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0000763907 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2022-03-31 0000763907 us-gaap:FairValueMeasurementsRecurringMember 2022-03-31 0000763907 func:AmortizationOfUnrecognizedLossMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember func:AccumulatedNetUnrealizedInvestmentGainLossHeldToMaturityMember 2022-01-01 2022-03-31 0000763907 func:AccretableYieldInIncomeMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedOtherThanTemporaryImpairmentMember 2022-01-01 2022-03-31 0000763907 func:AmortizationOfUnrecognizedLossMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember func:AccumulatedNetUnrealizedInvestmentGainLossHeldToMaturityMember 2021-01-01 2021-03-31 0000763907 func:AccretableYieldInIncomeMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedOtherThanTemporaryImpairmentMember 2021-01-01 2021-03-31 0000763907 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2022-01-01 2022-03-31 0000763907 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:PensionPlansDefinedBenefitMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2022-01-01 2022-03-31 0000763907 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedOtherThanTemporaryImpairmentMember 2022-01-01 2022-03-31 0000763907 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2022-01-01 2022-03-31 0000763907 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember func:AccumulatedNetUnrealizedInvestmentGainLossHeldToMaturityMember 2022-01-01 2022-03-31 0000763907 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2021-01-01 2021-03-31 0000763907 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:PensionPlansDefinedBenefitMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2021-01-01 2021-03-31 0000763907 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedOtherThanTemporaryImpairmentMember 2021-01-01 2021-03-31 0000763907 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember func:AccumulatedNetUnrealizedInvestmentGainLossHeldToMaturityMember 2021-01-01 2021-03-31 0000763907 us-gaap:CollateralizedDebtObligationsMember 2022-01-01 2022-03-31 0000763907 func:ResidentialRealEstateConstructionFinancingReceivableMember 2022-03-31 0000763907 func:CommercialRealEstateNonOwnerOccupiedFinancingReceivableMember 2022-03-31 0000763907 func:ResidentialRealEstateConstructionFinancingReceivableMember 2021-12-31 0000763907 func:CommercialRealEstateNonOwnerOccupiedFinancingReceivableMember 2021-12-31 0000763907 us-gaap:ResidentialMortgageMember 2022-01-01 2022-03-31 0000763907 us-gaap:HomeEquityMember 2022-01-01 2022-03-31 0000763907 func:OtherCommercialRealEstateFinancingReceivableMember 2022-01-01 2022-03-31 0000763907 func:CommercialRealEstateNonOwnerOccupiedFinancingReceivableMember 2022-01-01 2022-03-31 0000763907 func:AllOtherAcquisitionAndDevelopmentMember 2022-01-01 2022-03-31 0000763907 us-gaap:ResidentialMortgageMember 2021-01-01 2021-03-31 0000763907 us-gaap:HomeEquityMember 2021-01-01 2021-03-31 0000763907 func:ResidentialRealEstateConstructionFinancingReceivableMember 2021-01-01 2021-03-31 0000763907 func:OtherCommercialRealEstateFinancingReceivableMember 2021-01-01 2021-03-31 0000763907 func:CommercialRealEstateNonOwnerOccupiedFinancingReceivableMember 2021-01-01 2021-03-31 0000763907 func:AllOtherAcquisitionAndDevelopmentMember 2021-01-01 2021-03-31 0000763907 func:PartialChargeOffMember 2022-03-31 0000763907 func:AllOtherAcquisitionAndDevelopmentMember 2022-03-31 0000763907 func:PartialChargeOffMember 2021-12-31 0000763907 func:OtherCommercialRealEstateFinancingReceivableMember 2021-12-31 0000763907 func:AllOtherAcquisitionAndDevelopmentMember 2021-12-31 0000763907 us-gaap:ResidentialMortgageMember 2022-03-31 0000763907 us-gaap:HomeEquityMember 2022-03-31 0000763907 func:OtherCommercialRealEstateFinancingReceivableMember 2022-03-31 0000763907 us-gaap:ResidentialMortgageMember 2021-12-31 0000763907 us-gaap:HomeEquityMember 2021-12-31 0000763907 func:TroubledDebtRestructuringMember 2022-03-31 0000763907 func:NewTroubledDebtRestructuringLoansMember 2022-03-31 0000763907 func:TroubledDebtRestructuringMember 2021-12-31 0000763907 func:NewTroubledDebtRestructuringLoansMember 2021-03-31 0000763907 func:TroubledDebtRestructuringMember 2022-01-01 2022-03-31 0000763907 func:NewTroubledDebtRestructuringLoansMember 2022-01-01 2022-03-31 0000763907 func:TroubledDebtRestructuringMember 2021-01-01 2021-12-31 0000763907 func:NewTroubledDebtRestructuringLoansMember 2021-01-01 2021-03-31 0000763907 us-gaap:ResidentialPortfolioSegmentMember 2022-01-01 2022-03-31 0000763907 us-gaap:ConsumerPortfolioSegmentMember 2022-01-01 2022-03-31 0000763907 us-gaap:CommercialRealEstatePortfolioSegmentMember 2022-01-01 2022-03-31 0000763907 us-gaap:CommercialPortfolioSegmentMember 2022-01-01 2022-03-31 0000763907 func:CommercialAndResidentialConstructionPortfolioSegmentMember 2022-01-01 2022-03-31 0000763907 us-gaap:ResidentialPortfolioSegmentMember 2021-01-01 2021-03-31 0000763907 us-gaap:ConsumerPortfolioSegmentMember 2021-01-01 2021-03-31 0000763907 us-gaap:CommercialPortfolioSegmentMember 2021-01-01 2021-03-31 0000763907 func:CommercialAndResidentialConstructionPortfolioSegmentMember 2021-01-01 2021-03-31 0000763907 us-gaap:UnallocatedFinancingReceivablesMember 2022-03-31 0000763907 us-gaap:ResidentialPortfolioSegmentMember 2022-03-31 0000763907 us-gaap:ConsumerPortfolioSegmentMember 2022-03-31 0000763907 us-gaap:CommercialRealEstatePortfolioSegmentMember 2022-03-31 0000763907 us-gaap:CommercialPortfolioSegmentMember 2022-03-31 0000763907 func:CommercialAndResidentialConstructionPortfolioSegmentMember 2022-03-31 0000763907 us-gaap:UnallocatedFinancingReceivablesMember 2021-12-31 0000763907 us-gaap:ResidentialPortfolioSegmentMember 2021-12-31 0000763907 us-gaap:ConsumerPortfolioSegmentMember 2021-12-31 0000763907 us-gaap:CommercialRealEstatePortfolioSegmentMember 2021-12-31 0000763907 func:CommercialAndResidentialConstructionPortfolioSegmentMember 2021-12-31 0000763907 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedDebtObligationsMember 2022-03-31 0000763907 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedDebtObligationsMember 2021-12-31 0000763907 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedDebtObligationsMember 2021-03-31 0000763907 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedDebtObligationsMember 2020-12-31 0000763907 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedDebtObligationsMember 2022-01-01 2022-03-31 0000763907 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedDebtObligationsMember 2021-01-01 2021-03-31 0000763907 func:Year2022Member func:UnvestedRestrictedStockUnitsMember func:LongTermIncentivePlanMember 2022-03-31 0000763907 func:Year2021Member us-gaap:RestrictedStockUnitsRSUMember func:LongTermIncentivePlanMember 2022-03-31 0000763907 func:Year2020Member func:UnvestedRestrictedStockUnitsMember func:LongTermIncentivePlanMember 2022-03-31 0000763907 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0000763907 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0000763907 us-gaap:InterestRateSwapMember 2016-03-31 0000763907 us-gaap:InterestRateSwapMember 2022-01-01 2022-03-31 0000763907 us-gaap:InterestRateSwapMember 2022-03-31 0000763907 us-gaap:InterestRateSwapMember 2021-12-31 0000763907 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2022-01-31 0000763907 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2021-01-31 0000763907 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2022-01-01 2022-01-31 0000763907 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2021-01-01 2021-01-31 0000763907 func:Year2022Member us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2022-01-01 2022-03-31 0000763907 func:Year2021Member us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2022-01-01 2022-03-31 0000763907 func:Year2021Member us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2021-01-01 2021-03-31 0000763907 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2021-01-01 2021-03-31 0000763907 us-gaap:PensionPlansDefinedBenefitMember 2021-01-01 2021-03-31 0000763907 srt:DirectorMember 2022-01-01 2022-03-31 0000763907 srt:DirectorMember func:TwentyEighteenEquityPlanMember 2021-05-01 2021-05-31 0000763907 srt:DirectorMember func:TwentyEighteenEquityPlanMember 2021-01-01 2021-01-31 0000763907 srt:MaximumMember func:TwentyEighteenEquityPlanMember 2022-03-31 0000763907 srt:DirectorMember 2022-03-31 0000763907 2021-03-31 0000763907 2020-12-31 0000763907 us-gaap:CorporateDebtSecuritiesMember 2022-03-31 0000763907 us-gaap:USStatesAndPoliticalSubdivisionsMember 2021-12-31 0000763907 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2021-12-31 0000763907 us-gaap:MortgageBackedSecuritiesMember 2021-12-31 0000763907 us-gaap:CommercialMortgageBackedSecuritiesMember 2021-12-31 0000763907 func:InvestmentSecuritiesAvailableForSaleMember us-gaap:FairValueInputsLevel3Member 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2022-01-01 2022-03-31 0000763907 us-gaap:RestrictedStockUnitsRSUMember 2021-01-01 2021-03-31 0000763907 func:Year2021Member us-gaap:RestrictedStockUnitsRSUMember func:LongTermIncentivePlanMember 2022-01-01 2022-03-31 0000763907 srt:DirectorMember func:TwentyEighteenEquityPlanMember 2022-01-01 2022-03-31 0000763907 func:LongTermIncentivePlanMember 2022-01-01 2022-03-31 0000763907 srt:DirectorMember func:TwentyEighteenEquityPlanMember 2021-01-01 2021-03-31 0000763907 func:LongTermIncentivePlanMember 2021-01-01 2021-03-31 0000763907 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-03-31 0000763907 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0000763907 us-gaap:CollateralizedDebtObligationsMember 2022-03-31 0000763907 us-gaap:CollateralizedDebtObligationsMember 2021-12-31 0000763907 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2022-01-01 2022-03-31 0000763907 srt:OfficerMember us-gaap:RestrictedStockUnitsRSUMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2022-01-01 2022-03-31 0000763907 srt:OfficerMember us-gaap:RestrictedStockUnitsRSUMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2022-01-01 2022-03-31 0000763907 us-gaap:RestrictedStockUnitsRSUMember func:LongTermIncentivePlanMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2022-01-01 2022-03-31 0000763907 us-gaap:RestrictedStockUnitsRSUMember func:LongTermIncentivePlanMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2020-03-26 2020-03-26 0000763907 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2022-01-01 2022-03-31 0000763907 us-gaap:FairValueInputsLevel2Member 2021-01-01 2021-12-31 0000763907 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2021-01-01 2021-12-31 0000763907 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2021-01-01 2021-12-31 0000763907 us-gaap:PensionPlansDefinedBenefitMember 2022-01-01 2022-03-31 0000763907 func:ResidentialRealEstateConstructionFinancingReceivableMember 2022-01-01 2022-03-31 0000763907 func:ResidentialRealEstateConstructionFinancingReceivableMember 2021-01-01 2021-12-31 0000763907 func:CoronavirusAidReliefAndEconomicSecurityActMember us-gaap:CommercialPortfolioSegmentMember 2022-01-01 2022-03-31 0000763907 func:CoronavirusAidReliefAndEconomicSecurityActMember us-gaap:CommercialPortfolioSegmentMember 2021-01-01 2021-12-31 0000763907 func:CoronavirusAidReliefAndEconomicSecurityActMember us-gaap:CommercialPortfolioSegmentMember 2022-03-31 0000763907 func:CoronavirusAidReliefAndEconomicSecurityActMember us-gaap:CommercialPortfolioSegmentMember 2021-12-31 0000763907 us-gaap:CommercialPortfolioSegmentMember 2021-12-31 0000763907 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2022-01-01 2022-03-31 0000763907 func:AccumulatedNetUnrealizedInvestmentGainLossHeldToMaturityMember 2022-01-01 2022-03-31 0000763907 2021-01-01 2021-01-31 0000763907 us-gaap:InterestRateSwapMember 2016-03-01 2016-03-31 0000763907 us-gaap:SubstandardMember 2022-01-01 2022-03-31 0000763907 us-gaap:USTreasurySecuritiesMember 2022-03-31 0000763907 us-gaap:USStatesAndPoliticalSubdivisionsMember 2022-03-31 0000763907 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2022-03-31 0000763907 us-gaap:ResidentialMortgageBackedSecuritiesMember 2022-03-31 0000763907 us-gaap:MortgageBackedSecuritiesMember 2022-03-31 0000763907 us-gaap:CommercialMortgageBackedSecuritiesMember 2022-03-31 0000763907 us-gaap:ResidentialMortgageBackedSecuritiesMember 2021-12-31 0000763907 func:RecognitionOfGainsLossesInIncomeMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2022-01-01 2022-03-31 0000763907 func:InsuranceCompaniesMember 2022-01-01 2022-03-31 0000763907 func:BanksMember 2022-01-01 2022-03-31 0000763907 func:InvestmentSecuritiesAvailableForSaleMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember func:DiscountedCashFlowMember 2022-01-01 2022-03-31 0000763907 func:ImpairedLoansMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:MeasurementInputRevenueMultipleMember 2022-01-01 2022-03-31 0000763907 func:EquityMethodInvestmentMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:MeasurementInputRevenueMultipleMember 2021-01-01 2021-12-31 0000763907 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember func:DiscountedCashFlowMember 2021-01-01 2021-12-31 0000763907 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember func:MarketComparablePropertiesMember 2021-01-01 2021-12-31 0000763907 srt:MinimumMember func:ImpairedLoansMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember func:MarketComparablePropertiesMember 2022-01-01 2022-03-31 0000763907 srt:MaximumMember func:ImpairedLoansMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember func:MarketComparablePropertiesMember 2022-01-01 2022-03-31 0000763907 srt:MinimumMember func:ImpairedLoansMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember func:MarketComparablePropertiesMember 2021-01-01 2021-12-31 0000763907 srt:MaximumMember func:ImpairedLoansMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember func:MarketComparablePropertiesMember 2021-01-01 2021-12-31 0000763907 srt:WeightedAverageMember func:ImpairedLoansMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember func:MarketComparablePropertiesMember 2022-01-01 2022-03-31 0000763907 srt:WeightedAverageMember func:ImpairedLoansMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember func:MarketComparablePropertiesMember 2021-01-01 2021-12-31 0000763907 2022-02-01 2022-02-01 0000763907 func:FirstUnitedBankTrustMember 2021-12-31 0000763907 func:FirstUnitedBankTrustMember 2022-03-31 0000763907 2021-01-01 2021-03-31 0000763907 us-gaap:FairValueInputsLevel1Member 2022-03-31 0000763907 us-gaap:FairValueInputsLevel1Member 2021-12-31 0000763907 us-gaap:FairValueInputsLevel3Member 2021-12-31 0000763907 us-gaap:FairValueInputsLevel3Member 2022-03-31 0000763907 us-gaap:FairValueInputsLevel2Member 2022-03-31 0000763907 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2022-03-31 0000763907 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2022-03-31 0000763907 us-gaap:FairValueInputsLevel2Member 2021-12-31 0000763907 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2021-12-31 0000763907 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2021-12-31 0000763907 2022-03-31 0000763907 2021-12-31 0000763907 2022-04-30 0000763907 2022-01-01 2022-03-31 xbrli:shares iso4217:USD xbrli:pure func:security func:contract func:director iso4217:USD xbrli:shares func:employee

Table of Contents

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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 March 31, 2022

◻ 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: 6,637,979 shares of common stock, par value $.01 per share, as of April 30, 2022.

