FIRST UNITED CORP/MD/ 10-Q

Item 1. Financial Statements First United Corporation and Subsidiaries Consolidated Statement of Financial Condition (In thousands, except share data - Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2021 December 31, 2020 ​ ​ ​ ​ ​ ​ Assets ​ ​ ​ ​ ​ ​ Cash and due from banks ​ $ 190,949 ​ $ 146,673 Interest bearing deposits in banks ​ ​ 3,473 ​ ​ 2,759 Cash and cash equivalents ​ ​ 194,422 ​ ​ 149,432 Investment securities – available for sale (at fair value) ​ ​ 242,013 ​ ​ 226,885 Investment securities – held to maturity (fair value $ 75,574 at June 30, 2021 and $ 77,612 at December 31, 2020) ​ ​ 65,683 ​ ​ 68,263 Restricted investment in bank stock, at cost ​ ​ 3,658 ​ ​ 4,468 Loans held for sale ​ ​ 1,443 ​ ​ 3,546 Loans ​ ​ 1,145,343 ​ ​ 1,167,812 Unearned fees ​ ​ ( 2,458 ) ​ ​ ( 1,730 ) Allowance for loan losses ​ ​ ( 17,068 ) ​ ​ ( 16,486 ) Net loans ​ ​ 1,125,817 ​ ​ 1,149,596 Premises and equipment, net ​ ​ 35,988 ​ ​ 36,863 Goodwill ​ ​ 11,004 ​ ​ 11,004 Bank owned life insurance ​ ​ 44,553 ​ ​ 43,974 Deferred tax assets ​ ​ 7,849 ​ ​ 7,972 Other real estate owned, net ​ ​ 6,756 ​ ​ 9,386 Operating lease asset ​ ​ 2,414 ​ ​ 2,408 Accrued interest receivable and other assets ​ ​ 22,206 ​ ​ 19,617 Total Assets ​ $ 1,763,806 ​ $ 1,733,414 Liabilities and Shareholders’ Equity ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ Non-interest bearing deposits ​ $ 497,736 ​ $ 420,427 Interest bearing deposits ​ ​ 958,375 ​ ​ 1,001,939 Total deposits ​ ​ 1,456,111 ​ ​ 1,422,366 Short-term borrowings ​ ​ 49,406 ​ ​ 49,160 Long-term borrowings ​ ​ 100,929 ​ ​ 100,929 Operating lease liability ​ ​ 2,945 ​ ​ 2,958 Accrued interest payable and other liabilities ​ ​ 22,867 ​ ​ 26,044 Dividends payable ​ ​ 992 ​ ​ 910 Total Liabilities ​ ​ 1,633,250 ​ ​ 1,602,367 Shareholders’ Equity: ​ ​ ​ ​ ​ ​ Common Stock – par value $ 0.01 per share; Authorized 25,000,000 shares; issued and outstanding 6,614,604 shares at June 30, 2021 and 6,992,911 at December 31, 2020 ​ ​ 66 ​ ​ 70 Surplus ​ ​ 23,422 ​ ​ 30,149 Retained earnings ​ ​ 135,536 ​ ​ 129,691 Accumulated other comprehensive loss ​ ​ ( 28,468 ) ​ ​ ( 28,863 ) Total Shareholders’ Equity ​ ​ 130,556 ​ ​ 131,047 Total Liabilities and Shareholders’ Equity ​ $ 1,763,806 ​ $ 1,733,414 ​ See accompanying notes to the consolidated financial statements 3 Table of Contents First United Corporation and Subsidiaries Consolidated Statement of Operations (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ June 30, ​ 2021 2020 ​ ​ (Unaudited) Interest income ​ ​ ​ ​ ​ ​ Interest and fees on loans ​ $ 25,829 ​ $ 26,252 Interest on investment securities ​ ​ ​ ​ ​ ​ Taxable ​ ​ 1,984 ​ ​ 2,652 Exempt from federal income tax ​ ​ 543 ​ ​ 533 Total investment income ​ ​ 2,527 ​ ​ 3,185 Other ​ ​ 142 ​ ​ 283 Total interest income ​ ​ 28,498 ​ ​ 29,720 Interest expense ​ ​ ​ ​ ​ ​ Interest on deposits ​ ​ 2,145 ​ ​ 3,482 Interest on short-term borrowings ​ ​ 50 ​ ​ 49 Interest on long-term borrowings ​ ​ 1,304 ​ ​ 1,646 Total interest expense ​ ​ 3,499 ​ ​ 5,177 Net interest income ​ ​ 24,999 ​ ​ 24,543 Provision for loan losses ​ ​ 665 ​ ​ 4,821 Net interest income after provision for loan losses ​ ​ 24,334 ​ ​ 19,722 Other operating income ​ ​ ​ ​ ​ ​ Net gains on investments, available for sale ​ ​ 154 ​ ​ 47 Net gains on investments, held to maturity ​ ​ — ​ ​ 60 Gains on sale of residential mortgage loans ​ ​ 860 ​ ​ 746 Gains/(losses) on disposal of fixed assets ​ ​ 16 ​ ​ ( 18 ) Net gains ​ ​ 1,030 ​ ​ 835 Other Income ​ ​ ​ ​ ​ ​ Service charges on deposit accounts ​ ​ 817 ​ ​ 992 Other service charges ​ ​ 432 ​ ​ 322 Trust department ​ ​ 4,275 ​ ​ 3,484 Debit card income ​ ​ 1,723 ​ ​ 1,314 Bank owned life insurance ​ ​ 579 ​ ​ 588 Brokerage commissions ​ ​ 625 ​ ​ 479 Other ​ ​ 612 ​ ​ 254 Total other income ​ ​ 9,063 ​ ​ 7,433 Total other operating income ​ ​ 10,093 ​ ​ 8,268 Other operating expenses ​ ​ ​ ​ ​ ​ Salaries and employee benefits ​ ​ 10,495 ​ ​ 10,866 FDIC premiums ​ ​ 366 ​ ​ 203 Equipment ​ ​ 1,805 ​ ​ 1,893 Occupancy ​ ​ 1,418 ​ ​ 1,493 Data processing ​ ​ 1,601 ​ ​ 2,025 Marketing ​ ​ 279 ​ ​ 283 Professional services ​ ​ 2,661 ​ ​ 1,904 Contract labor ​ ​ 333 ​ ​ 300 Line rentals ​ ​ 483 ​ ​ 438 Other real estate owned ​ ​ ( 610 ) ​ ​ ( 3 ) Investor relations ​ ​ 430 ​ ​ 1,106 Settlement expense ​ ​ 3,300 ​ ​ — Other ​ ​ 1,398 ​ ​ 1,924 Total other operating expenses ​ ​ 23,959 ​ ​ 22,432 Income before income tax expense ​ ​ 10,468 ​ ​ 5,558 Provision for income tax expense ​ ​ 2,635 ​ ​ 1,233 Net Income ​ $ 7,833 ​ $ 4,325 Basic net income per share ​ $ 1.15 ​ $ 0.62 Diluted net income per share ​ $ 1.15 ​ $ 0.62 Weighted average number of basic shares outstanding ​ ​ 6,803 ​ ​ 7,018 Weighted average number of diluted shares outstanding ​ ​ 6,808 ​ ​ 7,032 Dividends declared per common share ​ $ 0.30 ​ $ 0.26 ​ See accompanying notes to the consolidated financial statements ​ 4 Table of Contents First United Corporation and Subsidiaries Consolidated Statement of Operations (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ June 30, ​ 2021 2020 ​ ​ (Unaudited) Interest income ​ ​ ​ ​ ​ ​ Interest and fees on loans ​ $ 13,097 ​ $ 13,413 Interest on investment securities ​ ​ ​ ​ ​ ​ Taxable ​ ​ 994 ​ ​ 1,344 Exempt from federal income tax ​ ​ 268 ​ ​ 273 Total investment income ​ ​ 1,262 ​ ​ 1,617 Other ​ ​ 77 ​ ​ 74 Total interest income ​ ​ 14,436 ​ ​ 15,104 Interest expense ​ ​ ​ ​ ​ ​ Interest on deposits ​ ​ 999 ​ ​ 1,612 Interest on short-term borrowings ​ ​ 26 ​ ​ 21 Interest on long-term borrowings ​ ​ 648 ​ ​ 815 Total interest expense ​ ​ 1,673 ​ ​ 2,448 Net interest income ​ ​ 12,763 ​ ​ 12,656 Provision for loan losses ​ ​ 555 ​ ​ 2,167 Net interest income after provision for loan losses ​ ​ 12,208 ​ ​ 10,489 Other operating income ​ ​ ​ ​ ​ ​ Net gains on investments, available for sale ​ ​ 154 ​ ​ 47 Net gains on investments, held to maturity ​ ​ — ​ ​ 60 Gains on sale of residential mortgage loans ​ ​ 272 ​ ​ 687 Gains on disposal of fixed assets ​ ​ 16 ​ ​ — Net gains ​ ​ 442 ​ ​ 794 Other Income ​ ​ ​ ​ ​ ​ Service charges on deposit accounts ​ ​ 412 ​ ​ 377 Other service charges ​ ​ 221 ​ ​ 32 Trust department ​ ​ 2,034 ​ ​ 1,731 Debit card income ​ ​ 913 ​ ​ 680 Bank owned life insurance ​ ​ 293 ​ ​ 285 Brokerage commissions ​ ​ 357 ​ ​ 202 Other ​ ​ 91 ​ ​ 118 Total other income ​ ​ 4,321 ​ ​ 3,425 Total other operating income ​ ​ 4,763 ​ ​ 4,219 Other operating expenses ​ ​ ​ ​ ​ ​ Salaries and employee benefits ​ ​ 5,507 ​ ​ 4,943 FDIC premiums ​ ​ 183 ​ ​ 160 Equipment ​ ​ 954 ​ ​ 967 Occupancy ​ ​ 693 ​ ​ 746 Data processing ​ ​ 875 ​ ​ 973 Marketing ​ ​ 133 ​ ​ 153 Professional services ​ ​ 1,491 ​ ​ 1,181 Contract labor ​ ​ 185 ​ ​ 149 Line rentals ​ ​ 268 ​ ​ 221 Other real estate owned ​ ​ ( 198 ) ​ ​ ( 3 ) Investor relations ​ ​ 306 ​ ​ 1,013 Other ​ ​ 635 ​ ​ 924 Total other operating expenses ​ ​ 11,032 ​ ​ 11,427 Income before income tax expense ​ ​ 5,939 ​ ​ 3,281 Provision for income tax expense ​ ​ 1,536 ​ ​ 711 Net Income ​ $ 4,403 ​ $ 2,570 Basic net income per common share ​ $ 0.66 ​ $ 0.37 Diluted net income per common share ​ $ 0.66 ​ $ 0.37 Weighted average number of basic shares outstanding ​ ​ 6,609 ​ ​ 6,974 Weighted average number of diluted shares outstanding ​ ​ 6,615 ​ ​ 6,992 Dividends declared per common share ​ $ 0.15 ​ $ 0.13 ​ See accompanying notes to the consolidated financial statements 5 Table of Contents First United Corporation and Subsidiaries Consolidated Statement of Comprehensive Loss (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ June 30, ​ ​ 2021 ​ 2020 Comprehensive Income ​ (Unaudited) Net Income ​ $ 7,833 ​ $ 4,325 Other comprehensive income/(loss), net of tax and reclassification adjustments: ​ ​ ​ ​ ​ ​ Net unrealized gains/(losses) on investments with OTTI ​ ​ 1,773 ​ ​ ( 1,506 ) Net unrealized (losses)/gains on all other AFS securities ​ ​ ( 3,281 ) ​ ​ 1,992 Net unrealized gains on HTM securities ​ ​ 79 ​ ​ 494 Net unrealized gains/(losses) on cash flow hedges ​ ​ 371 ​ ​ ( 1,044 ) Net unrealized gains/(losses) on pension ​ ​ 1,343 ​ ​ ( 1,516 ) Net unrealized gains on SERP ​ ​ 110 ​ ​ 68 Other comprehensive income/(loss), net of tax ​ ​ 395 ​ ​ ( 1,512 ) Comprehensive income ​ $ 8,228 ​ $ 2,813 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ June 30, ​ 2021 2020 Comprehensive Income (in thousands) ​ (Unaudited) Net Income ​ $ 4,403 ​ $ 2,570 Other comprehensive income, net of tax and reclassification adjustments: ​ ​ ​ ​ ​ ​ Net unrealized gains/(losses) on investments with OTTI ​ ​ 1,544 ​ ​ ( 281 ) Net unrealized gains on all other AFS securities ​ ​ 1,921 ​ ​ 608 Net unrealized gains on HTM securities ​ ​ 34 ​ ​ 441 Net unrealized losses on cash flow hedges ​ ​ ( 34 ) ​ ​ ( 81 ) Net unrealized gains on pension ​ ​ 1,210 ​ ​ 3,399 Net unrealized gains on SERP ​ ​ 55 ​ ​ 34 Other comprehensive income, net of tax ​ ​ 4,730 ​ ​ 4,120 Comprehensive income ​ $ 9,133 ​ $ 6,690 ​ See accompanying notes to the consolidated financial statements ​ 6 Table of Contents First United Corporation and Subsidiaries Consolidated Statement of Changes in Shareholders’ Equity (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock Surplus Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity Balance at January 1, 2021 ​ $ 70 ​ $ 30,149 ​ $ 129,691 ​ $ ( 28,863 ) ​ $ 131,047 Net income ​ ​ ​ ​ ​ ​ ​ ​ 3,430 ​ ​ ​ ​ ​ 3,430 Other comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 4,335 ) ​ ​ ( 4,335 ) Stock based compensation ​ ​ ​ ​ ​ 50 ​ ​ ​ ​ ​ ​ ​ ​ 50 Common stock issued - 2,956 shares ​ ​ ​ ​ ​ 46 ​ ​ ​ ​ ​ ​ ​ ​ 46 Common stock dividend declared - $ 0.15 per share ​ ​ ​ ​ ​ ​ ​ ​ ( 1,049 ) ​ ​ ​ ​ ​ ( 1,049 ) Balance at March 31, 2021 ​ $ 70 ​ $ 30,245 ​ $ 132,072 ​ $ ( 33,198 ) ​ $ 129,189 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ ​ ​ ​ ​ ​ ​ ​ 4,403 ​ ​ ​ ​ ​ 4,403 Other comprehensive income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4,730 ​ ​ 4,730 Stock based compensation ​ ​ ​ ​ ​ 296 ​ ​ ​ ​ ​ ​ ​ ​ 296 Common stock issued - 3,261 shares ​ ​ ​ ​ ​ 56 ​ ​ ​ ​ ​ ​ ​ ​ 56 Common stock repurchase - 400,000 shares ​ ​ ( 4 ) ​ ​ ( 7,175 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 7,179 ) Common stock dividend declared - $ 0.15 per share ​ ​ ​ ​ ​ ​ ​ ​ ( 939 ) ​ ​ ​ ​ ​ ( 939 ) Balance at June 30, 2021 ​ $ 66 ​ $ 23,422 ​ $ 135,536 ​ $ ( 28,468 ) ​ $ 130,556 ​ See accompanying notes to the consolidated financial statements ​ 7 Table of Contents First United Corporation and Subsidiaries Consolidated Statement of Changes in Shareholders’ Equity (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock Surplus Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity Balance at January 1, 2020 ​ $ 71 ​ $ 32,359 ​ $ 119,481 ​ $ ( 25,971 ) ​ $ 125,940 Net income ​ ​ ​ ​ ​ ​ ​ ​ 1,755 ​ ​ ​ ​ ​ 1,755 Other comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 5,632 ) ​ ​ ( 5,632 ) Stock based compensation ​ ​ ​ ​ ​ 98 ​ ​ ​ ​ ​ ​ ​ ​ 98 Common stock issued - 2,167 shares ​ ​ ​ ​ ​ 52 ​ ​ ​ ​ ​ ​ ​ ​ 52 Stock repurchase - 145,291 shares ​ ​ ( 1 ) ​ ​ ( 2,753 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 2,754 ) Common stock dividend declared - $ 0.13 per share ​ ​ ​ ​ ​ ​ ​ ​ ( 910 ) ​ ​ ​ ​ ​ ( 910 ) Balance at March 31, 2020 ​ $ 70 ​ $ 29,756 ​ $ 120,326 ​ $ ( 31,603 ) ​ $ 118,549 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ ​ ​ ​ ​ ​ ​ ​ 2,570 ​ ​ ​ ​ ​ 2,570 Other comprehensive income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4,120 ​ ​ 4,120 Stock based compensation ​ ​ ​ ​ ​ 71 ​ ​ ​ ​ ​ ​ ​ ​ 71 Common stock issued - 3,465 shares ​ ​ ​ ​ ​ 47 ​ ​ ​ ​ ​ ​ ​ ​ 47 Common stock dividend declared - $ 0.13 per share ​ ​ ​ ​ ​ ​ ​ ​ ( 904 ) ​ ​ ​ ​ ​ ( 904 ) Balance at June 30, 2020 ​ $ 70 ​ $ 29,874 ​ $ 121,992 ​ $ ( 27,483 ) ​ $ 124,453 ​ See accompanying notes to the consolidated financial statements ​ 8 Table of Contents First United Corporation and Subsidiaries Consolidated Statement of Cash Flows (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ June 30, ​ 2021 2020 ​ ​ (Unaudited) Operating activities ​ ​ ​ ​ ​ ​ Net income ​ $ 7,833 ​ $ 4,325 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ Provision for loan losses ​ ​ 665 ​ ​ 4,821 Depreciation ​ ​ 1,632 ​ ​ 1,625 Stock based compensation ​ ​ 402 ​ ​ 169 Gains on sales of other real estate owned ​ ​ ( 596 ) ​ ​ ( 21 ) Write-(ups)\downs of other real estate owned ​ ​ ( 160 ) ​ ​ 39 Originations of loans held for sale ​ ​ ( 20,744 ) ​ ​ ( 34,298 ) Proceeds from sale of loans held for sale ​ ​ 23,707 ​ ​ 30,511 Gains from sale of loans held for sale ​ ​ ( 860 ) ​ ​ ( 746 ) (Gains)/losses on disposal of fixed assets ​ ​ ( 16 ) ​ ​ 18 Net amortization of investment securities discounts and premiums- AFS ​ ​ 516 ​ ​ 62 Net amortization of investment securities discounts and premiums- HTM ​ ​ 168 ​ ​ 96 Gains on sales/calls of investment securities – AFS ​ ​ ( 154 ) ​ ​ ( 47 ) Gain on calls of investment securities – HTM ​ ​ — ​ ​ ( 60 ) Earnings on Bank owned life insurance ​ ​ ( 579 ) ​ ​ ( 588 ) Amortization of deferred loan fees ​ ​ ( 1,979 ) ​ ​ ( 1,269 ) Operating lease asset ​ ​ ( 6 ) ​ ​ 143 Decrease/(increase) in accrued interest receivable and other assets ​ ​ ( 502 ) ​ ​ ( 3,581 ) Deferred tax (benefit)/expense ​ ​ ( 22 ) ​ ​ 1 Operating lease liability ​ ​ ( 13 ) ​ ​ ( 151 ) Increase in accrued interest payable and other liabilities ​ ​ ( 2,670 ) ​ ​ 1,778 Net cash provided by operating activities ​ ​ 6,622 ​ ​ 2,827 Investing activities ​ ​ ​ ​ ​ ​ Proceeds from maturities/calls of investment securities - AFS ​ ​ 27,285 ​ ​ 22,327 Proceeds from maturities/calls of investment securities - HTM ​ ​ 8,744 ​ ​ 38,601 Proceeds from sales of investment securities - AFS ​ ​ 13,687 ​ ​ 1,080 Purchases of investment securities - AFS ​ ​ ( 58,516 ) ​ ​ ( 37,664 ) Purchases of investment securities - HTM ​ ​ ( 6,332 ) ​ ​ ( 18,633 ) Proceeds from sales of other real estate owned ​ ​ 3,386 ​ ​ 204 Proceeds from disposal of fixed assets ​ ​ — ​ ​ — Net decrease/(increase) in restricted stock ​ ​ 810 ​ ​ ( 53 ) Net decrease/(increase) in loans ​ ​ 45,193 ​ ​ ( 132,649 ) Purchases of loans ​ ​ ( 20,100 ) ​ ​ — Purchases of premises and equipment ​ ​ ( 741 ) ​ ​ ( 1,254 ) Net cash provided by/(used in) investing activities ​ ​ 13,416 ​ ​ ( 128,041 ) Financing activities ​ ​ ​ ​ ​ ​ Net increase in deposits ​ ​ 33,745 ​ ​ 209,537 Issuance of common stock ​ ​ 46 ​ ​ 99 Cash dividends on common stock ​ ​ ( 1,906 ) ​ ​ ( 1,830 ) Net increase/(decrease) in short-term borrowings ​ ​ 246 ​ ​ ( 12,727 ) Stock repurchase ​ ​ ( 7,179 ) ​ ​ ( 2,754 ) Net cash provided by financing activities ​ ​ 24,952 ​ ​ 192,325 Increase in cash and cash equivalents ​ ​ 44,990 ​ ​ 67,111 Cash and cash equivalents at beginning of the year ​ ​ 149,432 ​ ​ 49,979 Cash and cash equivalents at end of period ​ $ 194,422 ​ $ 117,090 Supplemental information ​ ​ ​ ​ ​ ​ Interest paid ​ $ 3,561 ​ $ 5,206 Taxes paid ​ $ 3,487 ​ $ 75 Non-cash investing activities: ​ ​ ​ ​ ​ ​ Transfers from loans to other real estate owned ​ $ — ​ $ 21 ​ See accompanying notes to the consolidated financial statements ​ 9 Table of Contents FIRST UNITED CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 – Basis of Presentation The accompanying unaudited consolidated financial statements of First United Corporation and its consolidated subsidiaries, including First United Bank & Trust (the “Bank”), have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, as required by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 270, Interim Reporting , and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all the information and footnotes required for annual financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring items, have been included. Certain prior period balances have been reclassified to conform to the current period presentation. Operating results for the three and six month periods ended June 30, 2021 are not necessarily indicative of the results that may be expected for the full year or for any future interim period. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2020. As used in these notes, the terms “the Corporation” “we”, “us”, and “our” refer to First United Corporation and, unless the context clearly requires otherwise, its consolidated subsidiaries. The Corporation has evaluated events and transactions occurring subsequent to the statement of financial condition date of June 30, 2021 for items that should potentially be recognized or disclosed in these financial statements. Note 2 – COVID-19 The COVID-19 pandemic has adversely impacted our business and financial results and that of many of our customers, and the ultimate impact will depend on future developments, which are highly uncertain, cannot be predicted, and are largely outside of our control, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic. The COVID-19 pandemic has created extensive disruptions to the global and U.S. economies and to the lives of individuals throughout the world. Governments, businesses, and the public are taking unprecedented actions to contain the spread of COVID-19 and to mitigate its effects, including closures of businesses and schools, fiscal and monetary stimulus, and legislation designed to deliver financial aid and other relief. While the scope, duration, and full effects of COVID-19 are not fully known, the pandemic and the efforts to contain it have disrupted global economic activity, adversely affected the functioning of financial markets, impacted market interest rates, increased economic and market uncertainty, and disrupted trade and supply chains. Congress, the President, and the Board of Governors of the Federal Reserve System (the “Federal Reserve”) have taken several actions designed to cushion the economic fallout. Most notably, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), a $2 trillion legislative package, was signed into law at the end of March 2020. The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors, such as by providing funds for loans under the Paycheck Protection Program (the “PPP”) administered by the Small Business Administration (the “SBA”). Section 4013 of the CARES Act, “Temporary Relief from Troubled Debt Restructurings,” provides banks the option to temporarily suspend certain requirements under U.S. GAAP related to trouble debt restructurings (“TDRs”) for a limited period of time to account for the effects of COVID-19. Additionally, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Economic Aid Act”) was enacted on December 27, 2020 and provided for a second round of PPP loans. The PPP Extension Act of 2021, which was enacted on March 30, 2021, extended the PPP application deadline to May 31, 2021 and provided the SBA with additional time to process applications through June 30, 2021. Also, the Consolidated Appropriations Act (the “CAA”) passed on December 27, 2020, which, among other things, extended the provisions of Section 4013 of the CARES Act to January 1, 2022. The Federal Reserve also took actions to mitigate the economic impact of the COVID-19 pandemic, including cutting the federal funds rate 150 basis points and targeting a 0 to 25 basis point rate. In addition to the general impact of the COVID-19 pandemic, certain provisions of the CARES Act as well as other legislative and regulatory relief efforts are expected to have a material impact on the Company’s operations. During the first six months of 2021, we continued to assist our business customers with the PPP loan forgiveness process and to originate additional PPP loans. We remained diligent in protecting our associates and customers from the lingering effects of 10 Table of Contents the pandemic, delaying opening our lobbies until April 1, 2021. Many of our sales and support employees continue to work remotely as we have adjusted to a hybrid work environment. We have continued to monitor our market areas, maintaining travel protocols and utilizing safety precautions while continuing to provide full banking services to our customers. ​ Paycheck Protection Program The Corporation actively participated in the PPP. On January 19, 2021, the SBA implemented a second round of funding for PPP loans. The Corporation originated $ 66.1 million in PPP loans during the first six months of 2021, consisting of 870 loans with an average loan size of $ 80 thousand. New PPP loans are no longer available. A total of 1,174 loans totaling $ 148.5 million were originated in 2020. As of June 30, 2021, approximately $ 140.5 million have been forgiven with a remaining balance of $ 74.1 million. COVID Modifications While the COVID-19 pandemic has had an impact on most industries, some have been more affected than others. In accordance with Section 4013 of the CARES Act and related regulatory pronouncements, we have not accounted for modifications of loans affected by the pandemic as troubled debt restructurings nor have we designated them as past due or nonaccrual. ​ As of July 16, 2021, there were six commercial loans totaling $ 7.3 million in total loan modifications related to the real estate rental and health care sectors. These loans are scheduled to return to contractual payment terms within the next quarter. ​ Note 3 – Earnings Per Common Share Basic earnings per common share is derived by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period and does not include the effect of any potentially dilutive common stock equivalents. Diluted earnings per share is derived by dividing net income available to common shareholders by the weighted-average number of shares outstanding, adjusted for the dilutive effect of outstanding common stock equivalents, such as restricted stock units (“RSUs”). At June 30, 2021, there were RSUs relating to 7,073 time-vested shares of common stock outstanding. There were no anti-dilutive shares at June 30, 2021 or 2020. ​ 11 Table of Contents The following tables set forth the calculation of basic and diluted earnings per common share for the six and three months periods ended June 30, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six months ended June 30, ​ ​ 2021 ​ 2020 ​ ​ ​ Average Per Share ​ ​ Average Per Share (in thousands, except for per share amount) ​ Income ​ Shares ​ Amount ​ Income ​ Shares ​ Amount Basic Earnings Per Share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 7,833 ​ 6,803 ​ $ 1.15 ​ $ 4,325 ​ 7,018 ​ $ 0.62 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted Earnings Per Share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 7,833 ​ 6,808 ​ $ 1.15 ​ $ 4,325 ​ 7,032 ​ $ 0.62 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended June 30, ​ ​ 2021 ​ 2020 ​ ​ ​ ​ ​ Average ​ Per Share ​ ​ ​ ​ Average ​ Per Share (in thousands, except for per share amount) ​ Income ​ Shares ​ Amount ​ Income ​ Shares ​ Amount Basic Earnings Per Share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 4,403 ​ 6,609 ​ $ 0.66 ​ $ 2,570 ​ 6,974 ​ $ 0.37 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted Earnings Per Share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 4,403 ​ 6,615 ​ $ 0.66 ​ $ 2,570 ​ 6,992 ​ $ 0.37 ​ ​ ​ ​ ​ ​ 12 Table of Contents Note 4 – Investments The following table shows a comparison of amortized cost and fair values of investment securities at June 30, 2021 and December 31, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value OTTI in AOCL June 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 59,703 ​ $ 367 ​ $ 1,949 ​ $ 58,121 ​ $ — Residential mortgage-backed agencies ​ ​ 32,027 ​ ​ — ​ ​ 545 ​ ​ 31,482 ​ ​ — Commercial mortgage-backed agencies ​ ​ 54,361 ​ ​ 306 ​ ​ 477 ​ ​ 54,190 ​ ​ — Collateralized mortgage obligations ​ ​ 73,559 ​ ​ 144 ​ ​ 1,547 ​ ​ 72,156 ​ ​ — Obligations of states and political subdivisions ​ ​ 9,417 ​ ​ 417 ​ ​ — ​ ​ 9,834 ​ ​ — Collateralized debt obligations ​ ​ 18,579 ​ ​ — ​ ​ 2,349 ​ ​ 16,230 ​ ​ ( 1,415 ) Total available for sale ​ $ 247,646 ​ $ 1,234 ​ $ 6,867 ​ $ 242,013 ​ $ ( 1,415 ) Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage-backed agencies ​ $ 35,595 ​ $ 879 ​ $ 327 ​ $ 36,147 ​ $ — Commercial mortgage-backed agencies ​ ​ 9,747 ​ ​ 397 ​ ​ — ​ ​ 10,144 ​ ​ — Collateralized mortgage obligations ​ ​ 118 ​ ​ 1 ​ ​ — ​ ​ 119 ​ ​ — Obligations of states and political subdivisions ​ ​ 20,223 ​ ​ 8,941 ​ ​ — ​ ​ 29,164 ​ ​ — Total held to maturity ​ $ 65,683 ​ $ 10,218 ​ $ 327 ​ $ 75,574 ​ $ — December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 75,856 ​ $ 899 ​ $ 322 ​ $ 76,433 ​ $ — Residential mortgage-backed agencies ​ ​ 22,999 ​ ​ — ​ ​ 100 ​ ​ 22,899 ​ ​ — Commercial mortgage-backed agencies ​ ​ 32,549 ​ ​ 529 ​ ​ 36 ​ ​ 33,042 ​ ​ — Collateralized mortgage obligations ​ ​ 70,372 ​ ​ 266 ​ ​ 1 ​ ​ 70,637 ​ ​ — Obligations of states and political subdivisions ​ ​ 10,144 ​ ​ 470 ​ ​ — ​ ​ 10,614 ​ ​ — Collateralized debt obligations ​ ​ 18,544 ​ ​ — ​ ​ 5,284 ​ ​ 13,260 ​ ​ ( 3,839 ) Total available for sale ​ $ 230,464 ​ $ 2,164 ​ $ 5,743 ​ $ 226,885 ​ $ ( 3,839 ) Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage-backed agencies ​ $ 34,597 ​ $ 1,173 ​ $ 38 ​ $ 35,732 ​ $ — Commercial mortgage-backed agencies ​ ​ 11,716 ​ ​ 587 ​ ​ — ​ ​ 12,303 ​ ​ — Collateralized mortgage obligations ​ ​ 1,348 ​ ​ 58 ​ ​ — ​ ​ 1,406 ​ ​ — Obligations of states and political subdivisions ​ ​ 20,602 ​ ​ 7,569 ​ ​ — ​ ​ 28,171 ​ ​ — Total held to maturity ​ $ 68,263 ​ $ 9,387 ​ $ 38 ​ $ 77,612 ​ $ — ​ 13 Table of Contents The following table shows the Corporation’s investment securities with gross unrealized losses and fair values at June 30, 2021 and December 31, 2020, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 months ​ ​ ​ 12 months or more ​ ​ (in thousands) Fair Value Unrealized Losses Number of Investments Fair Value Unrealized Losses Number of Investments June 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 34,409 ​ $ 1,949 ​ 6 ​ $ — ​ $ — ​ — Residential mortgage-backed agencies ​ ​ 31,481 ​ ​ 545 ​ 3 ​ ​ — ​ ​ — ​ — Commercial mortgage-backed agencies ​ ​ 24,748 ​ ​ 477 ​ 3 ​ ​ — ​ ​ — ​ — Collateralized mortgage obligations ​ ​ 65,230 ​ ​ 1,547 ​ 7 ​ ​ — ​ ​ — ​ — Collateralized debt obligations ​ ​ — ​ ​ — ​ — ​ ​ 16,230 ​ ​ 2,349 ​ 9 Total available for sale ​ $ 155,868 ​ $ 4,518 ​ 19 ​ $ 16,230 ​ $ 2,349 ​ 9 Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage-backed agencies ​ ​ 8,268 ​ ​ 327 ​ 3 ​ ​ — ​ ​ — ​ — Total held to maturity ​ $ 8,268 ​ $ 327 ​ 3 ​ $ — ​ $ — ​ — December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 39,611 ​ $ 322 ​ 7 ​ $ — ​ $ — ​ — Residential mortgage-backed agencies ​ ​ 22,899 ​ ​ 100 ​ 2 ​ ​ — ​ ​ — ​ — Commercial mortgage-backed agencies ​ ​ 16,034 ​ ​ 36 ​ 1 ​ ​ — ​ ​ — ​ — Collateralized mortgage obligations ​ ​ 39,628 ​ ​ 1 ​ 4 ​ ​ — ​ ​ — ​ — Collateralized debt obligations ​ ​ — ​ ​ — ​ — ​ ​ 13,260 ​ ​ 5,284 ​ 9 Total available for sale ​ $ 118,172 ​ $ 459 ​ 14 ​ $ 13,260 ​ $ 5,284 ​ 9 Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage-backed agencies ​ $ 2,973 ​ $ 38 ​ 1 ​ $ — ​ $ — ​ — Total held to maturity ​ $ 2,973 ​ $ 38 ​ 1 ​ $ — ​ $ — ​ — ​ Management systematically evaluates securities for impairment on a quarterly basis. Based upon application of accounting guidance for subsequent measurement in ASC Topic 320 (ASC Section 320-10-35), management assesses whether (a) the Corporation has the intent to sell a security being evaluated and (b) it is more likely than not that the Corporation will be required to sell the security prior to the anticipated recovery of any decline in fair value. If neither applies, then any decline in the fair value below the security’s cost that is considered an other-than-temporary decline is split into two components. The first component is the loss attributable to declining credit quality. Credit losses are recognized in earnings as realized losses in the period in which the impairment determination is made. The second component consists of all other losses, which are recognized in other comprehensive loss. In estimating other than temporary impairment (“OTTI”) losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) adverse conditions specifically related to the security, an industry, or a geographic area, (3) the historic and implied volatility of the fair value of the security, (4) changes in the rating of the security by a rating agency, (5) recoveries or additional declines in fair value subsequent to the balance sheet date, (6) failure of the issuer of the security to make scheduled interest or principal payments, and (7) the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future. Management also monitors cash flow projections for securities that are considered beneficial interests under the guidance of ASC Subtopic 325-40, Investments – Other – Beneficial Interests in Securitized Financial Assets , (ASC Section 325-40-35). Management believes that the valuation of certain securities is a critical accounting policy that requires significant estimates in preparation of the Corporation’s consolidated financial statements. Management utilizes an independent third party to prepare both the impairment valuations and fair value determinations for the Corporation’s collateralized debt obligation (“CDO”) portfolio consisting of pooled trust preferred securities. See Note 9 for a discussion of the methodology used by management to determine the fair values of these securities. Based upon a review of credit quality and the cash flow tests performed by the independent third party, management determined that there were no securities that had credit-related OTTI charges during the first six months of 2021 or 2020. 