FIRST UNITED CORP/MD/ 10-Q

Item 1. Financial Statements First United Corporation and Subsidiaries Consolidated Statements of Financial Condition (In thousands, except share data - Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 December 31, 2021 ​ ​ ​ ​ ​ ​ Assets ​ ​ ​ ​ ​ ​ Cash and due from banks ​ $ 71,211 ​ $ 109,823 Interest bearing deposits in banks ​ ​ 4,905 ​ ​ 5,897 Cash and cash equivalents ​ ​ 76,116 ​ ​ 115,720 Investment securities – available for sale (at fair value) ​ ​ 143,609 ​ ​ 286,771 Investment securities – held to maturity (fair value $ 235,026 at March 31, 2022 and $ 65,369 at December 31, 2021) ​ ​ 241,656 ​ ​ 56,259 Restricted investment in bank stock, at cost ​ ​ 1,026 ​ ​ 1,029 Loans held for sale ​ ​ 140 ​ ​ 67 Loans ​ ​ 1,181,401 ​ ​ 1,153,687 Unearned fees ​ ​ ( 107 ) ​ ​ ( 292 ) Allowance for loan losses ​ ​ ( 15,292 ) ​ ​ ( 15,955 ) Net loans ​ ​ 1,166,002 ​ ​ 1,137,440 Premises and equipment, net ​ ​ 34,001 ​ ​ 34,697 Goodwill and other intangibles ​ ​ 12,000 ​ ​ 12,052 Bank owned life insurance ​ ​ 45,442 ​ ​ 45,150 Deferred tax assets ​ ​ 10,361 ​ ​ 6,857 Other real estate owned, net ​ ​ 4,477 ​ ​ 4,477 Right of use assets ​ ​ 2,161 ​ ​ 2,247 Pension asset ​ ​ 1,699 ​ ​ 4,765 Accrued interest receivable ​ ​ 5,075 ​ ​ 4,821 Other assets ​ ​ 16,458 ​ ​ 17,486 Total Assets ​ $ 1,760,223 ​ $ 1,729,838 Liabilities and Shareholders’ Equity ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ Non-interest bearing deposits ​ $ 530,901 ​ $ 501,627 Interest bearing deposits ​ ​ 976,654 ​ ​ 967,747 Total deposits ​ ​ 1,507,555 ​ ​ 1,469,374 Short-term borrowings ​ ​ 58,902 ​ ​ 57,699 Long-term borrowings ​ ​ 30,929 ​ ​ 30,929 Operating lease liability ​ ​ 2,666 ​ ​ 2,761 SERP deferred compensation ​ ​ 10,424 ​ ​ 10,395 Accrued interest payable and other liabilities ​ ​ 11,674 ​ ​ 15,787 Dividends payable ​ ​ 995 ​ ​ 993 Total Liabilities ​ ​ 1,623,145 ​ ​ 1,587,938 Shareholders’ Equity: ​ ​ ​ ​ ​ ​ Common Stock – par value $ 0.01 per share; Authorized 25,000,000 shares; issued and outstanding 6,637,979 shares at March 31, 2022 and 6,620,955 at December 31, 2021 ​ ​ 66 ​ ​ 66 Surplus ​ ​ 23,712 ​ ​ 23,661 Retained earnings ​ ​ 150,207 ​ ​ 145,487 Accumulated other comprehensive loss ​ ​ ( 36,907 ) ​ ​ ( 27,314 ) Total Shareholders’ Equity ​ ​ 137,078 ​ ​ 141,900 Total Liabilities and Shareholders’ Equity ​ $ 1,760,223 ​ $ 1,729,838 ​ See accompanying notes to the consolidated financial statements ​ ​ 3 Table of Contents First United Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ 2022 2021 ​ ​ (Unaudited) Interest income ​ ​ ​ ​ ​ ​ Interest and fees on loans ​ $ 12,432 ​ $ 12,732 Interest on investment securities ​ ​ ​ ​ ​ ​ Taxable ​ ​ 1,406 ​ ​ 990 Exempt from federal income tax ​ ​ 282 ​ ​ 275 Total investment income ​ ​ 1,688 ​ ​ 1,265 Other ​ ​ 27 ​ ​ 65 Total interest income ​ ​ 14,147 ​ ​ 14,062 Interest expense ​ ​ ​ ​ ​ ​ Interest on deposits: ​ ​ ​ ​ ​ ​ Savings ​ ​ 18 ​ ​ 25 Interest-bearing transaction accounts ​ ​ 152 ​ ​ 342 Other time ​ ​ 305 ​ ​ 779 Total interest on Deposits ​ ​ 475 ​ ​ 1,146 Interest on short-term borrowings ​ ​ 18 ​ ​ 24 Interest on long-term borrowings ​ ​ 313 ​ ​ 656 Total Interest Expense ​ ​ 806 ​ ​ 1,826 Net Interest income ​ ​ 13,341 ​ ​ 12,236 Provision/(credit) for loan losses ​ ​ ( 419 ) ​ ​ 110 Net interest income after provision for loan losses ​ ​ 13,760 ​ ​ 12,126 Other operating income ​ ​ ​ ​ ​ ​ Net gains on investments, available for sale ​ ​ 3 ​ ​ — Net gains on sale of residential mortgage loans ​ ​ 21 ​ ​ 588 Net gains on disposal of fixed assets ​ ​ 28 ​ ​ — Net gains ​ ​ 52 ​ ​ 588 Other Income ​ ​ ​ ​ ​ ​ Service charges on deposit accounts ​ ​ 465 ​ ​ 405 Other service charges ​ ​ 213 ​ ​ 211 Trust department ​ ​ 2,189 ​ ​ 2,241 Debit card income ​ ​ 886 ​ ​ 810 Bank owned life insurance ​ ​ 292 ​ ​ 286 Brokerage commissions ​ ​ 220 ​ ​ 268 Other ​ ​ 117 ​ ​ 117 Total other income ​ ​ 4,382 ​ ​ 4,338 Total other operating income ​ ​ 4,434 ​ ​ 4,926 Other operating expenses ​ ​ ​ ​ ​ ​ Salaries and employee benefits ​ ​ 5,968 ​ ​ 4,988 FDIC premiums ​ ​ 174 ​ ​ 183 Equipment expense ​ ​ 1,044 ​ ​ 851 Occupancy expense of premises ​ ​ 727 ​ ​ 725 Data processing expense ​ ​ 821 ​ ​ 726 Marketing expense ​ ​ 106 ​ ​ 146 Professional services ​ ​ 520 ​ ​ 766 Contract labor ​ ​ 165 ​ ​ 148 Telephone ​ ​ 114 ​ ​ 215 Other real estate owned ​ ​ 95 ​ ​ ( 412 ) Investor relations ​ ​ 96 ​ ​ 124 Settlement expense ​ ​ — ​ ​ 3,300 Contributions ​ ​ 21 ​ ​ 23 Other ​ ​ 727 ​ ​ 740 Total other operating expenses ​ ​ 10,578 ​ ​ 12,523 Income before income tax expense ​ ​ 7,616 ​ ​ 4,529 4 Table of Contents Provision for income tax expense ​ ​ 1,901 ​ ​ 1,099 Net Income ​ $ 5,715 ​ $ 3,430 Basic net income per share ​ $ 0.86 ​ $ 0.49 Diluted net income per share ​ $ 0.86 ​ $ 0.49 Weighted average number of basic shares outstanding ​ ​ 6,628 ​ ​ 6,996 Weighted average number of diluted shares outstanding ​ ​ 6,636 ​ ​ 7,000 Dividends declared per common share ​ $ 0.15 ​ $ 0.15 ​ See accompanying notes to the consolidated financial statements ​ 5 Table of Contents ​ First United Corporation and Subsidiaries Consolidated Statements of Comprehensive Loss (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ ​ 2022 ​ 2021 Comprehensive Loss ​ (Unaudited) Net Income ​ $ 5,715 ​ $ 3,430 Other comprehensive income, net of tax and reclassification adjustments: ​ ​ ​ ​ ​ ​ Available for sale securities: ​ ​ ​ ​ ​ ​ Unrealized holding gains on investments with OTTI ​ $ 141 ​ $ 363 Reclassification adjustment for accretable yield realized in income ​ ​ 50 ​ ​ 50 Other comprehensive income on investments with OTTI ​ ​ 91 ​ ​ 313 ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses on all other AFS investments ​ $ ( 10,844 ) ​ $ ( 7,105 ) Unrealized holding losses on securities transferred from available for sale to held to maturity ​ ​ 8,328 ​ ​ — Reclassification adjustment for gains realized in income ​ ​ 3 ​ ​ — Other comprehensive losses on all other AFS investments ​ ​ ( 2,519 ) ​ ​ ( 7,105 ) ​ ​ ​ ​ ​ ​ ​ Held to Maturity Securities ​ ​ ​ ​ ​ ​ Unrealized holding losses on securities transferred to held to maturity ​ $ ( 8,328 ) ​ $ — Reclassification adjustment for amortization realized in income ​ ​ ( 94 ) ​ ​ ( 61 ) Other comprehensive (losses)/income on HTM investments ​ ​ ( 8,234 ) ​ ​ 61 ​ ​ ​ ​ ​ ​ ​ Cash flow hedges: ​ ​ ​ ​ ​ ​ Unrealized holding gains on cash flow hedges ​ $ 839 ​ $ 532 Reclassification adjustment for gains realized in income ​ ​ — ​ ​ — Other comprehensive income on cash flow hedges ​ ​ 839 ​ ​ 532 ​ ​ ​ ​ ​ ​ ​ Pension plan liability: ​ ​ ​ ​ ​ ​ Unrealized holding losses on pension plan liability ​ $ ( 3,620 ) ​ $ ( 190 ) Reclassification adjustment for amortization of unrecognized loss realized in income ​ ​ ( 279 ) ​ ​ ( 372 ) Other comprehensive (losses)/income on pension plan liability ​ ​ ( 3,341 ) ​ ​ 182 ​ ​ ​ ​ ​ ​ ​ SERP liability: ​ ​ ​ ​ ​ ​ Unrealized holding losses on SERP liability ​ $ ( 68 ) ​ $ ( 75 ) Reclassification adjustment for amortization of prior service costs realized in income ​ ​ — ​ ​ 1 Other comprehensive losses on SERP liability ​ ​ 68 ​ ​ 74 ​ ​ ​ ​ ​ ​ ​ Other comprehensive losses before income tax ​ ​ ( 13,096 ) ​ ​ ( 5,943 ) Income tax benefit related to other comprehensive income ​ ​ 3,503 ​ ​ 1,608 ​ ​ ​ ​ ​ ​ ​ Other comprehensive loss, net of tax ​ ​ ( 9,593 ) ​ ​ ( 4,335 ) Comprehensive Loss ​ $ ( 3,878 ) ​ $ ( 905 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ See accompanying notes to the consolidated financial statements ​ 6 Table of Contents First United Corporation and Subsidiaries Consolidated Statements of Changes in Shareholders’ Equity (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock Surplus Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity Balance at January 1, 2022 ​ $ 66 ​ $ 23,661 ​ $ 145,487 ​ $ ( 27,314 ) ​ $ 141,900 Net income ​ ​ ​ ​ ​ ​ ​ ​ 5,715 ​ ​ ​ ​ ​ 5,715 Other comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 9,593 ) ​ ​ ( 9,593 ) Stock based compensation ​ ​ ​ ​ ​ ( 4 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 4 ) Common stock issued - 15,456 shares ​ ​ ​ ​ ​ 55 ​ ​ ​ ​ ​ ​ ​ ​ 55 Common stock dividend declared - $ 0.15 per share ​ ​ ​ ​ ​ ​ ​ ​ ( 995 ) ​ ​ ​ ​ ​ ( 995 ) Balance at March 31, 2022 ​ $ 66 ​ $ 23,712 ​ $ 150,207 ​ $ ( 36,907 ) ​ $ 137,078 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock Surplus Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity Balance at January 1, 2021 ​ $ 70 ​ $ 30,149 ​ $ 129,691 ​ $ ( 28,863 ) ​ $ 131,047 Net income ​ ​ ​ ​ ​ ​ ​ ​ 3,430 ​ ​ ​ ​ ​ 3,430 Other comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 4,335 ) ​ ​ ( 4,335 ) Stock based compensation ​ ​ ​ ​ ​ 50 ​ ​ ​ ​ ​ ​ ​ ​ 50 Common stock issued - 2,956 shares ​ ​ ​ ​ ​ 46 ​ ​ ​ ​ ​ ​ ​ ​ 46 Common stock dividend declared - $ 0.15 per share ​ ​ ​ ​ ​ ​ ​ ​ ( 1,049 ) ​ ​ ​ ​ ​ ( 1,049 ) Balance at March 31, 2021 ​ $ 70 ​ $ 30,245 ​ $ 132,072 ​ $ ( 33,198 ) ​ $ 129,189 ​ See accompanying notes to the consolidated financial statements ​ 7 Table of Contents First United Corporation and Subsidiaries Consolidated Statements of Cash Flows (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ 2022 2021 ​ ​ (Unaudited) Operating activities ​ ​ ​ ​ ​ ​ Net income ​ $ 5,715 ​ $ 3,430 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ Provision (credit) for loan losses ​ ​ ( 419 ) ​ ​ 110 Depreciation ​ ​ 820 ​ ​ 819 Stock based compensation ​ ​ ( 4 ) ​ ​ 50 Gains on sales of other real estate owned ​ ​ — ​ ​ ( 491 ) Write-downs of other real estate owned ​ ​ — ​ ​ 4 Originations of loans held for sale ​ ​ ( 963 ) ​ ​ ( 12,702 ) Proceeds from sale of loans held for sale ​ ​ 911 ​ ​ 15,406 Gains from sale of loans held for sale ​ ​ ( 21 ) ​ ​ ( 588 ) Gains on disposal of fixed assets ​ ​ ( 28 ) ​ ​ — Net amortization of investment securities discounts and premiums- AFS ​ ​ 83 ​ ​ 317 Net (accretion)/amortization of investment securities discounts and premiums- HTM ​ ​ ( 165 ) ​ ​ 61 Amortization of intangible assets ​ ​ 52 ​ ​ — Gains on sales/calls of investment securities – AFS ​ ​ ( 3 ) ​ ​ — Earnings on Bank owned life insurance ​ ​ ( 292 ) ​ ​ ( 286 ) Amortization of deferred loan fees ​ ​ ( 113 ) ​ ​ ( 776 ) Amortization of operating lease right of use asset ​ ​ 86 ​ ​ ( 87 ) Increase in accrued interest receivable and other assets ​ ​ 105 ​ ​ 947 Deferred tax expense/(benefit) ​ ​ 549 ​ ​ ( 209 ) Operating lease liability ​ ​ ( 95 ) ​ ​ 77 (Decrease)/increase in accrued interest payable and other liabilities ​ ​ ( 3,143 ) ​ ​ 1,811 Net cash provided by operating activities ​ ​ 3,075 ​ ​ 7,893 Investing activities ​ ​ ​ ​ ​ ​ Proceeds from maturities/calls of investment securities - AFS ​ ​ 5,063 ​ ​ 20,793 Proceeds from maturities/calls of investment securities - HTM ​ ​ 3,260 ​ ​ 5,176 Proceeds from sales of investment securities - AFS ​ ​ 1,023 ​ ​ — Purchases of investment securities - AFS ​ ​ ( 12,892 ) ​ ​ ( 5,010 ) Purchases of investment securities - HTM ​ ​ ( 49,456 ) ​ ​ ( 6,332 ) Proceeds from sales of other real estate owned ​ ​ — ​ ​ 2,339 Proceeds from disposal of fixed assets ​ ​ 30 ​ ​ — Net decrease in restricted stock ​ ​ 3 ​ ​ 814 Net increase in loans ​ ​ ( 28,030 ) ​ ​ ( 29,180 ) Purchases of premises and equipment ​ ​ ( 126 ) ​ ​ ( 235 ) Net cash used in investing activities ​ ​ ( 81,125 ) ​ ​ ( 11,635 ) Financing activities ​ ​ ​ ​ ​ ​ Net increase in deposits ​ ​ 38,181 ​ ​ 45,897 Issuance of common stock ​ ​ 55 ​ ​ 46 Cash dividends on common stock ​ ​ ( 993 ) ​ ​ ( 910 ) Net increase in short-term borrowings ​ ​ 1,203 ​ ​ 2,294 Net cash provided by financing activities ​ ​ 38,446 ​ ​ 47,327 (Decrease)/increase in cash and cash equivalents ​ ​ ( 39,604 ) ​ ​ 43,585 Cash and cash equivalents at beginning of the year ​ ​ 115,720 ​ ​ 149,432 Cash and cash equivalents at end of period ​ $ 76,116 ​ $ 193,017 Supplemental information ​ ​ ​ ​ ​ ​ Interest paid ​ $ 840 ​ $ 2,581 Taxes paid ​ $ 2,568 ​ $ 88 Non-cash investing activities: ​ ​ ​ ​ ​ ​ Transfers from securities available for sale to held to maturity ​ $ 139,036 ​ $ — ​ See accompanying notes to the consolidated financial statements ​ 8 Table of Contents FIRST UNITED CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 – Basis of Presentation The financial information is presented in accordance with generally accepted accounting principles and general practice for financial institutions in the United States of America (“U.S. GAAP”). In preparing financial statements, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of financial statements. In addition, these estimates and assumptions affect revenues and expenses in the financial statements and as such, actual results could differ from those estimates. Material estimates that are particularly susceptible to change include: (a) the allowance for loan losses and (b) fair values of available for sale debt securities based on estimates from independent valuation services or from brokers. Transfers of Investment Securities from Available-for-Sale to Held-to-Maturity Transfers of debt securities into the held-to-maturity category from the available-for-sale category are made at fair value at the date of transfer. The unrealized holding gain or loss at the date of transfer is retained in other comprehensive income and in the carrying value of the held-to-maturity securities. Such amounts are amortized over the remaining expected life of the security. Principles of Consolidation The consolidated financial statements include the accounts of First United Corporation, the Bank, the OakFirst Loan Centers, First OREO Trust and FUBT OREO I, LLC. All significant inter-company accounts and transactions have been eliminated. Certain prior period balances have been reclassified to conform to the current period presentation. Operating results for the three month period ended March 31, 2022 are not necessarily indicative of the results that may be expected for the full year or for any future interim period. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2021. As used in these notes, the terms “the Corporation” “we”, “us”, and “our” refer to First United Corporation and, unless the context clearly requires otherwise, its consolidated subsidiaries. The Corporation has evaluated events and transactions occurring subsequent to the statement of financial condition date of March 31, 2022 for items that should potentially be recognized or disclosed in these financial statements. ​ 9 Table of Contents Note 2 – Earnings Per Common Share Basic earnings per common share is derived by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period and does not include the effect of any potentially dilutive common stock equivalents. Diluted earnings per share is derived by dividing net income available to common shareholders by the weighted-average number of shares outstanding, adjusted for the dilutive effect of outstanding common stock equivalents, such as restricted stock units (“RSUs”). There were no anti-dilutive shares outstanding at March 31, 2022 or 2021. The following table sets forth the calculation of basic and diluted earnings per common share for the three month periods ended March 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, ​ ​ 2022 ​ 2021 ​ ​ ​ Average Per Share ​ ​ Average Per Share (in thousands, except for per share amount) ​ Income ​ Shares ​ Amount ​ Income ​ Shares ​ Amount Basic Earnings Per Share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 5,715 ​ 6,628 ​ $ 0.86 ​ $ 3,430 ​ 6,996 ​ $ 0.49 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted Earnings Per Share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restricted stock units ​ ​ ​ ​ 8 ​ ​ ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 5,715 ​ 6,636 ​ $ 0.86 ​ $ 3,430 ​ 7,000 ​ $ 0.49 ​ ​ ​ 10 Table of Contents Note 3 – Investments The following table shows a comparison of amortized cost and fair values of investment securities at March 31, 2022 and December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value OTTI in AOCL March 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 11,070 ​ $ — ​ $ 772 ​ $ 10,298 ​ $ — Residential mortgage-backed agencies ​ ​ 48,319 ​ ​ — ​ ​ 4,021 ​ ​ 44,298 ​ ​ — Commercial mortgage-backed agencies ​ ​ 38,907 ​ ​ — ​ ​ 2,674 ​ ​ 36,233 ​ ​ — Collateralized mortgage obligations ​ ​ 27,994 ​ ​ — ​ ​ 1,997 ​ ​ 25,997 ​ ​ — Obligations of states and political subdivisions ​ ​ 8,351 ​ ​ 114 ​ ​ 1 ​ ​ 8,464 ​ ​ — Corporate bonds ​ ​ 1,000 ​ ​ — ​ ​ — ​ ​ 1,000 ​ ​ — Collateralized debt obligations ​ ​ 18,616 ​ ​ 145 ​ ​ 1,442 ​ ​ 17,319 ​ ​ ( 570 ) Total available for sale ​ $ 154,257 ​ $ 259 ​ $ 10,907 ​ $ 143,609 ​ $ ( 570 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Amortized Cost Gross Unrecognized Gains Gross Unrecognized Losses Fair Value OTTI in AOCL March 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. treasuries ​ $ 37,012 ​ $ — ​ $ 953 ​ $ 36,059 ​ $ — U.S. government agencies ​ ​ 67,527 ​ ​ — ​ ​ 4,522 ​ ​ 63,005 ​ ​ — Residential mortgage-backed agencies ​ ​ 29,068 ​ ​ 14 ​ ​ 1,324 ​ ​ 27,758 ​ ​ — Commercial mortgage-backed agencies ​ ​ 26,525 ​ ​ 28 ​ ​ 1,171 ​ ​ 25,382 ​ ​ — Collateralized mortgage obligations ​ ​ 58,490 ​ ​ — ​ ​ 2,967 ​ ​ 55,523 ​ ​ — Obligations of states and political subdivisions ​ ​ 23,034 ​ ​ 4,519 ​ ​ 254 ​ ​ 27,299 ​ ​ — Total held to maturity ​ $ 241,656 ​ $ 4,561 ​ $ 11,191 ​ $ 235,026 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 11 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value OTTI in AOCL December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 69,602 ​ $ 66 ​ $ 2,499 ​ $ 67,169 ​ $ — Residential mortgage-backed agencies ​ ​ 49,630 ​ ​ — ​ ​ 969 ​ ​ 48,661 ​ ​ — Commercial mortgage-backed agencies ​ ​ 51,694 ​ ​ 175 ​ ​ 1,001 ​ ​ 50,868 ​ ​ — Collateralized mortgage obligations ​ ​ 93,018 ​ ​ 84 ​ ​ 3,025 ​ ​ 90,077 ​ ​ — Obligations of states and political subdivisions ​ ​ 12,439 ​ ​ 371 ​ ​ 6 ​ ​ 12,804 ​ ​ — Collateralized debt obligations ​ ​ 18,609 ​ ​ 112 ​ ​ 1,529 ​ ​ 17,192 ​ ​ ( 660 ) Total available for sale ​ $ 294,992 ​ $ 808 ​ $ 9,029 ​ $ 286,771 ​ $ ( 660 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Amortized Cost Gross Unrecognized Gains Gross Unrecognized Losses Fair Value OTTI in AOCL December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage-backed agencies ​ $ 30,634 ​ $ 649 ​ $ 436 ​ $ 30,847 ​ $ — Commercial mortgage-backed agencies ​ ​ 5,456 ​ ​ 145 ​ ​ — ​ ​ 5,601 ​ ​ — Obligations of states and political subdivisions ​ ​ 20,169 ​ ​ 8,752 ​ ​ — ​ ​ 28,921 ​ ​ — Total held to maturity ​ $ 56,259 ​ $ 9,546 ​ $ 436 ​ $ 65,369 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Corporation reassessed classification of certain investments and, effective February 1, 2022, the Corporation transferred $ 139.0 million of callable agencies, obligation of state and political subdivisions, and collateralized mortgage obligations from available for sale to held to maturity securities. The transfer occurred at fair value. The related unrealized loss of $ 8.4 million included in other comprehensive loss remained in other comprehensive loss, to be amortized out of other comprehensive loss with an offsetting entry to interest income as a yield adjustment over the remaining term of the securities. No gain or loss was recorded at the time of transfer. ​ ​ 12 Table of Contents The following table shows the Corporation’s investment securities with gross unrealized and unrecognized losses and fair values at March 31, 2022 and December 31, 2021, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 months ​ ​ ​ 12 months or more ​ ​ (in thousands) Fair Value Unrealized Losses Number of Investments Fair Value Unrealized Losses Number of Investments March 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 8,661 ​ ​ 409 ​ 2 ​ ​ 1,637 ​ ​ 363 ​ 1 Residential mortgage-backed agencies ​ ​ 27,175 ​ ​ 2,023 ​ 3 ​ ​ 17,123 ​ ​ 1,998 ​ 2 Commercial mortgage-backed agencies ​ ​ 27,640 ​ ​ 1,819 ​ 7 ​ ​ 8,593 ​ ​ 855 ​ 2 Collateralized mortgage obligations ​ ​ 17,359 ​ ​ 1,157 ​ 9 ​ ​ 8,637 ​ ​ 840 ​ 1 Obligations of states and political subdivisions ​ ​ 2,673 ​ ​ 1 ​ 1 ​ ​ — ​ ​ — ​ — Collateralized debt obligations ​ ​ — ​ ​ — ​ — ​ ​ 10,566 ​ ​ 1,442 ​ 5 Total available for sale ​ $ 83,508 ​ $ 5,409 ​ 22 ​ $ 46,556 ​ $ 5,498 ​ 11 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 months ​ 12 months or more (in thousands) Fair Value Unrecognized Losses Number of Investments Fair Value Unrecognized Losses Number of Investments March 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. treasuries ​ $ 36,059 ​ ​ 953 ​ 4 ​ $ — ​ $ — ​ — U.S. government agencies ​ ​ 63,005 ​ $ 4,522 ​ 9 ​ ​ — ​ ​ — ​ — Residential mortgage-backed agencies ​ ​ 14,874 ​ ​ 340 ​ 29 ​ ​ 7,791 ​ ​ 984 ​ 3 Commercial mortgage-backed agencies ​ ​ 20,641 ​ ​ 1,171 ​ 2 ​ ​ — ​ ​ — ​ — Collateralized mortgage obligations ​ ​ 55,523 ​ ​ 2,967 ​ 7 ​ ​ — ​ ​ — ​ — Obligations of states and political subdivisions ​ ​ 2,611 ​ ​ 254 ​ 1 ​ ​ — ​ ​ — ​ — Total held to maturity ​ $ 192,713 ​ $ 10,207 ​ 52 ​ $ 7,791 ​ $ 984 ​ 3 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 13 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 months ​ 12 months or more (in thousands) Fair Value Unrealized Losses Number of Investments Fair Value Unrealized Losses Number of Investments December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 23,577 ​ $ 122 ​ 3 ​ $ 33,972 ​ $ 2,377 ​ 6 Residential mortgage-backed agencies ​ ​ 29,507 ​ ​ 257 ​ 3 ​ ​ 19,154 ​ ​ 712 ​ 2 Commercial mortgage-backed agencies ​ ​ 32,177 ​ ​ 787 ​ 4 ​ ​ 5,211 ​ ​ 214 ​ 1 Collateralized mortgage obligations ​ ​ 24,322 ​ ​ 649 ​ 5 ​ ​ 43,076 ​ ​ 2,376 ​ 5 Obligations of states and political subdivisions ​ ​ 3,046 ​ ​ 6 ​ 1 ​ ​ — ​ ​ — ​ — Collateralized debt obligations ​ ​ — ​ ​ — ​ — ​ ​ 10,468 ​ ​ 1,529 ​ 5 Total available for sale ​ $ 112,629 ​ $ 1,821 ​ 16 ​ $ 111,881 ​ $ 7,208 ​ 19 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 months ​ 12 months or more (in thousands) Fair Value Unrecognized Losses Number of Investments Fair Value Unrecognized Losses Number of Investments December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage-backed agencies ​ $ 7,395 ​ $ 291 ​ 6 ​ $ 2,782 ​ $ 145 ​ 1 Total held to maturity ​ $ 7,395 ​ $ 291 ​ 6 ​ $ 2,782 ​ $ 145 ​ 1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Management systematically evaluates securities for impairment on a quarterly basis. Based upon application of Accounting Standards Codification (“ASC”) Topic 320 (Section 320-10-35), management must assess whether (a) the Corporation has the intent to sell the security and (b) it is more likely than not that the Corporation will be required to sell the security prior to its anticipated recovery. If neither applies, then declines in the fair value of securities below their cost that are considered other-than-temporary declines are split into two components. The first is the loss attributable to declining credit quality. Credit losses are recognized in earnings as realized losses in the period in which the impairment determination is made. The second component consists of all other losses. The other losses are recognized in other comprehensive income. In estimating other than temporary impairment (“OTTI”) charges, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) adverse conditions specifically related to the security, an industry, or a geographic area, (3) the historic and implied volatility of the security, (4) changes in the rating of a security by a rating agency, (5) recoveries or additional declines in fair value subsequent to the balance sheet date, (6) failure of the issuer of the security to make scheduled interest payments, and (7) the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future. Due to the duration and the significant market value decline in the pooled trust preferred securities held in our portfolio, we performed more extensive testing on these securities for purposes of evaluating whether or not an OTTI has occurred. A cash flow analysis is performed quarterly on each of the collateralized debt obligation (“CDO”) investment securities. In performing the detailed cash flow analysis the Bank works with an independent third party to estimate expected cash flows and assist with the evaluation of OTTI. The cash flow analyses performed included the following assumptions: ● Default probabilities vary for each investment. ● Recoveries of 10 % for banks and 15 % for insurance companies with a two-year lag on all defaults and deferrals. ● No prepayments for 5 years and then 5 % per annum for the remaining life of the investment. 