​

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Table of Contents

INDEX TO QUARTERLY REPORT

FIRST UNITED CORPORATION

​

​ ​ | ​ | ​
​ ​ | ​ | Page
PART I. FINANCIAL INFORMATION | 3
Item 1. | Financial Statements (unaudited) | 3
​ | Consolidated Statements of Financial Condition – March 31, 2022 and December 31, 2021 | 3
​ | Consolidated Statements of Operations – for the three months ended March 31, 2022 and 2021 | 4
​ | Consolidated Statements of Comprehensive Loss – for the three months ended March 31, 2022 and 2021 | 6
​ | Consolidated Statements of Changes in Shareholders’ Equity – for three months ended March 31, 2022 and 2021 | 7
​ | Consolidated Statements of Cash Flows – for the three months ended March 31, 2022 and 2021 | 8
​ | Notes to Consolidated Financial Statements | 9
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 38
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 55
Item 4. | Controls and Procedures | 56
​ | ​ | ​
PART II. OTHER INFORMATION | 57
Item 1. | Legal Proceedings | 57
Item 1A. | Risk Factors | 57
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 57
Item 3. | Defaults upon Senior Securities | 57
Item 4. | Mine Safety Disclosures | 57
Item 5. | Other Information | 57
Item 6. | Exhibits | 58
SIGNATURES | 59

​

​

​

​

2

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

First United Corporation and Subsidiaries

Consolidated Statements of Financial Condition

(In thousands, except share data - Unaudited)

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, 2022 |  | December 31, 2021
​ | ​ | ​ | ​ | ​ | ​
Assets | ​ | ​ | ​ | ​ | ​ | ​
Cash and due from banks | ​ | $ | 71,211 | ​ | $ | 109,823
Interest bearing deposits in banks | ​ | ​ | 4,905 | ​ | ​ | 5,897
Cash and cash equivalents | ​ | ​ | 76,116 | ​ | ​ | 115,720
Investment securities – available for sale (at fair value) | ​ | ​ | 143,609 | ​ | ​ | 286,771
Investment securities – held to maturity (fair value $235,026 at March 31, 2022 and $65,369 at December 31, 2021) | ​ | ​ | 241,656 | ​ | ​ | 56,259
Restricted investment in bank stock, at cost | ​ | ​ | 1,026 | ​ | ​ | 1,029
Loans held for sale | ​ | ​ | 140 | ​ | ​ | 67
Loans | ​ | ​ | 1,181,401 | ​ | ​ | 1,153,687
Unearned fees | ​ | ​ | (107) | ​ | ​ | (292)
Allowance for loan losses | ​ | ​ | (15,292) | ​ | ​ | (15,955)
Net loans | ​ | ​ | 1,166,002 | ​ | ​ | 1,137,440
Premises and equipment, net | ​ | ​ | 34,001 | ​ | ​ | 34,697
Goodwill and other intangibles | ​ | ​ | 12,000 | ​ | ​ | 12,052
Bank owned life insurance | ​ | ​ | 45,442 | ​ | ​ | 45,150
Deferred tax assets | ​ | ​ | 10,361 | ​ | ​ | 6,857
Other real estate owned, net | ​ | ​ | 4,477 | ​ | ​ | 4,477
Right of use assets | ​ | ​ | 2,161 | ​ | ​ | 2,247
Pension asset | ​ | ​ | 1,699 | ​ | ​ | 4,765
Accrued interest receivable | ​ | ​ | 5,075 | ​ | ​ | 4,821
Other assets | ​ | ​ | 16,458 | ​ | ​ | 17,486
Total Assets | ​ | $ | 1,760,223 | ​ | $ | 1,729,838
Liabilities and Shareholders’ Equity | ​ | ​ | ​ | ​ | ​ | ​
Liabilities: | ​ | ​ | ​ | ​ | ​ | ​
Non-interest bearing deposits | ​ | $ | 530,901 | ​ | $ | 501,627
Interest bearing deposits | ​ | ​ | 976,654 | ​ | ​ | 967,747
Total deposits | ​ | ​ | 1,507,555 | ​ | ​ | 1,469,374
Short-term borrowings | ​ | ​ | 58,902 | ​ | ​ | 57,699
Long-term borrowings | ​ | ​ | 30,929 | ​ | ​ | 30,929
Operating lease liability | ​ | ​ | 2,666 | ​ | ​ | 2,761
SERP deferred compensation | ​ | ​ | 10,424 | ​ | ​ | 10,395
Accrued interest payable and other liabilities | ​ | ​ | 11,674 | ​ | ​ | 15,787
Dividends payable | ​ | ​ | 995 | ​ | ​ | 993
Total Liabilities | ​ | ​ | 1,623,145 | ​ | ​ | 1,587,938
Shareholders’ Equity: | ​ | ​ | ​ | ​ | ​ | ​
Common Stock – par value $0.01 per share; Authorized 25,000,000 shares; issued and outstanding 6,637,979 shares at March 31, 2022 and 6,620,955 at December 31, 2021 | ​ | ​ | 66 | ​ | ​ | 66
Surplus | ​ | ​ | 23,712 | ​ | ​ | 23,661
Retained earnings | ​ | ​ | 150,207 | ​ | ​ | 145,487
Accumulated other comprehensive loss | ​ | ​ | (36,907) | ​ | ​ | (27,314)
Total Shareholders’ Equity | ​ | ​ | 137,078 | ​ | ​ | 141,900
Total Liabilities and Shareholders’ Equity | ​ | $ | 1,760,223 | ​ | $ | 1,729,838

​

See accompanying notes to the consolidated financial statements

​

​

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First United Corporation and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share data)

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | March 31,
​ |  | 2022 |  | 2021
​ | ​ | (Unaudited)
Interest income | ​ | ​ | ​ | ​ | ​ | ​
Interest and fees on loans | ​ | $ | 12,432 | ​ | $ | 12,732
Interest on investment securities | ​ | ​ | ​ | ​ | ​ | ​
Taxable | ​ | ​ | 1,406 | ​ | ​ | 990
Exempt from federal income tax | ​ | ​ | 282 | ​ | ​ | 275
Total investment income | ​ | ​ | 1,688 | ​ | ​ | 1,265
Other | ​ | ​ | 27 | ​ | ​ | 65
Total interest income | ​ | ​ | 14,147 | ​ | ​ | 14,062
Interest expense | ​ | ​ | ​ | ​ | ​ | ​
Interest on deposits: | ​ | ​ | ​ | ​ | ​ | ​
Savings | ​ | ​ | 18 | ​ | ​ | 25
Interest-bearing transaction accounts | ​ | ​ | 152 | ​ | ​ | 342
Other time | ​ | ​ | 305 | ​ | ​ | 779
Total interest on Deposits | ​ | ​ | 475 | ​ | ​ | 1,146
Interest on short-term borrowings | ​ | ​ | 18 | ​ | ​ | 24
Interest on long-term borrowings | ​ | ​ | 313 | ​ | ​ | 656
Total Interest Expense | ​ | ​ | 806 | ​ | ​ | 1,826
Net Interest income | ​ | ​ | 13,341 | ​ | ​ | 12,236
Provision/(credit) for loan losses | ​ | ​ | (419) | ​ | ​ | 110
Net interest income after provision for loan losses | ​ | ​ | 13,760 | ​ | ​ | 12,126
Other operating income | ​ | ​ | ​ | ​ | ​ | ​
Net gains on investments, available for sale | ​ | ​ | 3 | ​ | ​ | —
Net gains on sale of residential mortgage loans | ​ | ​ | 21 | ​ | ​ | 588
Net gains on disposal of fixed assets | ​ | ​ | 28 | ​ | ​ | —
Net gains | ​ | ​ | 52 | ​ | ​ | 588
Other Income | ​ | ​ | ​ | ​ | ​ | ​
Service charges on deposit accounts | ​ | ​ | 465 | ​ | ​ | 405
Other service charges | ​ | ​ | 213 | ​ | ​ | 211
Trust department | ​ | ​ | 2,189 | ​ | ​ | 2,241
Debit card income | ​ | ​ | 886 | ​ | ​ | 810
Bank owned life insurance | ​ | ​ | 292 | ​ | ​ | 286
Brokerage commissions | ​ | ​ | 220 | ​ | ​ | 268
Other | ​ | ​ | 117 | ​ | ​ | 117
Total other income | ​ | ​ | 4,382 | ​ | ​ | 4,338
Total other operating income | ​ | ​ | 4,434 | ​ | ​ | 4,926
Other operating expenses | ​ | ​ | ​ | ​ | ​ | ​
Salaries and employee benefits | ​ | ​ | 5,968 | ​ | ​ | 4,988
FDIC premiums | ​ | ​ | 174 | ​ | ​ | 183
Equipment expense | ​ | ​ | 1,044 | ​ | ​ | 851
Occupancy expense of premises | ​ | ​ | 727 | ​ | ​ | 725
Data processing expense | ​ | ​ | 821 | ​ | ​ | 726
Marketing expense | ​ | ​ | 106 | ​ | ​ | 146
Professional services | ​ | ​ | 520 | ​ | ​ | 766
Contract labor | ​ | ​ | 165 | ​ | ​ | 148
Telephone | ​ | ​ | 114 | ​ | ​ | 215
Other real estate owned | ​ | ​ | 95 | ​ | ​ | (412)
Investor relations | ​ | ​ | 96 | ​ | ​ | 124
Settlement expense | ​ | ​ | — | ​ | ​ | 3,300
Contributions | ​ | ​ | 21 | ​ | ​ | 23
Other | ​ | ​ | 727 | ​ | ​ | 740
Total other operating expenses | ​ | ​ | 10,578 | ​ | ​ | 12,523
Income before income tax expense | ​ | ​ | 7,616 | ​ | ​ | 4,529

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Provision for income tax expense | ​ | ​ | 1,901 | ​ | ​ | 1,099
Net Income | ​ | $ | 5,715 | ​ | $ | 3,430
Basic net income per share | ​ | $ | 0.86 | ​ | $ | 0.49
Diluted net income per share | ​ | $ | 0.86 | ​ | $ | 0.49
Weighted average number of basic shares outstanding | ​ | ​ | 6,628 | ​ | ​ | 6,996
Weighted average number of diluted shares outstanding | ​ | ​ | 6,636 | ​ | ​ | 7,000
Dividends declared per common share | ​ | $ | 0.15 | ​ | $ | 0.15

​

See accompanying notes to the consolidated financial statements

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​

First United Corporation and Subsidiaries

Consolidated Statements of Comprehensive Loss

(In thousands)

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | March 31,
​ | ​ | 2022 | ​ | 2021
Comprehensive Loss | ​ | (Unaudited)
Net Income | ​ | $ | 5,715 | ​ | $ | 3,430
Other comprehensive income, net of tax and reclassification adjustments: | ​ | ​ | ​ | ​ | ​ | ​
Available for sale securities: | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains on investments with OTTI | ​ | $ | 141 | ​ | $ | 363
Reclassification adjustment for accretable yield realized in income | ​ | ​ | 50 | ​ | ​ | 50
Other comprehensive income on investments with OTTI | ​ | ​ | 91 | ​ | ​ | 313
​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses on all other AFS investments | ​ | $ | (10,844) | ​ | $ | (7,105)
Unrealized holding losses on securities transferred from available for sale to held to maturity | ​ | ​ | 8,328 | ​ | ​ | —
Reclassification adjustment for gains realized in income | ​ | ​ | 3 | ​ | ​ | —
Other comprehensive losses on all other AFS investments | ​ | ​ | (2,519) | ​ | ​ | (7,105)
​ | ​ | ​ | ​ | ​ | ​ | ​
Held to Maturity Securities | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses on securities transferred to held to maturity | ​ | $ | (8,328) | ​ | $ | —
Reclassification adjustment for amortization realized in income | ​ | ​ | (94) | ​ | ​ | (61)
Other comprehensive (losses)/income on HTM investments | ​ | ​ | (8,234) | ​ | ​ | 61
​ | ​ | ​ | ​ | ​ | ​ | ​
Cash flow hedges: | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains on cash flow hedges | ​ | $ | 839 | ​ | $ | 532
Reclassification adjustment for gains realized in income | ​ | ​ | — | ​ | ​ | —
Other comprehensive income on cash flow hedges | ​ | ​ | 839 | ​ | ​ | 532
​ | ​ | ​ | ​ | ​ | ​ | ​
Pension plan liability: | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses on pension plan liability | ​ | $ | (3,620) | ​ | $ | (190)
Reclassification adjustment for amortization of unrecognized loss realized in income | ​ | ​ | (279) | ​ | ​ | (372)
Other comprehensive (losses)/income on pension plan liability | ​ | ​ | (3,341) | ​ | ​ | 182
​ | ​ | ​ | ​ | ​ | ​ | ​
SERP liability: | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses on SERP liability | ​ | $ | (68) | ​ | $ | (75)
Reclassification adjustment for amortization of prior service costs realized in income | ​ | ​ | — | ​ | ​ | 1
Other comprehensive losses on SERP liability | ​ | ​ | 68 | ​ | ​ | 74
​ | ​ | ​ | ​ | ​ | ​ | ​
Other comprehensive losses before income tax | ​ | ​ | (13,096) | ​ | ​ | (5,943)
Income tax benefit related to other comprehensive income | ​ | ​ | 3,503 | ​ | ​ | 1,608
​ | ​ | ​ | ​ | ​ | ​ | ​
Other comprehensive loss, net of tax | ​ | ​ | (9,593) | ​ | ​ | (4,335)
Comprehensive Loss | ​ | $ | (3,878) | ​ | $ | (905)
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​

​

See accompanying notes to the consolidated financial statements

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First United Corporation and Subsidiaries

Consolidated Statements 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, 2022 | ​ | $ | 66 | ​ | $ | 23,661 | ​ | $ | 145,487 | ​ | $ | (27,314) | ​ | $ | 141,900
Net income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 5,715 | ​ | ​ | ​ | ​ | ​ | 5,715
Other comprehensive loss | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (9,593) | ​ | ​ | (9,593)
Stock based compensation | ​ | ​ | ​ | ​ | ​ | (4) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (4)
Common stock issued - 15,456 shares | ​ | ​ | ​ | ​ | ​ | 55 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 55
Common stock dividend declared - $0.15 per share | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (995) | ​ | ​ | ​ | ​ | ​ | (995)
Balance at March 31, 2022 | ​ | $ | 66 | ​ | $ | 23,712 | ​ | $ | 150,207 | ​ | $ | (36,907) | ​ | $ | 137,078

​

​

​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 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

​

See accompanying notes to the consolidated financial statements

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First United Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | March 31,
​ |  | 2022 |  | 2021
​ | ​ | (Unaudited)
Operating activities | ​ | ​ | ​ | ​ | ​ | ​
Net income | ​ | $ | 5,715 | ​ | $ | 3,430
Adjustments to reconcile net income to net cash provided by operating activities: | ​ | ​ | ​ | ​ | ​ | ​
Provision (credit) for loan losses | ​ | ​ | (419) | ​ | ​ | 110
Depreciation | ​ | ​ | 820 | ​ | ​ | 819
Stock based compensation | ​ | ​ | (4) | ​ | ​ | 50
Gains on sales of other real estate owned | ​ | ​ | — | ​ | ​ | (491)
Write-downs of other real estate owned | ​ | ​ | — | ​ | ​ | 4
Originations of loans held for sale | ​ | ​ | (963) | ​ | ​ | (12,702)
Proceeds from sale of loans held for sale | ​ | ​ | 911 | ​ | ​ | 15,406
Gains from sale of loans held for sale | ​ | ​ | (21) | ​ | ​ | (588)
Gains on disposal of fixed assets | ​ | ​ | (28) | ​ | ​ | —
Net amortization of investment securities discounts and premiums- AFS | ​ | ​ | 83 | ​ | ​ | 317
Net (accretion)/amortization of investment securities discounts and premiums- HTM | ​ | ​ | (165) | ​ | ​ | 61
Amortization of intangible assets | ​ | ​ | 52 | ​ | ​ | —
Gains on sales/calls of investment securities – AFS | ​ | ​ | (3) | ​ | ​ | —
Earnings on Bank owned life insurance | ​ | ​ | (292) | ​ | ​ | (286)
Amortization of deferred loan fees | ​ | ​ | (113) | ​ | ​ | (776)
Amortization of operating lease right of use asset | ​ | ​ | 86 | ​ | ​ | (87)
Increase in accrued interest receivable and other assets | ​ | ​ | 105 | ​ | ​ | 947
Deferred tax expense/(benefit) | ​ | ​ | 549 | ​ | ​ | (209)
Operating lease liability | ​ | ​ | (95) | ​ | ​ | 77
(Decrease)/increase in accrued interest payable and other liabilities | ​ | ​ | (3,143) | ​ | ​ | 1,811
Net cash provided by operating activities | ​ | ​ | 3,075 | ​ | ​ | 7,893
Investing activities | ​ | ​ | ​ | ​ | ​ | ​
Proceeds from maturities/calls of investment securities - AFS | ​ | ​ | 5,063 | ​ | ​ | 20,793
Proceeds from maturities/calls of investment securities - HTM | ​ | ​ | 3,260 | ​ | ​ | 5,176
Proceeds from sales of investment securities - AFS | ​ | ​ | 1,023 | ​ | ​ | —
Purchases of investment securities - AFS | ​ | ​ | (12,892) | ​ | ​ | (5,010)
Purchases of investment securities - HTM | ​ | ​ | (49,456) | ​ | ​ | (6,332)
Proceeds from sales of other real estate owned | ​ | ​ | — | ​ | ​ | 2,339
Proceeds from disposal of fixed assets | ​ | ​ | 30 | ​ | ​ | —
Net decrease in restricted stock | ​ | ​ | 3 | ​ | ​ | 814
Net increase in loans | ​ | ​ | (28,030) | ​ | ​ | (29,180)
Purchases of premises and equipment | ​ | ​ | (126) | ​ | ​ | (235)
Net cash used in investing activities | ​ | ​ | (81,125) | ​ | ​ | (11,635)
Financing activities | ​ | ​ | ​ | ​ | ​ | ​
Net increase in deposits | ​ | ​ | 38,181 | ​ | ​ | 45,897
Issuance of common stock | ​ | ​ | 55 | ​ | ​ | 46
Cash dividends on common stock | ​ | ​ | (993) | ​ | ​ | (910)
Net increase in short-term borrowings | ​ | ​ | 1,203 | ​ | ​ | 2,294
Net cash provided by financing activities | ​ | ​ | 38,446 | ​ | ​ | 47,327
(Decrease)/increase in cash and cash equivalents | ​ | ​ | (39,604) | ​ | ​ | 43,585
Cash and cash equivalents at beginning of the year | ​ | ​ | 115,720 | ​ | ​ | 149,432
Cash and cash equivalents at end of period | ​ | $ | 76,116 | ​ | $ | 193,017
Supplemental information | ​ | ​ | ​ | ​ | ​ | ​
Interest paid | ​ | $ | 840 | ​ | $ | 2,581
Taxes paid | ​ | $ | 2,568 | ​ | $ | 88
Non-cash investing activities: | ​ | ​ | ​ | ​ | ​ | ​
Transfers from securities available for sale to held to maturity | ​ | $ | 139,036 | ​ | $ | —

​

See accompanying notes to the consolidated financial statements

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FIRST UNITED CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 – Basis of Presentation

The financial information is presented in accordance with generally accepted accounting principles and general practice for financial institutions in the United States of America (“U.S. GAAP”). In preparing financial statements, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of financial statements. In addition, these estimates and assumptions affect revenues and expenses in the financial statements and as such, actual results could differ from those estimates.

Material estimates that are particularly susceptible to change include: (a) the allowance for loan losses and (b) fair values of available for sale debt securities based on estimates from independent valuation services or from brokers.

Transfers of Investment Securities from Available-for-Sale to Held-to-Maturity

Transfers of debt securities into the held-to-maturity category from the available-for-sale category are made at fair value at the date of transfer. The unrealized holding gain or loss at the date of transfer is retained in other comprehensive income and in the carrying value of the held-to-maturity securities. Such amounts are amortized over the remaining expected life of the security.

Principles of Consolidation

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

Certain prior period balances have been reclassified to conform to the current period presentation. Operating results for the three month period ended March 31, 2022 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, 2021.

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 March 31, 2022 for items that should potentially be recognized or disclosed in these financial statements.

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Note 2 – Earnings Per Common Share

Basic earnings per common share is derived by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period and does not include the effect of any potentially dilutive common stock equivalents. Diluted earnings per share is derived by dividing net income available to common shareholders by the weighted-average number of shares outstanding, adjusted for the dilutive effect of outstanding common stock equivalents, such as restricted stock units (“RSUs”). There were no anti-dilutive shares outstanding at March 31, 2022 or 2021.