14 Table of Contents The Corporation believes that the investment securities that were in an unrealized loss position at June 30, 2021 do not represent other-than-temporary impairment. The Corporation does not intend to sell, nor is it anticipated that the Corporation will be required to sell, any of its impaired investment securities at a loss. The following tables present a cumulative roll-forward of the amount of non-cash OTTI charges related to credit losses that have been recognized in earnings for the trust preferred securities held in the CDO portfolio during the six month and three month periods ended June 30, 2021 and 2020 that the Corporation does not intend to sell: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ June 30, (in thousands) 2021 2020 Balance of credit-related OTTI at January 1 ​ $ 2,244 ​ $ 2,446 Reduction for increases in cash flows expected to be collected ​ ​ ( 101 ) ​ ​ ( 101 ) Balance of credit-related OTTI at June 30 ​ $ 2,143 ​ $ 2,345 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ June 30, (in thousands) ​ 2021 ​ 2020 Balance of credit-related OTTI at April 1 ​ $ 2,194 ​ $ 2,396 Reduction for increases in cash flows expected to be collected ​ ​ ( 51 ) ​ ​ ( 51 ) Balance of credit-related OTTI at June 30 ​ $ 2,143 ​ $ 2,345 ​ The amortized cost and estimated fair value of securities by contractual maturity at June 30, 2021 are shown in the following table. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2021 (in thousands) Amortized Cost Fair Value Contractual Maturity ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ Due after one year through five years ​ $ 4,411 ​ $ 4,489 Due after five years through ten years ​ ​ 10,063 ​ ​ 10,238 Due after ten years ​ ​ 73,225 ​ ​ 69,458 ​ ​ ​ 87,699 ​ ​ 84,185 Residential mortgage-backed agencies ​ ​ 32,027 ​ ​ 31,482 Commercial mortgage-backed agencies ​ ​ 54,361 ​ ​ 54,190 Collateralized mortgage obligations ​ ​ 73,559 ​ ​ 72,156 Total available for sale ​ $ 247,646 ​ $ 242,013 Held to Maturity: ​ ​ ​ ​ ​ ​ Due after ten years ​ $ 20,223 ​ $ 29,164 Residential mortgage-backed agencies ​ ​ 35,595 ​ ​ 36,147 Commercial mortgage-backed agencies ​ ​ 9,747 ​ ​ 10,144 Collateralized mortgage obligations ​ ​ 118 ​ ​ 119 Total held to maturity ​ $ 65,683 ​ $ 75,574 ​ ​ ​ 15 Table of Contents Note 5 – Loans and Related Allowance for Loan Losses The following table summarizes the primary segments of the loan portfolio at June 30, 2021 and December 31, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Commercial Real Estate Acquisition and Development Commercial and Industrial Residential Mortgage Consumer Total June 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ 7,494 ​ $ 858 ​ $ — ​ $ 2,918 ​ $ — ​ $ 11,270 Collectively evaluated for impairment ​ ​ 354,447 ​ ​ 130,772 ​ ​ 229,852 ​ ​ 361,490 ​ ​ 57,512 ​ ​ 1,134,073 Total loans ​ $ 361,941 ​ $ 131,630 ​ $ 229,852 ​ $ 364,408 ​ $ 57,512 ​ $ 1,145,343 December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ 3,330 ​ $ 842 ​ $ — ​ $ 3,185 ​ $ 102 ​ $ 7,459 Collectively evaluated for impairment ​ ​ 365,846 ​ ​ 116,119 ​ ​ 266,745 ​ ​ 375,985 ​ ​ 35,658 ​ ​ 1,160,353 Total loans ​ $ 369,176 ​ $ 116,961 ​ $ 266,745 ​ $ 379,170 ​ $ 35,760 ​ $ 1,167,812 ​ The commercial and industrial portfolio in the table above includes $ 74.1 million and $ 114.0 million of PPP loans at June 30, 2021 and December 31, 2020, respectively, which are 100 % guaranteed by the SBA, and no allowance for loan loss (“ALL”) has been assigned to them. The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention and Substandard within the internal risk rating system at June 30, 2021 and December 31, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Pass Special Mention Substandard Total June 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 171,876 ​ $ 10,255 ​ $ 6,340 ​ $ 188,471 All other CRE ​ ​ 164,282 ​ ​ 2,531 ​ ​ 6,657 ​ ​ 173,470 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 20,179 ​ ​ — ​ ​ — ​ ​ 20,179 All other A&D ​ ​ 110,998 ​ ​ — ​ ​ 453 ​ ​ 111,451 Commercial and industrial ​ ​ 212,138 ​ ​ 6,132 ​ ​ 11,582 ​ ​ 229,852 Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ 298,413 ​ ​ — ​ ​ 5,556 ​ ​ 303,969 Residential mortgage - home equity ​ ​ 59,655 ​ ​ — ​ ​ 784 ​ ​ 60,439 Consumer ​ ​ 57,420 ​ ​ — ​ ​ 92 ​ ​ 57,512 Total ​ $ 1,094,961 ​ $ 18,918 ​ $ 31,464 ​ $ 1,145,343 December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 178,670 ​ $ 5,526 ​ $ 6,322 ​ $ 190,518 All other CRE ​ ​ 166,504 ​ ​ 5,664 ​ ​ 6,490 ​ ​ 178,658 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 18,920 ​ ​ — ​ ​ — ​ ​ 18,920 All other A&D ​ ​ 97,648 ​ ​ 17 ​ ​ 376 ​ ​ 98,041 Commercial and industrial ​ ​ 245,185 ​ ​ 8,867 ​ ​ 12,693 ​ ​ 266,745 Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ 309,177 ​ ​ 283 ​ ​ 6,117 ​ ​ 315,577 Residential mortgage - home equity ​ ​ 62,804 ​ ​ — ​ ​ 789 ​ ​ 63,593 Consumer ​ ​ 35,648 ​ ​ 3 ​ ​ 109 ​ ​ 35,760 Total ​ $ 1,114,556 ​ $ 20,360 ​ $ 32,896 ​ $ 1,167,812 ​ 16 Table of Contents The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans at June 30, 2021 and December 31, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90 Days+ Past Due Total Past Due and Accruing Non- Accrual Total Loans June 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 183,896 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 4,575 ​ $ 188,471 All other CRE ​ ​ 172,913 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 557 ​ ​ 173,470 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 20,179 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 20,179 All other A&D ​ ​ 111,045 ​ ​ — ​ ​ — ​ ​ 5 ​ ​ 5 ​ ​ 401 ​ ​ 111,451 Commercial and industrial ​ ​ 229,754 ​ ​ 98 ​ ​ — ​ ​ — ​ ​ 98 ​ ​ — ​ ​ 229,852 Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ 301,002 ​ ​ 588 ​ ​ 874 ​ ​ 224 ​ ​ 1,686 ​ ​ 1,281 ​ ​ 303,969 Residential mortgage - home equity ​ ​ 59,889 ​ ​ 79 ​ ​ — ​ ​ — ​ ​ 79 ​ ​ 471 ​ ​ 60,439 Consumer ​ ​ 57,280 ​ ​ 124 ​ ​ 64 ​ ​ 44 ​ ​ 232 ​ ​ ​ ​ ​ 57,512 Total ​ $ 1,135,958 ​ $ 889 ​ $ 938 ​ $ 273 ​ $ 2,100 ​ $ 7,285 ​ $ 1,145,343 December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 190,510 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 8 ​ $ 190,518 All other CRE ​ ​ 177,360 ​ ​ 408 ​ ​ — ​ ​ — ​ ​ 408 ​ ​ 890 ​ ​ 178,658 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 18,920 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 18,920 All other A&D ​ ​ 97,660 ​ ​ 5 ​ ​ — ​ ​ 10 ​ ​ 15 ​ ​ 366 ​ ​ 98,041 Commercial and industrial ​ ​ 266,708 ​ ​ 37 ​ ​ — ​ ​ — ​ ​ 37 ​ ​ — ​ ​ 266,745 Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ 312,500 ​ ​ 63 ​ ​ 670 ​ ​ 710 ​ ​ 1,443 ​ ​ 1,634 ​ ​ 315,577 Residential mortgage - home equity ​ ​ 63,036 ​ ​ 80 ​ ​ 63 ​ ​ — ​ ​ 143 ​ ​ 414 ​ ​ 63,593 Consumer ​ ​ 35,473 ​ ​ 230 ​ ​ 26 ​ ​ 4 ​ ​ 260 ​ ​ 27 ​ ​ 35,760 Total ​ $ 1,162,167 ​ $ 823 ​ $ 759 ​ $ 724 ​ $ 2,306 ​ $ 3,339 ​ $ 1,167,812 ​ The current status of commercial and industrial loans includes $ 74.1 million and $ 114.0 million of PPP loans at June 30, 2021 and December 31, 2020, respectively. 17 Table of Contents Non-accrual loans that have been subject to partial charge-offs totaled $ 0.5 million at June 30, 2021 and $ 0.2 million at December 31, 2020. Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $ 0.6 million at June 30, 2021 and $ 0.4 million at December 31, 2020. Foreclosure and repossession activities were temporarily suspended as a result of COVID-19. As a percentage of the loan portfolio, accruing loans past due 30 days or more increased slightly to 0.19 %, including PPP loans, or 0.20 % excluding PPP loans, compared to 0.17 % at June 30, 2020 and 0.20 % at December 31, 2020. The following table summarizes the primary segments of the ALL at June 30, 2021 and December 31, 2020, segregated by the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Commercial Real Estate Acquisition and Development Commercial and Industrial Residential Mortgage Consumer Unallocated Total June 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ 230 ​ $ — ​ $ — ​ $ 20 ​ $ — ​ $ — ​ $ 250 Collectively evaluated for impairment ​ $ 5,445 ​ $ 2,500 ​ $ 2,944 ​ $ 4,839 ​ $ 590 ​ $ 500 ​ $ 16,818 Total ALL ​ $ 5,675 ​ $ 2,500 ​ $ 2,944 ​ $ 4,859 ​ $ 590 ​ $ 500 ​ $ 17,068 December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ 4 ​ $ 13 ​ $ — ​ $ 40 ​ $ — ​ $ — ​ $ 57 Collectively evaluated for impairment ​ $ 5,539 ​ $ 2,326 ​ $ 2,584 ​ $ 5,110 ​ $ 370 ​ $ 500 ​ $ 16,429 Total ALL ​ $ 5,543 ​ $ 2,339 ​ $ 2,584 ​ $ 5,150 ​ $ 370 ​ $ 500 ​ $ 16,486 ​ The evaluation of the need and amount of a specific allocation of the ALL and whether a loan can be removed from impairment status is made on a quarterly basis. 18 Table of Contents The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not required at June 30, 2021 and December 31, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired Loans with Specific Allowance ​ Impaired Loans with No Specific Allowance ​ Total Impaired Loans (in thousands) Recorded Investment Related Allowances Recorded Investment Recorded Investment (1) Unpaid Principal Balance June 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 1,866 ​ $ 230 ​ $ 2,818 ​ $ 4,684 ​ $ 4,684 All other CRE ​ ​ — ​ ​ — ​ ​ 2,810 ​ ​ 2,810 ​ ​ 2,810 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ — ​ ​ — ​ ​ 252 ​ ​ 252 ​ ​ 252 All other A&D ​ ​ — ​ ​ — ​ ​ 606 ​ ​ 606 ​ ​ 1,815 Commercial and industrial ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,214 Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ ​ 440 ​ ​ 15 ​ ​ 2,007 ​ ​ 2,447 ​ ​ 2,627 Residential mortgage – home equity ​ ​ 46 ​ ​ 5 ​ ​ 425 ​ ​ 471 ​ ​ 503 Consumer ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 25 Total impaired loans ​ $ 2,352 ​ $ 250 ​ $ 8,918 ​ $ 11,270 ​ $ 14,930 December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 111 ​ $ 4 ​ $ 8 ​ $ 119 ​ $ 119 All other CRE ​ ​ — ​ ​ — ​ ​ 3,211 ​ ​ 3,211 ​ ​ 3,211 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ — ​ ​ — ​ ​ 266 ​ ​ 266 ​ ​ 266 All other A&D ​ ​ 276 ​ ​ 13 ​ ​ 300 ​ ​ 576 ​ ​ 1,724 Commercial and industrial ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,214 Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ ​ 936 ​ ​ 34 ​ ​ 1,910 ​ ​ 2,846 ​ ​ 3,031 Residential mortgage – home equity ​ ​ 76 ​ ​ 6 ​ ​ 339 ​ ​ 415 ​ ​ 447 Consumer ​ ​ — ​ ​ — ​ ​ 26 ​ ​ 26 ​ ​ 51 Total impaired loans ​ $ 1,399 ​ $ 57 ​ $ 6,060 ​ $ 7,459 ​ $ 11,063 ​ (1) Recorded investment consists of unpaid principal balance, net of charge-offs, interest payments received applied to principal and unamortized deferred loan origination fees and cost. ​ 19 Table of Contents The following tables present the activity in the ALL for the six and three month periods ended June 30, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Commercial Real Estate Acquisition and Development Commercial and Industrial Residential Mortgage Consumer Unallocated Total ALL balance at January 1, 2021 ​ $ 5,543 ​ $ 2,339 ​ $ 2,584 ​ $ 5,150 ​ $ 370 ​ $ 500 ​ $ 16,486 Charge-offs ​ ​ — ​ ​ ( 81 ) ​ ​ — ​ ​ ( 82 ) ​ ​ ( 175 ) ​ ​ — ​ ​ ( 338 ) Recoveries ​ ​ — ​ ​ 110 ​ ​ 38 ​ ​ 29 ​ ​ 78 ​ ​ — ​ ​ 255 Provision ​ ​ 132 ​ ​ 132 ​ ​ 322 ​ ​ ( 238 ) ​ ​ 317 ​ ​ — ​ ​ 665 ALL balance at June 30, 2021 ​ $ 5,675 ​ $ 2,500 ​ $ 2,944 ​ $ 4,859 ​ $ 590 ​ $ 500 ​ $ 17,068 ALL balance at January 1, 2020 ​ $ 2,882 ​ $ 3,674 ​ $ 1,341 ​ $ 3,828 ​ $ 312 ​ $ 500 ​ $ 12,537 Charge-offs ​ ​ — ​ ​ ( 31 ) ​ ​ ( 232 ) ​ ​ ( 98 ) ​ ​ ( 223 ) ​ ​ — ​ ​ ( 584 ) Recoveries ​ ​ 66 ​ ​ 22 ​ ​ 16 ​ ​ 48 ​ ​ 88 ​ ​ — ​ ​ 240 Provision ​ ​ 1,579 ​ ​ 833 ​ ​ 872 ​ ​ 1,328 ​ ​ 209 ​ ​ — ​ ​ 4,821 ALL balance at June 30, 2020 ​ $ 4,527 ​ $ 4,498 ​ $ 1,997 ​ $ 5,106 ​ $ 386 ​ $ 500 ​ $ 17,014 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ Commercial Real Estate ​ Acquisition and Development ​ Commercial and Industrial ​ Residential Mortgage ​ Consumer ​ Unallocated ​ Total ALL balance at April 1, 2021 ​ $ 5,404 ​ $ 2,423 ​ $ 2,831 ​ $ 5,028 ​ $ 368 ​ $ 500 ​ $ 16,554 Charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 95 ) ​ ​ — ​ ​ ( 95 ) Recoveries ​ ​ — ​ ​ 9 ​ ​ 2 ​ ​ 12 ​ ​ 31 ​ ​ — ​ ​ 54 Provision ​ ​ 271 ​ ​ 68 ​ ​ 111 ​ ​ ( 181 ) ​ ​ 286 ​ ​ — ​ ​ 555 ALL balance at June 30, 2021 ​ $ 5,675 ​ $ 2,500 ​ $ 2,944 ​ $ 4,859 ​ $ 590 ​ $ 500 ​ $ 17,068 ALL balance at April 1, 2020 ​ $ 3,816 ​ $ 4,063 ​ $ 1,682 ​ $ 4,586 ​ $ 365 ​ $ 500 ​ $ 15,012 Charge-offs ​ ​ — ​ ​ ( 16 ) ​ ​ ( 131 ) ​ ​ — ​ ​ ( 91 ) ​ ​ — ​ ​ ( 238 ) Recoveries ​ ​ — ​ ​ 8 ​ ​ 1 ​ ​ 22 ​ ​ 42 ​ ​ — ​ ​ 73 Provision ​ ​ 711 ​ ​ 443 ​ ​ 445 ​ ​ 498 ​ ​ 70 ​ ​ — ​ ​ 2,167 ALL balance at June 30, 2020 ​ $ 4,527 ​ $ 4,498 ​ $ 1,997 ​ $ 5,106 ​ $ 386 ​ $ 500 ​ $ 17,014 ​ The ALL is based on estimates, and actual losses may vary from current estimates. Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date. 20 Table of Contents The following table presents the average recorded investment in impaired loans by class and related interest income recognized for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six months ended ​ Six months ended ​ ​ June 30, 2021 ​ June 30, 2020 (in thousands) Average investment Interest income recognized on an accrual basis Interest income recognized on a cash basis Average investment Interest income recognized on an accrual basis Interest income recognized on a cash basis Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 3,165 ​ $ 6 ​ $ — ​ $ 138 ​ $ 3 ​ $ — All other CRE ​ ​ 3,058 ​ ​ 69 ​ ​ — ​ ​ 3,182 ​ ​ 73 ​ ​ — Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 259 ​ ​ 6 ​ ​ — ​ ​ 285 ​ ​ 6 ​ ​ — All other A&D ​ ​ 599 ​ ​ 6 ​ ​ — ​ ​ 8,436 ​ ​ 6 ​ ​ 1 Commercial and industrial ​ ​ — ​ ​ — ​ ​ — ​ ​ 16 ​ ​ — ​ ​ — Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ ​ 2,672 ​ ​ 39 ​ ​ 5 ​ ​ 2,477 ​ ​ 43 ​ ​ — Residential mortgage – home equity ​ ​ 454 ​ ​ — ​ ​ — ​ ​ 709 ​ ​ — ​ ​ 3 Consumer ​ ​ 17 ​ ​ — ​ ​ — ​ ​ 14 ​ ​ — ​ ​ — Total ​ $ 10,224 ​ $ 126 ​ $ 5 ​ $ 15,257 ​ $ 131 ​ $ 4 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Three months ended ​ ​ June 30, 2021 ​ June 30, 2020 (in thousands) ​ Average investment ​ Interest income recognized on an accrual basis ​ Interest income recognized on a cash basis ​ Average investment ​ Interest income recognized on an accrual basis ​ Interest income recognized on a cash basis Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 4,689 ​ $ 3 ​ $ — ​ $ 132 ​ $ 1 ​ $ — All other CRE ​ ​ 2,982 ​ ​ 34 ​ ​ — ​ ​ 3,258 ​ ​ 36 ​ ​ — Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 255 ​ ​ 3 ​ ​ — ​ ​ 282 ​ ​ 3 ​ ​ — All other A&D ​ ​ 611 ​ ​ 3 ​ ​ — ​ ​ 8,515 ​ ​ 3 ​ ​ — Commercial and industrial ​ ​ — ​ ​ — ​ ​ — ​ ​ 9 ​ ​ — ​ ​ — Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ ​ 2,585 ​ ​ 19 ​ ​ — ​ ​ 2,450 ​ ​ 21 ​ ​ — Residential mortgage – home equity ​ ​ 474 ​ ​ — ​ ​ — ​ ​ 634 ​ ​ — ​ ​ 3 Consumer ​ ​ 11 ​ ​ — ​ ​ — ​ ​ 19 ​ ​ — ​ ​ — Total ​ $ 11,607 ​ $ 62 ​ $ — ​ $ 15,299 ​ $ 64 ​ $ 3 ​ The Bank modifies loan terms in the normal course of business. Among other reasons, modifications might be made in an effort to retain the loan relationship, to remain competitive in the current interest rate environment and/or to re-amortize or extend the loan’s term to better match the loan’s payment stream with the borrower’s cash flow. A modified loan is considered to be a TDR when the Bank has determined that the borrower is troubled (i.e., experiencing financial difficulties). The Bank evaluates the probability that the borrower will be in payment default on any of its debt obligations in the foreseeable future without modification. To make this determination, the Bank performs a global financial review of the borrower and loan guarantors to assess their current ability to meet their financial obligations. Section 4013 of the CARES Act allows financial institutions to suspend application of certain current TDRs accounting guidance under ASC 310-40 for loan modifications related to the COVID-19 pandemic made between March 1, 2020 and the earlier of January 1, 2022 or 60 days after the end of the COVID-19 national emergency, provided certain criteria are met. This relief can 21 Table of Contents be applied to loan modifications for borrowers that defer or delay the payment of principal or interest, or change the interest rate on the loan and that were not more than 30 days past due as of December 31, 2019. In April 2020, federal and state banking regulators issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus to provide further interpretation of when a borrower is experiencing financial difficulty, specifically indicating that if the modification is either short-term (i.e., up to nine months) or mandated by a federal or state government in response to the COVID-19 pandemic, the borrower is not experiencing financial difficulty under ASC 310-40. The Corporation continues to prudently work with borrowers negatively impacted by the COVID-19 pandemic while managing credit risks and recognizing appropriate allowance for credit losses on its loan portfolio. See Note 2 to the financial statements included elsewhere in this report for additional information. There were 14 loans totaling $ 3.8 million and $ 4.0 million that were classified as TDRs at June 30, 2021 and December 31, 2020, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Temporary Rate Modification ​ Extension of Maturity ​ Modification of Payment and Other Terms (in thousands) ​ Number of Contracts ​ Recorded Investment ​ Number of Contracts ​ Recorded Investment ​ Number of Contracts ​ Recorded Investment Six months ended June 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ — ​ $ — ​ 1 ​ $ 109 ​ — ​ $ — All other CRE ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — All other A&D ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Commercial and industrial ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Residential mortgage – home equity ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Consumer ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Total ​ — ​ $ — ​ 1 ​ $ 109 ​ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Temporary Rate Modification ​ Extension of Maturity ​ Modification of Payment and Other Terms (in thousands) ​ Number of Contracts ​ Recorded Investment ​ Number of Contracts ​ Recorded Investment ​ Number of Contracts ​ Recorded Investment Six months ended June 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ — ​ $ — ​ — ​ $ — ​ — ​ $ — All other CRE ​ — ​ ​ — ​ — ​ ​ — ​ 1 ​ ​ 2,226 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — All other A&D ​ — ​ ​ — ​ 1 ​ ​ 217 ​ — ​ ​ — Commercial and industrial ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ 1 ​ ​ 46 ​ 1 ​ ​ 230 ​ 2 ​ ​ 245 Residential mortgage – home equity ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Consumer ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Total ​ 1 ​ $ 46 ​ 2 ​ $ 447 ​ 3 ​ $ 2,471 ​ During the six month period ended June 30, 2021, there were no new TDRs and one existing TDR that had reached its modification maturity date and was re-modified. The Bank had no significant commitments to lend additional funds to TDRs. During 22 Table of Contents the six month period ended June 30, 2020, there were no new TDRs but six existing TDRs that had reached their modification maturity dates were re-modified. These modifications did not impact the ALL. During the six month periods ended June 30, 2021 and 2020, there were no payment defaults. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Temporary Rate Modification ​ Extension of Maturity ​ Modification of Payment and Other Terms (in thousands) ​ Number of Contracts ​ Recorded Investment ​ Number of Contracts ​ Recorded Investment ​ Number of Contracts ​ Recorded Investment Three months ended June 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ — ​ $ — ​ 1 ​ $ 109 ​ — ​ $ — All other CRE ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — All other A&D ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Commercial and industrial ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Residential mortgage – home equity ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Consumer ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Total ​ — ​ $ — ​ 1 ​ $ 109 ​ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Temporary Rate Modification ​ Extension of Maturity ​ Modification of Payment and Other Terms (in thousands) ​ Number of Contracts ​ Recorded Investment ​ Number of Contracts ​ Recorded Investment ​ Number of Contracts ​ Recorded Investment Three months ended June 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ — ​ $ — ​ — ​ $ — ​ — ​ $ — All other CRE ​ — ​ ​ — ​ — ​ ​ — ​ 1 ​ ​ 2,226 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — All other A&D ​ — ​ ​ — ​ 1 ​ ​ 217 ​ — ​ ​ — Commercial and industrial ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ 1 ​ ​ 46 ​ 1 ​ ​ 230 ​ 2 ​ ​ 245 Residential mortgage – home equity ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Consumer ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — Total ​ 1 ​ $ 46 ​ 2 ​ $ 447 ​ 3 ​ $ 2,471 ​ During the three month period ended June 30, 2021, there were no new TDRs and one existing TDR that had reached its modification maturity date and was re-modified. The Bank had no significant commitments to lend additional funds to TDR borrowers. During the three month period ended June 30, 2020, there were no new TDRs but six existing TDRs that had reached their modification maturity dates were re-modified. These re-modifications did not impact the ALL. During the three months ended June 30, 2021 and 2020, there were no payment defaults under TDRs. ​ ​ 23 Table of Contents Note 6 - Other Real Estate Owned, net The following table presents the components of other real estate owned (“OREO”) at June 30, 2021 and December 31, 2020: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) June 30, 2021 December 31, 2020 Commercial real estate ​ $ 900 ​ $ 945 Acquisition and development ​ ​ 5,856 ​ ​ 8,441 Residential mortgage ​ ​ — ​ ​ — Total OREO, net ​ $ 6,756 ​ $ 9,386 ​ The following table presents the activity in the OREO valuation allowance for the six and three month periods ended June 30, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ Three Months Ended ​ ​ June 30, ​ June 30, (in thousands) 2021 2020 ​ 2021 ​ 2020 Balance beginning of period ​ $ 1,010 ​ $ 1,790 ​ $ 1,004 ​ $ 1,780 Fair value adjustment ​ ​ ( 160 ) ​ ​ 39 ​ ​ ( 164 ) ​ ​ 13 Sales of OREO ​ ​ ( 307 ) ​ ​ ( 95 ) ​ ​ ( 297 ) ​ ​ ( 59 ) Balance at end of period ​ $ 543 ​ $ 1,734 ​ $ 543 ​ $ 1,734 ​ The following table presents the components of OREO (income)/expenses, net, for the six and three month periods ended June 30, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ Three Months Ended ​ ​ June 30, ​ June 30, (in thousands) 2021 2020 ​ 2021 ​ 2020 Gains on sale of real estate, net ​ $ ( 596 ) ​ $ ( 21 ) ​ $ ( 105 ) ​ $ ( 11 ) Fair value adjustment, net ​ ​ ( 160 ) ​ ​ 39 ​ ​ ( 164 ) ​ ​ 13 Expenses, net ​ ​ 195 ​ ​ 65 ​ ​ 72 ​ ​ 31 Rental and other income ​ ​ ( 49 ) ​ ​ ( 86 ) ​ ​ ( 1 ) ​ ​ ( 36 ) Total OREO income, net ​ $ ( 610 ) ​ $ ( 3 ) ​ $ ( 198 ) ​ $ ( 3 ) ​ ​ ​ Note 7 – Fair Value of Financial Instruments Fair value is defined as the price to sell an asset or to transfer a liability in an orderly transaction between willing market participants as of the measurement date. Fair value is best determined by values quoted through active trading markets. Active trading markets are characterized by numerous transactions of similar financial instruments between willing buyers and willing sellers. Because no active trading market exists for various types of financial instruments, many of the fair values disclosed were derived using present value discounted cash flows or other valuation techniques described below. As a result, the Corporation’s ability to actually realize these derived values cannot be assumed. The Corporation measures fair values based on the fair value hierarchy established in ASC Paragraph 820-10-35-37. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of inputs that may be used to measure fair value under the hierarchy are as follows: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets and liabilities. This level is the most reliable source of valuation. Level 2: Quoted prices that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability. Level 2 inputs include inputs other than quoted prices that are observable for the asset or 24 Table of Contents liability (for example, interest rates and yield curves at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). It also includes inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs). Several sources are utilized for valuing these assets, including a contracted valuation service, Standard & Poor’s (“S&P”) evaluations and pricing services, and other valuation matrices. Level 3: Prices or valuation techniques that require inputs that are both significant to the valuation assumptions and not readily observable in the market (i.e. supported with little or no market activity). Level 3 instruments are valued based on the best available data, some of which is internally developed, and consider risk premiums that a market participant would require. The level established within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Management believes that the Corporation’s valuation techniques are appropriate and consistent with the techniques used by other market participants. However, the use of different methodologies and assumptions could result in a different estimate of fair values at the reporting date. The valuation techniques used by the Corporation to measure, on a recurring basis and on a non-recurring basis, the fair value of assets as of June 30, 2021 are discussed in the paragraphs that follow. Investments – The fair value of investments is determined using a market approach. As of June 30, 2021, the U.S. Government agencies, residential and commercial mortgage-backed securities, collateralized mortgage obligations, and state and political subdivisions bonds, excluding the tax increment financing (“TIF”) bonds, were classified as Level 2 within the valuation hierarchy. Their fair values were determined based upon market-corroborated inputs and valuation matrices, which were obtained through third party data service providers or securities brokers through which the Corporation has historically transacted both purchases and sales of investment securities. The TIF bonds were classified as Level 3 within the valuation hierarchy as they are not openly traded. The CDO segment, which consists of pooled trust preferred securities issued by banks, thrifts and insurance companies, is classified as Level 3 within the valuation hierarchy. At June 30, 2021, the Corporation owned nine trust preferred securities with an amortized cost of $ 18.6 million and a fair value of $ 16.2 million. At June 30, 2021, the market for these securities is not active and the markets for similar securities are also not active. Recent developments in the credit markets have had a negative impact on the market for CDOs. Specifically, as COVID-19 developed, which led to deteriorating performance of credit instruments, investors became less willing to buy a range of structured credit products. The result was massive spread-widening across a wide range of credit instruments, and for CDO bonds in particular. At present, we believe that it is not currently economically feasible to form new CDOs or restructure existing CDOs, as the market for CDO bonds has effectively disappeared. The market values for these securities or any securities other than those issued or guaranteed by the U.S. Department of the Treasury are depressed relative to historical levels. Therefore, in the current market, a low market price for a particular bond may only provide evidence of stress in the credit markets in general rather than being an indicator of credit problems with a particular issue. Given the conditions in the current debt markets and the absence of observable transactions in the secondary and new issue markets, management has determined that (a) the few observable transactions and market quotations that are available are not reliable for the purpose of obtaining fair value at June 30, 2021, (b) an income valuation approach technique (i.e. present value) that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs will be equally or more representative of fair value than a market approach, and (c) the CDO segment is appropriately classified within Level 3 of the valuation hierarchy because management determined that significant adjustments were required to determine fair value at the measurement date. Management uses an independent third party to prepare both the evaluations of OTTI as well as the fair value determinations for its CDO portfolio. Management believes that the valuations are adequately reflected at June 30, 2021. The approach used by the third party to determine fair value involved several steps, which included detailed credit and structural evaluation of each piece of collateral in each bond, projection of default, recovery and prepayment/amortization probabilities for each piece of collateral in the bond, and discounted cash flow modeling. The discount rate methodology used by the third party combines a baseline current market yield for comparable corporate and structured credit products with adjustments based on evaluations of the differences found in structure and risks associated with actual and projected credit performance of each CDO being valued. Currently, the only active and liquid trading market that exists is for stand-alone trust preferred securities, with 25 Table of Contents a limited market for highly-rated CDO securities that are more senior in the capital structure than the securities in the CDO portfolio. Therefore, adjustments to the baseline discount rate are also made to reflect the additional leverage found in structured instruments. At June 30, 2021, these conditions had a minimal impact on the trust preferred bonds, although there has been a significant effect on several asset classes in the equity and fixed income markets related to COVID-19. Management will continue to review assumptions as they relate to the impact of COVID-19 during the remainder of the year. Derivative financial instruments (Cash flow hedge) – The Corporation’s open derivative positions are interest rate swap agreements. Those classified as Level 2 open derivative positions are valued using externally developed pricing models based on observable market inputs provided by a third party and validated by management. The Corporation has considered counterparty credit risk in the valuation of its interest rate swap assets. Impaired loans – Fair value of the collateral dependent loans is measured based on the loan’s observable market price or the fair value of the collateral (less estimated selling costs). Collateral may be real estate and/or business assets such as equipment, inventory and/or accounts receivable. The value of business equipment, inventory and accounts receivable collateral is based on either net book value of the business’ financial statements or evaluations/appraisals obtained by the Bank. If necessary, these values may be discounted based on management’s review and analysis. Appraised and reported values may be discounted based on management’s historical experience, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and client’s business. Collateral dependent loans are reviewed and evaluated on at least a quarterly basis for additional individual reserve and adjusted accordingly, based on the factors identified above . ​ Other real estate owned – OREO included in the table below are considered impaired with specific write-downs. OREO is adjusted to fair value upon acquisition of the real estate collateral. Subsequently, OREO is carried at the lower of carrying value or fair value. The estimated fair value for OREO included in Level 3 is determined by independent market based appraisals and other available market information, less costs to sell, that may be reduced further based on market expectations or an executed sales agreement. If the fair value of the collateral deteriorates subsequent to initial recognition, the Company records the OREO as a nonrecurring Level 3 adjustment. Valuation techniques are consistent with those techniques applied in prior periods. ​ 26 Table of Contents For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of June 30, 2021 and December 31, 2020, the significant unobservable inputs used in the fair value measurements were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Fair Value at June 30, 2021 Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment Securities – available for sale ​ $ 16,230 ​ Discounted Cash Flow ​ Discount Rate ​ LIBOR+ 3.75% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired Loans ​ $ 2,099 ​ Market Comparable Properties ​ Marketability Discount ​ 10.0 % - 15.0 % (1) (weighted avg 10.5 %) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other Real Estate Owned ​ $ 443 ​ Market Comparable Properties ​ Marketability Discount ​ 15.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Fair Value at December 31, 2020 Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment Securities – available for sale ​ $ 13,260 ​ Discounted Cash Flow ​ Discount Rate ​ LIBOR+ 5.25% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired Loans ​ $ 1,465 ​ Market Comparable Properties ​ Marketability Discount ​ 10.0 % - 15.0 % (1) (weighted avg 12.5 %) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other Real Estate Owned ​ $ 913 ​ Market Comparable Properties ​ Marketability Discount ​ 15.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NOTE: (1) Range would include discounts taken since appraisal and estimated values 27 Table of Contents For assets measured at fair value on a recurring and non-recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2021 and December 31, 2020 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at June 30, 2021 Using ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ ​ Assets/(liabilities) ​ Active Markets ​ Other ​ Significant ​ ​ Measured at ​ for Identical ​ Observable ​ Unobservable ​ ​ Fair Value ​ Assets ​ Inputs ​ Inputs (in thousands) 06/30/21 (Level 1) (Level 2) (Level 3) Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 58,121 ​ ​ ​ ​ $ 58,121 ​ ​ ​ Residential mortgage-backed agencies ​ $ 31,482 ​ ​ ​ ​ $ 31,482 ​ ​ ​ Commercial mortgage-backed agencies ​ $ 54,190 ​ ​ ​ ​ $ 54,190 ​ ​ ​ Collateralized mortgage obligations ​ $ 72,156 ​ ​ ​ ​ $ 72,156 ​ ​ ​ Obligations of states and political subdivisions ​ $ 9,834 ​ ​ ​ ​ $ 9,834 ​ ​ ​ Collateralized debt obligations ​ $ 16,230 ​ ​ ​ ​ ​ ​ ​ $ 16,230 Financial derivatives ​ $ ( 834 ) ​ ​ ​ ​ $ ( 834 ) ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired loans ​ $ 2,099 ​ ​ ​ ​ ​ ​ ​ $ 2,099 Other real estate owned ​ $ 443 ​ ​ ​ ​ ​ ​ ​ $ 443 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at December 31, 2020 Using ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ Assets/(liabilities) ​ Active Markets ​ Other ​ Significant ​ ​ Measured at ​ for Identical ​ Observable ​ Unobservable ​ ​ Fair Value ​ Assets ​ Inputs ​ Inputs (in thousands) 12/31/20 (Level 1) (Level 2) (Level 3) Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 76,433 ​ ​ ​ ​ $ 76,433 ​ ​ ​ Residential mortgage-backed agencies ​ $ 22,899 ​ ​ ​ ​ $ 22,899 ​ ​ ​ Commercial mortgage-backed agencies ​ $ 33,042 ​ ​ ​ ​ $ 33,042 ​ ​ ​ Collateralized mortgage obligations ​ $ 70,637 ​ ​ ​ ​ $ 70,637 ​ ​ ​ Obligations of states and political subdivisions ​ $ 10,614 ​ ​ ​ ​ $ 10,614 ​ ​ ​ Collateralized debt obligations ​ $ 13,260 ​ ​ ​ ​ ​ ​ ​ $ 13,260 Financial derivatives ​ $ ( 1,320 ) ​ ​ ​ ​ $ ( 1,320 ) ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired loans ​ $ 1,465 ​ ​ ​ ​ ​ ​ ​ $ 1,465 Other real estate owned ​ $ 913 ​ ​ ​ ​ ​ ​ ​ $ 913 ​ There were no transfers of assets between any of the fair value hierarchy for the six and three month periods ended June 30, 2021 or 2020. 28 Table of Contents The following tables show a reconciliation of the beginning and ending balances for fair valued assets measured on a recurring basis using Level 3 significant unobservable inputs for the six and three month periods ended June 30, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ ​ Using Significant Unobservable Inputs ​ ​ (Level 3) ​ ​ Investment Securities (in thousands) Available for Sale Beginning balance January 1, 2021 ​ $ 13,260 Total losses realized/unrealized: ​ ​ ​ Included in other comprehensive income ​ ​ 2,970 Ending balance June 30, 2021 ​ $ 16,230 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (in thousands) ​ Investment Securities Available for Sale Beginning balance April 1, 2021 ​ $ 13,649 Total gains realized/unrealized: ​ ​ ​ Included in other comprehensive income ​ ​ 2,581 Ending balance June 30, 2021 ​ $ 16,230 ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ ​ Using Significant Unobservable Inputs ​ ​ (Level 3) ​ ​ Investment Securities (in thousands) Available for Sale Beginning balance January 1, 2020 ​ $ 14,354 Total losses realized/unrealized: ​ ​ ​ Included in other comprehensive loss ​ ​ ( 2,402 ) Ending balance June 30, 2020 ​ $ 11,952 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (in thousands) ​ Investment Securities Available for Sale Beginning balance April 1, 2020 ​ $ 12,380 Total losses realized/unrealized: ​ ​ ​ Included in other comprehensive income ​ ​ ( 428 ) Ending balance June 30, 2020 ​ $ 11,952 ​ There were no gains or losses included in earnings attributable to the change in realized/unrealized gains or losses related to the assets for the six and three month periods ended June 30, 2021 or 2020. The disclosed fair values may vary significantly between institutions based on the estimates and assumptions used in the various valuation methodologies. The derived fair values are subjective in nature and involve uncertainties and significant judgment. Therefore, they cannot be determined with precision. Changes in the assumptions could significantly impact the derived estimates of fair value. Disclosure of non-financial assets such as buildings, as well as certain financial instruments such as leases is not required. Accordingly, the aggregate fair values presented do not represent the underlying value of the Corporation. 