31, 2020. The ALL to loans outstanding, on a non-GAAP basis, excluding PPP loan balances of $74.1 million, was 1.60% at June 30, 2021, and 1.55% at December 31, 2020, excluding PPP loan balances of $114.0 million. This increase in 5 basis points is primarily related to the decrease in loan balances, offset slightly by the increase in the reserves.

The ratio of net charge offs to average loans for the six months ended June 30, 2021 was an annualized 0.01%, compared to 0.06% for the six months ended June 30, 2020. The CRE portfolio did not have any charge offs or recoveries in the first six months of 2021, compared to an annualized net recovery rate of 0.04% as of June 30, 2020. The A&D loans had an annualized net recovery rate of 0.05% as of June 30, 2021, compared to a net charge-off  rate of 0.01% as of June 30, 2020. The C&I portfolio had net recoveries to average loans of 0.03% as of June 30, 2021, compared to net charge-offs of 0.22% as of June 30, 2020. The residential mortgage ratios were a net charge-off rate of 0.03% as of June 30, 2021, compared to net charge-off rate of 0.02% as of June 30, 2020, and the consumer loan ratios were net charge-off rates of 0.42% and 0.75% as of June 30, 2021 and June 30, 2020, respectively. Our special assets team continues to aggressively collect on charged-off loans.

Management believes that the ALL at June 30, 2021 was adequate to provide for probable credit 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.

Investment Securities

At June 30, 2021, the total amortized cost basis of the available-for-sale investment portfolio was $247.6 million, compared to a fair value of $242.0 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 $65.7 million, compared to a fair value of $75.6 million.

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

	June 30, 2021					December 31, 2020
	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	$	59,703	$	58,121	24%	$	75,856	$	76,433	34%
Residential mortgage-backed agencies		32,027		31,482	13%		22,999		22,899	10%
Commercial mortgage-backed agencies		54,361		54,190	22%		32,549		33,042	14%
Collateralized mortgage obligations		73,559		72,156	30%		70,372		70,637	31%
Obligations of state and political subdivisions		9,417		9,834	4%		10,144		10,614	5%
Collateralized debt obligations		18,579		16,230	7%		18,544		13,260	6%
Total available for sale	$	247,646	$	242,013	100%	$	230,464	$	226,885	100%
Securities Held to Maturity:
Residential mortgage-backed agencies	$	35,595	$	36,147	48%	$	34,597	$	35,732	46%
Commercial mortgage-backed agencies		9,747		10,144	13%		11,716		12,303	16%
Collateralized mortgage obligations		118		119	0%		1,348		1,406	2%
Obligations of state and political subdivisions		20,223		29,164	39%		20,602		28,171	36%
Total held to maturity	$	65,683	$	75,574	100%	$	68,263	$	77,612	100%

Total fair value of investment securities available-for-sale increased by $15.1 million since December 31, 2020. At June 30, 2021, the securities classified as available-for-sale included a net unrealized loss of $5.6 million, which represents the difference between the fair value and amortized cost of securities in the portfolio.

As discussed in Note 7 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 $225.8 million of the available-for-sale portfolio was valued using Level 2 pricing and had net unrealized losses of $3.3 million at June 30, 2021. The remaining $16.2 million of the securities available-for-sale represents the entire collateralized debt obligation (“CDO”) portfolio, which was valued using significant unobservable inputs (Level 3 assets). The $2.3 million in net unrealized losses associated with this portfolio relates to nine pooled trust preferred securities that comprise the CDO portfolio. Net unrealized losses of $1.4 million represent non-credit related OTTI charges on seven of the securities, while $0.9 million of unrealized losses relates to two 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 June 30, 2021:

Level 3 Investment Securities Available for Sale
(dollars in thousands)
Investment Description			First United Level 3 Investments						Security Credit Status
										Deferrals/			Collateral	Number of
										Defaults			Support	Performing
				Fair		Unrealized		Lower		as % of			as % of	Issuers/
		Amortized		Market		Gain/		Credit	Original	Original	Performing	Collateral	Performing	Total
Deal	Class	Cost		Value		(Loss)		Rating	Collateral	Collateral	Collateral	Support	Collateral	Issuers
Preferred Term Security XVIII*	C	$	1,894	$	1,443	$	(451)	C	676,565	14.82%	268,049	21,124	7.88%	40 / 56
Preferred Term Security XVIII	C		2,717		2,164		(553)	C	676,565	14.82%	268,049	21,124	7.88%	40 / 56
Preferred Term Security XIX*	C		1,843		1,776		(67)	C	700,535	6.57%	412,787	28,706	6.95%	47 / 52
Preferred Term Security XIX*	C		1,103		1,066		(37)	C	700,535	6.57%	412,787	28,706	6.95%	47 / 52
Preferred Term Security XIX*	C		2,556		2,487		(69)	C	700,535	6.57%	412,787	28,706	6.95%	47 / 52
Preferred Term Security XIX*	C		1,104		1,066		(38)	C	700,535	6.57%	412,787	28,706	6.95%	47 / 52
Preferred Term Security XXII*	C-1		1,594		1,407		(187)	C	1,386,600	10.31%	624,548	72,765	11.65%	58 / 72
Preferred Term Security XXII*	C-1		3,984		3,519		(465)	C	1,386,600	10.31%	624,548	72,765	11.65%	58 / 72
Preferred Term Security XXIII	C-1		1,784		1,302		(482)	C	1,467,000	13.97%	658,365	74,616	11.33%	71 / 83
Total Level 3 Securities Available for Sale		$	18,579	$	16,230	$	(2,349)

*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 6.57% to 14.82% 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.

The market for these securities as of June 30, 2021 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 June 30, 2021, (b) an income valuation approach technique

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(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 uses 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, 2020 and June 30, 2021.

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 six months of 2021.  Additionally, there has been no change in the performing collateral, no decline in the percentage of deferrals/defaults to original collateral, and increases in collateral support for each of the positions held by the Corporation.

Deposits

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

(dollars in thousands)	June 30, 2021			December 31, 2020
Non-interest bearing demand deposits:
Retail	$	497,736	34%	$	420,427	30%
Interest-bearing deposits:
Demand		207,820	14%		201,571	14%
Money Market:
Retail		322,525	22%		376,096	26%
Savings deposits		228,516	16%		196,046	14%
Time deposits less than $100,000:
Retail		80,690	6%		88,728	6%
Time deposits $100,000 or more:
Retail		118,824	8%		139,498	10%
Total Deposits	$	1,456,111	100%	$	1,422,366	100%

Total deposits at June 30, 2021 increased by $33.7 million when compared to deposits at December 31, 2020.  During the first six months of 2021, non-interest-bearing deposits increased by $77.3 million, driven by retail and commercial account growth partially attributable to government stimulus programs, including the most recent PPP funding round. Traditional savings accounts increased by $32.5 million, as we continued to see significant growth in our Prime Saver product and total demand deposits increased by $6.2 million. Total money market accounts decreased by $53.6 million due primarily to management’s decision to move wealth management money market funds off balance sheet in the first quarter of 2021. We believe that these funds can be readily shifted back to in-house money market accounts should liquidity needs arise in the future.  Time deposits decreased by $28.7 million, primarily in time deposits over $100,000, as we continued to reduce pricing on single-service relationships and municipal bids.  

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Borrowed Funds

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

(in thousands)	June 30, 2021		December 31, 2020
Securities sold under agreements to repurchase	$	49,406	$	49,160
Total short-term borrowings		49,406		49,160
FHLB advances	$	70,000	$	70,000
Junior subordinated debt		30,929		30,929
Total long-term borrowings	$	100,929	$	100,929

Total short-term borrowings increased slightly by $0.2 million during the first six months of 2021. This increase was due to increased cash balances from our existing accounts. Long-term borrowings remained constant during the first six months of 2021.

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, Pacific Coast Banker’s Bank, PNC Financial Services, Atlantic Community Bankers Bank, Community Bankers Bank and Zions National Bank).

2. Secured advances with the FHLB, 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.

6. Federal Reserve PPPLF – provides funding and uses SBA PPP loans as collateral at 100% value.  This program expired on July 31, 2021.

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.

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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 June 30, 2021, 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.

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.

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Based on the simulation analysis performed at June 30, 2021 and December 31, 2020, management estimated the following changes in net interest income, assuming the indicated rate changes:

(Dollars in thousands)	June 30, 2021		December 31, 2020
+400 basis points	$	6,342	$	5,124
+300 basis points	$	4,949	$	4,067
+200 basis points	$	3,455	$	2,897
+100 basis points	$	1,676	$	1,527
-100 basis points	$	(2,856)	$	(2,174)

This estimate is based on assumptions that may be affected by unforeseeable changes in the general interest rate environment and any number of unforeseeable factors. Rates on different assets and liabilities within a single maturity category adjust to changes in interest rates to varying degrees and over varying periods of time. The relationships between lending rates and rates paid on purchased funds are not constant over time. Management can respond to current or anticipated market conditions by lengthening or shortening the Bank’s sensitivity through loan repricings or changing its funding mix. The rate of growth in interest-free sources of funds will influence the level of interest-sensitive funding sources. In addition, the absolute level of interest rates will affect the volume of earning assets and funding sources. As a result of these limitations, the interest-sensitive gap is only one factor to be considered in estimating the net interest margin.

Management believes that no material changes in our market risks, our procedures used to evaluate and mitigate those risks, or our actual or simulated sensitivity positions have occurred since December 31, 2020. Our NII simulation analysis as of December 31, 2020 is included in Item 7 of Part II Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2020 under the heading “Market Risk and Interest Sensitivity.

Impact of Inflation – Our assets and liabilities are primarily monetary in nature, and as such, future changes in prices do not affect the obligations to pay or receive fixed and determinable amounts of money. During inflationary periods, monetary assets lose value in terms of purchasing power and monetary liabilities have corresponding purchasing power gains. The concept of purchasing power is not an adequate indicator of the impact of inflation on financial institutions because it does not incorporate changes in our earnings.

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 June 30, 2021, the Bank had $130.0 million available through unsecured lines of credit with correspondent banks, $1.0 million available through a secured line of credit with the Fed Discount Window and approximately $122.2 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 First United 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.  Based on capital ratios at June 30, 2021, both the Bank and First United Corporation are considered to be well-capitalized.

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The following table presents our capital ratios as of the dates indicated:

	June 30, 2021		December 31, 2020		Required for Capital Adequacy Purposes		Required to be Well Capitalized
Total Capital (to risk-weighted assets)
Consolidated	15.80	%	16.08	%	8.00	%	10.00	%
First United Bank & Trust	14.92	%	15.50	%	8.00	%	10.00	%
Tier 1 Capital (to risk-weighted assets)
Consolidated	14.55	%	14.83	%	6.00	%	8.00	%
First United Bank & Trust	13.66	%	14.25	%	6.00	%	8.00	%
Common Equity Tier 1 Capital (to risk-weighted assets)
Consolidated	12.37	%	12.61	%	4.50	%	6.50	%
First United Bank & Trust	13.66	%	14.25	%	4.50	%	6.50	%
Tier 1 Capital (to average assets)
Consolidated	9.94	%	10.36	%	4.00	%	5.00	%
First United Bank & Trust	9.20	%	9.81	%	4.00	%	5.00	%

Contractual Obligations, Commitments and Off-Balance Sheet Arrangements

Contractual Obligations

The Corporation enters into contractual obligations in the normal course of business. Among these obligations are FHLB advances and junior subordinated debentures, operating lease agreements for banking and subsidiaries’ offices and for data processing and telecommunications equipment. Comparing June 30, 2021 to December 31, 2020, short-term borrowings increased $0.2 million, primarily due to the increase in our Treasury Management overnight investment sweep accounts as we saw growth in balances from our existing municipality accounts.

Commitments

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. We are not a party to any other off-balance sheet arrangements.

Commitments to extend credit in the form of consumer, commercial and business at the dates indicated were as follows:

(in thousands)	June 30, 2021		December 31, 2020
Residential Mortgage - home equity	$	63,200	$	59,615
Residential Mortgage - construction		18,768		12,220
Commercial		131,848		125,294
Consumer - personal credit lines		4,638		4,314
Standby letters of credit		16,685		17,675
Total	$	235,139	$	219,118

The increase of $16.0 million in commitments at June 30, 2021, when compared to December 31, 2020 was due to continued demand for consumer and commercial construction funding during the first six months of 2021. Management will continue to monitor these balances.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The information required by this item is included 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

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December 31, 2020 under the heading “Market Risk and Interest Sensitivity” both of which are incorporated in this Item 3 by reference.

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 (“PEO”) and its principal financial officer (“PFO”), as appropriate, to allow for timely decisions regarding required disclosure. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls 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 June 30, 2021 was carried out under the supervision and with the participation of management, including the PEO and the PFO. Based on that evaluation, management, including the PEO and the PFO, has concluded that our disclosure controls and procedures are, in fact, effective at the reasonable assurance level.

During the six months ended June 30, 2021, 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.

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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 First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2020. Management does not believe that any material changes in our risk factors have occurred since they were last disclosed except as follows.

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

Issuer Purchases of Equity Securities
Period	Total Number of Shares (or Units) Purchased		Average Price Paid per Share (or Unit)	Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1)
April 2021	400,000	$	17.95	400,000	105,876
May 2021	—		—	—	105,876
June 2021	—	$	—	—	105,876
Total	400,000	$	17.95	400,000	105,876

(1) All shares were purchased in open-market transactions pursuant to First United Corporation’s stock repurchase plan that was initially adopted effective January 27, 2021.  The plan, authorized the repurchase of up to 400,000 shares of common stock of First United Corporation. The plan authorizes the repurchases to be conducted through open market or private transactions at such times and in such amounts per transaction as the Chairman and Chief Executive Officer of First United Corporation determines to be appropriate.  

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

71

Item 6. Exhibits

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

Exhibit	Description
3.1	Articles of Amendment to Articles of Amendment and Restatement of First United Corporation (incorporated by reference to Exhibit 3.1 to First United Corporation’s Current Report on Form 8-K filed on June 3, 2021)
10.1	Stock Purchase Agreement, dated as of Aril 16, 2021, by and between First United Corporation and Driver Opportunity Partners I LP (incorporated by reference to Exhibit 10.1 to First United Corporation’s Current Report on Form 8-K filed on April 19, 2021)
10.2	Cooperation and Settlement Agreement, dated as of April 16, 2021, by and between First United Corporation, Driver Opportunity Partners I LP, and the other parties named therein (incorporated by reference to Exhibit 10.2 to First United Corporation’s Current Report on Form 8-K filed on April 19, 2021)
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 Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)
32	Certification of the Principal Executive Officer and the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act (furnished herewith)
101.INS	Inline XBRL Instance Document (filed herewith)
101.SCH	Inline XBRL Taxonomy Extension Schema (filed herewith)
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith)
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith)
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase (filed herewith)
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith)
104	The cover page of First United Corporation’s Quarterly Report on Form 10Q for the quarter ended June 30, 2021 formatted in Inline XBRL, included within the Exhibit 101 attachments (filed herewith).

72

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: August 12, 2021	/s/ Carissa L. Rodeheaver
	Carissa L. Rodeheaver, CPA
	Chairman of the Board, President and Chief Executive Officer
	(Principal Executive Officer)
Date: August 12, 2021	/s/ Tonya K. Sturm
	Tonya K. Sturm, Senior Vice President,
	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

73

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: August 12, 2021	/s/ Carissa L. Rodeheaver
	Carissa L. Rodeheaver, CPA
	Chairman of the Board, President and Chief Executive Officer
	(Principal Executive Officer)

EX-3.2

Exhibit 31.2

Certifications of the Principal Financial 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: August 12, 2021	/s/ Tonya K. Sturm
	Tonya K. Sturm, Senior Vice President,
	Chief Financial Officer
	(Principal Financial 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 June 30, 2021 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: August 12, 2021	/s/ Carissa L. Rodeheaver
	Carissa L. Rodeheaver, CPA
	Chairman of the Board, President and Chief Executive Officer
	(Principal Executive Officer)
Date: August 12, 2021	/s/ Tonya K. Sturm
	Tonya K. Sturm, Senior Vice President,
	Chief Financial Officer
	(Principal Financial Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2021	Jul. 31, 2021
Document and Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2021
Document Transition Report	false
Current Fiscal Year End Date	--12-31
Entity File Number	0-14237
Entity Registrant Name	First United Corporation
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	52-1380770
Entity Address, Address Line One	19 South Second Street
Entity Address, City or Town	Oakland
Entity Address, State or Province	MD
Entity Address, Postal Zip Code	21550-0009
City Area Code	800
Local Phone Number	470-4356
Title of 12(b) Security	Common Stock
Trading Symbol	FUNC
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		6,614,604
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2021
Entity Central Index Key	0000763907
Amendment Flag	false

XML

Consolidated Statement of Financial Condition - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Assets
Cash and due from banks	$ 190,949	$ 146,673
Interest bearing deposits in banks	3,473	2,759
Cash and cash equivalents	194,422	149,432
Investment securities - available for sale (at fair value)	242,013	226,885
Investment securities - held to maturity (fair value $75,574 at June 30, 2021 and $77,612 at December 31, 2020)	65,683	68,263
Restricted investment in bank stock, at cost	3,658	4,468
Loans held for sale	1,443	3,546
Loans	1,145,343	1,167,812
Unearned fees	(2,458)	(1,730)
Allowance for loan losses	(17,068)	(16,486)
Net loans	1,125,817	1,149,596
Premises and equipment, net	35,988	36,863
Goodwill	11,004	11,004
Bank owned life insurance	44,553	43,974
Deferred tax assets	7,849	7,972
Other real estate owned, net	6,756	9,386
Operating lease asset	2,414	2,408
Accrued interest receivable and other assets	22,206	19,617
Total Assets	1,763,806	1,733,414
Liabilities:
Non-interest bearing deposits	497,736	420,427
Interest bearing deposits	958,375	1,001,939
Total deposits	1,456,111	1,422,366
Short-term borrowings	49,406	49,160
Long-term borrowings	100,929	100,929
Operating lease liability	2,945	2,958
Accrued interest payable and other liabilities	22,867	26,044
Dividends payable	992	910
Total Liabilities	1,633,250	1,602,367
Shareholders' Equity:
Common Stock - par value $0.01 per share; Authorized 25,000,000 shares; issued and outstanding 6,614,604 shares at June 30, 2021 and 6,992,911 at December 31, 2020	66	70
Surplus	23,422	30,149
Retained earnings	135,536	129,691
Accumulated other comprehensive loss	(28,468)	(28,863)
Total Shareholders' Equity	130,556	131,047
Total Liabilities and Shareholders' Equity	$ 1,763,806	$ 1,733,414

XML

Consolidated Statement of Financial Condition (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Consolidated Statement of Financial Condition [Abstract]
Held-to-maturity securities, fair value	$ 75,574	$ 77,612
Common stock, Par value	$ 0.01	$ 0.01
Common Stock, Shares Authorized	25,000,000	25,000,000
Common Stock, Shares, Issued	6,614,604	6,992,911
Common Stock, Shares, Outstanding	6,614,604	6,992,911

XML

Consolidated Statement of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Interest income
Interest and fees on loans	$ 13,097	$ 13,413	$ 25,829	$ 26,252
Interest on investment securities: Taxable	994	1,344	1,984	2,652
Interest on investment securities: Exempt from federal income tax	268	273	543	533
Total investment income	1,262	1,617	2,527	3,185
Other	77	74	142	283
Total interest income	14,436	15,104	28,498	29,720
Interest expense
Interest on deposits	999	1,612	2,145	3,482
Interest on short-term borrowings	26	21	50	49
Interest on long-term borrowings	648	815	1,304	1,646
Total interest expense	1,673	2,448	3,499	5,177
Net interest income	12,763	12,656	24,999	24,543
Provision for loan losses	555	2,167	665	4,821
Net interest income after provision for loan losses	12,208	10,489	24,334	19,722
Other operating income
Net gains on investments, available for sale	154	47	154	47
Net gains on investments, held to maturity		60		60
Gains on sale of residential mortgage loans	272	687	860	746
Gains/(losses) on disposal of fixed assets	16		16	(18)
Net gains	442	794	1,030	835
Total other income	4,321	3,425	9,063	7,433
Total other operating income	4,763	4,219	10,093	8,268
Other operating expenses
Salaries and employee benefits	5,507	4,943	10,495	10,866
FDIC premiums	183	160	366	203
Equipment	954	967	1,805	1,893
Occupancy	693	746	1,418	1,493
Data processing	875	973	1,601	2,025
Marketing	133	153	279	283
Professional services	1,491	1,181	2,661	1,904
Contract labor	185	149	333	300
Line rentals	268	221	483	438
Other real estate owned	(198)	(3)	(610)	(3)
Investor relations	306	1,013	430	1,106
Settlement expense			3,300
Other	635	924	1,398	1,924
Total other operating expenses	11,032	11,427	23,959	22,432
Income before income tax expense	5,939	3,281	10,468	5,558
Provision for income tax expense	1,536	711	2,635	1,233
Net Income	$ 4,403	$ 2,570	$ 7,833	$ 4,325
Basic net income per share	$ 0.66	$ 0.37	$ 1.15	$ 0.62
Diluted net income per share	$ 0.66	$ 0.37	$ 1.15	$ 0.62
Weighted average number of basic shares outstanding	6,609	6,974	6,803	7,018
Weighted average number of diluted shares outstanding	6,615	6,992	6,808	7,032
Dividends declared per common share	$ 0.15	$ 0.13	$ 0.30	$ 0.26
Service Charges on Deposit Accounts [Member]
Other operating income
Total other income	$ 412	$ 377	$ 817	$ 992
Other Service Charges [Member]
Other operating income
Total other income	221	32	432	322
Trust Department [Member]
Other operating income
Total other income	2,034	1,731	4,275	3,484
Debit Card Income [Member]
Other operating income
Total other income	913	680	1,723	1,314
Bank Owned Life Insurance [Member]
Other operating income
Total other income	293	285	579	588
Brokerage Commissions [Member]
Other operating income
Total other income	357	202	625	479
Other [Member]
Other operating income
Total other income	$ 91	$ 118	$ 612	$ 254

XML

Consolidated Statement of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Consolidated Statement of Comprehensive Income [Abstract]
Net Income	$ 4,403	$ 2,570	$ 7,833	$ 4,325
Other comprehensive loss, net of tax and reclassification adjustments:
Net unrealized gains/(losses) on investments with OTTI	1,544	(281)	1,773	(1,506)
Net unrealized (losses)/gains on all other AFS securities	1,921	608	(3,281)	1,992
Net unrealized gains on HTM securities	34	441	79	494
Net unrealized gains/(losses) on cash flow hedges	(34)	(81)	371	(1,044)
Net unrealized gains/(losses) on pension	1,210	3,399	1,343	(1,516)
Net unrealized gains on SERP	55	34	110	68
Other comprehensive income/(loss), net of tax	4,730	4,120	395	(1,512)
Comprehensive income	$ 9,133	$ 6,690	$ 8,228	$ 2,813