The following table sets forth the calculation of basic and diluted earnings per common share for the three month periods ended March 31, 2022 and 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three months ended March 31,
​ | ​ | 2022 | ​ | 2021
​ |  | ​ | ​ |  | 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 | ​ | $ | 5,715 | ​ | 6,628 | ​ | $ | 0.86 | ​ | $ | 3,430 | ​ | 6,996 | ​ | $ | 0.49
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Diluted Earnings Per Share: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Restricted stock units | ​ | ​ | ​ | ​ | 8 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 4 | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net income | ​ | $ | 5,715 | ​ | 6,636 | ​ | $ | 0.86 | ​ | $ | 3,430 | ​ | 7,000 | ​ | $ | 0.49

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Note 3 – Investments

The following table shows a comparison of amortized cost and fair values of investment securities at March 31, 2022 and December 31, 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value |  | OTTI in AOCL
March 31, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Available for Sale: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. government agencies | ​ | $ | 11,070 | ​ | $ | — | ​ | $ | 772 | ​ | $ | 10,298 | ​ | $ | —
Residential mortgage-backed agencies | ​ | ​ | 48,319 | ​ | ​ | — | ​ | ​ | 4,021 | ​ | ​ | 44,298 | ​ | ​ | —
Commercial mortgage-backed agencies | ​ | ​ | 38,907 | ​ | ​ | — | ​ | ​ | 2,674 | ​ | ​ | 36,233 | ​ | ​ | —
Collateralized mortgage obligations | ​ | ​ | 27,994 | ​ | ​ | — | ​ | ​ | 1,997 | ​ | ​ | 25,997 | ​ | ​ | —
Obligations of states and political subdivisions | ​ | ​ | 8,351 | ​ | ​ | 114 | ​ | ​ | 1 | ​ | ​ | 8,464 | ​ | ​ | —
Corporate bonds | ​ | ​ | 1,000 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 1,000 | ​ | ​ | —
Collateralized debt obligations | ​ | ​ | 18,616 | ​ | ​ | 145 | ​ | ​ | 1,442 | ​ | ​ | 17,319 | ​ | ​ | (570)
Total available for sale | ​ | $ | 154,257 | ​ | $ | 259 | ​ | $ | 10,907 | ​ | $ | 143,609 | ​ | $ | (570)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Amortized Cost |  | Gross Unrecognized Gains |  | Gross Unrecognized Losses |  | Fair Value |  | OTTI in AOCL
March 31, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Held to Maturity: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. treasuries | ​ | $ | 37,012 | ​ | $ | — | ​ | $ | 953 | ​ | $ | 36,059 | ​ | $ | —
U.S. government agencies | ​ | ​ | 67,527 | ​ | ​ | — | ​ | ​ | 4,522 | ​ | ​ | 63,005 | ​ | ​ | —
Residential mortgage-backed agencies | ​ | ​ | 29,068 | ​ | ​ | 14 | ​ | ​ | 1,324 | ​ | ​ | 27,758 | ​ | ​ | —
Commercial mortgage-backed agencies | ​ | ​ | 26,525 | ​ | ​ | 28 | ​ | ​ | 1,171 | ​ | ​ | 25,382 | ​ | ​ | —
Collateralized mortgage obligations | ​ | ​ | 58,490 | ​ | ​ | — | ​ | ​ | 2,967 | ​ | ​ | 55,523 | ​ | ​ | —
Obligations of states and political subdivisions | ​ | ​ | 23,034 | ​ | ​ | 4,519 | ​ | ​ | 254 | ​ | ​ | 27,299 | ​ | ​ | —
Total held to maturity | ​ | $ | 241,656 | ​ | $ | 4,561 | ​ | $ | 11,191 | ​ | $ | 235,026 | ​ | $ | —
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value |  | OTTI in AOCL
December 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Available for Sale: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. government agencies | ​ | $ | 69,602 | ​ | $ | 66 | ​ | $ | 2,499 | ​ | $ | 67,169 | ​ | $ | —
Residential mortgage-backed agencies | ​ | ​ | 49,630 | ​ | ​ | — | ​ | ​ | 969 | ​ | ​ | 48,661 | ​ | ​ | —
Commercial mortgage-backed agencies | ​ | ​ | 51,694 | ​ | ​ | 175 | ​ | ​ | 1,001 | ​ | ​ | 50,868 | ​ | ​ | —
Collateralized mortgage obligations | ​ | ​ | 93,018 | ​ | ​ | 84 | ​ | ​ | 3,025 | ​ | ​ | 90,077 | ​ | ​ | —
Obligations of states and political subdivisions | ​ | ​ | 12,439 | ​ | ​ | 371 | ​ | ​ | 6 | ​ | ​ | 12,804 | ​ | ​ | —
Collateralized debt obligations | ​ | ​ | 18,609 | ​ | ​ | 112 | ​ | ​ | 1,529 | ​ | ​ | 17,192 | ​ | ​ | (660)
Total available for sale | ​ | $ | 294,992 | ​ | $ | 808 | ​ | $ | 9,029 | ​ | $ | 286,771 | ​ | $ | (660)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Amortized Cost |  | Gross Unrecognized Gains |  | Gross Unrecognized Losses |  | Fair Value |  | OTTI in AOCL
December 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Held to Maturity: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage-backed agencies | ​ | $ | 30,634 | ​ | $ | 649 | ​ | $ | 436 | ​ | $ | 30,847 | ​ | $ | —
Commercial mortgage-backed agencies | ​ | ​ | 5,456 | ​ | ​ | 145 | ​ | ​ | — | ​ | ​ | 5,601 | ​ | ​ | —
Obligations of states and political subdivisions | ​ | ​ | 20,169 | ​ | ​ | 8,752 | ​ | ​ | — | ​ | ​ | 28,921 | ​ | ​ | —
Total held to maturity | ​ | $ | 56,259 | ​ | $ | 9,546 | ​ | $ | 436 | ​ | $ | 65,369 | ​ | $ | —
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

​

The Corporation reassessed classification of certain investments and, effective February 1, 2022, the Corporation transferred $139.0 million of callable agencies, obligation of state and political subdivisions, and collateralized mortgage obligations from available for sale to held to maturity securities. The transfer occurred at fair value. The related unrealized loss of $8.4 million included in other comprehensive loss remained in other comprehensive loss, to be amortized out of other comprehensive loss with an offsetting entry to interest income as a yield adjustment over the remaining term of the securities. No gain or loss was recorded at the time of transfer.

​

​

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The following table shows the Corporation’s investment securities with gross unrealized and unrecognized losses and fair values at March 31, 2022 and December 31, 2021, 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
March 31, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Available for Sale: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. government agencies | ​ | $ | 8,661 | ​ | ​ | 409 | ​ | 2 | ​ | ​ | 1,637 | ​ | ​ | 363 | ​ | 1
Residential mortgage-backed agencies | ​ | ​ | 27,175 | ​ | ​ | 2,023 | ​ | 3 | ​ | ​ | 17,123 | ​ | ​ | 1,998 | ​ | 2
Commercial mortgage-backed agencies | ​ | ​ | 27,640 | ​ | ​ | 1,819 | ​ | 7 | ​ | ​ | 8,593 | ​ | ​ | 855 | ​ | 2
Collateralized mortgage obligations | ​ | ​ | 17,359 | ​ | ​ | 1,157 | ​ | 9 | ​ | ​ | 8,637 | ​ | ​ | 840 | ​ | 1
Obligations of states and political subdivisions | ​ | ​ | 2,673 | ​ | ​ | 1 | ​ | 1 | ​ | ​ | — | ​ | ​ | — | ​ | —
Collateralized debt obligations | ​ | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | 10,566 | ​ | ​ | 1,442 | ​ | 5
Total available for sale | ​ | $ | 83,508 | ​ | $ | 5,409 | ​ | 22 | ​ | $ | 46,556 | ​ | $ | 5,498 | ​ | 11
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Less than 12 months | ​ | 12 months or more
(in thousands) |  | Fair Value |  | Unrecognized Losses |  | Number of Investments |  | Fair Value |  | Unrecognized Losses |  | Number of Investments
March 31, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Held to Maturity: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. treasuries | ​ | $ | 36,059 | ​ | ​ | 953 | ​ | 4 | ​ | $ | — | ​ | $ | — | ​ | —
U.S. government agencies | ​ | ​ | 63,005 | ​ | $ | 4,522 | ​ | 9 | ​ | ​ | — | ​ | ​ | — | ​ | —
Residential mortgage-backed agencies | ​ | ​ | 14,874 | ​ | ​ | 340 | ​ | 29 | ​ | ​ | 7,791 | ​ | ​ | 984 | ​ | 3
Commercial mortgage-backed agencies | ​ | ​ | 20,641 | ​ | ​ | 1,171 | ​ | 2 | ​ | ​ | — | ​ | ​ | — | ​ | —
Collateralized mortgage obligations | ​ | ​ | 55,523 | ​ | ​ | 2,967 | ​ | 7 | ​ | ​ | — | ​ | ​ | — | ​ | —
Obligations of states and political subdivisions | ​ | ​ | 2,611 | ​ | ​ | 254 | ​ | 1 | ​ | ​ | — | ​ | ​ | — | ​ | —
Total held to maturity | ​ | $ | 192,713 | ​ | $ | 10,207 | ​ | 52 | ​ | $ | 7,791 | ​ | $ | 984 | ​ | 3
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

​

​

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​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Less than 12 months | ​ | 12 months or more
(in thousands) |  | Fair Value |  | Unrealized Losses |  | Number of Investments |  | Fair Value |  | Unrealized Losses |  | Number of Investments
December 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Available for Sale: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. government agencies | ​ | $ | 23,577 | ​ | $ | 122 | ​ | 3 | ​ | $ | 33,972 | ​ | $ | 2,377 | ​ | 6
Residential mortgage-backed agencies | ​ | ​ | 29,507 | ​ | ​ | 257 | ​ | 3 | ​ | ​ | 19,154 | ​ | ​ | 712 | ​ | 2
Commercial mortgage-backed agencies | ​ | ​ | 32,177 | ​ | ​ | 787 | ​ | 4 | ​ | ​ | 5,211 | ​ | ​ | 214 | ​ | 1
Collateralized mortgage obligations | ​ | ​ | 24,322 | ​ | ​ | 649 | ​ | 5 | ​ | ​ | 43,076 | ​ | ​ | 2,376 | ​ | 5
Obligations of states and political subdivisions | ​ | ​ | 3,046 | ​ | ​ | 6 | ​ | 1 | ​ | ​ | — | ​ | ​ | — | ​ | —
Collateralized debt obligations | ​ | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | 10,468 | ​ | ​ | 1,529 | ​ | 5
Total available for sale | ​ | $ | 112,629 | ​ | $ | 1,821 | ​ | 16 | ​ | $ | 111,881 | ​ | $ | 7,208 | ​ | 19
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Less than 12 months | ​ | 12 months or more
(in thousands) |  | Fair Value |  | Unrecognized Losses |  | Number of Investments |  | Fair Value |  | Unrecognized Losses |  | Number of Investments
December 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Held to Maturity: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage-backed agencies | ​ | $ | 7,395 | ​ | $ | 291 | ​ | 6 | ​ | $ | 2,782 | ​ | $ | 145 | ​ | 1
Total held to maturity | ​ | $ | 7,395 | ​ | $ | 291 | ​ | 6 | ​ | $ | 2,782 | ​ | $ | 145 | ​ | 1
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

​

Management systematically evaluates securities for impairment on a quarterly basis. Based upon application of Accounting Standards Codification (“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 other than temporary impairment (“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.

A cash flow analysis is performed quarterly on each of the collateralized debt obligation (“CDO”) investment securities. In performing the detailed cash flow analysis the Bank works with an independent third party to estimate expected cash flows and assist with the evaluation of OTTI. The cash flow analyses performed included the following assumptions:

| ● | Default probabilities vary for each investment.

| ● | Recoveries of 10% for banks and 15% for insurance companies with a two-year lag on all defaults and deferrals.

| ● | No prepayments for 5 years and then 5% per annum for the remaining life of the investment.

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| ● | Our investment securities have been modeled using the above assumptions by independent third party using the forward London Inter-bank Offered Rate (“LIBOR”)

Based upon a review of credit quality and the cash flow tests performed by the independent third party, management determined that no additional credit-related OTTI was required during the first three months of 2022.

Management performs due diligence on the third-party processes and has an adequate understanding of the analysis, assumptions and methodology used by the third party to prepare the fair value determination and the OTTI evaluation. Management reviews the qualifications of the third party and believes the third party is qualified to provide the analysis and pricing determinations. Quarterly, management reviews the third party’s detailed assumptions and analyzes its projected discounted present value results for reasonableness and consistency with the trend of prior projections. Annually, management performs stress tests of the assumptions used in the third party models and performs back tests of the assumptions and prepayment projections to validate the impairment model results. As a result of its due diligence process, the fair value presented and the OTTI recognized are appropriate. A total of $3.0 million in impairment losses were realized between calendar year 2009 and calendar year 2011 on the CDO portfolio remaining at March 31, 2022. Due to the prior credit impairment, the securities in this portfolio have continued to be evaluated to determine whether any additional OTTI has occurred. Based on management’s review of the third-party evaluations, there were no material differences in the relative valuations between March 31, 2022 and December 31, 2021.

Due to the duration and 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 OTTI has occurred.

The market for these securities as of March 31, 2022 was not active and markets for similar securities were also not active. The inactivity was evidenced first by a significant widening of the bid-ask spread in the brokered markets in which these securities trade and then by a significant decrease in the volume of trades relative to historical levels. The new issue market is also inactive, as no new CDOs have been issued since 2007. There are currently very few market participants who are willing to effect transactions in these securities. The market values for these securities, or any securities other than those issued or guaranteed by the U.S. Department of the Treasury (the “Treasury”), are very depressed relative to historical levels. Therefore, in the current market, a low market price for a particular bond may only provide evidence of stress in the credit markets in general rather than being an indicator of credit problems with a particular issue. Given the conditions in the current debt markets and the absence of observable transactions in the secondary and new issue markets, management has determined that (a) the few observable transactions and market quotations that are available are not reliable for the purpose of obtaining fair value at March 31, 2022, (b) an income valuation approach technique (i.e. present value) that maximizes the use of relevant unobservable inputs and minimizes the use of observable inputs will be equally or more representative of fair value than a market approach, and (c) the CDO segment is appropriately classified within Level 3 of the valuation hierarchy because management determined that significant adjustments were required to determine fair value at the measurement date.

Management utilizes 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, 2021 and March 31, 2022.

The following table presents 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 three month periods ended March 31, 2022 and 2021 that the Corporation does not intend to sell:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | March 31,
(in thousands) |  | 2022 |  | 2021
Balance of credit-related OTTI at January 1 | ​ | $ | 2,043 | ​ | $ | 2,244
Reduction for increases in cash flows expected to be collected | ​ | ​ | (50) | ​ | ​ | (50)
Balance of credit-related OTTI at March 31 | ​ | $ | 1,993 | ​ | $ | 2,194

​

​

​

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The amortized cost and estimated fair value of securities by contractual maturity at March 31, 2022 are shown in the following table. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, 2022
(in thousands) |  | Amortized Cost |  | Fair Value
Available for Sale: | ​ | ​ | ​ | ​ | ​ | ​
Due after one year through five years | ​ | $ | 8,370 | ​ | $ | 8,217
Due after five years through ten years | ​ | ​ | 5,564 | ​ | ​ | 5,312
Due after ten years | ​ | ​ | 25,103 | ​ | ​ | 23,552
​ | ​ | ​ | 39,037 | ​ | ​ | 37,081
Residential mortgage-backed agencies | ​ | ​ | 48,319 | ​ | ​ | 44,298
Commercial mortgage-backed agencies | ​ | ​ | 38,907 | ​ | ​ | 36,233
Collateralized mortgage obligations | ​ | ​ | 27,994 | ​ | ​ | 25,997
Total available for sale | ​ | $ | 154,257 | ​ | $ | 143,609
Held to Maturity: | ​ | ​ | ​ | ​ | ​ | ​
Due after one year through five years | ​ | $ | 49,512 | ​ | $ | 48,077
Due after five years through ten years | ​ | ​ | 14,319 | ​ | ​ | 13,553
Due after ten years | ​ | $ | 63,742 | ​ | $ | 64,733
​ | ​ | ​ | 127,573 | ​ | ​ | 126,363
Residential mortgage-backed agencies | ​ | ​ | 29,068 | ​ | ​ | 27,758
Commercial mortgage-backed agencies | ​ | ​ | 26,525 | ​ | ​ | 25,382
Collateralized mortgage obligations | ​ | ​ | 58,490 | ​ | ​ | 55,523
Total held to maturity | ​ | $ | 241,656 | ​ | $ | 235,026

​

​

​

Note 4 – Loans and Related Allowance for Loan Losses

The following table summarizes the primary segments of the loan portfolio at March 31, 2022 and December 31, 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Commercial Real Estate |  | Acquisition and Development |  | Commercial and Industrial |  | Residential Mortgage |  | Consumer |  | Total
March 31, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Individually evaluated for impairment | ​ | $ | 2,316 | ​ | $ | 612 | ​ | $ | — | ​ | $ | 2,603 | ​ | $ | — | ​ | $ | 5,531
Collectively evaluated for impairment | ​ | ​ | 388,820 | ​ | ​ | 132,419 | ​ | ​ | 194,914 | ​ | ​ | 397,101 | ​ | ​ | 62,616 | ​ | ​ | 1,175,870
Total loans | ​ | $ | 391,136 | ​ | $ | 133,031 | ​ | $ | 194,914 | ​ | $ | 399,704 | ​ | $ | 62,616 | ​ | $ | 1,181,401
December 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Individually evaluated for impairment | ​ | $ | 2,365 | ​ | $ | 629 | ​ | $ | 90 | ​ | $ | 2,644 | ​ | $ | — | ​ | $ | 5,728
Collectively evaluated for impairment | ​ | ​ | 371,926 | ​ | ​ | 127,448 | ​ | ​ | 180,886 | ​ | ​ | 402,042 | ​ | ​ | 65,657 | ​ | ​ | 1,147,959
Total loans | ​ | $ | 374,291 | ​ | $ | 128,077 | ​ | $ | 180,976 | ​ | $ | 404,686 | ​ | $ | 65,657 | ​ | $ | 1,153,687

​

The commercial and industrial portfolio in the table above includes $1.3 million and $7.7 million of Paycheck Protection Program (“PPP”) loans at March 31, 2022 and December 31, 2021, respectively, which are 100% guaranteed by the SBA, and no allowance for loan loss (“ALL”) has been assigned to them.