29 Table of Contents The following tables present fair value information about financial instruments, whether or not recognized in the Consolidated Statement of Financial Condition, for which it is practicable to estimate that value. The actual carrying amounts and estimated fair values of the Corporation’s financial instruments that are included in the Consolidated Statement of Financial Condition are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2021 ​ Fair Value Measurements ​ ​ ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ ​ ​ ​ ​ Active Markets ​ Other ​ Significant ​ ​ ​ ​ ​ ​ for Identical ​ Observable ​ Unobservable ​ ​ Carrying ​ Fair ​ Assets ​ Inputs ​ Inputs (in thousands) Amount Value (Level 1) (Level 2) (Level 3) Financial Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and due from banks ​ $ 190,949 ​ $ 190,949 ​ $ 190,949 ​ ​ ​ ​ ​ ​ Interest bearing deposits in banks ​ ​ 3,473 ​ ​ 3,473 ​ ​ 3,473 ​ ​ ​ ​ ​ ​ Investment securities - AFS ​ ​ 242,013 ​ ​ 242,013 ​ ​ ​ ​ $ 225,783 ​ $ 16,230 Investment securities - HTM ​ ​ 65,683 ​ ​ 75,574 ​ ​ ​ ​ ​ 46,410 ​ ​ 29,164 Restricted bank stock ​ ​ 3,658 ​ ​ 3,658 ​ ​ ​ ​ ​ 3,658 ​ ​ ​ Loans, net ​ ​ 1,125,817 ​ ​ 1,121,938 ​ ​ ​ ​ ​ ​ ​ ​ 1,121,938 Accrued interest receivable ​ ​ 5,201 ​ ​ 5,201 ​ ​ ​ ​ ​ 765 ​ ​ 4,436 Financial Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposits - non-maturity ​ ​ 1,256,597 ​ ​ 1,256,597 ​ ​ ​ ​ ​ 1,256,597 ​ ​ ​ Deposits - time deposits ​ ​ 199,514 ​ ​ 201,160 ​ ​ ​ ​ ​ 201,160 ​ ​ ​ Financial derivatives ​ ​ 834 ​ ​ 834 ​ ​ ​ ​ ​ 834 ​ ​ ​ Short-term borrowed funds ​ ​ 49,406 ​ ​ 49,406 ​ ​ ​ ​ ​ 49,406 ​ ​ ​ Long-term borrowed funds ​ ​ 100,929 ​ ​ 103,176 ​ ​ ​ ​ ​ 103,176 ​ ​ ​ Accrued interest payable ​ ​ 329 ​ ​ 329 ​ ​ ​ ​ ​ 329 ​ ​ ​ Off balance sheet financial instruments ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ Fair Value Measurements ​ ​ ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ ​ ​ ​ ​ Active Markets ​ Other ​ Significant ​ ​ ​ ​ ​ ​ for Identical ​ Observable ​ Unobservable ​ ​ Carrying ​ Fair ​ Assets ​ Inputs ​ Inputs (in thousands) Amount Value (Level 1) (Level 2) (Level 3) Financial Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and due from banks ​ $ 146,673 ​ $ 146,673 ​ $ 146,673 ​ ​ ​ ​ ​ ​ Interest bearing deposits in banks ​ ​ 2,759 ​ ​ 2,759 ​ ​ 2,759 ​ ​ ​ ​ ​ ​ Investment securities - AFS ​ ​ 226,885 ​ ​ 226,885 ​ ​ ​ ​ $ 213,625 ​ $ 13,260 Investment securities - HTM ​ ​ 68,263 ​ ​ 77,612 ​ ​ ​ ​ ​ 49,442 ​ ​ 28,170 Restricted bank stock ​ ​ 4,468 ​ ​ 4,468 ​ ​ ​ ​ ​ 4,468 ​ ​ ​ Loans, net ​ ​ 1,149,596 ​ ​ 1,150,186 ​ ​ ​ ​ ​ ​ ​ ​ 1,150,186 Accrued interest receivable ​ ​ 6,241 ​ ​ 6,241 ​ ​ ​ ​ ​ 6,241 ​ ​ ​ Financial Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposits - non-maturity ​ ​ 1,194,140 ​ ​ 1,194,140 ​ ​ ​ ​ ​ 1,194,140 ​ ​ ​ Deposits - time deposits ​ ​ 228,226 ​ ​ 231,241 ​ ​ ​ ​ ​ 231,241 ​ ​ ​ Financial derivative ​ ​ 1,320 ​ ​ 1,320 ​ ​ ​ ​ ​ 1,320 ​ ​ ​ Short-term borrowed funds ​ ​ 49,160 ​ ​ 49,160 ​ ​ ​ ​ ​ 49,160 ​ ​ ​ Long-term borrowed funds ​ ​ 100,929 ​ ​ 104,825 ​ ​ ​ ​ ​ 104,825 ​ ​ ​ Accrued interest payable ​ ​ 391 ​ ​ 391 ​ ​ ​ ​ ​ 391 ​ ​ ​ Off balance sheet financial instruments ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ 30 Table of Contents Note 8 – Accumulated Other Comprehensive Loss The following table presents the changes in each component of accumulated other comprehensive loss for the 12 months ended December 31, 2020, the three months ended March 31, 2021, and the three months ended June 30, 2021 : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment ​ Investment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ securities- ​ securities- ​ Investment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ with OTTI ​ all other ​ securities- ​ Cash Flow ​ Pension ​ ​ ​ ​ (in thousands) AFS AFS HTM Hedge Plan SERP Total Accumulated OCL, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance - January 1, 2020 ​ $ ( 2,542 ) ​ $ ( 853 ) ​ $ ( 899 ) ​ $ ( 85 ) ​ $ ( 20,417 ) ​ $ ( 1,175 ) ​ $ ( 25,971 ) Other comprehensive income/(loss) before reclassifications ​ ​ ( 587 ) ​ ​ 1,291 ​ ​ — ​ ​ ( 869 ) ​ ​ ( 3,262 ) ​ ​ ( 625 ) ​ ​ ( 4,052 ) Amounts reclassified from accumulated other comprehensive loss ​ ​ ( 148 ) ​ ​ ( 463 ) ​ ​ 584 ​ ​ — ​ ​ 1,049 ​ ​ 138 ​ ​ 1,160 Balance - December 31, 2020 ​ $ ( 3,277 ) ​ $ ( 25 ) ​ $ ( 315 ) ​ $ ( 954 ) ​ $ ( 22,630 ) ​ $ ( 1,662 ) ​ $ ( 28,863 ) Other comprehensive income/(loss) before reclassifications ​ ​ 266 ​ ​ ( 5,202 ) ​ ​ — ​ ​ 405 ​ ​ ( 139 ) ​ ​ — ​ ​ ( 4,670 ) Amounts reclassified from accumulated other comprehensive loss ​ ​ ( 37 ) ​ ​ — ​ ​ 45 ​ ​ — ​ ​ 272 ​ ​ 55 ​ ​ 335 Balance - March 31, 2021 ​ $ ( 3,048 ) ​ $ ( 5,227 ) ​ $ ( 270 ) ​ $ ( 549 ) ​ $ ( 22,497 ) ​ $ ( 1,607 ) ​ $ ( 33,198 ) Other comprehensive income/(loss) before reclassifications ​ ​ 1,581 ​ ​ 2,034 ​ ​ — ​ ​ ( 34 ) ​ ​ 938 ​ ​ — ​ ​ 4,519 Amounts reclassified from accumulated other comprehensive loss ​ ​ ( 37 ) ​ ​ ( 113 ) ​ ​ 34 ​ ​ — ​ ​ 272 ​ ​ 55 ​ ​ 211 Balance - June 30, 2021 ​ $ ( 1,504 ) ​ $ ( 3,306 ) ​ $ ( 236 ) ​ $ ( 583 ) ​ $ ( 21,287 ) ​ $ ( 1,552 ) ​ $ ( 28,468 ) ​ 31 Table of Contents The following tables present the components of other comprehensive income/(loss) for the six and three month periods ended June 30, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Before ​ Tax ​ ​ Components of Other Comprehensive Income ​ Tax ​ (Expense) ​ ​ (in thousands) Amount Benefit Net For the six months ended June 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ $ 2,523 ​ $ ( 676 ) ​ $ 1,847 Less: accretable yield recognized in income ​ ​ 101 ​ ​ ( 27 ) ​ ​ 74 Net unrealized gains on investments with OTTI ​ ​ 2,422 ​ ​ ( 649 ) ​ ​ 1,773 Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ ​ ( 4,327 ) ​ ​ 1,159 ​ ​ ( 3,168 ) Less: gains recognized in income ​ ​ 154 ​ ​ ( 41 ) ​ ​ 113 Net unrealized losses on all other AFS securities ​ ​ ( 4,481 ) ​ ​ 1,200 ​ ​ ( 3,281 ) Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Less: gains recognized in income ​ ​ — ​ ​ — ​ ​ — Less: amortization recognized in income ​ ​ ( 108 ) ​ ​ 29 ​ ​ ( 79 ) Net unrealized gains on HTM securities ​ ​ 108 ​ ​ ( 29 ) ​ ​ 79 Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 507 ​ ​ ( 136 ) ​ ​ 371 Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial gain ​ ​ 1,090 ​ ​ ( 291 ) ​ ​ 799 Less: amortization of unrecognized loss ​ ​ ( 744 ) ​ ​ 200 ​ ​ ( 544 ) Net pension plan liability adjustment ​ ​ 1,834 ​ ​ ( 491 ) ​ ​ 1,343 SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ — ​ ​ — ​ ​ — Less: amortization of unrecognized loss ​ ​ ( 150 ) ​ ​ 40 ​ ​ ( 110 ) Net SERP liability adjustment ​ ​ 150 ​ ​ ( 40 ) ​ ​ 110 Other comprehensive income ​ $ 540 ​ $ ( 145 ) ​ $ 395 ​ ​ ​ 32 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Before ​ Tax ​ ​ Components of Other Comprehensive Loss ​ Tax ​ (Expense) ​ ​ (in thousands) Amount Benefit Net For the six months ended June 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ $ ( 1,956 ) ​ $ 524 ​ $ ( 1,432 ) Less: accretable yield recognized in income ​ ​ 101 ​ ​ ( 27 ) ​ ​ 74 Net unrealized losses on investments with OTTI ​ ​ ( 2,057 ) ​ ​ 551 ​ ​ ( 1,506 ) Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 2,767 ​ ​ ( 741 ) ​ ​ 2,026 Less: gains recognized in income ​ ​ 47 ​ ​ ( 13 ) ​ ​ 34 Net unrealized gains on all other AFS securities ​ ​ 2,720 ​ ​ ( 728 ) ​ ​ 1,992 Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ — ​ ​ — ​ ​ — Less: gains recognized in income ​ ​ 60 ​ ​ ( 16 ) ​ ​ 44 Less: amortization recognized in income ​ ​ ( 735 ) ​ ​ 197 ​ ​ ( 538 ) Net unrealized gains on HTM securities ​ ​ 675 ​ ​ ( 181 ) ​ ​ 494 Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ ​ ( 1,425 ) ​ ​ 381 ​ ​ ( 1,044 ) Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ ( 2,786 ) ​ ​ 746 ​ ​ ( 2,040 ) Less: amortization of unrecognized loss ​ ​ ( 716 ) ​ ​ 192 ​ ​ ( 524 ) Net pension plan liability adjustment ​ ​ ( 2,070 ) ​ ​ 554 ​ ​ ( 1,516 ) SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ — ​ ​ — ​ ​ — Less: amortization of unrecognized loss ​ ​ ( 94 ) ​ ​ 25 ​ ​ ( 69 ) Less: amortization of prior service costs ​ ​ 1 ​ ​ — ​ ​ 1 Net SERP liability adjustment ​ ​ 93 ​ ​ ( 25 ) ​ ​ 68 Other comprehensive loss ​ $ ( 2,064 ) ​ $ 552 ​ $ ( 1,512 ) ​ ​ ​ 33 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Components of Other Comprehensive Income (in thousands) ​ Before Tax Amount ​ Tax (Expense) Benefit ​ Net For the three months ended June 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ $ 2,160 ​ $ ( 579 ) ​ $ 1,581 Less: accretable yield recognized in income ​ ​ 51 ​ ​ ( 14 ) ​ ​ 37 Net unrealized gains on investments with OTTI ​ ​ 2,109 ​ ​ ( 565 ) ​ ​ 1,544 Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 2,778 ​ ​ ( 744 ) ​ ​ 2,034 Less: gains recognized in income ​ ​ 154 ​ ​ ( 41 ) ​ ​ 113 Net unrealized gains on all other AFS securities ​ ​ 2,624 ​ ​ ( 703 ) ​ ​ 1,921 Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ — ​ ​ — ​ ​ — Less: amortization recognized in income ​ ​ ( 46 ) ​ ​ 12 ​ ​ ( 34 ) Net unrealized gains on HTM securities ​ ​ 46 ​ ​ ( 12 ) ​ ​ 34 Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ ( 47 ) ​ ​ 13 ​ ​ ( 34 ) Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial gain ​ ​ 1,280 ​ ​ ( 342 ) ​ ​ 938 Less: amortization of unrecognized loss ​ ​ ( 372 ) ​ ​ 100 ​ ​ ( 272 ) Net pension plan liability adjustment ​ ​ 1,652 ​ ​ ( 442 ) ​ ​ 1,210 SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ — ​ ​ — ​ ​ — Less: amortization of unrecognized loss ​ ​ ( 73 ) ​ ​ 18 ​ ​ ( 55 ) Net SERP liability adjustment ​ ​ 73 ​ ​ ( 18 ) ​ ​ 55 Other comprehensive income ​ $ 6,457 ​ $ ( 1,727 ) ​ $ 4,730 ​ ​ 34 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Components of Other Comprehensive Income (in thousands) ​ Before Tax Amount ​ Tax (Expense) Benefit ​ Net For the three months ended June 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ $ ( 333 ) ​ $ 89 ​ $ ( 244 ) Less: accretable yield recognized in income ​ ​ 51 ​ ​ ( 14 ) ​ ​ 37 Net unrealized losses on investments with OTTI ​ ​ ( 384 ) ​ ​ 103 ​ ​ ( 281 ) Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 877 ​ ​ ( 235 ) ​ ​ 642 Less: gains recognized in income ​ ​ 47 ​ ​ ( 13 ) ​ ​ 34 Net unrealized gains on all other AFS securities ​ ​ 830 ​ ​ ( 222 ) ​ ​ 608 Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ — ​ ​ — ​ ​ — Less: gains recognized in income ​ ​ 60 ​ ​ ( 16 ) ​ ​ 44 Less: amortization recognized in income ​ ​ ( 662 ) ​ ​ 177 ​ ​ ( 485 ) Net unrealized gains on HTM securities ​ ​ 602 ​ ​ ( 161 ) ​ ​ 441 Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ ​ ( 111 ) ​ ​ 30 ​ ​ ( 81 ) Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial gain ​ ​ 4,284 ​ ​ ( 1,147 ) ​ ​ 3,137 Less: amortization of unrecognized loss ​ ​ ( 358 ) ​ ​ 96 ​ ​ ( 262 ) Net pension plan liability adjustment ​ ​ 4,642 ​ ​ ( 1,243 ) ​ ​ 3,399 SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Less: amortization of unrecognized loss ​ ​ ( 47 ) ​ ​ 13 ​ ​ ( 34 ) Less: amortization of prior service costs ​ ​ — ​ ​ — ​ ​ — Net SERP liability adjustment ​ ​ 47 ​ ​ ( 13 ) ​ ​ 34 Other comprehensive income ​ $ 5,626 ​ $ ( 1,506 ) ​ $ 4,120 ​ 35 Table of Contents The following table presents the details of amounts reclassified from accumulated other comprehensive loss for the six and three month periods ended June 30, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amounts Reclassified from ​ Six Months Ended ​ ​ Accumulated Other Comprehensive Loss ​ June 30, ​ Affected Line Item in the Statement (in thousands) 2021 2020 Where Net Income is Presented Net unrealized gains on available for sale investment securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ Accretable yield ​ $ 101 ​ $ 101 ​ Interest income on taxable investment securities Taxes ​ ​ ( 27 ) ​ ​ ( 27 ) ​ Provision for income tax expense ​ ​ $ 74 ​ $ 74 ​ Net of tax Net unrealized gains on available for sale investment securities - all others: ​ ​ ​ ​ ​ ​ ​ ​ Gains on sales ​ $ 154 ​ $ 47 ​ Net gains Taxes ​ ​ ( 41 ) ​ ​ ( 13 ) ​ Provision for income tax expense ​ ​ $ 113 ​ $ 34 ​ Net of tax Net unrealized losses on held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ Amortization ​ $ ( 108 ) ​ $ ( 735 ) ​ Interest income on taxable investment securities Gains on calls ​ ​ — ​ ​ 60 ​ Net gains Taxes ​ ​ 29 ​ ​ 181 ​ Provision for income tax expense ​ ​ $ ( 79 ) ​ $ ( 494 ) ​ Net of tax Net pension plan liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized loss ​ $ ( 744 ) ​ $ ( 716 ) ​ Other Expense Taxes ​ ​ 200 ​ ​ 192 ​ Provision for income tax expense ​ ​ $ ( 544 ) ​ $ ( 524 ) ​ Net of tax Net SERP liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized loss ​ $ ( 150 ) ​ $ ( 94 ) ​ Other Expense Amortization of prior service costs ​ ​ — ​ ​ 1 ​ Salaries and employee benefits Taxes ​ ​ 40 ​ ​ 25 ​ Provision for income tax expense ​ ​ $ ( 110 ) ​ $ ( 68 ) ​ Net of tax Total reclassifications for the period ​ $ ( 546 ) ​ $ ( 978 ) ​ Net of tax ​ ​ 36 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amounts Reclassified from ​ Three Months Ended ​ ​ Accumulated Other Comprehensive Loss ​ June 30, ​ Affected Line Item in the Statement (in thousands) ​ 2021 ​ 2020 ​ Where Net Income is Presented Net unrealized gains on available for sale investment securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ Accretable Yield ​ $ 51 ​ $ 51 ​ Interest income on taxable investment securities Taxes ​ ​ ( 14 ) ​ ​ ( 14 ) ​ Provision for income tax expense ​ ​ $ 37 ​ $ 37 ​ Net of tax Net unrealized gains on available for sale investment securities - all others: ​ ​ ​ ​ ​ ​ ​ ​ Gains on sales ​ $ 154 ​ $ 47 ​ Net gains Taxes ​ ​ ( 41 ) ​ ​ ( 13 ) ​ Provision for income tax expense ​ ​ $ 113 ​ $ 34 ​ Net of tax Net unrealized losses on held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ Amortization ​ $ ( 46 ) ​ $ ( 662 ) ​ Interest income on taxable investment securities Gains on calls ​ ​ — ​ ​ 60 ​ Net gains Taxes ​ ​ 12 ​ ​ 161 ​ Provision for income tax expense ​ ​ $ ( 34 ) ​ $ ( 441 ) ​ Net of tax Net pension plan liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized loss ​ $ ( 372 ) ​ $ ( 358 ) ​ Other expense Amortization of prior service costs ​ ​ — ​ ​ — ​ Salaries and employee benefits Taxes ​ ​ 100 ​ ​ 96 ​ Provision for income tax expense ​ ​ $ ( 272 ) ​ $ ( 262 ) ​ Net of tax Net SERP liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized loss ​ $ ( 73 ) ​ $ ( 47 ) ​ Other expense Amortization of prior service costs ​ ​ — ​ ​ — ​ Salaries and employee benefits Taxes ​ ​ 18 ​ ​ 13 ​ Provision for income tax