14 Table of Contents ● Our investment securities have been modeled using the above assumptions by independent third party using the forward London Inter-bank Offered Rate (“LIBOR”) Based upon a review of credit quality and the cash flow tests performed by the independent third party, management determined that no additional credit-related OTTI was required during the first three months of 2022. Management performs due diligence on the third-party processes and has an adequate understanding of the analysis, assumptions and methodology used by the third party to prepare the fair value determination and the OTTI evaluation. Management reviews the qualifications of the third party and believes the third party is qualified to provide the analysis and pricing determinations. Quarterly, management reviews the third party’s detailed assumptions and analyzes its projected discounted present value results for reasonableness and consistency with the trend of prior projections. Annually, management performs stress tests of the assumptions used in the third party models and performs back tests of the assumptions and prepayment projections to validate the impairment model results. As a result of its due diligence process, the fair value presented and the OTTI recognized are appropriate. A total of $ 3.0 million in impairment losses were realized between calendar year 2009 and calendar year 2011 on the CDO portfolio remaining at March 31, 2022. Due to the prior credit impairment, the securities in this portfolio have continued to be evaluated to determine whether any additional OTTI has occurred. Based on management’s review of the third-party evaluations, there were no material differences in the relative valuations between March 31, 2022 and December 31, 2021. Due to the duration and market value decline in the pooled trust preferred securities held in our portfolio, we performed more extensive testing on these securities for purposes of evaluating whether or not OTTI has occurred. The market for these securities as of March 31, 2022 was not active and markets for similar securities were also not active. The inactivity was evidenced first by a significant widening of the bid-ask spread in the brokered markets in which these securities trade and then by a significant decrease in the volume of trades relative to historical levels. The new issue market is also inactive, as no new CDOs have been issued since 2007. There are currently very few market participants who are willing to effect transactions in these securities. The market values for these securities, or any securities other than those issued or guaranteed by the U.S. Department of the Treasury (the “Treasury”), are very depressed relative to historical levels. Therefore, in the current market, a low market price for a particular bond may only provide evidence of stress in the credit markets in general rather than being an indicator of credit problems with a particular issue. Given the conditions in the current debt markets and the absence of observable transactions in the secondary and new issue markets, management has determined that (a) the few observable transactions and market quotations that are available are not reliable for the purpose of obtaining fair value at March 31, 2022, (b) an income valuation approach technique (i.e. present value) that maximizes the use of relevant unobservable inputs and minimizes the use of observable inputs will be equally or more representative of fair value than a market approach, and (c) the CDO segment is appropriately classified within Level 3 of the valuation hierarchy because management determined that significant adjustments were required to determine fair value at the measurement date. Management utilizes an independent third party to prepare both the evaluations of OTTI and the fair value determinations for the CDO portfolio. Management does not believe that there were any material differences in the OTTI evaluations and pricing between December 31, 2021 and March 31, 2022. The following table presents a cumulative roll-forward of the amount of non-cash OTTI charges related to credit losses that have been recognized in earnings for the trust preferred securities held in the CDO portfolio during the three month periods ended March 31, 2022 and 2021 that the Corporation does not intend to sell: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, (in thousands) 2022 2021 Balance of credit-related OTTI at January 1 ​ $ 2,043 ​ $ 2,244 Reduction for increases in cash flows expected to be collected ​ ​ ( 50 ) ​ ​ ( 50 ) Balance of credit-related OTTI at March 31 ​ $ 1,993 ​ $ 2,194 ​ ​ ​ 15 Table of Contents The amortized cost and estimated fair value of securities by contractual maturity at March 31, 2022 are shown in the following table. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 (in thousands) Amortized Cost Fair Value Available for Sale: ​ ​ ​ ​ ​ ​ Due after one year through five years ​ $ 8,370 ​ $ 8,217 Due after five years through ten years ​ ​ 5,564 ​ ​ 5,312 Due after ten years ​ ​ 25,103 ​ ​ 23,552 ​ ​ ​ 39,037 ​ ​ 37,081 Residential mortgage-backed agencies ​ ​ 48,319 ​ ​ 44,298 Commercial mortgage-backed agencies ​ ​ 38,907 ​ ​ 36,233 Collateralized mortgage obligations ​ ​ 27,994 ​ ​ 25,997 Total available for sale ​ $ 154,257 ​ $ 143,609 Held to Maturity: ​ ​ ​ ​ ​ ​ Due after one year through five years ​ $ 49,512 ​ $ 48,077 Due after five years through ten years ​ ​ 14,319 ​ ​ 13,553 Due after ten years ​ $ 63,742 ​ $ 64,733 ​ ​ ​ 127,573 ​ ​ 126,363 Residential mortgage-backed agencies ​ ​ 29,068 ​ ​ 27,758 Commercial mortgage-backed agencies ​ ​ 26,525 ​ ​ 25,382 Collateralized mortgage obligations ​ ​ 58,490 ​ ​ 55,523 Total held to maturity ​ $ 241,656 ​ $ 235,026 ​ ​ ​ Note 4 – Loans and Related Allowance for Loan Losses The following table summarizes the primary segments of the loan portfolio at March 31, 2022 and December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Commercial Real Estate Acquisition and Development Commercial and Industrial Residential Mortgage Consumer Total March 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ 2,316 ​ $ 612 ​ $ — ​ $ 2,603 ​ $ — ​ $ 5,531 Collectively evaluated for impairment ​ ​ 388,820 ​ ​ 132,419 ​ ​ 194,914 ​ ​ 397,101 ​ ​ 62,616 ​ ​ 1,175,870 Total loans ​ $ 391,136 ​ $ 133,031 ​ $ 194,914 ​ $ 399,704 ​ $ 62,616 ​ $ 1,181,401 December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ 2,365 ​ $ 629 ​ $ 90 ​ $ 2,644 ​ $ — ​ $ 5,728 Collectively evaluated for impairment ​ ​ 371,926 ​ ​ 127,448 ​ ​ 180,886 ​ ​ 402,042 ​ ​ 65,657 ​ ​ 1,147,959 Total loans ​ $ 374,291 ​ $ 128,077 ​ $ 180,976 ​ $ 404,686 ​ $ 65,657 ​ $ 1,153,687 ​ The commercial and industrial portfolio in the table above includes $ 1.3 million and $ 7.7 million of Paycheck Protection Program (“PPP”) loans at March 31, 2022 and December 31, 2021, respectively, which are 100 % guaranteed by the SBA, and no allowance for loan loss (“ALL”) has been assigned to them. 16 Table of Contents The following table presents the classes of the loan portfolio summarized by the aggregate pass and the criticized categories of special mention and substandard within the internal risk rating system at March 31, 2022 and December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Pass Special Mention Substandard Total March 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 182,504 ​ $ 6,504 ​ $ 12,387 ​ $ 201,395 All other CRE ​ ​ 182,968 ​ ​ 2,330 ​ ​ 4,443 ​ ​ 189,741 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 27,177 ​ ​ — ​ ​ — ​ ​ 27,177 All other A&D ​ ​ 105,258 ​ ​ 215 ​ ​ 381 ​ ​ 105,854 Commercial and industrial ​ ​ 175,253 ​ ​ 4,992 ​ ​ 14,669 ​ ​ 194,914 Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ 335,872 ​ ​ — ​ ​ 5,356 ​ ​ 341,228 Residential mortgage - home equity ​ ​ 57,744 ​ ​ — ​ ​ 732 ​ ​ 58,476 Consumer ​ ​ 62,457 ​ ​ — ​ ​ 159 ​ ​ 62,616 Total ​ $ 1,129,233 ​ $ 14,041 ​ $ 38,127 ​ $ 1,181,401 December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 173,299 ​ $ 12,987 ​ $ 6,077 ​ $ 192,363 All other CRE ​ ​ 174,395 ​ ​ 2,357 ​ ​ 5,176 ​ ​ 181,928 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 19,924 ​ ​ — ​ ​ — ​ ​ 19,924 All other A&D ​ ​ 107,532 ​ ​ 218 ​ ​ 403 ​ ​ 108,153 Commercial and industrial ​ ​ 161,429 ​ ​ 5,071 ​ ​ 14,476 ​ ​ 180,976 Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ 338,832 ​ ​ — ​ ​ 5,624 ​ ​ 344,456 Residential mortgage - home equity ​ ​ 59,533 ​ ​ — ​ ​ 697 ​ ​ 60,230 Consumer ​ ​ 65,557 ​ ​ — ​ ​ 100 ​ ​ 65,657 Total ​ $ 1,100,501 ​ $ 20,633 ​ $ 32,553 ​ $ 1,153,687 ​ Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The increase of $ 6.3 million in the substandard category was related to one large relationship in the nursing care sector that was downgraded from special mention in the first quarter of 2022. This relationship continues to perform according to its contractual terms and is not considered impaired. 17 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 March 31, 2022 and December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90 Days+ Past Due Total Past Due and Accruing Non- Accrual Total Loans March 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 201,395 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 201,395 All other CRE ​ ​ 189,165 ​ ​ 503 ​ ​ — ​ ​ — ​ ​ 503 ​ ​ 73 ​ ​ 189,741 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 27,177 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 27,177 All other A&D ​ ​ 105,473 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 381 ​ ​ 105,854 Commercial and industrial ​ ​ 194,681 ​ ​ 230 ​ ​ 3 ​ ​ — ​ ​ 233 ​ ​ — ​ ​ 194,914 Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ 339,090 ​ ​ 590 ​ ​ 61 ​ ​ — ​ ​ 651 ​ ​ 1,487 ​ ​ 341,228 Residential mortgage - home equity ​ ​ 57,737 ​ ​ 299 ​ ​ 49 ​ ​ — ​ ​ 348 ​ ​ 391 ​ ​ 58,476 Consumer ​ ​ 62,159 ​ ​ 281 ​ ​ 139 ​ ​ 37 ​ ​ 457 ​ ​ ​ ​ ​ 62,616 Total ​ $ 1,176,877 ​ $ 1,903 ​ $ 252 ​ $ 37 ​ $ 2,192 ​ $ 2,332 ​ $ 1,181,401 December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 192,363 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 192,363 All other CRE ​ ​ 181,847 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 81 ​ ​ 181,928 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 19,924 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 19,924 All other A&D ​ ​ 107,763 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 390 ​ ​ 108,153 Commercial and industrial ​ ​ 180,676 ​ ​ 132 ​ ​ 78 ​ ​ — ​ ​ 210 ​ ​ 90 ​ ​ 180,976 Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage - term ​ ​ 340,429 ​ ​ 159 ​ ​ 2,222 ​ ​ 148 ​ ​ 2,529 ​ ​ 1,498 ​ ​ 344,456 Residential mortgage - home equity ​ ​ 59,485 ​ ​ 238 ​ ​ 104 ​ ​ — ​ ​ 342 ​ ​ 403 ​ ​ 60,230 Consumer ​ ​ 65,208 ​ ​ 268 ​ ​ 29 ​ ​ 152 ​ ​ 449 ​ ​ — ​ ​ 65,657 Total ​ $ 1,147,695 ​ $ 797 ​ $ 2,433 ​ $ 300 ​ $ 3,530 ​ $ 2,462 ​ $ 1,153,687 ​ The current category of commercial and industrial loans includes $ 1.3 million and $ 7.7 million of PPP loans at March 31, 2022 and December 31, 2021, respectively. Non-accrual loans that have been subject to partial charge-offs totaled $ 0.6 million at March 31, 2022 and $ 0.5 million at December 31, 2021. Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $ 0.2 million at both March 31, 2022 and December 31, 2021. Management continues to conform to federal and state mandates relative to the foreclosure processes for both Federal Backed and Non-Federal Backed mortgages. As a percentage of the loan portfolio, accruing loans past due 30 days or more decreased to 0.19 % at March 31, 2022 from 0.31 % at December 31, 2021. 18 Table of Contents The following table summarizes the primary segments of the ALL at March 31, 2022 and December 31, 2021, segregated by the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Commercial Real Estate Acquisition and Development Commercial and Industrial Residential Mortgage Consumer Unallocated Total March 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ — ​ $ — ​ $ — ​ $ 35 ​ $ — ​ $ — ​ $ 35 Collectively evaluated for impairment ​ $ 5,922 ​ $ 2,542 ​ $ 2,513 ​ $ 2,910 ​ $ 940 ​ $ 430 ​ $ 15,257 Total ALL ​ $ 5,922 ​ $ 2,542 ​ $ 2,513 ​ $ 2,945 ​ $ 940 ​ $ 430 ​ $ 15,292 December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ — ​ $ — ​ $ 28 ​ $ 36 ​ $ — ​ $ — ​ $ 64 Collectively evaluated for impairment ​ $ 6,032 ​ $ 2,615 ​ $ 2,432 ​ $ 3,448 ​ $ 934 ​ $ 430 ​ $ 15,891 Total ALL ​ $ 6,032 ​ $ 2,615 ​ $ 2,460 ​ $ 3,484 ​ $ 934 ​ $ 430 ​ $ 15,955 ​ The evaluation of the need and amount of a specific allocation of the ALL and whether a loan can be removed from impairment status is made on a quarterly basis. 19 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 March 31, 2022 and December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired Loans with Specific Allowance ​ Impaired Loans with No Specific Allowance ​ Total Impaired Loans (in thousands) Recorded Investment Related Allowances Recorded Investment Recorded Investment (1) Unpaid Principal Balance March 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ — ​ $ — ​ $ 105 ​ $ 105 ​ $ 105 All other CRE ​ ​ — ​ ​ — ​ ​ 2,211 ​ ​ 2,211 ​ ​ 2,211 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ — ​ ​ — ​ ​ 231 ​ ​ 231 ​ ​ 231 All other A&D ​ ​ — ​ ​ — ​ ​ 381 ​ ​ 381 ​ ​ 1,590 Commercial and industrial ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,214 Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ ​ 328 ​ ​ 30 ​ ​ 1,884 ​ ​ 2,212 ​ ​ 2,273 Residential mortgage – home equity ​ ​ 46 ​ ​ 5 ​ ​ 345 ​ ​ 391 ​ ​ 391 Consumer ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total impaired loans ​ $ 374 ​ $ 35 ​ $ 5,157 ​ $ 5,531 ​ $ 9,015 December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ — ​ $ — ​ $ 106 ​ $ 106 ​ $ 106 All other CRE ​ ​ — ​ ​ — ​ ​ 2,259 ​ ​ 2,259 ​ ​ 2,259 Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ — ​ ​ — ​ ​ 239 ​ ​ 239 ​ ​ 239 All other A&D ​ ​ — ​ ​ — ​ ​ 390 ​ ​ 390 ​ ​ 1,599 Commercial and industrial ​ ​ 90 ​ ​ 28 ​ ​ — ​ ​ 90 ​ ​ 2,304 Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ ​ 344 ​ ​ 31 ​ ​ 1,897 ​ ​ 2,241 ​ ​ 2,302 Residential mortgage – home equity ​ ​ 46 ​ ​ 5 ​ ​ 357 ​ ​ 403 ​ ​ 422 Consumer ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total impaired loans ​ $ 480 ​ $ 64 ​ $ 5,248 ​ $ 5,728 ​ $ 9,231 ​ (1) Recorded investment consists of unpaid principal balance, net of charge-offs, interest payments received applied to principal and unamortized deferred loan origination fees and cost. Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate. For general allowances, historical loss trends are used in the estimation of losses in the current portfolio. These historical loss amounts are modified by other qualitative factors. The classes described above, which are based on the Federal call code assigned to each loan, provide the starting point for the ALL analysis. Management tracks the historical net charge-off activity (full and partial charge-offs, net of full and partial recoveries) at the call code level. A historical charge-off factor is calculated utilizing a defined number of consecutive historical quarters. Consumer pools currently utilize a rolling twelve quarters, while Commercial pools currently utilize a rolling eight quarters. Management supplements the historical charge-off factor with a number of additional qualitative factors that are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience. The additional factors, which are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources, are: (a) national and local economic trends and conditions; (b) levels of and trends in delinquency rates and non-accrual loans; (c) trends in volumes and terms of loans; (d) effects of changes in lending policies; (e) experience, ability, and depth of lending staff; (f) value of underlying collateral; and (g) concentrations of credit from a loan type, industry and/or geographic standpoint. 20 Table of Contents Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process to make appropriate and timely adjustments to the ALL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL. Residential mortgage and consumer loans are charged off after they are 120 days contractually past due. All other loans are charged off based on an evaluation of the facts and circumstances of each individual loan. When the Bank believes that its ability to collect is solely dependent on the liquidation of the collateral, a full or partial charge-off is recorded promptly to bring the recorded investment to an amount that the Bank believes is supported by an ability to collect on the collateral. The circumstances that may impact the Bank’s decision to charge-off all or a portion of a loan include default or non-payment by the borrower, scheduled foreclosure actions, and/or prioritization of the Bank’s claim in bankruptcy. There may be circumstances where due to pending events, the Bank will place a specific allocation of the ALL on a loan for which a partial charge-off has been previously recognized. This specific allocation may be either charged-off or removed depending upon the outcome of the pending event. Full or partial charge-offs are not recovered until full principal and interest on the loan have been collected, even if a subsequent appraisal supports a higher value. In most cases, loans with partial charge-offs remain in non-accrual status. Both full and partial charge-offs reduce the recorded investment of the loan and the ALL and are considered to be charge-offs for purposes of all credit loss metrics and trends, including the historical rolling charge-off rates used in the determination of the ALL. ​ The following tables present the activity in the ALL for the three month periods ended March 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Commercial Real Estate Acquisition and Development Commercial and Industrial Residential Mortgage Consumer Unallocated Total ALL balance at January 1, 2022 ​ $ 6,032 ​ $ 2,615 ​ $ 2,460 ​ $ 3,484 ​ $ 934 ​ $ 430 ​ $ 15,955 Charge-offs ​ ​ — ​ ​ — ​ ​ ( 48 ) ​ ​ ( 9 ) ​ ​ ( 246 ) ​ ​ — ​ ​ ( 303 ) Recoveries ​ ​ 1 ​ ​ 18 ​ ​ 3 ​ ​ 15 ​ ​ 22 ​ ​ — ​ ​ 59 Provision ​ ​ ( 111 ) ​ ​ ( 91 ) ​ ​ 98 ​ ​ ( 545 ) ​ ​ 230 ​ ​ — ​ ​ ( 419 ) ALL balance at March 31, 2022 ​ $ 5,922 ​ $ 2,542 ​ $ 2,513 ​ $ 2,945 ​ $ 940 ​ $ 430 ​ $ 15,292 ALL balance at January 1, 2021 ​ $ 5,543 ​ $ 2,339 ​ $ 2,584 ​ $ 5,150 ​ $ 370 ​ $ 500 ​ $ 16,486 Charge-offs ​ ​ — ​ ​ ( 81 ) ​ ​ — ​ ​ ( 82 ) ​ ​ ( 80 ) ​ ​ — ​ ​ ( 243 ) Recoveries ​ ​ — ​ ​ 101 ​ ​ 36 ​ ​ 17 ​ ​ 47 ​ ​ — ​ ​ 201 Provision ​ ​ ( 139 ) ​ ​ 64 ​ ​ 211 ​ ​ ( 57 ) ​ ​ 31 ​ ​ — ​ ​ 110 ALL balance at March 31, 2021 ​ $ 5,404 ​ $ 2,423 ​ $ 2,831 ​ $ 5,028 ​ $ 368 ​ $ 500 ​ $ 16,554 ​ ​ The ALL is based on estimates, and actual losses may vary from current estimates. Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date. 21 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Three months ended ​ ​ March 31, 2022 ​ March 31, 2021 (in thousands) Average investment Interest income recognized on an accrual basis Interest income recognized on a cash basis ​ Average investment Interest income recognized on an accrual basis Interest income recognized on a cash basis Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non owner-occupied ​ $ 106 ​ $ 3 ​ $ — ​ $ 2,406 ​ $ 3 ​ $ — All other CRE ​ ​ 2,235 ​ ​ 23 ​ ​ — ​ ​ 3,182 ​ ​ 35 ​ ​ — Acquisition and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 235 ​ ​ 4 ​ ​ — ​ ​ 263 ​ ​ 3 ​ ​ — All other A&D ​ ​ 386 ​ ​ — ​ ​ — ​ ​ 596 ​ ​ 3 ​ ​ — Commercial and industrial ​ ​ 45 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Residential mortgage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage – term ​ ​ 2,227 ​ ​ 12 ​ ​ 5 ​ ​ 2,784 ​ ​ 20 ​ ​ 5 Residential mortgage – home equity ​ ​ 397 ​ ​ — ​ ​ — ​ ​ 446 ​ ​ — ​ ​ — Consumer ​ ​ — ​ ​ — ​ ​ — ​ ​ 25 ​ ​ — ​ ​ — Total ​ $ 5,631 ​ $ 42 ​ $ 5 ​ $ 9,702 ​ $ 64 ​ $ 5 ​ ​ In the normal course of business, the Bank modifies loan terms for various reasons. These reasons may include as a retention strategy to compete in the current interest rate environment, and to re-amortize or extend a loan term to better match the loan’s payment stream with the borrower’s cash flows. A modified loan is considered to be a troubled debt restructuring (a “TDR”) when the Bank has determined that the borrower is troubled (i.e. experiencing financial difficulties) and a concession has been granted. The Bank evaluates the probability that the borrower will be in payment default on any of its debt in the foreseeable future without modification. To make this determination, the Bank performs a global financial review of the borrower and loan guarantors to assess their current ability to meet their financial obligations. When the Bank restructures a loan to a troubled borrower, the loan terms (i.e. interest rate, payment, amortization period and/or maturity date) are modified in such a way to enable the borrower to cover the modified debt service payments based on current financials and cash flow adequacy. If a borrower’s hardship is thought to be temporary, then modified terms are only offered for that time period. Where possible, the Bank obtains additional collateral and/or secondary payment sources at the time of the restructure in order to put the Bank in the best possible position if the borrower is not able to meet the modified terms. To date, the Bank has not forgiven any principal as a restructuring concession. The Bank will not offer modified terms if it believes that modifying the loan terms will only delay an inevitable permanent default. All loans designated as TDRs are considered impaired loans and may be in either accruing or non-accruing status. If the loan was accruing at the time of the modification, then it continues to be in accruing status subsequent to the modification. Non-accrual TDRs may return to accruing status when there has been sufficient payment performance for a period of at least six months. TDRs are considered to be in payment default if, subsequent to modification, the loans are transferred to non-accrual status or to foreclosure. A loan may be removed from being reported as a TDR in the calendar year following the modification if the interest rate at the time of modification was consistent with the interest rate for a loan with comparable credit risk and the loan has performed according to its modified terms for at least six months. Further, a loan that has been removed from TDR reporting status and has been subsequently re-modified at standard market terms, may be removed from impaired status as well. The volume, type and performance of TDR activity is considered in the assessment of the local economic trend qualitative factor used in the determination of the ALL for loans that are evaluated collectively for impairment. There were 12 loans totaling $ 3.2 million and $ 3.3 million that were classified as TDRs at March 31, 2022 and December 31, 2021, respectively. 