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The following table presents the classes of the loan portfolio summarized by the aggregate pass and the criticized categories of special mention and substandard within the internal risk rating system at March 31, 2022 and December 31, 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Pass |  | Special Mention |  | Substandard |  | Total
March 31, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | $ | 182,504 | ​ | $ | 6,504 | ​ | $ | 12,387 | ​ | $ | 201,395
All other CRE | ​ | ​ | 182,968 | ​ | ​ | 2,330 | ​ | ​ | 4,443 | ​ | ​ | 189,741
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | ​ | 27,177 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 27,177
All other A&D | ​ | ​ | 105,258 | ​ | ​ | 215 | ​ | ​ | 381 | ​ | ​ | 105,854
Commercial and industrial | ​ | ​ | 175,253 | ​ | ​ | 4,992 | ​ | ​ | 14,669 | ​ | ​ | 194,914
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage - term | ​ | ​ | 335,872 | ​ | ​ | — | ​ | ​ | 5,356 | ​ | ​ | 341,228
Residential mortgage - home equity | ​ | ​ | 57,744 | ​ | ​ | — | ​ | ​ | 732 | ​ | ​ | 58,476
Consumer | ​ | ​ | 62,457 | ​ | ​ | — | ​ | ​ | 159 | ​ | ​ | 62,616
Total | ​ | $ | 1,129,233 | ​ | $ | 14,041 | ​ | $ | 38,127 | ​ | $ | 1,181,401
December 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | $ | 173,299 | ​ | $ | 12,987 | ​ | $ | 6,077 | ​ | $ | 192,363
All other CRE | ​ | ​ | 174,395 | ​ | ​ | 2,357 | ​ | ​ | 5,176 | ​ | ​ | 181,928
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | ​ | 19,924 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 19,924
All other A&D | ​ | ​ | 107,532 | ​ | ​ | 218 | ​ | ​ | 403 | ​ | ​ | 108,153
Commercial and industrial | ​ | ​ | 161,429 | ​ | ​ | 5,071 | ​ | ​ | 14,476 | ​ | ​ | 180,976
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage - term | ​ | ​ | 338,832 | ​ | ​ | — | ​ | ​ | 5,624 | ​ | ​ | 344,456
Residential mortgage - home equity | ​ | ​ | 59,533 | ​ | ​ | — | ​ | ​ | 697 | ​ | ​ | 60,230
Consumer | ​ | ​ | 65,557 | ​ | ​ | — | ​ | ​ | 100 | ​ | ​ | 65,657
Total | ​ | $ | 1,100,501 | ​ | $ | 20,633 | ​ | $ | 32,553 | ​ | $ | 1,153,687

​

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due.

The increase of $6.3 million in the substandard category was related to one large relationship in the nursing care sector that was downgraded from special mention in the first quarter of 2022. This relationship continues to perform according to its contractual terms and is not considered impaired.

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The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans at March 31, 2022 and December 31, 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Current |  | 30-59 Days Past Due |  | 60-89 Days Past Due |  | 90 Days+ Past Due |  | Total Past Due and Accruing |  | Non- Accrual |  | Total Loans
March 31, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | $ | 201,395 | ​ | $ | — | ​ | $ | — | ​ | $ | — | ​ | $ | — | ​ | $ | — | ​ | $ | 201,395
All other CRE | ​ | ​ | 189,165 | ​ | ​ | 503 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 503 | ​ | ​ | 73 | ​ | ​ | 189,741
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | ​ | 27,177 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 27,177
All other A&D | ​ | ​ | 105,473 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 381 | ​ | ​ | 105,854
Commercial and industrial | ​ | ​ | 194,681 | ​ | ​ | 230 | ​ | ​ | 3 | ​ | ​ | — | ​ | ​ | 233 | ​ | ​ | — | ​ | ​ | 194,914
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage - term | ​ | ​ | 339,090 | ​ | ​ | 590 | ​ | ​ | 61 | ​ | ​ | — | ​ | ​ | 651 | ​ | ​ | 1,487 | ​ | ​ | 341,228
Residential mortgage - home equity | ​ | ​ | 57,737 | ​ | ​ | 299 | ​ | ​ | 49 | ​ | ​ | — | ​ | ​ | 348 | ​ | ​ | 391 | ​ | ​ | 58,476
Consumer | ​ | ​ | 62,159 | ​ | ​ | 281 | ​ | ​ | 139 | ​ | ​ | 37 | ​ | ​ | 457 | ​ | ​ | ​ | ​ | ​ | 62,616
Total | ​ | $ | 1,176,877 | ​ | $ | 1,903 | ​ | $ | 252 | ​ | $ | 37 | ​ | $ | 2,192 | ​ | $ | 2,332 | ​ | $ | 1,181,401
December 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | $ | 192,363 | ​ | $ | — | ​ | $ | — | ​ | $ | — | ​ | $ | — | ​ | $ | — | ​ | $ | 192,363
All other CRE | ​ | ​ | 181,847 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 81 | ​ | ​ | 181,928
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | ​ | 19,924 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 19,924
All other A&D | ​ | ​ | 107,763 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 390 | ​ | ​ | 108,153
Commercial and industrial | ​ | ​ | 180,676 | ​ | ​ | 132 | ​ | ​ | 78 | ​ | ​ | — | ​ | ​ | 210 | ​ | ​ | 90 | ​ | ​ | 180,976
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage - term | ​ | ​ | 340,429 | ​ | ​ | 159 | ​ | ​ | 2,222 | ​ | ​ | 148 | ​ | ​ | 2,529 | ​ | ​ | 1,498 | ​ | ​ | 344,456
Residential mortgage - home equity | ​ | ​ | 59,485 | ​ | ​ | 238 | ​ | ​ | 104 | ​ | ​ | — | ​ | ​ | 342 | ​ | ​ | 403 | ​ | ​ | 60,230
Consumer | ​ | ​ | 65,208 | ​ | ​ | 268 | ​ | ​ | 29 | ​ | ​ | 152 | ​ | ​ | 449 | ​ | ​ | — | ​ | ​ | 65,657
Total | ​ | $ | 1,147,695 | ​ | $ | 797 | ​ | $ | 2,433 | ​ | $ | 300 | ​ | $ | 3,530 | ​ | $ | 2,462 | ​ | $ | 1,153,687

​

The current category of commercial and industrial loans includes $1.3 million and $7.7 million of PPP loans at March 31, 2022 and December 31, 2021, respectively.

Non-accrual loans that have been subject to partial charge-offs totaled $0.6 million at March 31, 2022 and $0.5 million at December 31, 2021. Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $0.2 million at both March 31, 2022 and December 31, 2021. Management continues to conform to federal and state mandates relative to the foreclosure processes for both Federal Backed and Non-Federal Backed mortgages. As a percentage of the loan portfolio, accruing loans past due 30 days or more decreased to 0.19% at March 31, 2022 from 0.31% at December 31, 2021.

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Table of Contents

The following table summarizes the primary segments of the ALL at March 31, 2022 and December 31, 2021, segregated by the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Commercial Real Estate |  | Acquisition and Development |  | Commercial and Industrial |  | Residential Mortgage |  | Consumer |  | Unallocated |  | Total
March 31, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Individually evaluated for impairment | ​ | $ | — | ​ | $ | — | ​ | $ | — | ​ | $ | 35 | ​ | $ | — | ​ | $ | — | ​ | $ | 35
Collectively evaluated for impairment | ​ | $ | 5,922 | ​ | $ | 2,542 | ​ | $ | 2,513 | ​ | $ | 2,910 | ​ | $ | 940 | ​ | $ | 430 | ​ | $ | 15,257
Total ALL | ​ | $ | 5,922 | ​ | $ | 2,542 | ​ | $ | 2,513 | ​ | $ | 2,945 | ​ | $ | 940 | ​ | $ | 430 | ​ | $ | 15,292
December 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Individually evaluated for impairment | ​ | $ | — | ​ | $ | — | ​ | $ | 28 | ​ | $ | 36 | ​ | $ | — | ​ | $ | — | ​ | $ | 64
Collectively evaluated for impairment | ​ | $ | 6,032 | ​ | $ | 2,615 | ​ | $ | 2,432 | ​ | $ | 3,448 | ​ | $ | 934 | ​ | $ | 430 | ​ | $ | 15,891
Total ALL | ​ | $ | 6,032 | ​ | $ | 2,615 | ​ | $ | 2,460 | ​ | $ | 3,484 | ​ | $ | 934 | ​ | $ | 430 | ​ | $ | 15,955

​

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 March 31, 2022 and December 31, 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 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
March 31, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | $ | — | ​ | $ | — | ​ | $ | 105 | ​ | $ | 105 | ​ | $ | 105
All other CRE | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 2,211 | ​ | ​ | 2,211 | ​ | ​ | 2,211
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 231 | ​ | ​ | 231 | ​ | ​ | 231
All other A&D | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 381 | ​ | ​ | 381 | ​ | ​ | 1,590
Commercial and industrial | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 2,214
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage – term | ​ | ​ | 328 | ​ | ​ | 30 | ​ | ​ | 1,884 | ​ | ​ | 2,212 | ​ | ​ | 2,273
Residential mortgage – home equity | ​ | ​ | 46 | ​ | ​ | 5 | ​ | ​ | 345 | ​ | ​ | 391 | ​ | ​ | 391
Consumer | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Total impaired loans | ​ | $ | 374 | ​ | $ | 35 | ​ | $ | 5,157 | ​ | $ | 5,531 | ​ | $ | 9,015
December 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | $ | — | ​ | $ | — | ​ | $ | 106 | ​ | $ | 106 | ​ | $ | 106
All other CRE | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 2,259 | ​ | ​ | 2,259 | ​ | ​ | 2,259
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 239 | ​ | ​ | 239 | ​ | ​ | 239
All other A&D | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 390 | ​ | ​ | 390 | ​ | ​ | 1,599
Commercial and industrial | ​ | ​ | 90 | ​ | ​ | 28 | ​ | ​ | — | ​ | ​ | 90 | ​ | ​ | 2,304
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage – term | ​ | ​ | 344 | ​ | ​ | 31 | ​ | ​ | 1,897 | ​ | ​ | 2,241 | ​ | ​ | 2,302
Residential mortgage – home equity | ​ | ​ | 46 | ​ | ​ | 5 | ​ | ​ | 357 | ​ | ​ | 403 | ​ | ​ | 422
Consumer | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Total impaired loans | ​ | $ | 480 | ​ | $ | 64 | ​ | $ | 5,248 | ​ | $ | 5,728 | ​ | $ | 9,231

​

| (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.

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

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

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

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

​

The following tables present the activity in the ALL for the three month periods ended March 31, 2022 and 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Commercial Real Estate |  | Acquisition and Development |  | Commercial and Industrial |  | Residential Mortgage |  | Consumer |  | Unallocated |  | Total
ALL balance at January 1, 2022 | ​ | $ | 6,032 | ​ | $ | 2,615 | ​ | $ | 2,460 | ​ | $ | 3,484 | ​ | $ | 934 | ​ | $ | 430 | ​ | $ | 15,955
Charge-offs | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (48) | ​ | ​ | (9) | ​ | ​ | (246) | ​ | ​ | — | ​ | ​ | (303)
Recoveries | ​ | ​ | 1 | ​ | ​ | 18 | ​ | ​ | 3 | ​ | ​ | 15 | ​ | ​ | 22 | ​ | ​ | — | ​ | ​ | 59
Provision | ​ | ​ | (111) | ​ | ​ | (91) | ​ | ​ | 98 | ​ | ​ | (545) | ​ | ​ | 230 | ​ | ​ | — | ​ | ​ | (419)
ALL balance at March 31, 2022 | ​ | $ | 5,922 | ​ | $ | 2,542 | ​ | $ | 2,513 | ​ | $ | 2,945 | ​ | $ | 940 | ​ | $ | 430 | ​ | $ | 15,292
ALL balance at January 1, 2021 | ​ | $ | 5,543 | ​ | $ | 2,339 | ​ | $ | 2,584 | ​ | $ | 5,150 | ​ | $ | 370 | ​ | $ | 500 | ​ | $ | 16,486
Charge-offs | ​ | ​ | — | ​ | ​ | (81) | ​ | ​ | — | ​ | ​ | (82) | ​ | ​ | (80) | ​ | ​ | — | ​ | ​ | (243)
Recoveries | ​ | ​ | — | ​ | ​ | 101 | ​ | ​ | 36 | ​ | ​ | 17 | ​ | ​ | 47 | ​ | ​ | — | ​ | ​ | 201
Provision | ​ | ​ | (139) | ​ | ​ | 64 | ​ | ​ | 211 | ​ | ​ | (57) | ​ | ​ | 31 | ​ | ​ | — | ​ | ​ | 110
ALL balance at March 31, 2021 | ​ | $ | 5,404 | ​ | $ | 2,423 | ​ | $ | 2,831 | ​ | $ | 5,028 | ​ | $ | 368 | ​ | $ | 500 | ​ | $ | 16,554

​

​

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:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three months ended | ​ | Three months ended
​ | ​ | March 31, 2022 | ​ | March 31, 2021
(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 | ​ | $ | 106 | ​ | $ | 3 | ​ | $ | — | ​ | $ | 2,406 | ​ | $ | 3 | ​ | $ | —
All other CRE | ​ | ​ | 2,235 | ​ | ​ | 23 | ​ | ​ | — | ​ | ​ | 3,182 | ​ | ​ | 35 | ​ | ​ | —
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | ​ | 235 | ​ | ​ | 4 | ​ | ​ | — | ​ | ​ | 263 | ​ | ​ | 3 | ​ | ​ | —
All other A&D | ​ | ​ | 386 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 596 | ​ | ​ | 3 | ​ | ​ | —
Commercial and industrial | ​ | ​ | 45 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage – term | ​ | ​ | 2,227 | ​ | ​ | 12 | ​ | ​ | 5 | ​ | ​ | 2,784 | ​ | ​ | 20 | ​ | ​ | 5
Residential mortgage – home equity | ​ | ​ | 397 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 446 | ​ | ​ | — | ​ | ​ | —
Consumer | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 25 | ​ | ​ | — | ​ | ​ | —
Total | ​ | $ | 5,631 | ​ | $ | 42 | ​ | $ | 5 | ​ | $ | 9,702 | ​ | $ | 64 | ​ | $ | 5

​

​

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

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

All loans designated as TDRs are considered impaired loans and may be in either accruing or non-accruing status. If the loan was accruing at the time of the modification, then it continues to be in accruing status subsequent to the modification. Non-accrual TDRs may return to accruing status when there has been sufficient payment performance for a period of at least six months. TDRs are considered to be in payment default if, subsequent to modification, the loans are transferred to non-accrual status or to foreclosure. A loan may be removed from being reported as a TDR in the calendar year following the modification if the interest rate at the time of modification was consistent with the interest rate for a loan with comparable credit risk and the loan has performed according to its modified terms for at least six months. Further, a loan that has been removed from TDR reporting status and has been subsequently re-modified at standard market terms, may be removed from impaired status as well.

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

There were 12 loans totaling $3.2 million and $3.3 million that were classified as TDRs at March 31, 2022 and December 31, 2021, respectively.

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During the three month periods ended March 31, 2022 and 2021, there were no new TDRs and no modifications on existing TDRs, nor were there any payment defaults under existing TDRs. The Bank had no significant commitments to lend additional funds to TDR borrowers.

Note 5 - Other Real Estate Owned, net

The following table presents the components of other real estate owned (“OREO”) at March 31, 2022 and December 31, 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | March 31, 2022 |  | December 31, 2021
Acquisition and development | ​ | $ | 4,477 | ​ | $ | 4,477
Total OREO, net | ​ | $ | 4,477 | ​ | $ | 4,477

​

The following table presents the activity in the OREO valuation allowance for the three month periods ended March 31, 2022 and 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | March 31,
(in thousands) |  | 2022 |  | 2021
Balance beginning of period | ​ | $ | 454 | ​ | $ | 1,010
Fair value adjustment | ​ | ​ | — | ​ | ​ | 4
Sales of OREO | ​ | ​ | — | ​ | ​ | (10)
Balance at end of period | ​ | $ | 454 | ​ | $ | 1,004

​

The following table presents the components of OREO (income)/expenses, net, for the three month periods ended March 31, 2022 and 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | March 31,
(in thousands) |  | 2022 |  | 2021
Gains on sale of real estate, net | ​ | $ | — | ​ | $ | (491)
Fair value adjustment, net | ​ | ​ | — | ​ | ​ | 4
Expenses, net | ​ | ​ | 96 | ​ | ​ | 123
Rental and other income | ​ | ​ | (1) | ​ | ​ | (48)
Total OREO expenses/(income), net | ​ | $ | 95 | ​ | $ | (412)

​

​

​

Note 6 – Fair Value of Financial Instruments

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

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

The Corporation measures fair values based on the fair value hierarchy established in ASC Paragraph 820-10-35-37. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1

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

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

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

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

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

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

The fair value of investments available-for-sale is determined using a market approach. At March 31, 2022 and December 31, 2021, the U.S. Government agencies and treasuries, residential and commercial mortgage-backed securities, and municipal bonds segments are classified as Level 2 within the valuation hierarchy. Their fair values were determined based upon market-corroborated inputs and valuation matrices, which were obtained through third party data service providers or securities brokers through which we have historically transacted both purchases and sales of investment securities.

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

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

Equity Investment- Equity investments included in the table below are considered impaired with losses recognized on the income statement in net gains. Fair value of the equity investment was based on an independent third-party valuation report where the value was determined based on the revenue multiples of like kind information technology businesses. These assets are included as Level 3 fair values based upon the lowest level of input that is significant to the fair value measurements.