XML

Consolidated Statement of Changes in Shareholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Surplus [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Total
Balance at Dec. 31, 2019	$ 71	$ 32,359	$ 119,481	$ (25,971)	$ 125,940
Net income			1,755		1,755
Other comprehensive income/(loss)				(5,632)	(5,632)
Common stock issued		52			52
Stock based compensation		98			98
Stock repurchase	(1)	(2,753)			(2,754)
Common stock dividend declared			(910)		(910)
Balance at Mar. 31, 2020	70	29,756	120,326	(31,603)	118,549
Balance at Dec. 31, 2019	71	32,359	119,481	(25,971)	125,940
Net income					4,325
Other comprehensive income/(loss)					(1,512)
Balance at Jun. 30, 2020	70	29,874	121,992	(27,483)	124,453
Balance at Mar. 31, 2020	70	29,756	120,326	(31,603)	118,549
Net income			2,570		2,570
Other comprehensive income/(loss)				4,120	4,120
Common stock issued		47			47
Stock based compensation		71			71
Common stock dividend declared			(904)		(904)
Balance at Jun. 30, 2020	70	29,874	121,992	(27,483)	124,453
Balance at Dec. 31, 2020	70	30,149	129,691	(28,863)	131,047
Net income			3,430		3,430
Other comprehensive income/(loss)				(4,335)	(4,335)
Common stock issued		46			46
Stock based compensation		50			50
Common stock dividend declared			(1,049)		(1,049)
Balance at Mar. 31, 2021	70	30,245	132,072	(33,198)	129,189
Balance at Dec. 31, 2020	70	30,149	129,691	(28,863)	131,047
Net income					7,833
Other comprehensive income/(loss)					395
Balance at Jun. 30, 2021	66	23,422	135,536	(28,468)	130,556
Balance at Mar. 31, 2021	70	30,245	132,072	(33,198)	129,189
Net income			4,403		4,403
Other comprehensive income/(loss)				4,730	4,730
Common stock issued		56			56
Stock based compensation		296			296
Stock repurchase	(4)	(7,175)			(7,179)
Common stock dividend declared			(939)		(939)
Balance at Jun. 30, 2021	$ 66	$ 23,422	$ 135,536	$ (28,468)	$ 130,556

XML

Consolidated Statement of Changes in Shareholders' Equity (Parenthetical) - $ / shares	3 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Mar. 31, 2020
Consolidated Statement of Changes in Shareholders' Equity [Abstract]
Common stock issued, shares	3,261	2,956	3,465	2,167
Stock repurchase, shares	400,000			145,291
Common stock dividend declared per share	$ 0.15	$ 0.15	$ 0.13	$ 0.13

XML

Consolidated Statement of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Operating activities
Net income	$ 7,833	$ 4,325
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	665	4,821
Depreciation	1,632	1,625
Stock based compensation	402	169
Gains on sales of other real estate owned	(596)	(21)
Write-(ups)\downs of other real estate owned	(160)	39
Originations of loans held for sale	(20,744)	(34,298)
Proceeds from sale of loans held for sale	23,707	30,511
Gains from sale of loans held for sale	(860)	(746)
(Gains)/losses on disposal of fixed assets	(16)	18
Net amortization of investment securities discounts and premiums- AFS	516	62
Net amortization of investment securities discounts and premiums- HTM	168	96
Gains on sales/calls of investment securities - AFS	(154)	(47)
Gain on calls of investment securities - HTM		(60)
Earnings on Bank owned life insurance	(579)	(588)
Amortization of deferred loan fees	(1,979)	(1,269)
Amortization of operating lease asset	(6)	143
Decrease/(increase) in accrued interest receivable and other assets	(502)	(3,581)
Deferred tax (benefit)/expense	(22)	1
Operating lease liability	(13)	(151)
Increase in accrued interest payable and other liabilities	(2,670)	1,778
Net cash provided by operating activities	6,622	2,827
Investing activities
Proceeds from maturities/calls of investment securities - AFS	27,285	22,327
Proceeds from maturities/calls of investment securities - HTM	8,744	38,601
Proceeds from sales of investment securities - AFS	13,687	1,080
Purchases of investment securities - AFS	(58,516)	(37,664)
Purchases of investment securities - HTM	(6,332)	(18,633)
Proceeds from sales of other real estate owned	3,386	204
Net decrease/(increase) in restricted stock	810	(53)
Net decrease/(increase) in loans	45,193	(132,649)
Purchases of loans	(20,100)
Purchases of premises and equipment	(741)	(1,254)
Net cash provided by/(used in) investing activities	13,416	(128,041)
Financing activities
Net increase in deposits	33,745	209,537
Issuance of common stock	46	99
Cash dividends on common stock	(1,906)	(1,830)
Net increase/(decrease) in short-term borrowings	246	(12,727)
Stock repurchase	(7,179)	(2,754)
Net cash provided by financing activities	24,952	192,325
Increase in cash and cash equivalents	44,990	67,111
Cash and cash equivalents at beginning of the year	149,432	49,979
Cash and cash equivalents at end of period	194,422	117,090
Supplemental information
Interest paid	3,561	5,206
Taxes paid	$ 3,487	75
Non-cash investing activities:
Transfers from loans to other real estate owned		$ 21

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2021

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. Certain prior period balances have been reclassified to conform to the current period presentation. Operating results for the three and six month periods ended June 30, 2021 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, 2020.

As used in these notes, the terms “the Corporation” “we”, “us”, and “our” refer to First United Corporation and, unless the context clearly requires otherwise, its consolidated subsidiaries.

The Corporation has evaluated events and transactions occurring subsequent to the statement of financial condition date of June 30, 2021 for items that should potentially be recognized or disclosed in these financial statements.

XML

COVID-19

6 Months Ended

Jun. 30, 2021

COVID-19 [Abstract]

COVID-19

Note 2 – COVID-19

The COVID-19 pandemic has adversely impacted our business and financial results and that of many of our customers, and the ultimate impact will depend on future developments, which are highly uncertain, cannot be predicted, and are largely outside of our control, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic. The COVID-19 pandemic has created extensive disruptions to the global and U.S. economies and to the lives of individuals throughout the world. Governments, businesses, and the public are taking unprecedented actions to contain the spread of COVID-19 and to mitigate its effects, including closures of businesses and schools, fiscal and monetary stimulus, and legislation designed to deliver financial aid and other relief. While the scope, duration, and full effects of COVID-19 are not fully known, the pandemic and the efforts to contain it have disrupted global economic activity, adversely affected the functioning of financial markets, impacted market interest rates, increased economic and market uncertainty, and disrupted trade and supply chains.

Congress, the President, and the Board of Governors of the Federal Reserve System (the “Federal Reserve”) have taken several actions designed to cushion the economic fallout. Most notably, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), a $2 trillion legislative package, was signed into law at the end of March 2020. The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors, such as by providing funds for loans under the Paycheck Protection Program (the “PPP”) administered by the Small Business Administration (the “SBA”). Section 4013 of the CARES Act, “Temporary Relief from Troubled Debt Restructurings,” provides banks the option to temporarily suspend certain requirements under U.S. GAAP related to trouble debt restructurings (“TDRs”) for a limited period of time to account for the effects of COVID-19. Additionally, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Economic Aid Act”) was enacted on December 27, 2020 and provided for a second round of PPP loans. The PPP Extension Act of 2021, which was enacted on March 30, 2021, extended the PPP application deadline to May 31, 2021 and provided the SBA with additional time to process applications through June 30, 2021.  Also, the Consolidated Appropriations Act (the “CAA”) passed on December 27, 2020, which, among other things, extended the provisions of Section 4013 of the CARES Act to January 1, 2022. The Federal Reserve also took actions to mitigate the economic impact of the COVID-19 pandemic, including cutting the federal funds rate 150 basis points and targeting a 0 to 25 basis point rate. In addition to the general impact of the COVID-19 pandemic, certain provisions of the CARES Act as well as other legislative and regulatory relief efforts are expected to have a material impact on the Company’s operations.  

During the first six months of 2021, we continued to assist our business customers with the PPP loan forgiveness process and to originate additional PPP loans. We remained diligent in protecting our associates and customers from the lingering effects of

the pandemic, delaying opening our lobbies until April 1, 2021.  Many of our sales and support employees continue to work remotely as we have adjusted to a hybrid work environment.  We have continued to monitor our market areas, maintaining travel protocols and utilizing safety precautions while continuing to provide full banking services to our customers.

Paycheck Protection Program

The Corporation actively participated in the PPP.  On January 19, 2021, the SBA implemented a second round of funding for PPP loans.   The Corporation originated $66.1 million in PPP loans during the first six months of 2021, consisting of 870 loans with an average loan size of $80 thousand. New PPP loans are no longer available.  A total of 1,174 loans totaling $148.5 million were originated in 2020.  As of June 30, 2021, approximately $140.5 million have been forgiven with a remaining balance of $74.1 million.

COVID Modifications

While the COVID-19 pandemic has had an impact on most industries, some have been more affected than others.  In accordance with Section 4013 of the CARES Act and related regulatory pronouncements, we have not accounted for modifications of loans affected by the pandemic as troubled debt restructurings nor have we designated them as past due or nonaccrual.  

As of July 16, 2021, there were six commercial loans totaling $7.3 million in total loan modifications related to the real estate rental and health care sectors.  These loans are scheduled to return to contractual payment terms within the next quarter.

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Earnings Per Common Share

6 Months Ended

Jun. 30, 2021

Earnings Per Common Share [Abstract]

Earnings Per Common Share

Note 3 – 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, such as restricted stock units (“RSUs”). At June 30, 2021, there were RSUs relating to 7,073 time-vested shares of common stock outstanding. There were no anti-dilutive shares at June 30, 2021 or 2020.

The following tables set forth the calculation of basic and diluted earnings per common share for the six and three months periods ended June 30, 2021 and 2020:

	Six months ended June 30,
	2021					2020
			Average	Per Share				Average	Per Share
(in thousands, except for per share amount)	Income		Shares	Amount		Income		Shares	Amount
Basic Earnings Per Share:
Net income	$	7,833	6,803	$	1.15	$	4,325	7,018	$	0.62
Diluted Earnings Per Share:
Net income	$	7,833	6,808	$	1.15	$	4,325	7,032	$	0.62

	Three months ended June 30,
	2021					2020
			Average	Per Share				Average	Per Share
(in thousands, except for per share amount)	Income		Shares	Amount		Income		Shares	Amount
Basic Earnings Per Share:
Net income	$	4,403	6,609	$	0.66	$	2,570	6,974	$	0.37
Diluted Earnings Per Share:
Net income	$	4,403	6,615	$	0.66	$	2,570	6,992	$	0.37

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Investments

6 Months Ended

Jun. 30, 2021

Investments [Abstract]

Investments

Note 4 – Investments

The following table shows a comparison of amortized cost and fair values of investment securities at June 30, 2021 and December 31, 2020:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI in AOCL
June 30, 2021
Available for Sale:
U.S. government agencies	$	59,703	$	367	$	1,949	$	58,121	$	—
Residential mortgage-backed agencies		32,027		—		545		31,482		—
Commercial mortgage-backed agencies		54,361		306		477		54,190		—
Collateralized mortgage obligations		73,559		144		1,547		72,156		—
Obligations of states and political subdivisions		9,417		417		—		9,834		—
Collateralized debt obligations		18,579		—		2,349		16,230		(1,415)
Total available for sale	$	247,646	$	1,234	$	6,867	$	242,013	$	(1,415)
Held to Maturity:
Residential mortgage-backed agencies	$	35,595	$	879	$	327	$	36,147	$	—
Commercial mortgage-backed agencies		9,747		397		—		10,144		—
Collateralized mortgage obligations		118		1		—		119		—
Obligations of states and political subdivisions		20,223		8,941		—		29,164		—
Total held to maturity	$	65,683	$	10,218	$	327	$	75,574	$	—
December 31, 2020
Available for Sale:
U.S. government agencies	$	75,856	$	899	$	322	$	76,433	$	—
Residential mortgage-backed agencies		22,999		—		100		22,899		—
Commercial mortgage-backed agencies		32,549		529		36		33,042		—
Collateralized mortgage obligations		70,372		266		1		70,637		—
Obligations of states and political subdivisions		10,144		470		—		10,614		—
Collateralized debt obligations		18,544		—		5,284		13,260		(3,839)
Total available for sale	$	230,464	$	2,164	$	5,743	$	226,885	$	(3,839)
Held to Maturity:
Residential mortgage-backed agencies	$	34,597	$	1,173	$	38	$	35,732	$	—
Commercial mortgage-backed agencies		11,716		587		—		12,303		—
Collateralized mortgage obligations		1,348		58		—		1,406		—
Obligations of states and political subdivisions		20,602		7,569		—		28,171		—
Total held to maturity	$	68,263	$	9,387	$	38	$	77,612	$	—

The following table shows the Corporation’s investment securities with gross unrealized losses and fair values at June 30, 2021 and December 31, 2020, 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		Number of Investments	Fair Value		Unrealized Losses		Number of Investments
June 30, 2021
Available for Sale:
U.S. government agencies	$	34,409	$	1,949	6	$	—	$	—	—
Residential mortgage-backed agencies		31,481		545	3		—		—	—
Commercial mortgage-backed agencies		24,748		477	3		—		—	—
Collateralized mortgage obligations		65,230		1,547	7		—		—	—
Collateralized debt obligations		—		—	—		16,230		2,349	9
Total available for sale	$	155,868	$	4,518	19	$	16,230	$	2,349	9
Held to Maturity:
Residential mortgage-backed agencies		8,268		327	3		—		—	—
Total held to maturity	$	8,268	$	327	3	$	—	$	—	—
December 31, 2020
Available for Sale:
U.S. government agencies	$	39,611	$	322	7	$	—	$	—	—
Residential mortgage-backed agencies		22,899		100	2		—		—	—
Commercial mortgage-backed agencies		16,034		36	1		—		—	—
Collateralized mortgage obligations		39,628		1	4		—		—	—
Collateralized debt obligations		—		—	—		13,260		5,284	9
Total available for sale	$	118,172	$	459	14	$	13,260	$	5,284	9
Held to Maturity:
Residential mortgage-backed agencies	$	2,973	$	38	1	$	—	$	—	—
Total held to maturity	$	2,973	$	38	1	$	—	$	—	—

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 the anticipated recovery of any decline in fair value. If neither applies, then any decline in the fair value below the security’s cost that is considered an other-than-temporary decline is split into two components. The first component 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).

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. 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 OTTI charges during the first six months of 2021 or 2020.

The Corporation believes that the investment securities that were in an unrealized loss position at June 30, 2021 do not represent other-than-temporary impairment. The Corporation does not intend to sell, nor is it anticipated that the Corporation will be required to sell, any of its impaired investment securities at a loss.

The following tables present a cumulative roll-forward of the amount of non-cash OTTI charges related to credit losses that have been recognized in earnings for the trust preferred securities held in the CDO portfolio during the six month and three month periods ended June 30, 2021 and 2020 that the Corporation does not intend to sell:

	Six Months Ended
	June 30,
(in thousands)	2021		2020
Balance of credit-related OTTI at January 1	$	2,244	$	2,446
Reduction for increases in cash flows expected to be collected		(101)		(101)
Balance of credit-related OTTI at June 30	$	2,143	$	2,345

	Three Months Ended
	June 30,
(in thousands)	2021		2020
Balance of credit-related OTTI at April 1	$	2,194	$	2,396
Reduction for increases in cash flows expected to be collected		(51)		(51)
Balance of credit-related OTTI at June 30	$	2,143	$	2,345

The amortized cost and estimated fair value of securities by contractual maturity at June 30, 2021 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.

	June 30, 2021
(in thousands)	Amortized Cost		Fair Value
Contractual Maturity
Available for Sale:
Due after one year through five years	$	4,411	$	4,489
Due after five years through ten years		10,063		10,238
Due after ten years		73,225		69,458
		87,699		84,185
Residential mortgage-backed agencies		32,027		31,482
Commercial mortgage-backed agencies		54,361		54,190
Collateralized mortgage obligations		73,559		72,156
Total available for sale	$	247,646	$	242,013
Held to Maturity:
Due after ten years	$	20,223	$	29,164
Residential mortgage-backed agencies		35,595		36,147
Commercial mortgage-backed agencies		9,747		10,144
Collateralized mortgage obligations		118		119
Total held to maturity	$	65,683	$	75,574

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Loans and Related Allowance for Loan Losses

6 Months Ended

Jun. 30, 2021

Loans and Related Allowance for Loan Losses [Abstract]

Loans and Related Allowance for Loan Losses

Note 5 – Loans and Related Allowance for Loan Losses

The following table summarizes the primary segments of the loan portfolio at June 30, 2021 and December 31, 2020:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Total
June 30, 2021
Individually evaluated for impairment	$	7,494	$	858	$	—	$	2,918	$	—	$	11,270
Collectively evaluated for impairment		354,447		130,772		229,852		361,490		57,512		1,134,073
Total loans	$	361,941	$	131,630	$	229,852	$	364,408	$	57,512	$	1,145,343
December 31, 2020
Individually evaluated for impairment	$	3,330	$	842	$	—	$	3,185	$	102	$	7,459
Collectively evaluated for impairment		365,846		116,119		266,745		375,985		35,658		1,160,353
Total loans	$	369,176	$	116,961	$	266,745	$	379,170	$	35,760	$	1,167,812

The commercial and industrial portfolio in the table above includes $74.1 million and $114.0 million of PPP loans at June 30, 2021 and December 31, 2020, respectively, which are 100% guaranteed by the SBA, and no allowance for loan loss (“ALL”) has been assigned to them.

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 June 30, 2021 and December 31, 2020:

(in thousands)	Pass		Special Mention		Substandard		Total
June 30, 2021
Commercial real estate
Non owner-occupied	$	171,876	$	10,255	$	6,340	$	188,471
All other CRE		164,282		2,531		6,657		173,470
Acquisition and development
1-4 family residential construction		20,179		—		—		20,179
All other A&D		110,998		—		453		111,451
Commercial and industrial		212,138		6,132		11,582		229,852
Residential mortgage
Residential mortgage - term		298,413		—		5,556		303,969
Residential mortgage - home equity		59,655		—		784		60,439
Consumer		57,420		—		92		57,512
Total	$	1,094,961	$	18,918	$	31,464	$	1,145,343
December 31, 2020
Commercial real estate
Non owner-occupied	$	178,670	$	5,526	$	6,322	$	190,518
All other CRE		166,504		5,664		6,490		178,658
Acquisition and development
1-4 family residential construction		18,920		—		—		18,920
All other A&D		97,648		17		376		98,041
Commercial and industrial		245,185		8,867		12,693		266,745
Residential mortgage
Residential mortgage - term		309,177		283		6,117		315,577
Residential mortgage - home equity		62,804		—		789		63,593
Consumer		35,648		3		109		35,760
Total	$	1,114,556	$	20,360	$	32,896	$	1,167,812

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans at June 30, 2021 and December 31, 2020:

(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
June 30, 2021
Commercial real estate
Non owner-occupied	$	183,896	$	—	$	—	$	—	$	—	$	4,575	$	188,471
All other CRE		172,913		—		—		—		—		557		173,470
Acquisition and development
1-4 family residential construction		20,179		—		—		—		—		—		20,179
All other A&D		111,045		—		—		5		5		401		111,451
Commercial and industrial		229,754		98		—		—		98		—		229,852
Residential mortgage
Residential mortgage - term		301,002		588		874		224		1,686		1,281		303,969
Residential mortgage - home equity		59,889		79		—		—		79		471		60,439
Consumer		57,280		124		64		44		232				57,512
Total	$	1,135,958	$	889	$	938	$	273	$	2,100	$	7,285	$	1,145,343
December 31, 2020
Commercial real estate
Non owner-occupied	$	190,510	$	—	$	—	$	—	$	—	$	8	$	190,518
All other CRE		177,360		408		—		—		408		890		178,658
Acquisition and development
1-4 family residential construction		18,920		—		—		—		—		—		18,920
All other A&D		97,660		5		—		10		15		366		98,041
Commercial and industrial		266,708		37		—		—		37		—		266,745
Residential mortgage
Residential mortgage - term		312,500		63		670		710		1,443		1,634		315,577
Residential mortgage - home equity		63,036		80		63		—		143		414		63,593
Consumer		35,473		230		26		4		260		27		35,760
Total	$	1,162,167	$	823	$	759	$	724	$	2,306	$	3,339	$	1,167,812

The current status of commercial and industrial loans includes $74.1 million and $114.0 million of PPP loans at June 30, 2021 and December 31, 2020, respectively.

Non-accrual loans that have been subject to partial charge-offs totaled $0.5 million at June 30, 2021 and $0.2 million at December 31, 2020.  Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $0.6 million at June 30, 2021 and $0.4 million at December 31, 2020.  Foreclosure and repossession activities were temporarily suspended as a result of COVID-19. As a percentage of the loan portfolio, accruing loans past due 30 days or more increased slightly to 0.19%, including PPP loans, or 0.20% excluding PPP loans, compared to 0.17% at June 30, 2020 and 0.20% at December 31, 2020. 

The following table summarizes the primary segments of the ALL at June 30, 2021 and December 31, 2020, 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
June 30, 2021
Individually evaluated for impairment	$	230	$	—	$	—	$	20	$	—	$	—	$	250
Collectively evaluated for impairment	$	5,445	$	2,500	$	2,944	$	4,839	$	590	$	500	$	16,818
Total ALL	$	5,675	$	2,500	$	2,944	$	4,859	$	590	$	500	$	17,068
December 31, 2020
Individually evaluated for impairment	$	4	$	13	$	—	$	40	$	—	$	—	$	57
Collectively evaluated for impairment	$	5,539	$	2,326	$	2,584	$	5,110	$	370	$	500	$	16,429
Total ALL	$	5,543	$	2,339	$	2,584	$	5,150	$	370	$	500	$	16,486

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 required at June 30, 2021 and December 31, 2020:

	Impaired Loans with Specific Allowance				Impaired Loans with No Specific Allowance		Total Impaired Loans
(in thousands)	Recorded Investment		Related Allowances		Recorded Investment		Recorded Investment (1)		Unpaid Principal Balance
June 30, 2021
Commercial real estate
Non owner-occupied	$	1,866	$	230	$	2,818	$	4,684	$	4,684
All other CRE		—		—		2,810		2,810		2,810
Acquisition and development
1-4 family residential construction		—		—		252		252		252
All other A&D		—		—		606		606		1,815
Commercial and industrial		—		—		—		—		2,214
Residential mortgage
Residential mortgage – term		440		15		2,007		2,447		2,627
Residential mortgage – home equity		46		5		425		471		503
Consumer		—		—		—		—		25
Total impaired loans	$	2,352	$	250	$	8,918	$	11,270	$	14,930
December 31, 2020
Commercial real estate
Non owner-occupied	$	111	$	4	$	8	$	119	$	119
All other CRE		—		—		3,211		3,211		3,211
Acquisition and development
1-4 family residential construction		—		—		266		266		266
All other A&D		276		13		300		576		1,724
Commercial and industrial		—		—		—		—		2,214
Residential mortgage
Residential mortgage – term		936		34		1,910		2,846		3,031
Residential mortgage – home equity		76		6		339		415		447
Consumer		—		—		26		26		51
Total impaired loans	$	1,399	$	57	$	6,060	$	7,459	$	11,063

(1) Recorded investment consists of unpaid principal balance, net of charge-offs, interest payments received applied to principal and unamortized deferred loan origination fees and cost.