22 Table of Contents During the three month periods ended March 31, 2022 and 2021, there were no new TDRs and no modifications on existing TDRs, nor were there any payment defaults under existing TDRs. The Bank had no significant commitments to lend additional funds to TDR borrowers. Note 5 - Other Real Estate Owned, net The following table presents the components of other real estate owned (“OREO”) at March 31, 2022 and December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) March 31, 2022 December 31, 2021 Acquisition and development ​ $ 4,477 ​ $ 4,477 Total OREO, net ​ $ 4,477 ​ $ 4,477 ​ The following table presents the activity in the OREO valuation allowance for the three month periods ended March 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, (in thousands) 2022 2021 Balance beginning of period ​ $ 454 ​ $ 1,010 Fair value adjustment ​ ​ — ​ ​ 4 Sales of OREO ​ ​ — ​ ​ ( 10 ) Balance at end of period ​ $ 454 ​ $ 1,004 ​ The following table presents the components of OREO (income)/expenses, net, for the three month periods ended March 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, (in thousands) 2022 2021 Gains on sale of real estate, net ​ $ — ​ $ ( 491 ) Fair value adjustment, net ​ ​ — ​ ​ 4 Expenses, net ​ ​ 96 ​ ​ 123 Rental and other income ​ ​ ( 1 ) ​ ​ ( 48 ) Total OREO expenses/(income), net ​ $ 95 ​ $ ( 412 ) ​ ​ ​ Note 6 – Fair Value of Financial Instruments The Corporation complies with the guidance of ASC Topic 820, Fair Value Measurements and Disclosures , which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements required under other accounting pronouncements. The Corporation also follows the guidance on matters relating to all financial instruments found in ASC Subtopic 825-10, Financial Instruments – Overall . Fair value is defined as the price to sell an asset or to transfer a liability in an orderly transaction between willing market participants as of the measurement date. Fair value is best determined by values quoted through active trading markets. Active trading markets are characterized by numerous transactions of similar financial instruments between willing buyers and willing sellers. Because no active trading market exists for various types of financial instruments, many of the fair values disclosed were derived using present value discounted cash flows or other valuation techniques described below. As a result, the Corporation’s ability to actually realize these derived values cannot be assumed. The Corporation measures fair values based on the fair value hierarchy established in ASC Paragraph 820-10-35-37. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 23 Table of Contents measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of inputs that may be used to measure fair value under the hierarchy are as follows: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets and liabilities. This level is the most reliable source of valuation. Level 2: Quoted prices that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability. Level 2 inputs include inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). It also includes inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs). Several sources are utilized for valuing these assets, including a contracted valuation service, Standard & Poor’s (“S&P”) evaluations and pricing services, and other valuation matrices. Level 3: Prices or valuation techniques that require inputs that are both significant to the valuation assumptions and not readily observable in the market (i.e. supported with little or no market activity). Level 3 instruments are valued based on the best available data, some of which is internally developed, and consider risk premiums that a market participant would require. The level established within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Transfers in and out of Level 1, 2 or 3 are recorded at fair value at the beginning of the reporting period. Investments – The investment portfolio is classified and accounted for based on the guidance of ASC Topic 320, Investments – Debt and Equity Securities . The fair value of investments available-for-sale is determined using a market approach. At March 31, 2022 and December 31, 2021, the U.S. Government agencies and treasuries, residential and commercial mortgage-backed securities, and municipal bonds segments are classified as Level 2 within the valuation hierarchy. Their fair values were determined based upon market-corroborated inputs and valuation matrices, which were obtained through third party data service providers or securities brokers through which we have historically transacted both purchases and sales of investment securities. Derivative financial instruments (Cash flow hedge) – The Corporation’s open derivative positions are interest rate swap agreements. Those classified as Level 2 open derivative positions are valued using externally developed pricing models based on observable market inputs provided by a third party and validated by management. The Corporation has considered counterparty credit risk in the valuation of its interest rate swap assets. Impaired loans – Loans included in the table below are those that are considered impaired with a specific allocation or with partial charge-offs, based upon the guidance of the loan impairment subsection of the Receivables Topic, ASC Section 310-10-35, under which the Corporation has measured impairment generally based on the fair value of the loan’s collateral. Fair value consists of the loan balance less its valuation allowance and is generally determined based on independent third-party appraisals of the collateral or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values based upon the lowest level of input that is significant to the fair value measurements. Equity Investment- Equity investments included in the table below are considered impaired with losses recognized on the income statement in net gains. Fair value of the equity investment was based on an independent third-party valuation report where the value was determined based on the revenue multiples of like kind information technology businesses. These assets are included as Level 3 fair values based upon the lowest level of input that is significant to the fair value measurements. Other real estate owned – OREO included in the table below are considered impaired with specific write-downs. Fair value of other real estate owned was based on independent third-party appraisals of the properties. These values were determined based on the sales prices of similar properties in the approximate geographic area. These assets are included as Level 3 fair values based upon the lowest level of input that is significant to the fair value measurements. 24 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 March 31, 2022 and December 31, 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at March 31, 2022 Using ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ ​ Assets/(liabilities) ​ Active Markets ​ Other ​ Significant ​ ​ Measured at ​ for Identical ​ Observable ​ Unobservable ​ ​ Fair Value ​ Assets ​ Inputs ​ Inputs (in thousands) 03/31/22 (Level 1) (Level 2) (Level 3) Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 10,298 ​ ​ ​ ​ $ 10,298 ​ ​ ​ Residential mortgage-backed agencies ​ $ 44,298 ​ ​ ​ ​ $ 44,298 ​ ​ ​ Commercial mortgage-backed agencies ​ $ 36,233 ​ ​ ​ ​ $ 36,233 ​ ​ ​ Collateralized mortgage obligations ​ $ 25,997 ​ ​ ​ ​ $ 25,997 ​ ​ ​ Obligations of states and political subdivisions ​ $ 8,464 ​ ​ ​ ​ $ 8,464 ​ ​ ​ Corporate bonds ​ $ 1,000 ​ ​ ​ ​ $ 1,000 ​ ​ ​ Collateralized debt obligations ​ $ 17,319 ​ ​ ​ ​ ​ ​ ​ $ 17,319 Financial derivatives ​ $ 386 ​ ​ ​ ​ $ 386 ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired loans, net ​ $ 131 ​ ​ ​ ​ ​ ​ ​ $ 131 Equity Investment ​ $ 590 ​ ​ ​ ​ ​ ​ ​ $ 590 Other real estate owned ​ $ — ​ ​ ​ ​ ​ ​ ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at December 31, 2021 Using ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ Assets/(liabilities) ​ Active Markets ​ Other ​ Significant ​ ​ Measured at ​ for Identical ​ Observable ​ Unobservable ​ ​ Fair Value ​ Assets ​ Inputs ​ Inputs (in thousands) 12/31/21 (Level 1) (Level 2) (Level 3) Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 67,169 ​ ​ ​ ​ $ 67,169 ​ ​ ​ Residential mortgage-backed agencies ​ $ 48,661 ​ ​ ​ ​ $ 48,661 ​ ​ ​ Commercial mortgage-backed agencies ​ $ 50,868 ​ ​ ​ ​ $ 50,868 ​ ​ ​ Collateralized mortgage obligations ​ $ 90,077 ​ ​ ​ ​ $ 90,077 ​ ​ ​ Obligations of states and political subdivisions ​ $ 12,804 ​ ​ ​ ​ $ 12,804 ​ ​ ​ Collateralized debt obligations ​ $ 17,192 ​ ​ ​ ​ ​ ​ ​ $ 17,192 Financial derivatives ​ $ ( 453 ) ​ ​ ​ ​ $ ( 453 ) ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired loans, net ​ $ 408 ​ ​ ​ ​ ​ ​ ​ $ 408 Equity investment ​ $ 590 ​ ​ ​ ​ ​ ​ ​ $ 590 Other real estate owned ​ $ 349 ​ ​ ​ ​ ​ ​ ​ $ 349 ​ At March 31, 2022, the fair value of impaired loans with a valuation allowance or partial charge-off was $ 0.8 million, net of valuation allowances of $ 35,500 and partial charge-offs of $ 1.3 million. During the three months ended March 31, 2022, changes to the valuation allowance or additional charge off activity was recorded on loans with a net balance of approximately $ 0.1 million. At December 31, 2021, the fair value of impaired loans with a valuation allowance or charge-off was $ 1.0 million, net of valuation allowances of $ 64,700 and charge-offs of $ 1.3 million. During the year ended December 31, 2021, changes to the valuation allowance or additional charge off activity was recorded on loans with a net balance of approximately $ 0.4 million. ​ 25 Table of Contents There were no transfers of assets between any of the fair value hierarchy for the three month periods ended March 31, 2022 or 2021. For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of March 31, 2022 and December 31, 2021, the significant unobservable inputs used in the fair value measurements were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Fair Value at March 31, 2022 Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment Securities – available for sale -CDO ​ $ 17,319 ​ Discounted Cash Flow ​ Discount Rate ​ 4.50 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired Loans, net ​ $ 131 ​ Market Comparable Properties ​ Marketability Discount ​ 10.0% - 15.0% (1) (weighted avg 0 %) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity Investment ​ $ 590 ​ Market Method ​ Revenue Multiples ​ 2.8 x ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Fair Value at December 31, 2021 Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value Recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment Securities – available for sale -CDO ​ $ 17,192 ​ Discounted Cash Flow ​ Discount Rate ​ 4.50 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-recurring: ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired Loans, net ​ $ 408 ​ Market Comparable Properties ​ Marketability Discount ​ 10.0% - 15.0% (1) (weighted avg 13.2 %) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity Investment ​ $ 590 ​ Market Method ​ Revenue Multiples ​ 2.8 x ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other Real Estate Owned ​ $ 349 ​ Market Comparable Properties ​ Marketability Discount ​ 15.