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

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For assets measured at fair value on a recurring and non-recurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2022 and December 31, 2021 were as follows:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Fair Value Measurements at March 31, 2022 Using
​ | ​ | ​ | ​ | Quoted | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Prices in | ​ | Significant | ​ | ​ | ​
​ | ​ | Assets/(liabilities) | ​ | Active Markets | ​ | Other | ​ | Significant
​ | ​ | Measured at | ​ | for Identical | ​ | Observable | ​ | Unobservable
​ | ​ | Fair Value | ​ | Assets | ​ | Inputs | ​ | Inputs
(in thousands) |  | 03/31/22 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Recurring: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Investment securities available-for-sale: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. government agencies | ​ | $ | 10,298 | ​ | ​ | ​ | ​ | $ | 10,298 | ​ | ​ | ​
Residential mortgage-backed agencies | ​ | $ | 44,298 | ​ | ​ | ​ | ​ | $ | 44,298 | ​ | ​ | ​
Commercial mortgage-backed agencies | ​ | $ | 36,233 | ​ | ​ | ​ | ​ | $ | 36,233 | ​ | ​ | ​
Collateralized mortgage obligations | ​ | $ | 25,997 | ​ | ​ | ​ | ​ | $ | 25,997 | ​ | ​ | ​
Obligations of states and political subdivisions | ​ | $ | 8,464 | ​ | ​ | ​ | ​ | $ | 8,464 | ​ | ​ | ​
Corporate bonds | ​ | $ | 1,000 | ​ | ​ | ​ | ​ | $ | 1,000 | ​ | ​ | ​
Collateralized debt obligations | ​ | $ | 17,319 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 17,319
Financial derivatives | ​ | $ | 386 | ​ | ​ | ​ | ​ | $ | 386 | ​ | ​ | ​
Non-recurring: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Impaired loans, net | ​ | $ | 131 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 131
Equity Investment | ​ | $ | 590 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 590
Other real estate owned | ​ | $ | — | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | —

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Fair Value Measurements at December 31, 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) |  | 12/31/21 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Recurring: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Investment securities available-for-sale: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. government agencies | ​ | $ | 67,169 | ​ | ​ | ​ | ​ | $ | 67,169 | ​ | ​ | ​
Residential mortgage-backed agencies | ​ | $ | 48,661 | ​ | ​ | ​ | ​ | $ | 48,661 | ​ | ​ | ​
Commercial mortgage-backed agencies | ​ | $ | 50,868 | ​ | ​ | ​ | ​ | $ | 50,868 | ​ | ​ | ​
Collateralized mortgage obligations | ​ | $ | 90,077 | ​ | ​ | ​ | ​ | $ | 90,077 | ​ | ​ | ​
Obligations of states and political subdivisions | ​ | $ | 12,804 | ​ | ​ | ​ | ​ | $ | 12,804 | ​ | ​ | ​
Collateralized debt obligations | ​ | $ | 17,192 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 17,192
Financial derivatives | ​ | $ | (453) | ​ | ​ | ​ | ​ | $ | (453) | ​ | ​ | ​
Non-recurring: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Impaired loans, net | ​ | $ | 408 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 408
Equity investment | ​ | $ | 590 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 590
Other real estate owned | ​ | $ | 349 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 349

​

At March 31, 2022, the fair value of impaired loans with a valuation allowance or partial charge-off was $0.8 million, net of valuation allowances of $35,500 and partial charge-offs of $1.3 million. During the three months ended March 31, 2022, changes to the valuation allowance or additional charge off activity was recorded on loans with a net balance of approximately $0.1 million. At December 31, 2021, the fair value of impaired loans with a valuation allowance or charge-off was $1.0 million, net of valuation allowances of $64,700 and charge-offs of $1.3 million. During the year ended December 31, 2021, changes to the valuation allowance or additional charge off activity was recorded on loans with a net balance of approximately $0.4 million.

​

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There were no transfers of assets between any of the fair value hierarchy for the three month periods ended March 31, 2022 or 2021.

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of March 31, 2022 and December 31, 2021, the significant unobservable inputs used in the fair value measurements were as follows:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Fair Value at March 31, 2022 |  | Valuation Technique |  | Significant Unobservable Inputs |  | Significant Unobservable Input Value
Recurring: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Investment Securities – available for sale -CDO | ​ | $ | 17,319 | ​ | Discounted Cash Flow | ​ | Discount Rate | ​ | 4.50%
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-recurring: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Impaired Loans, net | ​ | $ | 131 | ​ | Market Comparable Properties | ​ | Marketability Discount | ​ | 10.0% - 15.0% (1) (weighted avg 0%)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Equity Investment | ​ | $ | 590 | ​ | Market Method | ​ | Revenue Multiples | ​ | 2.8x

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | Fair Value at December 31, 2021 |  | Valuation Technique |  | Significant Unobservable Inputs |  | Significant Unobservable Input Value
Recurring: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Investment Securities – available for sale -CDO | ​ | $ | 17,192 | ​ | Discounted Cash Flow | ​ | Discount Rate | ​ | 4.50%
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-recurring: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Impaired Loans, net | ​ | $ | 408 | ​ | Market Comparable Properties | ​ | Marketability Discount | ​ | 10.0% - 15.0% (1) (weighted avg 13.2%)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Equity Investment | ​ | $ | 590 | ​ | Market Method | ​ | Revenue Multiples | ​ | 2.8x
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other Real Estate Owned | ​ | $ | 349 | ​ | Market Comparable Properties | ​ | Marketability Discount | ​ | 15.0%
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

​

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

​

​

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The following tables show a reconciliation of the beginning and ending balances for fair valued assets measured on a recurring basis using Level 3 significant unobservable inputs for the three month periods ended March 31, 2022 and 2021:

​

​ | ​ | ​ | ​
​ | ​ | Fair Value Measurements
​ | ​ | Using Significant Unobservable Inputs
​ | ​ | (Level 3)
​ | ​ | Investment Securities
(in thousands) |  | Available for Sale
Beginning balance January 1, 2022 | ​ | $ | 17,192
Total losses realized/unrealized: | ​ | ​ | ​
Included in other comprehensive loss | ​ | ​ | 127
Ending balance March 31, 2022 | ​ | $ | 17,319

​

​

​

​ | ​ | ​ | ​
​ | ​ | 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 loss | ​ | ​ | 389
Ending balance March 31, 2021 | ​ | $ | 13,649

​

​

There were no gains or losses included in earnings attributable to the change in realized/unrealized gains or losses related to the assets for the three month periods ended March 31, 2022 or 2021.

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.

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

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, 2022 | ​ | 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 | ​ | $ | 71,211 | ​ | $ | 71,211 | ​ | $ | 71,211 | ​ | ​ | ​ | ​ | ​ | ​
Interest bearing deposits in banks | ​ | ​ | 4,905 | ​ | ​ | 4,905 | ​ | ​ | 4,905 | ​ | ​ | ​ | ​ | ​ | ​
Investment securities - AFS | ​ | ​ | 143,609 | ​ | ​ | 143,609 | ​ | ​ | ​ | ​ | $ | 126,290 | ​ | $ | 17,319
Investment securities - HTM | ​ | ​ | 241,656 | ​ | ​ | 235,026 | ​ | ​ | ​ | ​ | ​ | 210,338 | ​ | ​ | 24,688
Restricted bank stock | ​ | ​ | 1,026 | ​ | ​ | N/A | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans, net | ​ | ​ | 1,166,002 | ​ | ​ | 1,132,057 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 1,132,057
Financial derivatives | ​ | ​ | 386 | ​ | ​ | 386 | ​ | ​ | ​ | ​ | ​ | 386 | ​ | ​ | ​
Accrued interest receivable | ​ | ​ | 5,075 | ​ | ​ | 5,075 | ​ | ​ | ​ | ​ | ​ | 989 | ​ | ​ | 4,086
Financial Liabilities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deposits - non-maturity | ​ | ​ | 1,359,262 | ​ | ​ | 1,359,262 | ​ | ​ | ​ | ​ | ​ | 1,359,262 | ​ | ​ | ​
Deposits - time deposits | ​ | ​ | 148,293 | ​ | ​ | 148,716 | ​ | ​ | ​ | ​ | ​ | 148,716 | ​ | ​ | ​
Short-term borrowed funds | ​ | ​ | 58,902 | ​ | ​ | 58,902 | ​ | ​ | ​ | ​ | ​ | 58,902 | ​ | ​ | ​
Long-term borrowed funds | ​ | ​ | 30,929 | ​ | ​ | 31,070 | ​ | ​ | ​ | ​ | ​ | 31,070 | ​ | ​ | ​
Accrued interest payable | ​ | ​ | 103 | ​ | ​ | 103 | ​ | ​ | ​ | ​ | ​ | 103 | ​ | ​ | ​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | December 31, 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 | ​ | $ | 109,823 | ​ | $ | 109,823 | ​ | $ | 109,823 | ​ | ​ | ​ | ​ | ​ | ​
Interest bearing deposits in banks | ​ | ​ | 5,897 | ​ | ​ | 5,897 | ​ | ​ | 5,897 | ​ | ​ | ​ | ​ | ​ | ​
Investment securities - AFS | ​ | ​ | 286,771 | ​ | ​ | 286,771 | ​ | ​ | ​ | ​ | $ | 269,579 | ​ | $ | 17,192
Investment securities - HTM | ​ | ​ | 56,259 | ​ | ​ | 65,369 | ​ | ​ | ​ | ​ | ​ | 36,448 | ​ | ​ | 28,921
Restricted bank stock | ​ | ​ | 1,029 | ​ | ​ | 1,029 | ​ | ​ | ​ | ​ | ​ | 1,029 | ​ | ​ | ​
Loans, net | ​ | ​ | 1,137,440 | ​ | ​ | 1,122,671 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 1,122,671
Accrued interest receivable | ​ | ​ | 4,821 | ​ | ​ | 4,821 | ​ | ​ | ​ | ​ | ​ | 4,821 | ​ | ​ | ​
Financial Liabilities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deposits - non-maturity | ​ | ​ | 1,306,145 | ​ | ​ | 1,306,145 | ​ | ​ | ​ | ​ | ​ | 1,306,145 | ​ | ​ | ​
Deposits - time deposits | ​ | ​ | 163,229 | ​ | ​ | 163,961 | ​ | ​ | ​ | ​ | ​ | 163,961 | ​ | ​ | ​
Financial derivatives | ​ | ​ | 453 | ​ | ​ | 453 | ​ | ​ | ​ | ​ | ​ | 453 | ​ | ​ | ​
Short-term borrowed funds | ​ | ​ | 57,699 | ​ | ​ | 57,699 | ​ | ​ | ​ | ​ | ​ | 57,699 | ​ | ​ | ​
Long-term borrowed funds | ​ | ​ | 30,929 | ​ | ​ | 31,085 | ​ | ​ | ​ | ​ | ​ | 31,085 | ​ | ​ | ​
Accrued interest payable | ​ | ​ | 137 | ​ | ​ | 137 | ​ | ​ | ​ | ​ | ​ | 137 | ​ | ​ | ​

​

​

​

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Note 7 – 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, 2021, and the three months ended March 31, 2022:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 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, 2021 | ​ | $ | (3,277) | ​ | $ | (25) | ​ | $ | (315) | ​ | $ | (954) | ​ | $ | (22,630) | ​ | $ | (1,662) | ​ | $ | (28,863)
Other comprehensive income/(loss) before reclassifications | ​ | ​ | 2,475 | ​ | ​ | (5,611) | ​ | ​ | — | ​ | ​ | 635 | ​ | ​ | 3,431 | ​ | ​ | (521) | ​ | ​ | 409
Amounts reclassified from accumulated other comprehensive loss | ​ | ​ | (147) | ​ | ​ | (113) | ​ | ​ | 181 | ​ | ​ | — | ​ | ​ | 1,091 | ​ | ​ | 128 | ​ | ​ | 1,140
Balance - December 31, 2021 | ​ | $ | (949) | ​ | $ | (5,749) | ​ | $ | (134) | ​ | $ | (319) | ​ | $ | (18,108) | ​ | $ | (2,055) | ​ | $ | (27,314)
Other comprehensive income/(loss) before reclassifications | ​ | ​ | 103 | ​ | ​ | (1,843) | ​ | ​ | (6,100) | ​ | ​ | 614 | ​ | ​ | (2,651) | ​ | ​ | — | ​ | ​ | (9,877)
Amounts reclassified from accumulated other comprehensive loss | ​ | ​ | (37) | ​ | ​ | (2) | ​ | ​ | 69 | ​ | ​ | — | ​ | ​ | 204 | ​ | ​ | 50 | ​ | ​ | 284
Balance - March 31, 2022 | ​ | $ | (883) | ​ | $ | (7,594) | ​ | $ | (6,165) | ​ | $ | 295 | ​ | $ | (20,555) | ​ | $ | (2,005) | ​ | $ | (36,907)

​

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The following tables present the components of other comprehensive income/(loss) for the three month periods ended March 31, 2022 and 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Before | ​ | Tax | ​ | ​
Components of Other Comprehensive Loss | ​ | Tax | ​ | (Expense) | ​ | ​
(in thousands) |  | Amount |  | Benefit |  | Net
For the three months ended March 31, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Available for sale (AFS) securities with OTTI: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains | ​ | $ | 141 | ​ | $ | (38) | ​ | $ | 103
Less: accretable yield recognized in income | ​ | ​ | 50 | ​ | ​ | (13) | ​ | ​ | 37
Net unrealized gains on investments with OTTI | ​ | ​ | 91 | ​ | ​ | (25) | ​ | ​ | 66
Available for sale securities – all other: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses | ​ | ​ | (10,844) | ​ | ​ | 2,901 | ​ | ​ | (7,943)
Unrealized holding losses on securities transferred from available for sale to held to maturity | ​ | ​ | 8,328 | ​ | ​ | (2,228) | ​ | ​ | 6,100
Less: gains recognized in income | ​ | ​ | 3 | ​ | ​ | (1) | ​ | ​ | 2
Net unrealized losses on all other AFS securities | ​ | ​ | (2,519) | ​ | ​ | 674 | ​ | ​ | (1,845)
Held to maturity securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses on securities transferred to held to maturity | ​ | ​ | (8,328) | ​ | ​ | 2,228 | ​ | ​ | (6,100)
Less: amortization recognized in income | ​ | ​ | (94) | ​ | ​ | 25 | ​ | ​ | (69)
Net unrealized losses on HTM securities | ​ | ​ | (8,234) | ​ | ​ | 2,203 | ​ | ​ | (6,031)
Cash flow hedges: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains | ​ | ​ | 839 | ​ | ​ | (225) | ​ | ​ | 614
Pension Plan: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized net actuarial loss | ​ | ​ | (3,620) | ​ | ​ | 969 | ​ | ​ | (2,651)
Less: amortization of unrecognized loss | ​ | ​ | (279) | ​ | ​ | 75 | ​ | ​ | (204)
Net pension plan liability adjustment | ​ | ​ | (3,341) | ​ | ​ | 894 | ​ | ​ | (2,447)
SERP: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Less: amortization of unrecognized loss | ​ | ​ | (68) | ​ | ​ | 18 | ​ | ​ | (50)
Less: amortization of prior service costs | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Net SERP liability adjustment | ​ | ​ | 68 | ​ | ​ | (18) | ​ | ​ | 50
Other comprehensive loss | ​ | $ | (13,096) | ​ | $ | 3,503 | ​ | $ | (9,593)

​

​

​

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Before | ​ | Tax | ​ | ​
Components of Other Comprehensive Loss | ​ | Tax | ​ | (Expense) | ​ | ​
(in thousands) |  | Amount |  | Benefit |  | Net
For the three months ended March 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Available for sale (AFS) securities with OTTI: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains | ​ | $ | 363 | ​ | $ | (97) | ​ | $ | 266
Less: accretable yield recognized in income | ​ | ​ | 50 | ​ | ​ | (13) | ​ | ​ | 37
Net unrealized gains on investments with OTTI | ​ | ​ | 313 | ​ | ​ | (84) | ​ | ​ | 229
Available for sale securities – all other: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding losses | ​ | ​ | (7,105) | ​ | ​ | 1,903 | ​ | ​ | (5,202)
Less: gains recognized in income | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Net unrealized gains on all other AFS securities | ​ | ​ | (7,105) | ​ | ​ | 1,903 | ​ | ​ | (5,202)
Held to maturity securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Less: amortization recognized in income | ​ | ​ | (61) | ​ | ​ | 16 | ​ | ​ | (45)
Net unrealized gains on HTM securities | ​ | ​ | 61 | ​ | ​ | (16) | ​ | ​ | 45
Cash flow hedges: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized holding gains | ​ | ​ | 532 | ​ | ​ | (127) | ​ | ​ | 405
Pension Plan: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrealized net actuarial loss | ​ | ​ | (190) | ​ | ​ | 51 | ​ | ​ | (139)
Less: amortization of unrecognized loss | ​ | ​ | (372) | ​ | ​ | 100 | ​ | ​ | (272)
Net pension plan liability adjustment | ​ | ​ | 182 | ​ | ​ | (49) | ​ | ​ | 133
SERP: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Less: amortization of unrecognized loss | ​ | ​ | (75) | ​ | ​ | 19 | ​ | ​ | (56)
Less: amortization of prior service costs | ​ | ​ | 1 | ​ | ​ | — | ​ | ​ | 1
Net SERP liability adjustment | ​ | ​ | 74 | ​ | ​ | (19) | ​ | ​ | 55
Other comprehensive loss | ​ | $ | (5,943) | ​ | $ | 1,608 | ​ | $ | (4,335)

​

​

​

​

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The following table presents the details of amounts reclassified from accumulated other comprehensive loss for the three month periods ended March 31, 2022 and 2021:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amounts Reclassified from | ​ | Three Months Ended | ​ | ​
Accumulated Other Comprehensive Loss | ​ | March 31, | ​ | Affected Line Item in the Statement
(in thousands) |  | 2022 |  | 2021 |  | Where Net Income is Presented
Net unrealized gains on available for sale investment securities with OTTI: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Accretable yield | ​ | $ | 50 | ​ | $ | 50 | ​ | Interest income on taxable investment securities
Taxes | ​ | ​ | (13) | ​ | ​ | (13) | ​ | Provision for income tax expense
​ | ​ | $ | 37 | ​ | $ | 37 | ​ | Net of tax
Net unrealized gains on available for sale investment securities - all others: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Gains recognized | ​ | $ | 3 | ​ | $ | — | ​ | Net gains
Taxes | ​ | ​ | (1) | ​ | ​ | — | ​ | Provision for income tax expense
​ | ​ | $ | 2 | ​ | $ | — | ​ | Net of tax
Net unrealized losses on held to maturity securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amortization | ​ | $ | (94) | ​ | $ | (61) | ​ | Interest income on taxable investment securities
Taxes | ​ | ​ | 25 | ​ | ​ | 16 | ​ | Provision for income tax expense
​ | ​ | $ | (69) | ​ | $ | (45) | ​ | Net of tax
Net pension plan liability adjustment: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amortization of unrecognized loss | ​ | $ | (279) | ​ | $ | (372) | ​ | Other Expense
Taxes | ​ | ​ | 75 | ​ | ​ | 100 | ​ | Provision for income tax expense
​ | ​ | $ | (204) | ​ | $ | (272) | ​ | Net of tax
Net SERP liability adjustment: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amortization of unrecognized loss | ​ | $ | (68) | ​ | $ | (75) | ​ | Other Expense
Amortization of prior service costs | ​ | ​ | — | ​ | ​ | 1 | ​ | Salaries and employee benefits
Taxes | ​ | ​ | 18 | ​ | ​ | 19 | ​ | Provision for income tax expense
​ | ​ | $ | (50) | ​ | $ | (55) | ​ | Net of tax
Total reclassifications for the period | ​ | $ | (284) | ​ | $ | (335) | ​ | Net of tax

​

​

​

​

​

Note 8 – 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:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
Pension Plan | ​ | March 31,
(in thousands) |  | 2022 |  | 2021
Service cost | ​ | $ | 14 | ​ | $ | 39
Interest cost | ​ | ​ | 384 | ​ | ​ | 356
Expected return on assets | ​ | ​ | (952) | ​ | ​ | (893)
Amortization of net actuarial loss | ​ | ​ | 279 | ​ | ​ | 372
Net pension credit included in employee benefits and other expense | ​ | $ | (275) | ​ | $ | (126)

​

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​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
Defined Benefit SERP | ​ | March 31,
(in thousands) |  | 2022 |  | 2021
Service cost | ​ | $ | 41 | ​ | $ | 35
Interest cost | ​ | ​ | 72 | ​ | ​ | 60
Amortization of recognized loss | ​ | ​ | 68 | ​ | ​ | 75
Amortization of prior service cost | ​ | ​ | — | ​ | ​ | (1)
Net Defined Benefit SERP expense included in employee benefits and other expense | ​ | $ | 181 | ​ | $ | 169

​

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 2022 or 2021. 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

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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 2021, the Board of Directors approved discretionary contributions to three participants totaling $101,257. The Corporation recorded $12,657 of related compensation expense for the first three months of 2022 and 2021 related to these contributions. In January 2022, the Board of Directors approved discretionary contributions to three participants totaling $103,689. The Corporation recorded $12,961 of related compensation expense for the first three months of 2022 related to these contributions. Each discretionary contribution has a two year vesting period.