The following tables present the activity in the ALL for the six and three month periods ended June 30, 2021 and 2020:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Unallocated		Total
ALL balance at January 1, 2021	$	5,543	$	2,339	$	2,584	$	5,150	$	370	$	500	$	16,486
Charge-offs		—		(81)		—		(82)		(175)		—		(338)
Recoveries		—		110		38		29		78		—		255
Provision		132		132		322		(238)		317		—		665
ALL balance at June 30, 2021	$	5,675	$	2,500	$	2,944	$	4,859	$	590	$	500	$	17,068
ALL balance at January 1, 2020	$	2,882	$	3,674	$	1,341	$	3,828	$	312	$	500	$	12,537
Charge-offs		—		(31)		(232)		(98)		(223)		—		(584)
Recoveries		66		22		16		48		88		—		240
Provision		1,579		833		872		1,328		209		—		4,821
ALL balance at June 30, 2020	$	4,527	$	4,498	$	1,997	$	5,106	$	386	$	500	$	17,014

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Unallocated		Total
ALL balance at April 1, 2021	$	5,404	$	2,423	$	2,831	$	5,028	$	368	$	500	$	16,554
Charge-offs		—		—		—		—		(95)		—		(95)
Recoveries		—		9		2		12		31		—		54
Provision		271		68		111		(181)		286		—		555
ALL balance at June 30, 2021	$	5,675	$	2,500	$	2,944	$	4,859	$	590	$	500	$	17,068
ALL balance at April 1, 2020	$	3,816	$	4,063	$	1,682	$	4,586	$	365	$	500	$	15,012
Charge-offs		—		(16)		(131)		—		(91)		—		(238)
Recoveries		—		8		1		22		42		—		73
Provision		711		443		445		498		70		—		2,167
ALL balance at June 30, 2020	$	4,527	$	4,498	$	1,997	$	5,106	$	386	$	500	$	17,014

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.

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

	Six months ended						Six months ended
	June 30, 2021						June 30, 2020
(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	$	3,165	$	6	$	—	$	138	$	3	$	—
All other CRE		3,058		69		—		3,182		73		—
Acquisition and development
1-4 family residential construction		259		6		—		285		6		—
All other A&D		599		6		—		8,436		6		1
Commercial and industrial		—		—		—		16		—		—
Residential mortgage
Residential mortgage – term		2,672		39		5		2,477		43		—
Residential mortgage – home equity		454		—		—		709		—		3
Consumer		17		—		—		14		—		—
Total	$	10,224	$	126	$	5	$	15,257	$	131	$	4

	Three months ended						Three months ended
	June 30, 2021						June 30, 2020
(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	$	4,689	$	3	$	—	$	132	$	1	$	—
All other CRE		2,982		34		—		3,258		36		—
Acquisition and development
1-4 family residential construction		255		3		—		282		3		—
All other A&D		611		3		—		8,515		3		—
Commercial and industrial		—		—		—		9		—		—
Residential mortgage
Residential mortgage – term		2,585		19		—		2,450		21		—
Residential mortgage – home equity		474		—		—		634		—		3
Consumer		11		—		—		19		—		—
Total	$	11,607	$	62	$	—	$	15,299	$	64	$	3

The Bank modifies loan terms in the normal course of business. Among other reasons, modifications might be made in an effort to retain the loan relationship, to remain competitive in the current interest rate environment and/or to re-amortize or extend the loan’s term to better match the loan’s payment stream with the borrower’s cash flow. A modified loan is considered to be a 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.

Section 4013 of the CARES Act allows financial institutions to suspend application of certain current TDRs accounting guidance under ASC 310-40 for loan modifications related to the COVID-19 pandemic made between March 1, 2020 and the earlier of January 1, 2022 or 60 days after the end of the COVID-19 national emergency, provided certain criteria are met. This relief can

be applied to loan modifications for borrowers that defer or delay the payment of principal or interest, or change the interest rate on the loan and that were not more than 30 days past due as of December 31, 2019. In April 2020, federal and state banking regulators issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus to provide further interpretation of when a borrower is experiencing financial difficulty, specifically indicating that if the modification is either short-term (i.e., up to nine months) or mandated by a federal or state government in response to the COVID-19 pandemic, the borrower is not experiencing financial difficulty under ASC 310-40. The Corporation continues to prudently work with borrowers negatively impacted by the COVID-19 pandemic while managing credit risks and recognizing appropriate allowance for credit losses on its loan portfolio. See Note 2 to the financial statements included elsewhere in this report for additional information.

There were 14 loans totaling $3.8 million and $4.0 million that were classified as TDRs at June 30, 2021 and December 31, 2020, respectively.

	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
Six months ended June 30, 2021
Commercial real estate
Non owner-occupied	—	$	—	1	$	109	—	$	—
All other CRE	—		—	—		—	—		—
Acquisition and development
1-4 family residential construction	—		—	—		—	—		—
All other A&D	—		—	—		—	—		—
Commercial and industrial	—		—	—		—	—		—
Residential mortgage
Residential mortgage – term	—		—	—		—	—		—
Residential mortgage – home equity	—		—	—		—	—		—
Consumer	—		—	—		—	—		—
Total	—	$	—	1	$	109	—	$	—

	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
Six months ended June 30, 2020
Commercial real estate
Non owner-occupied	—	$	—	—	$	—	—	$	—
All other CRE	—		—	—		—	1		2,226
Acquisition and development
1-4 family residential construction	—		—	—		—	—		—
All other A&D	—		—	1		217	—		—
Commercial and industrial	—		—	—		—	—		—
Residential mortgage
Residential mortgage – term	1		46	1		230	2		245
Residential mortgage – home equity	—		—	—		—	—		—
Consumer	—		—	—		—	—		—
Total	1	$	46	2	$	447	3	$	2,471

During the six month period ended June 30, 2021, there were no new TDRs and one existing TDR that had reached its modification maturity date and was re-modified. The Bank had no significant commitments to lend additional funds to TDRs.  During

the six month period ended June 30, 2020, there were no new TDRs but six existing TDRs that had reached their modification maturity dates were re-modified.  These modifications did not impact the ALL.  During the six month periods ended June 30, 2021 and 2020, there were no payment defaults.

	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 June 30, 2021
Commercial real estate
Non owner-occupied	—	$	—	1	$	109	—	$	—
All other CRE	—		—	—		—	—		—
Acquisition and development
1-4 family residential construction	—		—	—		—	—		—
All other A&D	—		—	—		—	—		—
Commercial and industrial	—		—	—		—	—		—
Residential mortgage
Residential mortgage – term	—		—	—		—	—		—
Residential mortgage – home equity	—		—	—		—	—		—
Consumer	—		—	—		—	—		—
Total	—	$	—	1	$	109	—	$	—
	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 June 30, 2020
Commercial real estate
Non owner-occupied	—	$	—	—	$	—	—	$	—
All other CRE	—		—	—		—	1		2,226
Acquisition and development
1-4 family residential construction	—		—	—		—	—		—
All other A&D	—		—	1		217	—		—
Commercial and industrial	—		—	—		—	—		—
Residential mortgage
Residential mortgage – term	1		46	1		230	2		245
Residential mortgage – home equity	—		—	—		—	—		—
Consumer	—		—	—		—	—		—
Total	1	$	46	2	$	447	3	$	2,471

During the three month period ended June 30, 2021, there were no new TDRs and one existing TDR that had reached its modification maturity date and was re-modified. The Bank had no significant commitments to lend additional funds to TDR borrowers.  During the three month period ended June 30, 2020, there were no new TDRs but six existing TDRs that had reached their modification maturity dates were re-modified.  These re-modifications did not impact the ALL.  During the three months ended June 30, 2021 and 2020, there were no payment defaults under TDRs.

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Other Real Estate Owned, Net

6 Months Ended

Jun. 30, 2021

Other Real Estate Owned, Net [Abstract]

Other Real Estate Owned, Net

Note 6 - Other Real Estate Owned, net

The following table presents the components of other real estate owned (“OREO”) at June 30, 2021 and December 31, 2020:

(in thousands)	June 30, 2021		December 31, 2020
Commercial real estate	$	900	$	945
Acquisition and development		5,856		8,441
Residential mortgage		—		—
Total OREO, net	$	6,756	$	9,386

The following table presents the activity in the OREO valuation allowance for the six and three month periods ended June 30, 2021 and 2020:

	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands)	2021		2020		2021		2020
Balance beginning of period	$	1,010	$	1,790	$	1,004	$	1,780
Fair value adjustment		(160)		39		(164)		13
Sales of OREO		(307)		(95)		(297)		(59)
Balance at end of period	$	543	$	1,734	$	543	$	1,734

The following table presents the components of OREO (income)/expenses, net, for the six and three month periods ended June 30, 2021 and 2020:

	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands)	2021		2020		2021		2020
Gains on sale of real estate, net	$	(596)	$	(21)	$	(105)	$	(11)
Fair value adjustment, net		(160)		39		(164)		13
Expenses, net		195		65		72		31
Rental and other income		(49)		(86)		(1)		(36)
Total OREO income, net	$	(610)	$	(3)	$	(198)	$	(3)

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2021

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

Note 7 – Fair Value of Financial Instruments

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.

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 basis and on a non-recurring basis, the fair value of assets as of June 30, 2021 are discussed in the paragraphs that follow.

Investments – The fair value of investments is determined using a market approach. As of June 30, 2021, the U.S. Government agencies, residential and commercial mortgage-backed securities, collateralized mortgage obligations, and state and political subdivisions bonds, excluding the tax increment financing (“TIF”) bonds, were 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 TIF bonds were classified as Level 3 within the valuation hierarchy as they are not openly traded.

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 June 30, 2021, the Corporation owned nine trust preferred securities with an amortized cost of $18.6 million and a fair value of $16.2 million. At June 30, 2021, the market for these securities is not active and the markets for similar securities are also not active. Recent developments in the credit markets have had a negative impact on the market for CDOs. Specifically, as COVID-19 developed, which led to deteriorating performance of credit instruments, investors became less willing to buy a range of structured credit products. The result was massive spread-widening across a wide range of credit instruments, and for CDO bonds in particular. At present, we believe that it is not currently economically feasible to form new CDOs or restructure existing CDOs, as the market for CDO bonds has effectively disappeared. The market values for these securities or any securities other than those issued or guaranteed by the U.S. Department of 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 June 30, 2021, (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 uses 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 June 30, 2021.

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.

At June 30, 2021, these conditions had a minimal impact on the trust preferred bonds, although there has been a significant effect on several asset classes in the equity and fixed income markets related to COVID-19. Management will continue to review assumptions as they relate to the impact of COVID-19 during the remainder of the year.

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 – Fair value of the collateral dependent loans is measured based on the loan’s observable market price or the fair value of the collateral (less estimated selling costs). Collateral may be real estate and/or business assets such as equipment, inventory and/or accounts receivable. The value of business equipment, inventory and accounts receivable collateral is based on either net book value of the business’ financial statements or evaluations/appraisals obtained by the Bank.   If necessary, these values may be discounted based on management’s review and analysis.  Appraised and reported values may be discounted based on management’s historical experience, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and client’s business. Collateral dependent loans are reviewed and evaluated on at least a quarterly basis for additional individual reserve and adjusted accordingly, based on the factors identified above.

Other real estate owned – OREO included in the table below are considered impaired with specific write-downs. OREO is adjusted to fair value upon acquisition of the real estate collateral. Subsequently, OREO is carried at the lower of carrying value or fair value. The estimated fair value for OREO included in Level 3 is determined by independent market based appraisals and other available market information, less costs to sell, that may be reduced further based on market expectations or an executed sales agreement. If the fair value of the collateral deteriorates subsequent to initial recognition, the Company records the OREO as a nonrecurring Level 3 adjustment. Valuation techniques are consistent with those techniques applied in prior periods.

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of June 30, 2021 and December 31, 2020, the significant unobservable inputs used in the fair value measurements were as follows:

(in thousands)	Fair Value at June 30, 2021		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale	$	16,230	Discounted Cash Flow	Discount Rate	LIBOR+ 3.75%
Non-recurring:
Impaired Loans	$	2,099	Market Comparable Properties	Marketability Discount	10.0% - 15.0% (1) (weighted avg 10.5%)
Other Real Estate Owned	$	443	Market Comparable Properties	Marketability Discount	15.0%

(in thousands)	Fair Value at December 31, 2020		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale	$	13,260	Discounted Cash Flow	Discount Rate	LIBOR+ 5.25%
Non-recurring:
Impaired Loans	$	1,465	Market Comparable Properties	Marketability Discount	10.0% - 15.0% (1) (weighted avg 12.5%)
Other Real Estate Owned	$	913	Market Comparable Properties	Marketability Discount	15.0%

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 June 30, 2021 and December 31, 2020 were as follows:

			Fair Value Measurements at June 30, 2021 Using
			Quoted
			Prices in	Significant
	Assets/(liabilities)		Active Markets	Other		Significant
	Measured at		for Identical	Observable		Unobservable
	Fair Value		Assets	Inputs		Inputs
(in thousands)	06/30/21		(Level 1)	(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	58,121		$	58,121
Residential mortgage-backed agencies	$	31,482		$	31,482
Commercial mortgage-backed agencies	$	54,190		$	54,190
Collateralized mortgage obligations	$	72,156		$	72,156
Obligations of states and political subdivisions	$	9,834		$	9,834
Collateralized debt obligations	$	16,230				$	16,230
Financial derivatives	$	(834)		$	(834)
Non-recurring:
Impaired loans	$	2,099				$	2,099
Other real estate owned	$	443				$	443

			Fair Value Measurements at December 31, 2020 Using
			Quoted
			Prices in	Significant
	Assets/(liabilities)		Active Markets	Other		Significant
	Measured at		for Identical	Observable		Unobservable
	Fair Value		Assets	Inputs		Inputs
(in thousands)	12/31/20		(Level 1)	(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	76,433		$	76,433
Residential mortgage-backed agencies	$	22,899		$	22,899
Commercial mortgage-backed agencies	$	33,042		$	33,042
Collateralized mortgage obligations	$	70,637		$	70,637
Obligations of states and political subdivisions	$	10,614		$	10,614
Collateralized debt obligations	$	13,260				$	13,260
Financial derivatives	$	(1,320)		$	(1,320)
Non-recurring:
Impaired loans	$	1,465				$	1,465
Other real estate owned	$	913				$	913

There were no transfers of assets between any of the fair value hierarchy for the six and three month periods ended June 30, 2021 or 2020.

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 six and three month periods ended June 30, 2021 and 2020:

	Fair Value Measurements
	Using Significant Unobservable Inputs
	(Level 3)
	Investment Securities
(in thousands)	Available for Sale
Beginning balance January 1, 2021	$	13,260
Total losses realized/unrealized:
Included in other comprehensive income		2,970
Ending balance June 30, 2021	$	16,230

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(in thousands)	Investment Securities Available for Sale
Beginning balance April 1, 2021	$	13,649
Total gains realized/unrealized:
Included in other comprehensive income		2,581
Ending balance June 30, 2021	$	16,230

	Fair Value Measurements
	Using Significant Unobservable Inputs
	(Level 3)
	Investment Securities
(in thousands)	Available for Sale
Beginning balance January 1, 2020	$	14,354
Total losses realized/unrealized:
Included in other comprehensive loss		(2,402)
Ending balance June 30, 2020	$	11,952

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(in thousands)	Investment Securities Available for Sale
Beginning balance April 1, 2020	$	12,380
Total losses realized/unrealized:
Included in other comprehensive income		(428)
Ending balance June 30, 2020	$	11,952

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 six and three month periods ended June 30, 2021 or 2020.

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 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:

	June 30, 2021				Fair Value Measurements
					Quoted
					Prices in		Significant
					Active Markets		Other		Significant
					for Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	190,949	$	190,949	$	190,949
Interest bearing deposits in banks		3,473		3,473		3,473
Investment securities - AFS		242,013		242,013			$	225,783	$	16,230
Investment securities - HTM		65,683		75,574				46,410		29,164
Restricted bank stock		3,658		3,658				3,658
Loans, net		1,125,817		1,121,938						1,121,938
Accrued interest receivable		5,201		5,201				765		4,436
Financial Liabilities:
Deposits - non-maturity		1,256,597		1,256,597				1,256,597
Deposits - time deposits		199,514		201,160				201,160
Financial derivatives		834		834				834
Short-term borrowed funds		49,406		49,406				49,406
Long-term borrowed funds		100,929		103,176				103,176
Accrued interest payable		329		329				329
Off balance sheet financial instruments		—		—		—

	December 31, 2020				Fair Value Measurements
					Quoted
					Prices in		Significant
					Active Markets		Other		Significant
					for Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	146,673	$	146,673	$	146,673
Interest bearing deposits in banks		2,759		2,759		2,759
Investment securities - AFS		226,885		226,885			$	213,625	$	13,260
Investment securities - HTM		68,263		77,612				49,442		28,170
Restricted bank stock		4,468		4,468				4,468
Loans, net		1,149,596		1,150,186						1,150,186
Accrued interest receivable		6,241		6,241				6,241
Financial Liabilities:
Deposits - non-maturity		1,194,140		1,194,140				1,194,140
Deposits - time deposits		228,226		231,241				231,241
Financial derivative		1,320		1,320				1,320
Short-term borrowed funds		49,160		49,160				49,160
Long-term borrowed funds		100,929		104,825				104,825
Accrued interest payable		391		391				391
Off balance sheet financial instruments		—		—		—

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Accumulated Other Comprehensive Loss

6 Months Ended

Jun. 30, 2021

Accumulated Other Comprehensive Loss [Abstract]

Accumulated Other Comprehensive Loss

Note 8 – 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, 2020, the three months ended March 31, 2021, and the three months ended June 30, 2021:

	Investment		Investment
	securities-		securities-		Investment
	with OTTI		all other		securities-		Cash Flow		Pension
(in thousands)	AFS		AFS		HTM		Hedge		Plan		SERP		Total
Accumulated OCL, net:
Balance - January 1, 2020	$	(2,542)	$	(853)	$	(899)	$	(85)	$	(20,417)	$	(1,175)	$	(25,971)
Other comprehensive income/(loss) before reclassifications		(587)		1,291		—		(869)		(3,262)		(625)		(4,052)
Amounts reclassified from accumulated other comprehensive loss		(148)		(463)		584		—		1,049		138		1,160
Balance - December 31, 2020	$	(3,277)	$	(25)	$	(315)	$	(954)	$	(22,630)	$	(1,662)	$	(28,863)
Other comprehensive income/(loss) before reclassifications		266		(5,202)		—		405		(139)		—		(4,670)
Amounts reclassified from accumulated other comprehensive loss		(37)		—		45		—		272		55		335
Balance - March 31, 2021	$	(3,048)	$	(5,227)	$	(270)	$	(549)	$	(22,497)	$	(1,607)	$	(33,198)
Other comprehensive income/(loss) before reclassifications		1,581		2,034		—		(34)		938		—		4,519
Amounts reclassified from accumulated other comprehensive loss		(37)		(113)		34		—		272		55		211
Balance - June 30, 2021	$	(1,504)	$	(3,306)	$	(236)	$	(583)	$	(21,287)	$	(1,552)	$	(28,468)

The following tables present the components of other comprehensive income/(loss) for the six and three month periods ended June 30, 2021 and 2020:

	Before		Tax
Components of Other Comprehensive Income	Tax		(Expense)
(in thousands)	Amount		Benefit		Net
For the six months ended June 30, 2021
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	2,523	$	(676)	$	1,847
Less: accretable yield recognized in income		101		(27)		74
Net unrealized gains on investments with OTTI		2,422		(649)		1,773
Available for sale securities – all other:
Unrealized holding losses		(4,327)		1,159		(3,168)
Less: gains recognized in income		154		(41)		113
Net unrealized losses on all other AFS securities		(4,481)		1,200		(3,281)
Held to maturity securities:
Less: gains recognized in income		—		—		—
Less: amortization recognized in income		(108)		29		(79)
Net unrealized gains on HTM securities		108		(29)		79
Cash flow hedges:
Unrealized holding gains		507		(136)		371
Pension Plan:
Unrealized net actuarial gain		1,090		(291)		799
Less: amortization of unrecognized loss		(744)		200		(544)
Net pension plan liability adjustment		1,834		(491)		1,343
SERP:
Unrealized net actuarial loss		—		—		—
Less: amortization of unrecognized loss		(150)		40		(110)
Net SERP liability adjustment		150		(40)		110
Other comprehensive income	$	540	$	(145)	$	395

	Before		Tax
Components of Other Comprehensive Loss	Tax		(Expense)
(in thousands)	Amount		Benefit		Net
For the six months ended June 30, 2020
Available for sale (AFS) securities with OTTI:
Unrealized holding losses	$	(1,956)	$	524	$	(1,432)
Less: accretable yield recognized in income		101		(27)		74
Net unrealized losses on investments with OTTI		(2,057)		551		(1,506)
Available for sale securities – all other:
Unrealized holding gains		2,767		(741)		2,026
Less: gains recognized in income		47		(13)		34
Net unrealized gains on all other AFS securities		2,720		(728)		1,992
Held to maturity securities:
Unrealized holding gains		—		—		—
Less: gains recognized in income		60		(16)		44
Less: amortization recognized in income		(735)		197		(538)
Net unrealized gains on HTM securities		675		(181)		494
Cash flow hedges:
Unrealized holding losses		(1,425)		381		(1,044)
Pension Plan:
Unrealized net actuarial loss		(2,786)		746		(2,040)
Less: amortization of unrecognized loss		(716)		192		(524)
Net pension plan liability adjustment		(2,070)		554		(1,516)
SERP:
Unrealized net actuarial loss		—		—		—
Less: amortization of unrecognized loss		(94)		25		(69)
Less: amortization of prior service costs		1		—		1
Net SERP liability adjustment		93		(25)		68
Other comprehensive loss	$	(2,064)	$	552	$	(1,512)

