10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For quarterly period ended September 30, 2015

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

For the transition period from _______________ to ________________

Commission file number 0-14237

First United Corporation

(Exact name of registrant as specified in its charter)

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

19 South Second Street, Oakland, Maryland           21550-0009

(Address of principal executive offices)               (Zip Code)

(800) 470-4356

(Registrant's telephone number, including area code)

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

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

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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 6,254,620 shares of common stock, par value $.01 per share, as of October 31, 2015.

INDEX TO QUARTERLY REPORT

FIRST UNITED CORPORATION

PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements (unaudited)	3
	Consolidated Statement of Financial Condition – September 30, 2015 and December 31, 2014	3
	Consolidated Statement of Operations - for the three and nine months ended September 30, 2015 and 2014	4
	Consolidated Statement of Comprehensive Income – for the three and nine months ended September 30, 2015 and 2014	6
	Consolidated Statement of Changes in Shareholders’ Equity - for the nine months ended September 30, 2015 and year ended December 31, 2014	7
	Consolidated Statement of Cash Flows - for the nine months ended September 30, 2015 and 2014	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	54
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	77
Item 4.	Controls and Procedures	77
PART II. OTHER INFORMATION		78
Item 1.	Legal Proceedings	78
Item 1A.	Risk Factors	78
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	78
Item 3.	Defaults upon Senior Securities	78
Item 4.	Mine Safety Disclosures	78
Item 5.	Other Information	78
Item 6.	Exhibits	78
SIGNATURES		78
EXHIBIT INDEX		79

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FIRST UNITED CORPORATION

Consolidated Statement of Financial Condition

(In thousands, except per share and percentage data)

	September 30,			December 31,
	2015			2014
	(Unaudited)
Assets
Cash and due from banks	$	61,406		$	27,554
Interest bearing deposits in banks		3,383			7,897
Cash and cash equivalents		64,789			35,451
Investment securities – available-for-sale (at fair value)		185,519			221,117
Investment securities – held to maturity (fair value $108,759 at September 30, 2015 and $110,771 at December 31, 2014)		106,732			109,449
Restricted investment in bank stock, at cost		5,904			7,524
Loans		843,092			839,991
Allowance for loan losses		(12,211	)		(12,065	)
Net loans		830,881			827,926
Premises and equipment, net		25,013			25,629
Goodwill and other intangible assets, net		11,004			11,004
Bank owned life insurance		39,853			33,504
Deferred tax assets		23,928			25,907
Other real estate owned		7,477			12,932
Accrued interest receivable and other assets		19,215			21,853
Total Assets	$	1,320,315		$	1,332,296
Liabilities and Shareholders’ Equity
Liabilities:
Non-interest bearing deposits	$	214,975		$	201,188
Interest bearing deposits		781,366			780,135
Total deposits		996,341			981,323
Short-term borrowings		38,460			39,801
Long-term borrowings		147,555			182,606
Accrued interest payable and other liabilities		23,367			19,567
Total Liabilities		1,205,723			1,223,297
Shareholders’ Equity:
Preferred stock – no par value; Authorized 2,000 shares of which 30 shares of Series A, $1,000 per share liquidation preference, 5% cumulative increasing to 9% cumulative on February 15, 2014, were issued and outstanding on September 30, 2015 and December 31, 2014		30,000			30,000
Common Stock – par value $.01 per share; Authorized 25,000 shares; issued and outstanding 6,255 shares at September 30, 2015 and 6,228 at December 31, 2014		63			62
Surplus		21,939			21,795
Retained earnings		79,841			77,375
Accumulated other comprehensive loss		(17,251	)		(20,233	)
Total Shareholders’ Equity		114,592			108,999
Total Liabilities and Shareholders’ Equity	$	1,320,315		$	1,332,296

See accompanying notes to the consolidated financial statements

3

FIRST UNITED CORPORATION

Consolidated Statement of Operations

(In thousands, except per share data)

	Nine months ended
	September 30,
	2015			2014
	(Unaudited)
Interest income
Interest and fees on loans	$	27,549		$	28,144
Interest on investment securities
Taxable		5,365			5,323
Exempt from federal income tax		970			1,175
Total investment income		6,335			6,498
Other		268			276
Total interest income		34,152			34,918
Interest expense
Interest on deposits		3,018			3,489
Interest on short-term borrowings		42			46
Interest on long-term borrowings		4,213			4,699
Total interest expense		7,273			8,234
Net interest income		26,879			26,684
Provision for loan losses		626			1,629
Net interest income after provision for loan losses		26,253			25,055
Other operating income
Net gains – other		100			1,127
Total net gains		100			1,127
Service charges		2,177			2,213
Trust department		4,225			3,922
Debit card income		1,586			1,516
Bank owned life insurance		849			737
Brokerage commissions		706			607
Other		308			309
Total other income		9,851			9,304
Total other operating income		9,951			10,431
Other operating expenses
Salaries and employee benefits		15,703			14,613
FDIC premiums		1,404			1,360
Equipment		1,905			1,931
Occupancy		1,867			1,868
Data processing		2,580			2,379
Professional Services		1,145			1,092
Other real estate owned		976			2,128
Other		4,782			5,202
Total other operating expenses		30,362			30,573
Income before income tax expense		5,842			4,913
Provision for income tax expense		1,351			975
Net Income		4,491			3,938
Accumulated preferred stock dividends and discount accretion		(2,025	)		(1,925	)
Net Income Available to Common Shareholders	$	2,466		$	2,013
Basic and diluted net income per common share	$	0.39		$	0.32
Weighted average number of basic and diluted shares outstanding		6,247			6,220

See accompanying notes to the consolidated financial statements

4

FIRST UNITED CORPORATION

Consolidated Statement of Operations

(In thousands, except per share data)

	Three Months Ended
	September 30,
	2015			2014
	(Unaudited)
Interest income
Interest and fees on loans	$	9,311		$	9,447
Interest on investment securities
Taxable		1,755			1,579
Exempt from federal income tax		302			371
Total investment income		2,057			1,950
Other		93			100
Total interest income		11,461			11,497
Interest expense
Interest on deposits		960			1,154
Interest on short-term borrowings		14			16
Interest on long-term borrowings		1,277			1,502
Total interest expense		2,251			2,672
Net interest income		9,210			8,825
Provision for loan losses		500			688
Net interest income after provision for loan losses		8,710			8,137
Other operating income
Net gains– other		95			166
Total net gains		95			166
Service charges		792			747
Trust department		1,455			1,354
Debit card income		578			529
Bank owned life insurance		294			249
Brokerage commissions		238			201
Other		90			88
Total other income		3,447			3,168
Total other operating income		3,542			3,334
Other operating expenses
Salaries and employee benefits		5,445			4,910
FDIC premiums		474			478
Equipment		634			625
Occupancy		617			592
Data processing		871			803
Professional Services		240			239
Other real estate owned		(71	)		514
Other		1,500			1,747
Total other operating expenses		9,710			9,908
Income before income tax expense		2,542			1,563
Provision for income tax expense		594			223
Net Income		1,948			1,340
Accumulated preferred stock dividends and discount accretion		(675	)		(675	)
Net Income Available to Common Shareholders	$	1,273		$	665
Basic and diluted net income per common share	$	0.20		$	0.10
Weighted average number of basic and diluted shares outstanding		6,255			6,228

See accompanying notes to the consolidated financial statements

5

FIRST UNITED CORPORATION

Consolidated Statement of Comprehensive Income

(In thousands)

	Nine months ended
	September 30,
	2015			2014
Comprehensive Income (in thousands)	(Unaudited)
Net Income	$	4,491		$	3,938
Other comprehensive income/(loss), net of tax and reclassification adjustments:
Net unrealized gains on investments with OTTI		3,729			3,388
Net unrealized gains on all other AFS securities		1,394			8,255
Net unrealized gains/(losses) on HTM securities		225			(2,315	)
Net unrealized gains on cash flow hedges		55			137
Net unrealized losses on pension		(2,452	)		(650	)
Net unrealized gains on SERP		31			1
Other comprehensive income, net of tax		2,982			8,816
Comprehensive income	$	7,473		$	12,754

See accompanying notes to the consolidated financial statements

FIRST UNITED CORPORATION

Consolidated Statement of Comprehensive Income

(In thousands)

	Three months ended
	September 30,
	2015			2014
Comprehensive Income (in thousands)	(Unaudited)
Net Income	$	1,948		$	1,340
Other comprehensive income/(loss), net of tax and reclassification adjustments:
Net unrealized gains on investments with OTTI		913			346
Net unrealized gains/(losses) on all other AFS securities		727			(87	)
Net unrealized gains on HTM securities		64			57
Net unrealized gains on cash flow hedges		20			26
Net unrealized losses on pension		(1,616	)		(687	)
Net unrealized gains on SERP		10			0
Other comprehensive income/(loss), net of tax		118			(345	)
Comprehensive income	$	2,066		$	995

See accompanying notes to the consolidated financial statements

6

FIRST UNITED CORPORATION

Consolidated Statement of Changes in Shareholders’ Equity

(In thousands)

	Preferred Stock		Common Stock		Surplus		Retained Earnings			Accumulated Other Comprehensive Income/(Loss)			Total Shareholders' Equity
	(Unaudited)
Balance at January 1, 2014	$	29,994	$	62	$	21,661	$	74,379		$	(24,213	)	$	101,883
Net income								5,597						5,597
Other comprehensive income											3,980			3,980
Stock based compensation						134								134
Preferred stock discount accretion		6						(6	)					0
Preferred stock dividends paid								(2,595	)					(2,595	)
Balance at December 31, 2014		30,000		62		21,795		77,375			(20,233	)		108,999
Net income								4,491						4,491
Other comprehensive income											2,982			2,982
Stock based compensation				1		144								145
Preferred stock dividends paid								(2,025	)					(2,025	)
Balance at September 30, 2015	$	30,000	$	63	$	21,939	$	79,841		$	(17,251	)	$	114,592

See accompanying notes to the consolidated financial statements

7

FIRST UNITED CORPORATION

Consolidated Statement of Cash Flows

(In thousands)

	Nine months ended
	September 30,
	2015			2014
	(Unaudited)
Operating activities
Net income	$	4,491		$	3,938
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		626			1,629
Depreciation		1,307			1,471
Stock compensation		144			95
(Gain)/loss on sales of other real estate owned		(718	)		921
Write-downs of other real estate owned		1,202			885
Gain on loan sales		(40	)		(37	)
Loss on disposal of fixed assets		2			3
Net amortization of investment securities discounts and premiums- AFS		436			152
Net amortization of investment securities discounts and premiums- HTM		78			19
(Gains)/losses on sales of investment securities – available-for-sale		(62	)		7
Gain on sales of investment securities – held for trading		0			(1,100	)
Amortization of deferred loan fees		(408	)		(363	)
Decrease in accrued interest receivable and other assets		2,638			2,229
Decrease/(increase) in deferred tax benefit		377			(4	)
Decrease in accrued interest payable and other liabilities		(137	)		(5,685	)
Earnings on bank owned life insurance		(849	)		(737	)
Net cash provided by operating activities		9,087			3,423
Investing activities
Proceeds from maturities/calls of investment securities available-for-sale		38,713			122,291
Proceeds from maturities/calls of investment securities held-to-maturity		6,348			3,275
Proceeds from sales of investment securities available-for-sale		52,672			56,838
Proceeds from sales of investment securities held for trading		0			1,100
Purchases of investment securities available-for-sale		(47,640	)		(153,924	)
Purchases of investment securities held-to-maturity		(3,709	)		(2,421	)
Proceeds from sales of other real estate owned		5,870			5,667
Proceeds from loan sales		4,935			4,312
Proceeds from disposal of fixed assets		6			0
Purchase of BOLI policy		(5,500	)		0
Net decrease in FHLB stock		1,620			389
Net increase in loans		(8,967	)		(23,782	)
Purchases of premises and equipment		(699	)		(570	)
Net cash provided by investing activities		43,649			13,175
Financing activities
Net increase/(decrease) in deposits		15,018			(4,370	)
Preferred stock dividends paid		(2,025	)		(8,420	)
Common stock grants		1			0
Net (decrease)/increase in short-term borrowings		(1,341	)		4,318
Payments on long-term borrowings		(35,051	)		(49	)
Net cash used in financing activities		(23,398	)		(8,521	)
Increase in cash and cash equivalents		29,338			8,077
Cash and cash equivalents at beginning of the year		35,451			43,063
Cash and cash equivalents at end of period	$	64,789		$	51,140
Supplemental information
Interest paid	$	7,533		$	14,995
Non-cash investing activities:
Transfers from loans to other real estate owned	$	899		$	2,030
Security sold September 30, settled in October	$	0		$	618
Transfers from securities available for sale to held-to-maturity	$	0		$	103,934

See accompanying notes to the consolidated financial statements

8

FIRST UNITED CORPORATION

NoteS to Consolidated Financial Statements (UNAUDITED)

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements of First United Corporation and its consolidated subsidiaries, including First United Bank & Trust (the “Bank”), have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, as required by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 270, Interim Reporting, and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all the information and footnotes required for annual financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring items, have been included. Operating results for the nine- and three-month periods ended September 30, 2015 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, 2014. For purposes of comparability, certain prior period amounts have been reclassified to conform to the 2015 presentation. Such reclassifications had no impact on net income or equity.

Subsequent Events –

On October 30, 2015, First United Corporation and its bank subsidiary, First United Bank & Trust (collectively, “First United”), were notified by the Financial Industry Regulatory Authority (“FINRA”) that a FINRA arbitration panel had awarded $11.5 million in compensatory damages to First United in a proceeding that First United brought against FTN Financial Securities Corp. (“FTN”) and two of its representatives. First United alleged, among other things, that, in recommending and selling certain trust preferred securities to First United, FTN committed fraud, breached its fiduciary duty to First United, breached its contract with First United and violated rules concerning suitability and other regulatory standards. FTN paid the $11.5 million award amount to First United on November 5, 2015.

First United Corporation has evaluated events and transactions occurring subsequent to the statement of financial condition date of September 30, 2015 for items that should potentially be recognized or disclosed in these financial statements as prescribed by ASC Topic 855, Subsequent Events.

As used in these notes to consolidated financial statements, First United Corporation and its consolidated subsidiaries are sometimes collectively referred to as the “Corporation”.

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.

9

The following tables set forth the calculation of basic and diluted earnings per common share for the nine- and three-month periods ended September 30, 2015 and 2014:

	Nine months ended September 30,
	2015							2014
				Average		Per Share					Average		Per Share
(in thousands, except for per share amount)	Income			Shares		Amount		Income			Shares		Amount
Basic and Diluted Earnings Per Share:
Net income	$	4,491						$	3,938
Preferred stock dividends		(2,025	)						(1,919	)
Discount accretion on preferred stock		0							(6	)
Net income available to common shareholders	$	2,466			6,247	$	0.39	$	2,013			6,220	$	0.32

	Three months ended September 30,
	2015							2014
				Average		Per Share					Average		Per Share
(in thousands, except for per share amount)	Income			Shares		Amount		Income			Shares		Amount
Basic and Diluted Earnings Per Share:
Net income	$	1,948						$	1,340
Preferred stock dividends deferred		(675	)						(675	)
Discount accretion on preferred stock		0							0
Net income available to common shareholders	$	1,273			6,255	$	0.20	$	665			6,228	$	0.10

Note 3 – Net Gains

The following table summarizes the gain/(loss) activity for the nine- and three-month periods ended September 30, 2015 and 2014:

	Nine months ended						Three months ended
	September 30,						September 30,
(in thousands)	2015			2014			2015			2014
Net gains – other:
Available-for-sale securities:
Realized gains	$	373		$	427		$	217		$	222
Realized losses		(311	)		(434	)		(138	)		(75	)
Held-for-trading:
Realized gains		0			1,100			0			0
Gain on sale of consumer loans		40			37			16			19
Loss on disposal of fixed assets		(2	)		(3	)		0			0
Net gains – other	$	100		$	1,127		$	95		$	166

Note 4 – Cash and Cash Equivalents

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

	September 30,		December 31,
(in thousands)	2015		2014
Cash and due from banks, weighted average interest rate of 0.10% (at September 30, 2015)	$	61,406	$	27,554

10

Interest bearing deposits in banks, which represent funds invested at a correspondent bank, are carried at cost which approximates fair value and, as of September 30, 2015 and December 31, 2014, consisted of daily funds invested at the Federal Home Loan Bank (“FHLB”) of Atlanta, First Tennessee Bank (“FTN”), and Merchants and Traders (“M&T”).

	September 30,		December 31,
(in thousands)	2015		2014
FHLB daily investments, interest rate of 0.005% (at September 30, 2015)	$	1,521	$	983
FTN daily investments, interest rate of 0.07% (at September 30, 2015)		850		850
M&T daily investments, interest rate of 0.15% (at September 30, 2015)		1,012		6,064
	$	3,383	$	7,897

Note 5 – Investments

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

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

11

The following table shows a comparison of amortized cost and fair values of investment securities at September 30, 2015 and December 31, 2014:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI in AOCI
September 30, 2015
Available for Sale:
U.S. government agencies	$	34,096	$	125	$	0	$	34,221	$	0
Residential mortgage-backed agencies		14,495		162		163		14,494		0
Commercial mortgage-backed agencies		45,162		669		26		45,805		0
Collateralized mortgage obligations		10,172		92		47		10,217		0
Obligations of states and political subdivisions		48,065		1,081		292		48,854		0
Collateralized debt obligations		35,636		3,631		7,339		31,928		(60	)
Total available for sale	$	187,626	$	5,760	$	7,867	$	185,519	$	(60	)
Held to Maturity:
U.S. government agencies	$	24,658	$	784	$	0	$	25,442	$	0
Residential mortgage-backed agencies		54,869		689		83		55,475		0
Commercial mortgage-backed agencies		18,148		565		0		18,713		0
Collateralized mortgage obligations		6,432		0		34		6,398		0
Obligations of states and political subdivisions		2,625		106		0		2,731		0
Total held to maturity	$	106,732	$	2,144	$	117	$	108,759	$	0
December 31, 2014
Available for Sale:
U.S. treasuries	$	29,607	$	0	$	11	$	29,596	$	0
U.S. government agencies		39,077		117		253		38,941		0
Residential mortgage-backed agencies		45,175		510		412		45,273		0
Commercial mortgage-backed agencies		26,007		53		103		25,957		0
Collateralized mortgage obligations		8,611		96		0		8,707		0
Obligations of states and political subdivisions		46,151		1,413		260		47,304		0
Collateralized debt obligations		37,117		1,155		12,933		25,339		6,143
Total available for sale	$	231,745	$	3,344	$	13,972	$	221,117	$	6,143
Held to Maturity:
U.S. government agencies	$	24,520	$	514	$	0	$	25,034	$	0
Residential mortgage-backed agencies		58,400		613		5		59,008		0
Commercial mortgage-backed agencies		16,425		312		0		16,737		0
Collateralized mortgage obligations		7,379		5		0		7,384		0
Obligations of states and political subdivisions		2,725		0		117		2,608		0
Total held to maturity	$	109,449	$	1,444	$	122	$	110,771	$	0

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

	Nine months ended				Three months ended
	September 30,				September 30,
(in thousands)	2015		2014		2015		2014
Proceeds	$	52,672	$	56,838	$	28,005	$	616
Realized gains		373		1,527		217		222
Realized losses		311		434		138		75

12

The following table shows the Corporation’s investment securities with gross unrealized losses and fair values at September 30, 2015 and December 31, 2014, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:

	Less than 12 months				12 months or more
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
September 30, 2015
Available for Sale:
Residential mortgage-backed agencies	$	0	$	0	$	8,110	$	163
Commercial mortgage-backed agencies		5,733		26		0		0
Collateralized mortgage obligations		5,560		47		0		0
Obligations of states and political subdivisions		18,168		151		4,320		141
Collateralized debt obligations		0		0		22,976		7,339
Total available for sale	$	29,461	$	224	$	35,406	$	7,643
Held to Maturity:
Residential mortgage-backed agencies	$	7,838	$	83	$	0	$	0
Collateralized mortgage obligations		6,398		34		0		0
Total held to maturity	$	14,236	$	117	$	0	$	0
December 31, 2014
Available for Sale:
U.S. treasuries	$	27,096	$	11	$	0	$	0
U.S. government agencies		0	$	0	$	18,819	$	253
Residential mortgage-backed agencies		0		0		17,918		412
Commercial mortgage-backed agencies		12,298		97		973		6
Obligations of states and political subdivisions		0		0		8,981		260
Collateralized debt obligations		0		0		20,290		12,933
Total available for sale	$	39,394	$	108	$	66,981	$	13,864
Held to Maturity:
Residential mortgage-backed agencies		3,850		5		0		0
Obligations of states and political subdivisions		0		0		2,608		117
Total held to maturity	$	3,850	$	5	$	2,608	$	117

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

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Management believes that the valuation of certain securities is a critical accounting policy that requires significant estimates in preparation of the Corporation’s consolidated financial statements. Management utilizes an independent third party to prepare both the impairment valuations and fair value determinations for the Corporation’s collateralized debt obligation (“CDO”) portfolio consisting of pooled trust preferred securities. Based on management’s review of the assumptions and results of the third-party review, it believes that the valuations are adequate at September 30, 2015.

U.S. Government Agencies – Available for Sale – There were no U.S. government agencies in an unrealized loss position as of September 30, 2015.

Residential Mortgage-Backed Agencies – Available for Sale - There were no residential mortgage-backed agencies in an unrealized loss position for less than 12 months as of September 30, 2015. There was one residential mortgage-backed agency security in an unrealized loss position for 12 months or more. The security is of the highest investment grade and the Corporation does not intend to sell it, and it is not more likely than not that the Corporation will be required to sell the security before recovery of its amortized cost basis, which may be at maturity. Accordingly, management does not consider this investment to be other-than-temporarily impaired at September 30, 2015.

Commercial Mortgage-Backed Agencies – Available for Sale – There were two commercial mortgage-backed agencies in an unrealized loss position for less than 12 months as of September 30, 2015. The securities are of the highest investment grade and the Corporation does not intend to sell them, and it is not more likely than not that the Corporation will be required to sell them before recovery of their amortized cost basis, which may be at maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at September 30, 2015. There were no commercial mortgage-backed agency securities in an unrealized loss position for 12 months or more.

Collateralized Mortgage Obligations – Available for Sale – There was one collateralized mortgage obligation in an unrealized loss position for less than 12 months as of September 30, 2015. The security is of the highest investment grade and the Corporation does not intend to sell it, and it is not more likely than not that the Corporation will be required to sell it before recovery of its amortized cost basis, which may be at maturity. Accordingly, management does not consider this investment to be other-than-temporarily impaired at September 30, 2015. There were no collateralized mortgage obligations in an unrealized loss position for 12 months or more.

Obligations of State and Political Subdivisions – Available for Sale – There were 10 obligations of state and political subdivisions that have been in an unrealized loss position for less than 12 months at September 30, 2015. There was one security that has been in an unrealized loss position for 12 months or more. These investments are of investment grade as determined by the major rating agencies and management reviews the ratings of the underlying issuers and performs an in-depth credit analysis on the securities. Management believes that this portfolio is well-diversified throughout the United States, and all bonds continue to perform according to their contractual terms. The Corporation does not intend to sell these investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at September 30, 2015.

Collateralized Debt Obligations – Available for Sale - The $7.3 million in unrealized losses greater than 12 months at September 30, 2015 relates to 12 pooled trust preferred securities that are included in the CDO portfolio. See Note 9 for a discussion of the methodology used by management to determine the fair values of these securities. Based upon a review of credit quality and the cash flow tests performed by the independent third party, management determined that there were no securities that had credit-related non-cash OTTI charges during the first nine months of 2015. The unrealized losses on the remaining securities in the portfolio are primarily attributable to continued depression in market interest rates, marketability, liquidity and the current economic environment.

U.S. Government Agencies – Held to Maturity – There were no U.S. government agencies in an unrealized loss position as of September 30, 2015.

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Residential Mortgage-Backed Agencies – Held to Maturity - Five residential mortgage-backed agencies have been in an unrealized loss position for less than 12 months as of September 30, 2015. The securities are of the highest investment grade and the Corporation has the intent and ability to hold the investments to maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at September 30, 2015. There were no residential mortgage-backed agencies in an unrealized loss position for 12 months or more.

Commercial Mortgage-Backed Agencies – Held to Maturity - There were no commercial mortgage-backed agencies in the Held to Maturity portfolio as of September 30, 2015 in a loss position.

Collateralized Mortgage Obligations – Held to Maturity – There was one collateralized mortgage obligations in an unrealized loss position for less than 12 months as of September 30, 2015. The security is of the highest investment grade and the Corporation has the intent and ability to hold the investment to maturity. Accordingly, management does not consider this investment to be other-than-temporarily impaired at September 30, 2015. There were no collateralized mortgage obligations in an unrealized loss position for 12 months or more.

Obligations of State and Political Subdivisions – Held to Maturity – There were no obligations of state and political subdivisions in the Held to Maturity portfolio as of September 30, 2015 in a loss position.

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The following tables present a cumulative roll-forward of the amount of non-cash OTTI charges related to credit losses which have been recognized in earnings for the trust preferred securities in the CDO portfolio held and not intended to be sold for the nine- and three-month periods ended September 30, 2015 and 2014:

	Nine months ended September 30,
(in thousands)	2015			2014
Balance of credit-related OTTI at January 1	$	12,583		$	13,422
Reduction for increases in cash flows expected to be collected		(479	)		(501	)
Balance of credit-related OTTI at September 30	$	12,104		$	12,921

	Three months ended September 30,
(in thousands)	2015			2014
Balance of credit-related OTTI at July 1	$	12,243		$	13,091
Reduction for increases in cash flows expected to be collected		(139	)		(170	)
Balance of credit-related OTTI at September 30	$	12,104		$	12,921

The amortized cost and estimated fair value of securities by contractual maturity at September 30, 2015 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.

	September 30, 2015
(in thousands)	Amortized Cost		Fair Value
Contractual Maturity
Available for sale:
Due after one year through five years	$	37,604	$	37,899
Due after five years through ten years		14,765		15,355
Due after ten years		65,428		61,749
		117,797		115,003
Residential mortgage-backed agencies	$	14,495	$	14,494
Commercial mortgage-backed agencies		45,162		45,805
Collateralized mortgage obligations		10,172		10,217
	$	187,626	$	185,519
Held to Maturity:
Due after five years through ten years	$	15,571	$	16,100
Due after ten years		11,712		12,073
		27,283		28,173
Residential mortgage-backed agencies	$	54,869	$	55,475
Commercial mortgage-backed agencies		18,148		18,713
Collateralized mortgage obligations		6,432		6,398
	$	106,732	$	108,759

Note 6 - Restricted Investment in Bank Stock

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

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Management evaluates the restricted stock for impairment in accordance with ASC Industry Topic 942, Financial Services – Depository and Lending-(ASC Section 942-325-35). Management’s evaluation of potential impairment is based on management’s assessment of the ultimate recoverability of the cost of the restricted stock rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability is influenced by criteria such as (a) the significance of the decline in net assets of the issuing bank as compared to the capital stock amount for that bank and the length of time this situation has persisted, (b) commitments by the issuing bank to make payments required by law or regulation and the level of such payments in relation to the operating performance of that bank, and (c) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the issuing bank. Management has evaluated the restricted stock for impairment and believes that no impairment charge is necessary as of September 30, 2015.

The Corporation recognizes dividends received on its restricted stock investments on a cash basis. For the nine months ended September 30, 2015, dividends of $234,445 were recognized in earnings. For the comparable period of 2014, dividends of $212,665 were recognized in earnings. For the three months ended September 30, 2015 and 2014, dividends of $78,777 and $68,329, respectively, were recognized in earnings.

Note 7 – Loans and Related Allowance for Loan Losses

The following table summarizes the primary segments of the loan portfolio as of September 30, 2015 and December 31, 2014:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Total
September 30, 2015
Individually evaluated for impairment	$	12,484	$	5,690	$	1,031	$	4,820	$	0	$	24,025
Collectively evaluated for impairment	$	253,449	$	93,066	$	73,749	$	374,127	$	24,676	$	819,067
Total loans	$	265,933	$	98,756	$	74,780	$	378,947	$	24,676	$	843,092
December 31, 2014
Individually evaluated for impairment	$	11,949	$	6,553	$	1,861	$	4,418	$	0	$	24,781
Collectively evaluated for impairment	$	244,115	$	92,748	$	91,394	$	363,223	$	23,730	$	815,210
Total loans	$	256,064	$	99,301	$	93,255	$	367,641	$	23,730	$	839,991

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

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

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

The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention and Substandard within the internal risk rating system as of September 30, 2015 and December 31, 2014:

(in thousands)	Pass		Special Mention		Substandard		Total
September 30, 2015
Commercial real estate
Non owner-occupied	$	125,412	$	11,669	$	10,462	$	147,543
All other CRE		99,712		565		18,113		118,390
Acquisition and development
1-4 family residential construction		15,752		0		700		16,452
All other A&D		75,595		76		6,633		82,304
Commercial and industrial		71,292		252		3,236		74,780
Residential mortgage
Residential mortgage - term		291,679		238		10,350		302,267
Residential mortgage - home equity		74,901		49		1,730		76,680
Consumer		24,659		0		17		24,676
Total	$	779,002	$	12,849	$	51,241	$	843,092
December 31, 2014
Commercial real estate
Non owner-occupied	$	115,276	$	10,884	$	11,273	$	137,433
All other CRE		90,740		8,618		19,273		118,631
Acquisition and development
1-4 family residential construction		12,920		0		790		13,710
All other A&D		72,323		1,356		11,912		85,591
Commercial and industrial		88,579		884		3,792		93,255
Residential mortgage
Residential mortgage - term		280,113		379		10,934		291,426
Residential mortgage - home equity		74,698		90		1,427		76,215
Consumer		23,658		0		72		23,730
Total	$	758,307	$	22,211	$	59,473	$	839,991

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

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans as of September 30, 2015 and December 31, 2014:

(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
September 30, 2015
Commercial real estate
Non owner-occupied	$	145,975	$	69	$	0	$	0	$	69	$	1,499	$	147,543
All other CRE		112,969		179		187		148		514		4,907		118,390
Acquisition and development
1-4 family residential construction		16,452		0		0		0		0		0		16,452
All other A&D		79,110		0		252		0		252		2,942		82,304
Commercial and industrial		74,532		79		0		0		79		169		74,780
Residential mortgage
Residential mortgage - term		297,653		438		1,638		509		2,585		2,029		302,267
Residential mortgage - home equity		75,374		798		278		0		1,076		230		76,680
Consumer		24,446		178		52		0		230		0		24,676
Total	$	826,511	$	1,741	$	2,407	$	657	$	4,805	$	11,776	$	843,092
December 31, 2014
Commercial real estate
Non owner-occupied	$	135,994	$	104	$	183	$	0	$	287	$	1,152	$	137,433
All other CRE		112,825		1,196		0		0		1,196		4,610		118,631
Acquisition and development
1-4 family residential construction		13,710		0		0		0		0		0		13,710
All other A&D		81,702		239		40		1		280		3,609		85,591
Commercial and industrial		93,060		0		20		4		24		171		93,255
Residential mortgage
Residential mortgage - term		279,340		8,654		1,350		416		10,420		1,666		291,426
Residential mortgage - home equity		74,913		577		313		69		959		343		76,215
Consumer		23,316		287		88		39		414		0		23,730
Total	$	814,860	$	11,057	$	1,994	$	529	$	13,580	$	11,551	$	839,991

Non-accrual loans which have been subject to a partial charge-off totaled $5.1 million at September 30, 2015, compared to $4.6 million at December 31, 2014. Loans secured by 1-4 family residential real estate properties in the process of foreclosure were $2.4 million at September 30, 2015 and $1.9 million at December 31, 2014.

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

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

The following table summarizes the primary segments of the ALL, as of September 30, 2015 and December 31, 2014 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
September 30, 2015
Individually evaluated for impairment	$	29	$	1,607	$	0	$	84	$	0	$	0	$	1,720
Collectively evaluated for impairment	$	2,552	$	2,881	$	734	$	3,608	$	216	$	500	$	10,491
Total ALL	$	2,581	$	4,488	$	734	$	3,692	$	216	$	500	$	12,211
December 31, 2014
Individually evaluated for impairment	$	36	$	1,141	$	0	$	59	$	0	$	0	$	1,236
Collectively evaluated for impairment	$	2,388	$	2,771	$	1,680	$	3,803	$	187	$	0	$	10,829
Total ALL	$	2,424	$	3,912	$	1,680	$	3,862	$	187	$	0	$	12,065

Management evaluates individual loans in all of the commercial segments for possible impairment if the loan (a) is greater than $500,000 or (b) is part of a relationship that is greater than $750,000 and is either (i) in nonaccrual status or (ii) risk-rated Substandard and greater than 60 days past due. Loans are considered to be impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Bank does not separately evaluate individual consumer and residential mortgage loans for impairment, unless such loans are part of a larger relationship that is impaired; otherwise, loans in these segments are considered impaired when they are classified as non-accrual.

Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods: (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs. The method is selected on a loan-by-loan basis, with management primarily utilizing the fair value of collateral method. If the fair value of the collateral less selling costs method is utilized for collateral securing loans in the commercial segments, then an updated external appraisal is ordered on the collateral supporting the loan if the loan balance is greater than $500,000 and the existing appraisal is greater than 18 months old. If an updated appraisal has not been received and reviewed in time for the determination of estimated fair value at quarter (or year) end, or if the appraisal is found to be deficient following the Corporation’s internal appraisal review process and re-ordered, then the estimated fair value of the collateral is determined by adjusting the existing appraisal by the appropriate percentage from an internally prepared appraisal discount grid. This grid considers the age of a third party appraisal and the geographic region where the collateral is located. The discount rates in the appraisal discount grid are updated periodically to reflect the most current knowledge that management has available, including the results of current appraisals. A specific allocation of the ALL is recorded if there is any deficiency in collateral value determined by comparing the estimated fair value to the recorded investment of the loan. When updated appraisals are received and reviewed, adjustments are made to the specific allocation as needed.

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

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of September 30, 2015 and December 31, 2014:

	Impaired Loans with Specific Allowance				Impaired Loans with No Specific Allowance		Total Impaired Loans
(in thousands)	Recorded Investment		Related Allowances		Recorded Investment		Recorded Investment		Unpaid Principal Balance
September 30, 2015
Commercial real estate
Non owner-occupied	$	137	$	29	$	4,445	$	4,582	$	4,592
All other CRE		0		0		7,902		7,902		8,401
Acquisition and development
1-4 family residential construction		700		68		0		700		746
All other A&D		4,419		1,539		571		4,990		8,756
Commercial and industrial		0		0		1,031		1,031		3,298
Residential mortgage
Residential mortgage - term		298		84		4,245		4,543		4,967
Residential mortgage – home equity		0		0		277		277		298
Consumer		0		0		0		0		0
Total impaired loans	$	5,554	$	1,720	$	18,471	$	24,025	$	31,058
December 31, 2014
Commercial real estate
Non owner-occupied	$	143	$	35	$	4,353	$	4,496	$	4,543
All other CRE		0		0		7,453		7,453		7,944
Acquisition and development
1-4 family residential construction		790		105		0		790		836
All other A&D		3,615		1,037		2,148		5,763		9,590
Commercial and industrial		0		0		1,861		1,861		2,723
Residential mortgage
Residential mortgage - term		296		59		3,779		4,075		4,485
Residential mortgage – home equity		0		0		343		343		363
Consumer		0		0		0		0		0
Total impaired loans	$	4,844	$	1,236	$	19,937	$	24,781	$	30,484

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

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

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

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

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL. Residential mortgage and consumer loans are charged off after they are 120 days contractually past due. All other loans are charged off based on an evaluation of the facts and circumstances of each individual loan. When the Bank believes that its ability to collect is solely dependent on the liquidation of the collateral, a full or partial charge-off is recorded promptly to bring the recorded investment to an amount that the Bank believes is supported by an ability to collect on the collateral. The circumstances that may impact the Bank’s decision to charge-off all or a portion of a loan include default or non-payment by the borrower, scheduled foreclosure actions, and/or prioritization of the Bank’s claim in bankruptcy. There may be circumstances where, due to pending events, the Bank will place a specific allocation of the ALL on a loan for which a partial charge-off has been previously recognized. This specific allocation may be either charged off or removed depending upon the outcome of the pending event. Full or partial charge-offs are not recovered until full principal and interest on the loan have been collected, even if a subsequent appraisal supports a higher value. Loans with partial charge-offs generally remain in non-accrual status. Both full and partial charge-offs reduce the recorded investment of the loan and the ALL and are considered to be charge-offs for purposes of all credit loss metrics and trends, including the historical rolling charge-off rates used in the determination of the ALL. At September 30, 2015, $.5 million of the ALL was considered to be unallocated.

22

The following tables present the activity in the ALL for the nine- and three-month periods ended September 30, 2015 and 2014:

(in thousands)	Commercial Real Estate			Acquisition and Development			Commercial and Industrial			Residential Mortgage			Consumer			Unallocated		Total
ALL balance at January 1, 2015	$	2,424		$	3,912		$	1,680		$	3,862		$	187		$	0	$	12,065
Charge-offs		(295	)		(256	)		0			(200	)		(247	)		0		(998	)
Recoveries		66			100			24			162			166			0		518
Provision		386			732			(970	)		(132	)		110			500		626
ALL balance at September 30, 2015	$	2,581		$	4,488		$	734		$	3,692		$	216		$	500	$	12,211
ALL balance at January 1, 2014	$	4,052		$	4,172		$	766		$	4,320		$	284		$	0	$	13,594
Charge-offs		(85	)		(2,423	)		(213	)		(682	)		(380	)		0		(3,783	)
Recoveries		11			104			22			183			308			0		628
Provision		(1,386	)		1,857			1,016			158			(16	)		0		1,629
ALL balance at September 30, 2014	$	2,592		$	3,710		$	1,591		$	3,979		$	196		$	0	$	12,068

(in thousands)	Commercial Real Estate			Acquisition and Development			Commercial and Industrial			Residential Mortgage			Consumer			Unallocated		Total
ALL balance at July 1, 2015	$	2,566		$	3,806		$	1,007		$	3,707		$	223		$	500	$	11,809
Charge-offs		(8	)		0			0			(164	)		(73	)		0		(245	)
Recoveries		1			59			4			29			54			0		147
Provision		22			623			(277	)		120			12			0		500
ALL balance at September 30, 2015	$	2,581		$	4,488		$	734		$	3,692		$	216		$	500	$	12,211
ALL balance at July 1, 2014	$	2,839		$	3,642		$	1,553		$	4,178		$	251		$	0	$	12,463
Charge-offs		(64	)		(903	)		(5	)		(116	)		(117	)		0		(1,205	)
Recoveries		1			33			15			27			46			0		122
Provision		(184	)		938			28			(110	)		16			0		688
ALL balance at September 30, 2014	$	2,592		$	3,710		$	1,591		$	3,979		$	196		$	0	$	12,068

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.

23

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

	Nine months ended						Nine months ended
	September 30, 2015						September 30, 2014
(in thousands)	Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis		Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis
Commercial real estate
Non owner-occupied	$	4,314	$	117	$	0	$	1,890	$	28	$	0
All other CRE		7,626		89		8		9,497		116		67
Acquisition and development
1-4 family residential construction		745		26		0		1,690		34		0
All other A&D		5,311		94		0		8,108		129		0
Commercial and industrial		1,471		60		18		2,065		70		2
Residential mortgage
Residential mortgage - term		4,245		124		4		6,552		154		55
Residential mortgage – home equity		349		0		2		640		4		4
Consumer		7		0		0		11		0		0
Total	$	24,068	$	510	$	32	$	30,453	$	535	$	128

	Three months ended						Three months ended
	September 30, 2015						September 30, 2014
(in thousands)	Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis		Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis
Commercial real estate
Non owner-occupied	$	4,607	$	39	$	0	$	2,591	$	17	$	0
All other CRE		7,935		34		0		8,506		35		23
Acquisition and development
1-4 family residential construction		701		8		0		1,016		9		0
All other A&D		5,091		31		0		7,540		33		0
Commercial and industrial		1,253		13		0		1,905		21		0
Residential mortgage
Residential mortgage - term		4,400		42		2		6,225		47		3
Residential mortgage – home equity		321		0		0		597		0		3
Consumer		0		0		0		0		0		0
Total	$	24,308	$	167	$	2	$	28,380	$	162	$	29

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

24

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

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

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

25

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

	Temporary Rate Modification				Extension of Maturity				Modification of Payment and Other Terms
(in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Nine months ended September 30, 2015
Commercial real estate
Non owner-occupied		0	$	0		1	$	3,097		1	$	136
All other CRE		0		0		1		237		5		3,847
Acquisition and development
1-4 family residential construction		0		0		0		0		1		700
All other A&D		0		0		3		372		1		1,746
Commercial and industrial		0		0		1		930		0		0
Residential mortgage
Residential mortgage – term		1		156		2		599		1		116
Residential mortgage – home equity		0		0		0		0		0		0
Consumer		0		0		0		0		0		0
Total		1	$	156		8	$	5,235		9	$	6,545

	Temporary Rate Modification				Extension of Maturity				Modification of Payment and Other Terms
(in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Three months ended September 30, 2015
Commercial real estate
Non owner-occupied		0	$	0		0	$	0		0	$	0
All other CRE		0		0		0		0		0		0
Acquisition and development
1-4 family residential construction		0		0		0		0		1		700
All other A&D		0		0		0		0		1		1,746
Commercial and industrial		0		0		0		0		0		0
Residential mortgage
Residential mortgage – term		1		156		0		0		0		0
Residential mortgage – home equity		0		0		0		0		0		0
Consumer		0		0		0		0		0		0
Total		1	$	156		0	$	0		2	$	2,446

During the nine months ended September 30, 2015, there were eight new TDRs. In addition, 10 existing TDRs which had reached their original modification maturity were re-modified. A $5,744 reduction of the ALL resulted from a change to the impairment evaluation of two loans from evaluated collectively to being evaluated individually. The remaining six new TDRs were impaired at the time of modification, resulting in no impact to the ALL as a result of the modifications and there was no impact to the recorded investment relating to the transfer of these loans.