Note 9 - 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).

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 January 2021, a total of 1,202 fully vested shares were issued to two new directors, which had a grant date fair market value of $16.66 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 $58,858 for the three months ended March 31, 2022 and $70,216 for the three months ended March 31, 2021.

Restricted Stock Units

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

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

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December 31, 2023, the RSUs performance goals are based on earnings per share for the year ending December 31, 2023 and growth in tangible book value per share during the performance period.

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

In the first quarter of 2020, RSUs were granted relating to 9,791 performance vesting shares (target level) for 2019 LTIP plan for the performance period ending December 31, 2021 and 10,143 performance vesting shares and 5,070 time vesting shares (target level) for 2020 LTIP plan for the performance period ending December 31, 2022, which had a grant date fair market value of $12.54 per share of common stock underlying each RSU. The 2020 plan has a performance period for the performance-vesting RSUs of three years ending December 31, 2022 and the time-vesting RSUs will vest ratably over a three year period that began on March 26, 2021. On March 26, 2021, 1,690 of the 5,070 time vesting shares were issued to participants. On March 26, 2022, 1,688 shares of the 3,380 remaining time vesting shares were issued to participants. Stock compensation expense was $26,127 for both of the three month periods ended March 31, 2022 and 2021. Unrecognized compensation expense at March 31, 2022 related to unvested RSUs was $63,584.

In May 2021, RSUs relating to 7,389 performance vesting shares and 3,693 time vesting shares (target level) for plan year 2021 were granted, which had a grant date fair market value of $17.93 per share of common stock underlying each RSU. The performance period for the performance-vesting RSUs is the three year period ending December 31, 2023. The time-vesting RSUs will vest ratably over a three year period beginning on May 5, 2022. Stock compensation expense was $16,571 for the three months ended March 31, 2022. Unrecognized compensation expense as of March 31, 2022 related to unvested units was $138,093.

In March 2022, RSUs relating to 8,096 performance vesting shares and 6,238 time vesting shares (target level) for plan year 2022 were granted, which had a grant date fair market value of $21.88 per share of common stock underlying each RSU. The performance period for the performance-vesting RSUs is the three year period ending December 31, 2024. The time-vesting RSUs will vest ratably over a three year period beginning on March 9, 2023. Unrecognized compensation expense as of March 31, 2022 related to unvested units was $313,743.

​

Note 10 – Derivative Financial Instruments

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

In March 2016, the Corporation entered into four interest rate swap contracts totaling $30.0 million notional amount, hedging future cash flows associated with floating rate trust preferred debt. As of March 31, 2022, $20.0 million notional amount remains.

The fair value of the interest rate swap contracts was $0.4 million and $(0.5) million at March 31, 2022 and December 31, 2021, respectively.

For the three months ended March 31, 2022, the Corporation recorded an increase in the value of the derivatives of $0.8 million and the related deferred tax of $0.2 million in net accumulated other comprehensive loss to reflect the effective portion of cash flow hedges. ASC Subtopic 815-30 requires the net accumulated other comprehensive loss to be reclassified to earnings if the hedge becomes ineffective or is terminated. There was no hedge ineffectiveness recorded for the three months ended March 31, 2022. The Corporation does not expect any material losses relating to these hedges to be reclassified into earnings within the next 12 months.

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Interest rate swap agreements are entered into with counterparties that meet established credit standards and the Corporation believes that the credit risk inherent in these contracts is not significant as of March 31, 2022.

The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the three month periods ended March 31, 2022 and 2021.

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
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: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Three months ended: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
March 31, 2022 | ​ | $ | 614 | ​ | $ | — | ​ | $ | —
March 31, 2021 | ​ | ​ | 405 | ​ | ​ | — | ​ | ​ | —

​

Notes:

| (a) | Reported as interest expense

| (b) | Reported as other income

Note 11 – Revenue Recognition

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

Wealth Management – Trust and Brokerage

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

Service Charges on Deposit Accounts

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

Other Service Charges

Fees, exchange, and other service charges are primarily comprised of ATM fees, loan servicing fees and other service charges. ATM fees are primarily generated when a Bank cardholder uses a non-Bank ATM or a non-Bank cardholder uses a Bank ATM. Loan servicing fees are comprised of fees earned on servicing of loan portfolios sold to the secondary market. Other service

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charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Corporation’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion.

Interchange Fees – Debit and Credit Card Income

Debit and credit card income is primarily comprised of interchange fees earned whenever the Corporation’s debit cards are processed through card payment networks such as Visa. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. Payment is typically received immediately or in the following month.

The following presents noninterest income, segregated by revenue streams that are within and outside the scope of ASC Topic 606, for the three month periods ended March 31, 2022 and March 31, 2021:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | March 31,
(in thousands) |  | 2022 | ​ | 2021
Noninterest income | ​ | ​ | ​ | ​ | ​ | ​
In-scope of Topic 606: | ​ | ​ | ​ | ​ | ​ | ​
Service charges on deposit accounts | ​ | $ | 465 | ​ | $ | 405
Other service charges | ​ | ​ | 213 | ​ | ​ | 211
Trust department | ​ | ​ | 2,189 | ​ | ​ | 2,241
Debit card income | ​ | ​ | 886 | ​ | ​ | 810
Brokerage commissions | ​ | ​ | 220 | ​ | ​ | 268
Noninterest income (in-scope of Topic 606) | ​ | ​ | 3,973 | ​ | ​ | 3,935
Noninterest income (out-of-scope of Topic 606) | ​ | ​ | 409 | ​ | ​ | 403
Total Noninterest Income | ​ | $ | 4,382 | ​ | $ | 4,338

​

​

​

Note 12 – Regulatory Capital Requirements

The following table presents our capital ratios for the three months ended March 31, 2022.

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, 2022 |  | December 31, 2021 |  | Required for Capital Adequacy Purposes |  | Required to be Well Capitalized |
Total Capital (to risk-weighted assets) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
First United Bank & Trust | ​ | 14.77 | % | 14.97 | % | 8.00 | % | 10.00 | %
Tier 1 Capital (to risk-weighted assets) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
First United Bank & Trust | ​ | 13.59 | % | 13.72 | % | 6.00 | % | 8.00 | %
Common Equity Tier 1 Capital (to risk-weighted assets) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
First United Bank & Trust | ​ | 13.59 | % | 13.72 | % | 4.50 | % | 6.50 | %
Tier 1 Capital (to average assets) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
First United Bank & Trust | ​ | 10.14 | % | 10.00 | % | 4.00 | % | 5.00 | %

​

As of March 31, 2022, the Bank was considered “well capitalized” under the regulatory framework for prompt corrective action.

​

​

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​

Note 13 – Recent Accounting Pronouncements

Recently issued but not yet effective Accounting Pronouncements

​

In June 2016, the Financial Accounting Standards Board (“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.

​

In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 made certain targeted amendments specific to troubled debt restructurings (TDRs) by creditors and vintage disclosure related to gross write-offs. Upon adoption, the Corporation will be required to apply the loan and refinancing and restructuring guidance to determine whether a modification results in a new loan or a continuation of an existing loan, rather than applying the recognition and measurement guidance for TDRs. The ASU also requires companies to disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within scope of Subtopic 326-20. ASU 2022-02 is effective March 31, 2023, for entities that have adopted ASU 2016-13, otherwise effective date is the same as ASU 2016-13. The Corporation’s current plan is to adopt ASU 2016-13 January 1, 2023 and will simultaneously implement ASU 2022-02.

​

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, 2021.

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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".

FIRST UNITED CORPORATION

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

At March 31, 2022, the Corporation’s total assets were $1.8 billion, net loans were $1.2 billion, and deposits were $1.5 billion. Shareholders’ equity at March 31, 2022 was $137.1 million.

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

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SELECTED FINANCIAL DATA

The following table sets forth certain selected financial data for the three month periods ended March 31, 2022 and 2021 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 three months ended | ​
​ | ​ | March 31, | ​
​ |  | 2022 |  | 2021 |
Per Share Data | ​ | ​ | ​ | ​ | ​ | ​ | ​
Basic net income per common share (1) - as reported | ​ | $ | 0.86 | ​ | $ | 0.49 | ​
Basic net income per common share (1) - non-GAAP | ​ | $ | 0.86 | ​ | $ | 0.86 | ​
Diluted net income per common share (1) - as reported | ​ | $ | 0.86 | ​ | $ | 0.49 | ​
Diluted net income per common share (1) - non-GAAP | ​ | $ | 0.86 | ​ | $ | 0.86 | ​
Basic book value per common share - as reported | ​ | $ | 20.22 | ​ | $ | 18.46 | ​
Diluted book value per common share - as reported | ​ | $ | 20.19 | ​ | $ | 18.45 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Significant Ratios: | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Return on Average Assets (a) (1) - as reported | ​ | ​ | 1.31 | % | ​ | 0.79 | %
Settlement expenses, net of income tax | ​ | ​ | — | ​ | ​ | 0.59 | %
Adjusted Return on Average Assets (a) (1) (non-GAAP) | ​ | ​ | 1.31 | % | ​ | 1.38 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Return on Average Equity (a) (1) - as reported | ​ | ​ | 16.49 | % | ​ | 10.58 | %
Settlement expenses, net of income tax | ​ | ​ | — | ​ | ​ | 5.41 | %
Income tax effect of adjustment | ​ | ​ | — | ​ | ​ | 2.49 | %
Adjusted Return on Average Equity (a) (1) (non-GAAP) | ​ | ​ | 16.49 | % | ​ | 18.48 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Average Equity to Average Assets | ​ | ​ | 7.94 | % | ​ | 7.45 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Capital Ratios: | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Consolidated Total Capital (to risk weighted assets) | ​ | ​ | 15.67 | % | ​ | 16.24 | %
Consolidated Tier 1 Capital (to risk weighted assets) | ​ | ​ | 14.52 | % | ​ | 14.99 | %
Consolidated Common Equity Tier 1 Capital (to risk weighted assets) | ​ | ​ | 12.42 | % | ​ | 12.76 | %
Consolidated Tier 1 Capital (to average assets) | ​ | ​ | 10.94 | % | ​ | 10.22 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(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 $5.7 million for the first quarter of 2022 compared to $3.4 million for the first quarter of 2021. Basic and diluted net income per share for the first quarter of 2022 were both $0.86, compared to basic and diluted net income per share of $0.49 for the first quarter of 2021. The increase in earnings for the first quarter of 2022 was primarily driven by the reduction of $3.3 million in litigation settlement expenses recorded in the first quarter of 2021. Additionally, we experienced an increase in net interest income, a credit to provision expense, stable non-interest income and reduced professional fees, marketing

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expenses and telephone related expenses offset by increases to salaries and employee benefits and other real estate owned (“OREO”) expenses.

​

Net interest income, on a non-GAAP, fully tax equivalent (“FTE”) basis, increased by $1.1 million (8.9%) for the first quarter 2022 when compared to the first quarter of 2021. This increase was driven by stable interest income and a 56% decrease in interest expense of $1.0 million. Interest income on loans decreased $0.3 million due to a decrease in average loan balances of $33.9 million and a reduction of unearned fees, primarily related to Paycheck Protection Program (“PPP”) loan forgiveness during 2021. Investment income increased $0.4 million due to an increase in average balances related to the deployment of excess cash balances to purchase investment securities late in the fourth quarter of 2021 and early in the first quarter of 2022. The reduction of interest expense resulted from the lowering of deposit rates throughout 2021, the declining balances in the higher cost CD portfolio and the prepayment of the Federal Home Loan Bank (“FHLB”) advances in 2021. The net interest margin for the first quarter of 2022 was 3.40%, compared to 3.11% for the first quarter of 2021.

​

Other operating income, including gains, for the first quarter of 2022 decreased by approximately $0.5 million when compared to the same period of 2021. An increase of $0.1 million in service charge and debit card income was offset by a decline of $0.1 million in trust and brokerage income due to the decline in the market value of assets under management during the first quarter of 2022, which was driven by the volatile stock market and the increase in interest rates during the quarter. Net gains decreased $0.5 million when comparing the first quarter of 2022 to the first quarter of 2021. This decrease was due to the slowing of refinance activity in the mortgage portfolio, which resulted in fewer gains on sales in 2022.

​

Non-GAAP, core operating expenses, exclusive of the $3.3 million in litigation settlement expense recorded in the first quarter of 2021, increased by $1.4 million when comparing the first quarter of 2022 to the first quarter of 2021. This increase was driven by an increase in salaries and benefits of $0.9 million related in part to a reduction in deferred loan origination costs in 2021 (primarily related to PPP activities) and increased incentive pay, offset by a decline in life and health insurance related to reduced claims. OREO expenses increased by $0.5 million due to an expense credit in the first quarter of 2021 related to gains on sales of properties. Equipment and data processing fees also increased $0.3 million quarter over quarter. These increases were offset by a decrease of $0.2 million in professional services and $0.1 million in telephone related expenses.

​

The provision for loan losses was a credit of $0.4 million for the quarter ended March 31, 2022 and an expense of $0.1 million for the quarter ended March 31, 2021. The credit to provision expense recorded in the first quarter of 2022 was attributable to reductions in the qualitative factors, particularly related to the continued payment performance of previously modified loans that began performing in accordance with their original payment terms. Net charge-offs of $0.2 million were recorded for the quarter ended March 31, 2022, compared to net charge offs of $42,000 for the same period of 2021. The ratio of the ALL to loans outstanding, including PPP loan balances, was 1.29% at March 31, 2022 compared to 1.38% at December 31, 2021. The ratio of ALL to loans outstanding, excluding PPP loan balances of $1.3 million and $7.7 million, respectively was 1.30% at March 31, 2022 and 1.39% at December 31, 2021, non-GAAP.

​

The effective income tax rates as a percentage of income for the three month periods ended March 31, 2022 and 2021 were 25.0% and 24.3%, respectively. The slight increase in the tax rate for the 2022 period 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. A new 2021 investment in a low-income housing tax credit is expected to provide tax benefits later in 2022 and future years.

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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.

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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:

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three months ended March 31,
​ |  | 2022 |  | 2021
(in thousands, except for per share amount) | ​ | ​ | ​ | ​ | ​ | ​
Net income - as reported | ​ | $ | 5,715 | ​ | $ | 3,430
Adjustments: | ​ | ​ | ​ | ​ | ​ | ​
Settlement expense | ​ | ​ | — | ​ | ​ | 3,300
Income tax effect of adjustment | ​ | ​ | — | ​ | ​ | (735)
Adjusted net income (non-GAAP) | ​ | $ | 5,715 | ​ | $ | 5,995
​ | ​ | ​ | ​ | ​ | ​ | ​
Basic and Diluted earnings per share - as reported | ​ | $ | 0.86 | ​ | $ | 0.49
Adjustments: | ​ | ​ | ​ | ​ | ​ | ​
Settlement expense | ​ | ​ | — | ​ | ​ | 0.47
Income tax effect of adjustment | ​ | ​ | — | ​ | ​ | (0.10)
Adjusted basic and diluted earnings per share (non-GAAP) | ​ | $ | 0.86 | ​ | $ | 0.86
​ | ​ | ​ | ​ | ​ | ​ | ​
Significant Ratios: | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​
Return on Average Assets (1) - as reported | ​ | ​ | 1.31% | ​ | ​ | 0.79%
Settlement expenses, net of income tax effect | ​ | ​ | — | ​ | ​ | 0.59%
Adjusted Return on Average Assets (1) (non-GAAP) | ​ | ​ | 1.31% | ​ | ​ | 1.38%
​ | ​ | ​ | ​ | ​ | ​ | ​
Return on Average Equity (1) - as reported | ​ | ​ | 16.49% | ​ | ​ | 10.58%
Settlement expenses, net of income tax effect | ​ | ​ | — | ​ | ​ | 7.90%
Adjusted Return on Average Equity (1) (non-GAAP) | ​ | ​ | 16.49% | ​ | ​ | 18.48%
​ | ​ | ​ | ​ | ​ | ​ | ​

​

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 tables below summarizes net interest income for the three month periods ended March 31, 2022 and 2021.