Components of Other Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the three months ended June 30, 2021
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	2,160	$	(579)	$	1,581
Less: accretable yield recognized in income		51		(14)		37
Net unrealized gains on investments with OTTI		2,109		(565)		1,544
Available for sale securities – all other:
Unrealized holding gains		2,778		(744)		2,034
Less: gains recognized in income		154		(41)		113
Net unrealized gains on all other AFS securities		2,624		(703)		1,921
Held to maturity securities:
Unrealized holding gains		—		—		—
Less: amortization recognized in income		(46)		12		(34)
Net unrealized gains on HTM securities		46		(12)		34
Cash flow hedges:
Unrealized holding gains		(47)		13		(34)
Pension Plan:
Unrealized net actuarial gain		1,280		(342)		938
Less: amortization of unrecognized loss		(372)		100		(272)
Net pension plan liability adjustment		1,652		(442)		1,210
SERP:
Unrealized net actuarial loss		—		—		—
Less: amortization of unrecognized loss		(73)		18		(55)
Net SERP liability adjustment		73		(18)		55
Other comprehensive income	$	6,457	$	(1,727)	$	4,730

Components of Other Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the three months ended June 30, 2020
Available for sale (AFS) securities with OTTI:
Unrealized holding losses	$	(333)	$	89	$	(244)
Less: accretable yield recognized in income		51		(14)		37
Net unrealized losses on investments with OTTI		(384)		103		(281)
Available for sale securities – all other:
Unrealized holding gains		877		(235)		642
Less: gains recognized in income		47		(13)		34
Net unrealized gains on all other AFS securities		830		(222)		608
Held to maturity securities:
Unrealized holding gains		—		—		—
Less: gains recognized in income		60		(16)		44
Less: amortization recognized in income		(662)		177		(485)
Net unrealized gains on HTM securities		602		(161)		441
Cash flow hedges:
Unrealized holding losses		(111)		30		(81)
Pension Plan:
Unrealized net actuarial gain		4,284		(1,147)		3,137
Less: amortization of unrecognized loss		(358)		96		(262)
Net pension plan liability adjustment		4,642		(1,243)		3,399
SERP:
Less: amortization of unrecognized loss		(47)		13		(34)
Less: amortization of prior service costs		—		—		—
Net SERP liability adjustment		47		(13)		34
Other comprehensive income	$	5,626	$	(1,506)	$	4,120

The following table presents the details of amounts reclassified from accumulated other comprehensive loss for the six and three month periods ended June 30, 2021 and 2020:

Amounts Reclassified from	Six Months Ended
Accumulated Other Comprehensive Loss	June 30,				Affected Line Item in the Statement
(in thousands)	2021		2020		Where Net Income is Presented
Net unrealized gains on available for sale investment securities with OTTI:
Accretable yield	$	101	$	101	Interest income on taxable investment securities
Taxes		(27)		(27)	Provision for income tax expense
	$	74	$	74	Net of tax
Net unrealized gains on available for sale investment securities - all others:
Gains on sales	$	154	$	47	Net gains
Taxes		(41)		(13)	Provision for income tax expense
	$	113	$	34	Net of tax
Net unrealized losses on held to maturity securities:
Amortization	$	(108)	$	(735)	Interest income on taxable investment securities
Gains on calls		—		60	Net gains
Taxes		29		181	Provision for income tax expense
	$	(79)	$	(494)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss	$	(744)	$	(716)	Other Expense
Taxes		200		192	Provision for income tax expense
	$	(544)	$	(524)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized loss	$	(150)	$	(94)	Other Expense
Amortization of prior service costs		—		1	Salaries and employee benefits
Taxes		40		25	Provision for income tax expense
	$	(110)	$	(68)	Net of tax
Total reclassifications for the period	$	(546)	$	(978)	Net of tax

Amounts Reclassified from	Three Months Ended
Accumulated Other Comprehensive Loss	June 30,				Affected Line Item in the Statement
(in thousands)	2021		2020		Where Net Income is Presented
Net unrealized gains on available for sale investment securities with OTTI:
Accretable Yield	$	51	$	51	Interest income on taxable investment securities
Taxes		(14)		(14)	Provision for income tax expense
	$	37	$	37	Net of tax
Net unrealized gains on available for sale investment securities - all others:
Gains on sales	$	154	$	47	Net gains
Taxes		(41)		(13)	Provision for income tax expense
	$	113	$	34	Net of tax
Net unrealized losses on held to maturity securities:
Amortization	$	(46)	$	(662)	Interest income on taxable investment securities
Gains on calls		—		60	Net gains
Taxes		12		161	Provision for income tax expense
	$	(34)	$	(441)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss	$	(372)	$	(358)	Other expense
Amortization of prior service costs		—		—	Salaries and employee benefits
Taxes		100		96	Provision for income tax expense
	$	(272)	$	(262)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized loss	$	(73)	$	(47)	Other expense
Amortization of prior service costs		—		—	Salaries and employee benefits
Taxes		18		13	Provision for income tax expense
	$	(55)	$	(34)	Net of tax
Total reclassifications for the period	$	(211)	$	(666)	Net of tax

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Employee Benefit Plans

6 Months Ended

Jun. 30, 2021

Employee Benefit Plans [Abstract]

Employee Benefit Plans

Note 9 – Employee Benefit Plans

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

	Six Months Ended				Three Months Ended
Pension Plan	June 30,				June 30,
(in thousands)	2021		2020		2021		2020
Service cost	$	78	$	112	$	39	$	56
Interest cost		711		813		355		406
Expected return on assets		(1,785)		(1,774)		(892)		(887)
Amortization of net actuarial loss		744		716		372		358
Net pension credit included in employee benefits and other expense	$	(252)	$	(133)	$	(126)	$	(67)

	Six Months Ended				Three Months Ended
Defined Benefit SERP	June 30,				June 30,
(in thousands)	2021		2020		2021		2020
Service cost	$	69	$	62	$	34	$	31
Interest cost		119		134		59		67
Amortization of recognized loss		151		94		76		47
Amortization of prior service cost		(1)		(1)		—		—
Net Defined Benefit SERP expense included in employee benefits and other expense	$	338	$	289	$	169	$	145

The service cost component of net periodic benefit cost is included in salaries and benefits and all other components of net periodic benefit cost are included in other expense in the Consolidated Statement of Operations for the Pension Plan and the Defined Benefit SERP.

The Pension Plan is a noncontributory defined benefit pension plan that 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 their (a) 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 Defined Benefit SERP in 2001 as an unfunded supplemental executive retirement plan. The Defined Benefit SERP is available only to a select group of management or highly compensated employees to provide supplemental retirement benefits in excess of limits imposed on qualified plans by federal tax law. Concurrent with the establishment of the Defined Benefit 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 Defined Benefit SERP benefits as well as other employee benefit costs.

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

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. No contributions were made to the Pension Plan during the first three months of 2021 and a contribution of $1.0 million was made during the first three months of 2020. The Corporation expects to fund the annual projected benefit payments for the Defined Benefit SERP from operations.

On January 9, 2015, First United Corporation and members of management who do not participate in the Defined Benefit SERP entered into participation agreements under the Deferred Compensation Plan, each styled as a Defined Contribution SERP Agreement (the “Contribution Agreement”). Pursuant to each Contribution Agreement, First United Corporation agreed, for each Plan Year (as defined in the Deferred Compensation Plan) in which it determines that it has been Profitable (as defined in the Contribution Agreement), to make a discretionary contribution to the participant’s Employer Account in an amount equal to 15% of the participant’s base salary level for such Plan Year, with the first Plan Year being the year ending December 31, 2015. The Contribution Agreement provides that the participant will become 100% vested in the amount maintained in his or her Employer Account upon the earliest to occur of the following events: (a) Normal Retirement (as defined in the Contribution Agreement); (b)  Separation from Service (as defined in the Contribution Agreement) following a Change of Control (as defined in the Deferred Compensation Plan) and subsequent Triggering Event (as defined in the Contribution Agreement); (c) Separation from Service due to a Disability (as defined in the Contribution Agreement); (d) with respect to a particular award of Employer Contribution Credits, the participant’s completion of 2 consecutive Years of Service (as defined in the Contribution 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 Contribution Agreement). In addition, the Contribution 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 Contribution 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 First United Corporation’s reasonable request, to provide at least six hours of transition services per month for 12 months following his or her Separation from Service (except in the case of death or Disability), except that only item (2) will apply in the event of a Separation from Service following a Change of Control and subsequent Triggering Event.

In January 2019, the Board approved discretionary contributions to four participants totaling $123,179. The contributions had a two year vesting period that ended on December 31, 2020. In January 2020, the Board of Directors of First United Corporation approved discretionary contributions to four participants totaling $126,058. The Corporation recorded $31,514 of related compensation expense for the first six months of 2021 and 2020.  The Corporation recorded $15,757 for the second quarters of 2021 and 2020, related to these contributions. In January 2021, the Board of Directors approved discretionary contributions to three participants totaling $101,257. The Corporation recorded $25,314 of related compensation expense for the first six months of 2021 and $12,657 for the second quarter of 2021 related to these contributions. Each discretionary contribution has a two year vesting period.

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Equity Compensation Plan Information

6 Months Ended

Jun. 30, 2021

Equity Compensation Plan Information [Abstract]

Equity Compensation Plan Information

Note 10 - Equity Compensation Plan Information

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

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

Stock based awards were made to non-employee directors in June 2020 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 June 2020, a total of 13,160 fully vested shares of common stock were issued to directors, which had a grant date fair market value of $14.52 per share. In July 2020, a total of 916 fully vested shares of common stock were issued to a new director, which had a grant date fair market value of $11.22 per share.  In May 2021, a total of 12,726 fully vested shares of common stock were issued to directors, which had a grant date fair value of $18.50 per share.  Director stock compensation expense was $132,860 for the six months ended June 30, 2021 and $106,681 for the six months ended June 30, 2020. Director stock compensation expense was $62,644 for the three months ended June 30, 2021 and $39,698 for the three months ended June 30, 2020.

Restricted Stock Units

On March 26, 2020, pursuant to the Corporation’s Long Term Incentive Plan (the "LTIP"), which is a sub-plan of the Equity Plan, the Compensation Committee of the Corporation’s Board of Directors (the "Committee") granted RSUs to the Corporation’s principal executive officer, its principal financial officer, and certain of its other executive officers. An RSU contemplates the issuance of shares of common stock of the Corporation if and when the RSU vests.

The RSUs granted to each of the foregoing officers consist of (a) a performance vesting award for a three year performance period ending December 31, 2021, (b) a performance vesting award for a three year performance period ending December 31, 2022, and (c) a time-vesting award that will vest ratably over a three year period beginning on March 26, 2021. Target performance levels were set based on the annual budget which supports the Company’s long-term objective of achieving high performance as compared to peers. Threshold performance is the minimum level of acceptable performance as defined by the Committee and maximum performance represented a level potentially achievable under ideal circumstances. Achievement of the threshold performance level

would result in each executive participant earning a payout at 50% of his or her respective target award opportunity. Achievement of the target performance level would result in the executive participant earning the target award and achievement at or above the maximum performance level would result in the executive participant earning 150% of the target opportunity. Actual results for any goal that falls between performance levels would be interpolated to calculate a proportionate award. For the performance period ending December 31, 2021, the RSUs’ performance goal is based on earnings per share for the year ending December 31, 2021. For the performance period ending December 31, 2022, the RSUs’ performance goals are based on earnings per share for the year ending December 31, 2022 and growth in tangible book value per share during the performance period. The threshold, target and maximum performance levels for these grants will be disclosed pursuant to Item 402 of Regulation S-K following the conclusion of the applicable performance period.

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

In the first quarter of 2020, RSUs relating to 19,934 performance vested shares and 5,070 time vested shares of common stock (target level) were granted, which had a grant date fair market value of $12.54 per share of common stock underlying each RSU. On March 26, 2021, 1,690 of the 5,070 time vested shares were issued to participants.  Stock compensation expense was $52,254 and $62,484 for the first six months of 2021 and 2020, respectively.  Stock compensation expense was $26,127 and $31,242 for the three month periods ended June 30, 2021 and 2020. Unrecognized compensation expense at June 30, 2021 related to unvested units was $136,300.

In May 2021, RSUs relating to 7,389 performance vested shares and 3,693 time vested shares of common stock (target level) were granted, which had a grant date fair market value of $17.93 per share of common stock underlying each RSU.  These RSUs are related to the 2021 plan granted in the second quarter of 2021. The performance vesting award for a three year performance period ending December 31, 2023, and a time-vesting award that will vest ratably over a three year period beginning on May 5, 2022. Stock compensation expense was $11,048 for the three and six month periods ended June 30, 2021.  Unrecognized compensation expense at June 30, 2021 related to unvested units was $187,806.

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Derivative Financial Instruments

6 Months Ended

Jun. 30, 2021

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

Note 11 – 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 loss.

In March 2016, the Corporation entered into four interest rate swap contracts totaling $30.0 million notional amount, hedging future cash flows associated with floating rate trust preferred debt. These contracts included a three year $5.0 million contract that matured on September 17, 2019, a five year $5.0 million contract that matured on March 17, 2021, a seven year $5.0 million contract that matures on March 17, 2023 and a 10 year $15.0 million contract that matures on March 17, 2026. As of June 30, 2021, $20.0 million notional amount remains.

The fair value of the interest rate swap contracts was $(834) thousand and $(1.3) million at June 30, 2021 and December 31, 2020, respectively.

For the six months ended June 30, 2021, the Corporation recorded an increase in the value of the derivatives of $485 thousand and the related deferred tax of $114 thousand in net accumulated other comprehensive loss to reflect the effective portion of cash flow hedges. ASC Subtopic 815-30 requires the net accumulated other comprehensive loss to be reclassified to earnings if the hedge becomes ineffective or is terminated. There was no hedge ineffectiveness recorded for the six months ended June 30, 2021. The Corporation does not expect any material losses relating to these hedges to be reclassified into earnings within the next 12 months.

Interest rate swap agreements are entered into with counterparties that meet established credit standards and the Corporation believes that the credit risk inherent in these contracts is not significant as of June 30, 2021.

The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the six and three month periods ended June 30, 2021 and 2020.

Derivative in Cash Flow Hedging Relationships
					Amount of gain or
					(loss) recognized in
			Amount of gain or		income or derivative
	Amount of gain or		(loss) reclassified from		(ineffective portion
	(loss) recognized in		accumulated OCI into		and amount excluded
	OCI on derivative		income (effective		from effectiveness
(in thousands)	(effective portion)		portion) (a)		testing) (b)
Interest rate contracts:
Six months ended:
June 30, 2021	$	371	$	—	$	—
June 30, 2020		(1,044)		—		—
Three months ended:
June 30, 2021	$	(34)	$	—	$	—
June 30, 2020		(81)		—		—

Notes:

(a) Reported as interest expense

(b) Reported as other income

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Revenue Recognition

6 Months Ended

Jun. 30, 2021

Revenue Recognition [Abstract]

Revenue Recognition

Note 12 – Revenue Recognition

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. Topic 606 is applicable to noninterest revenue streams such as wealth management, including trust and brokerage services, service charges on deposit accounts, interchange fee income – debit card income and gains/losses on OREO sales. Noninterest revenue streams in-scope of Topic 606 are discussed below.

Wealth Management

Trust and asset management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Corporation’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts. Optional services such as real estate sales and tax return preparation services are also available to existing trust and asset management customers. The Corporation’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered.

Service Charges on Deposit Accounts

Service charges on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. The Corporation’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account related fees are largely transactional based, and therefore, the Corporation’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

Interchange Fees – Debit and Credit Card Income

Fees, exchange, and other service charges are primarily comprised of debit and credit card income, ATM fees, merchant services income, and other service charges. Debit and credit card income is primarily comprised of interchange fees earned whenever the Corporation’s debit cards are processed through card payment networks such as Visa. ATM fees are primarily generated when a

Corporation cardholder uses a non-Corporation ATM or a non-Corporation cardholder uses a Corporation ATM. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Corporation’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the six and three month periods ended June 30, 2021 and June 30, 2020:

	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands)	2021		2020		2021		2020
Noninterest income
In-scope of Topic 606:
Service charges on deposit accounts	$	817	$	992	$	412	$	377
Other service charges		432		322		221		32
Trust department		4,275		3,484		2,034		1,731
Debit card income		1,723		1,314		913		680
Brokerage commissions		625		479		357		202
Noninterest income (in-scope of Topic 606)		7,872		6,591		3,937		3,022
Noninterest income (out-of-scope of Topic 606)		1,191		842		384		403
Total Noninterest Income	$	9,063	$	7,433	$	4,321	$	3,425

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Regulatory Capital Requirements

6 Months Ended

Jun. 30, 2021

Regulatory Capital Requirements [Abstract]

Regulatory Capital Requirements

Note 13 – Regulatory Capital Requirements

The following table presents our capital ratios for the six months ended June 30, 2021.

	June 30, 2021		December 31, 2020		Required for Capital Adequacy Purposes		Required to be Well Capitalized
Total Capital (to risk-weighted assets)
Consolidated	15.80	%	16.08	%	8.00	%	10.00	%
First United Bank & Trust	14.92	%	15.50	%	8.00	%	10.00	%
Tier 1 Capital (to risk-weighted assets)
Consolidated	14.55	%	14.83	%	6.00	%	8.00	%
First United Bank & Trust	13.66	%	14.25	%	6.00	%	8.00	%
Common Equity Tier 1 Capital (to risk-weighted assets)
Consolidated	12.37	%	12.61	%	4.50	%	6.50	%
First United Bank & Trust	13.66	%	14.25	%	4.50	%	6.50	%
Tier 1 Capital (to average assets)
Consolidated	9.94	%	10.36	%	4.00	%	5.00	%
First United Bank & Trust	9.20	%	9.81	%	4.00	%	5.00	%

As of June 30, 2021, the Bank and the Corporation are considered “well capitalized” under the regulatory framework for prompt corrective action.   The ratios at the Bank and Consolidated levels were negatively impacted primarily due to the increased funding from the Bank to the holding company related to the settlement expenses and the stock repurchase program.  The decrease at the Corporation level is related to the stock repurchase of 400,000 shares of common stock and the reduction to capital.

First United Corporation’s stock repurchase plan was initially adopted effective January 27, 2021, which authorized the repurchase of up to 400,000 shares of common stock of First United Corporation. The plan authorizes the repurchases to be conducted through open market or private transactions at such times and in such amounts per transaction as the Chairman and Chief Executive Officer of First United Corporation determines to be appropriate.  

On April 16, 2021 (the “Effective Date”), First United Corporation (the “Corporation”) entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Driver Opportunity Partners I LP (“Driver Partners”) under which, pursuant to the Corporation’s stock repurchase program authorized by the Corporation’s Board of Directors on January 27, 2021, the Corporation agreed to repurchase from Driver Partners 360,737 shares of the common stock, par value $0.01 per share, of the Corporation at a purchase price of $18.00 per share.

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Assets and Liabilities Subject to Enforceable Master Netting Arrangements

6 Months Ended

Jun. 30, 2021

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

Assets and Liabilities Subject to Enforceable Master Netting Arrangements

Note 14 – Assets and Liabilities Subject to Enforceable Master Netting Arrangements

Interest Rate 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 Assets or 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 12 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. government agency 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 Financial 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 assets and liabilities subject to an enforceable master netting arrangement or repurchase agreements at June 30, 2021 and December 31, 2020.

					Net Amounts		Gross Amounts
	Gross		Gross		of (Assets)/		Not Offset in the
	Amounts of		Amounts		Liabilities		Statement of Condition
	Recognized		Offset in the		Presented in				Cash
	(Assets)/		Statement of		the Statement		Financial		Collateral		Net
(in thousands)	Liabilities		Condition		of Condition		Instruments		Pledged		Amount
June 30, 2021
Interest Rate Swap Agreements	$	834	$	—	$	834	$	(834)	$	2,000	$	—
Repurchase Agreements	$	51,454	$	—	$	51,454	$	(51,454)	$	—	$	—
December 31, 2020
Interest Rate Swap Agreements	$	1,320	$	—	$	1,320	$	(1,320)	$	—	$	—
Repurchase Agreements	$	49,160	$	—	$	49,160	$	(49,160)	$	—	$	—

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Adoption of New Accounting Standards and Effects of New Accounting Pronouncements

6 Months Ended

Jun. 30, 2021

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

Adoption of New Accounting Standards and Effects of New Accounting Pronouncements

Note 15 – Adoption of New Accounting Standards and Effects of New Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“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 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 should consider historical information, current information, and supportable forecasts, including estimates of prepayments. ASU 2016-13 was originally effective for SEC filers for annual periods beginning after December 15, 2019, and interim periods within those annual periods. In November 2019, the FASB approved a delay of the required implementation date of ASU No. 2016-13 for smaller reporting companies, as defined by the Securities and Exchange Commission, including the Corporation, resulting in a required implementation date for the Corporation of January 1, 2023.

Management has formed a focus group consisting of multiple members from areas, including credit, finance, loan servicing, reporting, and information systems. The Corporation is completing its data and model validation analyses, with parallel processing of our existing allowance for loan losses model with the CECL model to follow. The Corporation is currently evaluating the provisions of ASU No. 2016-13 to determine the potential impact the new standard will have on the financial condition or results of operations.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848).”  The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendment only applies to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. The ASU is effective as of March 12, 2020 through December 31, 2022. The Corporation is in the process of evaluating the impact of this standard on the loan portfolio, investment portfolio, long term debt and interest rate swaps, 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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Earnings Per Common Share (Policy)

6 Months Ended

Jun. 30, 2021

Earnings Per Common Share [Abstract]

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, such as restricted stock units (“RSUs”). At June 30, 2021, there were RSUs relating to 7,073 time-vested shares of common stock outstanding. There were no anti-dilutive shares at June 30, 2021 or 2020.

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Investments (Policy)

6 Months Ended

Jun. 30, 2021

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 the anticipated recovery of any decline in fair value. If neither applies, then any decline in the fair value below the security’s cost that is considered an other-than-temporary decline is split into two components. The first component 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).