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) Range would include discounts taken since appraisal and estimated values ​ ​ 26 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 three month periods ended March 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ ​ Using Significant Unobservable Inputs ​ ​ (Level 3) ​ ​ Investment Securities (in thousands) Available for Sale Beginning balance January 1, 2022 ​ $ 17,192 Total losses realized/unrealized: ​ ​ ​ Included in other comprehensive loss ​ ​ 127 Ending balance March 31, 2022 ​ $ 17,319 ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ ​ Using Significant Unobservable Inputs ​ ​ (Level 3) ​ ​ Investment Securities (in thousands) Available for Sale Beginning balance January 1, 2021 ​ $ 13,260 Total losses realized/unrealized: ​ ​ ​ Included in other comprehensive loss ​ ​ 389 Ending balance March 31, 2021 ​ $ 13,649 ​ ​ There were no gains or losses included in earnings attributable to the change in realized/unrealized gains or losses related to the assets for the three month periods ended March 31, 2022 or 2021. The disclosed fair values may vary significantly between institutions based on the estimates and assumptions used in the various valuation methodologies. The derived fair values are subjective in nature and involve uncertainties and significant judgment. Therefore, they cannot be determined with precision. Changes in the assumptions could significantly impact the derived estimates of fair value. Disclosure of non-financial assets such as buildings, as well as certain financial instruments such as leases is not required. Accordingly, the aggregate fair values presented do not represent the underlying value of the Corporation. 27 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 ​ Fair Value Measurements ​ ​ ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ ​ ​ ​ ​ Active Markets ​ Other ​ Significant ​ ​ ​ ​ ​ ​ for Identical ​ Observable ​ Unobservable ​ ​ Carrying ​ Fair ​ Assets ​ Inputs ​ Inputs (in thousands) Amount Value (Level 1) (Level 2) (Level 3) Financial Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and due from banks ​ $ 71,211 ​ $ 71,211 ​ $ 71,211 ​ ​ ​ ​ ​ ​ Interest bearing deposits in banks ​ ​ 4,905 ​ ​ 4,905 ​ ​ 4,905 ​ ​ ​ ​ ​ ​ Investment securities - AFS ​ ​ 143,609 ​ ​ 143,609 ​ ​ ​ ​ $ 126,290 ​ $ 17,319 Investment securities - HTM ​ ​ 241,656 ​ ​ 235,026 ​ ​ ​ ​ ​ 210,338 ​ ​ 24,688 Restricted bank stock ​ ​ 1,026 ​ ​ N/A ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans, net ​ ​ 1,166,002 ​ ​ 1,132,057 ​ ​ ​ ​ ​ ​ ​ ​ 1,132,057 Financial derivatives ​ ​ 386 ​ ​ 386 ​ ​ ​ ​ ​ 386 ​ ​ ​ Accrued interest receivable ​ ​ 5,075 ​ ​ 5,075 ​ ​ ​ ​ ​ 989 ​ ​ 4,086 Financial Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposits - non-maturity ​ ​ 1,359,262 ​ ​ 1,359,262 ​ ​ ​ ​ ​ 1,359,262 ​ ​ ​ Deposits - time deposits ​ ​ 148,293 ​ ​ 148,716 ​ ​ ​ ​ ​ 148,716 ​ ​ ​ Short-term borrowed funds ​ ​ 58,902 ​ ​ 58,902 ​ ​ ​ ​ ​ 58,902 ​ ​ ​ Long-term borrowed funds ​ ​ 30,929 ​ ​ 31,070 ​ ​ ​ ​ ​ 31,070 ​ ​ ​ Accrued interest payable ​ ​ 103 ​ ​ 103 ​ ​ ​ ​ ​ 103 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ Fair Value Measurements ​ ​ ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ ​ ​ ​ ​ Active Markets ​ Other ​ Significant ​ ​ ​ ​ ​ ​ for Identical ​ Observable ​ Unobservable ​ ​ Carrying ​ Fair ​ Assets ​ Inputs ​ Inputs (in thousands) Amount Value (Level 1) (Level 2) (Level 3) Financial Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and due from banks ​ $ 109,823 ​ $ 109,823 ​ $ 109,823 ​ ​ ​ ​ ​ ​ Interest bearing deposits in banks ​ ​ 5,897 ​ ​ 5,897 ​ ​ 5,897 ​ ​ ​ ​ ​ ​ Investment securities - AFS ​ ​ 286,771 ​ ​ 286,771 ​ ​ ​ ​ $ 269,579 ​ $ 17,192 Investment securities - HTM ​ ​ 56,259 ​ ​ 65,369 ​ ​ ​ ​ ​ 36,448 ​ ​ 28,921 Restricted bank stock ​ ​ 1,029 ​ ​ 1,029 ​ ​ ​ ​ ​ 1,029 ​ ​ ​ Loans, net ​ ​ 1,137,440 ​ ​ 1,122,671 ​ ​ ​ ​ ​ ​ ​ ​ 1,122,671 Accrued interest receivable ​ ​ 4,821 ​ ​ 4,821 ​ ​ ​ ​ ​ 4,821 ​ ​ ​ Financial Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposits - non-maturity ​ ​ 1,306,145 ​ ​ 1,306,145 ​ ​ ​ ​ ​ 1,306,145 ​ ​ ​ Deposits - time deposits ​ ​ 163,229 ​ ​ 163,961 ​ ​ ​ ​ ​ 163,961 ​ ​ ​ Financial derivatives ​ ​ 453 ​ ​ 453 ​ ​ ​ ​ ​ 453 ​ ​ ​ Short-term borrowed funds ​ ​ 57,699 ​ ​ 57,699 ​ ​ ​ ​ ​ 57,699 ​ ​ ​ Long-term borrowed funds ​ ​ 30,929 ​ ​ 31,085 ​ ​ ​ ​ ​ 31,085 ​ ​ ​ Accrued interest payable ​ ​ 137 ​ ​ 137 ​ ​ ​ ​ ​ 137 ​ ​ ​ ​ ​ ​ 28 Table of Contents Note 7 – Accumulated Other Comprehensive Loss The following table presents the changes in each component of accumulated other comprehensive loss for the 12 months ended December 31, 2021, and the three months ended March 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment ​ Investment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ securities- ​ securities- ​ Investment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ with OTTI ​ all other ​ securities- ​ Cash Flow ​ Pension ​ ​ ​ ​ (in thousands) AFS AFS HTM Hedge Plan SERP Total Accumulated OCL, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance - January 1, 2021 ​ $ ( 3,277 ) ​ $ ( 25 ) ​ $ ( 315 ) ​ $ ( 954 ) ​ $ ( 22,630 ) ​ $ ( 1,662 ) ​ $ ( 28,863 ) Other comprehensive income/(loss) before reclassifications ​ ​ 2,475 ​ ​ ( 5,611 ) ​ ​ — ​ ​ 635 ​ ​ 3,431 ​ ​ ( 521 ) ​ ​ 409 Amounts reclassified from accumulated other comprehensive loss ​ ​ ( 147 ) ​ ​ ( 113 ) ​ ​ 181 ​ ​ — ​ ​ 1,091 ​ ​ 128 ​ ​ 1,140 Balance - December 31, 2021 ​ $ ( 949 ) ​ $ ( 5,749 ) ​ $ ( 134 ) ​ $ ( 319 ) ​ $ ( 18,108 ) ​ $ ( 2,055 ) ​ $ ( 27,314 ) Other comprehensive income/(loss) before reclassifications ​ ​ 103 ​ ​ ( 1,843 ) ​ ​ ( 6,100 ) ​ ​ 614 ​ ​ ( 2,651 ) ​ ​ — ​ ​ ( 9,877 ) Amounts reclassified from accumulated other comprehensive loss ​ ​ ( 37 ) ​ ​ ( 2 ) ​ ​ 69 ​ ​ — ​ ​ 204 ​ ​ 50 ​ ​ 284 Balance - March 31, 2022 ​ $ ( 883 ) ​ $ ( 7,594 ) ​ $ ( 6,165 ) ​ $ 295 ​ $ ( 20,555 ) ​ $ ( 2,005 ) ​ $ ( 36,907 ) ​ 29 Table of Contents The following tables present the components of other comprehensive income/(loss) for the three month periods ended March 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Before ​ Tax ​ ​ Components of Other Comprehensive Loss ​ Tax ​ (Expense) ​ ​ (in thousands) Amount Benefit Net For the three months ended March 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ $ 141 ​ $ ( 38 ) ​ $ 103 Less: accretable yield recognized in income ​ ​ 50 ​ ​ ( 13 ) ​ ​ 37 Net unrealized gains on investments with OTTI ​ ​ 91 ​ ​ ( 25 ) ​ ​ 66 Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ ​ ( 10,844 ) ​ ​ 2,901 ​ ​ ( 7,943 ) Unrealized holding losses on securities transferred from available for sale to held to maturity ​ ​ 8,328 ​ ​ ( 2,228 ) ​ ​ 6,100 Less: gains recognized in income ​ ​ 3 ​ ​ ( 1 ) ​ ​ 2 Net unrealized losses on all other AFS securities ​ ​ ( 2,519 ) ​ ​ 674 ​ ​ ( 1,845 ) Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses on securities transferred to held to maturity ​ ​ ( 8,328 ) ​ ​ 2,228 ​ ​ ( 6,100 ) Less: amortization recognized in income ​ ​ ( 94 ) ​ ​ 25 ​ ​ ( 69 ) Net unrealized losses on HTM securities ​ ​ ( 8,234 ) ​ ​ 2,203 ​ ​ ( 6,031 ) Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 839 ​ ​ ( 225 ) ​ ​ 614 Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ ( 3,620 ) ​ ​ 969 ​ ​ ( 2,651 ) Less: amortization of unrecognized loss ​ ​ ( 279 ) ​ ​ 75 ​ ​ ( 204 ) Net pension plan liability adjustment ​ ​ ( 3,341 ) ​ ​ 894 ​ ​ ( 2,447 ) SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Less: amortization of unrecognized loss ​ ​ ( 68 ) ​ ​ 18 ​ ​ ( 50 ) Less: amortization of prior service costs ​ ​ — ​ ​ — ​ ​ — Net SERP liability adjustment ​ ​ 68 ​ ​ ( 18 ) ​ ​ 50 Other comprehensive loss ​ $ ( 13,096 ) ​ $ 3,503 ​ $ ( 9,593 ) ​ ​ ​ 30 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Before ​ Tax ​ ​ Components of Other Comprehensive Loss ​ Tax ​ (Expense) ​ ​ (in thousands) Amount Benefit Net For the three months ended March 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (AFS) securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ $ 363 ​ $ ( 97 ) ​ $ 266 Less: accretable yield recognized in income ​ ​ 50 ​ ​ ( 13 ) ​ ​ 37 Net unrealized gains on investments with OTTI ​ ​ 313 ​ ​ ( 84 ) ​ ​ 229 Available for sale securities – all other: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses ​ ​ ( 7,105 ) ​ ​ 1,903 ​ ​ ( 5,202 ) Less: gains recognized in income ​ ​ — ​ ​ — ​ ​ — Net unrealized gains on all other AFS securities ​ ​ ( 7,105 ) ​ ​ 1,903 ​ ​ ( 5,202 ) Held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ — ​ ​ — ​ ​ — Less: amortization recognized in income ​ ​ ( 61 ) ​ ​ 16 ​ ​ ( 45 ) Net unrealized gains on HTM securities ​ ​ 61 ​ ​ ( 16 ) ​ ​ 45 Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains ​ ​ 532 ​ ​ ( 127 ) ​ ​ 405 Pension Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized net actuarial loss ​ ​ ( 190 ) ​ ​ 51 ​ ​ ( 139 ) Less: amortization of unrecognized loss ​ ​ ( 372 ) ​ ​ 100 ​ ​ ( 272 ) Net pension plan liability adjustment ​ ​ 182 ​ ​ ( 49 ) ​ ​ 133 SERP: ​ ​ ​ ​ ​ ​ ​ ​ ​ Less: amortization of unrecognized loss ​ ​ ( 75 ) ​ ​ 19 ​ ​ ( 56 ) Less: amortization of prior service costs ​ ​ 1 ​ ​ — ​ ​ 1 Net SERP liability adjustment ​ ​ 74 ​ ​ ( 19 ) ​ ​ 55 Other comprehensive loss ​ $ ( 5,943 ) ​ $ 1,608 ​ $ ( 4,335 ) ​ ​ ​ ​ 31 Table of Contents The following table presents the details of amounts reclassified from accumulated other comprehensive loss for the three month periods ended March 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ Amounts Reclassified from ​ Three Months Ended ​ ​ Accumulated Other Comprehensive Loss ​ March 31, ​ Affected Line Item in the Statement (in thousands) 2022 2021 Where Net Income is Presented Net unrealized gains on available for sale investment securities with OTTI: ​ ​ ​ ​ ​ ​ ​ ​ Accretable yield ​ $ 50 ​ $ 50 ​ Interest income on taxable investment securities Taxes ​ ​ ( 13 ) ​ ​ ( 13 ) ​ Provision for income tax expense ​ ​ $ 37 ​ $ 37 ​ Net of tax Net unrealized gains on available for sale investment securities - all others: ​ ​ ​ ​ ​ ​ ​ ​ Gains recognized ​ $ 3 ​ $ — ​ Net gains Taxes ​ ​ ( 1 ) ​ ​ — ​ Provision for income tax expense ​ ​ $ 2 ​ $ — ​ Net of tax Net unrealized losses on held to maturity securities: ​ ​ ​ ​ ​ ​ ​ ​ Amortization ​ $ ( 94 ) ​ $ ( 61 ) ​ Interest income on taxable investment securities Taxes ​ ​ 25 ​ ​ 16 ​ Provision for income tax expense ​ ​ $ ( 69 ) ​ $ ( 45 ) ​ Net of tax Net pension plan liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized loss ​ $ ( 279 ) ​ $ ( 372 ) ​ Other Expense Taxes ​ ​ 75 ​ ​ 100 ​ Provision for income tax expense ​ ​ $ ( 204 ) ​ $ ( 272 ) ​ Net of tax