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | GAAP | ​ | Non-GAAP - FTE | ​
​ | ​ | Three Months Ended | ​ | Three Months Ended | ​
​ | ​ | March 31, | ​ | March 31, | ​
(dollars in thousands) |  | 2022 |  | 2021 |  | 2022 |  | 2021 | ​
Interest income | ​ | $ | 14,147 | ​ | $ | 14,062 | ​ | $ | 14,388 | ​ | $ | 14,301 | ​
Interest expense | ​ | ​ | 806 | ​ | ​ | 1,826 | ​ | ​ | 806 | ​ | ​ | 1,826 | ​
Net interest income | ​ | $ | 13,341 | ​ | $ | 12,236 | ​ | $ | 13,582 | ​ | $ | 12,475 | ​
Net interest margin % | ​ | ​ | 3.34 | % | ​ | 3.05 | % | ​ | 3.40 | % | ​ | 3.11 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

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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 three month periods ended March 31, 2022 and 2021:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​
​ | ​ | March 31, | ​
​ | ​ | 2022 | ​ | 2021 | ​
​ | ​ | Average | ​ | ​ | ​ | Average | ​ | Average | ​ | ​ | ​ | Average | ​
(dollars in thousands) |  | Balance |  | Interest |  | Yield/Rate |  | Balance |  | Interest |  | Yield/Rate |
Assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans | ​ | $ | 1,168,803 | ​ | $ | 12,450 | ​ | 4.32 | % | $ | 1,202,677 | ​ | $ | 12,754 | ​ | 4.30 | %
Investment Securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Taxable | ​ | ​ | 363,155 | ​ | ​ | 1,406 | ​ | 1.57 | % | ​ | 255,853 | ​ | ​ | 990 | ​ | 1.57 | %
Non taxable | ​ | ​ | 28,022 | ​ | ​ | 505 | ​ | 7.31 | % | ​ | 26,075 | ​ | ​ | 492 | ​ | 7.65 | %
Total | ​ | ​ | 391,177 | ​ | ​ | 1,911 | ​ | 1.98 | % | ​ | 281,928 | ​ | ​ | 1,482 | ​ | 2.13 | %
Federal funds sold | ​ | ​ | 53,321 | ​ | ​ | 18 | ​ | 0.14 | % | ​ | 135,458 | ​ | ​ | 24 | ​ | 0.07 | %
Interest-bearing deposits with other banks | ​ | ​ | 5,255 | ​ | ​ | 1 | ​ | 0.08 | % | ​ | 2,668 | ​ | ​ | 1 | ​ | 0.15 | %
Other interest earning assets | ​ | ​ | 1,029 | ​ | ​ | 8 | ​ | 3.15 | % | ​ | 4,459 | ​ | ​ | 40 | ​ | 3.64 | %
Total earning assets | ​ | ​ | 1,619,585 | ​ | ​ | 14,388 | ​ | 3.60 | % | ​ | 1,627,190 | ​ | ​ | 14,301 | ​ | 3.56 | %
Allowance for loan losses | ​ | ​ | (15,900) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (16,404) | ​ | ​ | ​ | ​ | ​ | ​
Non-earning assets | ​ | ​ | 165,549 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 154,347 | ​ | ​ | ​ | ​ | ​ | ​
Total Assets | ​ | $ | 1,769,234 | ​ | ​ | ​ | ​ | ​ | ​ | $ | 1,765,133 | ​ | ​ | ​ | ​ | ​ | ​
Liabilities and Shareholders’ Equity | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest-bearing demand deposits | ​ | $ | 284,799 | ​ | $ | 89 | ​ | 0.13 | % | $ | 202,530 | ​ | $ | 172 | ​ | 0.34 | %
Interest-bearing money markets | ​ | ​ | 295,923 | ​ | ​ | 63 | ​ | 0.09 | % | ​ | 358,038 | ​ | ​ | 170 | ​ | 0.19 | %
Savings deposits | ​ | ​ | 243,919 | ​ | ​ | 18 | ​ | 0.03 | % | ​ | 202,968 | ​ | ​ | 25 | ​ | 0.05 | %
Time deposits | ​ | ​ | 154,811 | ​ | ​ | 305 | ​ | 0.80 | % | ​ | 227,548 | ​ | ​ | 779 | ​ | 1.39 | %
Short-term borrowings | ​ | ​ | 59,555 | ​ | ​ | 18 | ​ | 0.12 | % | ​ | 50,301 | ​ | ​ | 24 | ​ | 0.19 | %
Long-term borrowings | ​ | ​ | 30,929 | ​ | ​ | 313 | ​ | 4.10 | % | ​ | 100,929 | ​ | ​ | 656 | ​ | 2.64 | %
Total interest-bearing liabilities | ​ | ​ | 1,069,936 | ​ | ​ | 806 | ​ | 0.31 | % | ​ | 1,142,314 | ​ | ​ | 1,826 | ​ | 0.65 | %
Non-interest-bearing deposits | ​ | ​ | 530,672 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 465,476 | ​ | ​ | ​ | ​ | ​ | ​
Other liabilities | ​ | ​ | 28,109 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 25,802 | ​ | ​ | ​ | ​ | ​ | ​
Shareholders’ Equity | ​ | ​ | 140,517 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 131,541 | ​ | ​ | ​ | ​ | ​ | ​
Total Liabilities and Shareholders’ Equity | ​ | $ | 1,769,234 | ​ | ​ | ​ | ​ | ​ | ​ | $ | 1,765,133 | ​ | ​ | ​ | ​ | ​ | ​
Net interest income and spread | ​ | ​ | ​ | ​ | $ | 13,582 | ​ | 3.29 | % | ​ | ​ | ​ | $ | 12,475 | ​ | 2.91 | %
Net interest margin | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 3.40 | % | ​ | ​ | ​ | ​ | ​ | ​ | 3.11 | %

​

| (1) | The above table reflects the average rates earned or paid stated on an FTE basis assuming a 21% tax rate for 2022 and 2021. Non-GAAP interest income on a fully taxable equivalent was $241 and $239, 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.

The stable interest income was driven by a reduction in interest and fees on loans related to reduced fees and average balances of $33.9 million, primarily PPP loans. This decline was offset by increased interest income on the investment portfolio driven by an increase in average balances of $109.2 million.

​

The decrease in interest expense was driven by further reductions in deposit rates during 2021 and reducing the cost of interest-bearing deposits by 27 basis points and a decline in average balances of $11.6 million. The prepayment of the $70.0 million of FHLB advances in 2021 also contributed to the reduced interest expense.

​

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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 three month periods ended March 31, 2022 and 2021:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the Three months ended March 31, 2022
​ | ​ | compared to the three months ended March 31, 2021
(in thousands and tax equivalent basis) |  | Volume |  | Rate |  | Net
Interest Income: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans | ​ | $ | (364) | ​ | $ | 60 | ​ | $ | (304)
Taxable Investments | ​ | ​ | 422 | ​ | ​ | (6) | ​ | ​ | 416
Non-taxable Investments | ​ | ​ | 37 | ​ | ​ | (24) | ​ | ​ | 13
Federal funds sold | ​ | ​ | (15) | ​ | ​ | 9 | ​ | ​ | (6)
Interest-bearing deposits | ​ | ​ | 1 | ​ | ​ | (1) | ​ | ​ | 0
Other interest earning assets | ​ | ​ | (31) | ​ | ​ | (1) | ​ | ​ | (32)
Total interest income | ​ | ​ | 50 | ​ | ​ | 37 | ​ | ​ | 87
Interest Expense: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest-bearing demand deposits | ​ | ​ | 70 | ​ | ​ | (153) | ​ | ​ | (83)
Interest-bearing money markets | ​ | ​ | (30) | ​ | ​ | (77) | ​ | ​ | (107)
Savings deposits | ​ | ​ | 6 | ​ | ​ | (13) | ​ | ​ | (7)
Time deposits | ​ | ​ | (253) | ​ | ​ | (221) | ​ | ​ | (474)
Short-term borrowings | ​ | ​ | 5 | ​ | ​ | (11) | ​ | ​ | (6)
Long-term borrowings | ​ | ​ | (461) | ​ | ​ | 118 | ​ | ​ | (343)
Total interest expense | ​ | ​ | (663) | ​ | ​ | (357) | ​ | ​ | (1,020)
Net interest income | ​ | $ | 713 | ​ | $ | 394 | ​ | $ | 1,107

​

​

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

Provision for Loan Losses

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

The composition of other operating income for the three month periods ended March 31, 2022 and 2021 is illustrated in the following table:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Income as % of
​ | ​ | Total Other Income
​ | ​ | Three Months Ended
​ | ​ | March 31,
(in thousands) |  | 2022 |  | 2021
Service charges on deposit accounts | ​ | $ | 465 |  | 10% | ​ | $ | 405 |  | 9%
Other service charges | ​ | ​ | 213 | ​ | 5% | ​ | ​ | 211 | ​ | 5%
Trust department | ​ | ​ | 2,189 | ​ | 50% | ​ | ​ | 2,241 | ​ | 52%
Debit card income | ​ | ​ | 886 | ​ | 20% | ​ | ​ | 810 | ​ | 19%
Bank owned life insurance | ​ | ​ | 292 | ​ | 7% | ​ | ​ | 286 | ​ | 7%
Brokerage commissions | ​ | ​ | 220 | ​ | 5% | ​ | ​ | 268 | ​ | 6%
Other income | ​ | ​ | 117 | ​ | 3% | ​ | ​ | 117 | ​ | 2%
​ | ​ | $ | 4,382 | ​ | 100% | ​ | $ | 4,338 | ​ | 100%

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Other Operating Expenses

The composition of other operating expenses for the three month periods ended March 31, 2022 and 2021 is illustrated in the following table:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Expense as % of
​ | ​ | Total Other Operating Expenses
​ | ​ | Three Months Ended
​ | ​ | March 31,
(in thousands) |  | 2022 |  | 2021
Salaries and employee benefits | ​ | $ | 5,968 |  | 56% | ​ | $ | 4,988 |  | 40%
FDIC premiums | ​ | ​ | 174 | ​ | 2% | ​ | ​ | 183 | ​ | 1%
Equipment | ​ | ​ | 1,044 | ​ | 10% | ​ | ​ | 851 | ​ | 7%
Occupancy | ​ | ​ | 727 | ​ | 7% | ​ | ​ | 725 | ​ | 6%
Data processing | ​ | ​ | 821 | ​ | 8% | ​ | ​ | 726 | ​ | 6%
Marketing | ​ | ​ | 106 | ​ | 1% | ​ | ​ | 146 | ​ | 1%
Professional services | ​ | ​ | 520 | ​ | 5% | ​ | ​ | 766 | ​ | 6%
Contract labor | ​ | ​ | 165 | ​ | 1% | ​ | ​ | 148 | ​ | 1%
Telephone | ​ | ​ | 114 | ​ | 1% | ​ | ​ | 215 | ​ | 2%
Other real estate owned | ​ | ​ | 95 | ​ | 1% | ​ | ​ | (412) | ​ | (3)%
Investor relations | ​ | ​ | 96 | ​ | 1% | ​ | ​ | 124 | ​ | 1%
Settlement expense | ​ | ​ | — | ​ | 0% | ​ | ​ | 3,300 | ​ | 26%
Contributions | ​ | ​ | 21 | ​ | 0% | ​ | ​ | 23 | ​ | 0%
Other | ​ | ​ | 727 | ​ | 7% | ​ | ​ | 740 | ​ | 6%
​ | ​ | $ | 10,578 | ​ | 100% | ​ | $ | 12,523 | ​ | 100%
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

​

Provision for Income Taxes

In reporting interim financial information, income tax provisions should be determined under the procedures set forth in Financial Accounting Standards Board’s Accounting Standards Codification (“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.

FINANCIAL CONDITION

Balance Sheet Overview

Total assets at March 31, 2022 increased to $1.8 billion, representing a $30.5 million increase since December 31, 2021. During the first quarter of 2022, cash and interest-bearing deposits in other banks decreased by $39.6 million, the investment portfolio increased by $42.2 million and gross loans increased by $27.7 million. Management made a strategic decision to deploy excess cash balances early in the first quarter of 2022 by purchasing approximately $50.0 million in short-term treasury bonds. OREO balances remained stable during the first quarter although there continues to be interest in parcels of real estate that previously secured a large commercial participation loan. We anticipate further reductions to OREO balances during 2022 as we consummate additional sale contracts.

​

Total liabilities increased by $35.3 million when compared to liabilities at December 31, 2021. The increase in the first quarter of 2022 was attributable to core relationship deposit growth of $38.2 million. Balances in short-term borrowings related to our Treasury Management product increased slightly by $1.2 million. Total shareholders’ equity decreased by $4.8 million during the quarter, as net income of $5.7 million was offset by the payment of $1.0 million in dividends and the decline of $9.6 million in accumulated other comprehensive loss related to declining market values of our investment portfolio and pension plan assets.

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​

Loan Portfolio

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

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(dollars in thousands) |  | March 31, 2022 |  | December 31, 2021
Commercial real estate | ​ | $ | 391,136 |  | 33% | ​ | $ | 374,291 |  | 32%
Acquisition and development | ​ | ​ | 133,031 | ​ | 11% | ​ | ​ | 128,077 | ​ | 11%
Commercial and industrial * | ​ | ​ | 194,914 | ​ | 17% | ​ | ​ | 180,976 | ​ | 16%
Residential mortgage | ​ | ​ | 399,704 | ​ | 34% | ​ | ​ | 404,686 | ​ | 35%
Consumer | ​ | ​ | 62,616 | ​ | 5% | ​ | ​ | 65,657 | ​ | 6%
Total Loans | ​ | $ | 1,181,401 | ​ | 100% | ​ | $ | 1,153,687 | ​ | 100%

*Includes $1.3 million of PPP loans at March 31, 2022 and $7.7 million at December 31, 2021

​

Outstanding loans of $1.2 billion at March 31, 2022 reflected an increase of $27.7 million during the first quarter of 2022. Core commercial loan growth was offset slightly by PPP loan forgiveness. Commercial real estate (:CRE”) loans increased by $16.8 million, acquisition and development (“A&D”) loans increased by $5.0 million and commercial and industrial loans increased by $14.0 million, as growth in core portfolio loans of $20.4 million was offset by $6.4 million of PPP loan forgiveness. Residential mortgage loans decreased $5.0 million resulting from amortization of the portfolio as well as paydowns and payoffs. The refinancing activity continued to slow in the first quarter and much of the production of residential mortgage loans was booked to the in-house portfolio. The consumer loan portfolio decreased by $3.0 million.

​

Commercial loan production for the three months ended March 31, 2022 was approximately $68.1 million. At March 31, 2022, unfunded, committed commercial construction loans totaled approximately $25.6 million. Commercial amortization and payoffs were approximately $45.1 million through March 31, 2022, exclusive of PPP loans.

​

Consumer mortgage loan production for the first quarter of 2022 was approximately $20.5 million with the vast majority of this production being comprised of in-house mortgages. The production and pipeline mix of in-house, portfolio loans and investor loans as of March 31, 2022 consisted of $13.4 million in portfolio loans and $1.0 million in investor loans. Production levels have slowed for residential mortgages as compared to the first quarter of 2021 based on the long-term interest rate increases that have occurred during the fourth quarter of 2021 and into the first quarter of 2022.

​

Non-accrual loans totaled $2.3 million at March 31, 2022 compared to $2.5 million at December 31, 2021. The slight decrease in non-accrual balances at March 31, 2022 was primarily related to $0.1 million of one commercial and industrial loan that paid off in the first quarter of 2022.

​

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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) |  | March 31, 2022 |  | % of Applicable Portfolio |  | December 31, 2021 |  | % of Applicable Portfolio
Non-accrual loans: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | $ | 73 | ​ | 0.02% | ​ | $ | 81 | ​ | 0.02%
Acquisition and development | ​ | ​ | 381 | ​ | 0.29% | ​ | ​ | 390 | ​ | 0.30%
Commercial and industrial | ​ | ​ | — | ​ | 0.00% | ​ | ​ | 90 | ​ | 0.05%
Residential mortgage | ​ | ​ | 1,878 | ​ | 0.47% | ​ | ​ | 1,901 | ​ | 0.47%
Total non-accrual loans | ​ | $ | 2,332 | ​ | 0.20% | ​ | $ | 2,462 | ​ | 0.21%
Accruing Loans Past Due 90 days or more: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage | ​ | $ | — | ​ | ​ | ​ | $ | 148 | ​ | ​
Consumer | ​ | ​ | 37 | ​ | ​ | ​ | ​ | 152 | ​ | ​
Total loans past due 90 days or more | ​ | $ | 37 | ​ | ​ | ​ | $ | 300 | ​ | ​
Total non-accrual and accruing loans past due 90 days or more | ​ | $ | 2,369 | ​ | ​ | ​ | $ | 2,762 | ​ | ​
Restructured Loans (TDRs): | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Performing | ​ | $ | 2,934 | ​ | ​ | ​ | $ | 2,997 | ​ | ​
Non-accrual (included above) | ​ | ​ | 294 | ​ | ​ | ​ | ​ | 300 | ​ | ​
Total TDRs | ​ | $ | 3,228 | ​ | ​ | ​ | $ | 3,297 | ​ | ​
Other real estate owned | ​ | $ | 4,477 | ​ | ​ | ​ | $ | 4,477 | ​ | ​
Total Non-performing assets | ​ | $ | 6,846 | ​ | ​ | ​ | $ | 7,239 | ​ | ​
Impaired loans without a valuation allowance | ​ | ​ | 5,157 | ​ | ​ | ​ | ​ | 5,248 | ​ | ​
Impaired loans with a valuation allowance | ​ | ​ | 374 | ​ | ​ | ​ | ​ | 480 | ​ | ​
Total impaired loans | ​ | $ | 5,531 | ​ | ​ | ​ | $ | 5,728 | ​ | ​
Valuation allowance related to impaired loans | ​ | $ | 35 | ​ | ​ | ​ | $ | 64 | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-accrual loans to total loans (as %) | ​ | ​ | 0.20% | ​ | ​ | ​ | ​ | 0.21% | ​ | ​
Non-performing loans to total loans (as %) | ​ | ​ | 0.20% | ​ | ​ | ​ | ​ | 0.24% | ​ | ​
Non-performing assets to total assets (as %) | ​ | ​ | 0.39% | ​ | ​ | ​ | ​ | 0.42% | ​ | ​
Allowance for loan losses to non-accrual loans (as %) | ​ | ​ | 655.75% | ​ | ​ | ​ | ​ | 648.05% | ​ | ​
Allowance for loan losses to non-performing assets (as %) | ​ | ​ | 223.37% | ​ | ​ | ​ | ​ | 220.40% | ​ | ​

​

Performing loans considered to be impaired (including performing troubled debt restructurings, or TDRs), as defined and identified by management, amounted to $2.9 million at March 31, 2022 and $3.0 million at December 31, 2021. Loans are identified as impaired when, based on current information and events, management determines that we will be unable to collect all amounts due according to contractual terms. These loans consist primarily of A&D loans and CRE loans. The fair values are generally determined based upon independent third-party appraisals of the collateral or discounted cash flows based upon the expected proceeds. Specific allocations have been made where management believes there is insufficient collateral to repay the loan balance if liquidated and there is no secondary source of repayment available.