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Earnings Per Common Share (Tables)

6 Months Ended

Jun. 30, 2021

Earnings Per Common Share [Abstract]

Basic and Diluted Earnings Per Share

	Six months ended June 30,
	2021					2020
			Average	Per Share				Average	Per Share
(in thousands, except for per share amount)	Income		Shares	Amount		Income		Shares	Amount
Basic Earnings Per Share:
Net income	$	7,833	6,803	$	1.15	$	4,325	7,018	$	0.62
Diluted Earnings Per Share:
Net income	$	7,833	6,808	$	1.15	$	4,325	7,032	$	0.62

	Three months ended June 30,
	2021					2020
			Average	Per Share				Average	Per Share
(in thousands, except for per share amount)	Income		Shares	Amount		Income		Shares	Amount
Basic Earnings Per Share:
Net income	$	4,403	6,609	$	0.66	$	2,570	6,974	$	0.37
Diluted Earnings Per Share:
Net income	$	4,403	6,615	$	0.66	$	2,570	6,992	$	0.37

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Investments (Tables)

6 Months Ended

Jun. 30, 2021

Investments [Abstract]

Unrealized Gain (Loss) on Investments

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI in AOCL
June 30, 2021
Available for Sale:
U.S. government agencies	$	59,703	$	367	$	1,949	$	58,121	$	—
Residential mortgage-backed agencies		32,027		—		545		31,482		—
Commercial mortgage-backed agencies		54,361		306		477		54,190		—
Collateralized mortgage obligations		73,559		144		1,547		72,156		—
Obligations of states and political subdivisions		9,417		417		—		9,834		—
Collateralized debt obligations		18,579		—		2,349		16,230		(1,415)
Total available for sale	$	247,646	$	1,234	$	6,867	$	242,013	$	(1,415)
Held to Maturity:
Residential mortgage-backed agencies	$	35,595	$	879	$	327	$	36,147	$	—
Commercial mortgage-backed agencies		9,747		397		—		10,144		—
Collateralized mortgage obligations		118		1		—		119		—
Obligations of states and political subdivisions		20,223		8,941		—		29,164		—
Total held to maturity	$	65,683	$	10,218	$	327	$	75,574	$	—
December 31, 2020
Available for Sale:
U.S. government agencies	$	75,856	$	899	$	322	$	76,433	$	—
Residential mortgage-backed agencies		22,999		—		100		22,899		—
Commercial mortgage-backed agencies		32,549		529		36		33,042		—
Collateralized mortgage obligations		70,372		266		1		70,637		—
Obligations of states and political subdivisions		10,144		470		—		10,614		—
Collateralized debt obligations		18,544		—		5,284		13,260		(3,839)
Total available for sale	$	230,464	$	2,164	$	5,743	$	226,885	$	(3,839)
Held to Maturity:
Residential mortgage-backed agencies	$	34,597	$	1,173	$	38	$	35,732	$	—
Commercial mortgage-backed agencies		11,716		587		—		12,303		—
Collateralized mortgage obligations		1,348		58		—		1,406		—
Obligations of states and political subdivisions		20,602		7,569		—		28,171		—
Total held to maturity	$	68,263	$	9,387	$	38	$	77,612	$	—

Gross Unrealized Losses and Fair Values of Securities

	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrealized Losses		Number of Investments	Fair Value		Unrealized Losses		Number of Investments
June 30, 2021
Available for Sale:
U.S. government agencies	$	34,409	$	1,949	6	$	—	$	—	—
Residential mortgage-backed agencies		31,481		545	3		—		—	—
Commercial mortgage-backed agencies		24,748		477	3		—		—	—
Collateralized mortgage obligations		65,230		1,547	7		—		—	—
Collateralized debt obligations		—		—	—		16,230		2,349	9
Total available for sale	$	155,868	$	4,518	19	$	16,230	$	2,349	9
Held to Maturity:
Residential mortgage-backed agencies		8,268		327	3		—		—	—
Total held to maturity	$	8,268	$	327	3	$	—	$	—	—
December 31, 2020
Available for Sale:
U.S. government agencies	$	39,611	$	322	7	$	—	$	—	—
Residential mortgage-backed agencies		22,899		100	2		—		—	—
Commercial mortgage-backed agencies		16,034		36	1		—		—	—
Collateralized mortgage obligations		39,628		1	4		—		—	—
Collateralized debt obligations		—		—	—		13,260		5,284	9
Total available for sale	$	118,172	$	459	14	$	13,260	$	5,284	9
Held to Maturity:
Residential mortgage-backed agencies	$	2,973	$	38	1	$	—	$	—	—
Total held to maturity	$	2,973	$	38	1	$	—	$	—	—

Non-Cash OTTI Credit Losses Recognized in Earnings

	Six Months Ended
	June 30,
(in thousands)	2021		2020
Balance of credit-related OTTI at January 1	$	2,244	$	2,446
Reduction for increases in cash flows expected to be collected		(101)		(101)
Balance of credit-related OTTI at June 30	$	2,143	$	2,345

	Three Months Ended
	June 30,
(in thousands)	2021		2020
Balance of credit-related OTTI at April 1	$	2,194	$	2,396
Reduction for increases in cash flows expected to be collected		(51)		(51)
Balance of credit-related OTTI at June 30	$	2,143	$	2,345

Amortized Cost and Fair Values Classified by Contractual Maturity Date

	June 30, 2021
(in thousands)	Amortized Cost		Fair Value
Contractual Maturity
Available for Sale:
Due after one year through five years	$	4,411	$	4,489
Due after five years through ten years		10,063		10,238
Due after ten years		73,225		69,458
		87,699		84,185
Residential mortgage-backed agencies		32,027		31,482
Commercial mortgage-backed agencies		54,361		54,190
Collateralized mortgage obligations		73,559		72,156
Total available for sale	$	247,646	$	242,013
Held to Maturity:
Due after ten years	$	20,223	$	29,164
Residential mortgage-backed agencies		35,595		36,147
Commercial mortgage-backed agencies		9,747		10,144
Collateralized mortgage obligations		118		119
Total held to maturity	$	65,683	$	75,574

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Loans And Related Allowances For Loan Losses (Tables)

6 Months Ended

Jun. 30, 2021

Loans And Related Allowances For Loan Losses [Abstract]

Loan Portfolio Segments

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Total
June 30, 2021
Individually evaluated for impairment	$	7,494	$	858	$	—	$	2,918	$	—	$	11,270
Collectively evaluated for impairment		354,447		130,772		229,852		361,490		57,512		1,134,073
Total loans	$	361,941	$	131,630	$	229,852	$	364,408	$	57,512	$	1,145,343
December 31, 2020
Individually evaluated for impairment	$	3,330	$	842	$	—	$	3,185	$	102	$	7,459
Collectively evaluated for impairment		365,846		116,119		266,745		375,985		35,658		1,160,353
Total loans	$	369,176	$	116,961	$	266,745	$	379,170	$	35,760	$	1,167,812

Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating

(in thousands)	Pass		Special Mention		Substandard		Total
June 30, 2021
Commercial real estate
Non owner-occupied	$	171,876	$	10,255	$	6,340	$	188,471
All other CRE		164,282		2,531		6,657		173,470
Acquisition and development
1-4 family residential construction		20,179		—		—		20,179
All other A&D		110,998		—		453		111,451
Commercial and industrial		212,138		6,132		11,582		229,852
Residential mortgage
Residential mortgage - term		298,413		—		5,556		303,969
Residential mortgage - home equity		59,655		—		784		60,439
Consumer		57,420		—		92		57,512
Total	$	1,094,961	$	18,918	$	31,464	$	1,145,343
December 31, 2020
Commercial real estate
Non owner-occupied	$	178,670	$	5,526	$	6,322	$	190,518
All other CRE		166,504		5,664		6,490		178,658
Acquisition and development
1-4 family residential construction		18,920		—		—		18,920
All other A&D		97,648		17		376		98,041
Commercial and industrial		245,185		8,867		12,693		266,745
Residential mortgage
Residential mortgage - term		309,177		283		6,117		315,577
Residential mortgage - home equity		62,804		—		789		63,593
Consumer		35,648		3		109		35,760
Total	$	1,114,556	$	20,360	$	32,896	$	1,167,812

Loan Portfolio Summarized by the Past Due Status

(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
June 30, 2021
Commercial real estate
Non owner-occupied	$	183,896	$	—	$	—	$	—	$	—	$	4,575	$	188,471
All other CRE		172,913		—		—		—		—		557		173,470
Acquisition and development
1-4 family residential construction		20,179		—		—		—		—		—		20,179
All other A&D		111,045		—		—		5		5		401		111,451
Commercial and industrial		229,754		98		—		—		98		—		229,852
Residential mortgage
Residential mortgage - term		301,002		588		874		224		1,686		1,281		303,969
Residential mortgage - home equity		59,889		79		—		—		79		471		60,439
Consumer		57,280		124		64		44		232				57,512
Total	$	1,135,958	$	889	$	938	$	273	$	2,100	$	7,285	$	1,145,343
December 31, 2020
Commercial real estate
Non owner-occupied	$	190,510	$	—	$	—	$	—	$	—	$	8	$	190,518
All other CRE		177,360		408		—		—		408		890		178,658
Acquisition and development
1-4 family residential construction		18,920		—		—		—		—		—		18,920
All other A&D		97,660		5		—		10		15		366		98,041
Commercial and industrial		266,708		37		—		—		37		—		266,745
Residential mortgage
Residential mortgage - term		312,500		63		670		710		1,443		1,634		315,577
Residential mortgage - home equity		63,036		80		63		—		143		414		63,593
Consumer		35,473		230		26		4		260		27		35,760
Total	$	1,162,167	$	823	$	759	$	724	$	2,306	$	3,339	$	1,167,812

Primary Segments of the Allowance for Loan Loss

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Unallocated		Total
June 30, 2021
Individually evaluated for impairment	$	230	$	—	$	—	$	20	$	—	$	—	$	250
Collectively evaluated for impairment	$	5,445	$	2,500	$	2,944	$	4,839	$	590	$	500	$	16,818
Total ALL	$	5,675	$	2,500	$	2,944	$	4,859	$	590	$	500	$	17,068
December 31, 2020
Individually evaluated for impairment	$	4	$	13	$	—	$	40	$	—	$	—	$	57
Collectively evaluated for impairment	$	5,539	$	2,326	$	2,584	$	5,110	$	370	$	500	$	16,429
Total ALL	$	5,543	$	2,339	$	2,584	$	5,150	$	370	$	500	$	16,486

Impaired Loans and Related Interest Income by Loan Portfolio Class

	Impaired Loans with Specific Allowance				Impaired Loans with No Specific Allowance		Total Impaired Loans
(in thousands)	Recorded Investment		Related Allowances		Recorded Investment		Recorded Investment (1)		Unpaid Principal Balance
June 30, 2021
Commercial real estate
Non owner-occupied	$	1,866	$	230	$	2,818	$	4,684	$	4,684
All other CRE		—		—		2,810		2,810		2,810
Acquisition and development
1-4 family residential construction		—		—		252		252		252
All other A&D		—		—		606		606		1,815
Commercial and industrial		—		—		—		—		2,214
Residential mortgage
Residential mortgage – term		440		15		2,007		2,447		2,627
Residential mortgage – home equity		46		5		425		471		503
Consumer		—		—		—		—		25
Total impaired loans	$	2,352	$	250	$	8,918	$	11,270	$	14,930
December 31, 2020
Commercial real estate
Non owner-occupied	$	111	$	4	$	8	$	119	$	119
All other CRE		—		—		3,211		3,211		3,211
Acquisition and development
1-4 family residential construction		—		—		266		266		266
All other A&D		276		13		300		576		1,724
Commercial and industrial		—		—		—		—		2,214
Residential mortgage
Residential mortgage – term		936		34		1,910		2,846		3,031
Residential mortgage – home equity		76		6		339		415		447
Consumer		—		—		26		26		51
Total impaired loans	$	1,399	$	57	$	6,060	$	7,459	$	11,063

(1) Recorded investment consists of unpaid principal balance, net of charge-offs, interest payments received applied to principal and unamortized deferred loan origination fees and cost.

Allowance for Loan Losses Summarized by Loan Portfolio Segments

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Unallocated		Total
ALL balance at January 1, 2021	$	5,543	$	2,339	$	2,584	$	5,150	$	370	$	500	$	16,486
Charge-offs		—		(81)		—		(82)		(175)		—		(338)
Recoveries		—		110		38		29		78		—		255
Provision		132		132		322		(238)		317		—		665
ALL balance at June 30, 2021	$	5,675	$	2,500	$	2,944	$	4,859	$	590	$	500	$	17,068
ALL balance at January 1, 2020	$	2,882	$	3,674	$	1,341	$	3,828	$	312	$	500	$	12,537
Charge-offs		—		(31)		(232)		(98)		(223)		—		(584)
Recoveries		66		22		16		48		88		—		240
Provision		1,579		833		872		1,328		209		—		4,821
ALL balance at June 30, 2020	$	4,527	$	4,498	$	1,997	$	5,106	$	386	$	500	$	17,014

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Unallocated		Total
ALL balance at April 1, 2021	$	5,404	$	2,423	$	2,831	$	5,028	$	368	$	500	$	16,554
Charge-offs		—		—		—		—		(95)		—		(95)
Recoveries		—		9		2		12		31		—		54
Provision		271		68		111		(181)		286		—		555
ALL balance at June 30, 2021	$	5,675	$	2,500	$	2,944	$	4,859	$	590	$	500	$	17,068
ALL balance at April 1, 2020	$	3,816	$	4,063	$	1,682	$	4,586	$	365	$	500	$	15,012
Charge-offs		—		(16)		(131)		—		(91)		—		(238)
Recoveries		—		8		1		22		42		—		73
Provision		711		443		445		498		70		—		2,167
ALL balance at June 30, 2020	$	4,527	$	4,498	$	1,997	$	5,106	$	386	$	500	$	17,014

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

	Six months ended						Six months ended
	June 30, 2021						June 30, 2020
(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	$	3,165	$	6	$	—	$	138	$	3	$	—
All other CRE		3,058		69		—		3,182		73		—
Acquisition and development
1-4 family residential construction		259		6		—		285		6		—
All other A&D		599		6		—		8,436		6		1
Commercial and industrial		—		—		—		16		—		—
Residential mortgage
Residential mortgage – term		2,672		39		5		2,477		43		—
Residential mortgage – home equity		454		—		—		709		—		3
Consumer		17		—		—		14		—		—
Total	$	10,224	$	126	$	5	$	15,257	$	131	$	4

	Three months ended						Three months ended
	June 30, 2021						June 30, 2020
(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	$	4,689	$	3	$	—	$	132	$	1	$	—
All other CRE		2,982		34		—		3,258		36		—
Acquisition and development
1-4 family residential construction		255		3		—		282		3		—
All other A&D		611		3		—		8,515		3		—
Commercial and industrial		—		—		—		9		—		—
Residential mortgage
Residential mortgage – term		2,585		19		—		2,450		21		—
Residential mortgage – home equity		474		—		—		634		—		3
Consumer		11		—		—		19		—		—
Total	$	11,607	$	62	$	—	$	15,299	$	64	$	3

Troubled Debt Restructuring

	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
Six months ended June 30, 2021
Commercial real estate
Non owner-occupied	—	$	—	1	$	109	—	$	—
All other CRE	—		—	—		—	—		—
Acquisition and development
1-4 family residential construction	—		—	—		—	—		—
All other A&D	—		—	—		—	—		—
Commercial and industrial	—		—	—		—	—		—
Residential mortgage
Residential mortgage – term	—		—	—		—	—		—
Residential mortgage – home equity	—		—	—		—	—		—
Consumer	—		—	—		—	—		—
Total	—	$	—	1	$	109	—	$	—

	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
Six months ended June 30, 2020
Commercial real estate
Non owner-occupied	—	$	—	—	$	—	—	$	—
All other CRE	—		—	—		—	1		2,226
Acquisition and development
1-4 family residential construction	—		—	—		—	—		—
All other A&D	—		—	1		217	—		—
Commercial and industrial	—		—	—		—	—		—
Residential mortgage
Residential mortgage – term	1		46	1		230	2		245
Residential mortgage – home equity	—		—	—		—	—		—
Consumer	—		—	—		—	—		—
Total	1	$	46	2	$	447	3	$	2,471

	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 June 30, 2021
Commercial real estate
Non owner-occupied	—	$	—	1	$	109	—	$	—
All other CRE	—		—	—		—	—		—
Acquisition and development
1-4 family residential construction	—		—	—		—	—		—
All other A&D	—		—	—		—	—		—
Commercial and industrial	—		—	—		—	—		—
Residential mortgage
Residential mortgage – term	—		—	—		—	—		—
Residential mortgage – home equity	—		—	—		—	—		—
Consumer	—		—	—		—	—		—
Total	—	$	—	1	$	109	—	$	—
	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 June 30, 2020
Commercial real estate
Non owner-occupied	—	$	—	—	$	—	—	$	—
All other CRE	—		—	—		—	1		2,226
Acquisition and development
1-4 family residential construction	—		—	—		—	—		—
All other A&D	—		—	1		217	—		—
Commercial and industrial	—		—	—		—	—		—
Residential mortgage
Residential mortgage – term	1		46	1		230	2		245
Residential mortgage – home equity	—		—	—		—	—		—
Consumer	—		—	—		—	—		—
Total	1	$	46	2	$	447	3	$	2,471

XML

Other Real Estate Owned, Net (Tables)

6 Months Ended

Jun. 30, 2021

Other Real Estate Owned, Net [Abstract]

Components of OREO, Net of Related Valuation Allowance

(in thousands)	June 30, 2021		December 31, 2020
Commercial real estate	$	900	$	945
Acquisition and development		5,856		8,441
Residential mortgage		—		—
Total OREO, net	$	6,756	$	9,386

Schedule of Activity in OREO Valuation Allowance

	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands)	2021		2020		2021		2020
Balance beginning of period	$	1,010	$	1,790	$	1,004	$	1,780
Fair value adjustment		(160)		39		(164)		13
Sales of OREO		(307)		(95)		(297)		(59)
Balance at end of period	$	543	$	1,734	$	543	$	1,734

Schedule of Components of OREO Expenses, Net

	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands)	2021		2020		2021		2020
Gains on sale of real estate, net	$	(596)	$	(21)	$	(105)	$	(11)
Fair value adjustment, net		(160)		39		(164)		13
Expenses, net		195		65		72		31
Rental and other income		(49)		(86)		(1)		(36)
Total OREO income, net	$	(610)	$	(3)	$	(198)	$	(3)

XML

Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2021

Fair Value of Financial Instruments [Abstract]

Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques

(in thousands)	Fair Value at June 30, 2021		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale	$	16,230	Discounted Cash Flow	Discount Rate	LIBOR+ 3.75%
Non-recurring:
Impaired Loans	$	2,099	Market Comparable Properties	Marketability Discount	10.0% - 15.0% (1) (weighted avg 10.5%)
Other Real Estate Owned	$	443	Market Comparable Properties	Marketability Discount	15.0%

(in thousands)	Fair Value at December 31, 2020		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale	$	13,260	Discounted Cash Flow	Discount Rate	LIBOR+ 5.25%
Non-recurring:
Impaired Loans	$	1,465	Market Comparable Properties	Marketability Discount	10.0% - 15.0% (1) (weighted avg 12.5%)
Other Real Estate Owned	$	913	Market Comparable Properties	Marketability Discount	15.0%

NOTE:

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

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

			Fair Value Measurements at June 30, 2021 Using
			Quoted
			Prices in	Significant
	Assets/(liabilities)		Active Markets	Other		Significant
	Measured at		for Identical	Observable		Unobservable
	Fair Value		Assets	Inputs		Inputs
(in thousands)	06/30/21		(Level 1)	(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	58,121		$	58,121
Residential mortgage-backed agencies	$	31,482		$	31,482
Commercial mortgage-backed agencies	$	54,190		$	54,190
Collateralized mortgage obligations	$	72,156		$	72,156
Obligations of states and political subdivisions	$	9,834		$	9,834
Collateralized debt obligations	$	16,230				$	16,230
Financial derivatives	$	(834)		$	(834)
Non-recurring:
Impaired loans	$	2,099				$	2,099
Other real estate owned	$	443				$	443

			Fair Value Measurements at December 31, 2020 Using
			Quoted
			Prices in	Significant
	Assets/(liabilities)		Active Markets	Other		Significant
	Measured at		for Identical	Observable		Unobservable
	Fair Value		Assets	Inputs		Inputs
(in thousands)	12/31/20		(Level 1)	(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	76,433		$	76,433
Residential mortgage-backed agencies	$	22,899		$	22,899
Commercial mortgage-backed agencies	$	33,042		$	33,042
Collateralized mortgage obligations	$	70,637		$	70,637
Obligations of states and political subdivisions	$	10,614		$	10,614
Collateralized debt obligations	$	13,260				$	13,260
Financial derivatives	$	(1,320)		$	(1,320)
Non-recurring:
Impaired loans	$	1,465				$	1,465
Other real estate owned	$	913				$	913

Reconciliation of Fair Valued Assets Measured on a Recurring Basis

	Fair Value Measurements
	Using Significant Unobservable Inputs
	(Level 3)
	Investment Securities
(in thousands)	Available for Sale
Beginning balance January 1, 2021	$	13,260
Total losses realized/unrealized:
Included in other comprehensive income		2,970
Ending balance June 30, 2021	$	16,230

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(in thousands)	Investment Securities Available for Sale
Beginning balance April 1, 2021	$	13,649
Total gains realized/unrealized:
Included in other comprehensive income		2,581
Ending balance June 30, 2021	$	16,230

	Fair Value Measurements
	Using Significant Unobservable Inputs
	(Level 3)
	Investment Securities
(in thousands)	Available for Sale
Beginning balance January 1, 2020	$	14,354
Total losses realized/unrealized:
Included in other comprehensive loss		(2,402)
Ending balance June 30, 2020	$	11,952

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(in thousands)	Investment Securities Available for Sale
Beginning balance April 1, 2020	$	12,380
Total losses realized/unrealized:
Included in other comprehensive income		(428)
Ending balance June 30, 2020	$	11,952

Fair Value by Balance Sheet Grouping

	June 30, 2021				Fair Value Measurements
					Quoted
					Prices in		Significant
					Active Markets		Other		Significant
					for Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	190,949	$	190,949	$	190,949
Interest bearing deposits in banks		3,473		3,473		3,473
Investment securities - AFS		242,013		242,013			$	225,783	$	16,230
Investment securities - HTM		65,683		75,574				46,410		29,164
Restricted bank stock		3,658		3,658				3,658
Loans, net		1,125,817		1,121,938						1,121,938
Accrued interest receivable		5,201		5,201				765		4,436
Financial Liabilities:
Deposits - non-maturity		1,256,597		1,256,597				1,256,597
Deposits - time deposits		199,514		201,160				201,160
Financial derivatives		834		834				834
Short-term borrowed funds		49,406		49,406				49,406
Long-term borrowed funds		100,929		103,176				103,176
Accrued interest payable		329		329				329
Off balance sheet financial instruments		—		—		—