expense ​ ​ $ ( 55 ) ​ $ ( 34 ) ​ Net of tax Total reclassifications for the period ​ $ ( 211 ) ​ $ ( 666 ) ​ Net of tax ​ ​ ​ ​ Note 9 – Employee Benefit Plans The following tables present the components of the net periodic pension plan cost for First United Corporation’s noncontributory Defined Benefit Pension Plan (the “Pension Plan”) and the Bank’s Defined Benefit Supplemental Executive Retirement Plan (“Defined Benefit SERP”) for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ Three Months Ended Pension Plan ​ June 30, ​ June 30, (in thousands) 2021 2020 2021 2020 Service cost ​ $ 78 ​ $ 112 ​ $ 39 ​ $ 56 Interest cost ​ ​ 711 ​ ​ 813 ​ ​ 355 ​ ​ 406 Expected return on assets ​ ​ ( 1,785 ) ​ ​ ( 1,774 ) ​ ​ ( 892 ) ​ ​ ( 887 ) Amortization of net actuarial loss ​ ​ 744 ​ ​ 716 ​ ​ 372 ​ ​ 358 Net pension credit included in employee benefits and other expense ​ $ ( 252 ) ​ $ ( 133 ) ​ $ ( 126 ) ​ $ ( 67 ) ​ 37 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ Three Months Ended Defined Benefit SERP ​ June 30, ​ June 30, (in thousands) 2021 2020 2021 2020 Service cost ​ $ 69 ​ $ 62 ​ $ 34 ​ $ 31 Interest cost ​ ​ 119 ​ ​ 134 ​ ​ 59 ​ ​ 67 Amortization of recognized loss ​ ​ 151 ​ ​ 94 ​ ​ 76 ​ ​ 47 Amortization of prior service cost ​ ​ ( 1 ) ​ ​ ( 1 ) ​ ​ — ​ ​ — Net Defined Benefit SERP expense included in employee benefits and other expense ​ $ 338 ​ $ 289 ​ $ 169 ​ $ 145 ​ The service cost component of net periodic benefit cost is included in salaries and benefits and all other components of net periodic benefit cost are included in other expense in the Consolidated Statement of Operations for the Pension Plan and the Defined Benefit SERP. The Pension Plan is a noncontributory defined benefit pension plan that covers our employees who were hired prior to the freeze and others who were grandfathered into the plan. The benefits are based on years of service and the employees’ compensation during the last five years of employment. Effective April 30, 2010, the Pension Plan was amended, resulting in a “soft freeze”, the effect of which prohibits new entrants into the plan and ceases crediting of additional years of service after that date. Effective January 1, 2013, the Pension Plan was amended to unfreeze it for those employees for whom the sum of their (a) ages, at their closest birthday plus (b) years of service for vesting purposes equals 80 or greater. The “soft freeze” continues to apply to all other plan participants. Pension benefits for these participants are managed through discretionary contributions to the First United Corporation 401(k) Profit Sharing Plan (the “401(k) Plan”). The Bank established the Defined Benefit SERP in 2001 as an unfunded supplemental executive retirement plan. The Defined Benefit SERP is available only to a select group of management or highly compensated employees to provide supplemental retirement benefits in excess of limits imposed on qualified plans by federal tax law. Concurrent with the establishment of the Defined Benefit SERP, the Bank acquired Bank Owned Life Insurance (“BOLI”) policies on the senior management personnel and officers of the Bank. The benefits resulting from the favorable tax treatment accorded the earnings on the BOLI policies are intended to provide a source of funds for the future payment of the Defined Benefit SERP benefits as well as other employee benefit costs. The benefit obligation activity for both the Pension Plan and the Defined Benefit SERP was calculated using an actuarial measurement date of January 1. Plan assets and the benefit obligations were calculated using an actuarial measurement date of December 31. The Corporation will assess the need for future annual contributions to the pension plan based upon its funded status and an evaluation of the future benefits to be provided thereunder. No contributions were made to the Pension Plan during the first three months of 2021 and a contribution of $ 1.0 million was made during the first three months of 2020. The Corporation expects to fund the annual projected benefit payments for the Defined Benefit SERP from operations. On January 9, 2015, First United Corporation and members of management who do not participate in the Defined Benefit SERP entered into participation agreements under the Deferred Compensation Plan, each styled as a Defined Contribution SERP Agreement (the “Contribution Agreement”). Pursuant to each Contribution Agreement, First United Corporation agreed, for each Plan Year (as defined in the Deferred Compensation Plan) in which it determines that it has been Profitable (as defined in the Contribution Agreement), to make a discretionary contribution to the participant’s Employer Account in an amount equal to 15 % of the participant’s base salary level for such Plan Year, with the first Plan Year being the year ending December 31, 2015. The Contribution Agreement provides that the participant will become 100% vested in the amount maintained in his or her Employer Account upon the earliest to occur of the following events: (a) Normal Retirement (as defined in the Contribution Agreement); (b) Separation from Service (as defined in the Contribution Agreement) following a Change of Control (as defined in the Deferred Compensation Plan) and subsequent Triggering Event (as defined in the Contribution Agreement); (c) Separation from Service due to a Disability (as defined in the Contribution Agreement); (d) with respect to a particular award of Employer Contribution Credits, the participant’s completion of 2 consecutive Years of Service (as defined in the Contribution Agreement) immediately following the Plan Year for which such award was made; or (e) death. Notwithstanding the foregoing, however, a participant will 38 Table of Contents lose entitlement to the amount maintained in his or her Employer Account in the event employment is terminated for Cause (as defined in the Contribution Agreement). In addition, the Contribution Agreement conditions entitlement to the amounts held in the Employer Account on the participant (1) refraining from engaging in Competitive Employment (as defined in the Contribution Agreement) for three years following his or her Separation from Service, (2) refraining from injurious disclosure of confidential information concerning the Corporation, and (3) remaining available, at the First United Corporation’s reasonable request, to provide at least six hours of transition services per month for 12 months following his or her Separation from Service (except in the case of death or Disability), except that only item (2) will apply in the event of a Separation from Service following a Change of Control and subsequent Triggering Event. In January 2019, the Board approved discretionary contributions to four participants totaling $ 123,179 . The contributions had a two year vesting period that ended on December 31, 2020. In January 2020, the Board of Directors of First United Corporation approved discretionary contributions to four participants totaling $ 126,058 . The Corporation recorded $ 31,514 of related compensation expense for the first six months of 2021 and 2020. The Corporation recorded $ 15,757 for the second quarters of 2021 and 2020, related to these contributions. In January 2021, the Board of Directors approved discretionary contributions to three participants totaling $ 101,257 . The Corporation recorded $ 25,314 of related compensation expense for the first six months of 2021 and $ 12,657 for the second quarter of 2021 related to these contributions. Each discretionary contribution has a two year vesting period. Note 10 - Equity Compensation Plan Information At the 2018 Annual Meeting of Shareholders, First United Corporation’s shareholders approved the First United Corporation 2018 Equity Compensation Plan (the “Equity Plan”) which authorizes the issuance of up to 325,000 shares of common stock to employees, directors and qualifying consultants pursuant to stock options, stock appreciation rights, stock awards, dividend equivalents, and other stock-based awards. The Corporation complies with the provisions of ASC Topic 718, Compensation - Stock Compensation , in measuring and disclosing stock compensation cost. The measurement objective in ASC Paragraph 718-10-30-6 requires public companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The cost is recognized in expense over the period in which an employee is required to provide service in exchange for the award (the vesting period). Stock based awards were made to non-employee directors in June 2020 pursuant to First United Corporation’s director compensation policy. Each director receives an annual retainer of 1,000 shares of First United Corporation common stock, plus $ 10,000 to be paid, at the director’s election, in cash or additional shares of common stock. In June 2020, a total of 13,160 fully vested shares of common stock were issued to directors, which had a grant date fair market value of $ 14.52 per share. In July 2020, a total of 916 fully vested shares of common stock were issued to a new director, which had a grant date fair market value of $ 11.22 per share. In May 2021, a total of 12,726 fully vested shares of common stock were issued to directors, which had a grant date fair value of $ 18.50 per share. Director stock compensation expense was $ 132,860 for the six months ended June 30, 2021 and $ 106,681 for the six months ended June 30, 2020. Director stock compensation expense was $ 62,644 for the three months ended June 30, 2021 and $ 39,698 for the three months ended June 30, 2020. Restricted Stock Units On March 26, 2020, pursuant to the Corporation’s Long Term Incentive Plan (the "LTIP"), which is a sub-plan of the Equity Plan, the Compensation Committee of the Corporation’s Board of Directors (the "Committee") granted RSUs to the Corporation’s principal executive officer, its principal financial officer, and certain of its other executive officers. An RSU contemplates the issuance of shares of common stock of the Corporation if and when the RSU vests. The RSUs granted to each of the foregoing officers consist of (a) a performance vesting award for a three year performance period ending December 31, 2021, (b) a performance vesting award for a three year performance period ending December 31, 2022, and (c) a time-vesting award that will vest ratably over a three year period beginning on March 26, 2021. Target performance levels were set based on the annual budget which supports the Company’s long-term objective of achieving high performance as compared to peers. Threshold performance is the minimum level of acceptable performance as defined by the Committee and maximum performance represented a level potentially achievable under ideal circumstances. Achievement of the threshold performance level 39 Table of Contents would result in each executive participant earning a payout at 50 % of his or her respective target award opportunity. Achievement of the target performance level would result in the executive participant earning the target award and achievement at or above the maximum performance level would result in the executive participant earning 150 % of the target opportunity. Actual results for any goal that falls between performance levels would be interpolated to calculate a proportionate award. For the performance period ending December 31, 2021, the RSUs’ performance goal is based on earnings per share for the year ending December 31, 2021. For the performance period ending December 31, 2022, the RSUs’ performance goals are based on earnings per share for the year ending December 31, 2022 and growth in tangible book value per share during the performance period. The threshold, target and maximum performance levels for these grants will be disclosed pursuant to Item 402 of Regulation S-K following the conclusion of the applicable performance period. To receive any shares under an RSU, a grantee must be employed by the Corporation or one of its subsidiaries on the applicable vesting date, except that a grantee whose employment terminates prior to such vesting date due to death, disability or retirement will be entitled to a pro-rated portion of the shares subject to the RSUs, assuming that, in the case of performance-vesting RSUs, the performance goals had been met at their "target" levels. In the first quarter of 2020, RSUs relating to 19,934 performance vested shares and 5,070 time vested shares of common stock (target level) were granted, which had a grant date fair market value of $ 12.54 per share of common stock underlying each RSU. On March 26, 2021, 1,690 of the 5,070 time vested shares were issued to participants. Stock compensation expense was $ 52,254 and $ 62,484 for the first six months of 2021 and 2020, respectively. Stock compensation expense was $ 26,127 and $ 31,242 for the three month periods ended June 30, 2021 and 2020. Unrecognized compensation expense at June 30, 2021 related to unvested units was $ 136,300 . In May 2021, RSUs relating to 7,389 performance vested shares and 3,693 time vested shares of common stock (target level) were granted, which had a grant date fair market value of $ 17.93 per share of common stock underlying each RSU. These RSUs are related to the 2021 plan granted in the second quarter of 2021. The performance vesting award for a three year performance period ending December 31, 2023, and a time-vesting award that will vest ratably over a three year period beginning on May 5, 2022. Stock compensation expense was $ 11,048 for the three and six month periods ended June 30, 2021. Unrecognized compensation expense at June 30, 2021 related to unvested units was $ 187,806 . Note 11 – Derivative Financial Instruments As a part of managing interest rate risk, the Bank entered into interest rate swap agreements to modify the re-pricing characteristics of certain interest-bearing liabilities. The Corporation has designated these interest rate swap agreements as cash flow hedges under the guidance of ASC Subtopic 815-30, Derivatives and Hedging – Cash Flow Hedges . Cash flow hedges have the effective portion of changes in the fair value of the derivative, net of taxes, recorded in net accumulated other comprehensive loss. In March 2016, the Corporation entered into four interest rate swap contracts totaling $ 30.0 million notional amount, hedging future cash flows associated with floating rate trust preferred debt. These contracts included a three year $ 5.0 million contract that matured on September 17, 2019 , a five year $ 5.0 million contract that matured on March 17, 2021 , a seven year $ 5.0 million contract that matures on March 17, 2023 and a 10 year $ 15.0 million contract that matures on March 17, 2026 . As of June 30, 2021, $ 20.0 million notional amount remains. The fair value of the interest rate swap contracts was $( 834 ) thousand and $( 1.3 ) million at June 30, 2021 and December 31, 2020, respectively. For the six months ended June 30, 2021, the Corporation recorded an increase in the value of the derivatives of $ 485 thousand and the related deferred tax of $ 114 thousand in net accumulated other comprehensive loss to reflect the effective portion of cash flow hedges. ASC Subtopic 815-30 requires the net accumulated other comprehensive loss to be reclassified to earnings if the hedge becomes ineffective or is terminated. There was no hedge ineffectiveness recorded for the six months ended June 30, 2021. The Corporation does not expect any material losses relating to these hedges to be reclassified into earnings within the next 12 months. Interest rate swap agreements are entered into with counterparties that meet established credit standards and the Corporation believes that the credit risk inherent in these contracts is not significant as of June 30, 2021. 