During the quarter ended June 30, 2015, one residential mortgage loan totaling $70,000 that was modified as a TDR within the previous 12 months was transferred to non-accrual, and is considered a payment default. There were no payment defaults in the quarters ended September 30, 2015 or March 31, 2015.

26

	Temporary Rate Modification				Extension of Maturity				Modification of Payment and Other Terms
(in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Nine Months Ended September 30, 2014
Commercial real estate
Non owner-occupied		0	$	0		2	$	277		0	$	0
All other CRE		0		0		0		0		4		2,627
Acquisition and development
1-4 family residential construction		0		0		0		0		0		0
All other A&D		0		0		0		0		0		0
Commercial and industrial		0		0		0		0		0		0
Residential mortgage
Residential mortgage – term		1		90		0		0		0		0
Residential mortgage – home equity		0		0		0		0		0		0
Consumer		0		0		0		0		0		0
Total		1	$	90		2	$	277		4	$	2,627

	Temporary Rate								Modification of Payment
	Modification				Extension of Maturity				and Other Terms
	Number of		Recorded		Number of		Recorded		Number of		Recorded
(in thousands)	Contracts		Investment		Contracts		Investment		Contracts		Investment
Three Months Ended September 30, 2014
Commercial real estate
Non owner-occupied		0	$	0		0	$	0		0	$	0
All other CRE		0		0		0		0		0		0
Acquisition and development
1-4 family residential construction		0		0		0		0		0		0
All other A&D		0		0		0		0		0		0
Commercial and industrial		0		0		0		0		0		0
Residential mortgage
Residential mortgage – term		0		0		0		0		0		0
Residential mortgage – home equity		0		0		0		0		0		0
Consumer		0		0		0		0		0		0
Total		0	$	0		0	$	0		0	$	0

During the nine months ended September 30, 2014, there were two new TDRs. In addition, five existing TDRs which had reached their original modification maturity were re-modified. A $1,055 reduction of the ALL resulted from a change to the impairment evaluation of one loan, from evaluated collectively to being evaluated individually. The remaining new TDR was impaired at the time of modification, resulting in no impact to the ALL as a result of the modifications and there was no impact to the recorded investment relating to the transfer of these loans.

During the nine months ended September 30, 2014, three A&D loans totaling $1.7 million, a $.2 million C&I loan and a $.4 million owner-occupied CRE loan that were modified as TDRs within the previous 12 months were transferred to non-accrual, and are considered payment defaults.

27

Note 8 - Other Real Estate Owned

The following table presents the components of Other Real Estate Owned (“OREO”) at September 30, 2015 and December 31, 2014:

(in thousands)	September 30, 2015		December 31, 2014
Commercial real estate	$	1,728	$	1,772
Acquisition and development		4,746		9,263
Residential mortgage		1,003		1,897
Total OREO	$	7,477	$	12,932

The following table presents the activity in the OREO valuation allowance for the nine- and three-month periods ended September 30, 2015 and 2014:

	For the Nine Months Ended						For the Three Months Ended
	September 30,						September 30,
(in thousands)	2015			2014			2015			2014
Balance beginning of period	$	3,440		$	4,047		$	3,843		$	3,742
Fair value write-down		1,202			885			350			442
Sales of OREO		(831	)		(1,155	)		(382	)		(407	)
Balance at end of period	$	3,811		$	3,777		$	3,811		$	3,777

The following table presents the components of OREO expenses, net, for the nine- and three-month periods ended September 30, 2015 and 2014:

	For the Nine Months Ended						For the Three Months Ended
	September 30,						September 30,
(in thousands)	2015			2014			2015			2014
(Gains)/losses on real estate, net	$	(718	)	$	921		$	(640	)	$	(49	)
Fair value write-down, net		1,202			885			350			442
Expenses, net		704			594			248			237
Rental and other income		(212	)		(272	)		(29	)		(116	)
Total OREO expense/(income), net	$	976		$	2,128		$	(71	)	$	514

Note 9 – Fair Value of Financial Instruments

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

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

28

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

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

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

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

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

Management believes that the Corporation’s valuation techniques are appropriate and consistent with the techniques used by other market participants. However, the use of different methodologies and assumptions could result in a different estimate of fair values at the reporting date. The valuation techniques used by the Corporation to measure, on a recurring and non-recurring basis, the fair value of assets as of September 30, 2015 are discussed in the paragraphs that follow.

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

The fair value of investments is determined using a market approach. As of September 30, 2015, the U.S. Government agencies, residential and commercial mortgage-backed securities, collateralized mortgage obligations, and state and political subdivisions bonds segments are classified as Level 2 within the valuation hierarchy. Their fair values were determined based upon market-corroborated inputs and valuation matrices, which were obtained through third party data service providers or securities brokers through which the Corporation has historically transacted both purchases and sales of investment securities.

The CDO segment, which consists of pooled trust preferred securities issued by banks, thrifts and insurance companies, is classified as Level 3 within the valuation hierarchy. At September 30, 2015, the Corporation owned 16 pooled trust preferred securities with an amortized cost of $35.6 million and a fair value of $31.9 million. The market for these securities at September 30, 2015 is not active and markets for similar securities are also not active. The inactivity was evidenced first by a significant widening of the bid-ask spread in the brokered markets in which these securities trade and then by a significant decrease in the volume of trades relative to historical levels. The new issue market is also inactive, as few CDOs have been issued since 2007. There are currently very few market participants who are willing to effect transactions in these securities. The market values for these securities or any securities other than those issued or guaranteed by the U.S. Department of the Treasury (the “Treasury”) are depressed relative to historical levels. Therefore, in the current market, a low market price for a particular bond may only provide evidence of stress in the credit markets in general rather than being an indicator of credit problems with a particular issue. Given the conditions in the current debt markets and the absence of observable transactions in the secondary and new issue markets, management has determined that (a) the few observable transactions and market quotations that are available are not reliable for the purpose of obtaining fair value at September 30, 2015, (b) an income valuation approach technique (i.e. present value) that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs will be equally or more representative of fair value than a market approach, and (c) the CDO segment is appropriately classified within Level 3 of the valuation hierarchy because management determined that significant adjustments were required to determine fair value at the measurement date.

29

Management relies on an independent third party to prepare both the evaluations of OTTI as well as the fair value determinations for its CDO portfolio. Management believes that the valuations are adequately reflected at September 30, 2015.

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

Derivative financial instruments (Cash flow hedge) – The Corporation’s open derivative positions are interest rate swaps that are classified as Level 3 within the valuation hierarchy. Open derivative positions are valued using externally developed pricing models based on observable market inputs provided by a third party and validated by management. The Corporation has considered counterparty credit risk in the valuation of its interest rate swap assets.

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

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

30

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of September 30, 2015 and December 31, 2014, the significant unobservable inputs used in the fair value measurements were as follows:

(in thousands)	Fair Value at September 30, 2015			Valuation Technique	Significant Unobservable Inputs	Significant  Unobservable Input  Value
Recurring:
Investment Securities – available for sale	$	31,928		Discounted Cash Flow	Discount Rate	Range of Libor+ 5.50% to 9.50%
Cash Flow Hedge	$	(107	)	Discounted Cash Flow	Reuters Third Party Market Quote	99.9% (weighted avg 99.9%)
Non-recurring:
Impaired Loans	$	5,985		Market Comparable Properties	Marketability Discount	3% -15% (1) (weighted avg 11.6%)
Other Real Estate Owned	$	2,278		Market Comparable Properties	Marketability Discount	10.0% -15.0% (1) (weighted avg 12.3%)

(in thousands)	Fair Value at December 31, 2014			Valuation Technique	Significant Unobservable Inputs	Significant  Unobservable Input  Value
Recurring:
Investment Securities – available for sale	$	25,339		Discounted Cash Flow	Discount Rate	Range of Libor+ 5% to 12%
Cash Flow Hedge	$	(199	)	Discounted Cash Flow	Reuters Third Party Market Quote	99.9% (weighted avg 99.9%)
Non-recurring:
Impaired Loans	$	9,122		Market Comparable Properties	Marketability Discount	10% (1) (weighted avg 10%)
Other Real Estate Owned	$	2,511		Market Comparable Properties	Marketability Discount	10% -15% (1) (weighted avg 11%)

NOTE:

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

31

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 September 30, 2015 and December 31, 2014 are as follows:

				Fair Value Measurements at September 30, 2015 Using
	Assets  Measured at  Fair Value			Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs		Significant Unobservable  Inputs
(in thousands)	9/30/2015			(Level 1)	(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	34,221			$	34,221
Residential mortgage-backed agencies	$	14,494			$	14,494
Commercial mortgage-backed agencies	$	45,805			$	45,805
Collateralized mortgage obligations	$	10,217			$	10,217
Obligations of states and political subdivisions	$	48,854			$	48,854
Collateralized debt obligations	$	31,928					$	31,928
Financial Derivative	$	(107	)				$	(107	)
Non-recurring:
Impaired loans	$	5,985					$	5,985
Other real estate owned	$	2,278					$	2,278

				Fair Value Measurements at December 31, 2014 Using
	Assets  Measured at  Fair Value			Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs		Significant  Unobservable  Inputs
(in thousands)	12/31/2014			(Level 1)	(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. treasuries	$	29,596			$	29,596
U.S. government agencies	$	38,941			$	38,941
Residential mortgage-backed agencies	$	45,273			$	45,273
Commercial mortgage-backed agencies	$	25,957			$	25,957
Collateralized mortgage obligations	$	8,707			$	8,707
Obligations of states and political subdivisions	$	47,304			$	47,304
Collateralized debt obligations	$	25,339					$	25,339
Financial Derivative	$	(199	)				$	(199	)
Non-recurring:
Impaired loans	$	9,122					$	9,122
Other real estate owned	$	2,511					$	2,511

There were no transfers of assets between any of the fair value hierarchy for the nine-month periods ended September 30, 2015 and 2014.

32

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 nine- and three-month periods ended September 30, 2015 and 2014:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In thousands)	Investment Securities Available for Sale		Cash Flow Hedge
Beginning balance January 1, 2015	$	25,339	$	(199	)
Total gains realized/unrealized:
Included in other comprehensive income		6,589		92
Ending balance September 30, 2015	$	31,928	$	(107	)

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(in thousands)	Investment Securities Available for Sale		Cash Flow Hedge
Beginning balance January 1, 2014	$	17,538	$	(457	)
Total gains realized/unrealized:
Included in other comprehensive income		6,868		229
Ending balance September 30, 2014	$	24,406	$	(228	)

	Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
(in thousands)	Investment Securities Available for Sale		Cash Flow Hedge
Beginning balance July 1, 2015	$	30,046	$	(140	)
Total gains realized/unrealized:
Included in other comprehensive income		1,882		33
Ending balance September 30, 2015	$	31,928	$	(107	)

	Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
(in thousands)	Investment Securities Available for Sale		Cash Flow Hedge
Beginning balance July 1, 2014	$	23,921	$	(272	)
Total gains realized/unrealized:
Included in other comprehensive income		485		44
Ending balance September 30, 2014	$	24,406	$	(228	)

Gains (realized and unrealized) included in earnings for the periods identified above are reported in the Consolidated Statement of Operations in Other Operating Income. There were no gains or losses included in earnings attributable to the change in realized/unrealized gains or losses related to the assets for the nine- and three- months ended September 30, 2015 and 2014.

33

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

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

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

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

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

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

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

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

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

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

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

34

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:

	September 30, 2015				Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	61,406	$	61,406	$	61,406
Interest bearing deposits in banks		3,383		3,383		3,383
Investment securities - AFS		185,519		185,519			$	153,591	$	31,928
Investment securities - HTM		106,732		108,759				106,134		2,625
Restricted bank stock		5,904		5,904				5,904
Loans, net		830,881		835,132						835,132
Accrued interest receivable		3,709		3,709				3,709
Financial Liabilities:
Deposits – non-maturity		730,899		730,899				730,899
Deposits – time deposits		265,442		269,464				269,464
Short-term borrowed funds		38,460		38,460				38,460
Long-term borrowed funds		147,555		150,565				150,565
Accrued interest payable		622		622				622
Financial derivative		107		107						107
Off balance sheet financial instruments		0		0		0

35

	December 31, 2014				Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	27,554	$	27,554	$	27,554
Interest bearing deposits in banks		7,897		7,897		7,897
Investment securities - AFS		221,117		221,117			$	195,778	$	25,339
Investment securities - HTM		109,449		110,771				108,163		2,608
Restricted bank stock		7,524		7,524				7,524
Loans, net		827,926		830,904						830,904
Accrued interest receivable		4,152		4,152				4,152
Financial Liabilities:
Deposits- non-maturity		689,581		689,581				689,581
Deposits- time deposits		291,742		296,713				296,713
Short-term borrowed funds		39,801		39,801				39,801
Long-term borrowed funds		182,606		187,143				187,143
Accrued interest payable		882		882				882
Financial derivative		199		199						199
Off balance sheet financial instruments		0		0		0

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

36

Note 10 – Accumulated Other Comprehensive Loss

The following table presents the changes in each component of accumulated other comprehensive loss for the 12 months ended December 31, 2014 and the three-month periods ended March 31, 2015, June 30, 2015 and September 30, 2015:

(in thousands)	Investment securities- with OTTI AFS			Investment securities- all other AFS			Investment securities- HTM			Cash Flow Hedge			Pension Plan			SERP			Total
Accumulated OCL, net:
Balance - January 1, 2014	$	(7,623	)	$	(11,292	)	$	0		$	(274	)	$	(5,088	)	$	64		$	(24,213	)
Other comprehensive income/(loss) before reclassifications		4,349			8,712			(2,395	)		155			(6,513	)		(319	)		3,989
Amounts reclassified from accumulated other comprehensive loss		(405	)		25			140			0			209			22			(9	)
Balance - December 31, 2014	$	(3,679	)	$	(2,555	)	$	(2,255	)	$	(119	)	$	(11,392	)	$	(233	)	$	(20,233	)
Other comprehensive income/(loss) before reclassifications		1,670			621			0			21			(202	)		0			2,110
Amounts reclassified from accumulated other comprehensive loss		(100	)		58			70			0			112			10			150
Balance – March 31, 2015	$	(2,109	)	$	(1,876	)	$	(2,185	)	$	(98	)	$	(11,482	)	$	(223	)	$	(17,973	)
Other comprehensive income/(loss) before reclassifications		1,350			36			0			14			(856	)		0			544
Amounts reclassified from accumulated other comprehensive loss		(104	)		(48	)		91			0			110			11			60
Balance – June 30, 2015	$	(863	)	$	(1,888	)	$	(2,094	)	$	(84	)	$	(12,228	)	$	(212	)	$	(17,369	)
Other comprehensive income/(loss) before reclassifications		997			700			0			20			(1,737	)		0			(20	)
Amounts reclassified from accumulated other comprehensive loss		(84	)		27			64			0			121			10			138
Balance - September 30,2015	$	50		$	(1,161	)	$	(2,030	)	$	(64	)	$	(13,844	)	$	(202	)	$	(17,251	)

37

The following tables present the components of comprehensive income for the nine- and three-month periods ended September 30, 2015 and 2014:

Components of Comprehensive Income (in thousands)	Before Tax Amount			Tax (Expense) Benefit			Net
For the nine months ended September 30, 2015
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	6,682		$	(2,665	)	$	4,017
Less:  accretable yield recognized in income		479			(191	)		288
Net unrealized gains on investments with OTTI		6,203			(2,474	)		3,729
Available for sale securities – all other:
Unrealized holding gains		2,380			(949	)		1,431
Less:  gains recognized in income		62			(25	)		37
Net unrealized gains on all other AFS securities		2,318			(924	)		1,394
Held to maturity securities:
Unrealized holding gains		0			0			0
Less:  amortization recognized in income		(374	)		149			(225	)
Net unrealized gains on HTM securities		374			(149	)		225
Cash flow hedges:
Unrealized holding gains		92			(37	)		55
Pension Plan:
Unrealized net actuarial loss		(4,651	)		1,856			(2,795	)
Less: amortization of unrecognized loss		(576	)		229			(347	)
Less: amortization of transition asset		15			(6	)		9
Less: amortization of prior service costs		(9	)		4			(5	)
Net pension plan liability adjustment		(4,081	)		1,629			(2,452	)
SERP:
Unrealized net actuarial loss		0			0			0
Less: amortization of unrecognized loss		(37	)		15			(22	)
Less: amortization of prior service costs		(15	)		6			(9	)
Net SERP liability adjustment		52			(21	)		31
Other comprehensive income	$	4,958		$	(1,976	)	$	2,982

38

Components of Comprehensive Income (in thousands)	Before Tax Amount			Tax (Expense) Benefit			Net
For the nine months ended September 30, 2014
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	6,149		$	(2,460	)	$	3,689
Less:  accretable yield recognized in income		501			(200	)		301
Net unrealized gains on investments with OTTI		5,648			(2,260	)		3,388
Available for sale securities – all other:
Unrealized holding gains		13,746			(5,496	)		8,250
Less:  losses recognized in income		(7	)		2			(5	)
Net unrealized gains on all other AFS securities		13,753			(5,498	)		8,255
Held to maturity securities:
Unrealized holding losses		(3,984	)		1,593			(2,391	)
Less:  amortization recognized in income		(127	)		51			(76	)
Net unrealized losses on HTM securities		(3,857	)		1,542			(2,315	)
Cash flow hedges:
Unrealized holding gains		229			(92	)		137
Pension Plan:
Unrealized net actuarial loss		(1,345	)		539			(806	)
Less: amortization of unrecognized loss		(280	)		112			(168	)
Less: amortization of transition asset		30			(12	)		18
Less: amortization of prior service costs		(9	)		3			(6	)
Net pension plan liability adjustment		(1,086	)		436			(650	)
SERP:
Unrealized net actuarial loss		0			0			0
Less: amortization of unrecognized gain		13			(5	)		8
Less: amortization of prior service costs		(15	)		6			(9	)
Net SERP liability adjustment		2			(1	)		1
Other comprehensive income	$	14,689		$	(5,873	)	$	8,816

39

Components of Comprehensive Income (in thousands)	Before Tax Amount			Tax (Expense) Benefit			Net
For the three months ended September 30, 2015
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	1,658		$	(661	)	$	997
Less:  accretable yield recognized in income		139			(55	)		84
Net unrealized gains on investments with OTTI		1,519			(606	)		913
Available for sale securities – all other:
Unrealized holding gains		1,288			(515	)		773
Less:  gains recognized in income		79			(33	)		46
Net unrealized gains on all other AFS securities		1,209			(482	)		727
Held to maturity securities:
Unrealized holding gains		0			0			0
Less:  amortization recognized in income		(106	)		42			(64	)
Net unrealized gains on HTM securities		106			(42	)		64
Cash flow hedges:
Unrealized holding gains		33			(13	)		20
Pension Plan:
Unrealized net actuarial loss		(2,892	)		1,153			(1,739	)
Less: amortization of unrecognized loss		(204	)		80			(124	)
Less: amortization of transition asset		5			(2	)		3
Less: amortization of prior service costs		(3	)		1			(2	)
Net pension plan liability adjustment		(2,690	)		1,074			(1,616	)
SERP:
Unrealized net actuarial loss		0			0			0
Less: amortization of unrecognized loss		(13	)		5			(8	)
Less: amortization of prior service costs		(5	)		3			(2	)
Net SERP liability adjustment		18			(8	)		10
Other comprehensive income	$	195		$	(77	)	$	118

40

Components of Comprehensive Income (in thousands)	Before Tax Amount			Tax (Expense) Benefit			Net
For the three months ended September 30, 2014
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	748		$	(300	)	$	448
Less:  accretable yield recognized in income		170			(68	)		102
Net unrealized gains on investments with OTTI		578			(232	)		346
Available for sale securities – all other:
Unrealized holding gains		3			(2	)		1
Less:  gains recognized in income		147			(59	)		88
Net unrealized losses on all other AFS securities		(144	)		57			(87	)
Held to maturity securities:
Unrealized holding gains		0			0			0
Less:  amortization recognized in income		(95	)		38			(57	)
Net unrealized gains on HTM securities		95			(38	)		57
Cash flow hedges:
Unrealized holding gains		44			(18	)		26
Pension Plan:
Unrealized net actuarial loss		(1,233	)		494			(739	)
Less: amortization of unrecognized loss		(93	)		37			(56	)
Less: amortization of transition asset		10			(4	)		6
Less: amortization of prior service costs		(3	)		1			(2	)
Net pension plan liability adjustment		(1,147	)		460			(687	)
SERP:
Unrealized net actuarial loss		0			0			0
Less: amortization of unrecognized gain		4			(1	)		3
Less: amortization of prior service costs		(5	)		2			(3	)
Net SERP liability adjustment		1			(1	)		0
Other comprehensive loss	$	(573	)	$	228		$	(345	)

41

The following table presents the details of amount reclassified from accumulated other comprehensive loss for the nine- and three-month periods ended September 30, 2015 and 2014:

Amounts Reclassified From Accumulated Other Comprehensive Loss (in thousands)	For the nine months ended September 30, 2015			For the Nine months ended September 30, 2014			Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on investment securities with OTTI:
Accretable yield	$	479		$	501		Interest income on taxable investment securities
Taxes		(191	)		(200	)	Tax expense
	$	288		$	301		Net of tax
Unrealized gains and losses on available for sale investment securities - all others:
Gains/(losses) on sales	$	62		$	(7	)	Net gains/(losses) - other
Taxes		(25	)		2		Tax (expense)/benefit
	$	37		$	(5	)	Net of tax
Unrealized losses on held to maturity securities:
Amortization	$	(374	)	$	(127	)	Interest income on taxable investment securities
Taxes		149			51		Tax benefit
	$	(225	)	$	(76	)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss		(576	)		(280	)	Salaries and employee benefits
Amortization of transition asset		15			30		Salaries and employee benefits
Amortization of prior service costs		(9	)		(9	)	Salaries and employee benefits
Taxes		227			103		Tax benefit
	$	(343	)	$	(156	)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized (loss)/gain		(37	)		13		Salaries and employee benefits
Amortization of prior service costs		(15	)		(15	)	Salaries and employee benefits
Taxes		21			1		Tax benefit
	$	(31	)	$	(1	)	Net of tax
Total reclassifications for the period	$	(274	)	$	63		Net of tax

42

Amounts Reclassified From Accumulated Other Comprehensive Loss (in thousands)	For the Three months ended September 30, 2015			For the Three months ended September 30, 2014			Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on investment securities with OTTI:
Accretable Yield	$	139		$	170		Interest income on taxable investment securities
Taxes		(55	)		(68	)	Tax expense
	$	84		$	102		Net of tax
Unrealized gains and losses on available for sale investment securities - all others:
Gains on sales	$	79		$	147		Net gains - other
Taxes		(33	)		(59	)	Tax expense
	$	46		$	88		Net of tax
Unrealized losses on held to maturity securities:
Amortization	$	(106	)	$	(95	)	Interest income on taxable investment securities
Taxes		42			38		Tax benefit
	$	(64	)	$	(57	)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss		(204	)		(93	)	Salaries and employee benefits
Amortization of transition asset		5			10		Salaries and employee benefits
Amortization of prior service costs		(3	)		(3	)	Salaries and employee benefits
Taxes		79			34		Tax benefit
	$	(123	)	$	(52	)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized (loss)/gain		(13	)		4		Salaries and employee benefits
Amortization of prior service costs		(5	)		(5	)	Salaries and employee benefits
Taxes		8			1		Tax benefit
	$	(10	)	$	0		Net of tax
Total reclassifications for the period	$	(67	)	$	81		Net of tax

Note 11 – Junior Subordinated Debentures and Restrictions on Dividends

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

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

43

$20.6 million—floating rate payable quarterly based on three-month LIBOR plus 275 basis points (3.08% at September 30, 2015), maturing in 2034, became redeemable five years after issuance at First United Corporation’s option.

$10.3 million—floating rate payable quarterly based on three-month LIBOR plus 275 basis points (3.08% at September 30, 2015) maturing in 2034, became redeemable five years after issuance at First United Corporation’s option.

In December 2004, First United Corporation issued $5.0 million of junior subordinated debentures to third-party investors that were not tied to preferred securities. The debentures had a fixed rate of 5.88% for the first five years, payable quarterly, and converted to a floating rate in March 2010 based on the three month LIBOR plus 185 basis points. The debentures matured in March 2015 and were repaid.

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

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

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

At the request of the Federal Reserve Bank of Richmond (the “Reserve Bank”) in December 2010, the Corporation’s Board of Directors elected to defer quarterly interest payments under the TPS Debentures beginning with the payments due in March 2011. The terms of the TPS Debentures permit the Corporation to elect to defer payments of interest for up to 20 consecutive quarterly periods, provided that no event of default exists under the TPS Debentures at the time of the election. An election to defer interest payments is not considered a default under the TPS Debentures. In February 2014, First United Corporation received approval from the Reserve Bank to terminate this deferral by making the quarterly interest payments due to the Trusts in March 2014 and paying all deferred interest for prior quarters and has since received approval for interest payments through December 2015.

Until further notice from the Reserve Bank, First United Corporation is required to obtain the Reserve Bank’s prior approval before making any future interest payments under the TPS Debentures. In considering a request for approval, the Reserve Bank will consider, among other things, the Corporation’s financial condition and its quarterly results of operations. In addition to this pre-approval requirement, First United Corporation’s ability to make future quarterly interest payments under the TPS Debentures will depend in large part on its receipt of dividends from the Bank, and the Bank may make dividend payments only with the prior approval of the Federal Deposit Insurance Corporation (the “FDIC”) and the Maryland Commissioner of Financial Regulation (the “Maryland Commissioner”). As a result of these limitations, no assurance can be given that First United Corporation will make the quarterly interest payments due under the TPS Debentures in any future quarter. In the event that First United Corporation and/or the Bank do not receive the approvals necessary for First United Corporation to make future quarterly interest payments, First United Corporation will have to again elect to defer interest payments.

44

The terms of First United Corporation’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”) call for the payment, if declared by the Corporation’s Board of Directors, of cash dividends on February 15^th, May 15^th, August 15^th and November 15^th of each year. On November 15, 2010, at the request of the Reserve Bank, the Corporation’s Board of Directors voted to suspend quarterly cash dividends on the Series A Preferred Stock beginning with the dividend payment due November 15, 2010. During the suspension, dividends of $.4 million per dividend period continued to accrue. In April 2014, the Corporation received approval from the Reserve Bank to terminate this deferral by making a $6.5 million payment to the Treasury, representing the quarterly dividend payment due in May 2014 and all unpaid dividends that accrued during the suspension period and has since received approval to make all subsequent dividend payments through November 2015.

Until further notice from the Reserve Bank, First United Corporation is required to obtain the Reserve Bank’s prior approval before making any future quarterly dividend payment on the Series A Preferred Stock. In considering a request for approval, the Reserve Bank will consider, among other things, the Corporation’s financial condition and its quarterly results of operations. In addition, First United Corporation’s ability to make future quarterly dividend payments on the Series A Preferred Stock will depend in large part on its receipt of dividends from the Bank, the declaration and payment of which, as discussed above, are subject to the prior approval of the FDIC and the Maryland Commissioner. If First United Corporation and/or the Bank do not obtain the regulatory approvals required for a particular quarterly dividend, then First United Corporation would have to again suspend quarterly dividend payments, which would result in a prohibition against paying any dividends or other distributions on the outstanding shares of First United Corporation’s common stock during the suspension period.

First United Corporation’s Board of Directors suspended the payment of dividends on the common stock in December 2010 when it approved the above-mentioned deferral of dividends on the Series A Preferred Stock.  That Board of Directors has not resumed the payment of cash dividends on the common stock, and no assurance can be given with respect to if or when such resumption will occur. 

Note 12 – Borrowed Funds

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

(Dollars in thousands)	Nine months ended September 30, 2015			Year ended December 31, 2014
Securities sold under agreements to repurchase:
Outstanding at end of period	$	38,460		$	39,801
Weighted average interest rate at end of period		0.15	%		0.15	%
Maximum amount outstanding as of any month end	$	47,131		$	53,819
Average amount outstanding	$	33,506		$	45,702
Approximate weighted average rate during the period		0.12	%		0.13	%

At September 30, 2015, the repurchase agreements were secured by $59.7 million in investment securities issued by government related agencies. A minimum of 102% of fair value is pledged against account balances.

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

	September 30,		December 31,
(in thousands)	2015		2014
FHLB advances, bearing fixed interest at rates ranging from 1.00% to 3.69% at September 30, 2015	$	105,825	$	135,876
Junior subordinated debt, bearing variable interest rate of 3.03% at September 30, 2015		30,929		35,929
Junior subordinated debt, bearing fixed interest rate of 9.88% at September 30, 2015		10,801		10,801
Total long-term debt	$	147,555	$	182,606

At September 30, 2015, the long-term FHLB advances were secured by $216.8 million in loans.

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

	September 30, 2015						December 31, 2014
(in thousands)	Fixed Rate		Floating Rate		Total		Total
Due in 2015		0		0		0		35,000
Due in 2016		0		0		0		0
Due in 2017		0		0		0		0
Due in 2018		70,000		0		70,000		70,000
Due in 2019		0		0		0		0
Thereafter		46,626		30,929		77,555		77,606
Total long-term debt	$	116,626	$	30,929	$	147,555	$	182,606

Note 13 – Employee Benefit Plans

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

Pension	For the nine months ended						For the three months ended
	September 30,						September 30,
(in thousands)	2015			2014			2015			2014
Service cost	$	242		$	193		$	74		$	64
Interest cost		1,177			1,106			403			369
Expected return on assets		(2,224	)		(1,990	)		(740	)		(662	)
Amortization of transition asset		(15	)		(30	)		(5	)		(10	)
Amortization of net actuarial loss		576			280			204			93
Amortization of prior service cost		9			9			3			3
Net pension credit included in employee benefits	$	(235	)	$	(432	)	$	(61	)	$	(143	)

SERP	For the nine months ended					For the three months ended
	September 30,					September 30,
(in thousands)	2015		2014			2015		2014
Service cost	$	87	$	71		$	29	$	23
Interest cost		174		172			58		58
Amortization of recognized loss/(gain)		37		(13	)		13		(4	)
Amortization of prior service cost		15		15			5		5
Net SERP expense included in employee benefits	$	313	$	245		$	105	$	82

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

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

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

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

The Corporation will assess the need for future annual contributions to the pension plan based upon its funded status and an evaluation of the future benefits to be provided thereunder. There have been no contributions made as of September 30, 2015. The Corporation expects to fund the annual projected benefit payments for the SERP from operations.

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

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Note 14 - Equity Compensation Plan Information

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

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

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

Stock-based awards were made to non-employee directors in May 2015 pursuant to First United Corporation’s director compensation policy. Beginning May 2014, each director’s annual retainer is paid in 1,000 shares of common stock, with the remainder of $10,000 paid in cash or any portion thereof, in shares of stock. Prior to May 2014, the retainer of the 1,000 shares of stock was paid in shares of stock in the amount of $5,000. A total of 16,022 fully-vested shares of common stock were issued to directors in 2015, which had a fair market value of $8.96 per share. Director stock compensation expense was $111,848 for the nine months ended September 30, 2015 and $95,035 for the nine months ended September 30, 2014. Stock compensation expense was $35,889 and $39,025 for the three months ended September 30, 2015 and 2014, respectively.

In the first quarter of 2015, a one-time stock grant was awarded to two executive officers in the amount of 10,232 shares. These shares do not have any performance restrictions; however, they have a two-year vesting period. Executive stock compensation expense was $32,094 for the nine months ended September 30, 2015 and $11,382 for the three months ended September 30, 2015.

Note 15 – Letters of Credit and Off Balance Sheet Liabilities

The Corporation does not issue any guarantees that would require liability recognition or disclosure other than the standby letters of credit issued by the Bank.  Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.  Generally, the Bank’s letters of credit are issued with expiration dates within one year.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  The Bank generally holds collateral and/or personal guarantees supporting these commitments.  The Bank had $1.7 million of outstanding standby letters of credit at September 30, 2015 and $.9 million at December 31, 2014. Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payment required by the letters of credit.  Management does not believe that the amount of the liability associated with guarantees under standby letters of credit outstanding at September 30, 2015 and December 31, 2014 is material.

Note 16 – Derivative Financial Instruments

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

In July 2009, the Corporation entered into three interest rate swap contracts totaling $20.0 million notional amount, hedging future cash flows associated with floating rate trust preferred debt. As of September 30, 2015, swap contracts totaling $5.0 million notional amount remained, as the three-year $5.0 million contract matured on June 15, 2012 and the five-year $10.0 million contract matured on June 17, 2014. The seven-year $5 million contract matures June 17, 2016. The fair value of the interest rate swap contract was ($107) thousand at September 30, 2015 and ($199) thousand at December 31, 2014 and was reported in Other Liabilities on the Consolidated Statement of Financial Condition. Cash in the amount of $.9 million was posted as collateral as of September 30, 2015.

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For the nine months ended September 30, 2015, the Corporation recorded an increase in the value of the derivatives of $92 thousand and the related deferred tax benefit of $37 thousand in net accumulated other comprehensive loss to reflect the effective portion of cash flow hedges. ASC Subtopic 815-30 requires this amount to be reclassified to earnings if the hedge becomes ineffective or is terminated. There was no hedge ineffectiveness recorded for the nine months ending September 30, 2015. The Corporation does not expect any losses relating to these hedges to be reclassified into earnings within the next 12 months.

Interest rate swap agreements are entered into with counterparties that meet established credit standards and the Corporation believes that the credit risk inherent in these contracts is not significant as of September 30, 2015.

The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the nine- and three-months ended September 30, 2015 and 2014.

Derivative in Cash Flow Hedging Relationships
(in thousands)	Amount of gain recognized in OCI on derivative (effective portion)		Amount of gain or (loss) reclassified from accumulated OCI into income (effective portion) (a)		Amount of gain or (loss) recognized in income or derivative (ineffective portion and amount excluded from effectiveness testing) (b)
Interest rate contracts:
Nine months ended:
September 30, 2015	$	55	$	0	$	0
September 30, 2014		137		0		0
Three months ended:
September 30, 2015	$	20	$	0	$	0
September 30, 2014		26		0		0

Notes:

(a) Reported as interest expense

(b) Reported as other income

Note 17 – Variable Interest Entities (VIE)

As noted in Note 11, First United Corporation created the Trusts for the purposes of raising regulatory capital through the sale of mandatorily redeemable preferred capital securities to third party investors and common equity interests to First United Corporation. The Trusts are considered Variable Interest Entities (“VIEs”), but are not consolidated because First United Corporation is not the primary beneficiary of the Trusts. At September 30, 2015, the Corporation reported all of the $41.7 million of TPS Debentures issued in connection with these offerings as long-term borrowings and it reported its $1.3 million equity interest in the Trusts as “Other Assets”.

In November 2009, the Bank became a 99.99% limited partner in Liberty Mews Limited Partnership (“Liberty Mews”), a Maryland limited partnership formed for the purpose of acquiring, developing and operating low-income housing units in Garrett County, Maryland. The Partnership was financed with a total of $10.6 million of funding, including a $6.1 million equity contribution from the Bank as the limited partner. Liberty Mews used the proceeds from these sources to purchase the land and construct a 36-unit low income housing rental complex at a total cost of $10.6 million. The total assets of Liberty Mews were approximately $9.2 million at September 30, 2015 and $9.4 million at December 31, 2014.

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

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

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

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

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

The Corporation’s tax expense for the nine months ended September 30, 2015 was approximately $.3 million lower as a result of the impact of the tax credits and the tax losses relating to the partnership.

At September 30, 2015 and December 31, 2014, the Corporation included its total investment in Liberty Mews in “Other Assets” in its Consolidated Statement of Financial Condition. As of September 30, 2015, the Corporation’s commitment in Liberty Mews was fully funded. The following table presents details of the Bank’s involvement with Liberty Mews at the dates indicated:

	September 30,		December 31,
(in thousands)	2015		2014
Investment in LIHTC Partnership
Carrying amount on Balance Sheet of:
Investment (Other Assets)	$	3,994	$	4,429
Maximum exposure to loss		3,994		4,429

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Note 18 – Assets and Liabilities Subject to Enforceable Master Netting Arrangements

Interest Rate Swap Agreements (“Swap Agreements”)

The Corporation has entered into interest rate swap agreements to modify the re-pricing characteristics of certain interest-bearing liabilities as a part of managing interest rate risk. The swap agreements have been designated as cash flow hedges, and accordingly, the fair value of the interest rate swap contracts is reported in Other Liabilities on the Consolidated Statement of Financial Condition. The swap agreements were entered into with a third party financial institution. The Corporation is party to master netting arrangements with its financial institution counterparty; however, the Corporation does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral, in the form of cash, is pledged by the Corporation as the counterparty with net liability positions in accordance with contract thresholds. See Note 16 to the Consolidated Financial Statements for more information.

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

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

The following table presents the liabilities subject to an enforceable master netting arrangement or repurchase agreements as of September 30, 2015 and December 31, 2014.

							Gross Amounts Not Offset in the Statement of Condition
(In thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Condition		Net Amounts of Liabilities Presented in the Statement of Condition		Financial Instruments			Cash Collateral Pledged		Net Amount
September 30, 2015
Interest Rate Swap Agreements	$	107	$	0	$	107	$	(107	)	$	0	$	0
Repurchase Agreements	$	38,460	$	0	$	38,460	$	(38,460	)	$	0	$	0
December 31, 2014
Interest Rate Swap Agreements	$	199	$	0	$	199	$	(199	)	$	0	$	0
Repurchase Agreements	$	39,801	$	0	$	39,801	$	(39,801	)	$	0	$	0

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Note 19 – Adoption of New Accounting Standards and Effects of New Accounting Pronouncements

In February 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 changes the consolidation analysis for all reporting entities. The changes primarily affect the consolidation of limited partnerships and their equivalents (e.g., limited liability companies), as well as structured vehicles such as collateralized debt obligations. The ASU simplifies U.S. GAAP by eliminating entity specific consolidation guidance for limited partnerships. It also revises other aspects of the consolidation analysis, including how kick-out rights, fee arrangements and related parties are assessed. The amendments rescind the indefinite deferral of FASB Statement 167 for certain investment funds and replace it with a permanent scope exception for money market funds. The ASU applies to all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. The Corporation is evaluating the provisions of ASU 2015-02, but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations.

In January 2015, the FASB issued ASU 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. ASU 2015-01 eliminates the requirement in Subtopic 225-20 to consider whether an underlying event or transaction is extraordinary and if so to separately present the item in the income statement net of tax, after income from continuing operations. Items that are either unusual in nature or infrequently occurring will continue to be reported as a separate component of income from continuing operations. Alternatively, these amounts may still be disclosed in the notes to the financial statements. The same requirement has been expanded to include items that are both unusual and infrequent, (i.e., they should be separately presented as a component of income from continuing operations or disclosed in the footnotes). The ASU applies to all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, and the Corporation adopted ASU 2015-01 effective January 1, 2015, which had no material impact on the Corporation’s financial condition or results of operations.

In August 2014, the FASB issued ASU 2014-14, Classification of Certain Government-Guaranteed Mortgage Loans Upon Foreclosure, an amendment of ASC Subtopic 310-40, Receivables – Troubled Debt Restructurings by Creditors. ASU 2014-14 specifies that a mortgage loan be derecognized and a separate other receivable be recognized upon foreclosure if the loan has a government guarantee that is not separable from the loan before foreclosure; and at the time of foreclosure, the creditor has the intent to convey the real estate to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under the amount of the claim, which must be a fixed amount determined on the basis of the fair value of the real estate. On January 1, 2015, the Corporation adopted the amendments in ASU 2014-14 using the prospective transition method, with no material impact on the Corporation’s financial condition or results of operations.

In June 2014, the FASB issued ASU 2014-11, Repurchase-to Maturity Transactions, Repurchase Financings, and Disclosures, an amendment of ASC Topic 860, Transfers and Servicing. The amendments in ASU 2014-11 require repurchase-to-maturity transactions to be accounted for as secured borrowing transactions on the balance sheet, rather than sales; and for repurchase financing arrangements, require separate accounting for a transfer of a financial asset executed contemporaneously with (or in contemplation of) a repurchase agreement with the same counterparty, which also will generally result in secured borrowing accounting for the repurchase agreement. The ASU also introduces new disclosures to increase transparency about the types of collateral pledged for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions that are accounted for as secured borrowings, and requires a transferor to disclose information about transactions accounted for as a sale in which the transferor retains substantially all of the exposure to the economic return on the transferred financial assets through an agreement with the transferee. On January 1, 2015, the Corporation adopted the amendments in ASU 2014-11, with no material impact on the Corporation’s financial condition or results of operations. The disclosures required by the ASU are found in Note 12.

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In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which establishes a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate, construction and software industries. ASU 2014-09 specifies that an entity shall recognize revenue when, or as, the entity satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when, or as, the customer obtains control of the asset. Entities are required to disclose qualitative and quantitative information on the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early adoption not permitted. In August 2015, the FASB issued ASU 2015-14 to defer the date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application would be permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Corporation is evaluating the provisions of ASU 2014-09, but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations.