	December 31, 2020				Fair Value Measurements
					Quoted
					Prices in		Significant
					Active Markets		Other		Significant
					for Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	146,673	$	146,673	$	146,673
Interest bearing deposits in banks		2,759		2,759		2,759
Investment securities - AFS		226,885		226,885			$	213,625	$	13,260
Investment securities - HTM		68,263		77,612				49,442		28,170
Restricted bank stock		4,468		4,468				4,468
Loans, net		1,149,596		1,150,186						1,150,186
Accrued interest receivable		6,241		6,241				6,241
Financial Liabilities:
Deposits - non-maturity		1,194,140		1,194,140				1,194,140
Deposits - time deposits		228,226		231,241				231,241
Financial derivative		1,320		1,320				1,320
Short-term borrowed funds		49,160		49,160				49,160
Long-term borrowed funds		100,929		104,825				104,825
Accrued interest payable		391		391				391
Off balance sheet financial instruments		—		—		—

XML

Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2021

Accumulated Other Comprehensive Loss [Abstract]

Schedule of Accumulated Other Comprehensive Loss

	Investment		Investment
	securities-		securities-		Investment
	with OTTI		all other		securities-		Cash Flow		Pension
(in thousands)	AFS		AFS		HTM		Hedge		Plan		SERP		Total
Accumulated OCL, net:
Balance - January 1, 2020	$	(2,542)	$	(853)	$	(899)	$	(85)	$	(20,417)	$	(1,175)	$	(25,971)
Other comprehensive income/(loss) before reclassifications		(587)		1,291		—		(869)		(3,262)		(625)		(4,052)
Amounts reclassified from accumulated other comprehensive loss		(148)		(463)		584		—		1,049		138		1,160
Balance - December 31, 2020	$	(3,277)	$	(25)	$	(315)	$	(954)	$	(22,630)	$	(1,662)	$	(28,863)
Other comprehensive income/(loss) before reclassifications		266		(5,202)		—		405		(139)		—		(4,670)
Amounts reclassified from accumulated other comprehensive loss		(37)		—		45		—		272		55		335
Balance - March 31, 2021	$	(3,048)	$	(5,227)	$	(270)	$	(549)	$	(22,497)	$	(1,607)	$	(33,198)
Other comprehensive income/(loss) before reclassifications		1,581		2,034		—		(34)		938		—		4,519
Amounts reclassified from accumulated other comprehensive loss		(37)		(113)		34		—		272		55		211
Balance - June 30, 2021	$	(1,504)	$	(3,306)	$	(236)	$	(583)	$	(21,287)	$	(1,552)	$	(28,468)

Components of Comprehensive Income

	Before		Tax
Components of Other Comprehensive Income	Tax		(Expense)
(in thousands)	Amount		Benefit		Net
For the six months ended June 30, 2021
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	2,523	$	(676)	$	1,847
Less: accretable yield recognized in income		101		(27)		74
Net unrealized gains on investments with OTTI		2,422		(649)		1,773
Available for sale securities – all other:
Unrealized holding losses		(4,327)		1,159		(3,168)
Less: gains recognized in income		154		(41)		113
Net unrealized losses on all other AFS securities		(4,481)		1,200		(3,281)
Held to maturity securities:
Less: gains recognized in income		—		—		—
Less: amortization recognized in income		(108)		29		(79)
Net unrealized gains on HTM securities		108		(29)		79
Cash flow hedges:
Unrealized holding gains		507		(136)		371
Pension Plan:
Unrealized net actuarial gain		1,090		(291)		799
Less: amortization of unrecognized loss		(744)		200		(544)
Net pension plan liability adjustment		1,834		(491)		1,343
SERP:
Unrealized net actuarial loss		—		—		—
Less: amortization of unrecognized loss		(150)		40		(110)
Net SERP liability adjustment		150		(40)		110
Other comprehensive income	$	540	$	(145)	$	395

	Before		Tax
Components of Other Comprehensive Loss	Tax		(Expense)
(in thousands)	Amount		Benefit		Net
For the six months ended June 30, 2020
Available for sale (AFS) securities with OTTI:
Unrealized holding losses	$	(1,956)	$	524	$	(1,432)
Less: accretable yield recognized in income		101		(27)		74
Net unrealized losses on investments with OTTI		(2,057)		551		(1,506)
Available for sale securities – all other:
Unrealized holding gains		2,767		(741)		2,026
Less: gains recognized in income		47		(13)		34
Net unrealized gains on all other AFS securities		2,720		(728)		1,992
Held to maturity securities:
Unrealized holding gains		—		—		—
Less: gains recognized in income		60		(16)		44
Less: amortization recognized in income		(735)		197		(538)
Net unrealized gains on HTM securities		675		(181)		494
Cash flow hedges:
Unrealized holding losses		(1,425)		381		(1,044)
Pension Plan:
Unrealized net actuarial loss		(2,786)		746		(2,040)
Less: amortization of unrecognized loss		(716)		192		(524)
Net pension plan liability adjustment		(2,070)		554		(1,516)
SERP:
Unrealized net actuarial loss		—		—		—
Less: amortization of unrecognized loss		(94)		25		(69)
Less: amortization of prior service costs		1		—		1
Net SERP liability adjustment		93		(25)		68
Other comprehensive loss	$	(2,064)	$	552	$	(1,512)

Components of Other Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the three months ended June 30, 2021
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	2,160	$	(579)	$	1,581
Less: accretable yield recognized in income		51		(14)		37
Net unrealized gains on investments with OTTI		2,109		(565)		1,544
Available for sale securities – all other:
Unrealized holding gains		2,778		(744)		2,034
Less: gains recognized in income		154		(41)		113
Net unrealized gains on all other AFS securities		2,624		(703)		1,921
Held to maturity securities:
Unrealized holding gains		—		—		—
Less: amortization recognized in income		(46)		12		(34)
Net unrealized gains on HTM securities		46		(12)		34
Cash flow hedges:
Unrealized holding gains		(47)		13		(34)
Pension Plan:
Unrealized net actuarial gain		1,280		(342)		938
Less: amortization of unrecognized loss		(372)		100		(272)
Net pension plan liability adjustment		1,652		(442)		1,210
SERP:
Unrealized net actuarial loss		—		—		—
Less: amortization of unrecognized loss		(73)		18		(55)
Net SERP liability adjustment		73		(18)		55
Other comprehensive income	$	6,457	$	(1,727)	$	4,730

Components of Other Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the three months ended June 30, 2020
Available for sale (AFS) securities with OTTI:
Unrealized holding losses	$	(333)	$	89	$	(244)
Less: accretable yield recognized in income		51		(14)		37
Net unrealized losses on investments with OTTI		(384)		103		(281)
Available for sale securities – all other:
Unrealized holding gains		877		(235)		642
Less: gains recognized in income		47		(13)		34
Net unrealized gains on all other AFS securities		830		(222)		608
Held to maturity securities:
Unrealized holding gains		—		—		—
Less: gains recognized in income		60		(16)		44
Less: amortization recognized in income		(662)		177		(485)
Net unrealized gains on HTM securities		602		(161)		441
Cash flow hedges:
Unrealized holding losses		(111)		30		(81)
Pension Plan:
Unrealized net actuarial gain		4,284		(1,147)		3,137
Less: amortization of unrecognized loss		(358)		96		(262)
Net pension plan liability adjustment		4,642		(1,243)		3,399
SERP:
Less: amortization of unrecognized loss		(47)		13		(34)
Less: amortization of prior service costs		—		—		—
Net SERP liability adjustment		47		(13)		34
Other comprehensive income	$	5,626	$	(1,506)	$	4,120

Reclassification out of Accumulated Other Comprehensive Income

Amounts Reclassified from	Six Months Ended
Accumulated Other Comprehensive Loss	June 30,				Affected Line Item in the Statement
(in thousands)	2021		2020		Where Net Income is Presented
Net unrealized gains on available for sale investment securities with OTTI:
Accretable yield	$	101	$	101	Interest income on taxable investment securities
Taxes		(27)		(27)	Provision for income tax expense
	$	74	$	74	Net of tax
Net unrealized gains on available for sale investment securities - all others:
Gains on sales	$	154	$	47	Net gains
Taxes		(41)		(13)	Provision for income tax expense
	$	113	$	34	Net of tax
Net unrealized losses on held to maturity securities:
Amortization	$	(108)	$	(735)	Interest income on taxable investment securities
Gains on calls		—		60	Net gains
Taxes		29		181	Provision for income tax expense
	$	(79)	$	(494)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss	$	(744)	$	(716)	Other Expense
Taxes		200		192	Provision for income tax expense
	$	(544)	$	(524)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized loss	$	(150)	$	(94)	Other Expense
Amortization of prior service costs		—		1	Salaries and employee benefits
Taxes		40		25	Provision for income tax expense
	$	(110)	$	(68)	Net of tax
Total reclassifications for the period	$	(546)	$	(978)	Net of tax

Amounts Reclassified from	Three Months Ended
Accumulated Other Comprehensive Loss	June 30,				Affected Line Item in the Statement
(in thousands)	2021		2020		Where Net Income is Presented
Net unrealized gains on available for sale investment securities with OTTI:
Accretable Yield	$	51	$	51	Interest income on taxable investment securities
Taxes		(14)		(14)	Provision for income tax expense
	$	37	$	37	Net of tax
Net unrealized gains on available for sale investment securities - all others:
Gains on sales	$	154	$	47	Net gains
Taxes		(41)		(13)	Provision for income tax expense
	$	113	$	34	Net of tax
Net unrealized losses on held to maturity securities:
Amortization	$	(46)	$	(662)	Interest income on taxable investment securities
Gains on calls		—		60	Net gains
Taxes		12		161	Provision for income tax expense
	$	(34)	$	(441)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss	$	(372)	$	(358)	Other expense
Amortization of prior service costs		—		—	Salaries and employee benefits
Taxes		100		96	Provision for income tax expense
	$	(272)	$	(262)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized loss	$	(73)	$	(47)	Other expense
Amortization of prior service costs		—		—	Salaries and employee benefits
Taxes		18		13	Provision for income tax expense
	$	(55)	$	(34)	Net of tax
Total reclassifications for the period	$	(211)	$	(666)	Net of tax

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Employee Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2021

Pension [Member]

Components of Net Periodic Pension Plan Cost

	Six Months Ended				Three Months Ended
Pension Plan	June 30,				June 30,
(in thousands)	2021		2020		2021		2020
Service cost	$	78	$	112	$	39	$	56
Interest cost		711		813		355		406
Expected return on assets		(1,785)		(1,774)		(892)		(887)
Amortization of net actuarial loss		744		716		372		358
Net pension credit included in employee benefits and other expense	$	(252)	$	(133)	$	(126)	$	(67)

SERP [Member]

Components of Net Periodic Pension Plan Cost

	Six Months Ended				Three Months Ended
Defined Benefit SERP	June 30,				June 30,
(in thousands)	2021		2020		2021		2020
Service cost	$	69	$	62	$	34	$	31
Interest cost		119		134		59		67
Amortization of recognized loss		151		94		76		47
Amortization of prior service cost		(1)		(1)		—		—
Net Defined Benefit SERP expense included in employee benefits and other expense	$	338	$	289	$	169	$	145

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Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2021

Derivative Financial Instruments [Abstract]

Impact Of Derivative Financial Instruments

Derivative in Cash Flow Hedging Relationships
					Amount of gain or
					(loss) recognized in
			Amount of gain or		income or derivative
	Amount of gain or		(loss) reclassified from		(ineffective portion
	(loss) recognized in		accumulated OCI into		and amount excluded
	OCI on derivative		income (effective		from effectiveness
(in thousands)	(effective portion)		portion) (a)		testing) (b)
Interest rate contracts:
Six months ended:
June 30, 2021	$	371	$	—	$	—
June 30, 2020		(1,044)		—		—
Three months ended:
June 30, 2021	$	(34)	$	—	$	—
June 30, 2020		(81)		—		—

Notes:

(a) Reported as interest expense

(b) Reported as other income

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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2021

Revenue Recognition [Abstract]

Schedule of Noninterest Income Segregated by Revenue Streams In-Scope and Out-of-Scope of Topic 606

	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands)	2021		2020		2021		2020
Noninterest income
In-scope of Topic 606:
Service charges on deposit accounts	$	817	$	992	$	412	$	377
Other service charges		432		322		221		32
Trust department		4,275		3,484		2,034		1,731
Debit card income		1,723		1,314		913		680
Brokerage commissions		625		479		357		202
Noninterest income (in-scope of Topic 606)		7,872		6,591		3,937		3,022
Noninterest income (out-of-scope of Topic 606)		1,191		842		384		403
Total Noninterest Income	$	9,063	$	7,433	$	4,321	$	3,425

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Regulatory Capital Requirements (Tables)

6 Months Ended

Jun. 30, 2021

Regulatory Capital Requirements [Abstract]

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations

	June 30, 2021		December 31, 2020		Required for Capital Adequacy Purposes		Required to be Well Capitalized
Total Capital (to risk-weighted assets)
Consolidated	15.80	%	16.08	%	8.00	%	10.00	%
First United Bank & Trust	14.92	%	15.50	%	8.00	%	10.00	%
Tier 1 Capital (to risk-weighted assets)
Consolidated	14.55	%	14.83	%	6.00	%	8.00	%
First United Bank & Trust	13.66	%	14.25	%	6.00	%	8.00	%
Common Equity Tier 1 Capital (to risk-weighted assets)
Consolidated	12.37	%	12.61	%	4.50	%	6.50	%
First United Bank & Trust	13.66	%	14.25	%	4.50	%	6.50	%
Tier 1 Capital (to average assets)
Consolidated	9.94	%	10.36	%	4.00	%	5.00	%
First United Bank & Trust	9.20	%	9.81	%	4.00	%	5.00	%

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

6 Months Ended

Jun. 30, 2021

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

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

					Net Amounts		Gross Amounts
	Gross		Gross		of (Assets)/		Not Offset in the
	Amounts of		Amounts		Liabilities		Statement of Condition
	Recognized		Offset in the		Presented in				Cash
	(Assets)/		Statement of		the Statement		Financial		Collateral		Net
(in thousands)	Liabilities		Condition		of Condition		Instruments		Pledged		Amount
June 30, 2021
Interest Rate Swap Agreements	$	834	$	—	$	834	$	(834)	$	2,000	$	—
Repurchase Agreements	$	51,454	$	—	$	51,454	$	(51,454)	$	—	$	—
December 31, 2020
Interest Rate Swap Agreements	$	1,320	$	—	$	1,320	$	(1,320)	$	—	$	—
Repurchase Agreements	$	49,160	$	—	$	49,160	$	(49,160)	$	—	$	—

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COVID-19 (Narrative) (Details) $ in Thousands		6 Months Ended	12 Months Ended
	Jul. 16, 2021 USD ($) loan	Jun. 30, 2021 USD ($) loan	Dec. 31, 2020 USD ($) loan
Significant Event [Line Items]
Aggregate principal balance of loans forgiven		$ 140,500
PPP remaining balance		74,100
Loans Originated In 2020 [Member]
Significant Event [Line Items]
PPP loans originated			$ 148,500
Number of PPP loans processed | loan			1,174
Loans Originated In 2021 [Member]
Significant Event [Line Items]
PPP loans originated		$ 66,100
Number of PPP loans processed | loan		870
PPP average loan size originated		$ 80
COVID-19 Modifications [Member] | Commercial Loan [Member] | Subsequent Event [Member]
Significant Event [Line Items]
Number of loans in modification | loan	6
Loans modification amount	$ 7,300

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Earnings Per Common Share (Narrative) (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Shares of common stock outstanding	6,615,000	6,992,000	6,808,000	7,032,000
Restricted Stock Units (RSUs) [Member]
Antidilutive shares excluded from computation of earnings per share	0	0	0	0
Time-vested Shares [Member] | Restricted Stock Units (RSUs) [Member]
Shares of common stock outstanding			7,073

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Earnings Per Common Share (Basic and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2021	Jun. 30, 2020
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net Income	$ 4,403	$ 3,430	$ 2,570	$ 1,755	$ 7,833	$ 4,325
Basic Earnings Per Share: Average Shares	6,609		6,974		6,803	7,018
Diluted Earnings Per Share: Average Shares	6,615		6,992		6,808	7,032
Basic Earnings Per Share Amount	$ 0.66		$ 0.37		$ 1.15	$ 0.62
Diluted Earnings Per Share Anount	$ 0.66		$ 0.37		$ 1.15	$ 0.62

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Investments (Unrealized Gain (Loss) on Investments) (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Schedule of Investments [Line Items]
Amortized Cost	$ 247,646	$ 230,464
Gross Unrealized Gains	1,234	2,164
Gross Unrealized Losses	6,867	5,743
Fair Value	242,013	226,885
OTTI in AOCL	(1,415)	(3,839)
Held-to-maturity Amortized cost	65,683	68,263
Held-to-maturity Gross Unrealized Gains	10,218	9,387
Held-to-maturity Gross Unrealized Losses	327	38
Fair Value	75,574	77,612
U.S. government agencies [Member]
Schedule of Investments [Line Items]
Amortized Cost	59,703	75,856
Gross Unrealized Gains	367	899
Gross Unrealized Losses	1,949	322
Fair Value	58,121	76,433
Residential mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Amortized Cost	32,027	22,999
Gross Unrealized Losses	545	100
Fair Value	31,482	22,899
Held-to-maturity Amortized cost	35,595	34,597
Held-to-maturity Gross Unrealized Gains	879	1,173
Held-to-maturity Gross Unrealized Losses	327	38
Fair Value	36,147	35,732
Commercial mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Amortized Cost	54,361	32,549
Gross Unrealized Gains	306	529
Gross Unrealized Losses	477	36
Fair Value	54,190	33,042
Held-to-maturity Amortized cost	9,747	11,716
Held-to-maturity Gross Unrealized Gains	397	587
Fair Value	10,144	12,303
Collateralized mortgage obligations [Member]
Schedule of Investments [Line Items]
Amortized Cost	73,559	70,372
Gross Unrealized Gains	144	266
Gross Unrealized Losses	1,547	1
Fair Value	72,156	70,637
Held-to-maturity Amortized cost	118	1,348
Held-to-maturity Gross Unrealized Gains	1	58
Fair Value	119	1,406
Obligations of states and political subdivisions [Member]
Schedule of Investments [Line Items]
Amortized Cost	9,417	10,144
Gross Unrealized Gains	417	470
Fair Value	9,834	10,614
Held-to-maturity Amortized cost	20,223	20,602
Held-to-maturity Gross Unrealized Gains	8,941	7,569
Fair Value	29,164	28,171
Collateralized debt obligations [Member]
Schedule of Investments [Line Items]
Amortized Cost	18,579	18,544
Gross Unrealized Losses	2,349	5,284
Fair Value	16,230	13,260
OTTI in AOCL	$ (1,415)	$ (3,839)

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Investments (Gross Unrealized Losses and Fair Values of Securities) (Details) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Schedule of Investments [Line Items]
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 155,868,000	$ 118,172,000
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	$ 4,518,000	$ 459,000
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number of Investments	19	14
Available-for-Sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	$ 16,230,000	$ 13,260,000
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	$ 2,349,000	$ 5,284,000
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Investments	9	9
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 8,268,000	$ 2,973,000
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	$ 327,000	$ 38,000
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number Of Investments	3	1
U.S. government agencies [Member]
Schedule of Investments [Line Items]
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 34,409,000	$ 39,611,000
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	$ 1,949,000	$ 322,000
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number of Investments	6	7
Residential mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 31,481,000	$ 22,899,000
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	$ 545,000	$ 100,000
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number of Investments	3	2
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 8,268,000	$ 2,973,000
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	$ 327,000	$ 38,000
Held-to-Maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number Of Investments	3	1
Commercial mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 24,748,000	$ 16,034,000
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	$ 477,000	$ 36,000
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number of Investments	3	1
Collateralized mortgage obligations [Member]
Schedule of Investments [Line Items]
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 65,230,000	$ 39,628,000
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	$ 1,547,000	$ 1,000
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Number of Investments	7	4
Collateralized debt obligations [Member]
Schedule of Investments [Line Items]
Available-for-Sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	$ 16,230,000	$ 13,260,000
Available-for-Sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	$ 2,349,000	$ 5,284,000
Available-for-Sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Investments	9	9

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Investments (Non-Cash OTTI Credit Losses Recognized in Earnings) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Investments [Abstract]
Balance of credit-related OTTI, Beginning	$ 2,194	$ 2,396	$ 2,244	$ 2,446
Reduction for increases in cash flows expected to be collected	(51)	(51)	(101)	(101)
Balance of credit-related OTTI, Ending	$ 2,143	$ 2,345	$ 2,143	$ 2,345

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Investments (Amortized Cost and Fair Values Classified by Contractual Maturity Date) (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Schedule of Investments [Line Items]
Amortized Cost: Due after one year through five years	$ 4,411
Amortized Cost: Due after five years through ten years	10,063
Amortized Cost: Due after ten years	73,225
Available For Sale Debt Maturities Amortized Cost Sub Total	87,699
Fair Value: Due after one year through five years	4,489
Fair Value: Due after five years through ten years	10,238
Fair Value: Due after ten years	69,458
Available For Sale Debt Maturities Fair Value Sub Total	84,185
Available-for-sale Securities, Amortized Cost Basis	247,646	$ 230,464
Available-for-sale Securities	242,013	226,885
Amortized Cost: Due after ten years, Held to maturity	20,223
Fair Value: Due after ten years, Held to maturity	29,164
Held-to-maturity Securities	65,683	68,263
Held-to-maturity securities, fair value	75,574	77,612
Residential mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Available-for-sale Securities, Amortized Cost Basis	32,027	22,999
Available-for-sale Securities	31,482	22,899
Held-to-maturity Securities	35,595	34,597
Held-to-maturity securities, fair value	36,147	35,732
Commercial mortgage-backed agencies [Member]
Schedule of Investments [Line Items]
Available-for-sale Securities, Amortized Cost Basis	54,361	32,549
Available-for-sale Securities	54,190	33,042
Held-to-maturity Securities	9,747	11,716
Held-to-maturity securities, fair value	10,144	12,303
Collateralized mortgage obligations [Member]
Schedule of Investments [Line Items]
Available-for-sale Securities, Amortized Cost Basis	73,559	70,372
Available-for-sale Securities	72,156	70,637
Held-to-maturity Securities	118	1,348
Held-to-maturity securities, fair value	$ 119	$ 1,406