40 Table of Contents The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the six and three month periods ended June 30, 2021 and 2020. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative in Cash Flow Hedging Relationships ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount of gain or ​ ​ ​ ​ ​ ​ ​ ​ (loss) recognized in ​ ​ ​ ​ ​ Amount of gain or ​ income or derivative ​ ​ Amount of gain or ​ (loss) reclassified from ​ (ineffective portion ​ ​ (loss) recognized in ​ accumulated OCI into ​ and amount excluded ​ ​ OCI on derivative ​ income (effective ​ from effectiveness (in thousands) (effective portion) portion) (a) testing) (b) Interest rate contracts: ​ ​ ​ ​ ​ ​ ​ ​ ​ Six months ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2021 ​ $ 371 ​ $ — ​ $ — June 30, 2020 ​ ​ ( 1,044 ) ​ ​ — ​ ​ — Three months ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2021 ​ $ ( 34 ) ​ $ — ​ $ — June 30, 2020 ​ ​ ( 81 ) ​ ​ — ​ ​ — ​ Notes: (a) Reported as interest expense (b) Reported as other income Note 12 – Revenue Recognition Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. Topic 606 is applicable to noninterest revenue streams such as wealth management, including trust and brokerage services, service charges on deposit accounts, interchange fee income – debit card income and gains/losses on OREO sales. Noninterest revenue streams in-scope of Topic 606 are discussed below. Wealth Management Trust and asset management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Corporation’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts. Optional services such as real estate sales and tax return preparation services are also available to existing trust and asset management customers. The Corporation’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered. Service Charges on Deposit Accounts Service charges on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. The Corporation’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account related fees are largely transactional based, and therefore, the Corporation’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts. Interchange Fees – Debit and Credit Card Income Fees, exchange, and other service charges are primarily comprised of debit and credit card income, ATM fees, merchant services income, and other service charges. Debit and credit card income is primarily comprised of interchange fees earned whenever the Corporation’s debit cards are processed through card payment networks such as Visa. ATM fees are primarily generated when a 41 Table of Contents Corporation cardholder uses a non-Corporation ATM or a non-Corporation cardholder uses a Corporation ATM. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Corporation’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month. The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the six and three month periods ended June 30, 2021 and June 30, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ Three Months Ended ​ ​ June 30, ​ June 30, (in thousands) 2021 ​ 2020 ​ 2021 ​ 2020 Noninterest income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ In-scope of Topic 606: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Service charges on deposit accounts ​ $ 817 ​ $ 992 ​ $ 412 ​ $ 377 Other service charges ​ ​ 432 ​ ​ 322 ​ ​ 221 ​ ​ 32 Trust department ​ ​ 4,275 ​ ​ 3,484 ​ ​ 2,034 ​ ​ 1,731 Debit card income ​ ​ 1,723 ​ ​ 1,314 ​ ​ 913 ​ ​ 680 Brokerage commissions ​ ​ 625 ​ ​ 479 ​ ​ 357 ​ ​ 202 Noninterest income (in-scope of Topic 606) ​ ​ 7,872 ​ ​ 6,591 ​ ​ 3,937 ​ ​ 3,022 Noninterest income (out-of-scope of Topic 606) ​ ​ 1,191 ​ ​ 842 ​ ​ 384 ​ ​ 403 Total Noninterest Income ​ $ 9,063 ​ $ 7,433 ​ $ 4,321 ​ $ 3,425 ​ ​ ​ Note 13 – Regulatory Capital Requirements The following table presents our capital ratios for the six months ended June 30, 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2021 December 31, 2020 Required for Capital Adequacy Purposes Required to be Well Capitalized Total Capital (to risk-weighted assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated ​ 15.80 % 16.08 % 8.00 % 10.00 % First United Bank & Trust ​ 14.92 % 15.50 % 8.00 % 10.00 % Tier 1 Capital (to risk-weighted assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated ​ 14.55 % 14.83 % 6.00 % 8.00 % First United Bank & Trust ​ 13.66 % 14.25 % 6.00 % 8.00 % Common Equity Tier 1 Capital (to risk-weighted assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated ​ 12.37 % 12.61 % 4.50 % 6.50 % First United Bank & Trust ​ 13.66 % 14.25 % 4.50 % 6.50 % Tier 1 Capital (to average assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated ​ 9.94 % 10.36 % 4.00 % 5.00 % First United Bank & Trust ​ 9.20 % 9.81 % 4.00 % 5.00 % ​ As of June 30, 2021, the Bank and the Corporation are considered “well capitalized” under the regulatory framework for prompt corrective action. The ratios at the Bank and Consolidated levels were negatively impacted primarily due to the increased funding from the Bank to the holding company related to the settlement expenses and the stock repurchase program. The decrease at the Corporation level is related to the stock repurchase of 400,000 shares of common stock and the reduction to capital. ​ First United Corporation’s stock repurchase plan was initially adopted effective January 27, 2021, which authorized the repurchase of up to 400,000 shares of common stock of First United Corporation. The plan authorizes the repurchases to be conducted through open market or private transactions at such times and in such amounts per transaction as the Chairman and Chief Executive Officer of First United Corporation determines to be appropriate. ​ 42 Table of Contents On April 16, 2021 (the “Effective Date”), First United Corporation (the “Corporation”) entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Driver Opportunity Partners I LP (“Driver Partners”) under which, pursuant to the Corporation’s stock repurchase program authorized by the Corporation’s Board of Directors on January 27, 2021, the Corporation agreed to repurchase from Driver Partners 360,737 shares of the common stock, par value $ 0.01 per share, of the Corporation at a purchase price of $ 18.00 per share. ​ ​ Note 14 – Assets and Liabilities Subject to Enforceable Master Netting Arrangements Interest Rate Swap Agreements The Corporation has entered into interest rate swap agreements to modify the re-pricing characteristics of certain interest-bearing liabilities as a part of managing interest rate risk. The swap agreements have been designated as cash flow hedges, and accordingly, the fair value of the interest rate swap contracts is reported in Other Assets or Other Liabilities on the Consolidated Statement of Financial Condition. The swap agreements were entered into with a third-party financial institution. The Corporation is party to master netting arrangements with its financial institution counterparty; however, the Corporation does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral, in the form of cash and investment securities, are pledged by the Corporation as the counterparty with net liability positions in accordance with contract thresholds. See Note 12 to the Consolidated Financial Statements for more information. Securities Sold Under Agreements to Repurchase (“Repurchase Agreements”) The Bank enters into agreements under which it sells interests in U.S. government agency securities to certain customers subject to an obligation to repurchase, and on the part of the customers to resell, such interests. Under these arrangements, the Bank may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing arrangements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a liability in the Consolidated Statement of Financial Condition, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. There is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. In addition, as the Bank does not enter into reverse repurchase agreements, there is no such offsetting to be done with the repurchase agreements. The right of setoff for a repurchase agreement resembles a secured borrowing, whereby the collateral would be used to settle the fair value of the repurchase agreement should the Bank be in default (i.e. fails to repurchase the U.S. securities on the maturity date of the agreement). The investment security collateral, maintained at 102 % of the borrowing, is held by a third party financial institution in the counterparty’s custodial account. The following table presents the assets and liabilities subject to an enforceable master netting arrangement or repurchase agreements at June 30, 2021 and December 31, 2020. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Amounts ​ Gross Amounts ​ ​ ​ ​ ​ Gross ​ Gross ​ of (Assets)/ ​ Not Offset in the ​ ​ ​ ​ ​ Amounts of ​ Amounts ​ Liabilities ​ Statement of Condition ​ ​ ​ ​ ​ Recognized ​ Offset in the ​ Presented in ​ ​ ​ ​ Cash ​ ​ ​ ​ ​ (Assets)/ ​ Statement of ​ the Statement ​ Financial ​ Collateral ​ Net (in thousands) Liabilities Condition of Condition Instruments Pledged Amount June 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest Rate Swap Agreements ​ $ 834 ​ $ — ​ $ 834 ​ $ ( 834 ) ​ $ 2,000 ​ $ — Repurchase Agreements ​ $ 51,454 ​ $ — ​ $ 51,454 ​ $ ( 51,454 ) ​ $ — ​ $ — December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest Rate Swap Agreements ​ $ 1,320 ​ $ — ​ $ 1,320 ​ $ ( 1,320 ) ​ $ — ​ $ — Repurchase Agreements ​ $ 49,160 ​ $ — ​ $ 49,160 ​ $ ( 49,160 ) ​ $ — ​ $ — ​ ​ ​ 43 Table of Contents Note 15 – Adoption of New Accounting Standards and Effects of New Accounting Pronouncements In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . ASU 2016-13 introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchases financial assets with credit deterioration since their origination. The new model referred to as current expected credit losses (“CECL”) model, will apply to: (a) financial assets subject to credit losses and measured at amortized cost; and (b) certain off-balance sheet credit exposures. This includes loans, held to maturity debt securities, loan commitments, financial guarantees and net investments in leases as well as reinsurance and trade receivables. The estimate of expected credit losses should consider historical information, current information, and supportable forecasts, including estimates of prepayments. ASU 2016-13 was originally effective for SEC filers for annual periods beginning after December 15, 2019, and interim periods within those annual periods. In November 2019, the FASB approved a delay of the required implementation date of ASU No. 2016-13 for smaller reporting companies, as defined by the Securities and Exchange Commission, including the Corporation, resulting in a required implementation date for the Corporation of January 1, 2023. Management has formed a focus group consisting of multiple members from areas, including credit, finance, loan servicing, reporting, and information systems. The Corporation is completing its data and model validation analyses, with parallel processing of our existing allowance for loan losses model with the CECL model to follow. The Corporation is currently evaluating the provisions of ASU No. 2016-13 to determine the potential impact the new standard will have on the financial condition or results of operations. In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848).” The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendment only applies to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. The ASU is effective as of March 12, 2020 through December 31, 2022. The Corporation is in the process of evaluating the impact of this standard on the loan portfolio, investment portfolio, long term debt and interest rate swaps, but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations. ​ 44 Table of Contents