In January 2014, the FASB issued ASU 2014-04, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure, which provides guidance clarifying when an in substance repossession or foreclosure occurs that would require a loan receivable to be derecognized and the real estate property recognized. ASU 2014-04 specifies the circumstances when a creditor should be considered to have received physical possession of the residential real estate property collateralizing a consumer mortgage loan, and requires interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate that are in the process of foreclosure. On January 1, 2015, the Corporation adopted the amendments in ASU 2014-04 using the prospective transition method. The adoption had no material impact on the Corporation’s financial condition or results of operations.

In January 2014, the FASB issued ASU 2014-01, Accounting for Investments in Qualified Affordable Housing Projects, which provides amendments and guidance on accounting for investments by a reporting entity in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for the low-income housing tax credit. The amendments permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. A reporting entity that uses the effective yield method to account for its investments in qualified affordable housing projects before the date of adoption may continue to apply the effective yield method for those preexisting investments. Additional disclosure requirements are applicable to all reporting entities, regardless of whether the election is made. On January 1, 2015, the Corporation adopted the amendments in ASU 2014-01. As of that date, the Corporation had a single investment in a flow-through limited liability entity that invests in an affordable housing project, for which it currently utilizes the effective yield method to account for its investment. As permitted by the ASU, the Corporation did not change its method of accounting. The disclosures required by the ASU are found in Note 17.

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

INTRODUCTION

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

FORWARD-LOOKING STATEMENTS

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

FIRST UNITED CORPORATION

First United Corporation is a Maryland corporation chartered in 1985 and a bank holding company registered with the Board of Governors of the Federal Reserve System (the “FRB”) under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). Between July 1, 1985 and September 24, 2014, the Corporation was registered with the FRB as a financial holding company under the federal Gramm-Leach-Bliley Act. The Corporation terminated its election to operate as a financial holding company because it is not engaged, and does not anticipate engaging in the foreseeable future, in any activity that requires that election. The termination is not expected to have any material impact on our future financial condition or results of operations. The Corporation’s primary business is serving as the parent company of First United Bank & Trust, a Maryland trust company (the “Bank”), First United Statutory Trust I (“Trust I”) and First United Statutory Trust II (“Trust II”), both Connecticut statutory business trusts, and First United Statutory Trust III, a Delaware statutory business trust (“Trust III” and together with Trust I and Trust II, the “Trusts”). The Trusts were formed for the purpose of selling trust preferred securities that qualified as Tier 1 capital. The Bank has three wholly-owned subsidiaries: OakFirst Loan Center, Inc., a West Virginia finance company; OakFirst Loan Center, LLC, a Maryland finance company (collectively, the “OakFirst Loan Centers”), and First OREO Trust, a Maryland statutory trust formed for the purposes of servicing and disposing of the real estate that the Bank acquires through foreclosure or by deed in lieu of foreclosure. The Bank also owns 99.9% of the limited partnership interests in Liberty Mews Limited Partnership; a Maryland limited partnership formed for the purpose of acquiring, developing and operating low-income housing units in Garrett County, Maryland.

At September 30, 2015, the Corporation had total assets of $1.3 billion, net loans of $830.9 million, and deposits of $996.3 million. Shareholders’ equity at September 30, 2015 was $114.6 million.

The Corporation maintains an Internet site at www.mybank4.com on which it makes available, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to the foregoing as soon as reasonably practicable after these reports are electronically filed with, or furnished to, the SEC.

RECENT DEVELOPMENTS

On October 30, 2015, First United Corporation and the Bank (collectively, “First United”) were notified by the Financial Industry Regulatory Authority (“FINRA”) that a FINRA arbitration panel had awarded $11.5 million in compensatory damages to First United in a proceeding that First United brought against FTN Financial Securities Corp. (“FTN”) and two of its representatives. First United alleged, among other things, that, in recommending and selling certain trust preferred securities to First United, FTN committed fraud, breached its fiduciary duty to First United, breached its contract with First United and violated rules concerning suitability and other regulatory standards. FTN paid the $11.5 million award amount to First United on November 5, 2015.

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ESTIMATES AND CRITICAL ACCOUNTING POLICIES

This discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. (See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of Part II of First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014). On an on-going basis, management evaluates estimates, including those related to loan losses and intangible assets, other-than-temporary impairment (“OTTI”) of investment securities, income taxes, fair value of investments and pension plan assumptions. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the consolidated financial statements.

Allowance for Loan Losses

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

Goodwill and Other Intangible Assets

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Intangibles - Goodwill and Other, establishes standards for the amortization of acquired intangible assets and impairment assessment of goodwill.  The $11 million recorded as goodwill at September 30, 2015 is primarily related to the Bank’s 2003 acquisition of Huntington National Bank branches and is not subject to periodic amortization. 

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

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

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Accounting for Income Taxes

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

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

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

Other-Than-Temporary Impairment of Investment Securities

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

Fair Value of Investments

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

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Pension Plan Assumptions

Our pension plan costs are calculated using actuarial concepts, as discussed within the requirements of ASC Topic 715, Compensation – Retirement Benefits. Pension expense and the determination of our projected pension liability are based upon two critical assumptions: (a) the discount rate; and (b) the expected return on plan assets. We evaluate each of these critical assumptions annually. Other assumptions impact the determination of pension expense and the projected liability including the primary employee demographics, such as retirement patterns, employee turnover, mortality rates, and estimated employer compensation increases. These factors, along with the critical assumptions, are carefully reviewed by management each year in consultation with our pension plan consultants and actuaries. Further information about our pension plan assumptions, the plan’s funded status, and other plan information is included in Note 13 to the consolidated financial statements presented elsewhere in this report.

Management does not believe that any material changes in our critical accounting policies have occurred since December 31, 2014.

SELECTED FINANCIAL DATA

The following table sets forth certain selected financial data for the nine-month periods ended September 30, 2015 and 2014 and is qualified in its entirety by the detailed information and unaudited financial statements, including the notes thereto, included elsewhere in this quarterly report.

	As of or For the Nine months ended September 30,
	2015			2014
Per Share Data
Basic and diluted net income per common share	$	0.39		$	0.32
Basic and diluted book value per common share	$	13.52		$	13.21
Significant Ratios
Return on Average Assets (a)		0.45	%		0.39	%
Return on Average Equity (a)		5.34	%		4.79	%
Average Equity to Average Assets		9.23	%		8.18	%

Note: ^(a) Annualized

RESULTS OF OPERATIONS

Overview

Consolidated net income available to common shareholders was $2.5 million for the first nine months of 2015, compared to $2.0 million for the same period of 2014. Basic and diluted net income per common share for the first nine months of 2015 was $.39, compared to basic and diluted net income per common share of $.32 for the same period of 2014. The increase in earnings was due to an increase in net interest income of $.2 million, a decrease of $1.0 million in provision expense, and a decline of other operating expenses of $.2 million offset by a decline of $.5 million in other operating income. The net interest margin for the first nine months of 2015, the year ended December 31, 2014 and the first nine months of 2014, on a fully tax equivalent (“FTE”) basis, was 3.07%, 3.00% and 3.02%, respectively. Deferred interest income recorded on the investment portfolio contributed to the increase in the net interest margin for the first nine months of 2015 when compared to the margin recorded for the year ended December 31, 2014.

The provision for loan losses decreased to $.6 million for the nine months ended September 30, 2015 from the $1.6 million recorded for the nine months ended September 30, 2014. The decrease was driven by lower net charge-offs and slow loan growth. Specific allocations have been made for impaired loans where management has determined that the collateral supporting the loans is not adequate to cover the loan balance, and the qualitative factors affecting the ALL have been adjusted based on the current economic environment and the characteristics of the loan portfolio.

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Interest expense on our interest-bearing liabilities decreased $1.0 million during the nine months ended September 30, 2015 when compared to the same period of 2014 due to a decrease of $4.3 million in average interest-bearing deposits as well as a 20 basis point decrease in the average rate paid. Our management and retail staff continue to focus on shifting the Bank’s deposit mix away from higher cost certificates of deposit and towards lower cost core deposit accounts. This strategic focus will continue throughout 2015 as we continue to place an emphasis on the full relationship customer.

Other operating income decreased $.5 million during the first nine months of 2015 when compared to the same period of 2014. This decrease was primarily attributable to a $1.0 million decrease in gains on the sale of investment securities held-for-trading relating to four CDOs that had been written down through impairment charges in prior years. The decrease in gains was offset by increases in trust and brokerage income and earnings on Bank Owned Life Insurance.

Operating expenses decreased $.2 million in the first nine months of 2015 when compared to the same period of 2014. This was due to a $1.2 million decrease in other real estate owned (“OREO”) expenses primarily due to a reduction in valuation allowances and a gain booked on the sale of a hotel property in the third quarter of 2015, offset by a $1.1 million increase in salaries and employee benefits due to increased costs related to the administration of the pension plan and health care costs.

Consolidated net income available to common shareholders was $1.3 million, or $.20 per common share, for the third quarter of 2015, compared to $.7 million, or $.10 per common share, for the same period of 2014. The increase in earnings for the third quarter of 2015 when compared to the third quarter of 2014 resulted from an increase in net interest income of $.4 million due to reduced interest expense relating to the payments of long-term debt, reduced provision expense, an increase of $.2 million in other operating income and a reduction in other operating expenses of $.2 million. The net interest margin for the third quarter of 2015, on a FTE basis, increased to 3.13% from 2.96% for the same period of 2014.

Other operating income increased $.2 million during the third quarter of 2015 when compared to the same period of 2014. The increase was attributable to increases in trust department and brokerage income, debit card income and Bank Owned Life Insurance.

Operating expenses decreased $.2 million in the third quarter of 2015 when compared to the same period of 2014. This decrease was due to decreases in OREO expenses relating to a reduction in valuation allowances and a gain booked on the sale of a hotel property and decreases in other miscellaneous expenses. These decreases were offset by a $.5 million increase in salaries and benefits due primarily to increased pension costs and health care costs.

Net Interest Income

Net interest income is the largest source of operating revenue and is the difference between the interest earned on interest-earning assets and the interest expense incurred on interest-bearing liabilities. For analytical and discussion purposes, net interest income is adjusted to an FTE basis to facilitate performance comparisons between taxable and tax-exempt assets. FTE income is determined by increasing tax-exempt income by an amount equal to the federal income taxes that would have been paid if this income were taxable at the statutorily applicable rate.

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The following table sets forth the average balances, net interest income and expense, and average yields and rates of our interest-earning assets and interest-bearing liabilities for the nine-month periods ended September 30, 2015 and 2014:

	Nine months ended September 30,
	2015								2014
(dollars in thousands)	Average Balance			Interest		Average Yield/Rate			Average Balance			Interest		Average Yield/Rate
Assets
Loans	$	840,458		$	27,576		4.39	%	$	816,144		$	28,172		4.62	%
Investment Securities:
Taxable		285,013			5,365		2.52			286,489			5,323		2.48
Non taxable		35,597			1,553		5.83			56,799			1,881		4.43
Total		320,610			6,918		2.88			343,288			7,204		2.81
Federal funds sold		25,219			30		0.16			37,358			62		0.22
Interest-bearing deposits with other banks		4,622			4		0.11			7,856			2		0.03
Other interest earning assets		6,889			234		4.55			7,625			212		3.71
Total earning assets		1,197,798			34,762		3.88	%		1,212,271			35,652		3.93	%
Allowance for loan losses		(11,966	)							(12,787	)
Non-earning assets		141,218								143,060
Total Assets	$	1,327,050							$	1,342,544
Liabilities and Shareholders’ Equity
Interest-bearing demand deposits	$	151,646		$	79		0.07	%	$	142,774		$	97		0.09	%
Interest-bearing money markets		220,088			359		0.22			213,777			371		0.23
Savings deposits		135,717			177		0.17			122,689			174		0.19
Time deposits:
Less than $100k		144,394			1,138		1.05			165,380			1,359		1.10
$100k or more		135,400			1,265		1.25			146,914			1,488		1.35
Short-term borrowings		35,922			42		0.16			45,009			46		0.14
Long-term borrowings		170,472			4,213		3.30			182,646			4,699		3.44
Total interest-bearing liabilities		993,639			7,273		0.98	%		1,019,189			8,234		1.08	%
Non-interest-bearing deposits		201,312								195,562
Other liabilities		19,687								17,963
Shareholders’ Equity		112,412								109,830
Total Liabilities and Shareholders’ Equity	$	1,327,050							$	1,342,544
Net interest income and spread				$	27,489		2.90	%				$	27,418		2.85	%
Net interest margin							3.07	%							3.02	%

Note:

(1) The above table reflects the average rates earned or paid stated on an FTE basis assuming a 35% tax rate. Non-GAAP interest income on a fully taxable equivalent was $610 and $734, respectively.

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

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

Net interest income, on an FTE basis, increased $.1 million (.26%) during the first nine months of 2015 over the same period in 2014 due to a $1.0 million (11.67%) decrease in interest expense, which was partially offset by a $.9 million (2.50%) decrease in interest income. The net interest margin in the first nine months of 2015 was 3.07%, compared to 3.02% for the first nine months of 2014.

Comparing the first nine months of 2015 to the same period of 2014, the decline in interest income was due to a $14.5 million decrease in average earning asset balances as well as a five basis point reduction in the rates. The rate decline was due to the loan portfolio repricing and new loans booked at lower rates. The decrease in average earning assets was due to a $22.7 million reduction in investment securities and a $12.1 million decrease in fed funds sold, offset by a $24.3 million increase in loans.

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Interest expense decreased during the first nine months of 2015 when compared to the same period of 2014 due to an overall reduction in the average rate paid on interest-bearing liabilities and a decrease of $25.6 million on our average interest-bearing liabilities. The effect on the average rate paid was a 10 basis point decrease from 1.08% for the nine months ended September 30, 2014 to .98% for the same period of 2015.

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The following table sets forth the average balances, net interest income and expense, and average yields and rates of our interest-earning assets and interest-bearing liabilities for the three-month periods ended September 30, 2015 and 2014:

	Three months ended September 30,
	2015								2014
(dollars in thousands)	Average Balance			Interest		Average Yield/Rate			Average Balance			Interest		Average Yield/Rate
Assets
Loans	$	842,189		$	9,320		4.39	%	$	824,268		$	9,456		4.55	%
Investment Securities:
Taxable		271,411			1,755		2.57			278,544			1,580		2.25
Non taxable		33,689			483		5.69			39,947			595		5.90
Total		305,100			2,238		2.91			318,491			2,175		2.71
Federal funds sold		34,330			14		0.16			56,841			30		0.21
Interest-bearing deposits with other banks		3,692			1		0.11			7,468			1		0.03
Other interest earning assets		6,080			78		5.12			7,486			68		3.58
Total earning assets		1,191,391			11,651		3.88	%		1,214,554			11,730		3.83	%
Allowance for loan losses		(11,890	)							(12,272	)
Non-earning assets		141,912								137,770
Total Assets	$	1,321,413							$	1,340,052
Liabilities and Shareholders’ Equity
Interest-bearing demand deposits	$	160,616		$	23		0.06	%	$	140,981		$	29		0.08	%
Interest-bearing money markets		218,661			122		0.22			216,502			129		0.24
Savings deposits		138,837			56		0.16			125,742			60		0.19
Time deposits:
Less than $100k		141,711			368		1.03			159,389			441		1.10
$100k or more		130,328			391		1.19			144,024			495		1.36
Short-term borrowings		39,010			14		0.14			47,181			16		0.13
Long-term borrowings		152,452			1,277		3.32			182,631			1,502		3.26
Total interest-bearing liabilities		981,615			2,251		0.91	%		1,016,450			2,672		1.04	%
Non-interest-bearing deposits		203,971								200,449
Other liabilities		21,433								10,914
Shareholders’ Equity		114,394								112,239
Total Liabilities and Shareholders’ Equity	$	1,321,413							$	1,340,052
Net interest income and spread				$	9,400		2.97	%				$	9,058		2.79	%
Net interest margin							3.13	%							2.96	%

Note:

(1) The above table reflects the average rates earned or paid stated on an FTE basis assuming a 35% tax rate. Non-GAAP interest income on a fully taxable equivalent was $190 and $233, respectively.

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

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

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Net interest income, on an FTE basis, increased $.3 million during the third quarter of 2015 over the same period in 2014 due to a decrease of $.4 million (15.76%) in interest expense, offset by a $.1 million (.67%) decrease in interest income. The decrease in interest expense was primarily due to the decrease in the average balance of long-term borrowings relating to the payments of sub-debt and a FHLB advance. The net interest margin for the third quarter of 2015 increased to 3.13% from 2.96% for the three months ended September 30, 2014.

Interest expense decreased during the third quarter of 2015 when compared to the same period of 2014 due to the overall reduction in average interest-bearing liabilities of $34.8 million. The overall effect was a 13 basis point decrease in the average rate paid on our average interest-bearing liabilities, from 1.04% for the three months ended September 30, 2014 to .91% for the same period of 2015. 

The following table sets forth an analysis of volume and rate changes in interest income and interest expense for our average interest-earning assets and average interest-bearing liabilities for the nine-month periods ending September 30, 2015 and September 30, 2014:

	2015 Compared to 2014
(in thousands and tax equivalent basis)	Volume			Rate			Net
Interest Income:
Loans	$	1,067		$	(1,663	)	$	(596	)
Taxable Investments		(37	)		79			42
Non-taxable Investments		(1,237	)		909			(328	)
Federal funds sold		(19	)		(13	)		(32	)
Other interest earning assets		(185	)		209			24
Total interest income		(411	)		(479	)		(890	)
Interest Expense:
Interest-bearing demand deposits		6			(24	)		(18	)
Interest-bearing money markets		14			(26	)		(12	)
Savings deposits		23			(20	)		3
Time deposits less than $100		(221	)		0			(221	)
Time deposits $100 or more		(144	)		(79	)		(223	)
Short-term borrowings		(14	)		10			(4	)
Long-term borrowings		(402	)		(84	)		(486	)
Total interest expense		(738	)		(223	)		(961	)
Net interest income	$	327		$	(256	)	$	71

Note:

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

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The following table sets forth an analysis of volume and rate changes in interest income and interest expense for our average interest-earning assets and average interest-bearing liabilities for the three-month periods ending September 30, 2015 and September 30, 2014:

	2015 Compared to 2014
(in thousands and tax equivalent basis)	Volume			Rate			Net
Interest Income:
Loans	$	787		$	(923	)	$	(136	)
Taxable Investments		(183	)		358			175
Non-taxable Investments		(356	)		244			(112	)
Federal funds sold		(36	)		20			(16	)
Other interest earning assets		(271	)		281			10
Total interest income		(59	)		(20	)		(79	)
Interest Expense:
Interest-bearing demand deposits		11			(17	)		(6	)
Interest-bearing money markets		5			(12	)		(7	)
Savings deposits		21			(25	)		(4	)
Time deposits less than $100		(182	)		109			(73	)
Time deposits $100 or more		(163	)		59			(104	)
Short-term borrowings		(12	)		10			(2	)
Long-term borrowings		(1,003	)		778			(225	)
Total interest expense		(1,323	)		902			(421	)
Net interest income	$	1,264		$	(922	)	$	342

Note:

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

Provision for Loan Losses

The provision for loan losses was $.6 million for the nine months ended September 30, 2015 compared to $1.6 million for the nine months ended September 30, 2014.  The lower net charge-offs as well as continued reductions in the level of classified and impaired assets (discussed below in the section entitled “FINANCIAL CONDITION” under the heading “Allowance and Provision for Loan Losses”), were contributing factors to the lower provision expense. Management strives to ensure that the ALL reflects a level commensurate with the risk inherent in our loan portfolio.

Other Operating Income

Other operating income, exclusive of gains, increased $.5 million during the first nine months of 2015 when compared to the same period of 2014. This increase was attributable to increases in trust and brokerage income and earnings on Bank Owned Life Insurance due to new purchases of general account contracts during the second quarter of 2015.

Net gains of $.1 million were reported in other income in the first nine months of 2015, compared to net gains of $1.1 million during the same period of 2014. The decrease resulted from a reduction in gains on sales of investment securities held-for-trading relating to four CDOs that had been written down through impairment charges in prior years.

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Other operating income, exclusive of gains, increased $.3 million during the third quarter of 2015 when compared to the same period of 2014. We saw increases in trust and brokerage income, debit card income and earnings on Bank Owned Life Insurance due to new purchases of general account contracts during the second quarter of 2015.

Net gains of $.1 million were reported in other income in the third quarter of 2015, compared to net gains of $.2 million during the same period of 2014.

The following table shows the major components of other operating income for the nine- and three-month periods ended September 30, 2015 and 2014, exclusive of net gains:

	Income as % of Total Other Operating Income						Income as % of Total Other Operating Income
	For the nine months ended						For the three months ended
	September 30,						September 30,
	2015			2014			2015			2014
Service charges		22	%		23	%		23	%		24	%
Trust department		43	%		42	%		42	%		43	%
Debit card Income		16	%		16	%		17	%		17	%
Bank owned life insurance		9	%		8	%		8	%		8	%
Brokerage income		7	%		6	%		7	%		6	%
Other income		3	%		5	%		3	%		2	%
		100	%		100	%		100	%		100	%

Other Operating Expenses

Operating expenses decreased $.2 million in the first nine months of 2015 when compared to the same period of 2014. This was due to a $1.2 million decrease in OREO expenses primarily due to a reduction in valuation allowances and a gain booked on the sale of a hotel property in the third quarter of 2015, offset by a $1.1 million increase in salaries and employee benefits due to increased costs related to the administration of the pension plan and health care costs.

Operating expenses decreased $.2 million in the third quarter of 2015 when compared to the same period of 2014. This decrease was due to decreases in OREO expenses relating to a reduction in valuation allowances and a gain booked on the sale of a hotel property and decreases in other miscellaneous expenses. These decreases were offset by a $.5 million increase in salaries and benefits due primarily to increased pension costs and health care costs.

The composition of other operating expenses for the nine- and three-month periods ended September 30, 2015 and 2014 is illustrated in the following table.

	Expense as % of Total Other Operating Expenses						Expense as % of Total Other Operating Expenses
	For the nine months ended						For the three months ended
	September 30,						September 30,
	2015			2014			2015			2014
Salaries and employee benefits		52	%		48	%		56	%		50	%
FDIC premiums		5	%		4	%		5	%		5	%
Occupancy, equipment and data processing		20	%		20	%		22	%		20	%
Professional Services		4	%		4	%		2	%		2	%
Other real estate owned		3	%		7	%		0	%		5	%
Other		16	%		17	%		15	%		18	%
		100	%		100	%		100	%		100	%

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Provision for Income Taxes

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

The effective tax rate for the first nine months of 2015 was 23.1%, compared to an effective tax rate of 19.8% for the first nine months of 2014. Our effective income tax rates differed from the 35% federal statutory rate due to the effects of tax-exempt income on loans, securities and bank-owned life insurance, as well as the low income housing tax credits.

FINANCIAL CONDITION

Balance Sheet Overview

When compared to December 31, 2014, total assets at September 30, 2015 remained stable at $1.3 billion. During the first nine months of 2015, cash and interest-bearing deposits in other banks increased $29.3 million, the investment portfolio decreased $38.3 million, Bank Owned Life Insurance increased $6.4 million, due primarily to new general account contracts purchased in the second quarter, and gross loans increased $3.1 million. Total liabilities decreased by $17.6 million during the first nine months of 2015 due primarily to reductions of $1.3 million in short-term borrowings and $35.1 million in long-term borrowings due to the repayment of First United Corporation’s junior subordinated debentures of $5.0 million that matured in March of 2015 and the repayment of an FHLB advance of $30.0 million that matured in July of 2015. This decline was offset by an increase of $15.0 million in total deposits. Comparing September 30, 2015 to December 31, 2014, shareholders’ equity increased $5.6 million as a result of a $3.0 million decrease in accumulated other comprehensive loss and $2.5 million in earnings during the first nine months of 2015.

Loan Portfolio

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

(dollars in thousands)	September 30, 2015				December 31, 2014
Commercial real estate	$	265,933	31	%	$	256,064	30	%
Acquisition and development		98,756	12	%		99,301	12	%
Commercial and industrial		74,780	9	%		93,255	11	%
Residential mortgage		378,947	45	%		367,641	44	%
Consumer		24,676	3	%		23,730	3	%
Total Loans	$	843,092	100	%	$	839,991	100	%

Comparing September 30, 2015 to December 31, 2014, outstanding loans increased by $3.1 million (.37%). Commercial real estate (“CRE”) loans increased $9.9 million, acquisition and development (“A&D”) loans decreased $.5 million, commercial and industrial (“C&I”) loans decreased $18.5 million, residential mortgages increased by $11.3 million, and the consumer portfolio increased by $.9 million. Approximately 43% of the commercial loan portfolio was collateralized by real estate at September 30, 2015 and 44% at December 31, 2014.

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Risk Elements of Loan Portfolio

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

(dollars in thousands)	September 30, 2015		% of Applicable Portfolio			December 31, 2014		% of Applicable Portfolio
Non-accrual loans:
Commercial real estate	$	6,406		2.41	%	$	5,762		2.30	%
Acquisition and development		2,942		2.98	%		3,609		3.60	%
Commercial and industrial		169		0.23	%		171		0.20	%
Residential mortgage		2,259		0.60	%		2,009		0.54	%
Consumer		0		0.00	%		0		0.00	%
Total non-accrual loans	$	11,776		1.40	%	$	11,551		1.38	%
Accruing Loans Past Due 90 days or more:
Commercial real estate	$	148				$	0
Acquisition and development		0					1
Commercial and industrial		0					4
Residential mortgage		509					485
Consumer		0					39
Total loans past due 90 days or more	$	657				$	529
Total non-accrual and accruing loans past due 90 days or more	$	12,433				$	12,080
Restructured Loans (TDRs):
Performing	$	11,044				$	7,621
Non-accrual (included above)		6,813					6,063
Total TDRs	$	17,857				$	13,684
Other real estate owned	$	7,477				$	12,932
Impaired loans without a valuation allowance	$	18,471				$	19,937
Impaired loans with a valuation allowance		5,554					4,844
Total impaired loans	$	24,025				$	24,781
Valuation allowance related to impaired loans	$	1,720				$	1,236

Performing loans considered to be impaired (including performing troubled debt restructurings, or TDRs), as defined and identified by management, amounted to $12.2 million at September 30, 2015 and $13.2 million at December 31, 2014. Loans are identified as impaired when, based on current information and events, management determines that we will be unable to collect all amounts due according to contractual terms. These loans consist primarily of A&D loans and CRE loans. The fair values are generally determined based upon independent third party appraisals of the collateral or discounted cash flows based upon the expected proceeds. Specific allocations have been made where management believes there is insufficient collateral to repay the loan balance if liquidated and there is no secondary source of repayment available.

The level of performing impaired loans (other than performing TDRs) decreased $4.4 million during the nine months ended September 30, 2015, due to the reclassification of five loans totaling $.4 million out of impaired status due to improved performance, and the transfer of a $3.1 million non-owner occupied real estate loan and a $.9 million C&I loan into performing TDR status. Management will continue to monitor all loans that have been removed from an impaired status and take appropriate steps to ensure that satisfactory performance is sustained.

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The following table presents the details of impaired loans that are TDRs by class as of September 30, 2015 and December 31, 2014:

	September 30, 2015				December 31, 2014
(in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Performing
Commercial real estate
Non owner-occupied		4	$	3,083		2	$	270
All other CRE		2		2,995		1		2,843
Acquisition and development
1-4 family residential construction		1		700		1		790
All other A&D		4		2,049		4		2,154
Commercial and industrial		2		862		1		404
Residential mortgage
Residential mortgage – term		7		1,355		7		1,160
Residential mortgage – home equity		0		0		0		0
Consumer		0		0		0		0
Total performing		20	$	11,044		16	$	7,621
Non-accrual
Commercial real estate
Non owner-occupied		0	$	0		1	$	458
All other CRE		5		3,540		4		2,073
Acquisition and development
1-4 family residential construction		0		0		0		0
All other A&D		4		2,832		4		3,139
Commercial and industrial		1		169		1		171
Residential mortgage
Residential mortgage – term		3		272		1		222
Residential mortgage – home equity		0		0		0		0
Consumer		0		0		0		0
Total non-accrual		13		6,813		11		6,063
Total TDRs		33	$	17,857		27	$	13,684

The level of TDRs increased $4.2 million during the nine months ended September 30, 2015. Five loans totaling $4.1 million were added to performing TDRs, and three loans totaling $2.2 million were added to non-performing TDRs. Additionally, seven loans already in performing TDRs and three loans already in non-performing TDRs were re-modified. There were partial charge-offs totaling $.2 million and one residential mortgage loan totaling $.07 million that was transferred to OREO during the nine months ended September 30, 2015. Additionally, $1.8 million in net principal payments and payoffs were received during the same time period.

Allowance and Provision for Loan Losses

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

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

The following table presents a summary of the activity in the ALL for the nine months ended September 30:

(dollars in thousands)	2015			2014
Balance, January 1	$	12,065		$	13,594
Charge-offs:
Commercial real estate		(295	)		(85	)
Acquisition and development		(256	)		(2,423	)
Commercial and industrial		0			(213	)
Residential mortgage		(200	)		(682	)
Consumer		(247	)		(380	)
Total charge-offs		(998	)		(3,783	)
Recoveries:
Commercial real estate		66			11
Acquisition and development		100			104
Commercial and industrial		24			22
Residential mortgage		162			183
Consumer		166			308
Total recoveries		518			628
Net credit losses		(480	)		(3,155	)
Provision for loan losses		626			1,629
Balance at end of period	$	12,211		$	12,068
Allowance for loan losses to gross loans outstanding (as %)		1.45	%		1.46	%
Net charge-offs to average loans outstanding during the period, annualized (as %)		0.08	%		0.52	%

The ALL increased to $12.2 million at September 30, 2015, from $12.1 million at December 31, 2014. The provision for loan losses decreased to $.6 million for the first nine months of 2015 compared to $1.6 million for the same period of 2014. Net charge-offs decreased to $.5 million for the nine months ended September 30, 2015, compared to $3.2 million for the nine months ended September 30, 2014. The ratio of the ALL to loans outstanding at September 30, 2015 was 1.45% compared to 1.44% at December 31, 2014.

The ratio of net charge-offs to average loans for the nine months ended September 30, 2015 was an annualized .08%, compared to an annualized .52% for the same period in 2014 and .49% for the year ended December 31, 2014. The CRE portfolio had an annualized net charge-off rate as of September 30, 2015 of .12% compared to an annualized net charge-off rate of .18% as of December 31, 2014. The annualized net charge-off rate for A&D loans as of September 30, 2015 was .21% compared to an annualized net charge-off rate of 2.46% as of December 31, 2014. The ratio for C&I loans improved to a net recovery rate of .04% as of September 30, 2015 compared to a net charge-off rate of .31% as of December 31, 2014. The residential mortgage ratios were a net charge-off rate of .01% as of September 30, 2015 and a net charge-off rate of .17% as of December 31, 2014, and the consumer loan ratios were net charge-off rates of .45% and .71% as of September 30, 2015 and December 31, 2014, respectively.

Accruing loans past due 30 days or more decreased to .57% of the loan portfolio at September 30, 2015, compared to 1.62% at December 31, 2014. The decrease for the first nine months of 2015 was primarily due to a decrease of $7.8 million in past-due accruing residential mortgage term loans.

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Non-accrual loans totaled $11.8 million at September 30, 2015 compared to $11.6 million at December 31, 2014. Non-accrual loans which have been subject to a partial charge-off totaled $5.1 million at September 30, 2015, compared to $4.6 million at December 31, 2014.

Management believes that the ALL at September 30, 2015 is adequate to provide for probable losses inherent in our loan portfolio. Amounts that will be recorded for the provision for loan losses in future periods will depend upon trends in the loan balances, including the composition of the loan portfolio, changes in loan quality and loss experience trends, potential recoveries on previously charged-off loans and changes in other qualitative factors. Management also applies interest rate risk, collateral value and debt service sensitivity analyses to the Commercial real estate loan portfolio and obtains new appraisals on specific loans under defined parameters to assist in the determination of the periodic provision for loan losses.

Investment Securities

At September 30, 2015, the total amortized cost basis of the available-for-sale investment portfolio was $187.6 million, compared to a fair value of $185.5 million. Unrealized gains and losses on securities available-for-sale are reflected in accumulated other comprehensive loss, a component of shareholders’ equity. The amortized cost basis of the held to maturity portfolio was $106.7 million compared to a fair value of $108.7 million.

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

	September 30, 2015							December 31, 2014
	Amortized		Fair Value		FV as %			Amortized		Fair Value		FV as %
(dollars in thousands)	Cost		(FV)		of Total			Cost		(FV)		of Total
Securities Available-for-Sale:
U.S. treasuries	$	0	$	0		0	%	$	29,607	$	29,596		13	%
U.S. government agencies		34,096		34,221		18	%		39,077		38,941		18	%
Residential mortgage-backed agencies		14,495		14,494		8	%		45,175		45,273		21	%
Commercial mortgage-backed agencies		45,162		45,805		25	%		26,007		25,957		12	%
Collateralized mortgage obligations		10,172		10,217		6	%		8,611		8,707		4	%
Obligations of state and political subdivisions		48,065		48,854		26	%		46,151		47,304		21	%
Collateralized debt obligations		35,636		31,928		17	%		37,117		25,339		11	%
Total available for sale	$	187,626	$	185,519		100	%	$	231,745	$	221,117		100	%
Securities Held to Maturity:
U.S. government agencies	$	24,658	$	25,442		23	%	$	24,520	$	25,034		23	%
Residential mortgage-backed agencies		54,869		55,475		51	%		58,400		59,008		53	%
Commercial mortgage-backed agencies		18,148		18,713		17	%		16,425		16,737		15	%
Collateralized mortgage obligations		6,432		6,398		6	%		7,379		7,384		7	%
Obligations of state and political subdivisions		2,625		2,731		3	%		2,725		2,608		2	%
Total held to maturity	$	106,732	$	108,759		100	%	$	109,449	$	110,771		100	%

Total investment securities available-for-sale decreased $35.6 million since December 31, 2014. At September 30, 2015, the securities classified as available-for-sale included a net unrealized loss of $2.1 million, which represents the difference between the fair value and amortized cost of securities in the portfolio.

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

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Approximately $153.6 million of the available-for-sale portfolio was valued using Level 2 pricing and had net unrealized gains of $1.6 million at September 30, 2015. The remaining $31.9 million of the securities available-for-sale represents the entire CDO portfolio, which was valued using significant unobservable inputs (Level 3 assets). The $3.7 million in net unrealized losses associated with this portfolio relates to 16 pooled trust preferred securities that comprise the CDO portfolio. Net unrealized gains of $.1 million represent non-credit related OTTI charges on 12 of the securities, while $3.8 million of unrealized losses relates to four securities which have had no credit related OTTI. The unrealized losses on these securities were primarily attributable to continued depression in the marketability and liquidity associated with CDOs.

The following table provides a summary of the trust preferred securities in the CDO portfolio and the credit status of these securities as of September 30, 2015:

Level 3 Investment Securities Available for Sale

(Dollars in Thousands) 

Investment Description		First United Level 3 Investments								Security Credit Status
Deal	Class	Amortized Cost		Fail Market Value		Unrealized Gain/(Loss)			Lowest Credit Rating	Original Collateral		Deferrals/ Defaults as % of Original Collateral			Performing Collateral		Collateral Support			Collateral Support as % of Performing Collateral			Number of Performing Issuers/Total Issuers
Preferred Term Security XI*	B-1		1,346		929		(417	)	C		635,775		16.12	%		373,075		(43,760	)		-11.73	%	42/55
Preferred Term Security XVI*	C		604		2,198		1,594		c		606,040		31.19	%		344,300		(87,494	)		-25.41	%	38/53
Preferred Term Security XVIII*	C		2,177		1,531		(646	)	c		676,565		19.56	%		352,820		(35,472	)		-10.05	%	45/64
Preferred Term Security XVIII	c		3,008		2,297		(711	)	c		676,565		19.56	%		352,820		(35,472	)		-10.05	%	45/64
Preferred Term Security XIX*	c		2,268		1,940		(328	)	c		700,535		9 71	%		491,226		(23,206	)		-4 72	%	52/62
Preferred Term Security XIX*	c		1,352		1,164		(188	)	c		700,535		9.71	%		491,226		(23,206	)		-4.72	%	52/62
Preferred Term Security XIX*	c		3,125		2,717		(408	)	c		700,535		9.71	%		491,226		(23,206	)		-4.72	%	52/62
Preferred Term Security XIX*	c		1,353		1,164		(189	)	c		700,535		9.71	%		491,226		(23,206	)		-4.72	%	52/62
Preferred Term Security XXII*	C-1		1,648		1,268		(380	)	c		1,386,600		16.37	%		913,615		(12,932	)		-1.42	%	65/85
Preferred Term Security XXII*	C-1		4,120		3,170		(950	)	c		1,386,600		16.37	%		913,615		(12,932	)		-1.42	%	65/85
Preferred Term Security XXIII	C-1		1,918		1,125		(793	)	c		1,467,000		17.38	%		878,185		15,642			1.78	%	86/105
Preferred Term Security XXIII*	D-1		2,711		4,066		1,355		c		1,467,000		17.38	%		878,185		(103,951	)		-11.84	%	86/105
Preferred Term Security XXIII*	D-1		903		1,355		452		c		1,467,000		17.38	%		878,185		(103,951	)		-11.84	%	86/105
Preferred Term Security XXIV*	C-1		1,103		1,333		230		c		1,050,600		27.20	%		651,394		(131,349	)		-20.16	%	59/83
Preferred Term Security I-P-IV	B-1		3,000		2,127		(873	)	ccc-		325,000		0.00	%		156,250		36,372			23.28	%	16/16
Preferred Term Security I-P-IV	B-1		5,000		3,544		(1,456	)	CCC-		325,000		0.00	%		156,250		36,372			23.28	%	16/16
Total Level 3 Securities Available for Sale			35,636		31,928		(3,708	)

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

The terms of the debentures underlying trust preferred securities allow the issuer of the debentures to defer interest payments for up to 20 quarters, and, in such case, the terms of the related trust preferred securities allow their issuers to defer dividend payments for up to 20 quarters. Some of the issuers of the trust preferred securities in our investment portfolio have defaulted and/or deferred payments ranging from 9.71% to 31.19% of the total collateral balances underlying the securities. The securities were designed to include structural features that provide investors with credit enhancement or support to provide default protection by subordinated tranches. These features include over-collateralization of the notes or subordination, excess interest or spread which will redirect funds in situations where collateral is insufficient, and a specified order of principal payments. There are securities in our portfolio that are under-collateralized, which does represent additional stress on our tranche. However, in these cases, the terms of the securities require excess interest to be redirected from subordinate tranches as credit support, which provides additional support to our investment.

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

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The market for these securities as of September 30, 2015 is not active and markets for similar securities are also not active. The inactivity was evidenced first by a significant widening of the bid-ask spread in the brokered markets in which these securities trade and then by a significant decrease in the volume of trades relative to historical levels. The new issue market is also inactive, as no new CDOs have been issued since 2007. There are currently very few market participants who are willing to effect transactions in these securities. The market values for these securities, or any securities other than those issued or guaranteed by the U.S. Department of the Treasury (the “Treasury”), are very depressed relative to historical levels. Therefore, in the current market, a low market price for a particular bond may only provide evidence of stress in the credit markets in general rather than being an indicator of credit problems with a particular issue. Given the conditions in the current debt markets and the absence of observable transactions in the secondary and new issue markets, management has determined that (a) the few observable transactions and market quotations that are available are not reliable for the purpose of obtaining fair value at September 30, 2015, (b) an income valuation approach technique (i.e. present value) that maximizes the use of relevant unobservable inputs and minimizes the use of observable inputs will be equally or more representative of fair value than a market approach, and (c) the CDO segment is appropriately classified within Level 3 of the valuation hierarchy because management determined that significant adjustments were required to determine fair value at the measurement date.

Management relies on an independent third party to prepare both the evaluations of OTTI and the fair value determinations for the CDO portfolio. Management does not believe that there were any material differences in the OTTI evaluations and pricing between December 31, 2014 and September 30, 2015.

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

Based upon a review of credit quality and the cash flow tests performed by the independent third party, management determined that no securities had credit-related OTTI during the first nine months of 2015.

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

On January 14, 2014, the federal banking agencies adopted a final interim rule that exempts CDOs from the scope of the Volcker Rule if they were issued in offerings in which, among other things, the proceeds were used primarily to purchase securities issued by depository institutions and their affiliates. In connection with that final interim rule, the agencies published a non-exclusive list of exempt offerings. Of the 16 CDOs held by the Bank, 14 were issued in exempt offerings. The two remaining CDOs are collateralized primarily by securities issued by insurance companies and are not included in the agencies’ list of exempt offerings, which fact required management to make a determination as to whether the CDOs constituted an “ownership interest” in a “covered fund”, such that the Bank would be required to dispose of them pursuant to the Volcker Rule. To make this determination, management conducted a thorough review of the Indentures that govern the CDOs and the other offering materials used by the issuers to offer and sell the CDOs.

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

Based on its review, management concluded that the two CDOs evidence “typical extensions of credit” and do not exhibit any of these seven characteristics. Accordingly, management concluded that none of these CDOs constitutes an “ownership interest” as defined by the Volcker Rule and that, therefore, as of September 30, 2015, the Corporation has the current intent and ability to hold these CDOs until maturity.