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Loans And Related Allowances For Loan Losses (Narrative) (Details)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2021 USD ($) contract	Jun. 30, 2020 USD ($) contract	Jun. 30, 2021 USD ($) contract loan	Jun. 30, 2020 USD ($) contract	Dec. 31, 2020 USD ($)	Mar. 31, 2021 USD ($)	Mar. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Financing Receivable, Modifications [Line Items]
Allowance for loan losses	$ 17,068,000	$ 17,014,000	$ 17,068,000	$ 17,014,000	$ 16,486,000	$ 16,554,000	$ 15,012,000	$ 12,537,000
Nonaccrual loans	7,285,000		7,285,000		3,339,000
Financing receivable, modifications, subsequent default, recorded investment			0	$ 0
Partial Charge Off [Member]
Financing Receivable, Modifications [Line Items]
Nonaccrual loans	$ 500,000		$ 500,000		200,000
New TDRs [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, number of contracts | contract	0	0	0	0
Existing TDRs [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, number of contracts | contract	1	6	1	6
Troubled Debt Restructuring [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, number of contracts | loan			14
Financing receivable, modifications, recorded investment	$ 3,800,000		$ 3,800,000		4,000,000.0
Additional funds	0		0
Financing receivable, modifications, subsequent default, recorded investment		$ 0
Commercial real estate- non owner-occupied [Member]
Financing Receivable, Modifications [Line Items]
Nonaccrual loans	4,575,000		4,575,000		8,000
Commercial real estate- all other CRE [Member]
Financing Receivable, Modifications [Line Items]
Nonaccrual loans	557,000		557,000		890,000
Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Modifications [Line Items]
Loans in process of foreclosure	600,000		$ 600,000		$ 400,000
Percentage of loan portfolio accruing loans including PPP loans past due 30 days or more			0.19%		0.17%
Percentage of loan portfolio accruing loans excluding PPP loans past due 30 days or more			0.20%		0.20%
Acquisition and development- All other A&D [Member]
Financing Receivable, Modifications [Line Items]
Nonaccrual loans	401,000		$ 401,000		$ 366,000
Commercial and industrial [Member]
Financing Receivable, Modifications [Line Items]
PPP loans					114,000,000.0
Allowance for loan losses	2,944,000	1,997,000	2,944,000	$ 1,997,000	2,584,000	2,831,000	1,682,000	1,341,000
Commercial and industrial [Member] | CARES Act [Member]
Financing Receivable, Modifications [Line Items]
PPP loans	74,100,000		$ 74,100,000		$ 114,000,000.0
PPP loans SBA guarantee percent			100.00%		100.00%
Allowance for loan losses	0		$ 0		$ 0
Residential mortgage- term [Member]
Financing Receivable, Modifications [Line Items]
Nonaccrual loans	1,281,000		1,281,000		1,634,000
Residential mortgage- home equity [Member]
Financing Receivable, Modifications [Line Items]
Nonaccrual loans	471,000		471,000		414,000
Consumer [Member]
Financing Receivable, Modifications [Line Items]
Allowance for loan losses	$ 590,000	$ 386,000	$ 590,000	$ 386,000	370,000	$ 368,000	$ 365,000	$ 312,000
Nonaccrual loans					$ 27,000

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Loans And Related Allowances For Loan Losses (Loan Portfolio Segments) (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	$ 11,270	$ 7,459
Collectively evaluated for impairment	1,134,073	1,160,353
Total Loans	1,145,343	1,167,812
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	7,494	3,330
Collectively evaluated for impairment	354,447	365,846
Total Loans	361,941	369,176
Acquisition and Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	858	842
Collectively evaluated for impairment	130,772	116,119
Total Loans	131,630	116,961
Commercial and industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Collectively evaluated for impairment	229,852	266,745
Total Loans	229,852	266,745
Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	2,918	3,185
Collectively evaluated for impairment	361,490	375,985
Total Loans	364,408	379,170
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment		102
Collectively evaluated for impairment	57,512	35,658
Total Loans	$ 57,512	$ 35,760

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Loans And Related Allowances For Loan Losses (Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating) (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 1,145,343	$ 1,167,812
Commercial real estate- non owner-occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	188,471	190,518
Commercial real estate- all other CRE [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	173,470	178,658
Acquisition and development- 1-4 family residential construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	20,179	18,920
Acquisition and development- All other A&D [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	111,451	98,041
Commercial and industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	229,852	266,745
Residential mortgage- term [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	303,969	315,577
Residential mortgage- home equity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	60,439	63,593
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	57,512	35,760
Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	1,094,961	1,114,556
Pass [Member] | Commercial real estate- non owner-occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	171,876	178,670
Pass [Member] | Commercial real estate- all other CRE [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	164,282	166,504
Pass [Member] | Acquisition and development- 1-4 family residential construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	20,179	18,920
Pass [Member] | Acquisition and development- All other A&D [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	110,998	97,648
Pass [Member] | Commercial and industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	212,138	245,185
Pass [Member] | Residential mortgage- term [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	298,413	309,177
Pass [Member] | Residential mortgage- home equity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	59,655	62,804
Pass [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	57,420	35,648
Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	18,918	20,360
Special Mention [Member] | Commercial real estate- non owner-occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	10,255	5,526
Special Mention [Member] | Commercial real estate- all other CRE [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	2,531	5,664
Special Mention [Member] | Acquisition and development- All other A&D [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans		17
Special Mention [Member] | Commercial and industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	6,132	8,867
Special Mention [Member] | Residential mortgage- term [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans		283
Special Mention [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans		3
Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	31,464	32,896
Substandard [Member] | Commercial real estate- non owner-occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	6,340	6,322
Substandard [Member] | Commercial real estate- all other CRE [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	6,657	6,490
Substandard [Member] | Acquisition and development- All other A&D [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	453	376
Substandard [Member] | Commercial and industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	11,582	12,693
Substandard [Member] | Residential mortgage- term [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	5,556	6,117
Substandard [Member] | Residential mortgage- home equity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	784	789
Substandard [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 92	$ 109

XML

Loans And Related Allowances For Loan Losses (Loan Portfolio Summarized by the Past Due Status) (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	$ 1,135,958	$ 1,162,167
Total Past Due and Accruing	2,100	2,306
Non-Accrual	7,285	3,339
Loans	1,145,343	1,167,812
Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due	889	823
Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due	938	759
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due	273	724
Commercial real estate- non owner-occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	183,896	190,510
Non-Accrual	4,575	8
Loans	188,471	190,518
Commercial real estate- all other CRE [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	172,913	177,360
Total Past Due and Accruing		408
Non-Accrual	557	890
Loans	173,470	178,658
Commercial real estate- all other CRE [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due		408
Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	20,179	18,920
Loans	20,179	18,920
Acquisition and development- All other A&D [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	111,045	97,660
Total Past Due and Accruing	5	15
Non-Accrual	401	366
Loans	111,451	98,041
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]
Past due		5
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]
Past due	5	10
Commercial and industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	229,754	266,708
Total Past Due and Accruing	98	37
Loans	229,852	266,745
Commercial and industrial [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due	98	37
Residential mortgage- term [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	301,002	312,500
Total Past Due and Accruing	1,686	1,443
Non-Accrual	1,281	1,634
Loans	303,969	315,577
Residential mortgage- term [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due	588	63
Residential mortgage- term [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due	874	670
Residential mortgage- term [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due	224	710
Residential mortgage- home equity [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	59,889	63,036
Total Past Due and Accruing	79	143
Non-Accrual	471	414
Loans	60,439	63,593
Residential mortgage- home equity [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due	79	80
Residential mortgage- home equity [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due		63
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	57,280	35,473
Total Past Due and Accruing	232	260
Non-Accrual		27
Loans	57,512	35,760
Consumer [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due	124	230
Consumer [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due	64	26
Consumer [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due	$ 44	$ 4

XML

Loans And Related Allowances For Loan Losses (Primary Segments of the Allowance for Loan Loss) (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	$ 250		$ 57
Collectively evaluated for impairment	16,818		16,429
Total Allowance For Loan Losses	17,068	$ 16,554	16,486	$ 17,014	$ 15,012	$ 12,537
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	230		4
Collectively evaluated for impairment	5,445		5,539
Total Allowance For Loan Losses	5,675	5,404	5,543	4,527	3,816	2,882
Acquisition and Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment			13
Collectively evaluated for impairment	2,500		2,326
Total Allowance For Loan Losses	2,500	2,423	2,339	4,498	4,063	3,674
Commercial and industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment	2,944		2,584
Total Allowance For Loan Losses	2,944	2,831	2,584	1,997	1,682	1,341
Residential Mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	20		40
Collectively evaluated for impairment	4,839		5,110
Total Allowance For Loan Losses	4,859	5,028	5,150	5,106	4,586	3,828
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment	590		370
Total Allowance For Loan Losses	590	368	370	386	365	312
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment	500		500
Total Allowance For Loan Losses	$ 500	$ 500	$ 500	$ 500	$ 500	$ 500

XML

Loans And Related Allowances For Loan Losses (Impaired Loans and Related Interest Income by Loan Portfolio Class) (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	$ 2,352	$ 1,399
Impaired Loans with Specific Allowance: Related Allowance	250	57
Impaired Loans with No Specific Allowance: Recorded Investment	8,918	6,060
Total Impaired Loans: Recorded Investment	11,270	7,459
Unpaid Principal Balance	14,930	11,063
Commercial real estate- non owner-occupied [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	1,866	111
Impaired Loans with Specific Allowance: Related Allowance	230	4
Impaired Loans with No Specific Allowance: Recorded Investment	2,818	8
Total Impaired Loans: Recorded Investment	4,684	119
Unpaid Principal Balance	4,684	119
Commercial real estate- all other CRE [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Specific Allowance: Recorded Investment	2,810	3,211
Total Impaired Loans: Recorded Investment	2,810	3,211
Unpaid Principal Balance	2,810	3,211
Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Specific Allowance: Recorded Investment	252	266
Total Impaired Loans: Recorded Investment	252	266
Unpaid Principal Balance	252	266
Acquisition and development- All other A&D [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment		276
Impaired Loans with Specific Allowance: Related Allowance		13
Impaired Loans with No Specific Allowance: Recorded Investment	606	300
Total Impaired Loans: Recorded Investment	606	576
Unpaid Principal Balance	1,815	1,724
Commercial and industrial [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	2,214	2,214
Residential mortgage- term [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	440	936
Impaired Loans with Specific Allowance: Related Allowance	15	34
Impaired Loans with No Specific Allowance: Recorded Investment	2,007	1,910
Total Impaired Loans: Recorded Investment	2,447	2,846
Unpaid Principal Balance	2,627	3,031
Residential mortgage- home equity [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	46	76
Impaired Loans with Specific Allowance: Related Allowance	5	6
Impaired Loans with No Specific Allowance: Recorded Investment	425	339
Total Impaired Loans: Recorded Investment	471	415
Unpaid Principal Balance	503	447
Consumer [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Specific Allowance: Recorded Investment		26
Total Impaired Loans: Recorded Investment		26
Unpaid Principal Balance	$ 25	$ 51

XML

Loans And Related Allowances For Loan Losses (Allowance for Loan Losses Summarized by Loan Portfolio Segments) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	$ 16,554	$ 15,012	$ 16,486	$ 12,537
Charge-offs	(95)	(238)	(338)	(584)
Recoveries	54	73	255	240
Provision	555	2,167	665	4,821
ALL Ending Balance	17,068	17,014	17,068	17,014
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	5,404	3,816	5,543	2,882
Recoveries				66
Provision	271	711	132	1,579
ALL Ending Balance	5,675	4,527	5,675	4,527
Acquisition and Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	2,423	4,063	2,339	3,674
Charge-offs		(16)	(81)	(31)
Recoveries	9	8	110	22
Provision	68	443	132	833
ALL Ending Balance	2,500	4,498	2,500	4,498
Commercial and industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	2,831	1,682	2,584	1,341
Charge-offs		(131)		(232)
Recoveries	2	1	38	16
Provision	111	445	322	872
ALL Ending Balance	2,944	1,997	2,944	1,997
Residential Mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	5,028	4,586	5,150	3,828
Charge-offs			(82)	(98)
Recoveries	12	22	29	48
Provision	(181)	498	(238)	1,328
ALL Ending Balance	4,859	5,106	4,859	5,106
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	368	365	370	312
Charge-offs	(95)	(91)	(175)	(223)
Recoveries	31	42	78	88
Provision	286	70	317	209
ALL Ending Balance	590	386	590	386
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	500	500	500	500
ALL Ending Balance	$ 500	$ 500	$ 500	$ 500

XML

Loans And Related Allowances For Loan Losses (Average of Impaired Loans and Related Interest Income by Loan Portfolio Class) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Financing Receivable, Impaired [Line Items]
Average Investment	$ 11,607	$ 15,299	$ 10,224	$ 15,257
Interest income recognized on an accrual basis	62	64	126	131
Interest income recognized on a cash basis		3	5	4
Commercial real estate- non owner-occupied [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	4,689	132	3,165	138
Interest income recognized on an accrual basis	3	1	6	3
Commercial real estate- all other CRE [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	2,982	3,258	3,058	3,182
Interest income recognized on an accrual basis	34	36	69	73
Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	255	282	259	285
Interest income recognized on an accrual basis	3	3	6	6
Acquisition and development- All other A&D [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	611	8,515	599	8,436
Interest income recognized on an accrual basis	3	3	6	6
Interest income recognized on a cash basis				1
Commercial and industrial [Member]
Financing Receivable, Impaired [Line Items]
Average Investment		9		16
Residential mortgage- term [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	2,585	2,450	2,672	2,477
Interest income recognized on an accrual basis	19	21	39	43
Interest income recognized on a cash basis			5
Residential mortgage- home equity [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	474	634	454	709
Interest income recognized on a cash basis		3		3
Consumer [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	$ 11	$ 19	$ 17	$ 14

XML

Loans And Related Allowances For Loan Losses (TDRs) (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021 USD ($) contract	Jun. 30, 2020 USD ($) contract	Jun. 30, 2021 USD ($) loan contract	Jun. 30, 2020 USD ($) contract
Troubled Debt Restructuring [Member]
Financing Receivable, Impaired [Line Items]
Number of contracts | loan			14
Temporary Rate Modification [Member]
Financing Receivable, Impaired [Line Items]
Number of contracts | contract		1		1
Recorded Investment | $		$ 46		$ 46
Extension Of Maturity [Member]
Financing Receivable, Impaired [Line Items]
Number of contracts | contract	1	2	1	2
Recorded Investment | $	$ 109	$ 447	$ 109	$ 447
Modification Of Payment And Other Terms [Member]
Financing Receivable, Impaired [Line Items]
Number of contracts | contract		3		3
Recorded Investment | $		$ 2,471		$ 2,471
Commercial real estate- non owner-occupied [Member] | Extension Of Maturity [Member]
Financing Receivable, Impaired [Line Items]
Number of contracts | contract	1		1
Recorded Investment | $	$ 109		$ 109
Commercial real estate- all other CRE [Member] | Modification Of Payment And Other Terms [Member]
Financing Receivable, Impaired [Line Items]
Number of contracts | contract		1		1
Recorded Investment | $		$ 2,226		$ 2,226
Acquisition and development- All other A&D [Member] | Extension Of Maturity [Member]
Financing Receivable, Impaired [Line Items]
Number of contracts | contract		1		1
Recorded Investment | $		$ 217		$ 217
Residential mortgage- term [Member] | Temporary Rate Modification [Member]
Financing Receivable, Impaired [Line Items]
Number of contracts | contract		1		1
Recorded Investment | $		$ 46		$ 46
Residential mortgage- term [Member] | Extension Of Maturity [Member]
Financing Receivable, Impaired [Line Items]
Number of contracts | contract		1		1
Recorded Investment | $		$ 230		$ 230
Residential mortgage- term [Member] | Modification Of Payment And Other Terms [Member]
Financing Receivable, Impaired [Line Items]
Number of contracts | contract		2		2
Recorded Investment | $		$ 245		$ 245

XML

Other Real Estate Owned, Net (Components of OREO, Net of Related Valuation Allowance) (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Total OREO, net	$ 6,756	$ 9,386
Commercial Real Estate [Member]
Total OREO, net	900	945
Acquisition and Development [Member]
Total OREO, net	5,856	8,441
Residential Mortgage [Member]
Total OREO, net	$ 6,756	$ 9,386

XML

Other Real Estate Owned, Net (Schedule of Activity in OREO Valuation Allowance) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Other Real Estate Owned, Net [Abstract]
Balance beginning of period	$ 1,004	$ 1,780	$ 1,010	$ 1,790
Fair value write-down	(164)	13	(160)	39
Sales of OREO	(297)	(59)	(307)	(95)
Balance at end of period	$ 543	$ 1,734	$ 543	$ 1,734

XML

Other Real Estate Owned, Net (Schedule of Components of OREO Expenses, Net) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Other Real Estate Owned, Net [Abstract]
Gains on sale of real estate, net	$ (105)	$ (11)	$ (596)	$ (21)
Fair value write-down	(164)	13	(160)	39
Expenses, net	72	31	195	65
Rental and other income	(1)	(36)	(49)	(86)
Total OREO expenses, net	$ (198)	$ (3)	$ (610)	$ (3)

XML

Fair Value of Financial Instruments (Narrative) (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2021 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2021 USD ($) security	Jun. 30, 2020 USD ($)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Gains or losses included in earnings attributable to the change in realized/unrealized gains or losses related to the assets	$ 0	$ 0	$ 0	$ 0
Fair value, assets, level 1 to level 2 transfers, amount	0	0	0	0
Fair value, assets, level 2 to level 1 transfer, amount	0	$ 0	$ 0	$ 0
Collateralized debt obligations [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Acquired trust preferred securities, number of securities | security			9
Collateralized debt obligations [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Trust preferred securities, amortized cost	18,600,000		$ 18,600,000
Trust preferred securities, fair value	$ 16,200,000		$ 16,200,000

XML

Fair Value of Financial Instruments (Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques) (Details) - Fair Value, Inputs, Level 3 [Member] - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Fair Value, Measurements, Recurring [Member] | Investment Securities - Available for Sale [Member] | Discounted Cash Flow [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of securities	$ 16,230	$ 13,260
Fair value input, unobservable input value, description	LIBOR+ 3.75%	LIBOR+ 5.25%
Fair Value, Measurements, Nonrecurring [Member] | Impaired Loans [Member] | Market Comparable Properties [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of securities	$ 2,099	$ 1,465
Fair Value, Measurements, Nonrecurring [Member] | Other Real Estate Owned [Member] | Market Comparable Properties [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of securities	$ 443	$ 913
Fair value measurements discount rate	15.00%	15.00%
Minimum [Member] | Fair Value, Measurements, Nonrecurring [Member] | Impaired Loans [Member] | Market Comparable Properties [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value measurements discount rate	10.00%	10.00%
Maximum [Member] | Fair Value, Measurements, Nonrecurring [Member] | Impaired Loans [Member] | Market Comparable Properties [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value measurements discount rate	15.00%	15.00%
Weighted Average [Member] | Fair Value, Measurements, Nonrecurring [Member] | Impaired Loans [Member] | Market Comparable Properties [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value measurements discount rate	10.50%	12.50%

XML

Fair Value of Financial Instruments (Assets And Liabilities Measured At Fair Value On A Recurring And Nonrecurring Basis) (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	$ 242,013	$ 226,885
Impaired Loans	11,270	7,459
Fair Value, Measurements, Recurring [Member] | Derivative Financial Instruments, Liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Derivative	(834)	(1,320)
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Derivative	(834)	(1,320)
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Derivative Financial Instruments, Liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Derivative	(834)	(1,320)
U.S. government agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	58,121	76,433
U.S. 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	58,121	76,433
U.S. government agencies [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	58,121	76,433
Residential mortgage-backed agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	31,482	22,899
Residential 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	31,482	22,899
Residential mortgage-backed agencies [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	31,482	22,899
Commercial mortgage-backed agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	54,190	33,042
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	54,190	33,042
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	54,190	33,042
Collateralized mortgage obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	72,156	70,637
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	72,156	70,637
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	72,156	70,637
Obligations of states and political subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	9,834	10,614
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	9,834	10,614
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	9,834	10,614
Collateralized debt obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	16,230	13,260
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	16,230	13,260
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	16,230	13,260
Impaired Loans [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	2,099	1,465
Impaired Loans [Member] | 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 Loans	2,099	1,465
Other Real Estate Owned [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other real estate owned	443	913
Other Real Estate Owned [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other real estate owned	$ 443	$ 913

XML

Fair Value of Financial Instruments (Reconciliation Of Fair Valued Assets Measured On A Recurring Basis) (Details) - Fair Value, Inputs, Level 3 [Member] - Fair Value, Measurements, Recurring [Member] - Collateralized debt obligations [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance	$ 13,649	$ 12,380	$ 13,260	$ 14,354
Total losses realized/unrealized: Included in other comprehensive income loss	2,581	(428)	2,970	(2,402)
Ending balance	$ 16,230	$ 11,952	$ 16,230	$ 11,952

XML

Fair Value of Financial Instruments (Fair Value By Balance Sheet Grouping) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks, Carrying Amount	$ 190,949	$ 146,673
Interest bearing deposits in banks, Carrying Amount	3,473	2,759
Investment securities - AFS, Carrying Amount	242,013	226,885
Restricted Bank stock, Carrying Amount	3,658	4,468
Loans, net, Carrying Amount	1,125,817	1,149,596
Short-term borrowed funds, carrying amount	49,406	49,160
Long-term borrowed funds, carrying amount	100,929	100,929
Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	190,949	146,673
Interest bearing deposits in banks	3,473	2,759
Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities - AFS	225,783	213,625
Investment securities - HTM	46,410	49,442
Restricted Bank Stock	3,658	4,468
Accrued interest receivable	765	6,241
Deposits - non-maturity	1,256,597	1,194,140
Deposits - time deposits	201,160	231,241
Financial derivative	834	1,320
Short-term borrowed funds	49,406	49,160
Long-term borrowed funds	103,176	104,825
Accrued interest payable	329	391
Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities - AFS	16,230	13,260
Investment securities - HTM	29,164	28,170
Loans, net	1,121,938	1,150,186
Accrued interest receivable	4,436
Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	190,949	146,673
Interest bearing deposits in banks	3,473	2,759
Investment securities - AFS	242,013	226,885
Investment securities - HTM	65,683	68,263
Restricted Bank Stock	3,658	4,468
Loans, net	1,125,817	1,149,596
Accrued interest receivable	5,201	6,241
Deposits - non-maturity	1,256,597	1,194,140
Deposits - time deposits	199,514	228,226
Financial derivative	834	1,320
Short-term borrowed funds	49,406	49,160
Long-term borrowed funds	100,929	100,929
Accrued interest payable	329	391
Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	190,949	146,673
Interest bearing deposits in banks	3,473	2,759
Investment securities - AFS	242,013	226,885
Investment securities - HTM	75,574	77,612
Restricted Bank Stock	3,658	4,468
Loans, net	1,121,938	1,150,186
Accrued interest receivable	5,201	6,241
Deposits - non-maturity	1,256,597	1,194,140
Deposits - time deposits	201,160	231,241
Financial derivative	834	1,320
Short-term borrowed funds	49,406	49,160
Long-term borrowed funds	103,176	104,825
Accrued interest payable	$ 329	$ 391