Net SERP liability adjustment: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of unrecognized loss ​ $ ( 68 ) ​ $ ( 75 ) ​ Other Expense Amortization of prior service costs ​ ​ — ​ ​ 1 ​ Salaries and employee benefits Taxes ​ ​ 18 ​ ​ 19 ​ Provision for income tax expense ​ ​ $ ( 50 ) ​ $ ( 55 ) ​ Net of tax Total reclassifications for the period ​ $ ( 284 ) ​ $ ( 335 ) ​ Net of tax ​ ​ ​ ​ ​ Note 8 – Employee Benefit Plans The following tables present the components of the net periodic pension plan cost for First United Corporation’s noncontributory Defined Benefit Pension Plan (the “Pension Plan”) and the Bank’s Defined Benefit Supplemental Executive Retirement Plan (“Defined Benefit SERP”) for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Pension Plan ​ March 31, (in thousands) 2022 2021 Service cost ​ $ 14 ​ $ 39 Interest cost ​ ​ 384 ​ ​ 356 Expected return on assets ​ ​ ( 952 ) ​ ​ ( 893 ) Amortization of net actuarial loss ​ ​ 279 ​ ​ 372 Net pension credit included in employee benefits and other expense ​ $ ( 275 ) ​ $ ( 126 ) ​ 32 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Defined Benefit SERP ​ March 31, (in thousands) 2022 2021 Service cost ​ $ 41 ​ $ 35 Interest cost ​ ​ 72 ​ ​ 60 Amortization of recognized loss ​ ​ 68 ​ ​ 75 Amortization of prior service cost ​ ​ — ​ ​ ( 1 ) Net Defined Benefit SERP expense included in employee benefits and other expense ​ $ 181 ​ $ 169 ​ The service cost component of net periodic benefit cost is included in salaries and benefits and all other components of net periodic benefit cost are included in other expense in the Consolidated Statement of Operations for the Pension Plan and the Defined Benefit SERP. The Pension Plan is a noncontributory defined benefit pension plan that covers our employees who were hired prior to the freeze and others who were grandfathered into the plan. The benefits are based on years of service and the employees’ compensation during the last five years of employment. Effective April 30, 2010, the Pension Plan was amended, resulting in a “soft freeze”, the effect of which prohibits new entrants into the plan and ceases crediting of additional years of service after that date. Effective January 1, 2013, the Pension Plan was amended to unfreeze it for those employees for whom the sum of their (a) ages, at their closest birthday plus (b) years of service for vesting purposes equals 80 or greater. The “soft freeze” continues to apply to all other plan participants. Pension benefits for these participants are managed through discretionary contributions to the First United Corporation 401(k) Profit Sharing Plan (the “401(k) Plan”). The Bank established the Defined Benefit SERP in 2001 as an unfunded supplemental executive retirement plan. The Defined Benefit SERP is available only to a select group of management or highly compensated employees to provide supplemental retirement benefits in excess of limits imposed on qualified plans by federal tax law. Concurrent with the establishment of the Defined Benefit SERP, the Bank acquired Bank Owned Life Insurance (“BOLI”) policies on the senior management personnel and officers of the Bank. The benefits resulting from the favorable tax treatment accorded the earnings on the BOLI policies are intended to provide a source of funds for the future payment of the Defined Benefit SERP benefits as well as other employee benefit costs. The benefit obligation activity for both the Pension Plan and the Defined Benefit SERP was calculated using an actuarial measurement date of January 1. Plan assets and the benefit obligations were calculated using an actuarial measurement date of December 31. The Corporation will assess the need for future annual contributions to the pension plan based upon its funded status and an evaluation of the future benefits to be provided thereunder. No contributions were made to the Pension Plan during the first three months of 2022 or 2021. The Corporation expects to fund the annual projected benefit payments for the Defined Benefit SERP from operations. On January 9, 2015, First United Corporation and members of management who do not participate in the Defined Benefit SERP entered into participation agreements under the Deferred Compensation Plan, each styled as a Defined Contribution SERP Agreement (the “Contribution Agreement”). Pursuant to each Contribution Agreement, First United Corporation agreed, for each Plan Year (as defined in the Deferred Compensation Plan) in which it determines that it has been Profitable (as defined in the Contribution Agreement), to make a discretionary contribution to the participant’s Employer Account in an amount equal to 15 % of the participant’s base salary level for such Plan Year, with the first Plan Year being the year ending December 31, 2015. The Contribution Agreement provides that the participant will become 100% vested in the amount maintained in his or her Employer Account upon the earliest to occur of the following events: (a) Normal Retirement (as defined in the Contribution Agreement); (b) Separation from Service (as defined in the Contribution Agreement) following a Change of Control (as defined in the Deferred Compensation Plan) and subsequent Triggering Event (as defined in the Contribution Agreement); (c) Separation from Service due to a Disability (as defined in the Contribution Agreement); (d) with respect to a particular award of Employer Contribution Credits, the participant’s completion of 2 consecutive Years of Service (as defined in the Contribution Agreement) immediately following the Plan Year for which such award was made; or (e) death. Notwithstanding the foregoing, however, a participant will lose entitlement to the amount maintained in his or her Employer Account in the event employment is terminated for Cause (as 33 Table of Contents defined in the Contribution Agreement). In addition, the Contribution Agreement conditions entitlement to the amounts held in the Employer Account on the participant (1) refraining from engaging in Competitive Employment (as defined in the Contribution Agreement) for three years following his or her Separation from Service, (2) refraining from injurious disclosure of confidential information concerning the Corporation, and (3) remaining available, at the First United Corporation’s reasonable request, to provide at least six hours of transition services per month for 12 months following his or her Separation from Service (except in the case of death or Disability), except that only item (2) will apply in the event of a Separation from Service following a Change of Control and subsequent Triggering Event. In January 2021, the Board of Directors approved discretionary contributions to three participants totaling $ 101,257 . The Corporation recorded $ 12,657 of related compensation expense for the first three months of 2022 and 2021 related to these contributions. In January 2022, the Board of Directors approved discretionary contributions to three participants totaling $ 103,689 . The Corporation recorded $ 12,961 of related compensation expense for the first three months of 2022 related to these contributions. Each discretionary contribution has a two year vesting period. Note 9 - Equity Compensation Plan Information At the 2018 Annual Meeting of Shareholders, First United Corporation’s shareholders approved the First United Corporation 2018 Equity Compensation Plan (the “Equity Plan”) which authorizes the issuance of up to 325,000 shares of common stock to employees, directors and qualifying consultants pursuant to stock options, stock appreciation rights, stock awards, dividend equivalents, and other stock-based awards. The Corporation complies with the provisions of ASC Topic 718, Compensation - Stock Compensation , in measuring and disclosing stock compensation cost. The measurement objective in ASC Paragraph 718-10-30-6 requires public companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The cost is recognized in expense over the period in which an employee is required to provide service in exchange for the award (the vesting period). Pursuant to First United Corporation’s director compensation policy, each director receives an annual retainer of 1,000 shares of First United Corporation common stock, plus $ 10,000 to be paid, at the director’s election, in cash or additional shares of common stock. In January 2021, a total of 1,202 fully vested shares were issued to two new directors, which had a grant date fair market value of $ 16.66 per share. In May 2021, a total of 12,726 fully vested shares of common stock were issued to directors, which had a grant date fair value of $ 18.50 per share. Director stock compensation expense was $ 58,858 for the three months ended March 31, 2022 and $ 70,216 for the three months ended March 31, 2021. Restricted Stock Units On March 26, 2020, pursuant to the Corporation’s Long Term Incentive Plan (the "LTIP"), which is a sub-plan of the Equity Plan, the Compensation Committee of First United Corporation’s Board of Directors (the "Committee") granted restricted stock units (“RSUs”) to the Corporation’s principal executive officer, its principal financial officer, and certain of its other executive officers. An RSU contemplates the issuance of shares of common stock of First United Corporation if and when the RSU vests. The RSUs granted to each of the foregoing officers consist of (a) a performance vesting award for a three year performance period and (b) a time-vesting award that will vest ratably over a three year period. Target performance levels were set based on the annual budget which supports the Corporation’s long-term objective of achieving high performance as compared to peers. Threshold performance is the minimum level of acceptable performance as defined by the Committee and maximum performance represented a level potentially achievable under ideal circumstances. Achievement of the threshold performance level would result in each executive participant earning a payout at 50 % of his or her respective target award opportunity. Achievement of the target performance level would result in the executive participant earning the target award and achievement at or above the maximum performance level would result in the executive participant earning 150 % of the target opportunity. Actual results for any goal that falls between performance levels would be interpolated to calculate a proportionate award. For the performance period ending December 31, 2021, the RSUs’ performance goal is based on earnings per share for the year ending December 31, 2021. For the performance period ending December 31, 2022, the RSUs performance goals are based on earnings per share for the year ending December 31, 2022 and growth in tangible book value per share during the performance period. For the performance period ending 34 Table of Contents December 31, 2023, the RSUs performance goals are based on earnings per share for the year ending December 31, 2023 and growth in tangible book value per share during the performance period. To receive any shares under an RSU, a grantee must be employed by the Corporation or one of its subsidiaries on the applicable vesting date, except that a grantee whose employment terminates prior to such vesting date due to death, disability or retirement will be entitled to a pro-rated portion of the shares subject to the RSUs, assuming that, in the case of performance-vesting RSUs, the performance goals had been met at their "target" levels. In the first quarter of 2020, RSUs were granted relating to 9,791 performance vesting shares (target level) for 2019 LTIP plan for