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

Deposits

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

(dollars in thousands)	September 30, 2015				December 31, 2014
Non-interest bearing demand deposits:
Retail	$	212,737	21.3	%	$	201,188	20.5	%
Brokered		2,238	0.2	%		0	0.0	%
Interest-bearing deposits:
Demand		163,517	16.4	%		134,302	13.7	%
Money Market:
Retail		210,197	21.1	%		224,699	22.9	%
Brokered		2,564	0.3	%		66	0.0	%
Savings deposits		139,646	14.0	%		129,326	13.2	%
Time deposits less than $100,000:
Retail		134,197	13.5	%		146,058	14.9	%
Brokered/CDARS		545	0.1	%		706	0.1	%
Time deposits $100,000 or more:
Retail		127,557	12.8	%		141,455	16.0	%
Brokered/CDARS		3,143	0.3	%		3,523	1.0	%
Total Deposits	$	996,341	100	%	$	981,323	100	%

Total deposits increased $15.0 million during the first nine months of 2015 when compared to deposits at December 31, 2014. With the continued focus of our retail staff to change the mix of the deposit portfolio, we have seen increases in core deposits and reductions in certificates of deposit. Non-interest bearing deposits increased $13.8 million. Traditional savings accounts increased $10.3 million due to continued growth in our Prime Saver product. Total demand deposits increased $29.2 million and total money market accounts decreased $12.0 million. Time deposits less than $100,000 declined $12.0 million and time deposits greater than $100,000 decreased $14.3 million.

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Borrowed Funds

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

	September 30,		December 31,
(in thousands)	2015		2014
Securities sold under agreements to repurchase	$	38,460	$	39,801
Total short-term borrowings	$	38,460	$	39,801
FHLB advances	$	105,825	$	135,876
Junior subordinated debt		41,730		46,730
Total long-term borrowings	$	147,555	$	182,606

Total short-term borrowings decreased by approximately $1.3 million during the first nine months of 2015 due primarily to decreases in our Treasury Management products. Long-term borrowings decreased by $35.1 million during the first nine months of 2015 due to the maturity of the subordinated debentures of $5.0 million, the repayment of an FHLB advance of $30 million and scheduled monthly amortization of long-term advances.

Liquidity Management

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

· Reliability and stability of core deposits;

· Cash flow structure and pledging status of investments; and

· Potential for unexpected loan demand.

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

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

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

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

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

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

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

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

Market Risk and Interest Sensitivity

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

At September 30, 2015, we were asset sensitive.

Our interest rate risk management goals are:

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

· Enable dynamic measurement and management of interest rate risk;

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

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

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

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

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

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

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

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

Capital Resources

We require capital to fund loans, satisfy our obligations under the Bank’s letters of credit, meet the deposit withdrawal demands of the Bank’s customers, and satisfy our other monetary obligations. To the extent that deposits are not adequate to fund our capital requirements, we can rely on the funding sources identified above under the heading “Liquidity Management”. At September 30, 2015, the Bank had $70.0 million available through unsecured lines of credit with correspondent banks, $20.1 million available through a secured line of credit with the Fed Discount Window and approximately $98.0 million available through the FHLB. Management is not aware of any demands, commitments, events or uncertainties that are likely to materially affect our ability to meet our future capital requirements.

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

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

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

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

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

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

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

The following table presents our capital ratios:

	September 30, 2015			December 31, 2014			Required for Capital Adequacy Purposes			Required for Capital Adequacy Purposes			Required to be Well Capitalized			Required to be Well Capitalized
Total Capital (to risk-weighted assets)
Consolidated		15.84	%		15.40	%		8.00	%					10.00	%
First United Bank & Trust		15.88	%		15.60	%		8.00	%					10.00	%
Tier 1 Capital (to risk-weighted assets)
Consolidated		13.64	%		14.23	%		4.00	%		6.00	% (1)		6.00	%		8.00	% (1)
First United Bank & Trust		14.67	%		14.43	%		4.00	%		6.00	% (1)		6.00	%		8.00	% (1)
Common Equity Tier 1 Capital (to risk-weighted assets)
Consolidated		9.00	%		N/A			4.50	%					6.50	%
First United Bank & Trust		14.67	%		N/A			4.50	%					6.50	%
Tier 1 Capital (to average assets)
Consolidated		10.54	%		11.29	%		4.00	%					5.00	%
First United Bank & Trust		11.29	%		11.43	%		4.00	%					5.00	%

(1) Effective January 1, 2015

In June 2009, in connection with its participation in the Treasury’s Troubled Asset Relief Program Capital Purchase Program, First United Corporation issued to the Treasury a 10-year warrant to purchase 326,323 shares of common stock at an exercise price of $13.79 per share. On May 26, 2015, the Corporation repurchased the warrant from the Treasury for a purchase price of $120,786, which is included in other expense. The warrant was canceled and as a result of the repurchase, the Treasury has no remaining equity investment in the Corporation. 

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Contractual Obligations, Commitments and Off-Balance Sheet Arrangements

Loan commitments are made to accommodate the financial needs of our customers. Letters of credit commit us to make payments on behalf of customers when certain specified future events occur. The credit risks inherent in loan commitments and letters of credit are essentially the same as those involved in extending loans to customers, and these arrangements are subject to our normal credit policies. Loan commitments and letters of credit totaled $107.7 million and $1.7 million, respectively, at September 30, 2015, compared to $103.0 million and $.9 million, respectively, at December 31, 2014. We are not a party to any other off-balance sheet arrangements.

See Note 12 to the consolidated financial statements presented elsewhere in this report for further disclosure on Borrowed Funds. There have been no other significant changes to contractual obligations as presented at December 31, 2014.

Item 3.     Quantitative and Qualitative Disclosures about Market Risk

Our primary market risk is interest rate fluctuation and we have procedures in place to evaluate and mitigate this risk. This market risk and our procedures are described above in Item 2 of Part I of this report under the caption “Market Risk and Interest Sensitivity”, and in Item 7 of Part II of First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014 under the caption “Market Risk and Interest Sensitivity”. Management believes that no material changes in our procedures used to evaluate and mitigate these risks have occurred since December 31, 2014. We believe the investment portfolio restructuring has better positioned the Corporation for a rising interest rate environment.

Item 4.     Controls and Procedures

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

An evaluation of the effectiveness of these disclosure controls as of September 30, 2015 was carried out under the supervision and with the participation of management, including the CEO and the CFO. Based on that evaluation, management, including the CEO and the CFO, has concluded that our disclosure controls and procedures are, in fact, effective at the reasonable assurance level.

During the third quarter of 2015, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1.     Legal Proceedings

None.

Item 1A.     Risk Factors

The risks and uncertainties to which our financial condition and operations are subject are discussed in detail in Item 1A of Part I of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014. Management does not believe that any material changes in our risk factors have occurred since they were last disclosed.

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

None.

Item 3.     Defaults upon Senior Securities

None.

Item 4.     Mine Safety Disclosures

Not Applicable.

Item 5.     Other Information

None.

Item 6.     Exhibits

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

SIGNATURES

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

		FIRST UNITED CORPORATION
Date:	November 10, 2015	/s/ William B. Grant
		William B. Grant, Chairman of the Board and
		Chief Executive Officer
		(Principal Executive Officer)
Date	November 10, 2015	/s/ Tonya K. Sturm
		Tonya K. Sturm, Vice President,
		Chief Financial Officer
		(Principal Accounting Officer)

78

EXHIBIT INDEX

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

79

EX-31.1

Exhibit 31.1

Certifications of the Principal Executive Officer

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

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

I, William B. Grant, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:	November 10, 2015	/s/ William B. Grant
		William B. Grant, Chairman of the Board and
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certifications of the Principal Accounting Officer

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

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

I, Tonya K. Sturm, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date	November 10, 2015	/s/ Tonya K. Sturm
		Tonya K. Sturm, Vice President,
		Chief Financial Officer
		(Principal Accounting Officer)

EX-32

Exhibit 32

Certification of Periodic Report

Pursuant to 18 U.S.C. § Section 1350

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

Pursuant to, and for purposes only of, 18 U.S.C. § 1350, each of the undersigned hereby certifies that (i) the Quarterly Report of First United Corporation on Form 10-Q for the quarter ended September 30, 2015 filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of First United Corporation.

Date:	November 10, 2015	/s/ William B. Grant
		William B. Grant, Chairman of the Board and
		Chief Executive Officer
		(Principal Executive Officer)
Date:	November 10, 2015	/s/ Tonya K. Sturm
		Tonya K. Sturm, Vice President,
		Chief Financial Officer
		(Principal Accounting Officer)

XML

Borrowed Funds (Tables)

9 Months Ended

Sep. 30, 2015

Borrowed Funds [Abstract]

Summary of Short Term Borrowings

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

(Dollars in thousands)	Nine months ended September 30, 2015		Year ended December 31, 2014
Securities sold under agreements to repurchase:
Outstanding at end of period	$	38,460	$	39,801
Weighted average interest rate at end of period		0.15%		0.15%
Maximum amount outstanding as of any month end	$	47,131	$	53,819
Average amount outstanding	$	33,506	$	45,702
Approximate weighted average rate during the period		0.12%		0.13%

Summary of Long Term Borrowings

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

	September 30,		December 31,
(in thousands)	2015		2014
FHLB advances, bearing fixed interest at rates ranging from 1.00% to 3.69% at September 30, 2015	$	105,825	$	135,876
Junior subordinated debt, bearing variable interest rate of 3.03% at September 30, 2015		30,929		35,929
Junior subordinated debt, bearing fixed interest rate of 9.88% at September 30, 2015		10,801		10,801
Total long-term debt	$	147,555	$	182,606

Contractual Maturities Of All Long Term Borrowings

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

	September 30, 2015						December 31, 2014
(in thousands)	Fixed Rate		Floating Rate		Total		Total
Due in 2015		0		0		0		35,000
Due in 2016		0		0		0		0
Due in 2017		0		0		0		0
Due in 2018		70,000		0		70,000		70,000
Due in 2019		0		0		0		0
Thereafter		46,626		30,929		77,555		77,606
Total long-term debt	$	116,626	$	30,929	$	147,555	$	182,606

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Restricted Investment in Bank Stock (Narrative) (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Restricted Investment in Bank Stock [Abstract]
Cash Dividends	$ 78,777	$ 68,329	$ 234,445	$ 212,665

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Investments (Narrative) (Details) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015 USD ($) loan security	Dec. 31, 2014 USD ($)
Schedule of Investments [Line Items]
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	$ 224	$ 108
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	7,643	13,864
Held-to-maturity securities	106,732	109,449
Held-to-maturity gross unrealized losses	$ 117	122
U.S. Treasury [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses		11
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses		0
U.S. Government Agencies [Member]
Schedule of Investments [Line Items]
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, nature	U.S. Government Agencies – Available for Sale – There were no U.S. government agencies in an unrealized loss position as of September 30, 2015.
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses		0
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses		253
Held-to-maturity, Securities in Unrealized Loss Positions, Qualitative Disclosure, Nature	U.S. Government Agencies – Held to Maturity – There were no U.S. government agencies in an unrealized loss position as of September 30, 2015.
Held-to-maturity, securities in unrealized loss positions, qualitative disclosure, number of positions | security	0
Held-to-maturity securities	$ 24,658	24,520
Held-to-maturity gross unrealized losses	$ 0	0
Residential Mortgage-backed Agencies [Member]
Schedule of Investments [Line Items]
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, nature	Residential Mortgage-Backed Agencies – Available for Sale - There were no residential mortgage-backed agencies in an unrealized loss position for less than 12 months as of September 30, 2015. There was one residential mortgage-backed agency security in an unrealized loss position for 12 months or more. The security is of the highest investment grade and the Corporation does not intend to sell it, and it is not more likely than not that the Corporation will be required to sell the security before recovery of its amortized cost basis, which may be at maturity. Accordingly, management does not consider this investment to be other-than-temporarily impaired at September 30, 2015
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, less than one year | security	0
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, greater than or equal to one year | security	1
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	$ 0	0
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	$ 163	412
Held-to-maturity, Securities in Unrealized Loss Positions, Qualitative Disclosure, Nature	Residential Mortgage-Backed Agencies – Held to Maturity - Five residential mortgage-backed agencies have been in an unrealized loss position for less than 12 months as of September 30, 2015. The securities are of the highest investment grade and the Corporation has the intent and ability to hold the investments to maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at September 30, 2015. There were no residential mortgage-backed agencies in an unrealized loss position for 12 months or more.
Held-to-maturity securities	$ 54,869	58,400
Held-to-maturity gross unrealized losses	$ 83	5
Commercial Mortgage-backed Agencies [Member]
Schedule of Investments [Line Items]
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, nature	Commercial Mortgage-Backed Agencies – Available for Sale – There were two commercial mortgage-backed agencies in an unrealized loss position for less than 12 months as of September 30, 2015. The securities are of the highest investment grade and the Corporation does not intend to sell them, and it is not more likely than not that the Corporation will be required to sell them before recovery of their amortized cost basis, which may be at maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at September 30, 2015. There were no commercial mortgage-backed agency securities in an unrealized loss position for 12 months or more.
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, less than one year | loan	2
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, greater than or equal to one year | security	0
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	$ 26	97
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	$ 0	6
Held-to-maturity, Securities in Unrealized Loss Positions, Qualitative Disclosure, Nature	Commercial Mortgage-Backed Agencies – Held to Maturity - There were no commercial mortgage-backed agencies in the Held to Maturity portfolio as of September 30, 2015 in a loss position.
Held-to-maturity, securities in unrealized loss positions, qualitative disclosure, number of positions | security	0
Held-to-maturity securities	$ 18,148	16,425
Held-to-maturity gross unrealized losses	$ 0	0
Collateralized Mortgage Obligations [Member]
Schedule of Investments [Line Items]
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, nature	Collateralized Mortgage Obligations – Available for Sale – There was one collateralized mortgage obligation in an unrealized loss position for less than 12 months as of September 30, 2015. The security is of the highest investment grade and the Corporation does not intend to sell it, and it is not more likely than not that the Corporation will be required to sell it before recovery of its amortized cost basis, which may be at maturity. Accordingly, management does not consider this investment to be other-than-temporarily impaired at September 30, 2015. There were no collateralized mortgage obligations in an unrealized loss position for 12 months or more.
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, greater than or equal to one year | security	0
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	$ 47
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	$ 0
Held-to-maturity, Securities in Unrealized Loss Positions, Qualitative Disclosure, Nature	Collateralized Mortgage Obligations – Held to Maturity – There was one collateralized mortgage obligations in an unrealized loss position for less than 12 months as of September 30, 2015. The security is of the highest investment grade and the Corporation has the intent and ability to hold the investment to maturity. Accordingly, management does not consider this investment to be other-than-temporarily impaired at September 30, 2015. There were no collateralized mortgage obligations in an unrealized loss position for 12 months or more.
Held-to-maturity securities	$ 6,432	7,379
Held-to-maturity gross unrealized losses	$ 34	0
Obligations of States and Political Subdivisions [Member]
Schedule of Investments [Line Items]
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, nature	Obligations of State and Political Subdivisions – Available for Sale – There were 10 obligations of state and political subdivisions that have been in an unrealized loss position for less than 12 months at September 30, 2015. There was one security that has been in an unrealized loss position for 12 months or more. These investments are of investment grade as determined by the major rating agencies and management reviews the ratings of the underlying issuers and performs an in-depth credit analysis on the securities. Management believes that this portfolio is well-diversified throughout the United States, and all bonds continue to perform according to their contractual terms. The Corporation does not intend to sell these investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at September 30, 2015.
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, less than one year | security	10
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, greater than or equal to one year | security	1
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	$ 151	0
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	$ 141	260
Held-to-maturity, Securities in Unrealized Loss Positions, Qualitative Disclosure, Nature	Obligations of State and Political Subdivisions – Held to Maturity – There were no obligations of state and political subdivisions in the Held to Maturity portfolio as of September 30, 2015 in a loss position.
Held-to-maturity securities	$ 2,625	2,725
Held-to-maturity gross unrealized losses	$ 0	117
Collateralized Debt Obligations [Member]
Schedule of Investments [Line Items]
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, nature	Collateralized Debt Obligations – Available for Sale - The $7.3 million in unrealized losses greater than 12 months at September 30, 2015 relates to 12 pooled trust preferred securities that are included in the CDO portfolio. See Note 9 for a discussion of the methodology used by management to determine the fair values of these securities. Based upon a review of credit quality and the cash flow tests performed by the independent third party, management determined that there were no securities that had credit-related non-cash OTTI charges during the first nine months of 2015. The unrealized losses on the remaining securities in the portfolio are primarily attributable to continued depression in market interest rates, marketability, liquidity and the current economic environment.
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, less than one year | security	1
Available-for-sale, securities in unrealized loss positions, qualitative disclosure, number of positions, greater than or equal to one year | security	12
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	$ 0	0
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	$ 7,339	$ 12,933
Less Than 12 Months [Member] | Residential Mortgage-backed Agencies [Member]
Schedule of Investments [Line Items]
Held-to-maturity, securities in unrealized loss positions, qualitative disclosure, number of positions | security	5
Less Than 12 Months [Member] | Collateralized Mortgage Obligations [Member]
Schedule of Investments [Line Items]
Held-to-maturity, securities in unrealized loss positions, qualitative disclosure, number of positions | security	1
Less Than 12 Months [Member] | Obligations of States and Political Subdivisions [Member]
Schedule of Investments [Line Items]
Held-to-maturity, securities in unrealized loss positions, qualitative disclosure, number of positions | security	0
12 Months or More [Member] | Residential Mortgage-backed Agencies [Member]
Schedule of Investments [Line Items]
Held-to-maturity, securities in unrealized loss positions, qualitative disclosure, number of positions | security	0
12 Months or More [Member] | Collateralized Mortgage Obligations [Member]
Schedule of Investments [Line Items]
Held-to-maturity, securities in unrealized loss positions, qualitative disclosure, number of positions | loan	0

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Fair Value of Financial Instruments (Reconciliation of Fair Valued Assets Measured on a Recurring Basis) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Collateralized Debt Obligations [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance	$ 30,046	$ 23,921	$ 25,339	$ 17,538
Included in other comprehensive income	1,882	485	6,589	6,868
Ending Balance	31,928	24,406	31,928	24,406
Interest Rate Swap [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance	(140)	(272)	(199)	(457)
Included in other comprehensive income	33	44	92	229
Ending Balance	$ (107)	$ (228)	$ (107)	$ (228)

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Loans and Related Allowance for Loan Losses (Narrative) (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2015 USD ($) loan	Jun. 30, 2015 USD ($)	Sep. 30, 2015 USD ($) loan	Sep. 30, 2014 USD ($) loan	Dec. 31, 2014 USD ($)	Jun. 30, 2014 USD ($)	Dec. 31, 2013 USD ($)
Financing Receivable, Modifications [Line Items]
Commercial amount benchmark minimum for internal annual review			$ 500,000
Commercial amount benchmark minimum for annual review by independent reviewer			1,000,000
Commercial amount benchmark minimum criticized relationships for annual review by independent reviewer			500,000
Commerical amount benchmark internal impairment review			500,000
Commerical amount benchmark internal impairment review minimum relationship amount			750,000
Commercial amount benchmark to require external appraisal			500,000
Nonaccrual loans subject to partial charge off	$ 11,776,000		11,776,000		$ 11,551,000
Reduction of the ALL resulting			5,744	$ 1,055
Loans in process of foreclosure	2,400,000		2,400,000		1,900,000
Total allowance for loan losses	12,211,000	$ 11,809,000	12,211,000	$ 12,068,000	12,065,000	$ 12,463,000	$ 13,594,000
Partial Charge Off [Member]
Financing Receivable, Modifications [Line Items]
Nonaccrual loans subject to partial charge off	5,100,000		$ 5,100,000		4,600,000
New TDR [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, number of contracts | loan			8	2
Pre Existing TDR Loans Remodified After Maturity [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, number of contracts | loan			10	5
Acquisition and Development (A&D) TDR [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, subsequent default, recorded investment				$ 1,700,000
Commerical Real Estate TDR [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, subsequent default, recorded investment				400,000
Commerical and Industrial TDR [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, subsequent default, recorded investment				$ 200,000
Unallocated [Member]
Financing Receivable, Modifications [Line Items]
Total allowance for loan losses	$ 500,000		$ 500,000
Residential Mortgage [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, subsequent default, number of contracts | loan	1
Financing receivable, modifications, subsequent default, recorded investment		$ 70,000
Commercial real estate- non owner-occupied [Member]
Financing Receivable, Modifications [Line Items]
Nonaccrual loans subject to partial charge off	$ 1,499,000		$ 1,499,000		$ 1,152,000

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Borrowed Funds (Summary of Long Term Borrowings) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
FHLB advances	$ 105,825	$ 135,876
Junior subordinated debt, bearing variable interest rates	30,929	35,929
Junior subordinated debt, bearing fixed interest rate	10,801	10,801
Total long-term debt	$ 147,555	$ 182,606
Junior Subordinated Debt [Member]
Debt Instrument [Line Items]
Maximum allowable period of interest deferment	3.03%
Debt instrument, interest rate, effective percentage	9.88%
Federal Home Loan Bank Advances [Member]
Debt Instrument [Line Items]
Maximum allowable period of interest deferment	1.00%
Debt instrument, interest rate, effective percentage rate range, maximum	3.69%

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Net Gains (Schedule of Net Gains/(Losses)) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Realized gains	$ 217	$ 222	$ 373	$ 1,527
Realized losses	(138)	(75)	(311)	(434)
Gain on sale of consumer loans			40	37
Loss on disposal of fixed assets			(2)	(3)
Net gains/(losses) - other	95	166	100	1,127
Available-for-sale Securities [Member]
Realized gains	217	222	373	427
Realized losses	(138)	(75)	(311)	(434)
Held-to-maturity Securities [Member]
Realized gains	0	0	0	1,100
Gain on sale of consumer loans	16	19	40	37
Loss on disposal of fixed assets	0	0	(2)	(3)
Net gains/(losses) - other	$ 95	$ 166	$ 100	$ 1,127

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Cash and Cash Equivalents (Tables)

9 Months Ended

Sep. 30, 2015

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents

	September 30,		December 31,
(in thousands)	2015		2014
Cash and due from banks, weighted average interest rate of 0.10% (at September 30, 2015)	$	61,406	$	27,554

Interest bearing deposits in banks, which represent funds invested at a correspondent bank, are carried at cost which approximates fair value and, as of September 30, 2015 and December 31, 2014, consisted of daily funds invested at the Federal Home Loan Bank (“FHLB”) of Atlanta, First Tennessee Bank (“FTN”), and Merchants and Traders (“M&T”).

	September 30,		December 31,
(in thousands)	2015		2014
FHLB daily investments, interest rate of 0.005% (at September 30, 2015)	$	1,521	$	983
FTN daily investments, interest rate of 0.07% (at September 30, 2015)		850		850
M&T daily investments, interest rate of 0.15% (at September 30, 2015)		1,012		6,064
	$	3,383	$	7,897

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Borrowed (Contractual Maturities of All Long Term Borrowings) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Due in 2015	$ 0	$ 35,000
Due in 2016	0	0
Due in 2017	0	0
Due in 2018	70,000	70,000
Due in 2019	0	0
Thereafter	77,555	77,606
Total long-term debt	147,555	$ 182,606
Fixed Rate [Member]
Debt Instrument [Line Items]
Due in 2015	0
Due in 2016	0
Due in 2017	0
Due in 2018	70,000
Due in 2019	0
Thereafter	46,626
Total long-term debt	116,626
Floating Rate [Member]
Debt Instrument [Line Items]
Due in 2015	0
Due in 2016	0
Due in 2017	0
Due in 2018	0
Due in 2019	0
Thereafter	30,929
Total long-term debt	$ 30,929

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Accumulated Other Comprehensive Loss (Components of Comprehensive Income) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Available for sale securities - all other: Net unrealized losses on all other AFS securities, Net of tax	$ 727	$ (87)	$ 1,394	$ 8,255
Cash flow hedges: Unrealized holding gains, Before Tax	33	44	92	229
Cash flow hedges: Unrealized holding gains, Tax Effect	(13)	(18)	(37)	(92)
Cash flow hedges: Unrealized holding gains, Net of Tax	20	26	55	137
Unrealized net actuarial gain (loss), Net of Tax	(1,616)	(687)	(2,452)	(650)
Other comprehensive income, Before tax amount	195	(573)	4,958	14,689
Other comprehensive income, Tax (expense) benefit	(77)	228	(1,976)	(5,873)
Other comprehensive income, Net	118	(345)	2,982	8,816
Investment securities- with OTTI [Member]
Available for sale (AFS) securities with OTTI: Unrealized holding gains, Before tax amount	1,658	748	6,682	6,149
Available for sale (AFS) securities with OTTI: Unrealized holding gains, Tax effect	(661)	(300)	(2,665)	(2,460)
Available for sale (AFS) securities with OTTI: Unrealized holding gains, Net of tax	997	448	4,017	3,689
Available for sale (AFS) securities with OTTI: Less: accretable yield recognized in income	139	170	479	501
Available for sale (AFS) securities with OTTI: Less: accretable yield recognized in income, Tax effect	(55)	(68)	(191)	(200)
Other than temporary impairment losses, investments, reclassification adjustment of noncredit portion included in net income, Available for sale securities, Net of tax	84	102	288	301
Available for sale (AFS) securities with OTTI: Net unrealized gains on investments with OTTI, Before tax amount	1,519	578	6,203	5,648
Available for sale (AFS) securities with OTTI: Net unrealized gains on investments with OTTI: Net unrealized gains on investments with OTTI, Tax effect	(606)	(232)	(2,474)	(2,260)
Available for sale (AFS) securities with OTTI: Net unrealized gains on investments with OTTI, Net of tax	913	346	3,729	3,388
Investment Securities -All Other AFS [Member]
Securities: Unrealized holding losses, Before tax	1,288	3	2,380	13,746
Securities: Unrealized holding losses, Tax effect	(515)	(2)	(949)	(5,496)
Securities: Unrealized holding losses, Net of tax	773	1	1,431	8,250
Securities: Less: gains recognized in income, Before tax	79	147	62	(7)
Securities: Less: gains recognized in income, Tax effect	(33)	(59)	(25)	2
Securities: gains recognized in income, Net of tax	46	88	37	(5)
Available for sale securities: Net unrealized losses on all other AFS securities, Before Tax	1,209	(144)	2,318	13,753
Available for sale securities: Net unrealized losses on all other AFS securities, Tax effect	(482)	57	(924)	(5,498)
Available for sale securities - all other: Net unrealized losses on all other AFS securities, Net of tax	727	(87)	1,394	8,255
Investment Securities HTM [Member]
Securities: Unrealized holding losses, Before tax	0	0	0	(3,984)
Securities: Unrealized holding losses, Tax effect	0	0	0	1,593
Securities: Unrealized holding losses, Net of tax	0	0	0	(2,391)
Securities: Less: gains recognized in income, Before tax	(106)	(95)	(374)	(127)
Securities: Less: gains recognized in income, Tax effect	42	38	149	51
Securities: gains recognized in income, Net of tax	(64)	(57)	(225)	(76)
Held to maturity securities: Net unrealized losses on all HTM securities, Before tax	106	95	374	(3,857)
Held to maturity securities: Net unrealized losses on all HTM securities, Tax	(42)	(38)	(149)	1,542
Held to maturity securities: Net unrealized losses on all HTM securities, After tax	64	57	225	(2,315)
Pension Plan [Member]
Unrealized net actuarial gain (loss), Before Tax	(2,892)	(1,233)	(4,651)	(1,345)
Unrealized net actuarial gain (loss), Tax Effect	1,153	494	1,856	539
Unrealized net actuarial gain (loss), Net of Tax	(1,739)	(739)	(2,795)	(806)
Net plan liability adjustment, Before Tax	(2,690)	(1,147)	(4,081)	(1,086)
Net plan liability adjustment, Tax Effect	1,074	460	1,629	436
Net plan liability adjustment, Net of Tax	(1,616)	(687)	(2,452)	(650)
SERP [Member]
Unrealized net actuarial gain (loss), Before Tax	0	0	0	0
Unrealized net actuarial gain (loss), Tax Effect	0	0	0	0
Unrealized net actuarial gain (loss), Net of Tax	0	0	0	0
Net plan liability adjustment, Before Tax	18	1	52	2
Net plan liability adjustment, Tax Effect	(8)	(1)	(21)	(1)
Net plan liability adjustment, Net of Tax	10	0	31	1
Amortization of unrecognized loss [Member] | Pension Plan [Member]
Less: amortization of unrecognized net gain (loss), Before Tax	(204)	(93)	(576)	(280)
Less: amortization of unrecognized net gain (loss), Tax Effect	80	37	229	112
Less: amortization of unrecognized net gain (loss), Net of Tax	(124)	(56)	(347)	(168)
Amortization of Unrecognized Gain [Member] | SERP [Member]
Less: amortization of unrecognized net gain (loss), Before Tax	(13)	4	(37)	13
Less: amortization of unrecognized net gain (loss), Tax Effect	5	(1)	15	(5)
Less: amortization of unrecognized net gain (loss), Net of Tax	(8)	3	(22)	8
Amortization of transition asset [Member] | Pension Plan [Member]
Less: amortization of transition asset, Before Tax	5	10	15	30
Less: amortization of transition asset, Tax Effect	(2)	(4)	(6)	(12)
Less: amortization of transition asset, Net of Tax	3	6	9	18
Amortization of prior service costs [Member] | Pension Plan [Member]
Less: amortization of prior service costs, Before Tax	(3)	(3)	(9)	(9)
Less: amortization of prior service costs, Tax Effect	1	1	4	3
Less: amortization of prior service costs, Net of Tax	(2)	(2)	(5)	(6)
Amortization of prior service costs [Member] | SERP [Member]
Less: amortization of prior service costs, Before Tax	(5)	(5)	(15)	(15)
Less: amortization of prior service costs, Tax Effect	3	2	6	6
Less: amortization of prior service costs, Net of Tax	$ (2)	$ (3)	$ (9)	$ (9)

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Loans and Related Allowance for Loan Losses (Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 843,092	$ 839,991
Commercial real estate- non owner-occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	147,543	137,433
Commercial real estate- all other CRE [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	118,390	118,631
Acquisition and development- 1-4 family residential construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	16,452	13,710
Acquisition and development- All other A&D [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	82,304	85,591
Commercial and industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	74,780	93,255
Residential mortgage- term [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	302,267	291,426
Residential mortgage- home equity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	76,680	76,215
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	24,676	23,730
Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	779,002	758,307
Pass [Member] | Commercial real estate- non owner-occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	125,412	115,276
Pass [Member] | Commercial real estate- all other CRE [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	99,712	90,740
Pass [Member] | Acquisition and development- 1-4 family residential construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	15,752	12,920
Pass [Member] | Acquisition and development- All other A&D [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	75,595	72,323
Pass [Member] | Commercial and industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	71,292	88,579
Pass [Member] | Residential mortgage- term [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	291,679	280,113
Pass [Member] | Residential mortgage- home equity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	74,901	74,698
Pass [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	24,659	23,658
Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	12,849	22,211
Special Mention [Member] | Commercial real estate- non owner-occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	11,669	10,884
Special Mention [Member] | Commercial real estate- all other CRE [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	565	8,618
Special Mention [Member] | Acquisition and development- 1-4 family residential construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	0	0
Special Mention [Member] | Acquisition and development- All other A&D [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	76	1,356
Special Mention [Member] | Commercial and industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	252	884
Special Mention [Member] | Residential mortgage- term [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	238	379
Special Mention [Member] | Residential mortgage- home equity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	49	90
Special Mention [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	0	0
Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	51,241	59,473
Substandard [Member] | Commercial real estate- non owner-occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	10,462	11,273
Substandard [Member] | Commercial real estate- all other CRE [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	18,113	19,273
Substandard [Member] | Acquisition and development- 1-4 family residential construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	700	790
Substandard [Member] | Acquisition and development- All other A&D [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	6,633	11,912
Substandard [Member] | Commercial and industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	3,236	3,792
Substandard [Member] | Residential mortgage- term [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	10,350	10,934
Substandard [Member] | Residential mortgage- home equity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	1,730	1,427
Substandard [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 17	$ 72

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Borrowed Funds (Narrative) (Details) $ in Millions	Sep. 30, 2015 USD ($)
Borrowed Funds [Abstract]
Repurchase agreements secured by available for sale securities	$ 59.7
FHLB advances secured by loans receivable	$ 216.8
Minimum fair value percentage pleadged against account balances	102.00%

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Variable Interest Entities (VIE) (Narrative) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2011	Dec. 31, 2009	Dec. 31, 2014
Variable Interest Entity [Line Items]
Long-term Debt	$ 147,555			$ 182,606
Payments to Acquire Businesses and Interest in Affiliates		$ 6,100	$ 6,100
VIE purpose	purchase the land and construct a 36-unit low income housing rental complex
Federal investment tax credits	$ 300	$ 8,400
Federal investment tax credit duration		10 years
Variable Interest Entity, Not Primary Beneficiary [Member]
Variable Interest Entity [Line Items]
Long-term Debt	41,700
Equity Method Investments	1,300
Ownership in Liberty Mews Limited Partnership			99.99%
VIE financing			$ 10,600
Construction and Development Costs			$ 10,600
Partnership total assets	$ 9,200			$ 9,400

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Employee Benefit Plans (Components of the Net Periodic Pension Plan Cost) (SERP) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Defined Benefit Plan Disclosure [Line Items]
Service cost			$ 242	$ 193
Interest cost			1,177	1,106
Amortization of prior service cost			9	9
Net pension credit included in employee benefits			(235)	(432)
SERP [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 29	$ 23	87	71
Interest cost	58	58	174	172
Amortization of recognized (gain)/ loss	13	(4)	37	(13)
Amortization of prior service cost	5	5	15	15
Net pension credit included in employee benefits	$ 105	$ 82	$ 313	$ 245

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Variable Interest Entities (VIE) (Investment in LIHTC Partnership) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Variable Interest Entities (VIE) [Abstract]
Investment (Other Assets)	$ 3,994	$ 4,429
Maximum exposure to loss	$ 3,994	$ 4,429

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Borrowed Funds (Summary of Short Term Borrowings) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Borrowed Funds [Abstract]
Outstanding at end of period	$ 38,460	$ 39,801
Weighted average interest rate at end of period	0.15%	0.15%
Maximum amount outstanding as of any month end	$ 47,131	$ 53,819
Average amount outstanding	$ 33,506	$ 45,702
Approximate weighted average rate during the period	0.12%	0.13%

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Fair Value of Financial Instruments (Fair Value by Balance Sheet Grouping) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	$ 61,406	$ 27,554
Investment securities - AFS, fair value	185,519	221,117
Investment securities - AFS, carrying amount	185,519	221,117
Interest bearing deposits	3,383	7,897
Investment securities - HTM	108,759	110,771
Restricted bank stock	5,904	7,524
Loans, net	835,132	830,904
Accrued interest receivable	3,709	4,152
Deposits - non-maturity	730,899	689,581
Deposits - time deposits	269,464	296,713
Short-term borrowed funds	38,460	39,801
Long-term borrowed funds	150,565	187,143
Accrued interest payable	622	882
Financial derivative	107	199
Off balance sheet financial instruments	0	0
Cash and due from banks, carrying amount	61,406	27,554
Available-for-sale securities, amortized cost basis	187,626	231,745
Interest bearing deposits in banks, carrying amount	3,383	7,897
Held-to-maturity amortized cost	106,732	109,449
Restricted bank stock, carrying amount	5,904	7,524
Loans, net, carrying amount	830,881	827,926
Accrued interest receivable, carrying amount	3,709	4,152
Deposits - non-maturity, carrying amount	730,899	689,581
Deposits - time deposits, carrying amount	265,442	291,742
Short-term borrowings	38,460	39,801
Long-term borrowings	147,555	182,606
Accrued interest payable, carrying amount	622	882
Financial derivative, carrying amount	107	199
Off-Balance Sheet risks, amount, liability, carrying amount	0	0
Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	61,406	27,554
Interest bearing deposits	3,383	7,897
Off balance sheet financial instruments	0	0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities - AFS, fair value	153,591	195,778
Investment securities - HTM	106,134	108,163
Restricted bank stock	5,904	7,524
Accrued interest receivable	3,709	4,152
Deposits - non-maturity	730,899	689,581
Deposits - time deposits	269,464	296,713
Short-term borrowed funds	38,460	39,801
Long-term borrowed funds	150,565	187,143
Accrued interest payable	622	882
Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities - AFS, fair value	31,928	25,339
Investment securities - HTM	2,625	2,608
Loans, net	835,132	830,904
Financial derivative	$ 107	$ 199

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Assets and Liabilities Subject to Enforceable Master Netting Agreements

9 Months Ended

Sep. 30, 2015

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

Assets and Liabilities Subject to Enforceable Master Netting Arrangements

Note 18 – Assets and Liabilities Subject to Enforceable Master Netting Arrangements

Interest Rate Swap Agreements (“Swap Agreements”)

The Corporation has entered into interest rate swap agreements to modify the re-pricing characteristics of certain interest-bearing liabilities as a part of managing interest rate risk.  The swap agreements have been designated as cash flow hedges, and accordingly, the fair value of the interest rate swap contracts is reported in Other Liabilities on the Consolidated Statement of Financial Condition.  The swap agreements were entered into with a third party financial institution.  The Corporation is party to master netting arrangements with its financial institution counterparty; however, the Corporation does not offset assets and liabilities under these arrangements for financial statement presentation purposes.  The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract.  Collateral, in the form of cash, is pledged by the Corporation as the counterparty with net liability positions in accordance with contract thresholds.  See Note 16 to the Consolidated Financial Statements for more information.

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

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

The following table presents the liabilities subject to an enforceable master netting arrangement or repurchase agreements as of September 30, 2015 and December 31, 2014.