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The following table presents the details of impaired loans that are TDRs by class at March 31, 2022 and December 31, 2021:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, 2022 | ​ | December 31, 2021
​ | ​ | Number of | ​ | Recorded | ​ | Number of | ​ | Recorded
(dollars in thousands) |  | Contracts |  | Investment |  | Contracts |  | Investment
Performing | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non owner-occupied | ​ | 1 | ​ | $ | 105 | ​ | 1 | ​ | $ | 106
All other CRE | ​ | 2 | ​ | ​ | 2,138 | ​ | 2 | ​ | ​ | 2,178
Acquisition and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
1-4 family residential construction | ​ | 1 | ​ | ​ | 231 | ​ | 1 | ​ | ​ | 239
All other A&D | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Commercial and industrial | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Residential mortgage | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage – term | ​ | 6 | ​ | ​ | 460 | ​ | 6 | ​ | ​ | 474
Residential mortgage – home equity | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Consumer | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Total performing | ​ | 10 | ​ | $ | 2,934 | ​ | 10 | ​ | $ | 2,997
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 | ​ | ​ | 294 | ​ | 2 | ​ | ​ | 300
Residential mortgage – home equity | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Consumer | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | —
Total non-accrual | ​ | 2 | ​ | ​ | 294 | ​ | 2 | ​ | ​ | 300
Total TDRs | ​ | 12 | ​ | $ | 3,228 | ​ | 12 | ​ | $ | 3,297

​

The level of TDRs was $3.2 million at March 31, 2022 compared to $3.3 million at December 31, 2021, with a slight reduction due to payments made during the first three months of 2022. There were no new TDRs during the first three months of 2022.

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. The ALL decreased to $15.3 million at March 31, 2022 compared to $16.0 million at December 31, 2021.

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The ratio of net charge offs to average loans for the quarter ended March 31, 2022 was an annualized 0.08%, compared to net charge offs to average loans of 0.01% for 2021. The decline was primarily driven by increased charge-offs on our portfolio. Our special assets team continues to aggressively collect on charged-off loans.

The ALL at March 31, 2022 is 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.

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

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(dollars in thousands) |  | 2022 |  | 2021 |
Balance, January 1 | ​ | $ | 15,955 | ​ | $ | 16,486 | ​
Charge-offs: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Acquisition and development | ​ | ​ | — | ​ | ​ | (81) | ​
Commercial and industrial | ​ | ​ | (48) | ​ | ​ | — | ​
Residential mortgage | ​ | ​ | (9) | ​ | ​ | (82) | ​
Consumer | ​ | ​ | (246) | ​ | ​ | (80) | ​
Total charge-offs | ​ | ​ | (303) | ​ | ​ | (243) | ​
Recoveries: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commercial real estate | ​ | ​ | 1 | ​ | ​ | — | ​
Acquisition and development | ​ | ​ | 18 | ​ | ​ | 101 | ​
Commercial and industrial | ​ | ​ | 3 | ​ | ​ | 36 | ​
Residential mortgage | ​ | ​ | 15 | ​ | ​ | 17 | ​
Consumer | ​ | ​ | 22 | ​ | ​ | 47 | ​
Total recoveries | ​ | ​ | 59 | ​ | ​ | 201 | ​
Net recoveries/(losses) | ​ | ​ | (244) | ​ | ​ | (42) | ​
Provision/(credit) for loan losses | ​ | ​ | (419) | ​ | ​ | 110 | ​
Balance at end of period | ​ | $ | 15,292 | ​ | $ | 16,554 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Allowance for loan losses to gross loans outstanding (as %) | ​ | ​ | 1.29 | % | ​ | 1.38 | %

​

​ | ​ | ​ | ​ | ​ | ​ | ​
Net (Charge-offs)/Recoveries as a % of Average Applicable Portfolio
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2022 | ​ | 2021
Commercial real estate | ​ | ​ | 0.00% | ​ | ​ | 0.00%
Acquisition and development | ​ | ​ | 0.06% | ​ | ​ | 0.07%
Commercial and industrial | ​ | ​ | (0.10)% | ​ | ​ | 0.05%
Residential mortgage | ​ | ​ | 0.01% | ​ | ​ | (0.07)%
Consumer | ​ | ​ | (1.42)% | ​ | ​ | (0.37)%
​ | ​ | ​ | ​ | ​ | ​ | ​

​

Investment Securities

At March 31, 2022, the total amortized cost basis of the available-for-sale investment portfolio was $154.3 million, compared to a fair value of $143.6 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 $241.7 million, compared to a fair value of $235.0 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:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, 2022 | ​ | December 31, 2021
​ | ​ | 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 | ​ | $ | 11,070 | ​ | $ | 10,298 | ​ | 7% | ​ | $ | 69,602 | ​ | $ | 67,169 | ​ | 23%
Residential mortgage-backed agencies | ​ | ​ | 48,319 | ​ | ​ | 44,298 | ​ | 31% | ​ | ​ | 49,630 | ​ | ​ | 48,661 | ​ | 17%
Commercial mortgage-backed agencies | ​ | ​ | 38,907 | ​ | ​ | 36,233 | ​ | 25% | ​ | ​ | 51,694 | ​ | ​ | 50,868 | ​ | 19%
Collateralized mortgage obligations | ​ | ​ | 27,994 | ​ | ​ | 25,997 | ​ | 18% | ​ | ​ | 93,018 | ​ | ​ | 90,077 | ​ | 31%
Obligations of state and political subdivisions | ​ | ​ | 8,351 | ​ | ​ | 8,464 | ​ | 6% | ​ | ​ | 12,439 | ​ | ​ | 12,804 | ​ | 4%
Corporate bonds | ​ | ​ | 1,000 | ​ | ​ | 1,000 | ​ | 1% | ​ | ​ | — | ​ | ​ | — | ​ | —
Collateralized debt obligations | ​ | ​ | 18,616 | ​ | ​ | 17,319 | ​ | 12% | ​ | ​ | 18,609 | ​ | ​ | 17,192 | ​ | 6%
Total available for sale | ​ | $ | 154,257 | ​ | $ | 143,609 | ​ | 100% | ​ | $ | 294,992 | ​ | $ | 286,771 | ​ | 100%
Securities Held to Maturity: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. treasuries | ​ | $ | 37,012 | ​ | $ | 36,059 | ​ | 15% | ​ | $ | — | ​ | $ | — | ​ | —
U.S. government agencies | ​ | ​ | 67,527 | ​ | ​ | 63,005 | ​ | 27% | ​ | ​ | — | ​ | ​ | — | ​ | —
Residential mortgage-backed agencies | ​ | ​ | 29,068 | ​ | ​ | 27,758 | ​ | 12% | ​ | ​ | 30,634 | ​ | ​ | 30,847 | ​ | 47%
Commercial mortgage-backed agencies | ​ | ​ | 26,525 | ​ | ​ | 25,382 | ​ | 11% | ​ | ​ | 5,456 | ​ | ​ | 5,601 | ​ | 9%
Collateralized mortgage obligations | ​ | ​ | 58,490 | ​ | ​ | 55,523 | ​ | 24% | ​ | ​ | — | ​ | ​ | — | ​ | —
Obligations of state and political subdivisions | ​ | ​ | 23,034 | ​ | ​ | 27,299 | ​ | 11% | ​ | ​ | 20,169 | ​ | ​ | 28,921 | ​ | 44%
Total held to maturity | ​ | $ | 241,656 | ​ | $ | 235,026 | ​ | 100% | ​ | $ | 56,259 | ​ | $ | 65,369 | ​ | 100%

​

Total fair value of investment securities available for sale decreased by $143.2 million since December 31, 2021 due to the transfer of investments from available-for-sale to held to maturity in the first quarter 2022. At March 31, 2022, the securities classified as available-for-sale included a net unrealized loss of $10.6 million, which represents the difference between the fair value and amortized cost of securities in the portfolio.

The Corporation reassessed classification of certain investments and effective February 1, 2022, the Corporation transferred $139.0 million of callable agencies, obligation of state and political subdivisions, and collateralized mortgage obligations from available for sale to held to maturity securities. The transfer occurred at fair value. The related unrealized loss of $8.4 million included in other comprehensive loss remained in other comprehensive loss, to be amortized out of other comprehensive loss with an offsetting entry to interest income as a yield adjustment over the remaining term of the securities. No gain or loss was recorded at the time of transfer. The transfer of these securities was completed in an effort to mitigate further decline in fair market value in a rising rate environment. Management’s assessment of the portfolio included lower yielding bonds and the risk of extension in an up 300 basis point shock.

​

As discussed in Note 6 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 $126.3 million of the available-for-sale portfolio was valued using Level 2 pricing and had net unrealized losses of $9.3 million at March 31, 2022. The remaining $17.3 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 $1.3 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 $0.6 million represent non-credit related OTTI charges on seven of the securities, while $0.7 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 March 31, 2022:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
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 | ​ | $ | 1,547 | ​ | $ | (347) | ​ | C | ​ | 676,565 | ​ | 14.82% | ​ | 267,395 | ​ | 22,044 | ​ | 8.24% | ​ | 40 / 56
Preferred Term Security XVIII | ​ | C | ​ | ​ | 2,717 | ​ | ​ | 2,320 | ​ | ​ | (397) | ​ | C | ​ | 676,565 | ​ | 14.82% | ​ | 267,395 | ​ | 22,044 | ​ | 8.24% | ​ | 40 / 56
Preferred Term Security XIX* | ​ | C | ​ | ​ | 1,843 | ​ | ​ | 1,876 | ​ | ​ | 33 | ​ | C | ​ | 700,535 | ​ | 6.57% | ​ | 407,420 | ​ | 32,950 | ​ | 8.09% | ​ | 45 / 51
Preferred Term Security XIX* | ​ | C | ​ | ​ | 1,103 | ​ | ​ | 1,125 | ​ | ​ | 22 | ​ | C | ​ | 700,535 | ​ | 6.57% | ​ | 407,420 | ​ | 32,950 | ​ | 8.09% | ​ | 45 / 51
Preferred Term Security XIX* | ​ | C | ​ | ​ | 2,557 | ​ | ​ | 2,626 | ​ | ​ | 69 | ​ | C | ​ | 700,535 | ​ | 6.57% | ​ | 407,420 | ​ | 32,950 | ​ | 8.09% | ​ | 45 / 51
Preferred Term Security XIX* | ​ | C | ​ | ​ | 1,105 | ​ | ​ | 1,126 | ​ | ​ | 21 | ​ | C | ​ | 700,535 | ​ | 6.57% | ​ | 407,420 | ​ | 32,950 | ​ | 8.09% | ​ | 45 / 51
Preferred Term Security XXII* | ​ | C-1 | ​ | ​ | 1,610 | ​ | ​ | 1,519 | ​ | ​ | (91) | ​ | C | ​ | 1,386,600 | ​ | 10.13% | ​ | 624,548 | ​ | 76,881 | ​ | 12.31% | ​ | 58 / 71
Preferred Term Security XXII* | ​ | C-1 | ​ | ​ | 4,023 | ​ | ​ | 3,796 | ​ | ​ | (227) | ​ | C | ​ | 1,386,600 | ​ | 10.13% | ​ | 624,548 | ​ | 76,881 | ​ | 12.31% | ​ | 58 / 71
Preferred Term Security XXIII | ​ | C-1 | ​ | ​ | 1,764 | ​ | ​ | 1,384 | ​ | ​ | (380) | ​ | C | ​ | 1,467,000 | ​ | 14.52% | ​ | 605,955 | ​ | 81,169 | ​ | 13.40% | ​ | 69 / 83
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total Level 3 Securities Available for Sale | ​ | ​ | ​ | $ | 18,616 | ​ | $ | 17,319 | ​ | $ | (1,297) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

​

*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 8.09% to 13.40% 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.

Deposits

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

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(dollars in thousands) |  | March 31, 2022 |  | December 31, 2021
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-interest-bearing demand deposits | ​ | $ | 530,901 |  | 35% | ​ | $ | 501,627 | ​ | 34%
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest-bearing deposits: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Demand | ​ | ​ | 284,582 | ​ | 19% | ​ | ​ | 228,175 | ​ | 16%
Money Market | ​ | ​ | 292,401 | ​ | 19% | ​ | ​ | 339,748 | ​ | 23%
Savings deposits | ​ | ​ | 251,378 | ​ | 17% | ​ | ​ | 236,595 | ​ | 16%
Time deposits | ​ | ​ | 148,293 | ​ | 10% | ​ | ​ | 163,229 | ​ | 11%
Total Deposits | ​ | $ | 1,507,555 | ​ | 100% | ​ | $ | 1,469,374 | ​ | 100%

​

Total deposits at March 31, 2022 increased by $38.2 million when compared to deposits at December 31, 2021. During the first quarter of 2022, non-interest-bearing deposits increased by $29.3 million, driven by retail commercial account growth. Traditional savings accounts increased by $14.8 million as we continued to see significant growth in our Prime Saver product, and total demand deposits increased by $56.4 million. Total money market accounts decreased by $47.3 million as some of our municipal accounts are shifting balances to state offered account products paying higher rates. Time deposits decreased by $14.9 million as we continued to hold rates low due to our higher cash balances.

​

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Borrowed Funds

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

​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | March 31, 2022 |  | December 31, 2021
Securities sold under agreements to repurchase | ​ | $ | 58,902 | ​ | $ | 57,699
Total short-term borrowings | ​ | ​ | 58,902 | ​ | ​ | 57,699
Junior subordinated debt | ​ | ​ | 30,929 | ​ | ​ | 30,929
Total long-term borrowings | ​ | $ | 30,929 | ​ | $ | 30,929

​

Total short-term borrowings increased by $1.2 million during the first three months of 2022. This increase was due to increased cash balances from existing Treasury Management accounts.

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.

​

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 March 31, 2022, 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.

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 March 31, 2022 and December 31, 2021, management estimated the following changes in net interest income, assuming the indicated rate changes:

​ | ​ | ​ | ​ | ​ | ​ | ​
(Dollars in thousands) |  | March 31, 2022 | ​ | December 31, 2021
+400 basis points | ​ | $ | 3,381 | ​ | $ | 4,072
+300 basis points | ​ | $ | 3,640 | ​ | $ | 3,233
+200 basis points | ​ | $ | 1,847 | ​ | $ | 2,315
+100 basis points | ​ | $ | 970 | ​ | $ | 1,160
-100 basis points | ​ | $ | (3,497) | ​ | $ | (3,110)

​

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, 2021. Our NII simulation analysis as of December 31, 2021 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, 2021 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 March 31, 2022, the Bank had $130.0 million available through unsecured lines of credit with correspondent banks, and approximately $187.5 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 is 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 March 31, 2022, the Bank was considered to be well-capitalized.

​

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The following table presents the Bank’s capital ratios as of the dates indicated:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, 2022 |  | December 31, 2021 |  | Required for Capital Adequacy Purposes |  | Required to be Well Capitalized |
Total Capital (to risk-weighted assets) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
First United Bank & Trust | ​ | 14.77 | % | 14.97 | % | 8.00 | % | 10.00 | %
Tier 1 Capital (to risk-weighted assets) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
First United Bank & Trust | ​ | 13.59 | % | 13.72 | % | 6.00 | % | 8.00 | %
Common Equity Tier 1 Capital (to risk-weighted assets) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
First United Bank & Trust | ​ | 13.59 | % | 13.72 | % | 4.50 | % | 6.50 | %
Tier 1 Capital (to average assets) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
First United Bank & Trust | ​ | 10.14 | % | 10.00 | % | 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 March 31, 2022 to December 31, 2021, short-term borrowings increased by $1.2 million during the first three months of 2022. This increase was due to increased cash balances from existing Treasury Management 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) |  | March 31, 2022 |  | December 31, 2021
Residential Mortgage - home equity | ​ | $ | 68,078 | ​ | $ | 66,874
Residential Mortgage - construction | ​ | ​ | 20,498 | ​ | ​ | 18,657
Commercial | ​ | ​ | 129,141 | ​ | ​ | 136,897
Consumer - personal credit lines | ​ | ​ | 4,494 | ​ | ​ | 4,551
Standby letters of credit | ​ | ​ | 15,643 | ​ | ​ | 15,711
Total | ​ | $ | 237,854 | ​ | $ | 242,690

​

The decrease of $4.8 million in commitments at March 31, 2022 when compared to December 31, 2021 was due to utilization of funds and balances moving to outstanding balances in the loan portfolio.

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 December 31, 2021 under the heading “Market Risk and Interest Sensitivity” both of which are incorporated in this Item 3 by reference.

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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 March 31, 2022 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 three months ended March 31, 2022, 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, 2021. 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

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

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

​ | ​ | ​
Exhibit |  | Description
10.1 | ​ | Appendix A to the First United Corporation Short-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to First United Corporation’s Current Report on Form 8-K filed on March 15, 2022)*
10.2 | ​ | Appendix A to the First United Corporation Long-Term Incentive Plan (incorporated by reference to Exhibit 10.2 to First United Corporation’s Current Report on Form 8-K filed on March 15, 2022)
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 March 31, 2022 formatted in Inline XBRL, included within the Exhibit 101 attachments (filed herewith).

* Portions of the exhibit have been omitted pursuant to Item 601(b)(10)(vi) of Regulation S-K.

​

​

​

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SIGNATURES

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

​ ​ | ​
​ ​ | FIRST UNITED CORPORATION
​ | ​
​ | ​
Date: May 9, 2022 | /s/ Carissa L. Rodeheaver
​ | Carissa L. Rodeheaver, CPA
​ | Chairman of the Board, President and Chief Executive Officer
​ | (Principal Executive Officer)
​ | ​
​ | ​
Date: May 9, 2022 | /s/ Tonya K. Sturm
​ | Tonya K. Sturm, Senior Vice President,
​ | Chief Financial Officer
​ | (Principal Financial Officer and Principal Accounting Officer)

​

​

​

​

​

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