the performance period ending December 31, 2021 and 10,143 performance vesting shares and 5,070 time vesting shares (target level) for 2020 LTIP plan for the performance period ending December 31, 2022, which had a grant date fair market value of $ 12.54 per share of common stock underlying each RSU. The 2020 plan has a performance period for the performance-vesting RSUs of three years ending December 31, 2022 and the time-vesting RSUs will vest ratably over a three year period that began on March 26, 2021. On March 26, 2021, 1,690 of the 5,070 time vesting shares were issued to participants. On March 26, 2022, 1,688 shares of the 3,380 remaining time vesting shares were issued to participants. Stock compensation expense was $ 26,127 for both of the three month periods ended March 31, 2022 and 2021. Unrecognized compensation expense at March 31, 2022 related to unvested RSUs was $ 63,584 . In May 2021, RSUs relating to 7,389 performance vesting shares and 3,693 time vesting shares (target level) for plan year 2021 were granted, which had a grant date fair market value of $ 17.93 per share of common stock underlying each RSU. The performance period for the performance-vesting RSUs is the three year period ending December 31, 2023. The time-vesting RSUs will vest ratably over a three year period beginning on May 5, 2022. Stock compensation expense was $ 16,571 for the three months ended March 31, 2022. Unrecognized compensation expense as of March 31, 2022 related to unvested units was $ 138,093 . In March 2022, RSUs relating to 8,096 performance vesting shares and 6,238 time vesting shares (target level) for plan year 2022 were granted, which had a grant date fair market value of $ 21.88 per share of common stock underlying each RSU. The performance period for the performance-vesting RSUs is the three year period ending December 31, 2024. The time-vesting RSUs will vest ratably over a three year period beginning on March 9, 2023. Unrecognized compensation expense as of March 31, 2022 related to unvested units was $ 313,743 . ​ Note 10 – Derivative Financial Instruments As a part of managing interest rate risk, the Corporation entered into interest rate swap agreements to modify the re-pricing characteristics of certain interest-bearing liabilities. The Corporation has designated its interest rate swap agreements as cash flow hedges under the guidance of ASC Subtopic 815-30, Derivatives and Hedging – Cash Flow Hedges . Cash flow hedges have the effective portion of changes in the fair value of the derivative, net of taxes, recorded in net accumulated other comprehensive income. In March 2016, the Corporation entered into four interest rate swap contracts totaling $ 30.0 million notional amount, hedging future cash flows associated with floating rate trust preferred debt. As of March 31, 2022, $ 20.0 million notional amount remains. The fair value of the interest rate swap contracts was $ 0.4 million and $( 0.5 ) million at March 31, 2022 and December 31, 2021, respectively. For the three months ended March 31, 2022, the Corporation recorded an increase in the value of the derivatives of $ 0.8 million and the related deferred tax of $ 0.2 million in net accumulated other comprehensive loss to reflect the effective portion of cash flow hedges. ASC Subtopic 815-30 requires the net accumulated other comprehensive loss to be reclassified to earnings if the hedge becomes ineffective or is terminated. There was no hedge ineffectiveness recorded for the three months ended March 31, 2022. The Corporation does not expect any material losses relating to these hedges to be reclassified into earnings within the next 12 months. 35 Table of Contents Interest rate swap agreements are entered into with counterparties that meet established credit standards and the Corporation believes that the credit risk inherent in these contracts is not significant as of March 31, 2022. The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the three month periods ended March 31, 2022 and 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative in Cash Flow Hedging Relationships ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount of gain or ​ ​ ​ ​ ​ ​ ​ ​ (loss) recognized in ​ ​ ​ ​ ​ Amount of gain or ​ income or derivative ​ ​ Amount of gain or ​ (loss) reclassified from ​ (ineffective portion ​ ​ (loss) recognized in ​ accumulated OCI into ​ and amount excluded ​ ​ OCI on derivative ​ income (effective ​ from effectiveness (in thousands) (effective portion) portion) (a) testing) (b) Interest rate contracts: ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 ​ $ 614 ​ $ — ​ $ — March 31, 2021 ​ ​ 405 ​ ​ — ​ ​ — ​ Notes: (a) Reported as interest expense (b) Reported as other income Note 11 – Revenue Recognition ASC Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. ASC Topic 606 is applicable to noninterest revenue streams such as wealth management, including trust and brokerage services, service charges on deposit accounts, interchange fee income – debit card income and gains/losses on OREO sales. Noninterest revenue streams in-scope of ASC Topic 606 are discussed below. Wealth Management – Trust and Brokerage Trust and asset management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Corporation’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts. Optional services such as real estate sales and tax return preparation services are also available to existing trust and asset management customers. The Corporation’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered. Service Charges on Deposit Accounts Service charges on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. The Corporation’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account related fees are largely transactional based, and therefore, the Corporation’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts. Other Service Charges Fees, exchange, and other service charges are primarily comprised of ATM fees, loan servicing fees and other service charges. ATM fees are primarily generated when a Bank cardholder uses a non-Bank ATM or a non-Bank cardholder uses a Bank ATM. Loan servicing fees are comprised of fees earned on servicing of loan portfolios sold to the secondary market. Other service 36 Table of Contents charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Corporation’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Interchange Fees – Debit and Credit Card Income Debit and credit card income is primarily comprised of interchange fees earned whenever the Corporation’s debit cards are processed through card payment networks such as Visa. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. Payment is typically received immediately or in the following month. The following presents noninterest income, segregated by revenue streams that are within and outside the scope of ASC Topic 606, for the three month periods ended March 31, 2022 and March 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, (in thousands) 2022 ​ 2021 Noninterest income ​ ​ ​ ​ ​ ​ In-scope of Topic 606: ​ ​ ​ ​ ​ ​ Service charges on deposit accounts ​ $ 465 ​ $ 405 Other service charges ​ ​ 213 ​ ​ 211 Trust department ​ ​ 2,189 ​ ​ 2,241 Debit card income ​ ​ 886 ​ ​ 810 Brokerage commissions ​ ​ 220 ​ ​ 268 Noninterest income (in-scope of Topic 606) ​ ​ 3,973 ​ ​ 3,935 Noninterest income (out-of-scope of Topic 606) ​ ​ 409 ​ ​ 403 Total Noninterest Income ​ $ 4,382 ​ $ 4,338 ​ ​ ​ Note 12 – Regulatory Capital Requirements The following table presents our capital ratios for the three months ended March 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 December 31, 2021 Required for Capital Adequacy Purposes Required to be Well Capitalized Total Capital (to risk-weighted assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ First United Bank & Trust ​ 14.77 % 14.97 % 8.00 % 10.00 % Tier 1 Capital (to risk-weighted assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ First United Bank & Trust ​ 13.59 % 13.72 % 6.00 % 8.00 % Common Equity Tier 1 Capital (to risk-weighted assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ First United Bank & Trust ​ 13.59 % 13.72 % 4.50 % 6.50 % Tier 1 Capital (to average assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ First United Bank & Trust ​ 10.14 % 10.00 % 4.00 % 5.00 % ​ As of March 31, 2022, the Bank was considered “well capitalized” under the regulatory framework for prompt corrective action. ​ ​ ​ 37 Table of Contents ​ Note 13 – Recent Accounting Pronouncements Recently issued but not yet effective Accounting Pronouncements ​ In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . ASU 2016-13 introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchases financial assets with credit deterioration since their origination. The new model referred to as current expected credit losses (“CECL”) model, will apply to: (a) financial assets subject to credit losses and measured at amortized cost; and (b) certain off-balance sheet credit exposures. This includes loans, held to maturity debt securities, loan commitments, financial guarantees and net investments in leases as well as reinsurance and trade receivables. The estimate of expected credit losses should consider historical information, current information, and supportable forecasts, including estimates of prepayments. ASU 2016-13 was originally effective for SEC filers for annual periods beginning after December 15, 2019, and interim periods within those annual periods. In November 2019, the FASB approved a delay of the required implementation date of ASU No. 2016-13 for smaller reporting companies, as defined by the Securities and Exchange Commission, including the Corporation, resulting in a required implementation date for the Corporation of January 1, 2023. Management has formed a focus group consisting of multiple members from areas, including credit, finance, loan servicing, reporting, and information systems. The Corporation is completing its data and model validation analyses, with parallel processing of our existing allowance for loan losses model with the CECL model to follow. The Corporation is currently evaluating the provisions of ASU No. 2016-13 to determine the potential impact the new standard will have on the financial condition or results of operations. In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848).” The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendment only applies to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. The ASU is effective as of March 12, 2020 through December 31, 2022. The Corporation is in the process of evaluating the impact of this standard on the loan portfolio, investment portfolio, long term debt and interest rate swaps, but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations. ​ In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 made certain targeted amendments specific to troubled debt restructurings (TDRs) by creditors and vintage disclosure related to gross write-offs. Upon adoption, the Corporation will be required to apply the loan and refinancing and restructuring guidance to determine whether a modification results in a new loan or a continuation of an existing loan, rather than applying the recognition and measurement guidance for TDRs. The ASU also requires companies to disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within scope of Subtopic 326-20. ASU 2022-02 is effective March 31, 2023, for entities that have adopted ASU 2016-13, otherwise effective date is the same as ASU 2016-13. The Corporation’s current plan is to adopt ASU 2016-13 January 1, 2023 and will simultaneously implement ASU 2022-02. ​