							Gross Amounts Not Offset in the Statement of Condition
(In thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Condition		Net Amounts of Liabilities Presented in the Statement of Condition		Financial Instruments		Cash Collateral Pledged		Net Amount
September 30, 2015
Interest Rate Swap Agreements	$	107	$	0	$	107	$	(107)	$	0	$	0
Repurchase Agreements	$	38,460	$	0	$	38,460	$	(38,460)	$	0	$	0
December 31, 2014
Interest Rate Swap Agreements	$	199	$	0	$	199	$	(199)	$	0	$	0
Repurchase Agreements	$	39,801	$	0	$	39,801	$	(39,801)	$	0	$	0

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Investments (Proceeds from Sales of Securities and Realized Gains and Losses) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Investments [Abstract]
Proceeds	$ 28,005	$ 616	$ 52,672	$ 56,838
Realized gains	217	222	373	1,527
Realized losses	$ 138	$ 75	$ 311	$ 434

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Variable Interest Entities (VIE) (Tables)

9 Months Ended

Sep. 30, 2015

Variable Interest Entities (VIE) [Abstract]

Investment in LIHTC Partnership

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

	September 30,		December 31,
(in thousands)	2015		2014
Investment in LIHTC Partnership
Carrying amount on Balance Sheet of:
Investment (Other Assets)	$	3,994	$	4,429
Maximum exposure to loss		3,994		4,429

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Junior Subordinated Debentures and Restrictions on Dividends (Narrative) (Details) - USD ($)	1 Months Ended	3 Months Ended		9 Months Ended
	Apr. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Trust common equity		$ 63,000		$ 63,000		$ 62,000
Preferred stock dividends deferred		(675,000)	$ (675,000)	(2,025,000)	$ (1,919,000)
First United Statutory Trust I And II Member
Trust preferred securities		30,000,000		30,000,000
Trust common equity		900,000		$ 900,000
Debenture issue date				2004-03
Junior Subordinated Debt [Member]
Debenture issue date				2004-12
Debt instrument, face amount		$ 5,000,000		$ 5,000,000
Variable interest rate				three month LIBOR plus 185 basis points
Debt instrument, interest rate, effective percentage		9.88%		9.88%
Debenture face value		$ 5,000,000		$ 5,000,000
Fixed interest rate		5.88%		5.88%
Debenture rate conversion date				2010-03
Maximum allowable period of interest deferment				5 years
Junior Subordinated Debt [Member] | First United Statutory Trust I Member
Debenture issued to unconsolidated subsidiary		$ 20,600,000		$ 20,600,000
Variable interest rate				three-month LIBOR plus 275 basis points
Debt instrument, interest rate, effective percentage		3.08%		3.08%
Maturity date				2034
Earliest availability for redemption				5 years
Junior Subordinated Debt [Member] | First United Statutory Trust II Member
Debenture issued to unconsolidated subsidiary		$ 10,300,000		$ 10,300,000
Variable interest rate				three-month LIBOR plus 275 basis points
Debt instrument, interest rate, effective percentage		3.08%		3.08%
Maturity date				2034
Earliest availability for redemption				5 years
Junior Subordinated Debt [Member] | December 2009 First United Statutory Trust III Member
Trust preferred securities		$ 7,000,000		$ 7,000,000
Trust common equity		200,000		$ 200,000
Debenture issue date				2009-12
Debenture issued to unconsolidated subsidiary		$ 7,200,000		$ 7,200,000
Maturity date				2040
Earliest availability for redemption				5 years
Fixed interest rate		9.875%		9.875%
Junior Subordinated Debt [Member] | January 2010 First United Statutory Trust III Member
Trust preferred securities		$ 3,500,000		$ 3,500,000
Trust common equity		100,000		$ 100,000
Debenture issue date				2010-01
Debenture issued to unconsolidated subsidiary		$ 3,600,000		$ 3,600,000
Maturity date				2040
Earliest availability for redemption				5 years
Fixed interest rate		9.875%		9.875%
Cumulative Preferred Stock [Member]
Quarterly preferred dividends accrual/paid	$ 6,500,000			$ 400,000

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2015

Fair Value of Financial Instruments [Abstract]

Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of September 30, 2015 and December 31, 2014, the significant unobservable inputs used in the fair value measurements were as follows:

(in thousands)		Fair Value at September 30, 2015	Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale	$	31,928	Discounted Cash Flow	Discount Rate	Range of Libor+ 5.50% to 9.50%
Cash Flow Hedge	$	(107)	Discounted Cash Flow	Reuters Third Party Market Quote	99.9%                       (weighted avg 99.9%)
Non-recurring:
Impaired Loans	$	5,985	Market Comparable Properties	Marketability Discount	3% -15% (1)               (weighted avg 11.6%)
Other Real Estate Owned	$	2,278	Market Comparable Properties	Marketability Discount	10.0% -15.0% (1)               (weighted avg 12.3%)
(in thousands)		Fair Value at December 31, 2014	Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale	$	25,339	Discounted Cash Flow	Discount Rate	Range of Libor+ 5% to 12%
Cash Flow Hedge	$	(199)	Discounted Cash Flow	Reuters Third Party Market Quote	99.9%                       (weighted avg 99.9%)
Non-recurring:
Impaired Loans	$	9,122	Market Comparable Properties	Marketability Discount	10% (1)               (weighted avg 10%)
Other Real Estate Owned	$	2,511	Market Comparable Properties	Marketability Discount	10% -15% (1)               (weighted avg 11%)

NOTE:

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

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

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 September 30, 2015 and December 31, 2014 are as follows:

			Fair Value Measurements at September 30, 2015 Using
		Assets Measured at Fair Value	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)		9/30/2015	(Level 1)		(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	34,221		$	34,221
Residential mortgage-backed agencies	$	14,494		$	14,494
Commercial mortgage-backed agencies	$	45,805		$	45,805
Collateralized mortgage obligations	$	10,217		$	10,217
Obligations of states and political subdivisions	$	48,854		$	48,854
Collateralized debt obligations	$	31,928				$	31,928
Financial Derivative	$	(107)				$	(107)
Non-recurring:
Impaired loans	$	5,985				$	5,985
Other real estate owned	$	2,278				$	2,278

			Fair Value Measurements at December 31, 2014 Using
		Assets Measured at Fair Value	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)		12/31/2014	(Level 1)		(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. treasuries	$	29,596		$	29,596
U.S. government agencies	$	38,941		$	38,941
Residential mortgage-backed agencies	$	45,273		$	45,273
Commercial mortgage-backed agencies	$	25,957		$	25,957
Collateralized mortgage obligations	$	8,707		$	8,707
Obligations of states and political subdivisions	$	47,304		$	47,304
Collateralized debt obligations	$	25,339				$	25,339
Financial Derivative	$	(199)				$	(199)
Non-recurring:
Impaired loans	$	9,122				$	9,122
Other real estate owned	$	2,511				$	2,511

Reconciliation of Fair Valued Assets Measured on a Recurring Basis

The following tables show a reconciliation of the beginning and ending balances for fair valued assets measured on a recurring basis using Level 3 significant unobservable inputs for the nine- and three-month periods ended September 30, 2015 and 2014:

		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In thousands)		Investment Securities Available for Sale		Cash Flow Hedge
Beginning balance January 1, 2015	$	25,339	$	(199)
Total gains realized/unrealized:
Included in other comprehensive income		6,589		92
Ending balance September 30, 2015	$	31,928	$	(107)

		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(in thousands)		Investment Securities Available for Sale		Cash Flow Hedge
Beginning balance January 1, 2014	$	17,538	$	(457)
Total gains realized/unrealized:
Included in other comprehensive income		6,868		229
Ending balance September 30, 2014	$	24,406	$	(228)

		Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
(in thousands)		Investment Securities Available for Sale		Cash Flow Hedge
Beginning balance July 1, 2015	$	30,046	$	(140)
Total gains realized/unrealized:
Included in other comprehensive income		1,882		33
Ending balance September 30, 2015	$	31,928	$	(107)

		Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
(in thousands)		Investment Securities Available for Sale		Cash Flow Hedge
Beginning balance July 1, 2014	$	23,921	$	(272)
Total gains realized/unrealized:
Included in other comprehensive income		485		44
Ending balance September 30, 2014	$	24,406	$	(228)

Fair Value by Balance Sheet Grouping

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

	September 30, 2015					Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	61,406	$	61,406	$	61,406
Interest bearing deposits in banks		3,383		3,383		3,383
Investment securities - AFS		185,519		185,519			$	153,591	$	31,928
Investment securities - HTM		106,732		108,759				106,134		2,625
Restricted bank stock		5,904		5,904				5,904
Loans, net		830,881		835,132						835,132
Accrued interest receivable		3,709		3,709				3,709
Financial Liabilities:
Deposits – non-maturity		730,899		730,899				730,899
Deposits – time deposits		265,442		269,464				269,464
Short-term borrowed funds		38,460		38,460				38,460
Long-term borrowed funds		147,555		150,565				150,565
Accrued interest payable		622		622				622
Financial derivative		107		107						107
Off balance sheet financial instruments		0		0		0

	December 31, 2014					Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	27,554	$	27,554	$	27,554
Interest bearing deposits in banks		7,897		7,897		7,897
Investment securities - AFS		221,117		221,117			$	195,778	$	25,339
Investment securities - HTM		109,449		110,771				108,163		2,608
Restricted bank stock		7,524		7,524				7,524
Loans, net		827,926		830,904						830,904
Accrued interest receivable		4,152		4,152				4,152
Financial Liabilities:
Deposits- non-maturity		689,581		689,581				689,581
Deposits- time deposits		291,742		296,713				296,713
Short-term borrowed funds		39,801		39,801				39,801
Long-term borrowed funds		182,606		187,143				187,143
Accrued interest payable		882		882				882
Financial derivative		199		199						199
Off balance sheet financial instruments		0		0		0

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Investments (Non-Cash OTTI Credit Losses Recognized in Earnings) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Investments [Abstract]
Balance of credit-related OTTI, beginning	$ 12,243	$ 13,091	$ 12,583	$ 13,422
Reduction for increases in cash flows expected to be collected	(139)	(170)	(479)	(501)
Balance of credit-related OTTI, ending	$ 12,104	$ 12,921	$ 12,104	$ 12,921

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Fair Value of Financial Instruments (Narrative) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2015 USD ($) security	Dec. 31, 2014 USD ($)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Amortized Cost	$ 187,626	$ 231,745
Available-for-sale Securities	$ 185,519	221,117
Collateralized Debt Obligations [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Acquired Trust Preferred Securities, Number of Securities | security	16
Amortized Cost	$ 35,636	37,117
Available-for-sale Securities	$ 31,928	$ 25,339

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Loans and Related Allowance for Loan Losses (Allowance for Loan Losses Summarized by Loan Portfolio Segments) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	$ 11,809	$ 12,463	$ 12,065	$ 13,594
Charge-offs	(245)	(1,205)	(998)	(3,783)
Recoveries	147	122	518	628
Provision for loan losses	500	688	626	1,629
ALL Ending Balance	12,211	12,068	12,211	12,068
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	2,566	2,839	2,424	4,052
Charge-offs	(8)	(64)	(295)	(85)
Recoveries	1	1	66	11
Provision for loan losses	22	(184)	386	(1,386)
ALL Ending Balance	2,581	2,592	2,581	2,592
Acquisition and Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	3,806	3,642	3,912	4,172
Charge-offs	0	(903)	(256)	(2,423)
Recoveries	59	33	100	104
Provision for loan losses	623	938	732	1,857
ALL Ending Balance	4,488	3,710	4,488	3,710
Commercial and industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	1,007	1,553	1,680	766
Charge-offs	0	(5)	0	(213)
Recoveries	4	15	24	22
Provision for loan losses	(277)	28	(970)	1,016
ALL Ending Balance	734	1,591	734	1,591
Residential Mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	3,707	4,178	3,862	4,320
Charge-offs	(164)	(116)	(200)	(682)
Recoveries	29	27	162	183
Provision for loan losses	120	(110)	(132)	158
ALL Ending Balance	3,692	3,979	3,692	3,979
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	223	251	187	284
Charge-offs	(73)	(117)	(247)	(380)
Recoveries	54	46	166	308
Provision for loan losses	12	16	110	(16)
ALL Ending Balance	216	196	216	196
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL Beginning Balance	500	0	0	0
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision for loan losses	0	0	500	0
ALL Ending Balance	$ 500	$ 0	$ 500	$ 0

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Cash and Cash Equivalents (Cash and Cash Equivalents) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Cash and Cash Equivalents [Line Items]
Cash and due from banks	$ 61,406	$ 27,554
Interest bearing deposits in banks	3,383	7,897
FHLB [Member]
Cash and Cash Equivalents [Line Items]
Interest bearing deposits in banks	$ 1,521	983
Interest Rate	0.005%
FTN [Member]
Cash and Cash Equivalents [Line Items]
Interest bearing deposits in banks	$ 850	850
Interest Rate	0.07%
M&T Fed Funds sold [Member]
Cash and Cash Equivalents [Line Items]
Interest bearing deposits in banks	$ 1,012	$ 6,064
Interest Rate	0.15%
Weighted Average [Member]
Cash and Cash Equivalents [Line Items]
Interest Rate	0.10%

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Earnings Per Common Share

9 Months Ended

Sep. 30, 2015

Earnings Per Common Share [Abstract]

Earnings Per Common Share

Note 2 – Earnings Per Common Share

Basic earnings per common share is derived by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period and does not include the effect of any potentially dilutive common stock equivalents.  Diluted earnings per share is derived by dividing net income available to common shareholders by the weighted-average number of shares outstanding, adjusted for the dilutive effect of outstanding common stock equivalents. 

The following tables set forth the calculation of basic and diluted earnings per common share for the nine- and three-month periods ended September 30, 2015 and 2014:

	Nine months ended September 30,
	2015					2014
			Average	Per Share				Average	Per Share
(in thousands, except for per share amount)	Income		Shares	Amount		Income		Shares	Amount
Basic and Diluted Earnings Per Share:
Net income	$	4,491				$	3,938
Preferred stock dividends		(2,025)					(1,919)
Discount accretion on preferred stock		0					(6)
Net income available to common shareholders	$	2,466	6,247	$	0.39	$	2,013	6,220	$	0.32

	Three months ended September 30,
	2015					2014
			Average	Per Share				Average	Per Share
(in thousands, except for per share amount)	Income		Shares	Amount		Income		Shares	Amount
Basic  and Diluted Earnings Per Share:
Net income	$	1,948				$	1,340
Preferred stock dividends deferred		(675)					(675)
Discount accretion on preferred stock		0					0
Net income available to common shareholders	$	1,273	6,255	$	0.20	$	665	6,228	$	0.10

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Loans and Related Allowance for Loan Losses (Average of Impaired Loans and Related Interest Income by Loan Portfolio Class) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Financing Receivable, Impaired [Line Items]
Average Investment	$ 24,308	$ 28,380	$ 24,068	$ 30,453
Interest income recognized on an accrual basis	167	162	510	535
Interest income recognized on a cash basis	2	29	32	128
Commercial real estate- non owner-occupied [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	4,607	2,591	4,314	1,890
Interest income recognized on an accrual basis	39	17	117	28
Interest income recognized on a cash basis	0	0	0	0
Commercial real estate- all other CRE [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	7,935	8,506	7,626	9,497
Interest income recognized on an accrual basis	34	35	89	116
Interest income recognized on a cash basis	0	23	8	67
Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	701	1,016	745	1,690
Interest income recognized on an accrual basis	8	9	26	34
Interest income recognized on a cash basis	0	0	0	0
Acquisition and development- All other A&D [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	5,091	7,540	5,311	8,108
Interest income recognized on an accrual basis	31	33	94	129
Interest income recognized on a cash basis	0	0	0	0
Commercial and industrial [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	1,253	1,905	1,471	2,065
Interest income recognized on an accrual basis	13	21	60	70
Interest income recognized on a cash basis	0	0	18	2
Residential mortgage- term [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	4,400	6,225	4,245	6,552
Interest income recognized on an accrual basis	42	47	124	154
Interest income recognized on a cash basis	2	3	4	55
Residential mortgage- home equity [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	321	597	349	640
Interest income recognized on an accrual basis	0	0	0	4
Interest income recognized on a cash basis	0	3	2	4
Consumer [Member]
Financing Receivable, Impaired [Line Items]
Average Investment	0	0	7	11
Interest income recognized on an accrual basis	0	0	0	0
Interest income recognized on a cash basis	$ 0	$ 0	$ 0	$ 0

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

9 Months Ended

Sep. 30, 2015

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

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

The following table presents the liabilities subject to an enforceable master netting arrangement or repurchase agreements as of September 30, 2015 and December 31, 2014.

							Gross Amounts Not Offset in the Statement of Condition
(In thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Condition		Net Amounts of Liabilities Presented in the Statement of Condition		Financial Instruments		Cash Collateral Pledged		Net Amount
September 30, 2015
Interest Rate Swap Agreements	$	107	$	0	$	107	$	(107)	$	0	$	0
Repurchase Agreements	$	38,460	$	0	$	38,460	$	(38,460)	$	0	$	0
December 31, 2014
Interest Rate Swap Agreements	$	199	$	0	$	199	$	(199)	$	0	$	0
Repurchase Agreements	$	39,801	$	0	$	39,801	$	(39,801)	$	0	$	0

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Restricted Investment in Bank Stock (Policy)

9 Months Ended

Sep. 30, 2015

Restricted Investment in Bank Stock [Abstract]

Restricted Investment in Bank Stock

Management evaluates the restricted stock for impairment in accordance with ASC Industry Topic 942, Financial Services – Depository and Lending-(ASC Section 942-325-35).  Management’s evaluation of potential impairment is based on management’s assessment of the ultimate recoverability of the cost of the restricted stock rather than by recognizing temporary declines in value.  The determination of whether a decline affects the ultimate recoverability is influenced by criteria such as (a) the significance of the decline in net assets of the issuing bank as compared to the capital stock amount for that bank and the length of time this situation has persisted, (b) commitments by the issuing bank to make payments required by law or regulation and the level of such payments in relation to the operating performance of that bank, and (c) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the issuing bank. Management has evaluated the restricted stock for impairment and believes that no impairment charge is necessary as of September 30, 2015.

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Investments (Policy)

9 Months Ended

Sep. 30, 2015

Investments [Abstract]

Investments

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

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Loans and Related Allowance for Loan Losses (Primary Segments of the Loan Portfolio) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	$ 24,025	$ 24,781
Collectively evaluated for impairment	819,067	815,210
Total Loans	843,092	839,991
Commercial and industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	1,031	1,861
Collectively evaluated for impairment	73,749	91,394
Total Loans	74,780	93,255
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	12,484	11,949
Collectively evaluated for impairment	253,449	244,115
Total Loans	265,933	256,064
Acquisition and Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	5,690	6,553
Collectively evaluated for impairment	93,066	92,748
Total Loans	98,756	99,301
Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	4,820	4,418
Collectively evaluated for impairment	374,127	363,223
Total Loans	378,947	367,641
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	24,676	23,730
Total Loans	$ 24,676	$ 23,730

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Basis of Presentation (Narrative) (Details) $ in Millions	Nov. 05, 2015 USD ($)
Subsequent Event [Member]
Subsequent Event [Line Items]
Litigation settlement, amount	$ 11.5

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Loans and Related Allowance for Loan Losses (Policy)

9 Months Ended

Sep. 30, 2015

Loans and Related Allowance for Loan Losses [Abstract]

Loan Status

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

Impaired Loans Receivable

Management evaluates individual loans in all of the commercial segments for possible impairment if the loan (a) is greater than $500,000 or (b) is part of a relationship that is greater than $750,000 and is either (i) in nonaccrual status or (ii) risk-rated Substandard and greater than 60 days past due.  Loans are considered to be impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  The Bank does not separately evaluate individual consumer and residential mortgage loans for impairment, unless such loans are part of a larger relationship that is impaired; otherwise, loans in these segments are considered impaired when they are classified as non-accrual.

Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods:  (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs.  The method is selected on a loan-by-loan basis, with management primarily utilizing the fair value of collateral method.  If the fair value of the collateral less selling costs method is utilized for collateral securing loans in the commercial segments, then an updated external appraisal is ordered on the collateral supporting the loan if the loan balance is greater than $500,000 and the existing appraisal is greater than 18 months old.  If an updated appraisal has not been received and reviewed in time for the determination of estimated fair value at quarter (or year) end, or if the appraisal is found to be deficient following the Corporation’s internal appraisal review process and re-ordered, then the estimated fair value of the collateral is determined by adjusting the existing appraisal by the appropriate percentage from an internally prepared appraisal discount grid.  This grid considers the age of a third party appraisal and the geographic region where the collateral is located.  The discount rates in the appraisal discount grid are updated periodically to reflect the most current knowledge that management has available, including the results of current appraisals.  A specific allocation of the ALL is recorded if there is any deficiency in collateral value determined by comparing the estimated fair value to the recorded investment of the loan. When updated appraisals are received and reviewed, adjustments are made to the specific allocation as needed.

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

Allowance for Loan Losses

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

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

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

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL.  When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL.  Residential mortgage and consumer loans are charged off after they are 120 days contractually past due.  All other loans are charged off based on an evaluation of the facts and circumstances of each individual loan. When the Bank believes that its ability to collect is solely dependent on the liquidation of the collateral, a full or partial charge-off is recorded promptly to bring the recorded investment to an amount that the Bank believes is supported by an ability to collect on the collateral.  The circumstances that may impact the Bank’s decision to charge-off all or a portion of a loan include default or non-payment by the borrower, scheduled foreclosure actions, and/or prioritization of the Bank’s claim in bankruptcy.   There may be circumstances where, due to pending events, the Bank will place a specific allocation of the ALL on a loan for which a partial charge-off has been previously recognized.  This specific allocation may be either charged off or removed depending upon the outcome of the pending event.  Full or partial charge-offs are not recovered until full principal and interest on the loan have been collected, even if a subsequent appraisal supports a higher value. Loans with partial charge-offs generally remain in non-accrual status. Both full and partial charge-offs reduce the recorded investment of the loan and the ALL and are considered to be charge-offs for purposes of all credit loss metrics and trends, including the historical rolling charge-off rates used in the determination of the ALL.  At September 30, 2015, $.5 million of the ALL was considered to be unallocated.

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Earnings Per Common Share (Tables)

9 Months Ended

Sep. 30, 2015

Earnings Per Common Share [Abstract]

Basic and Diluted Earnings Per Share

The following tables set forth the calculation of basic and diluted earnings per common share for the nine- and three-month periods ended September 30, 2015 and 2014:

	Nine months ended September 30,
	2015					2014
			Average	Per Share				Average	Per Share
(in thousands, except for per share amount)	Income		Shares	Amount		Income		Shares	Amount
Basic and Diluted Earnings Per Share:
Net income	$	4,491				$	3,938
Preferred stock dividends		(2,025)					(1,919)
Discount accretion on preferred stock		0					(6)
Net income available to common shareholders	$	2,466	6,247	$	0.39	$	2,013	6,220	$	0.32

	Three months ended September 30,
	2015					2014
			Average	Per Share				Average	Per Share
(in thousands, except for per share amount)	Income		Shares	Amount		Income		Shares	Amount
Basic  and Diluted Earnings Per Share:
Net income	$	1,948				$	1,340
Preferred stock dividends deferred		(675)					(675)
Discount accretion on preferred stock		0					0
Net income available to common shareholders	$	1,273	6,255	$	0.20	$	665	6,228	$	0.10

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Basis of Presentation

9 Months Ended

Sep. 30, 2015

Basis of Presentation [Abstract]

Basis of Presentation

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements of First United Corporation and its consolidated subsidiaries, including First United Bank & Trust (the “Bank”), have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, as required by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 270, Interim Reporting, and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.  Accordingly, they do not include all the information and footnotes required for annual financial statements.  In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring items, have been included.  Operating results for the nine- and three-month periods ended September 30, 2015 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, 2014.  For purposes of comparability, certain prior period amounts have been reclassified to conform to the 2015 presentation.  Such reclassifications had no impact on net income or equity.

Subsequent Events –

On October 30, 2015, First United Corporation and its bank subsidiary, First United Bank & Trust (collectively, “First United”), were notified by the Financial Industry Regulatory Authority (“FINRA”) that a FINRA arbitration panel had awarded $11.5 million in compensatory damages to First United in a proceeding that First United brought against FTN Financial Securities Corp. (“FTN”) and two of its representatives.  First United alleged, among other things, that, in recommending and selling certain trust preferred securities to First United, FTN committed fraud, breached its fiduciary duty to First United, breached its contract with First United and violated rules concerning suitability and other regulatory standards.  FTN paid the $11.5 million award amount to First United on November 5, 2015.

First United Corporation has evaluated events and transactions occurring subsequent to the statement of financial condition date of September 30, 2015 for items that should potentially be recognized or disclosed in these financial statements as prescribed by ASC Topic 855, Subsequent Events.  

As used in these notes to consolidated financial statements, First United Corporation and its consolidated subsidiaries are sometimes collectively referred to as the “Corporation”.

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Net Gains (Tables)

9 Months Ended

Sep. 30, 2015

Net Gains [Abstract]

Net Gains/(Losses)

The following table summarizes the gain/(loss) activity for the nine- and three-month periods ended September 30, 2015 and 2014:

	Nine months ended				Three months ended
	September 30,				September 30,
(in thousands)	2015		2014		2015		2014
Net gains – other:
Available-for-sale securities:
Realized gains	$	373	$	427	$	217	$	222
Realized losses		(311)		(434)		(138)		(75)
Held-for-trading:
Realized gains		0		1,100		0		0
Gain on sale of consumer loans		40		37		16		19
Loss on disposal of fixed assets		(2)		(3)		0		0
Net gains – other	$	100	$	1,127	$	95	$	166

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Letters of Credit and Off Balance Sheet Liabilities (Narrative) (Details) - USD ($) $ in Millions	Sep. 30, 2015	Dec. 31, 2014
Letters of Credit and Off Balance Sheet Liabilities [Abstract]
Outstanding standby letters of credit	$ 1.7	$ 0.9

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Employee Benefit Plans (Tables)

9 Months Ended

Sep. 30, 2015

Employee Benefit Plans [Abstract]

Components of the Net Periodic Pension Plan Cost

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

Pension	For the nine months ended				For the three months ended
	September 30,				September 30,
(in thousands)	2015		2014		2015		2014
Service cost	$	242	$	193	$	74	$	64
Interest cost		1,177		1,106		403		369
Expected return on assets		(2,224)		(1,990)		(740)		(662)
Amortization of transition asset		(15)		(30)		(5)		(10)
Amortization of net actuarial loss		576		280		204		93
Amortization of prior service cost		9		9		3		3
Net pension credit included in employee benefits	$	(235)	$	(432)	$	(61)	$	(143)

SERP	For the nine months ended				For the three months ended
	September 30,				September 30,
(in thousands)	2015		2014		2015		2014
Service cost	$	87	$	71	$	29	$	23
Interest cost		174		172		58		58
Amortization of recognized loss/(gain)		37		(13)		13		(4)
Amortization of prior service cost		15		15		5		5
Net SERP expense included in employee benefits	$	313	$	245	$	105	$	82

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Investments (Amortized Cost and Fair Values Classified by Contractual Maturity Date) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Schedule of Investments [Line Items]
Amortized Cost: Due after one year through five years	$ 37,604
Amortized Cost: Due after five years through ten years	14,765
Amortized Cost: Due after ten years	65,428
Amortized Cost: Sub Total	117,797
Fair Value: Due after one year through five years	37,899
Fair Value: Due after five years through ten years	15,355
Fair Value: Due after ten years	61,749
Available For Sale Debt Maturities Fair Value Sub Total	115,003
Available-for-sale Securities, Amortized Cost Basis	187,626	$ 231,745
Available-for-sale Securities	185,519	221,117
Amortized Cost: Due after five years through ten years, Held to maturity	15,571
Amortized Cost: Due after ten years, Held to maturity	11,712
Amortized Cost: Total, Held to maturity	27,283
Fair Value: Due after five years through ten years, Held to maturity	16,100
Fair Value: Due after ten years, Held to maturity	12,073
Fair Value: Total, Held to maturity	28,173
Held-to-maturity securities	106,732	109,449
Held-to-maturity securities, fair value	108,759	110,771
Residential Mortgage-backed Agencies [Member]
Schedule of Investments [Line Items]
Available-for-sale Securities, Amortized Cost Basis	14,495	45,175
Available-for-sale Securities	14,494	45,273
Held-to-maturity securities	54,869	58,400
Held-to-maturity securities, fair value	55,475	59,008
Commercial Mortgage-backed Agencies [Member]
Schedule of Investments [Line Items]
Available-for-sale Securities, Amortized Cost Basis	45,162	26,007
Available-for-sale Securities	45,805	25,957
Held-to-maturity securities	18,148	16,425
Held-to-maturity securities, fair value	18,713	16,737
Collateralized Mortgage Obligations [Member]
Schedule of Investments [Line Items]
Available-for-sale Securities, Amortized Cost Basis	10,172	8,611
Available-for-sale Securities	10,217	8,707
Held-to-maturity securities	6,432	7,379
Held-to-maturity securities, fair value	$ 6,398	$ 7,384

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Accumulated Other Comprehensive Loss (Schedule of Accumulated Other Comprehensive Loss) (Details) - USD ($) $ in Thousands	3 Months Ended			12 Months Ended
	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014
Beginning balance	$ (17,369)	$ (17,973)	$ (20,233)	$ (24,213)
Other comprehensive income/(loss) before reclassifications	(20)	544	2,110	3,989
Amounts reclassified from accumulated other comprehensive income	138	60	150	(9)
Ending balance	(17,251)	(17,369)	(17,973)	(20,233)
Investment securities- with OTTI [Member]
Beginning balance	(863)	(2,109)	(3,679)	(7,623)
Other comprehensive income/(loss) before reclassifications	997	1,350	1,670	4,349
Amounts reclassified from accumulated other comprehensive income	(84)	(104)	(100)	(405)
Ending balance	50	(863)	(2,109)	(3,679)
Investment Securities -All Other AFS [Member]
Beginning balance	(1,888)	(1,876)	(2,555)	(11,292)
Other comprehensive income/(loss) before reclassifications	700	36	621	8,712
Amounts reclassified from accumulated other comprehensive income	27	(48)	58	25
Ending balance	(1,161)	(1,888)	(1,876)	(2,555)
Investment Securities HTM [Member]
Beginning balance	(2,094)	(2,185)	(2,255)	0
Other comprehensive income/(loss) before reclassifications	0	0	0	(2,395)
Amounts reclassified from accumulated other comprehensive income	64	91	70	140
Ending balance	(2,030)	(2,094)	(2,185)	(2,255)
Cash Flow Hedge (OCI) [Member]
Beginning balance	(84)	(98)	(119)	(274)
Other comprehensive income/(loss) before reclassifications	20	14	21	155
Amounts reclassified from accumulated other comprehensive income	0	0	0	0
Ending balance	(64)	(84)	(98)	(119)
Pension Plan [Member]
Beginning balance	(12,228)	(11,482)	(11,392)	(5,088)
Other comprehensive income/(loss) before reclassifications	(1,737)	(856)	(202)	(6,513)
Amounts reclassified from accumulated other comprehensive income	121	110	112	209
Ending balance	(13,844)	(12,228)	(11,482)	(11,392)
SERP [Member]
Beginning balance	(212)	(223)	(233)	64
Other comprehensive income/(loss) before reclassifications	0	0	0	(319)
Amounts reclassified from accumulated other comprehensive income	10	11	10	22
Ending balance	$ (202)	$ (212)	$ (223)	$ (233)

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Consolidated Statement of Financial Condition - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Assets
Cash and due from banks	$ 61,406	$ 27,554
Interest bearing deposits in banks	3,383	7,897
Cash and cash equivalents	64,789	35,451
Investment securities - available-for-sale (at fair value)	185,519	221,117
Investment securities - held to maturity (fair value $108,417 at September 30, 2015 and $110,771 at December 31, 2014)	106,732	109,449
Restricted investment in bank stock, at cost	5,904	7,524
Loans	843,092	839,991
Allowance for loan losses	(12,211)	(12,065)
Net loans	830,881	827,926
Premises and equipment, net	25,013	25,629
Goodwill and other intangible assets, net	11,004	11,004
Bank owned life insurance	39,853	33,504
Deferred tax assets	23,928	25,907
Other real estate owned	7,477	12,932
Accrued interest receivable and other assets	19,215	21,853
Total Assets	1,320,315	1,332,296
Liabilities:
Non-interest bearing deposits	214,975	201,188
Interest bearing deposits	781,366	780,135
Total deposits	996,341	981,323
Short-term borrowings	38,460	39,801
Long-term borrowings	147,555	182,606
Accrued interest payable and other liabilities	23,367	19,567
Total Liabilities	1,205,723	1,223,297
Shareholders' Equity:
Preferred stock - no par value; Authorized 2,000 shares of which 30 shares of Series A, $1,000 per share liquidation preference, 5% cumulative increasing to 9% cumulative on February 15, 2014, were issued and outstanding on September 30, 2015 and December 31, 2014	30,000	30,000
Common Stock - par value $.01 per share; Authorized 25,000 shares; issued and outstanding 6,255 shares at September 30, 2015 and 6,228 at December 31, 2014	63	62
Surplus	21,939	21,795
Retained earnings	79,841	77,375
Accumulated other comprehensive loss	(17,251)	(20,233)
Total Shareholders' Equity	114,592	108,999
Total Liabilities and Shareholders' Equity	$ 1,320,315	$ 1,332,296

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Earnings Per Common Share (Basic and Diluted Earnings Per Common Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net Income	$ 1,948	$ 1,340	$ 4,491	$ 3,938	$ 5,597
Preferred stock dividends deferred	(675)	(675)	(2,025)	(1,919)
Discount accretion on preferred stock					0
Net income available to common shareholders	$ 1,273	$ 665	$ 2,466	$ 2,013
Weighted average number of basic and diluted shares outstanding	6,255	6,228	6,247	6,220
Basic and diluted net income per common share	$ 0.20	$ 0.10	$ 0.39	$ 0.32
Preferred Stock [Member]
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Discount accretion on preferred stock	$ 0	$ 0	$ 0	$ (6)	$ (6)

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Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Preferred Stock [Member]	Common Stock [Member]	Surplus [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Total
Balance at Dec. 31, 2013	$ 29,994	$ 62	$ 21,661	$ 74,379	$ (24,213)	$ 101,883
Net income				5,597		5,597
Other comprehensive income					3,980	3,980
Stock based compensation			134			134
Preferred stock discount accretion	6			(6)		0
Preferred stock dividends paid				(2,595)		(2,595)
Balance at Dec. 31, 2014	30,000	62	21,795	77,375	(20,233)	108,999
Net income				4,491		4,491
Other comprehensive income					2,982	2,982
Stock based compensation		1	144			145
Preferred stock discount accretion	0
Preferred stock dividends paid				(2,025)		(2,025)
Balance at Sep. 30, 2015	$ 30,000	$ 63	$ 21,939	$ 79,841	$ (17,251)	$ 114,592

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Loans and Related Allowance for Loan Losses (Primary Segments of the Allowance for Loan Loss) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Dec. 31, 2013
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	$ 1,720		$ 1,236
Collectively evaluated for impairment	10,491		10,829
Total allowance for loan losses	12,211	$ 11,809	12,065	$ 12,068	$ 12,463	$ 13,594
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	29		36
Collectively evaluated for impairment	2,552		2,388
Total allowance for loan losses	2,581	2,566	2,424	2,592	2,839	4,052
Acquisition and Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	1,607		1,141
Collectively evaluated for impairment	2,881		2,771
Total allowance for loan losses	4,488	3,806	3,912	3,710	3,642	4,172
Commercial and industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	0		0
Collectively evaluated for impairment	734		1,680
Total allowance for loan losses	734	1,007	1,680	1,591	1,553	766
Residential Mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	84		59
Collectively evaluated for impairment	3,608		3,803
Total allowance for loan losses	3,692	3,707	3,862	3,979	4,178	4,320
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	0		0
Collectively evaluated for impairment	216		187
Total allowance for loan losses	216	223	187	196	251	284
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	0		0
Collectively evaluated for impairment	500		0
Total allowance for loan losses	$ 500	$ 500	$ 0	$ 0	$ 0	$ 0

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Loans and Related Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2015

Loans and Related Allowance for Loan Losses [Abstract]

Primary Segments of the Loan Portfolio

The following table summarizes the primary segments of the loan portfolio as of September 30, 2015 and December 31, 2014:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Total
September 30, 2015
Individually evaluated for impairment	$	12,484	$	5,690	$	1,031	$	4,820	$	0	$	24,025
Collectively evaluated for impairment	$	253,449	$	93,066	$	73,749	$	374,127	$	24,676	$	819,067
Total loans	$	265,933	$	98,756	$	74,780	$	378,947	$	24,676	$	843,092
December 31, 2014
Individually evaluated for impairment	$	11,949	$	6,553	$	1,861	$	4,418	$	0	$	24,781
Collectively evaluated for impairment	$	244,115	$	92,748	$	91,394	$	363,223	$	23,730	$	815,210
Total loans	$	256,064	$	99,301	$	93,255	$	367,641	$	23,730	$	839,991

Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating

The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention and Substandard within the internal risk rating system as of September 30, 2015 and December 31, 2014:

(in thousands)	Pass		Special Mention		Substandard		Total
September 30, 2015
Commercial real estate
Non owner-occupied	$	125,412	$	11,669	$	10,462	$	147,543
All other CRE		99,712		565		18,113		118,390
Acquisition and development
1-4 family residential construction		15,752		0		700		16,452
All other A&D		75,595		76		6,633		82,304
Commercial and industrial		71,292		252		3,236		74,780
Residential mortgage
Residential mortgage - term		291,679		238		10,350		302,267
Residential mortgage - home equity		74,901		49		1,730		76,680
Consumer		24,659		0		17		24,676
Total	$	779,002	$	12,849	$	51,241	$	843,092
December 31, 2014
Commercial real estate
Non owner-occupied	$	115,276	$	10,884	$	11,273	$	137,433
All other CRE		90,740		8,618		19,273		118,631
Acquisition and development
1-4 family residential construction		12,920		0		790		13,710
All other A&D		72,323		1,356		11,912		85,591
Commercial and industrial		88,579		884		3,792		93,255
Residential mortgage
Residential mortgage - term		280,113		379		10,934		291,426
Residential mortgage - home equity		74,698		90		1,427		76,215
Consumer		23,658		0		72		23,730
Total	$	758,307	$	22,211	$	59,473	$	839,991

Loan Portfolio Summarized by the Past Due Status

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans as of September 30, 2015 and December 31, 2014:

(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
September 30, 2015
Commercial real estate
Non owner-occupied	$	145,975	$	69	$	0	$	0	$	69	$	1,499	$	147,543
All other CRE		112,969		179		187		148		514		4,907		118,390
Acquisition and development
1-4 family residential construction		16,452		0		0		0		0		0		16,452
All other A&D		79,110		0		252		0		252		2,942		82,304
Commercial and industrial		74,532		79		0		0		79		169		74,780
Residential mortgage
Residential mortgage - term		297,653		438		1,638		509		2,585		2,029		302,267
Residential mortgage - home equity		75,374		798		278		0		1,076		230		76,680
Consumer		24,446		178		52		0		230		0		24,676
Total	$	826,511	$	1,741	$	2,407	$	657	$	4,805	$	11,776	$	843,092
December 31, 2014
Commercial real estate
Non owner-occupied	$	135,994	$	104	$	183	$	0	$	287	$	1,152	$	137,433
All other CRE		112,825		1,196		0		0		1,196		4,610		118,631
Acquisition and development
1-4 family residential construction		13,710		0		0		0		0		0		13,710
All other A&D		81,702		239		40		1		280		3,609		85,591
Commercial and industrial		93,060		0		20		4		24		171		93,255
Residential mortgage
Residential mortgage - term		279,340		8,654		1,350		416		10,420		1,666		291,426
Residential mortgage - home equity		74,913		577		313		69		959		343		76,215
Consumer		23,316		287		88		39		414		0		23,730
Total	$	814,860	$	11,057	$	1,994	$	529	$	13,580	$	11,551	$	839,991

Primary Segments of the Allowance for Loan Loss

The following table summarizes the primary segments of the ALL, as of September 30, 2015 and December 31, 2014 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
September 30, 2015
Individually evaluated for impairment	$	29	$	1,607	$	0	$	84	$	0	$	0	$	1,720
Collectively evaluated for impairment	$	2,552	$	2,881	$	734	$	3,608	$	216	$	500	$	10,491
Total ALL	$	2,581	$	4,488	$	734	$	3,692	$	216	$	500	$	12,211
December 31, 2014
Individually evaluated for impairment	$	36	$	1,141	$	0	$	59	$	0	$	0	$	1,236
Collectively evaluated for impairment	$	2,388	$	2,771	$	1,680	$	3,803	$	187	$	0	$	10,829
Total ALL	$	2,424	$	3,912	$	1,680	$	3,862	$	187	$	0	$	12,065

Impaired Loans and Related Interest Income by Loan Portfolio Class

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of September 30, 2015 and December 31, 2014:

		Impaired Loans with Specific Allowance				Impaired Loans with No Specific Allowance		Total Impaired Loans
(in thousands)		Recorded Investment		Related Allowances		Recorded Investment		Recorded Investment		Unpaid Principal Balance
September 30, 2015
Commercial real estate
Non owner-occupied	$	137	$	29	$	4,445	$	4,582	$	4,592
All other CRE		0		0		7,902		7,902		8,401
Acquisition and development
1-4 family residential construction		700		68		0		700		746
All other A&D		4,419		1,539		571		4,990		8,756
Commercial and industrial		0		0		1,031		1,031		3,298
Residential mortgage
Residential mortgage - term		298		84		4,245		4,543		4,967
Residential mortgage – home equity		0		0		277		277		298
Consumer		0		0		0		0		0
Total impaired loans	$	5,554	$	1,720	$	18,471	$	24,025	$	31,058
December 31, 2014
Commercial real estate
Non owner-occupied	$	143	$	35	$	4,353	$	4,496	$	4,543
All other CRE		0		0		7,453		7,453		7,944
Acquisition and development
1-4 family residential construction		790		105		0		790		836
All other A&D		3,615		1,037		2,148		5,763		9,590
Commercial and industrial		0		0		1,861		1,861		2,723
Residential mortgage
Residential mortgage - term		296		59		3,779		4,075		4,485
Residential mortgage – home equity		0		0		343		343		363
Consumer		0		0		0		0		0
Total impaired loans	$	4,844	$	1,236	$	19,937	$	24,781	$	30,484

Allowance for Loan Losses Summarized by Loan Portfolio Segments

The following tables present the activity in the ALL for the nine- and three-month periods ended September 30, 2015 and 2014:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer			Unallocated	Total
ALL balance at January 1, 2015	$	2,424	$	3,912	$	1,680	$	3,862	$	187	$	0	$	12,065
Charge-offs		(295)		(256)		0		(200)		(247)		0		(998)
Recoveries		66		100		24		162		166		0		518
Provision		386		732		(970)		(132)		110		500		626
ALL balance at September 30, 2015	$	2,581	$	4,488	$	734	$	3,692	$	216	$	500	$	12,211
ALL balance at January 1, 2014	$	4,052	$	4,172	$	766	$	4,320	$	284	$	0	$	13,594
Charge-offs		(85)		(2,423)		(213)		(682)		(380)		0		(3,783)
Recoveries		11		104		22		183		308		0		628
Provision		(1,386)		1,857		1,016		158		(16)		0		1,629
ALL balance at September 30, 2014	$	2,592	$	3,710	$	1,591	$	3,979	$	196	$	0	$	12,068

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer			Unallocated	Total
ALL balance at July 1, 2015	$	2,566	$	3,806	$	1,007	$	3,707	$	223	$	500	$	11,809
Charge-offs		(8)		0		0		(164)		(73)		0		(245)
Recoveries		1		59		4		29		54		0		147
Provision		22		623		(277)		120		12		0		500
ALL balance at September 30, 2015	$	2,581	$	4,488	$	734	$	3,692	$	216	$	500	$	12,211
ALL balance at July 1, 2014	$	2,839	$	3,642	$	1,553	$	4,178	$	251	$	0	$	12,463
Charge-offs		(64)		(903)		(5)		(116)		(117)		0		(1,205)
Recoveries		1		33		15		27		46		0		122
Provision		(184)		938		28		(110)		16		0		688
ALL balance at September 30, 2014	$	2,592	$	3,710	$	1,591	$	3,979	$	196	$	0	$	12,068

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

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

	Nine months ended						Nine months ended
	September 30, 2015						September 30, 2014
(in thousands)	Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis		Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis
Commercial real estate
Non owner-occupied	$	4,314	$	117	$	0	$	1,890	$	28	$	0
All other CRE		7,626		89		8		9,497		116		67
Acquisition and development
1-4 family residential construction		745		26		0		1,690		34		0
All other A&D		5,311		94		0		8,108		129		0
Commercial and industrial		1,471		60		18		2,065		70		2
Residential mortgage
Residential mortgage - term		4,245		124		4		6,552		154		55
Residential mortgage – home equity		349		0		2		640		4		4
Consumer		7		0		0		11		0		0
Total	$	24,068	$	510	$	32	$	30,453	$	535	$	128

	Three months ended						Three months ended
	September 30, 2015						September 30, 2014
(in thousands)	Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis		Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis
Commercial real estate
Non owner-occupied	$	4,607	$	39	$	0	$	2,591	$	17	$	0
All other CRE		7,935		34		0		8,506		35		23
Acquisition and development
1-4 family residential construction		701		8		0		1,016		9		0
All other A&D		5,091		31		0		7,540		33		0
Commercial and industrial		1,253		13		0		1,905		21		0
Residential mortgage
Residential mortgage - term		4,400		42		2		6,225		47		3
Residential mortgage – home equity		321		0		0		597		0		3
Consumer		0		0		0		0		0		0
Total	$	24,308	$	167	$	2	$	28,380	$	162	$	29

Modification of Troubled Debt Restructuring by Class

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

	Temporary Rate Modification			Extension of Maturity			Modification of Payment and Other Terms
(in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Nine months ended September 30, 2015
Commercial real estate
Non owner-occupied	0	$	0	1	$	3,097	1	$	136
All other CRE	0		0	1		237	5		3,847
Acquisition and development
1-4 family residential construction	0		0	0		0	1		700
All other A&D	0		0	3		372	1		1,746
Commercial and industrial	0		0	1		930	0		0
Residential mortgage
Residential mortgage – term	1		156	2		599	1		116
Residential mortgage – home equity	0		0	0		0	0		0
Consumer	0		0	0		0	0		0
Total	1	$	156	8	$	5,235	9	$	6,545

	Temporary Rate Modification			Extension of Maturity			Modification of Payment and Other Terms
(in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Three months ended September 30, 2015
Commercial real estate
Non owner-occupied	0	$	0	0	$	0	0	$	0
All other CRE	0		0	0		0	0		0
Acquisition and development
1-4 family residential construction	0		0	0		0	1		700
All other A&D	0		0	0		0	1		1,746
Commercial and industrial	0		0	0		0	0		0
Residential mortgage
Residential mortgage – term	1		156	0		0	0		0
Residential mortgage – home equity	0		0	0		0	0		0
Consumer	0		0	0		0	0		0
Total	1	$	156	0	$	0	2	$	2,446

	Temporary Rate Modification			Extension of Maturity			Modification of Payment and Other Terms
(in thousands)	Number of Contracts	Recorded Investment		Number of Contracts		Recorded Investment	Number of Contracts	Recorded Investment
Nine Months Ended September 30, 2014
Commercial real estate
Non owner-occupied	0	$	0	2	$	277	0	$	0
All other CRE	0		0	0		0	4		2,627
Acquisition and development
1-4 family residential construction	0		0	0		0	0		0
All other A&D	0		0	0		0	0		0
Commercial and industrial	0		0	0		0	0		0
Residential mortgage
Residential mortgage – term	1		90	0		0	0		0
Residential mortgage – home equity	0		0	0		0	0		0
Consumer	0		0	0		0	0		0
Total	1	$	90	2	$	277	4	$	2,627

	Temporary Rate						Modification of Payment
	Modification			Extension of Maturity			and Other Terms
	Number of	Recorded		Number of	Recorded		Number of	Recorded
(in thousands)	Contracts	Investment		Contracts	Investment		Contracts	Investment
Three Months Ended September 30, 2014
Commercial real estate
Non owner-occupied	0	$	0	0	$	0	0	$	0
All other CRE	0		0	0		0	0		0
Acquisition and development
1-4 family residential construction	0		0	0		0	0		0
All other A&D	0		0	0		0	0		0
Commercial and industrial	0		0	0		0	0		0
Residential mortgage
Residential mortgage – term	0		0	0		0	0		0
Residential mortgage – home equity	0		0	0		0	0		0
Consumer	0		0	0		0	0		0
Total	0	$	0	0	$	0	0	$	0

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Other Real Estate Owned (Other Real Estate, Roll Forward) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Other Real Estate Owned [Abstract]
Beginning Balance	$ 3,843	$ 3,742	$ 3,440	$ 4,047
Fair value write-down	350	442	1,202	885
Sales of OREO	(382)	(407)	(831)	(1,155)
Ending Balance	$ 3,811	$ 3,777	$ 3,811	$ 3,777

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Letters of Credit and Off Balance Sheet Liabilities

9 Months Ended

Sep. 30, 2015

Letters of Credit and Off Balance Sheet Liabilities [Abstract]

Letters of Credit and Off Balance Sheet Liabilities

Note 15 – Letters of Credit and Off Balance Sheet Liabilities

The Corporation does not issue any guarantees that would require liability recognition or disclosure other than the standby letters of credit issued by the Bank.  Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.  Generally, the Bank’s letters of credit are issued with expiration dates within one year.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  The Bank generally holds collateral and/or personal guarantees supporting these commitments.  The Bank had $1.7 million of outstanding standby letters of credit at September 30, 2015 and $.9 million at December 31, 2014.  Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payment required by the letters of credit.  Management does not believe that the amount of the liability associated with guarantees under standby letters of credit outstanding at September 30, 2015 and December 31, 2014 is material. 