XML

Accumulated Other Comprehensive Loss (Schedule of Accumulated Other Comprehensive Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020
Balance, Beginning		$ (28,863)
Balance, Ending	$ (28,468)		$ (28,863)
Investment securities- with OTTI [Member]
Balance, Beginning	(3,048)	(3,277)	(2,542)
Other comprehensive income/(loss) before reclassifications	1,581	266	(587)
Amounts reclassified from accumulated other comprehensive loss	(37)	(37)	(148)
Balance, Ending	(1,504)	(3,048)	(3,277)
Investment Securities -All Other AFS [Member]
Balance, Beginning	(5,227)	(25)	(853)
Other comprehensive income/(loss) before reclassifications	2,034	(5,202)	1,291
Amounts reclassified from accumulated other comprehensive loss	(113)		(463)
Balance, Ending	(3,306)	(5,227)	(25)
Investment Securities HTM [Member]
Balance, Beginning	(270)	(315)	(899)
Amounts reclassified from accumulated other comprehensive loss	34	45	584
Balance, Ending	(236)	(270)	(315)
Cash Flow Hedge (OCI) [Member]
Balance, Beginning	(549)	(954)	(85)
Other comprehensive income/(loss) before reclassifications	(34)	405	(869)
Balance, Ending	(583)	(549)	(954)
Pension Plan [Member]
Balance, Beginning	(22,497)	(22,630)	(20,417)
Other comprehensive income/(loss) before reclassifications	938	(139)	(3,262)
Amounts reclassified from accumulated other comprehensive loss	272	272	1,049
Balance, Ending	(21,287)	(22,497)	(22,630)
SERP [Member]
Balance, Beginning	(1,607)	(1,662)	(1,175)
Other comprehensive income/(loss) before reclassifications			(625)
Amounts reclassified from accumulated other comprehensive loss	55	55	138
Balance, Ending	(1,552)	(1,607)	(1,662)
Accumulated Other Comprehensive Loss [Member]
Balance, Beginning	(33,198)	(28,863)	(25,971)
Other comprehensive income/(loss) before reclassifications	4,519	(4,670)	(4,052)
Amounts reclassified from accumulated other comprehensive loss	211	335	1,160
Balance, Ending	$ (28,468)	$ (33,198)	$ (28,863)

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Accumulated Other Comprehensive Loss (Components of Comprehensive Income) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Available for sale securities - all other: Net unrealized losses on all other AFS securities, Net of tax	$ 1,921	$ 608	$ (3,281)	$ 1,992
Held to maturity securities: Net unrealized gains on all HTM securities, Before tax		602
Held to maturity securities: Net unrealized gains on all HTM securities, Tax		(161)
Held to maturity securities: Net unrealized gains on all HTM securities, After tax		441
Cash flow hedges: Unrealized holding (losses) gains, Net of Tax	(34)	(81)	371	(1,044)
Unrealized net actuarial loss, Net of Tax	1,210	3,399	1,343	(1,516)
Other Comprehensive Income, Before Tax Amount	6,457	5,626	540	(2,064)
Other Comprehensive Income, Tax (Expense) Benefit	(1,727)	(1,506)	(145)	552
Other Comprehensive (loss) Income, Net	4,730	4,120	395	(1,512)
Amortization of Recognized Income [Member]
Less: amortization recognized in income, Before Tax		(662)
Less: amortization recognized in income, Tax Effect		177
Less: amortization recognized in income, Net of Tax		(485)
Cash flow hedges: Unrealized holding (losses) gains, Before Tax		60
Cash flow hedges: Unrealized holding (losses) gains, Tax Effect		(16)
Cash flow hedges: Unrealized holding (losses) gains, Net of Tax		44
Investment securities- with OTTI [Member]
Available for sale (AFS) securities with OTTI: Unrealized holding (losses) gains, Before Tax Amount	2,160	(333)	2,523	(1,956)
Available for sale (AFS) securities with OTTI: Unrealized holding (losses) gains, tax effect	(579)	89	(676)	524
Available for sale (AFS) securities with OTTI: Unrealized holding (losses) gains, Net of Tax	1,581	(244)	1,847	(1,432)
Available for sale (AFS) securities with OTTI: Less: accretable yield recognized in income, Before Tax Amount	51	51	101	101
Available for sale (AFS) securities with OTTI: Less: accretable yield recognized in income, Tax Effect	(14)	(14)	(27)	(27)
Available for sale (AFS) securities with OTTI: Less: accretable yield recognized in income, Net of Tax	37	37	74	74
Available for sale (AFS) securities with OTTI: Net unrealized losses on investments with OTTI, Before Tax Amount	2,109	(384)	2,422	(2,057)
Available for sale (AFS) securities with OTTI: Net unrealized losses on investments with OTTI, Tax Effect	(565)	103	(649)	551
Available for sale (AFS) securities with OTTI: Net unrealized losses on investments with OTTI, Net of Tax	1,544	(281)	1,773	(1,506)
Investment securities- all other [Member]
Securities: Unrealized holding gains (losses), Before Tax				2,767
Securities: Unrealized holding gains (losses), Tax Effect				(741)
Securities: Unrealized holding gains (losses), Net of Tax				2,026
Less: amortization recognized in income, Before Tax				47
Less: amortization recognized in income, Tax Effect				(13)
Less: amortization recognized in income, Net of Tax				34
Available for sale securities - all other: Net unrealized losses on all other AFS securities, Before Tax				2,720
Available for sale securities - all other: Net unrealized losses on all other AFS securities, Tax Effect				(728)
Available for sale securities - all other: Net unrealized losses on all other AFS securities, Net of tax				1,992
Investment Securities -All Other AFS [Member]
Securities: Unrealized holding gains (losses), Before Tax	2,778	877	(4,327)
Securities: Unrealized holding gains (losses), Tax Effect	(744)	(235)	1,159
Securities: Unrealized holding gains (losses), Net of Tax	2,034	642	(3,168)
Less: amortization recognized in income, Before Tax	154	47	154
Less: amortization recognized in income, Tax Effect	(41)	(13)	(41)
Less: amortization recognized in income, Net of Tax	113	34	113
Available for sale securities - all other: Net unrealized losses on all other AFS securities, Before Tax	2,624	830	(4,481)
Available for sale securities - all other: Net unrealized losses on all other AFS securities, Tax Effect	(703)	(222)	1,200
Available for sale securities - all other: Net unrealized losses on all other AFS securities, Net of tax	1,921	608	(3,281)
Investment Securities HTM [Member]
Less: amortization recognized in income, Before Tax			(108)	60
Less: amortization recognized in income, Tax Effect			29	(16)
Less: amortization recognized in income, Net of Tax			(79)	44
Held to maturity securities: Net unrealized gains on all HTM securities, Before tax	46		108
Held to maturity securities: Net unrealized gains on all HTM securities, Tax	(12)		(29)
Held to maturity securities: Net unrealized gains on all HTM securities, After tax	34		79
Investment Securities HTM [Member] | Amortization of Recognized Income [Member]
Less: amortization recognized in income, Before Tax	(46)			(735)
Less: amortization recognized in income, Tax Effect	12			197
Less: amortization recognized in income, Net of Tax	(34)			(538)
Held to maturity securities: Net unrealized gains on all HTM securities, Before tax				(675)
Held to maturity securities: Net unrealized gains on all HTM securities, Tax				(181)
Held to maturity securities: Net unrealized gains on all HTM securities, After tax				(494)
Cash Flow Hedge (OCI) [Member]
Cash flow hedges: Unrealized holding (losses) gains, Before Tax	(47)	(111)	507	(1,425)
Cash flow hedges: Unrealized holding (losses) gains, Tax Effect	13	30	(136)	381
Cash flow hedges: Unrealized holding (losses) gains, Net of Tax	(34)	(81)	371	(1,044)
Pension Plan [Member]
Unrealized net actuarial loss, Before Tax	1,280	4,284	1,090	(2,786)
Unrealized net actuarial loss, Tax Effect	(342)	(1,147)	(291)	746
Unrealized net actuarial loss, Net of Tax	938	3,137	799	(2,040)
Less: amortization of unrecognized loss, Before Tax				(716)
Less: amortization of unrecognized loss, Tax Effect				192
Less: amortization of unrecognized loss, Net of Tax				(524)
Net plan liability adjustment, Before Tax	1,652	4,642	1,834	(2,070)
Net plan liability adjustment, Tax Effect	(442)	(1,243)	(491)	554
Net plan liability adjustment, Net of Tax	1,210	3,399	1,343	(1,516)
Pension Plan [Member] | Amortization of Unrecognized Loss [Member]
Less: amortization of unrecognized loss, Before Tax	(372)	(358)
Less: amortization of unrecognized loss, Tax Effect	100	96
Less: amortization of unrecognized loss, Net of Tax	(272)	(262)
Pension Plan [Member] | Amortization of Recognized Income [Member]
Less: amortization of unrecognized loss, Before Tax			(744)
Less: amortization of unrecognized loss, Tax Effect			200
Less: amortization of unrecognized loss, Net of Tax			(544)
SERP [Member]
Net plan liability adjustment, Before Tax	73	47	150	93
Net plan liability adjustment, Tax Effect	(18)	(13)	(40)	(25)
Net plan liability adjustment, Net of Tax	55	34	110	68
SERP [Member] | Amortization of Unrecognized Loss [Member]
Available for sale securities - all other: Net unrealized losses on all other AFS securities, Before Tax	(73)
Available for sale securities - all other: Net unrealized losses on all other AFS securities, Tax Effect	18
Available for sale securities - all other: Net unrealized losses on all other AFS securities, Net of tax	$ (55)
Less: amortization of unrecognized loss, Before Tax		(47)	(150)	(94)
Less: amortization of unrecognized loss, Tax Effect		13	40	25
Less: amortization of unrecognized loss, Net of Tax		$ (34)	$ (110)	(69)
SERP [Member] | Amortization of Prior Service Costs [Member]
Less: amortization of prior service costs, Before Tax				1
Less: amortization of prior service costs, Net of Tax				$ 1

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Accumulated Other Comprehensive Loss (Reclassification out of Accumulated Other Comprehensive Income) (Details) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2021	Jun. 30, 2020
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest income on taxable investment securities	$ 994		$ 1,344		$ 1,984	$ 2,652
Provision for income tax expense	(1,536)		(711)		(2,635)	(1,233)
Net income	4,403	$ 3,430	2,570	$ 1,755	7,833	4,325
Reclassification out of Accumulated Other Comprehensive Loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net income	(211)		(666)		(546)	(978)
Investment securities- with OTTI [Member] | Reclassification out of Accumulated Other Comprehensive Loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest income on taxable investment securities	51		51		101	101
Provision for income tax expense	(14)		(14)		(27)	(27)
Net income	37		37		74	74
Investment securities- all other [Member] | Reclassification out of Accumulated Other Comprehensive Loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net gains	154		47		154	47
Provision for income tax expense	(41)		(13)		(41)	(13)
Net income	113		34		113	34
Investment Securities HTM [Member] | Reclassification out of Accumulated Other Comprehensive Loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest income on taxable investment securities	(46)		(662)		(108)	(735)
Net gains			60			60
Provision for income tax expense	12		161		29	181
Net income	(34)		(441)		(79)	(494)
Pension Plan [Member] | Reclassification out of Accumulated Other Comprehensive Loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Provision for income tax expense	100		96		200	192
Net income	(272)		(262)		(544)	(524)
Pension Plan [Member] | Reclassification out of Accumulated Other Comprehensive Loss [Member] | Amortization of Unrecognized Loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Other expense	(372)		(358)		(744)	(716)
SERP [Member] | Amortization of Prior Service Costs [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits						1
SERP [Member] | Reclassification out of Accumulated Other Comprehensive Loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Provision for income tax expense	18		13		40	25
Net income	(55)		(34)		(110)	(68)
SERP [Member] | Reclassification out of Accumulated Other Comprehensive Loss [Member] | Amortization of Unrecognized Loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Other expense	$ (73)		$ (47)		$ (150)	$ (94)

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Employee Benefit Plans (Narrative) (Details)	1 Months Ended			3 Months Ended		6 Months Ended
	Jan. 31, 2021 USD ($) employee	Jan. 31, 2020 USD ($) employee	Jan. 31, 2019 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2020 USD ($)
Defined Benefit Plan Disclosure [Line Items]
Discretionary contribution as percentage of employee's base pay						15.00%
Defined contribution plan consecutive years of service to be completed by participant						2 years
Period to refrain from engaging in competitive employment following separation from service						3 years
Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Period of employment used to determine benefits						5 years
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 their (a) 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						$ 0	$ 1,000,000.0
SERP [Member]
Defined Benefit Plan Disclosure [Line Items]
Employer discretionary contribution	$ 101,257	$ 126,058	$ 123,179	$ 12,657
Defined contribution plan, number of employees | employee	3	4
Vesting period of employer discretionary contribution			2 years			2 years
Defined benefit plan participants compensation expense						$ 25,314
SERP [Member] | Four Participants [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined benefit plan participants compensation expense				$ 15,757	$ 15,757	$ 31,514	$ 31,514

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Employee Benefit Plans (Components of Net Periodic Pension Plan Cost) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Service Cost	$ 39	$ 56	$ 78	$ 112
Interest Cost	355	406	711	813
Expected return on assets	(892)	(887)	(1,785)	(1,774)
Amortization of net actuarial loss/recognized loss	372	358	744	716
Net pension credit included in employee benefits and other expense	(126)	(67)	(252)	(133)
SERP [Member]
Defined Benefit Plan Disclosure [Line Items]
Service Cost	34	31	69	62
Interest Cost	59	67	119	134
Amortization of net actuarial loss/recognized loss	76	47	151	94
Amortization of prior service cost			(1)	(1)
Net pension credit included in employee benefits and other expense	$ 169	$ 145	$ 338	$ 289

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Equity Compensation Plan Information (Narrative) (Details) - USD ($)			1 Months Ended			3 Months Ended		6 Months Ended
	Mar. 26, 2021	Mar. 26, 2020	May 31, 2021	Jul. 31, 2020	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
2018 Equity Plan [Member] | Maximum [Member]
Maximum issuance of common stock options						325,000		325,000
2018 Equity Plan [Member] | Director [Member]
Shares issued to non employee directors					1,000
Amount payable to non-employee directors					$ 10,000		$ 10,000		$ 10,000
Fully-vested shares of common stock issued			12,726	916	13,160
Fully vested shares of common stock issued, per share value			$ 18.50	$ 11.22	$ 14.52		$ 14.52		$ 14.52
Stock compensation expense						$ 62,644	$ 39,698	$ 132,860	$ 106,681
Long-Term Incentive Plan [Member]
Stock compensation expense						26,127	$ 31,242	$ 52,254	$ 62,484
Restricted Stock Units (RSUs) [Member] | Officers [Member] | Share-based Payment Arrangement, Tranche One [Member]
Share-based compensation performance based award, percent								50.00%
Restricted Stock Units (RSUs) [Member] | Officers [Member] | Share-based Payment Arrangement, Tranche Two [Member]
Share-based compensation performance based award, percent								150.00%
Restricted Stock Units (RSUs) [Member] | Long-Term Incentive Plan [Member]
Shares of common stock grant date fair market value			$ 17.93						$ 12.54
Stock compensation expense								$ 11,048
Restricted Stock Units (RSUs) [Member] | Long-Term Incentive Plan [Member] | Share-based Payment Arrangement, Tranche One [Member]
Share-based compensation award vesting period		3 years
Restricted Stock Units (RSUs) [Member] | Long-Term Incentive Plan [Member] | Share-based Payment Arrangement, Tranche Two [Member]
Share-based compensation award vesting period								3 years
Performance Vested Shares [Member]
Share-based compensation award vesting period			3 years
Performance Vested Shares [Member] | Long-Term Incentive Plan [Member]
Share-based compensation shares of common stock granted			7,389						19,934
Time-vested Shares [Member] | Long-Term Incentive Plan [Member]
Share-based compensation shares of common stock granted			3,693						5,070
Shares-based compensation shares of common stock issued	1,690
Unvested Restricted Stock Units [Member] | Long-Term Incentive Plan [Member] | Year 2020 [Member]
Unrecognized compensation expense related to unvested units						136,300		$ 136,300
Unvested Restricted Stock Units [Member] | Long-Term Incentive Plan [Member] | Year 2021 [Member]
Unrecognized compensation expense related to unvested units						$ 187,806		$ 187,806

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Derivative Financial Instruments (Narrative) (Details)	1 Months Ended	6 Months Ended
	Mar. 31, 2016 USD ($) contract	Jun. 30, 2021 USD ($)	Dec. 31, 2020 USD ($)
Derivative [Line Items]
Deferred tax asset on gain on derivative		$ 114,000
Decrease in fair value of derivatives		485,000
Cash flow hedge ineffectiveness		0
Interest Rate Swap Agreements [Member]
Derivative [Line Items]
Interest rate swap notional amount	$ 30,000,000.0	20,000,000.0
Number of interest rate swap contracts | contract	4
Fair value of interest rate swap contracts		$ (834,000)	$ (1,300,000)
Swap Contract 3 Year 5 Million [Member]
Derivative [Line Items]
Interest rate swap notional amount	$ 5,000,000.0
Derivative, maturity date	Sep. 17, 2019
Derivative, term of contract		3 years
Swap Contract 5 Year $5 Million [Member]
Derivative [Line Items]
Interest rate swap notional amount	$ 5,000,000.0
Derivative, maturity date	Mar. 17, 2021
Derivative, term of contract		5 years
Swap Contract- 7 year $5 Million [Member]
Derivative [Line Items]
Interest rate swap notional amount	$ 5,000,000.0
Derivative, maturity date	Mar. 17, 2023
Derivative, term of contract		7 years
Swap Contract 10 Year $15 Million [Member]
Derivative [Line Items]
Interest rate swap notional amount	$ 15,000,000.0
Derivative, maturity date	Mar. 17, 2026
Derivative, term of contract		10 years

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Derivative Financial Instruments (Impact Of Derivative Financial Instruments) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Interest Rate Contract [Member] | Cash Flow Hedging [Member]
Derivative [Line Items]
Amount of gain (loss) recognized in OCI on derivative (effective portion)	$ (34)	$ (81)	$ 371	$ (1,044)

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Revenue Recognition (Schedule of Noninterest Income Segregated by Revenue Streams In-Scope and Out-of-Scope of Topic 606) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Noninterest income (in-scope of Topic 660)	$ 3,937	$ 3,022	$ 7,872	$ 6,591
Noninterest income (out-of-scope of Topic 660)	384	403	1,191	842
Total Noninterest Income	4,321	3,425	9,063	7,433
Service Charges on Deposit Accounts [Member]
Noninterest income (in-scope of Topic 660)	412	377	817	992
Total Noninterest Income	412	377	817	992
Other Service Charges [Member]
Noninterest income (in-scope of Topic 660)	221	32	432	322
Total Noninterest Income	221	32	432	322
Trust Department [Member]
Noninterest income (in-scope of Topic 660)	2,034	1,731	4,275	3,484
Total Noninterest Income	2,034	1,731	4,275	3,484
Debit Card Income [Member]
Noninterest income (in-scope of Topic 660)	913	680	1,723	1,314
Total Noninterest Income	913	680	1,723	1,314
Brokerage Commissions [Member]
Noninterest income (in-scope of Topic 660)	357	202	625	479
Total Noninterest Income	$ 357	$ 202	$ 625	$ 479

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Regulatory Capital Requirements (Narrative) (Details) - $ / shares		3 Months Ended		6 Months Ended
	Apr. 16, 2021	Jun. 30, 2021	Mar. 31, 2020	Jun. 30, 2021	Jan. 27, 2021	Dec. 31, 2020
Regulatory Capital Requirements [Abstract]
Stock repurchase, shares	360,737	400,000	145,291	400,000
Stock repurchase program number of shares authorized to be repurchased					400,000
Common stock, Par value	$ 0.01	$ 0.01		$ 0.01		$ 0.01
Stock repurchase program per share amount	$ 18.00

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Regulatory Capital Requirements (Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations) (Details)	Jun. 30, 2021	Dec. 31, 2020
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Capital to Risk Weighted Assets	15.80	16.08
Capital Required for Capital Adequacy to Risk Weighted Assets	8.00
Capital Required to be Well Capitalized to Risk Weighted Assets	10.00
Tier 1 Risk Based Capital to Risk Weighted Assets	14.55	14.83
Tier 1 Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets	6.00
Tier 1 Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	8.00
Common equity, Ratio	12.37	12.61
Common equity, Required For Capital Adequacy Purposes, Ratio	4.50
Common equity, Required To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	6.50
Tier 1 Leverage Capital to Average Assets	9.94	10.36
Tier 1 Leverage Capital Required for Capital Adequacy to Average Assets	4.00
Tier 1 Leverage Capital Required to be Well Capitalized to Average Assets	5.00
First United Bank & Trust [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Capital to Risk Weighted Assets	14.92	15.50
Capital Required for Capital Adequacy to Risk Weighted Assets	8.00
Capital Required to be Well Capitalized to Risk Weighted Assets	10.00
Tier 1 Risk Based Capital to Risk Weighted Assets	13.66	14.25
Tier 1 Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets	6.00
Tier 1 Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	8.00
Common equity, Ratio	13.66	14.25
Common equity, Required For Capital Adequacy Purposes, Ratio	4.50
Common equity, Required To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	6.50
Tier 1 Leverage Capital to Average Assets	9.20	9.81
Tier 1 Leverage Capital Required for Capital Adequacy to Average Assets	4.00
Tier 1 Leverage Capital Required to be Well Capitalized to Average Assets	5.00

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Assets and Liabilities Subject to Enforceable Master Netting Arrangements (Schedule of Assets and Liabilities Subject to an Enforceable Master Netting Arrangement or Repurchase Agreements) (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Investment security collateral as a percentage of borrowing	102.00%
Repurchase Agreements [Member]
Gross Amounts of Recognized (Assets)/Liabilities	$ 51,454	$ 49,160
Gross Amounts Offset in the Statement of Condition
Net Amounts of (Assets)/Liabilities Presented in the Statement of Condition	51,454	49,160
Gross Amounts Not Offset in the Statment of Condition: Financial Instruments	(51,454)	(49,160)
Gross Amounts Not Offset in the Statment of Condition: Cash Collateral Pledged
Net amount
Interest Rate Swap Agreements [Member]
Gross Amounts of Recognized (Assets)/Liabilities	834	1,320
Gross Amounts Offset in the Statement of Condition
Net Amounts of (Assets)/Liabilities Presented in the Statement of Condition	834	1,320
Gross Amounts Not Offset in the Statment of Condition: Financial Instruments	(834)	(1,320)
Gross Amounts Not Offset in the Statment of Condition: Cash Collateral Pledged	2,000
Net amount