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Other Real Estate Owned (Tables)

9 Months Ended

Sep. 30, 2015

Other Real Estate Owned [Abstract]

Schedule of Real Estate Properties

The following table presents the components of Other Real Estate Owned (“OREO”) at September 30, 2015 and December 31, 2014:

(in thousands)	September 30, 2015		December 31, 2014
Commercial real estate	$	1,728	$	1,772
Acquisition and development		4,746		9,263
Residential mortgage		1,003		1,897
Total OREO	$	7,477	$	12,932

Other Real Estate, Roll Forward

The following table presents the activity in the OREO valuation allowance for the nine- and three-month periods ended September 30, 2015 and 2014:

	For the Nine Months Ended				For the Three Months Ended
	September 30,				September 30,
(in thousands)	2015		2014		2015		2014
Balance beginning of period	$	3,440	$	4,047	$	3,843	$	3,742
Fair value write-down		1,202		885		350		442
Sales of OREO		(831)		(1,155)		(382)		(407)
Balance at end of period	$	3,811	$	3,777	$	3,811	$	3,777

Schedule of Components of Other Real Estate Owned Expense

The following table presents the components of OREO expenses, net, for the nine- and three-month periods ended September 30, 2015 and 2014:

	For the Nine Months Ended				For the Three Months Ended
	September 30,				September 30,
(in thousands)	2015		2014		2015		2014
(Gains)/losses on real estate, net	$	(718)	$	921	$	(640)	$	(49)
Fair value write-down, net		1,202		885		350		442
Expenses, net		704		594		248		237
Rental and other income		(212)		(272)		(29)		(116)
Total OREO expense/(income), net	$	976	$	2,128	$	(71)	$	514

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Variable Interest Entities (VIE)

9 Months Ended

Sep. 30, 2015

Variable Interest Entities (VIE) [Abstract]

Variable Interest Entities (VIE)

Note 17 – Variable Interest Entities (VIE)

As noted in Note 11, First United Corporation created the Trusts for the purposes of raising regulatory capital through the sale of mandatorily redeemable preferred capital securities to third party investors and common equity interests to First United Corporation.  The Trusts are considered Variable Interest Entities (“VIEs”), but are not consolidated because First United Corporation is not the primary beneficiary of the Trusts.  At September 30, 2015, the Corporation reported all of the $41.7 million of TPS Debentures issued in connection with these offerings as long-term borrowings and it reported its $1.3 million equity interest in the Trusts as “Other Assets”. 

In November 2009, the Bank became a 99.99% limited partner in Liberty Mews Limited Partnership (“Liberty Mews”), a Maryland limited partnership formed for the purpose of acquiring, developing and operating low-income housing units in Garrett County, Maryland.  The Partnership was financed with a total of $10.6 million of funding, including a $6.1 million equity contribution from the Bank as the limited partner. Liberty Mews used the proceeds from these sources to purchase the land and construct a 36-unit low income housing rental complex at a total cost of $10.6 million.  The total assets of Liberty Mews were approximately $9.2 million at September 30, 2015 and $9.4 million at December 31, 2014.

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

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

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

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

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

The Corporation’s tax expense for the nine months ended September 30, 2015 was approximately $.3 million lower as a result of the impact of the tax credits and the tax losses relating to the partnership.

At September 30, 2015 and December 31, 2014, the Corporation included its total investment in Liberty Mews in “Other Assets” in its Consolidated Statement of Financial Condition.  As of September 30, 2015, the Corporation’s commitment in Liberty Mews was fully funded.  The following table presents details of the Bank’s involvement with Liberty Mews at the dates indicated:

	September 30,		December 31,
(in thousands)	2015		2014
Investment in LIHTC Partnership
Carrying amount on Balance Sheet of:
Investment (Other Assets)	$	3,994	$	4,429
Maximum exposure to loss		3,994		4,429

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Fair Value of Financial Instruments (Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques) (Details) - USD ($) $ in Thousands		9 Months Ended	12 Months Ended
		Sep. 30, 2015	Dec. 31, 2014
Investment Securities - available for sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Input, Unobservable Input Value, Description			Range of Libor+ 5% to 12%
Fair Value, Inputs, Level 3 [Member] | Investment Securities - available for sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring		$ 31,928	$ 25,339
Valuation Technique		Discounted Cash Flow	Discounted Cash Flow
Fair Value, Inputs, Level 3 [Member] | Investment Securities - available for sale [Member] | Unobservable Input - Discount Rate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Input, Unobservable Input Value, Description		Range of Libor+ 5.50% to 9.50%
Fair Value, Inputs, Level 3 [Member] | Interest Rate Swap [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring		$ (107)	$ (199)
Valuation Technique		Discounted Cash Flow	Discounted Cash Flow
Fair Value, Inputs, Level 3 [Member] | Interest Rate Swap [Member] | Unobservable Input - Reuters Third Party Market Quote [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		99.90%	99.90%
Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		$ 5,985	$ 9,122
Valuation Technique		Market Comparable Properties	Market Comparable Properties
Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member] | Unobservable Input - Marketability Discount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	[1]		10.00%
Fair Value, Inputs, Level 3 [Member] | Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		$ 2,278	$ 2,511
Valuation Technique		Market Comparable Properties	Market Comparable Properties
Minimum [Member] | Fair Value, Inputs, Level 3 [Member] | Investment Securities - available for sale [Member] | Unobservable Input - Discount Rate [Member] | London Interbank Offered Rate (LIBOR) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		9.50%	5.00%
Minimum [Member] | Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member] | Unobservable Input - Marketability Discount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	[1]	3.00%
Minimum [Member] | Fair Value, Inputs, Level 3 [Member] | Other Real Estate Owned [Member] | Unobservable Input - Marketability Discount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	[1]	10.00%	10.00%
Maximum [Member] | Fair Value, Inputs, Level 3 [Member] | Investment Securities - available for sale [Member] | Unobservable Input - Discount Rate [Member] | London Interbank Offered Rate (LIBOR) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		5.50%	12.00%
Weighted Average [Member] | Fair Value, Inputs, Level 3 [Member] | Interest Rate Swap [Member] | Unobservable Input - Reuters Third Party Market Quote [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		99.90%	99.90%
Weighted Average [Member] | Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member] | Unobservable Input - Marketability Discount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		11.60%
Weighted Average [Member] | Fair Value, Inputs, Level 3 [Member] | Other Real Estate Owned [Member] | Unobservable Input - Marketability Discount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		12.30%

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

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Operating activities
Net Income	$ 4,491	$ 3,938
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	626	1,629
Depreciation	1,307	1,471
Stock compensation	144	95
(Gain)/loss on sales of other real estate owned	(718)	921
Write-downs of other real estate owned	1,202	885
Gain on loan sales	(40)	(37)
Loss on disposal of fixed assets	2	3
Loss on sales of investment securities - available-for-sale	(62)	7
Gain on sales of investment securities - held for trading	0	(1,100)
Amortization of deferred loan fees	(408)	(363)
Decrease in accrued interest receivable and other assets	2,638	2,229
Decrease in deferred tax benefit	377	(4)
Decrease in accrued interest payable and other liabilities	(137)	(5,685)
Earnings on bank owned life insurance	(849)	(737)
Net cash provided by operating activities	9,087	3,423
Investing activities
Proceeds from maturities/calls of investment securities available-for-sale	38,713	122,291
Proceeds from maturities/calls of investment securities held-to-maturity	6,348	3,275
Proceeds from sales of investment securities available-for-sale	52,672	56,838
Proceeds from sales of investment securities held for trading	0	1,100
Purchases of investment securities available-for-sale	(47,640)	(153,924)
Purchases of investment securities held-to-maturity	(3,709)	(2,421)
Proceeds from sales of other real estate owned	5,870	5,667
Proceeds from loan sales	4,935	4,312
Proceeds from disposal of fixed assets	6	0
Purchase of BOLI policy	(5,500)	0
Net decrease in FHLB stock	1,620	389
Net increase in loans	(8,967)	(23,782)
Purchases of premises and equipment	(699)	(570)
Net cash provided by investing activities	43,649	13,175
Financing activities
Net increase/(decrease) in deposits	15,018	(4,370)
Preferred stock dividends paid	(2,025)	(8,420)
Common Stock Grants	1	0
Net (decrease)/increase in short-term borrowings	(1,341)	4,318
Payments on long-term borrowings	(35,051)	(49)
Net cash used in financing activities	(23,398)	(8,521)
Increase in cash and cash equivalents	29,338	8,077
Cash and cash equivalents at beginning of the year	35,451	43,063
Cash and cash equivalents at end of period	64,789	51,140
Supplemental information
Interest paid	7,533	14,995
Non-cash investing activities:
Transfers from loans to other real estate owned	899	2,030
Security sold September 30, settled in October	0	618
Transfers from securities available for sale to held-to-maturity	0	103,934
Available-for-sale Securities [Member]
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization of investment securities discounts and premiums	436	152
Held-to-maturity Securities [Member]
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization of investment securities discounts and premiums	$ 78	$ 19

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Consolidated Statement of Financial Condition (Parenthetical) - USD ($) $ in Thousands	2 Months Ended	20 Months Ended
	Feb. 14, 2014	Sep. 30, 2015	Dec. 31, 2014
Held-to-maturity securities, fair value		$ 108,759	$ 110,771
Preferred Stock, Shares Authorized		2,000,000	2,000,000
Common Stock, Par or Stated Value Per Share		$ 0.01	$ 0.01
Common Stock, Shares Authorized		25,000,000	25,000,000
Common Stock, Shares, Issued		6,255,000	6,228,000
Common Stock, Shares, Outstanding		6,255,000	6,228,000
Series A Preferred Stock [Member]
Preferred Stock, Liquidation Preference Per Share		$ 1,000	$ 1,000
Preferred Stock, Shares Issued		30,000	30,000
Preferred Stock, Shares Outstanding		30,000	30,000
Preferred Stock, Dividend Rate, Percentage	5.00%	9.00%

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Accumulated Other Comprehensive Loss

9 Months Ended

Sep. 30, 2015

Accumulated Other Comprehensive Loss [Abstract]

Accumulated Other Comprehensive Loss

Note 10 – Accumulated Other Comprehensive Loss

The following table presents the changes in each component of accumulated other comprehensive loss for the 12 months ended December 31, 2014 and the three-month periods ended March 31, 2015, June 30, 2015 and September 30, 2015:

(in thousands)	Investment securities- with OTTI AFS		Investment securities- all other AFS			Investment securities- HTM	Cash Flow Hedge		Pension Plan		SERP		Total
Accumulated OCL, net:
Balance - January 1, 2014	$	(7,623)	$	(11,292)	$	0	$	(274)	$	(5,088)	$	64	$	(24,213)
Other comprehensive income/(loss) before reclassifications		4,349		8,712		(2,395)		155		(6,513)		(319)		3,989
Amounts reclassified from accumulated other comprehensive loss		(405)		25		140		0		209		22		(9)
Balance - December 31, 2014	$	(3,679)	$	(2,555)	$	(2,255)	$	(119)	$	(11,392)	$	(233)	$	(20,233)
Other comprehensive income/(loss) before reclassifications		1,670		621		0		21		(202)		0		2,110
Amounts reclassified from accumulated other comprehensive loss		(100)		58		70		0		112		10		150
Balance – March 31, 2015	$	(2,109)	$	(1,876)	$	(2,185)	$	(98)	$	(11,482)	$	(223)	$	(17,973)
Other comprehensive income/(loss) before reclassifications		1,350		36		0		14		(856)		0		544
Amounts reclassified from accumulated other comprehensive loss		(104)		(48)		91		0		110		11		60
Balance – June 30, 2015	$	(863)	$	(1,888)	$	(2,094)	$	(84)	$	(12,228)	$	(212)	$	(17,369)
Other comprehensive income/(loss) before reclassifications		997		700		0		20		(1,737)		0		(20)
Amounts reclassified from accumulated other comprehensive loss		(84)		27		64		0		121		10		138
Balance - September 30,2015	$	50	$	(1,161)	$	(2,030)	$	(64)	$	(13,844)	$	(202)	$	(17,251)

The following tables present the components of comprehensive income for the nine- and three-month periods ended September 30, 2015 and 2014:

Components of Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the nine months ended September 30, 2015
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	6,682	$	(2,665)	$	4,017
Less:  accretable yield recognized in income		479		(191)		288
Net unrealized gains on investments with OTTI		6,203		(2,474)		3,729
Available for sale securities – all other:
Unrealized holding gains		2,380		(949)		1,431
Less:  gains recognized in income		62		(25)		37
Net unrealized gains on all other AFS securities		2,318		(924)		1,394
Held to maturity securities:
Unrealized holding gains		0		0		0
Less:  amortization recognized in income		(374)		149		(225)
Net unrealized gains on HTM securities		374		(149)		225
Cash flow hedges:
Unrealized holding gains		92		(37)		55
Pension Plan:
Unrealized net actuarial loss		(4,651)		1,856		(2,795)
Less: amortization of unrecognized loss		(576)		229		(347)
Less: amortization of transition asset		15		(6)		9
Less: amortization of prior service costs		(9)		4		(5)
Net pension plan liability adjustment		(4,081)		1,629		(2,452)
SERP:
Unrealized net actuarial loss		0		0		0
Less: amortization of unrecognized loss		(37)		15		(22)
Less: amortization of prior service costs		(15)		6		(9)
Net SERP liability adjustment		52		(21)		31
Other comprehensive income	$	4,958	$	(1,976)	$	2,982

Components of Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the nine months ended September 30, 2014
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	6,149	$	(2,460)	$	3,689
Less:  accretable yield recognized in income		501		(200)		301
Net unrealized gains on investments with OTTI		5,648		(2,260)		3,388
Available for sale securities – all other:
Unrealized holding gains		13,746		(5,496)		8,250
Less:  losses recognized in income		(7)		2		(5)
Net unrealized gains on all other AFS securities		13,753		(5,498)		8,255
Held to maturity securities:
Unrealized holding losses		(3,984)		1,593		(2,391)
Less:  amortization recognized in income		(127)		51		(76)
Net unrealized losses on HTM securities		(3,857)		1,542		(2,315)
Cash flow hedges:
Unrealized holding gains		229		(92)		137
Pension Plan:
Unrealized net actuarial loss		(1,345)		539		(806)
Less: amortization of unrecognized loss		(280)		112		(168)
Less: amortization of transition asset		30		(12)		18
Less: amortization of prior service costs		(9)		3		(6)
Net pension plan liability adjustment		(1,086)		436		(650)
SERP:
Unrealized net actuarial loss		0		0		0
Less: amortization of unrecognized gain		13		(5)		8
Less: amortization of prior service costs		(15)		6		(9)
Net SERP liability adjustment		2		(1)		1
Other comprehensive income	$	14,689	$	(5,873)	$	8,816

Components of Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the three months ended September 30, 2015
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	1,658	$	(661)	$	997
Less:  accretable yield recognized in income		139		(55)		84
Net unrealized gains on investments with OTTI		1,519		(606)		913
Available for sale securities – all other:
Unrealized holding gains		1,288		(515)		773
Less:  gains recognized in income		79		(33)		46
Net unrealized gains on all other AFS securities		1,209		(482)		727
Held to maturity securities:
Unrealized holding gains		0		0		0
Less:  amortization recognized in income		(106)		42		(64)
Net unrealized gains on HTM securities		106		(42)		64
Cash flow hedges:
Unrealized holding gains		33		(13)		20
Pension Plan:
Unrealized net actuarial loss		(2,892)		1,153		(1,739)
Less: amortization of unrecognized loss		(204)		80		(124)
Less: amortization of transition asset		5		(2)		3
Less: amortization of prior service costs		(3)		1		(2)
Net pension plan liability adjustment		(2,690)		1,074		(1,616)
SERP:
Unrealized net actuarial loss		0		0		0
Less: amortization of unrecognized loss		(13)		5		(8)
Less: amortization of prior service costs		(5)		3		(2)
Net SERP liability adjustment		18		(8)		10
Other comprehensive income	$	195	$	(77)	$	118

Components of Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the three months ended September 30, 2014
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	748	$	(300)	$	448
Less:  accretable yield recognized in income		170		(68)		102
Net unrealized gains on investments with OTTI		578		(232)		346
Available for sale securities – all other:
Unrealized holding gains		3		(2)		1
Less:  gains recognized in income		147		(59)		88
Net unrealized losses on all other AFS securities		(144)		57		(87)
Held to maturity securities:
Unrealized holding gains		0		0		0
Less:  amortization recognized in income		(95)		38		(57)
Net unrealized gains on HTM securities		95		(38)		57
Cash flow hedges:
Unrealized holding gains		44		(18)		26
Pension Plan:
Unrealized net actuarial loss		(1,233)		494		(739)
Less: amortization of unrecognized loss		(93)		37		(56)
Less: amortization of transition asset		10		(4)		6
Less: amortization of prior service costs		(3)		1		(2)
Net pension plan liability adjustment		(1,147)		460		(687)
SERP:
Unrealized net actuarial loss		0		0		0
Less: amortization of unrecognized gain		4		(1)		3
Less: amortization of prior service costs		(5)		2		(3)
Net SERP liability adjustment		1		(1)		0
Other comprehensive loss	$	(573)	$	228	$	(345)

The following table presents the details of amount reclassified from accumulated other comprehensive loss for the nine- and three-month periods ended September 30, 2015 and 2014:

Amounts Reclassified From Accumulated Other Comprehensive Loss (in thousands)	For the nine months ended September 30, 2015		For the Nine months ended September 30, 2014		Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on investment securities with OTTI:
Accretable yield	$	479	$	501	Interest income on taxable investment securities
Taxes		(191)		(200)	Tax expense
	$	288	$	301	Net of tax
Unrealized gains and losses on available for sale investment securities - all others:
Gains/(losses) on sales	$	62	$	(7)	Net gains/(losses) - other
Taxes		(25)		2	Tax (expense)/benefit
	$	37	$	(5)	Net of tax
Unrealized losses on held to maturity securities:
Amortization	$	(374)	$	(127)	Interest income on taxable investment securities
Taxes		149		51	Tax benefit
	$	(225)	$	(76)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss		(576)		(280)	Salaries and employee benefits
Amortization of transition asset		15		30	Salaries and employee benefits
Amortization of prior service costs		(9)		(9)	Salaries and employee benefits
Taxes		227		103	Tax benefit
	$	(343)	$	(156)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized (loss)/gain		(37)		13	Salaries and employee benefits
Amortization of prior service costs		(15)		(15)	Salaries and employee benefits
Taxes		21		1	Tax benefit
	$	(31)	$	(1)	Net of tax
Total reclassifications for the period	$	(274)	$	63	Net of tax

Amounts Reclassified From Accumulated Other Comprehensive Loss (in thousands)	For the Three months ended September 30, 2015		For the Three months ended September 30, 2014		Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on investment securities with OTTI:
Accretable Yield	$	139	$	170	Interest income on taxable investment securities
Taxes		(55)		(68)	Tax expense
	$	84	$	102	Net of tax
Unrealized gains and losses on available for sale investment securities - all others:
Gains on sales	$	79	$	147	Net gains - other
Taxes		(33)		(59)	Tax expense
	$	46	$	88	Net of tax
Unrealized losses on held to maturity securities:
Amortization	$	(106)	$	(95)	Interest income on taxable investment securities
Taxes		42		38	Tax benefit
	$	(64)	$	(57)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss		(204)		(93)	Salaries and employee benefits
Amortization of transition asset		5		10	Salaries and employee benefits
Amortization of prior service costs		(3)		(3)	Salaries and employee benefits
Taxes		79		34	Tax benefit
	$	(123)	$	(52)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized (loss)/gain		(13)		4	Salaries and employee benefits
Amortization of prior service costs		(5)		(5)	Salaries and employee benefits
Taxes		8		1	Tax benefit
	$	(10)	$	0	Net of tax
Total reclassifications for the period	$	(67)	$	81	Net of tax

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Oct. 31, 2015
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2015
Entity Registrant Name	FIRST UNITED CORP/MD/
Entity Central Index Key	0000763907
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		6,254,620
Trading Symbol	func
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3

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Junior Subordinated Debentures and Restrictions on Dividends

9 Months Ended

Sep. 30, 2015

Junior Subordinated Debentures and Restrictions on Dividends [Abstract]

Junior Subordinated Debentures and Restrictions on Dividends

Note 11 – Junior Subordinated Debentures and Restrictions on Dividends

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

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

$20.6 million—floating rate payable quarterly based on three-month LIBOR plus 275 basis points (3.08% at September 30, 2015), maturing in 2034, became redeemable five years after issuance at First United Corporation’s option.

$10.3 million--floating rate payable quarterly based on three-month LIBOR plus 275 basis points (3.08% at September 30, 2015) maturing in 2034, became redeemable five years after issuance at First United Corporation’s option.

In December 2004,  First United Corporation issued $5.0 million of junior subordinated debentures to third-party investors that were not tied to preferred securities.  The debentures had a fixed rate of 5.88% for the first five years, payable quarterly, and converted to a floating rate in March 2010 based on the three month LIBOR plus 185 basis points.  The debentures matured in March 2015 and were repaid.

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

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

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

At the request of the Federal Reserve Bank of Richmond (the “Reserve Bank”) in December 2010, the Corporation’s Board of Directors elected to defer quarterly interest payments under the TPS Debentures beginning with the payments due in March 2011.  The terms of the TPS Debentures permit the Corporation to elect to defer payments of interest for up to 20 consecutive quarterly periods, provided that no event of default exists under the TPS Debentures at the time of the election.  An election to defer interest payments is not considered a default under the TPS Debentures.  In February 2014, First United Corporation received approval from the Reserve Bank to terminate this deferral by making the quarterly interest payments due to the Trusts in March 2014 and paying all deferred interest for prior quarters and has since received approval for interest payments through December 2015. 

 Until further notice from the Reserve Bank, First United Corporation is required to obtain the Reserve Bank’s prior approval before making any future interest payments under the TPS Debentures.  In considering a request for approval, the Reserve Bank will consider, among other things, the Corporation’s financial condition and its quarterly results of operations.   In addition to this pre-approval requirement, First United Corporation’s ability to make future quarterly interest payments under the TPS Debentures will depend in large part on its receipt of dividends from the Bank, and the Bank may make dividend payments only with the prior approval of the Federal Deposit Insurance Corporation (the “FDIC”) and the Maryland Commissioner of Financial Regulation (the “Maryland Commissioner”).  As a result of these limitations, no assurance can be given that First United Corporation will make the quarterly interest payments due under the TPS Debentures in any future quarter.  In the event that First United Corporation and/or the Bank do not receive the approvals necessary for First United Corporation to make future quarterly interest payments, First United Corporation will have to again elect to defer interest payments. 

The terms of First United Corporation’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”) call for the payment, if declared by the Corporation’s Board of Directors, of cash dividends on February 15th, May 15th, August 15th and November 15th of each year.  On November 15, 2010, at the request of the Reserve Bank, the Corporation’s Board of Directors voted to suspend quarterly cash dividends on the Series A Preferred Stock beginning with the dividend payment due November 15, 2010.  During the suspension, dividends of $.4 million per dividend period continued to accrue.  In April 2014, the Corporation received approval from the Reserve Bank to terminate this deferral by making a $6.5 million payment to the Treasury, representing the quarterly dividend payment due in May 2014 and all unpaid dividends that accrued during the suspension period and has since received approval to make all subsequent dividend payments through November 2015. 

Until further notice from the Reserve Bank, First United Corporation is required to obtain the Reserve Bank’s prior approval before making any future quarterly dividend payment on the Series A Preferred Stock.  In considering a request for approval, the Reserve Bank will consider, among other things, the Corporation’s financial condition and its quarterly results of operations.  In addition, First United Corporation’s ability to make future quarterly dividend payments on the Series A Preferred Stock will depend in large part on its receipt of dividends from the Bank, the declaration and payment of which, as discussed above, are subject to the prior approval of the FDIC and the Maryland Commissioner.  If First United Corporation and/or the Bank do not obtain the regulatory approvals required for a particular quarterly dividend, then First United Corporation would have to again suspend quarterly dividend payments, which would result in a prohibition against paying any dividends or other distributions on the outstanding shares of First United Corporation’s common stock during the suspension period.

First United Corporation’s Board of Directors suspended the payment of dividends on the common stock in December 2010 when it approved the above-mentioned deferral of dividends on the Series A Preferred Stock.  That Board of Directors has not resumed the payment of cash dividends on the common stock, and no assurance can be given with respect to if or when such resumption will occur. 

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Employee Benefit Plans (Components of the Net Periodic Pension Plan Cost) (Pension) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Defined Benefit Plan Disclosure [Line Items]
Service cost			$ 242	$ 193
Interest cost			1,177	1,106
Expected return on assets			(2,224)	(1,990)
Amortization of transition asset			(15)	(30)
Amortization of net actuarial loss			576	280
Amortization of prior service cost			9	9
Net pension credit included in employee benefits			$ (235)	$ (432)
Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 74	$ 64
Interest cost	403	369
Expected return on assets	(740)	(662)
Amortization of transition asset	(5)	(10)
Amortization of net actuarial loss	204	93
Amortization of prior service cost	3	3
Net pension credit included in employee benefits	$ (61)	$ (143)
Plan modificaiton description			The Pension Plan is a noncontributory defined benefit pension plan covers our employees who were hired prior to the freeze and others who were grandfathered into the plan. The benefits are based on years of service and the employees' compensation during the last five years of employment. Effective April 30, 2010, the Pension Plan was amended, resulting in a "soft freeze", the effect of which prohibits new entrants into the plan and ceases crediting of additional years of service after that date. Effective January 1, 2013, the Pension Plan was amended to unfreeze it for those employees for whom the sum of (a) their ages, at their closest birthday, plus (b) years of service for vesting purposes equals 80 or greater. The "soft freeze" continues to apply to all other plan participants. Pension benefits for these participants are managed through discretionary contributions to the First United Corporation 401(k) Profit Sharing Plan (the "401(k) Plan"). The Bank established the SERP in 2001 as an unfunded supplemental executive retirement plan. The SERP is available only to a select group of management or highly compensated employees to provide supplemental retirement benefits in excess of limits imposed on qualified plans by federal tax law. Concurrent with the establishment of the SERP, the Bank acquired Bank Owned Life Insurance ("BOLI") policies on the senior management personnel and officers of the Bank. The benefits resulting from the favorable tax treatment accorded the earnings on the BOLI policies are intended to provide a source of funds for the future payment of the SERP benefits as well as other employee benefit costs. The benefit obligation activity for both the Pension Plan and SERP was calculated using an actuarial measurement date of January 1. Plan assets and the benefit obligations were calculated using an actuarial measurement date of December 31.The Corporation will assess the need for future annual contributions to the pension plan based upon its funded status and an evaluation of the future benefits to be provided thereunder. There have been no contributions made as of September 30, 2015. The Corporation expects to fund the annual projected benefit payments for the SERP from operations.On January 9, 2015, the Corporation and members of management who do not participate in the SERP entered into participation agreements under the Deferred Compensation Plan, each styled as a SERP Alternative Participation Agreement (the "Participation Agreement").  Pursuant to each Participation Agreement, the Corporation agreed, for each Plan Year (as defined in the Deferred Compensation Plan) in which it determines that it has been Profitable (as defined in the Participation Agreement), to make a discretionary contribution to the participant's Employer Account in an amount equal to 15% of the participant's base salary level for such Plan Year, with the first Plan Year being the year ending December 31, 2015.  The Participation Agreement provides that the participant will become 100% vested in the amount maintained in his or her Employer Account upon the earliest to occur of the following events: (a) Normal Retirement (as defined in the Participation Agreement); (b)  Separation from Service (as defined in the Participation Agreement) following a Change of Control (as defined in the Deferred Compensation Plan) and subsequent Triggering Event (as defined in the Participation Agreement); (c) Separation from Service due to a Disability (as defined in the Participation Agreement); (d) with respect to a particular award of Employer Contribution Credits, the participant's completion of two consecutive Years of Service (as defined in the Participation Agreement) immediately following the Plan Year for which such award was made; or (e) death.  Notwithstanding the foregoing, however, a participant will lose entitlement to the amount maintained in his or her Employer Account in the event employment is terminated for Cause (as defined in the Participation Agreement).  In addition, the Participation Agreement conditions entitlement to the amounts held in the Employer Account on the participant (1) refraining from engaging in Competitive Employment (as defined in the Participation Agreement) for three years following his or her Separation from Service, (2) refraining from injurious disclosure of confidential information concerning the Corporation, and (3) remaining available, at the Corporation's reasonable request, to provide at least six hours of transition services per month for 12 months following his or her Separation from Service (except in the case of death or Disability), except that only item (2) will apply in the event of a Separation from Service following a Change of Control and subsequent Triggering Event.

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Consolidated Statement of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Interest income
Interest and fees on loans	$ 9,311	$ 9,447	$ 27,549	$ 28,144
Interest on investment securities: taxable	1,755	1,579	5,365	5,323
Interest on investment securities: Exempt from federal income tax	302	371	970	1,175
Total investment income	2,057	1,950	6,335	6,498
Other	93	100	268	276
Total interest income	11,461	11,497	34,152	34,918
Interest expense
Interest on deposits	960	1,154	3,018	3,489
Interest on short-term borrowings	14	16	42	46
Interest on long-term borrowings	1,277	1,502	4,213	4,699
Total interest expense	2,251	2,672	7,273	8,234
Net interest income	9,210	8,825	26,879	26,684
Provision for loan losses	500	688	626	1,629
Net interest income after provision for loan losses	8,710	8,137	26,253	25,055
Other operating income
Net gains - other	95	166	100	1,127
Total net gains	95	166	100	1,127
Service charges	792	747	2,177	2,213
Trust department	1,455	1,354	4,225	3,922
Debit card income	578	529	1,586	1,516
Bank owned life insurance	294	249	849	737
Brokerage commissions	238	201	706	607
Other	90	88	308	309
Total other income	3,447	3,168	9,851	9,304
Total other operating income	3,542	3,334	9,951	10,431
Other operating expenses
Salaries and employee benefits	5,445	4,910	15,703	14,613
FDIC premiums	474	478	1,404	1,360
Equipment	634	625	1,905	1,931
Occupancy	617	592	1,867	1,868
Data processing	871	803	2,580	2,379
Professional Services	240	239	1,145	1,092
Other real estate owned	(71)	514	976	2,128
Other	1,500	1,747	4,782	5,202
Total other operating expenses	9,710	9,908	30,362	30,573
Income before income tax expense	2,542	1,563	5,842	4,913
Provision for income tax expense	594	223	1,351	975
Net Income	1,948	1,340	4,491	3,938
Accumulated preferred stock dividends and discount accretion	(675)	(675)	(2,025)	(1,925)
Net Income Available to Common Shareholders	$ 1,273	$ 665	$ 2,466	$ 2,013
Basic and diluted net income per common share	$ 0.20	$ 0.10	$ 0.39	$ 0.32
Weighted average number of basic and diluted shares outstanding	6,255	6,228	6,247	6,220

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Investments

9 Months Ended

Sep. 30, 2015

Investments [Abstract]

Investments

Note 5 – Investments

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

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

The following table shows a comparison of amortized cost and fair values of investment securities at September 30, 2015 and December 31, 2014:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI in AOCI
September 30, 2015
Available for Sale:
U.S. government agencies	$	34,096	$	125	$	0	$	34,221	$	0
Residential mortgage-backed agencies		14,495		162		163		14,494		0
Commercial mortgage-backed agencies		45,162		669		26		45,805		0
Collateralized mortgage obligations		10,172		92		47		10,217		0
Obligations of states and political subdivisions		48,065		1,081		292		48,854		0
Collateralized debt obligations		35,636		3,631		7,339		31,928		(60)
Total available for sale	$	187,626	$	5,760	$	7,867	$	185,519	$	(60)
Held to Maturity:
U.S. government agencies	$	24,658	$	784	$	0	$	25,442	$	0
Residential mortgage-backed agencies		54,869		689		83		55,475		0
Commercial mortgage-backed agencies		18,148		565		0		18,713		0
Collateralized mortgage obligations		6,432		0		34		6,398		0
Obligations of states and political subdivisions		2,625		106		0		2,731		0
Total held to maturity	$	106,732	$	2,144	$	117	$	108,759	$	0
December 31, 2014
Available for Sale:
U.S. treasuries	$	29,607	$	0	$	11	$	29,596	$	0
U.S. government agencies		39,077		117		253		38,941		0
Residential mortgage-backed agencies		45,175		510		412		45,273		0
Commercial mortgage-backed agencies		26,007		53		103		25,957		0
Collateralized mortgage obligations		8,611		96		0		8,707		0
Obligations of states and political subdivisions		46,151		1,413		260		47,304		0
Collateralized debt obligations		37,117		1,155		12,933		25,339		6,143
Total available for sale	$	231,745	$	3,344	$	13,972	$	221,117	$	6,143
Held to Maturity:
U.S. government agencies	$	24,520	$	514	$	0	$	25,034	$	0
Residential mortgage-backed agencies		58,400		613		5		59,008		0
Commercial mortgage-backed agencies		16,425		312		0		16,737		0
Collateralized mortgage obligations		7,379		5		0		7,384		0
Obligations of states and political subdivisions		2,725		0		117		2,608		0
Total held to maturity	$	109,449	$	1,444	$	122	$	110,771	$	0

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

	Nine months ended				Three months ended
	September 30,				September 30,
(in thousands)	2015		2014		2015		2014
Proceeds	$	52,672	$	56,838	$	28,005	$	616
Realized gains		373		1,527		217		222
Realized losses		311		434		138		75

The following table shows the Corporation’s investment securities with gross unrealized losses and fair values at September 30, 2015 and December 31, 2014, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:

	Less than 12 months				12 months or more
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
September 30, 2015
Available for Sale:
Residential mortgage-backed agencies	$	0	$	0	$	8,110	$	163
Commercial mortgage-backed agencies		5,733		26		0		0
Collateralized mortgage obligations		5,560		47		0		0
Obligations of states and political subdivisions		18,168		151		4,320		141
Collateralized debt obligations		0		0		22,976		7,339
Total available for sale	$	29,461	$	224	$	35,406	$	7,643
Held to Maturity:
Residential mortgage-backed agencies	$	7,838	$	83	$	0	$	0
Collateralized mortgage obligations		6,398		34		0		0
Total held to maturity	$	14,236	$	117	$	0	$	0

December 31, 2014
Available for Sale:
U.S. treasuries	$	27,096	$	11	$	0	$	0
U.S. government agencies		0	$	0	$	18,819	$	253
Residential mortgage-backed agencies		0		0		17,918		412
Commercial mortgage-backed agencies		12,298		97		973		6
Obligations of states and political subdivisions		0		0		8,981		260
Collateralized debt obligations		0		0		20,290		12,933
Total available for sale	$	39,394	$	108	$	66,981	$	13,864
Held to Maturity:
Residential mortgage-backed agencies		3,850		5		0		0
Obligations of states and political subdivisions		0		0		2,608		117
Total held to maturity	$	3,850	$	5	$	2,608	$	117

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

Management believes that the valuation of certain securities is a critical accounting policy that requires significant estimates in preparation of the Corporation’s consolidated financial statements.  Management utilizes an independent third party to prepare both the impairment valuations and fair value determinations for the Corporation’s collateralized debt obligation (“CDO”) portfolio consisting of pooled trust preferred securities.  Based on management’s review of the assumptions and results of the third-party review, it believes that the valuations are adequate at September 30, 2015.

U.S. Government Agencies – Available for Sale – There were no U.S. government agencies in an unrealized loss position as of September 30, 2015. 

Residential Mortgage-Backed Agencies – Available for Sale - There were no residential mortgage-backed agencies in an unrealized loss position for less than 12 months as of September 30, 2015.  There was one residential mortgage-backed agency security in an unrealized loss position for 12 months or more.  The security is of the highest investment grade and the Corporation does not intend to sell it, and it is not more likely than not that the Corporation will be required to sell the security before recovery of its amortized cost basis, which may be at maturity.  Accordingly, management does not consider this investment to be other-than-temporarily impaired at September 30, 2015.

Commercial Mortgage-Backed Agencies – Available for Sale – There were two commercial mortgage-backed agencies in an unrealized loss position for less than 12 months as of September 30, 2015.    The securities are of the highest investment grade and the Corporation does not intend to sell them, and it is not more likely than not that the Corporation will be required to sell them before recovery of their amortized cost basis, which may be at maturity.  Accordingly, management does not consider these investments to be other-than-temporarily impaired at September 30, 2015.  There were no commercial mortgage-backed agency securities in an unrealized loss position for 12 months or more.

Collateralized Mortgage Obligations – Available for Sale – There was one collateralized mortgage obligation in an unrealized loss position for less than 12 months as of September 30, 2015.    The security is of the highest investment grade and the Corporation does not intend to sell it, and it is not more likely than not that the Corporation will be required to sell it before recovery of its amortized cost basis, which may be at maturity.  Accordingly, management does not consider this investment to be other-than-temporarily impaired at September 30, 2015.  There were no collateralized mortgage obligations in an unrealized loss position for 12 months or more.

Obligations of State and Political Subdivisions – Available for Sale – There were 10 obligations of state and political subdivisions that have been in an unrealized loss position for less than 12 months at September 30, 2015.  There was one security that has been in an unrealized loss position for 12 months or more.  These investments are of investment grade as determined by the major rating agencies and management reviews the ratings of the underlying issuers and performs an in-depth credit analysis on the securities.  Management believes that this portfolio is well-diversified throughout the United States, and all bonds continue to perform according to their contractual terms.  The Corporation does not intend to sell these investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity.  Accordingly, management does not consider these investments to be other-than-temporarily impaired at September 30, 2015.

Collateralized Debt Obligations – Available for Sale - The $7.3 million in unrealized losses greater than 12 months at September 30, 2015 relates to 12 pooled trust preferred securities that are included in the CDO portfolio.  See Note 9 for a discussion of the methodology used by management to determine the fair values of these securities.  Based upon a review of credit quality and the cash flow tests performed by the independent third party, management determined that there were no securities that had credit-related non-cash OTTI charges during the first nine months of 2015.  The unrealized losses on the remaining securities in the portfolio are primarily attributable to continued depression in market interest rates, marketability, liquidity and the current economic environment.

U.S. Government Agencies – Held to Maturity – There were no U.S. government agencies in an unrealized loss position as of September 30, 2015. 

Residential Mortgage-Backed Agencies – Held to Maturity - Five residential mortgage-backed agencies have been in an unrealized loss position for less than 12 months as of September 30, 2015.  The securities are of the highest investment grade and the Corporation has the intent and ability to hold the investments to maturity.  Accordingly, management does not consider these investments to be other-than-temporarily impaired at September 30, 2015.  There were no residential mortgage-backed agencies in an unrealized loss position for 12 months or more.

Commercial Mortgage-Backed Agencies – Held to Maturity - There were no commercial mortgage-backed agencies in the Held to Maturity portfolio as of September 30, 2015 in a loss position.

Collateralized Mortgage Obligations – Held to Maturity – There was one collateralized mortgage obligations in an unrealized loss position for less than 12 months as of September 30, 2015.  The security is of the highest investment grade and the Corporation has the intent and ability to hold the investment to maturity.  Accordingly, management does not consider this investment to be other-than-temporarily impaired at September 30, 2015.  There were no collateralized mortgage obligations in an unrealized loss position for 12 months or more. 

Obligations of State and Political Subdivisions – Held to Maturity – There were no obligations of state and political subdivisions in the Held to Maturity portfolio as of September 30, 2015 in a loss position.

The following tables present a cumulative roll-forward of the amount of non-cash OTTI charges related to credit losses which have been recognized in earnings for the trust preferred securities in the CDO portfolio held and not intended to be sold for the nine- and three-month periods ended September 30, 2015 and 2014:

	Nine months ended September 30,
(in thousands)	2015		2014
Balance of credit-related OTTI at January 1	$	12,583	$	13,422
Reduction for increases in cash flows expected to be collected		(479)		(501)
Balance of credit-related OTTI at September 30	$	12,104	$	12,921

	Three months ended September 30,
(in thousands)	2015		2014
Balance of credit-related OTTI at July 1	$	12,243	$	13,091
Reduction for increases in cash flows expected to be collected		(139)		(170)
Balance of credit-related OTTI at September 30	$	12,104	$	12,921

The amortized cost and estimated fair value of securities by contractual maturity at September 30, 2015 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.

	September 30, 2015
(in thousands)	Amortized Cost		Fair Value
Contractual Maturity
Available for sale:
Due after one year through five years	$	37,604	$	37,899
Due after five years through ten years		14,765		15,355
Due after ten years		65,428		61,749
		117,797		115,003
Residential mortgage-backed agencies	$	14,495	$	14,494
Commercial mortgage-backed agencies		45,162		45,805
Collateralized mortgage obligations		10,172		10,217
	$	187,626	$	185,519
Held to Maturity:
Due after five years through ten years	$	15,571	$	16,100
Due after ten years		11,712		12,073
		27,283		28,173
Residential mortgage-backed agencies	$	54,869	$	55,475
Commercial mortgage-backed agencies		18,148		18,713
Collateralized mortgage obligations		6,432		6,398
	$	106,732	$	108,759

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Cash and Cash Equivalents

9 Months Ended

Sep. 30, 2015

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents

Note 4 – Cash and Cash Equivalents

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

	September 30,		December 31,
(in thousands)	2015		2014
Cash and due from banks, weighted average interest rate of 0.10% (at September 30, 2015)	$	61,406	$	27,554

Interest bearing deposits in banks, which represent funds invested at a correspondent bank, are carried at cost which approximates fair value and, as of September 30, 2015 and December 31, 2014, consisted of daily funds invested at the Federal Home Loan Bank (“FHLB”) of Atlanta, First Tennessee Bank (“FTN”), and Merchants and Traders (“M&T”).

	September 30,		December 31,
(in thousands)	2015		2014
FHLB daily investments, interest rate of 0.005% (at September 30, 2015)	$	1,521	$	983
FTN daily investments, interest rate of 0.07% (at September 30, 2015)		850		850
M&T daily investments, interest rate of 0.15% (at September 30, 2015)		1,012		6,064
	$	3,383	$	7,897

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Derivative Financial Instruments

9 Months Ended

Sep. 30, 2015

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

Note 16 – Derivative Financial Instruments

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

In July 2009, the Corporation entered into three interest rate swap contracts totaling $20.0 million notional amount, hedging future cash flows associated with floating rate trust preferred debt.  As of September 30, 2015, swap contracts totaling $5.0 million notional amount remained, as the three-year $5.0 million contract matured on June 15, 2012 and the five-year $10.0 million contract matured on June 17, 2014.  The seven-year $5 million contract matures June 17, 2016.  The fair value of the interest rate swap contract was ($107) thousand at September 30, 2015 and ($199) thousand at December 31, 2014 and was reported in Other Liabilities on the Consolidated Statement of Financial Condition.  Cash in the amount of $.9 million was posted as collateral as of September 30, 2015. 

For the nine months ended September 30, 2015, the Corporation recorded an increase in the value of the derivatives of $92 thousand and the related deferred tax benefit of $37 thousand in net accumulated other comprehensive loss to reflect the effective portion of cash flow hedges.  ASC Subtopic 815-30 requires this amount to be reclassified to earnings if the hedge becomes ineffective or is terminated.  There was no hedge ineffectiveness recorded for the nine months ending September 30, 2015.  The Corporation does not expect any losses relating to these hedges to be reclassified into earnings within the next 12 months.

Interest rate swap agreements are entered into with counterparties that meet established credit standards and the Corporation believes that the credit risk inherent in these contracts is not significant as of September 30, 2015.

The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the nine- and three-months ended September 30, 2015 and 2014.

Derivative in Cash Flow Hedging Relationships
(in thousands)	Amount of gain recognized in OCI on derivative (effective portion)		Amount of gain or (loss) reclassified from accumulated OCI into income (effective portion) (a)		Amount of gain or (loss) recognized in income or derivative (ineffective portion and amount excluded from effectiveness testing) (b)
Interest rate contracts:
Nine months ended:
September 30, 2015	$	55	$	0	$	0
September 30, 2014		137		0		0
Three months ended:
September 30, 2015	$	20	$	0	$	0
September 30, 2014		26		0		0

Notes:

(a) Reported as interest expense

(b) Reported as other income

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Borrowed Funds

9 Months Ended

Sep. 30, 2015

Borrowed Funds [Abstract]

Borrowed Funds

Note 12 – Borrowed Funds

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

(Dollars in thousands)	Nine months ended September 30, 2015		Year ended December 31, 2014
Securities sold under agreements to repurchase:
Outstanding at end of period	$	38,460	$	39,801
Weighted average interest rate at end of period		0.15%		0.15%
Maximum amount outstanding as of any month end	$	47,131	$	53,819
Average amount outstanding	$	33,506	$	45,702
Approximate weighted average rate during the period		0.12%		0.13%

At September 30, 2015, the repurchase agreements were secured by $59.7 million in investment securities issued by government related agencies.  A minimum of 102% of fair value is pledged against account balances.

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

	September 30,		December 31,
(in thousands)	2015		2014
FHLB advances, bearing fixed interest at rates ranging from 1.00% to 3.69% at September 30, 2015	$	105,825	$	135,876
Junior subordinated debt, bearing variable interest rate of 3.03% at September 30, 2015		30,929		35,929
Junior subordinated debt, bearing fixed interest rate of 9.88% at September 30, 2015		10,801		10,801
Total long-term debt	$	147,555	$	182,606

At September 30, 2015, the long-term FHLB advances were secured by $216.8 million in loans.

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

	September 30, 2015						December 31, 2014
(in thousands)	Fixed Rate		Floating Rate		Total		Total
Due in 2015		0		0		0		35,000
Due in 2016		0		0		0		0
Due in 2017		0		0		0		0
Due in 2018		70,000		0		70,000		70,000
Due in 2019		0		0		0		0
Thereafter		46,626		30,929		77,555		77,606
Total long-term debt	$	116,626	$	30,929	$	147,555	$	182,606

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Derivative Financial Instruments (Narrative) (Details) $ in Thousands	1 Months Ended	9 Months Ended
	Jul. 31, 2009 USD ($) contract	Sep. 30, 2015 USD ($)	Dec. 31, 2014 USD ($)	Jun. 17, 2014 USD ($)	Jun. 15, 2012 USD ($)
Derivative [Line Items]
Interest rate swap notional amount		$ 5,000
Number of interest rate swap contracts | contract	3
Interest rate swap fair value		(107)	$ (199)
Cash collateral		900
Gain on derivative		92
Deferred tax asset on gain on derivative		$ 37
Cash flow hedge ineffectiveness		0
Interest Rate Swap [Member]
Derivative [Line Items]
Interest rate swap notional amount	$ 20,000
Derivative Matured [Member]
Derivative [Line Items]
Interest rate swap notional amount				$ 10,000	$ 5,000
Derivative, maturity date		Jun. 15, 2012
Swap Contract- 7 year $5 Million [Member]
Derivative [Line Items]
Interest rate swap notional amount		$ 5,000
Derivative, maturity date		Jun. 17, 2016

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Other Real Estate Owned

9 Months Ended

Sep. 30, 2015

Other Real Estate Owned [Abstract]

Other Real Estate Owned

Note 8 - Other Real Estate Owned

The following table presents the components of Other Real Estate Owned (“OREO”) at September 30, 2015 and December 31, 2014:

(in thousands)	September 30, 2015		December 31, 2014
Commercial real estate	$	1,728	$	1,772
Acquisition and development		4,746		9,263
Residential mortgage		1,003		1,897
Total OREO	$	7,477	$	12,932

The following table presents the activity in the OREO valuation allowance for the nine- and three-month periods ended September 30, 2015 and 2014:

	For the Nine Months Ended				For the Three Months Ended
	September 30,				September 30,
(in thousands)	2015		2014		2015		2014
Balance beginning of period	$	3,440	$	4,047	$	3,843	$	3,742
Fair value write-down		1,202		885		350		442
Sales of OREO		(831)		(1,155)		(382)		(407)
Balance at end of period	$	3,811	$	3,777	$	3,811	$	3,777

The following table presents the components of OREO expenses, net, for the nine- and three-month periods ended September 30, 2015 and 2014:

	For the Nine Months Ended				For the Three Months Ended
	September 30,				September 30,
(in thousands)	2015		2014		2015		2014
(Gains)/losses on real estate, net	$	(718)	$	921	$	(640)	$	(49)
Fair value write-down, net		1,202		885		350		442
Expenses, net		704		594		248		237
Rental and other income		(212)		(272)		(29)		(116)
Total OREO expense/(income), net	$	976	$	2,128	$	(71)	$	514

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Loans and Related Allowance for Loan Losses (Impaired Loans and Related Interest Income by Loan Portfolio Class) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	$ 5,554	$ 4,844
Impaired Loans with Specific Allowance: Related Allowance	1,720	1,236
Impaired Loans with No Specific Allowance: Recorded Investment	18,471	19,937
Total Impaired Loans: Recorded Investment	24,025	24,781
Unpaid Principal Balance	31,058	30,484
Commercial real estate- non owner-occupied [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	137	143
Impaired Loans with Specific Allowance: Related Allowance	29	35
Impaired Loans with No Specific Allowance: Recorded Investment	4,445	4,353
Total Impaired Loans: Recorded Investment	4,582	4,496
Unpaid Principal Balance	4,592	4,543
Commercial real estate- all other CRE [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	0	0
Impaired Loans with Specific Allowance: Related Allowance	0	0
Impaired Loans with No Specific Allowance: Recorded Investment	7,902	7,453
Total Impaired Loans: Recorded Investment	7,902	7,453
Unpaid Principal Balance	8,401	7,944
Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	700	790
Impaired Loans with Specific Allowance: Related Allowance	68	105
Impaired Loans with No Specific Allowance: Recorded Investment	0	0
Total Impaired Loans: Recorded Investment	700	790
Unpaid Principal Balance	746	836
Acquisition and development- All other A&D [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	4,419	3,615
Impaired Loans with Specific Allowance: Related Allowance	1,539	1,037
Impaired Loans with No Specific Allowance: Recorded Investment	571	2,148
Total Impaired Loans: Recorded Investment	4,990	5,763
Unpaid Principal Balance	8,756	9,590
Commercial and industrial [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	0	0
Impaired Loans with Specific Allowance: Related Allowance	0	0
Impaired Loans with No Specific Allowance: Recorded Investment	1,031	1,861
Total Impaired Loans: Recorded Investment	1,031	1,861
Unpaid Principal Balance	3,298	2,723
Residential mortgage- term [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	298	296
Impaired Loans with Specific Allowance: Related Allowance	84	59
Impaired Loans with No Specific Allowance: Recorded Investment	4,245	3,779
Total Impaired Loans: Recorded Investment	4,543	4,075
Unpaid Principal Balance	4,967	4,485
Residential mortgage- home equity [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	0	0
Impaired Loans with Specific Allowance: Related Allowance	0	0
Impaired Loans with No Specific Allowance: Recorded Investment	277	343
Total Impaired Loans: Recorded Investment	277	343
Unpaid Principal Balance	298	363
Consumer [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with Specific Allowance: Recorded Investment	0	0
Impaired Loans with Specific Allowance: Related Allowance	0	0
Impaired Loans with No Specific Allowance: Recorded Investment	0	0
Total Impaired Loans: Recorded Investment	0	0
Unpaid Principal Balance	$ 0	$ 0

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Restricted Investment in Bank Stock

9 Months Ended

Sep. 30, 2015

Restricted Investment in Bank Stock [Abstract]

Restricted Investment in Bank Stock

Note 6 - Restricted Investment in Bank Stock

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

Management evaluates the restricted stock for impairment in accordance with ASC Industry Topic 942, Financial Services – Depository and Lending-(ASC Section 942-325-35).  Management’s evaluation of potential impairment is based on management’s assessment of the ultimate recoverability of the cost of the restricted stock rather than by recognizing temporary declines in value.  The determination of whether a decline affects the ultimate recoverability is influenced by criteria such as (a) the significance of the decline in net assets of the issuing bank as compared to the capital stock amount for that bank and the length of time this situation has persisted, (b) commitments by the issuing bank to make payments required by law or regulation and the level of such payments in relation to the operating performance of that bank, and (c) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the issuing bank. Management has evaluated the restricted stock for impairment and believes that no impairment charge is necessary as of September 30, 2015.

The Corporation recognizes dividends received on its restricted stock investments on a cash basis.  For the nine months ended September 30, 2015, dividends of $234,445 were recognized in earnings.  For the comparable period of 2014, dividends of $212,665 were recognized in earnings.  For the three months ended September 30, 2015 and 2014, dividends of $78,777 and $68,329, respectively, were recognized in earnings.

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Loans and Related Allowance for Loan Losses

9 Months Ended

Sep. 30, 2015

Loans and Related Allowance for Loan Losses [Abstract]

Loans and Related Allowance for Loan Losses

Note 7 – Loans and Related Allowance for Loan Losses

The following table summarizes the primary segments of the loan portfolio as of September 30, 2015 and December 31, 2014:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Total
September 30, 2015
Individually evaluated for impairment	$	12,484	$	5,690	$	1,031	$	4,820	$	0	$	24,025
Collectively evaluated for impairment	$	253,449	$	93,066	$	73,749	$	374,127	$	24,676	$	819,067
Total loans	$	265,933	$	98,756	$	74,780	$	378,947	$	24,676	$	843,092
December 31, 2014
Individually evaluated for impairment	$	11,949	$	6,553	$	1,861	$	4,418	$	0	$	24,781
Collectively evaluated for impairment	$	244,115	$	92,748	$	91,394	$	363,223	$	23,730	$	815,210
Total loans	$	256,064	$	99,301	$	93,255	$	367,641	$	23,730	$	839,991

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

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

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

The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention and Substandard within the internal risk rating system as of September 30, 2015 and December 31, 2014:

(in thousands)	Pass		Special Mention		Substandard		Total
September 30, 2015
Commercial real estate
Non owner-occupied	$	125,412	$	11,669	$	10,462	$	147,543
All other CRE		99,712		565		18,113		118,390
Acquisition and development
1-4 family residential construction		15,752		0		700		16,452
All other A&D		75,595		76		6,633		82,304
Commercial and industrial		71,292		252		3,236		74,780
Residential mortgage
Residential mortgage - term		291,679		238		10,350		302,267
Residential mortgage - home equity		74,901		49		1,730		76,680
Consumer		24,659		0		17		24,676
Total	$	779,002	$	12,849	$	51,241	$	843,092
December 31, 2014
Commercial real estate
Non owner-occupied	$	115,276	$	10,884	$	11,273	$	137,433
All other CRE		90,740		8,618		19,273		118,631
Acquisition and development
1-4 family residential construction		12,920		0		790		13,710
All other A&D		72,323		1,356		11,912		85,591
Commercial and industrial		88,579		884		3,792		93,255
Residential mortgage
Residential mortgage - term		280,113		379		10,934		291,426
Residential mortgage - home equity		74,698		90		1,427		76,215
Consumer		23,658		0		72		23,730
Total	$	758,307	$	22,211	$	59,473	$	839,991

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

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans as of September 30, 2015 and December 31, 2014:

(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
September 30, 2015
Commercial real estate
Non owner-occupied	$	145,975	$	69	$	0	$	0	$	69	$	1,499	$	147,543
All other CRE		112,969		179		187		148		514		4,907		118,390
Acquisition and development
1-4 family residential construction		16,452		0		0		0		0		0		16,452
All other A&D		79,110		0		252		0		252		2,942		82,304
Commercial and industrial		74,532		79		0		0		79		169		74,780
Residential mortgage
Residential mortgage - term		297,653		438		1,638		509		2,585		2,029		302,267
Residential mortgage - home equity		75,374		798		278		0		1,076		230		76,680
Consumer		24,446		178		52		0		230		0		24,676
Total	$	826,511	$	1,741	$	2,407	$	657	$	4,805	$	11,776	$	843,092
December 31, 2014
Commercial real estate
Non owner-occupied	$	135,994	$	104	$	183	$	0	$	287	$	1,152	$	137,433
All other CRE		112,825		1,196		0		0		1,196		4,610		118,631
Acquisition and development
1-4 family residential construction		13,710		0		0		0		0		0		13,710
All other A&D		81,702		239		40		1		280		3,609		85,591
Commercial and industrial		93,060		0		20		4		24		171		93,255
Residential mortgage
Residential mortgage - term		279,340		8,654		1,350		416		10,420		1,666		291,426
Residential mortgage - home equity		74,913		577		313		69		959		343		76,215
Consumer		23,316		287		88		39		414		0		23,730
Total	$	814,860	$	11,057	$	1,994	$	529	$	13,580	$	11,551	$	839,991

Non-accrual loans which have been subject to a partial charge-off totaled $5.1 million at September 30, 2015, compared to $4.6 million at December 31, 2014.  Loans secured by 1-4 family residential real estate properties in the process of foreclosure were $2.4 million at September 30, 2015 and $1.9 million at December 31, 2014. 

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

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

The following table summarizes the primary segments of the ALL, as of September 30, 2015 and December 31, 2014 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
September 30, 2015
Individually evaluated for impairment	$	29	$	1,607	$	0	$	84	$	0	$	0	$	1,720
Collectively evaluated for impairment	$	2,552	$	2,881	$	734	$	3,608	$	216	$	500	$	10,491
Total ALL	$	2,581	$	4,488	$	734	$	3,692	$	216	$	500	$	12,211
December 31, 2014
Individually evaluated for impairment	$	36	$	1,141	$	0	$	59	$	0	$	0	$	1,236
Collectively evaluated for impairment	$	2,388	$	2,771	$	1,680	$	3,803	$	187	$	0	$	10,829
Total ALL	$	2,424	$	3,912	$	1,680	$	3,862	$	187	$	0	$	12,065

Management evaluates individual loans in all of the commercial segments for possible impairment if the loan (a) is greater than $500,000 or (b) is part of a relationship that is greater than $750,000 and is either (i) in nonaccrual status or (ii) risk-rated Substandard and greater than 60 days past due.  Loans are considered to be impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  The Bank does not separately evaluate individual consumer and residential mortgage loans for impairment, unless such loans are part of a larger relationship that is impaired; otherwise, loans in these segments are considered impaired when they are classified as non-accrual.

Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods:  (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs.  The method is selected on a loan-by-loan basis, with management primarily utilizing the fair value of collateral method.  If the fair value of the collateral less selling costs method is utilized for collateral securing loans in the commercial segments, then an updated external appraisal is ordered on the collateral supporting the loan if the loan balance is greater than $500,000 and the existing appraisal is greater than 18 months old.  If an updated appraisal has not been received and reviewed in time for the determination of estimated fair value at quarter (or year) end, or if the appraisal is found to be deficient following the Corporation’s internal appraisal review process and re-ordered, then the estimated fair value of the collateral is determined by adjusting the existing appraisal by the appropriate percentage from an internally prepared appraisal discount grid.  This grid considers the age of a third party appraisal and the geographic region where the collateral is located.  The discount rates in the appraisal discount grid are updated periodically to reflect the most current knowledge that management has available, including the results of current appraisals.  A specific allocation of the ALL is recorded if there is any deficiency in collateral value determined by comparing the estimated fair value to the recorded investment of the loan. When updated appraisals are received and reviewed, adjustments are made to the specific allocation as needed.

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

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of September 30, 2015 and December 31, 2014:

		Impaired Loans with Specific Allowance				Impaired Loans with No Specific Allowance		Total Impaired Loans
(in thousands)		Recorded Investment		Related Allowances		Recorded Investment		Recorded Investment		Unpaid Principal Balance
September 30, 2015
Commercial real estate
Non owner-occupied	$	137	$	29	$	4,445	$	4,582	$	4,592
All other CRE		0		0		7,902		7,902		8,401
Acquisition and development
1-4 family residential construction		700		68		0		700		746
All other A&D		4,419		1,539		571		4,990		8,756
Commercial and industrial		0		0		1,031		1,031		3,298
Residential mortgage
Residential mortgage - term		298		84		4,245		4,543		4,967
Residential mortgage – home equity		0		0		277		277		298
Consumer		0		0		0		0		0
Total impaired loans	$	5,554	$	1,720	$	18,471	$	24,025	$	31,058
December 31, 2014
Commercial real estate
Non owner-occupied	$	143	$	35	$	4,353	$	4,496	$	4,543
All other CRE		0		0		7,453		7,453		7,944
Acquisition and development
1-4 family residential construction		790		105		0		790		836
All other A&D		3,615		1,037		2,148		5,763		9,590
Commercial and industrial		0		0		1,861		1,861		2,723
Residential mortgage
Residential mortgage - term		296		59		3,779		4,075		4,485
Residential mortgage – home equity		0		0		343		343		363
Consumer		0		0		0		0		0
Total impaired loans	$	4,844	$	1,236	$	19,937	$	24,781	$	30,484

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

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

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

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

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL.  When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL.  Residential mortgage and consumer loans are charged off after they are 120 days contractually past due.  All other loans are charged off based on an evaluation of the facts and circumstances of each individual loan. When the Bank believes that its ability to collect is solely dependent on the liquidation of the collateral, a full or partial charge-off is recorded promptly to bring the recorded investment to an amount that the Bank believes is supported by an ability to collect on the collateral.  The circumstances that may impact the Bank’s decision to charge-off all or a portion of a loan include default or non-payment by the borrower, scheduled foreclosure actions, and/or prioritization of the Bank’s claim in bankruptcy.   There may be circumstances where, due to pending events, the Bank will place a specific allocation of the ALL on a loan for which a partial charge-off has been previously recognized.  This specific allocation may be either charged off or removed depending upon the outcome of the pending event.  Full or partial charge-offs are not recovered until full principal and interest on the loan have been collected, even if a subsequent appraisal supports a higher value. Loans with partial charge-offs generally remain in non-accrual status. Both full and partial charge-offs reduce the recorded investment of the loan and the ALL and are considered to be charge-offs for purposes of all credit loss metrics and trends, including the historical rolling charge-off rates used in the determination of the ALL.  At September 30, 2015, $.5 million of the ALL was considered to be unallocated.

The following tables present the activity in the ALL for the nine- and three-month periods ended September 30, 2015 and 2014:

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer			Unallocated	Total
ALL balance at January 1, 2015	$	2,424	$	3,912	$	1,680	$	3,862	$	187	$	0	$	12,065
Charge-offs		(295)		(256)		0		(200)		(247)		0		(998)
Recoveries		66		100		24		162		166		0		518
Provision		386		732		(970)		(132)		110		500		626
ALL balance at September 30, 2015	$	2,581	$	4,488	$	734	$	3,692	$	216	$	500	$	12,211
ALL balance at January 1, 2014	$	4,052	$	4,172	$	766	$	4,320	$	284	$	0	$	13,594
Charge-offs		(85)		(2,423)		(213)		(682)		(380)		0		(3,783)
Recoveries		11		104		22		183		308		0		628
Provision		(1,386)		1,857		1,016		158		(16)		0		1,629
ALL balance at September 30, 2014	$	2,592	$	3,710	$	1,591	$	3,979	$	196	$	0	$	12,068

(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer			Unallocated	Total
ALL balance at July 1, 2015	$	2,566	$	3,806	$	1,007	$	3,707	$	223	$	500	$	11,809
Charge-offs		(8)		0		0		(164)		(73)		0		(245)
Recoveries		1		59		4		29		54		0		147
Provision		22		623		(277)		120		12		0		500
ALL balance at September 30, 2015	$	2,581	$	4,488	$	734	$	3,692	$	216	$	500	$	12,211
ALL balance at July 1, 2014	$	2,839	$	3,642	$	1,553	$	4,178	$	251	$	0	$	12,463
Charge-offs		(64)		(903)		(5)		(116)		(117)		0		(1,205)
Recoveries		1		33		15		27		46		0		122
Provision		(184)		938		28		(110)		16		0		688
ALL balance at September 30, 2014	$	2,592	$	3,710	$	1,591	$	3,979	$	196	$	0	$	12,068

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

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

	Nine months ended						Nine months ended
	September 30, 2015						September 30, 2014
(in thousands)	Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis		Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis
Commercial real estate
Non owner-occupied	$	4,314	$	117	$	0	$	1,890	$	28	$	0
All other CRE		7,626		89		8		9,497		116		67
Acquisition and development
1-4 family residential construction		745		26		0		1,690		34		0
All other A&D		5,311		94		0		8,108		129		0
Commercial and industrial		1,471		60		18		2,065		70		2
Residential mortgage
Residential mortgage - term		4,245		124		4		6,552		154		55
Residential mortgage – home equity		349		0		2		640		4		4
Consumer		7		0		0		11		0		0
Total	$	24,068	$	510	$	32	$	30,453	$	535	$	128

	Three months ended						Three months ended
	September 30, 2015						September 30, 2014
(in thousands)	Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis		Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis
Commercial real estate
Non owner-occupied	$	4,607	$	39	$	0	$	2,591	$	17	$	0
All other CRE		7,935		34		0		8,506		35		23
Acquisition and development
1-4 family residential construction		701		8		0		1,016		9		0
All other A&D		5,091		31		0		7,540		33		0
Commercial and industrial		1,253		13		0		1,905		21		0
Residential mortgage
Residential mortgage - term		4,400		42		2		6,225		47		3
Residential mortgage – home equity		321		0		0		597		0		3
Consumer		0		0		0		0		0		0
Total	$	24,308	$	167	$	2	$	28,380	$	162	$	29

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

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

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

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

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

	Temporary Rate Modification			Extension of Maturity			Modification of Payment and Other Terms
(in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Nine months ended September 30, 2015
Commercial real estate
Non owner-occupied	0	$	0	1	$	3,097	1	$	136
All other CRE	0		0	1		237	5		3,847
Acquisition and development
1-4 family residential construction	0		0	0		0	1		700
All other A&D	0		0	3		372	1		1,746
Commercial and industrial	0		0	1		930	0		0
Residential mortgage
Residential mortgage – term	1		156	2		599	1		116
Residential mortgage – home equity	0		0	0		0	0		0
Consumer	0		0	0		0	0		0
Total	1	$	156	8	$	5,235	9	$	6,545

	Temporary Rate Modification			Extension of Maturity			Modification of Payment and Other Terms
(in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Three months ended September 30, 2015
Commercial real estate
Non owner-occupied	0	$	0	0	$	0	0	$	0
All other CRE	0		0	0		0	0		0
Acquisition and development
1-4 family residential construction	0		0	0		0	1		700
All other A&D	0		0	0		0	1		1,746
Commercial and industrial	0		0	0		0	0		0
Residential mortgage
Residential mortgage – term	1		156	0		0	0		0
Residential mortgage – home equity	0		0	0		0	0		0
Consumer	0		0	0		0	0		0
Total	1	$	156	0	$	0	2	$	2,446

During the nine months ended September 30, 2015, there were eight new TDRs.  In addition, 10 existing TDRs which had reached their original modification maturity were re-modified.  A $5,744 reduction of the ALL resulted from a change to the impairment evaluation of two loans from evaluated collectively to being evaluated individually.  The remaining six new TDRs were impaired at the time of modification, resulting in no impact to the ALL as a result of the modifications and there was no impact to the recorded investment relating to the transfer of these loans.

During the quarter ended June 30, 2015, one residential mortgage loan totaling $70,000 that was modified as a TDR within the previous 12 months was transferred to non-accrual, and is considered a payment default.  There were no payment defaults in the quarters ended September 30, 2015 or March 31, 2015.

	Temporary Rate Modification			Extension of Maturity			Modification of Payment and Other Terms
(in thousands)	Number of Contracts	Recorded Investment		Number of Contracts		Recorded Investment	Number of Contracts	Recorded Investment
Nine Months Ended September 30, 2014
Commercial real estate
Non owner-occupied	0	$	0	2	$	277	0	$	0
All other CRE	0		0	0		0	4		2,627
Acquisition and development
1-4 family residential construction	0		0	0		0	0		0
All other A&D	0		0	0		0	0		0
Commercial and industrial	0		0	0		0	0		0
Residential mortgage
Residential mortgage – term	1		90	0		0	0		0
Residential mortgage – home equity	0		0	0		0	0		0
Consumer	0		0	0		0	0		0
Total	1	$	90	2	$	277	4	$	2,627

	Temporary Rate						Modification of Payment
	Modification			Extension of Maturity			and Other Terms
	Number of	Recorded		Number of	Recorded		Number of	Recorded
(in thousands)	Contracts	Investment		Contracts	Investment		Contracts	Investment
Three Months Ended September 30, 2014
Commercial real estate
Non owner-occupied	0	$	0	0	$	0	0	$	0
All other CRE	0		0	0		0	0		0
Acquisition and development
1-4 family residential construction	0		0	0		0	0		0
All other A&D	0		0	0		0	0		0
Commercial and industrial	0		0	0		0	0		0
Residential mortgage
Residential mortgage – term	0		0	0		0	0		0
Residential mortgage – home equity	0		0	0		0	0		0
Consumer	0		0	0		0	0		0
Total	0	$	0	0	$	0	0	$	0

During the nine months ended September 30, 2014, there were two new TDRs.  In addition, five existing TDRs which had reached their original modification maturity were re-modified.  A $1,055 reduction of the ALL resulted from a change to the impairment evaluation of one loan, from evaluated collectively to being evaluated individually.  The remaining new TDR was impaired at the time of modification, resulting in no impact to the ALL as a result of the modifications and there was no impact to the recorded investment relating to the transfer of these loans.

During the nine months ended September 30, 2014, three A&D loans totaling $1.7 million, a $.2 million C&I loan and a $.4 million owner-occupied CRE loan that were modified as TDRs within the previous 12 months were transferred to non-accrual, and are considered payment defaults. 

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2015

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

Note 9 – Fair Value of Financial Instruments

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

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

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

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

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

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

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

Management believes that the Corporation’s valuation techniques are appropriate and consistent with the techniques used by other market participants.  However, the use of different methodologies and assumptions could result in a different estimate of fair values at the reporting date.  The valuation techniques used by the Corporation to measure, on a recurring and non-recurring basis, the fair value of assets as of September 30, 2015 are discussed in the paragraphs that follow. 

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

The fair value of investments is determined using a market approach.  As of September 30, 2015, the U.S. Government agencies, residential and commercial mortgage-backed securities, collateralized mortgage obligations, and state and political subdivisions bonds segments are classified as Level 2 within the valuation hierarchy.  Their fair values were determined based upon market-corroborated inputs and valuation matrices, which were obtained through third party data service providers or securities brokers through which the Corporation has historically transacted both purchases and sales of investment securities.

The CDO segment, which consists of pooled trust preferred securities issued by banks, thrifts and insurance companies, is classified as Level 3 within the valuation hierarchy.  At September 30, 2015, the Corporation owned 16 pooled trust preferred securities with an amortized cost of $35.6 million and a fair value of $31.9 million. The market for these securities at September 30, 2015 is not active and markets for similar securities are also not active.  The inactivity was evidenced first by a significant widening of the bid-ask spread in the brokered markets in which these securities trade and then by a significant decrease in the volume of trades relative to historical levels.  The new issue market is also inactive, as few CDOs have been issued since 2007.  There are currently very few market participants who are willing to effect transactions in these securities.  The market values for these securities or any securities other than those issued or guaranteed by the U.S. Department of the Treasury (the “Treasury”) are depressed relative to historical levels.  Therefore, in the current market, a low market price for a particular bond may only provide evidence of stress in the credit markets in general rather than being an indicator of credit problems with a particular issue.  Given the conditions in the current debt markets and the absence of observable transactions in the secondary and new issue markets, management has determined that (a) the few observable transactions and market quotations that are available are not reliable for the purpose of obtaining fair value at September 30, 2015, (b) an income valuation approach technique (i.e. present value) that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs will be equally or more representative of fair value than a market approach, and (c) the CDO segment is appropriately classified within Level 3 of the valuation hierarchy because management determined that significant adjustments were required to determine fair value at the measurement date.

Management relies on an independent third party to prepare both the evaluations of OTTI as well as the fair value determinations for its CDO portfolio. Management believes that the valuations are adequately reflected at September 30, 2015.

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

Derivative financial instruments (Cash flow hedge)–The Corporation’s open derivative positions are interest rate swaps that are classified as Level 3 within the valuation hierarchy. Open derivative positions are valued using externally developed pricing models based on observable market inputs provided by a third party and validated by management.   The Corporation has considered counterparty credit risk in the valuation of its interest rate swap assets. 

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

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

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of September 30, 2015 and December 31, 2014, the significant unobservable inputs used in the fair value measurements were as follows:

(in thousands)		Fair Value at September 30, 2015	Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale	$	31,928	Discounted Cash Flow	Discount Rate	Range of Libor+ 5.50% to 9.50%
Cash Flow Hedge	$	(107)	Discounted Cash Flow	Reuters Third Party Market Quote	99.9%                       (weighted avg 99.9%)
Non-recurring:
Impaired Loans	$	5,985	Market Comparable Properties	Marketability Discount	3% -15% (1)               (weighted avg 11.6%)
Other Real Estate Owned	$	2,278	Market Comparable Properties	Marketability Discount	10.0% -15.0% (1)               (weighted avg 12.3%)
(in thousands)		Fair Value at December 31, 2014	Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Recurring:
Investment Securities – available for sale	$	25,339	Discounted Cash Flow	Discount Rate	Range of Libor+ 5% to 12%
Cash Flow Hedge	$	(199)	Discounted Cash Flow	Reuters Third Party Market Quote	99.9%                       (weighted avg 99.9%)
Non-recurring:
Impaired Loans	$	9,122	Market Comparable Properties	Marketability Discount	10% (1)               (weighted avg 10%)
Other Real Estate Owned	$	2,511	Market Comparable Properties	Marketability Discount	10% -15% (1)               (weighted avg 11%)

NOTE:

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

For assets measured at fair value on a recurring and non-recurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2015 and December 31, 2014 are as follows:

			Fair Value Measurements at September 30, 2015 Using
		Assets Measured at Fair Value	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)		9/30/2015	(Level 1)		(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. government agencies	$	34,221		$	34,221
Residential mortgage-backed agencies	$	14,494		$	14,494
Commercial mortgage-backed agencies	$	45,805		$	45,805
Collateralized mortgage obligations	$	10,217		$	10,217
Obligations of states and political subdivisions	$	48,854		$	48,854
Collateralized debt obligations	$	31,928				$	31,928
Financial Derivative	$	(107)				$	(107)
Non-recurring:
Impaired loans	$	5,985				$	5,985
Other real estate owned	$	2,278				$	2,278

			Fair Value Measurements at December 31, 2014 Using
		Assets Measured at Fair Value	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)		12/31/2014	(Level 1)		(Level 2)		(Level 3)
Recurring:
Investment securities available-for-sale:
U.S. treasuries	$	29,596		$	29,596
U.S. government agencies	$	38,941		$	38,941
Residential mortgage-backed agencies	$	45,273		$	45,273
Commercial mortgage-backed agencies	$	25,957		$	25,957
Collateralized mortgage obligations	$	8,707		$	8,707
Obligations of states and political subdivisions	$	47,304		$	47,304
Collateralized debt obligations	$	25,339				$	25,339
Financial Derivative	$	(199)				$	(199)
Non-recurring:
Impaired loans	$	9,122				$	9,122
Other real estate owned	$	2,511				$	2,511

There were no transfers of assets between any of the fair value hierarchy for the nine-month periods ended September 30, 2015 and 2014.

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 nine- and three-month periods ended September 30, 2015 and 2014:

		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In thousands)		Investment Securities Available for Sale		Cash Flow Hedge
Beginning balance January 1, 2015	$	25,339	$	(199)
Total gains realized/unrealized:
Included in other comprehensive income		6,589		92
Ending balance September 30, 2015	$	31,928	$	(107)

		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(in thousands)		Investment Securities Available for Sale		Cash Flow Hedge
Beginning balance January 1, 2014	$	17,538	$	(457)
Total gains realized/unrealized:
Included in other comprehensive income		6,868		229
Ending balance September 30, 2014	$	24,406	$	(228)

		Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
(in thousands)		Investment Securities Available for Sale		Cash Flow Hedge
Beginning balance July 1, 2015	$	30,046	$	(140)
Total gains realized/unrealized:
Included in other comprehensive income		1,882		33
Ending balance September 30, 2015	$	31,928	$	(107)

		Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
(in thousands)		Investment Securities Available for Sale		Cash Flow Hedge
Beginning balance July 1, 2014	$	23,921	$	(272)
Total gains realized/unrealized:
Included in other comprehensive income		485		44
Ending balance September 30, 2014	$	24,406	$	(228)

Gains (realized and unrealized) included in earnings for the periods identified above are reported in the Consolidated Statement of Operations in Other Operating Income.  There were no gains or losses included in earnings attributable to the change in realized/unrealized gains or losses related to the assets for the nine- and three- months ended September 30, 2015 and 2014.

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

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

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

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

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

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

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

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

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

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

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

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

	September 30, 2015					Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	61,406	$	61,406	$	61,406
Interest bearing deposits in banks		3,383		3,383		3,383
Investment securities - AFS		185,519		185,519			$	153,591	$	31,928
Investment securities - HTM		106,732		108,759				106,134		2,625
Restricted bank stock		5,904		5,904				5,904
Loans, net		830,881		835,132						835,132
Accrued interest receivable		3,709		3,709				3,709
Financial Liabilities:
Deposits – non-maturity		730,899		730,899				730,899
Deposits – time deposits		265,442		269,464				269,464
Short-term borrowed funds		38,460		38,460				38,460
Long-term borrowed funds		147,555		150,565				150,565
Accrued interest payable		622		622				622
Financial derivative		107		107						107
Off balance sheet financial instruments		0		0		0

	December 31, 2014					Fair Value Measurements
	Carrying		Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	27,554	$	27,554	$	27,554
Interest bearing deposits in banks		7,897		7,897		7,897
Investment securities - AFS		221,117		221,117			$	195,778	$	25,339
Investment securities - HTM		109,449		110,771				108,163		2,608
Restricted bank stock		7,524		7,524				7,524
Loans, net		827,926		830,904						830,904
Accrued interest receivable		4,152		4,152				4,152
Financial Liabilities:
Deposits- non-maturity		689,581		689,581				689,581
Deposits- time deposits		291,742		296,713				296,713
Short-term borrowed funds		39,801		39,801				39,801
Long-term borrowed funds		182,606		187,143				187,143
Accrued interest payable		882		882				882
Financial derivative		199		199						199
Off balance sheet financial instruments		0		0		0

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

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Other Real Estate Owned (Schedule of Real Estate Properties) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Total OREO	$ 7,477	$ 12,932
Commercial Real Estate OREO [Member]
Total OREO	1,728	1,772
Acquisition and Development [Member]
Total OREO	4,746	9,263
Residential Mortgage [Member]
Total OREO	$ 1,003	$ 1,897

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Derivative Financial Instruments (Impact Of Derivative Financial Instruments) (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Derivative Financial Instruments [Abstract]
Amount of gain or (loss) recognized in OCI on derivative (effective portion)		$ 20	$ 26	$ 55	$ 137
Amount of gain or (loss) reclassified from accumulated OCI into income (effective portion)	[1]	0	0	0	0
Amount of gain or (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	[2]	$ 0	$ 0	$ 0	$ 0

[1] Reported as interest expense

[2] Reported as other income

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Other Real Estate Owned (Schedule of Components of OREO) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Other Real Estate Owned [Abstract]
(Gain)/loss on sales of other real estate owned	$ (640)	$ (49)	$ (718)	$ 921
Fair value write-down, net	350	442	1,202	885
Expenses, net	248	237	704	594
Rental and other income	(29)	(116)	(212)	(272)
Total OREO expense, net	$ (71)	$ 514	$ 976	$ 2,128

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Loans and Related Allowance for Loan Losses (Modification of Troubled Debt Restructuring by Class) (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015 USD ($) loan	Sep. 30, 2014 USD ($) loan	Sep. 30, 2015 USD ($) loan	Sep. 30, 2014 USD ($) loan
Temporary Rate Modification [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	1	0	1	1
Recorded Investment	$ 156	$ 0	$ 156	$ 90
Temporary Rate Modification [Member] | Commercial real estate- non owner-occupied [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	0	0
Recorded Investment	$ 0	$ 0	$ 0	$ 0
Temporary Rate Modification [Member] | Commercial real estate- all other CRE [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	0	0
Recorded Investment	$ 0	$ 0	$ 0	$ 0
Temporary Rate Modification [Member] | Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	0	0
Recorded Investment	$ 0	$ 0	$ 0	$ 0
Temporary Rate Modification [Member] | Acquisition and development- All other A&D [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	0	0
Recorded Investment	$ 0	$ 0	$ 0	$ 0
Temporary Rate Modification [Member] | Commercial and industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	0	0
Recorded Investment	$ 0	$ 0	$ 0	$ 0
Temporary Rate Modification [Member] | Residential mortgage- term [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	1	0	1	1
Recorded Investment	$ 156	$ 0	$ 156	$ 90
Temporary Rate Modification [Member] | Residential mortgage- home equity [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	0	0
Recorded Investment	$ 0	$ 0	$ 0	$ 0
Temporary Rate Modification [Member] | Consumer [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	0	0
Recorded Investment	$ 0	$ 0	$ 0	$ 0
Extension Of Maturity [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	8	2
Recorded Investment	$ 0	$ 0	$ 5,235	$ 277
Extension Of Maturity [Member] | Commercial real estate- non owner-occupied [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	1	2
Recorded Investment	$ 0	$ 0	$ 3,097	$ 277
Extension Of Maturity [Member] | Commercial real estate- all other CRE [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	1	0
Recorded Investment	$ 0	$ 0	$ 237	$ 0
Extension Of Maturity [Member] | Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	0	0
Recorded Investment	$ 0	$ 0	$ 0	$ 0
Extension Of Maturity [Member] | Acquisition and development- All other A&D [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	3	0
Recorded Investment	$ 0	$ 0	$ 372	$ 0
Extension Of Maturity [Member] | Commercial and industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	1	0
Recorded Investment	$ 0	$ 0	$ 930	$ 0
Extension Of Maturity [Member] | Residential mortgage- term [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	2	0
Recorded Investment	$ 0	$ 0	$ 599	$ 0
Extension Of Maturity [Member] | Residential mortgage- home equity [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	0	0
Recorded Investment	$ 0	$ 0	$ 0	$ 0
Extension Of Maturity [Member] | Consumer [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	0	0
Recorded Investment	$ 0	$ 0	$ 0	$ 0
Modification Of Payment And Other Terms [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	2	0	9	4
Recorded Investment	$ 2,446	$ 0	$ 6,545	$ 2,627
Modification Of Payment And Other Terms [Member] | Commercial real estate- non owner-occupied [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	1	0
Recorded Investment	$ 0	$ 0	$ 136	$ 0
Modification Of Payment And Other Terms [Member] | Commercial real estate- all other CRE [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	5	4
Recorded Investment	$ 0	$ 0	$ 3,847	$ 2,627
Modification Of Payment And Other Terms [Member] | Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	1	0	1	0
Recorded Investment	$ 700	$ 0	$ 700	$ 0
Modification Of Payment And Other Terms [Member] | Acquisition and development- All other A&D [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	1	0	1	0
Recorded Investment	$ 1,746	$ 0	$ 1,746	$ 0
Modification Of Payment And Other Terms [Member] | Commercial and industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	0	0
Recorded Investment	$ 0	$ 0	$ 0	$ 0
Modification Of Payment And Other Terms [Member] | Residential mortgage- term [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	1	0
Recorded Investment	$ 0	$ 0	$ 116	$ 0
Modification Of Payment And Other Terms [Member] | Residential mortgage- home equity [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	0	0
Recorded Investment	$ 0	$ 0	$ 0	$ 0
Modification Of Payment And Other Terms [Member] | Consumer [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | loan	0	0	0	0
Recorded Investment	$ 0	$ 0	$ 0	$ 0

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Investments (Tables)

9 Months Ended

Sep. 30, 2015

Investments [Abstract]

Unrealized Gain (Loss) on Investments

The following table shows a comparison of amortized cost and fair values of investment securities at September 30, 2015 and December 31, 2014:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI in AOCI
September 30, 2015
Available for Sale:
U.S. government agencies	$	34,096	$	125	$	0	$	34,221	$	0
Residential mortgage-backed agencies		14,495		162		163		14,494		0
Commercial mortgage-backed agencies		45,162		669		26		45,805		0
Collateralized mortgage obligations		10,172		92		47		10,217		0
Obligations of states and political subdivisions		48,065		1,081		292		48,854		0
Collateralized debt obligations		35,636		3,631		7,339		31,928		(60)
Total available for sale	$	187,626	$	5,760	$	7,867	$	185,519	$	(60)
Held to Maturity:
U.S. government agencies	$	24,658	$	784	$	0	$	25,442	$	0
Residential mortgage-backed agencies		54,869		689		83		55,475		0
Commercial mortgage-backed agencies		18,148		565		0		18,713		0
Collateralized mortgage obligations		6,432		0		34		6,398		0
Obligations of states and political subdivisions		2,625		106		0		2,731		0
Total held to maturity	$	106,732	$	2,144	$	117	$	108,759	$	0
December 31, 2014
Available for Sale:
U.S. treasuries	$	29,607	$	0	$	11	$	29,596	$	0
U.S. government agencies		39,077		117		253		38,941		0
Residential mortgage-backed agencies		45,175		510		412		45,273		0
Commercial mortgage-backed agencies		26,007		53		103		25,957		0
Collateralized mortgage obligations		8,611		96		0		8,707		0
Obligations of states and political subdivisions		46,151		1,413		260		47,304		0
Collateralized debt obligations		37,117		1,155		12,933		25,339		6,143
Total available for sale	$	231,745	$	3,344	$	13,972	$	221,117	$	6,143
Held to Maturity:
U.S. government agencies	$	24,520	$	514	$	0	$	25,034	$	0
Residential mortgage-backed agencies		58,400		613		5		59,008		0
Commercial mortgage-backed agencies		16,425		312		0		16,737		0
Collateralized mortgage obligations		7,379		5		0		7,384		0
Obligations of states and political subdivisions		2,725		0		117		2,608		0
Total held to maturity	$	109,449	$	1,444	$	122	$	110,771	$	0

Proceeds from Sales and Realized Gain and Losses

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

	Nine months ended				Three months ended
	September 30,				September 30,
(in thousands)	2015		2014		2015		2014
Proceeds	$	52,672	$	56,838	$	28,005	$	616
Realized gains		373		1,527		217		222
Realized losses		311		434		138		75

Gross Unrealized Losses and Fair Values of Securities

The following table shows the Corporation’s investment securities with gross unrealized losses and fair values at September 30, 2015 and December 31, 2014, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:

	Less than 12 months				12 months or more
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
September 30, 2015
Available for Sale:
Residential mortgage-backed agencies	$	0	$	0	$	8,110	$	163
Commercial mortgage-backed agencies		5,733		26		0		0
Collateralized mortgage obligations		5,560		47		0		0
Obligations of states and political subdivisions		18,168		151		4,320		141
Collateralized debt obligations		0		0		22,976		7,339
Total available for sale	$	29,461	$	224	$	35,406	$	7,643
Held to Maturity:
Residential mortgage-backed agencies	$	7,838	$	83	$	0	$	0
Collateralized mortgage obligations		6,398		34		0		0
Total held to maturity	$	14,236	$	117	$	0	$	0

December 31, 2014
Available for Sale:
U.S. treasuries	$	27,096	$	11	$	0	$	0
U.S. government agencies		0	$	0	$	18,819	$	253
Residential mortgage-backed agencies		0		0		17,918		412
Commercial mortgage-backed agencies		12,298		97		973		6
Obligations of states and political subdivisions		0		0		8,981		260
Collateralized debt obligations		0		0		20,290		12,933
Total available for sale	$	39,394	$	108	$	66,981	$	13,864
Held to Maturity:
Residential mortgage-backed agencies		3,850		5		0		0
Obligations of states and political subdivisions		0		0		2,608		117
Total held to maturity	$	3,850	$	5	$	2,608	$	117

Non-Cash OTTI Credit Losses Recognized in Earnings

The following tables present a cumulative roll-forward of the amount of non-cash OTTI charges related to credit losses which have been recognized in earnings for the trust preferred securities in the CDO portfolio held and not intended to be sold for the nine- and three-month periods ended September 30, 2015 and 2014:

	Nine months ended September 30,
(in thousands)	2015		2014
Balance of credit-related OTTI at January 1	$	12,583	$	13,422
Reduction for increases in cash flows expected to be collected		(479)		(501)
Balance of credit-related OTTI at September 30	$	12,104	$	12,921

	Three months ended September 30,
(in thousands)	2015		2014
Balance of credit-related OTTI at July 1	$	12,243	$	13,091
Reduction for increases in cash flows expected to be collected		(139)		(170)
Balance of credit-related OTTI at September 30	$	12,104	$	12,921

Amortized Cost and Fair Values Classified by Contractual Maturity Date

	September 30, 2015
(in thousands)	Amortized Cost		Fair Value
Contractual Maturity
Available for sale:
Due after one year through five years	$	37,604	$	37,899
Due after five years through ten years		14,765		15,355
Due after ten years		65,428		61,749
		117,797		115,003
Residential mortgage-backed agencies	$	14,495	$	14,494
Commercial mortgage-backed agencies		45,162		45,805
Collateralized mortgage obligations		10,172		10,217
	$	187,626	$	185,519
Held to Maturity:
Due after five years through ten years	$	15,571	$	16,100
Due after ten years		11,712		12,073
		27,283		28,173
Residential mortgage-backed agencies	$	54,869	$	55,475
Commercial mortgage-backed agencies		18,148		18,713
Collateralized mortgage obligations		6,432		6,398
	$	106,732	$	108,759

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Investments (Gross Unrealized Losses and Fair Values of Securities) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Schedule of Investments [Line Items]
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value	$ 29,461	$ 39,394
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	224	108
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, fair value	35,406	66,981
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	7,643	13,864
Held-to-maturity securities, continuous unrealized loss position, less than twelve months, fair value	14,236	3,850
Held-to-maturity securities, continuous unrealized loss position, less than 12 months, unrealized loss	117	5
Held-to-maturity securities, continuous unrealized loss position, twelve months or longer, fair value	0	2,608
Held-to-maturity securities, continuous unrealized loss position, 12 months or longer, unrealized loss	0	117
U.S. Treasury [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value		27,096
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses		11
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, fair value		0
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses		0
U.S. Government Agencies [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value		0
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses		0
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, fair value		18,819
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses		253
Residential Mortgage-backed Agencies [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value	0	0
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	0	0
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, fair value	8,110	17,918
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	163	412
Held-to-maturity securities, continuous unrealized loss position, less than twelve months, fair value	7,838	3,850
Held-to-maturity securities, continuous unrealized loss position, less than 12 months, unrealized loss	83	5
Held-to-maturity securities, continuous unrealized loss position, twelve months or longer, fair value	0	0
Held-to-maturity securities, continuous unrealized loss position, 12 months or longer, unrealized loss	0	0
Commercial Mortgage-backed Agencies [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value	5,733	12,298
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	26	97
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, fair value	0	973
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	0	6
Collateralized Mortgage Obligations [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value	5,560
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	47
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, fair value	0
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	0
Held-to-maturity securities, continuous unrealized loss position, less than twelve months, fair value	6,398
Held-to-maturity securities, continuous unrealized loss position, less than 12 months, unrealized loss	34
Held-to-maturity securities, continuous unrealized loss position, twelve months or longer, fair value	0
Held-to-maturity securities, continuous unrealized loss position, 12 months or longer, unrealized loss	0
Obligations of States and Political Subdivisions [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value	18,168	0
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	151	0
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, fair value	4,320	8,981
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	141	260
Held-to-maturity securities, continuous unrealized loss position, less than twelve months, fair value		0
Held-to-maturity securities, continuous unrealized loss position, less than 12 months, unrealized loss		0
Held-to-maturity securities, continuous unrealized loss position, twelve months or longer, fair value		2,608
Held-to-maturity securities, continuous unrealized loss position, 12 months or longer, unrealized loss		117
Collateralized Debt Obligations [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value	0	0
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses	0	0
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, fair value	22,976	20,290
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, unrealized losses	$ 7,339	$ 12,933

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Equity Compensation Plan Information

9 Months Ended

Sep. 30, 2015

Equity Compensation Plan Information [Abstract]

Equity Compensation Plan Information

Note 14 - Equity Compensation Plan Information

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

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

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

Stock-based awards were made to non-employee directors in May 2015 pursuant to First United Corporation’s director compensation policy.  Beginning May 2014, each director’s annual retainer is paid in 1,000 shares of common stock, with the remainder of $10,000 paid in cash or any portion thereof, in shares of stock.  Prior to May 2014, the retainer of the 1,000 shares of stock was paid in shares of stock in the amount of $5,000.   A total of 16,022 fully-vested shares of common stock were issued to directors in 2015, which had a fair market value of $8.96 per share.  Director stock compensation expense was $111,848 for the nine months ended September 30, 2015 and $95,035 for the nine months ended September 30, 2014.  Stock compensation expense was $35,889 and $39,025 for the three months ended September 30, 2015 and 2014, respectively.

In the first quarter of 2015, a one-time stock grant was awarded to two executive officers in the amount of 10,232 shares.  These shares do not have any performance restrictions; however, they have a two-year vesting period.    Executive stock compensation expense was $32,094 for the nine months ended September 30, 2015 and $11,382 for the three months ended September 30, 2015.

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Adoption of New Accounting Standards and Effects of New Accounting Pronouncements

9 Months Ended

Sep. 30, 2015

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

Accounting Pronouncements and Changes in Accounting Principles

Note 19 – Adoption of New Accounting Standards and Effects of New Accounting Pronouncements

In February 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis.  ASU 2015-02 changes the consolidation analysis for all reporting entities. The changes primarily affect the consolidation of limited partnerships and their equivalents (e.g., limited liability companies), as well as structured vehicles such as collateralized debt obligations. The ASU simplifies U.S. GAAP by eliminating entity specific consolidation guidance for limited partnerships. It also revises other aspects of the consolidation analysis, including how kick-out rights, fee arrangements and related parties are assessed. The amendments rescind the indefinite deferral of FASB Statement 167 for certain investment funds and replace it with a permanent scope exception for money market funds.  The ASU applies to all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. The Corporation is evaluating the provisions of ASU 2015-02, but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations.

In January 2015, the FASB issued ASU 2015-01, Income Statement – Extraordinary and Unusual Items(Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.  ASU 2015-01 eliminates the requirement in Subtopic 225-20 to consider whether an underlying event or transaction is extraordinary and if so to separately present the item in the income statement net of tax, after income from continuing operations.  Items that are either unusual in nature or infrequently occurring will continue to be reported as a separate component of income from continuing operations. Alternatively, these amounts may still be disclosed in the notes to the financial statements. The same requirement has been expanded to include items that are both unusual and infrequent, (i.e., they should be separately presented as a component of income from continuing operations or disclosed in the footnotes). The ASU applies to all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015.  Early adoption is permitted, and the Corporation adopted ASU 2015-01 effective January 1, 2015, which had no material impact on the Corporation’s financial condition or results of operations.

In August 2014, the FASB issued ASU 2014-14, Classification of Certain Government-Guaranteed Mortgage Loans Upon Foreclosure, an amendment of ASC Subtopic 310-40, Receivables – Troubled Debt Restructurings by Creditors.  ASU 2014-14 specifies that a mortgage loan be derecognized and a separate other receivable be recognized upon foreclosure if the loan has a government guarantee that is not separable from the loan before foreclosure; and at the time of foreclosure, the creditor has the intent to convey the real estate to the guarantor and make a claim on  the guarantee, and the creditor has the ability to recover under the amount of the claim, which must be a fixed amount determined on the basis of the fair value of the real estate.  On January 1, 2015, the Corporation adopted the amendments in ASU 2014-14 using the prospective transition method, with no material impact on the Corporation’s financial condition or results of operations.

In June 2014, the FASB issued ASU 2014-11, Repurchase-to Maturity Transactions, Repurchase Financings, and Disclosures, an amendment of ASC Topic 860, Transfers and Servicing.  The amendments in ASU 2014-11 require repurchase-to-maturity transactions to be accounted for as secured borrowing transactions on the balance sheet, rather than sales; and for repurchase financing arrangements, require separate accounting for a transfer of a financial asset executed contemporaneously with (or in contemplation of) a repurchase agreement with the same counterparty, which also will generally result in secured borrowing accounting for the repurchase agreement. The ASU also introduces new disclosures to increase transparency about the types of collateral pledged for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions that are accounted for as secured borrowings, and requires a transferor to disclose information about transactions accounted for as a sale in which the transferor retains substantially all of the exposure to the economic return on the transferred financial assets through an agreement with the transferee.  On January 1, 2015, the Corporation adopted the amendments in ASU 2014-11, with no material impact on the Corporation’s financial condition or results of operations.  The disclosures required by the ASU are found in Note 12.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which establishes a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate, construction and software industries.  ASU 2014-09 specifies that an entity shall recognize revenue when, or as, the entity satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer.  An asset is transferred when, or as, the customer obtains control of the asset. Entities are required to disclose qualitative and quantitative information on the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early adoption not permitted.  In August 2015, the FASB issued ASU 2015-14 to defer the date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.  Earlier application would be permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.  The Corporation is evaluating the provisions of ASU 2014-09, but believes that its adoption will not have a material impact on the Corporation’s financial condition or results of operations.

In January 2014, the FASB issued ASU 2014-04, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure,  which provides guidance clarifying when an in substance repossession or foreclosure occurs that would require a loan receivable to be derecognized and the real estate property recognized. ASU 2014-04 specifies the circumstances when a creditor should be considered to have received physical possession of the residential real estate property collateralizing a consumer mortgage loan, and requires interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate that are in the process of foreclosure.  On January 1, 2015, the Corporation adopted the amendments in ASU 2014-04 using the prospective transition method.  The adoption had no material impact on the Corporation’s financial condition or results of operations.

In January 2014, the FASB issued ASU 2014-01, Accounting for Investments in Qualified Affordable Housing Projects,  which provides amendments and guidance on accounting for investments by a reporting entity in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for the low-income housing tax credit.  The amendments permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. A reporting entity that uses the effective yield method to account for its investments in qualified affordable housing projects before the date of adoption may continue to apply the effective yield method for those preexisting investments. Additional disclosure requirements are applicable to all reporting entities, regardless of whether the election is made.  On January 1, 2015, the Corporation adopted the amendments in ASU 2014-01.  As of that date, the Corporation had a single investment in a flow-through limited liability entity that invests in an affordable housing project, for which it currently utilizes the effective yield method to account for its investment.  As permitted by the ASU, the Corporation did not change its method of accounting.  The disclosures required by the ASU are found in Note 17.

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Investments (Unrealized Gain (Loss) on Investments) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Schedule of Investments [Line Items]
Amortized Cost	$ 187,626	$ 231,745
Gross Unrealized Gains	5,760	3,344
Gross Unrealized Losses	7,867	13,972
Investment securities - available-for-sale (at fair value)	185,519	221,117
OTTI in AOCI	(60)	6,143
Held-to-maturity amortized cost	106,732	109,449
Held-to-maturity Gross Unrealized Gains	2,144	1,444
Held-to-maturity gross unrealized losses	117	122
Investment securities - HTM	108,759	110,771
Held-to-maturity OTTI in AOCI	0	0
U.S. Treasury [Member]
Schedule of Investments [Line Items]
Amortized Cost		29,607
Gross Unrealized Gains		0
Gross Unrealized Losses		11
Investment securities - available-for-sale (at fair value)		29,596
OTTI in AOCI		0
U.S. Government Agencies [Member]
Schedule of Investments [Line Items]
Amortized Cost	34,096	39,077
Gross Unrealized Gains	125	117
Gross Unrealized Losses	0	253
Investment securities - available-for-sale (at fair value)	34,221	38,941
OTTI in AOCI	0	0
Held-to-maturity amortized cost	24,658	24,520
Held-to-maturity Gross Unrealized Gains	784	514
Held-to-maturity gross unrealized losses	0	0
Investment securities - HTM	25,442	25,034
Held-to-maturity OTTI in AOCI	0	0
Residential Mortgage-backed Agencies [Member]
Schedule of Investments [Line Items]
Amortized Cost	14,495	45,175
Gross Unrealized Gains	162	510
Gross Unrealized Losses	163	412
Investment securities - available-for-sale (at fair value)	14,494	45,273
OTTI in AOCI	0	0
Held-to-maturity amortized cost	54,869	58,400
Held-to-maturity Gross Unrealized Gains	689	613
Held-to-maturity gross unrealized losses	83	5
Investment securities - HTM	55,475	59,008
Held-to-maturity OTTI in AOCI	0	0
Commercial Mortgage-backed Agencies [Member]
Schedule of Investments [Line Items]
Amortized Cost	45,162	26,007
Gross Unrealized Gains	669	53
Gross Unrealized Losses	26	103
Investment securities - available-for-sale (at fair value)	45,805	25,957
OTTI in AOCI	0	0
Held-to-maturity amortized cost	18,148	16,425
Held-to-maturity Gross Unrealized Gains	565	312
Held-to-maturity gross unrealized losses	0	0
Investment securities - HTM	18,713	16,737
Held-to-maturity OTTI in AOCI	0	0
Collateralized Mortgage Obligations [Member]
Schedule of Investments [Line Items]
Amortized Cost	10,172	8,611
Gross Unrealized Gains	92	96
Gross Unrealized Losses	47	0
Investment securities - available-for-sale (at fair value)	10,217	8,707
OTTI in AOCI	0	0
Held-to-maturity amortized cost	6,432	7,379
Held-to-maturity Gross Unrealized Gains	0	5
Held-to-maturity gross unrealized losses	34	0
Investment securities - HTM	6,398	7,384
Held-to-maturity OTTI in AOCI	0	0
Obligations of States and Political Subdivisions [Member]
Schedule of Investments [Line Items]
Amortized Cost	48,065	46,151
Gross Unrealized Gains	1,081	1,413
Gross Unrealized Losses	292	260
Investment securities - available-for-sale (at fair value)	48,854	47,304
OTTI in AOCI	0	0
Held-to-maturity amortized cost	2,625	2,725
Held-to-maturity Gross Unrealized Gains	106	0
Held-to-maturity gross unrealized losses	0	117
Investment securities - HTM	2,731	2,608
Held-to-maturity OTTI in AOCI	0	0
Collateralized Debt Obligations [Member]
Schedule of Investments [Line Items]
Amortized Cost	35,636	37,117
Gross Unrealized Gains	3,631	1,155
Gross Unrealized Losses	7,339	12,933
Investment securities - available-for-sale (at fair value)	31,928	25,339
OTTI in AOCI	$ (60)	$ 6,143

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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2015

Derivative Financial Instruments [Abstract]

Impact of Derivative Financial Instruments

The table below discloses the impact of derivative financial instruments on the Corporation’s Consolidated Financial Statements for the nine- and three-months ended September 30, 2015 and 2014.

Derivative in Cash Flow Hedging Relationships
(in thousands)	Amount of gain recognized in OCI on derivative (effective portion)		Amount of gain or (loss) reclassified from accumulated OCI into income (effective portion) (a)		Amount of gain or (loss) recognized in income or derivative (ineffective portion and amount excluded from effectiveness testing) (b)
Interest rate contracts:
Nine months ended:
September 30, 2015	$	55	$	0	$	0
September 30, 2014		137		0		0
Three months ended:
September 30, 2015	$	20	$	0	$	0
September 30, 2014		26		0		0

Notes:

(a) Reported as interest expense

(b) Reported as other income

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Consolidated Statements of Comprehensive Income [Abstract]
Net Income	$ 1,948	$ 1,340	$ 4,491	$ 3,938
Other comprehensive income/(loss), net of tax and reclassification adjustments:
Net unrealized gains on investments with OTTI	913	346	3,729	3,388
Net unrealized (losses)/gains on all other AFS securities	727	(87)	1,394	8,255
Net unrealized gains/(losses) on HTM securities	64	57	225	(2,315)
Net unrealized gains on cash flow hedges	20	26	55	137
Net unrealized (losses)/gains on pension	(1,616)	(687)	(2,452)	(650)
Net unrealized gains on SERP	10	0	31	1
Other comprehensive income, net of tax	118	(345)	2,982	8,816
Comprehensive income	$ 2,066	$ 995	$ 7,473	$ 12,754

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Assets and Liabilities Subject to Enforceable Master Netting Agreements (Schedule of Liabilities Subject to an enforceable Master Netting Arrangement or Repurchase Agreements) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Interest Rate Swap [Member]
Gross Amounts of Recognized Liabilities	$ 107	$ 199
Gross Amounts Offset in the Statement of Condition	0	0
Net Amounts of Liabilities Presented in the Statement of Condition	107	199
Gross Amounts Not Offset in the Statement of Condition: Financial Instruments	(107)	(199)
Gross Amounts Not Offset in the Statement of Condition: Cash Collateral Pledged	0	0
Net amount	0	0
Repurchase Agreements [Member]
Gross Amounts of Recognized Liabilities	38,460	39,801
Gross Amounts Offset in the Statement of Condition	0	0
Net Amounts of Liabilities Presented in the Statement of Condition	38,460	39,801
Gross Amounts Not Offset in the Statement of Condition: Financial Instruments	(38,460)	(39,801)
Gross Amounts Not Offset in the Statement of Condition: Cash Collateral Pledged	0	0
Net amount	$ 0	$ 0

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Net Gains

9 Months Ended

Sep. 30, 2015

Net Gains [Abstract]

Net Gains

Note 3 – Net Gains

The following table summarizes the gain/(loss) activity for the nine- and three-month periods ended September 30, 2015 and 2014:

	Nine months ended				Three months ended
	September 30,				September 30,
(in thousands)	2015		2014		2015		2014
Net gains – other:
Available-for-sale securities:
Realized gains	$	373	$	427	$	217	$	222
Realized losses		(311)		(434)		(138)		(75)
Held-for-trading:
Realized gains		0		1,100		0		0
Gain on sale of consumer loans		40		37		16		19
Loss on disposal of fixed assets		(2)		(3)		0		0
Net gains – other	$	100	$	1,127	$	95	$	166

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Loans and Related Allowance for Loan Losses (Loan Portfolio Summarized by the Past Due Status) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	$ 826,511	$ 814,860
30-59 Days Past Due	1,741	11,057
60-89 Days Past Due	2,407	1,994
90 Days+ Past Due	657	529
Total Past Due and Still Accruing	4,805	13,580
Non-Accrual	11,776	11,551
Total Loans	843,092	839,991
Commercial real estate- non owner-occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	145,975	135,994
30-59 Days Past Due	69	104
60-89 Days Past Due	0	183
90 Days+ Past Due	0	0
Total Past Due and Still Accruing	69	287
Non-Accrual	1,499	1,152
Total Loans	147,543	137,433
Commercial real estate- all other CRE [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	112,969	112,825
30-59 Days Past Due	179	1,196
60-89 Days Past Due	187	0
90 Days+ Past Due	148	0
Total Past Due and Still Accruing	514	1,196
Non-Accrual	4,907	4,610
Total Loans	118,390	118,631
Acquisition and development- 1-4 family residential construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	16,452	13,710
30-59 Days Past Due	0	0
60-89 Days Past Due	0	0
90 Days+ Past Due	0	0
Total Past Due and Still Accruing	0	0
Non-Accrual	0	0
Total Loans	16,452	13,710
Acquisition and development- All other A&D [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	79,110	81,702
30-59 Days Past Due	0	239
60-89 Days Past Due	252	40
90 Days+ Past Due	0	1
Total Past Due and Still Accruing	252	280
Non-Accrual	2,942	3,609
Total Loans	82,304	85,591
Commercial and industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	74,532	93,060
30-59 Days Past Due	79	0
60-89 Days Past Due	0	20
90 Days+ Past Due	0	4
Total Past Due and Still Accruing	79	24
Non-Accrual	169	171
Total Loans	74,780	93,255
Residential mortgage- term [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	297,653	279,340
30-59 Days Past Due	438	8,654
60-89 Days Past Due	1,638	1,350
90 Days+ Past Due	509	416
Total Past Due and Still Accruing	2,585	10,420
Non-Accrual	2,029	1,666
Total Loans	302,267	291,426
Residential mortgage- home equity [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	75,374	74,913
30-59 Days Past Due	798	577
60-89 Days Past Due	278	313
90 Days+ Past Due	0	69
Total Past Due and Still Accruing	1,076	959
Non-Accrual	230	343
Total Loans	76,680	76,215
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	24,446	23,316
30-59 Days Past Due	178	287
60-89 Days Past Due	52	88
90 Days+ Past Due	0	39
Total Past Due and Still Accruing	230	414
Non-Accrual	0	0
Total Loans	$ 24,676	$ 23,730

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Equity Compensation Plan Information (Narrative) (Details) - USD ($)	1 Months Ended	3 Months Ended			9 Months Ended		12 Months Ended
	May. 31, 2014	Sep. 30, 2015	Mar. 31, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Share-based compensation arrangement by share-based payment award, description					On June 18, 2008, the Board of Directors of First United Corporation adopted a Long-Term Incentive Program (the "LTIP"). This program was adopted as a sub-plan of the Omnibus Plan to reward participants for increasing shareholder value, align executive interests with those of shareholders, and serve as a retention tool for key executives. Under the LTIP, participants are granted shares of restricted common stock of First United Corporation. The amount of an award is based on a specified percentage of the participant's salary as of the date of grant. These shares will vest if the Corporation meets or exceeds certain performance thresholds.
Deferred compensation arrangement with individual, description					Stock-based awards were made to non-employee directors in May 2015 pursuant to First United Corporation's director compensation policy. Beginning May 2014, each director's annual retainer is paid in 1,000 shares of common stock, with the remainder of $10,000 paid in cash or any portion thereof, in shares of stock. Prior to May 2014, the retainer of the 1,000 shares of stock was paid in shares of stock in the amount of $5,000.
Director [Member]
Issued fully-vested common stock shares					16,022
Per share fair market value of issued fully vested common stock shares					$ 8.96
Shares issued to Director	1,000
Cash paid to Director	$ 10,000
Director stock compensation expense					111,848	$ 95,035
Stock compensation expense		$ 35,889		$ 39,025
Director Prior to May 2014 [Member]
Director stock compensation expense							$ 5,000
Executive [Member]
Stock compensation expense		$ 11,382			$ 32,094
Maximum [Member]
Maximum issuance of common stock options		185,000			185,000
Restricted Stock [Member] | Two Executive Officers [Member]
LTEP vesting period					2 years
Shares granted, other than options			10,232

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Fair Value of Financial Instruments (Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	$ 185,519	$ 221,117
Financial Derivative	(107)	(199)
Impaired Financing Receivable, Recorded Investment	24,025	24,781
Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Financing Receivable, Recorded Investment	5,985	9,122
Other Real Estate	2,278	2,511
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Derivative	(107)	(199)
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Financing Receivable, Recorded Investment	5,985	9,122
Other Real Estate	2,278	2,511
U.S. Treasury [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		29,596
U.S. Treasury [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		29,596
U.S. Treasury [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		29,596
U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	34,221	38,941
U.S. Government Agencies [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	34,221	38,941
U.S. Government Agencies [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	34,221	38,941
Residential Mortgage-backed Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	14,494	45,273
Residential Mortgage-backed Agencies [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	14,494	45,273
Residential Mortgage-backed Agencies [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	14,494	45,273
Commercial Mortgage-backed Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	45,805	25,957
Commercial Mortgage-backed Agencies [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	45,805	25,957
Commercial Mortgage-backed Agencies [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	45,805	25,957
Collateralized Mortgage Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	10,217	8,707
Collateralized Mortgage Obligations [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	10,217	8,707
Collateralized Mortgage Obligations [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	10,217	8,707
Obligations of States and Political Subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	48,854	47,304
Obligations of States and Political Subdivisions [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	48,854	47,304
Obligations of States and Political Subdivisions [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	48,854	47,304
Collateralized Debt Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	31,928	25,339
Collateralized Debt Obligations [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	31,928	25,339
Collateralized Debt Obligations [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	31,928	25,339
Interest Rate Swap [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Derivative	(107)	(199)
Interest Rate Swap [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Derivative	$ (107)	$ (199)

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Earnings Per Common Share (Policy)

9 Months Ended

Sep. 30, 2015

Earnings Per Common Share [Abstract]

Earnings Per Common Share

Basic earnings per common share is derived by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period and does not include the effect of any potentially dilutive common stock equivalents.  Diluted earnings per share is derived by dividing net income available to common shareholders by the weighted-average number of shares outstanding, adjusted for the dilutive effect of outstanding common stock equivalents. 

The following tables set forth the calculation of basic and diluted earnings per common share for the nine- and three-month periods ended September 30, 2015 and 2014:

	Nine months ended September 30,
	2015					2014
			Average	Per Share				Average	Per Share
(in thousands, except for per share amount)	Income		Shares	Amount		Income		Shares	Amount
Basic and Diluted Earnings Per Share:
Net income	$	4,491				$	3,938
Preferred stock dividends		(2,025)					(1,919)
Discount accretion on preferred stock		0					(6)
Net income available to common shareholders	$	2,466	6,247	$	0.39	$	2,013	6,220	$	0.32

	Three months ended September 30,
	2015					2014
			Average	Per Share				Average	Per Share
(in thousands, except for per share amount)	Income		Shares	Amount		Income		Shares	Amount
Basic  and Diluted Earnings Per Share:
Net income	$	1,948				$	1,340
Preferred stock dividends deferred		(675)					(675)
Discount accretion on preferred stock		0					0
Net income available to common shareholders	$	1,273	6,255	$	0.20	$	665	6,228	$	0.10

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Accumulated Other Comprehensive Loss (Schedule of Reclassifications From Accumulated Other Comprehensive Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net gains/(losses) - other	$ 95	$ 166	$ 100	$ 1,127
Salaries and employee benefits	(5,445)	(4,910)	(15,703)	(14,613)
Tax (expense) benefit	(594)	(223)	(1,351)	(975)
Net income	1,948	1,340	4,491	3,938	$ 5,597
Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net income	(67)	81	(274)	63
Investment securities- with OTTI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest income (expense) on investment securities: taxable	139	170	479	501
Tax (expense) benefit	(55)	(68)	(191)	(200)
Net income	84	102	288	301
Investment Securities -All Other AFS [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net gains/(losses) - other	79	147	62	(7)
Tax (expense) benefit	(33)	(59)	(25)	2
Net income	46	88	37	(5)
Investment Securities HTM [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest income (expense) on investment securities: taxable	(106)	(95)	(374)	(127)
Tax (expense) benefit	42	38	149	51
Net income	(64)	(57)	(225)	(76)
Pension Plan [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax (expense) benefit	79	34	227	103
Net income	(123)	(52)	(343)	(156)
Pension Plan [Member] | Amortization of unrecognized loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits	(204)	(93)	(576)	(280)
Pension Plan [Member] | Amortization of transition asset [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits	5	10	15	30
Pension Plan [Member] | Amortization of prior service costs [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits	(3)	(3)	(9)	(9)
SERP [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax (expense) benefit	8	1	21	1
Net income	(10)	0	(31)	(1)
SERP [Member] | Amortization of unrecognized loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits			(37)	13
SERP [Member] | Amortization of Unrecognized Gain [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits	(13)	4
SERP [Member] | Amortization of prior service costs [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits	$ (5)	$ (5)	$ (15)	$ (15)

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Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Sep. 30, 2015

Accumulated Other Comprehensive Loss [Abstract]

Schedule of Accumulated Other Comprehensive Loss

The following table presents the changes in each component of accumulated other comprehensive loss for the 12 months ended December 31, 2014 and the three-month periods ended March 31, 2015, June 30, 2015 and September 30, 2015:

(in thousands)	Investment securities- with OTTI AFS		Investment securities- all other AFS			Investment securities- HTM	Cash Flow Hedge		Pension Plan		SERP		Total
Accumulated OCL, net:
Balance - January 1, 2014	$	(7,623)	$	(11,292)	$	0	$	(274)	$	(5,088)	$	64	$	(24,213)
Other comprehensive income/(loss) before reclassifications		4,349		8,712		(2,395)		155		(6,513)		(319)		3,989
Amounts reclassified from accumulated other comprehensive loss		(405)		25		140		0		209		22		(9)
Balance - December 31, 2014	$	(3,679)	$	(2,555)	$	(2,255)	$	(119)	$	(11,392)	$	(233)	$	(20,233)
Other comprehensive income/(loss) before reclassifications		1,670		621		0		21		(202)		0		2,110
Amounts reclassified from accumulated other comprehensive loss		(100)		58		70		0		112		10		150
Balance – March 31, 2015	$	(2,109)	$	(1,876)	$	(2,185)	$	(98)	$	(11,482)	$	(223)	$	(17,973)
Other comprehensive income/(loss) before reclassifications		1,350		36		0		14		(856)		0		544
Amounts reclassified from accumulated other comprehensive loss		(104)		(48)		91		0		110		11		60
Balance – June 30, 2015	$	(863)	$	(1,888)	$	(2,094)	$	(84)	$	(12,228)	$	(212)	$	(17,369)
Other comprehensive income/(loss) before reclassifications		997		700		0		20		(1,737)		0		(20)
Amounts reclassified from accumulated other comprehensive loss		(84)		27		64		0		121		10		138
Balance - September 30,2015	$	50	$	(1,161)	$	(2,030)	$	(64)	$	(13,844)	$	(202)	$	(17,251)

Components of Comprehensive Income

The following tables present the components of comprehensive income for the nine- and three-month periods ended September 30, 2015 and 2014:

Components of Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the nine months ended September 30, 2015
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	6,682	$	(2,665)	$	4,017
Less:  accretable yield recognized in income		479		(191)		288
Net unrealized gains on investments with OTTI		6,203		(2,474)		3,729
Available for sale securities – all other:
Unrealized holding gains		2,380		(949)		1,431
Less:  gains recognized in income		62		(25)		37
Net unrealized gains on all other AFS securities		2,318		(924)		1,394
Held to maturity securities:
Unrealized holding gains		0		0		0
Less:  amortization recognized in income		(374)		149		(225)
Net unrealized gains on HTM securities		374		(149)		225
Cash flow hedges:
Unrealized holding gains		92		(37)		55
Pension Plan:
Unrealized net actuarial loss		(4,651)		1,856		(2,795)
Less: amortization of unrecognized loss		(576)		229		(347)
Less: amortization of transition asset		15		(6)		9
Less: amortization of prior service costs		(9)		4		(5)
Net pension plan liability adjustment		(4,081)		1,629		(2,452)
SERP:
Unrealized net actuarial loss		0		0		0
Less: amortization of unrecognized loss		(37)		15		(22)
Less: amortization of prior service costs		(15)		6		(9)
Net SERP liability adjustment		52		(21)		31
Other comprehensive income	$	4,958	$	(1,976)	$	2,982

Components of Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the nine months ended September 30, 2014
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	6,149	$	(2,460)	$	3,689
Less:  accretable yield recognized in income		501		(200)		301
Net unrealized gains on investments with OTTI		5,648		(2,260)		3,388
Available for sale securities – all other:
Unrealized holding gains		13,746		(5,496)		8,250
Less:  losses recognized in income		(7)		2		(5)
Net unrealized gains on all other AFS securities		13,753		(5,498)		8,255
Held to maturity securities:
Unrealized holding losses		(3,984)		1,593		(2,391)
Less:  amortization recognized in income		(127)		51		(76)
Net unrealized losses on HTM securities		(3,857)		1,542		(2,315)
Cash flow hedges:
Unrealized holding gains		229		(92)		137
Pension Plan:
Unrealized net actuarial loss		(1,345)		539		(806)
Less: amortization of unrecognized loss		(280)		112		(168)
Less: amortization of transition asset		30		(12)		18
Less: amortization of prior service costs		(9)		3		(6)
Net pension plan liability adjustment		(1,086)		436		(650)
SERP:
Unrealized net actuarial loss		0		0		0
Less: amortization of unrecognized gain		13		(5)		8
Less: amortization of prior service costs		(15)		6		(9)
Net SERP liability adjustment		2		(1)		1
Other comprehensive income	$	14,689	$	(5,873)	$	8,816

Components of Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the three months ended September 30, 2015
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	1,658	$	(661)	$	997
Less:  accretable yield recognized in income		139		(55)		84
Net unrealized gains on investments with OTTI		1,519		(606)		913
Available for sale securities – all other:
Unrealized holding gains		1,288		(515)		773
Less:  gains recognized in income		79		(33)		46
Net unrealized gains on all other AFS securities		1,209		(482)		727
Held to maturity securities:
Unrealized holding gains		0		0		0
Less:  amortization recognized in income		(106)		42		(64)
Net unrealized gains on HTM securities		106		(42)		64
Cash flow hedges:
Unrealized holding gains		33		(13)		20
Pension Plan:
Unrealized net actuarial loss		(2,892)		1,153		(1,739)
Less: amortization of unrecognized loss		(204)		80		(124)
Less: amortization of transition asset		5		(2)		3
Less: amortization of prior service costs		(3)		1		(2)
Net pension plan liability adjustment		(2,690)		1,074		(1,616)
SERP:
Unrealized net actuarial loss		0		0		0
Less: amortization of unrecognized loss		(13)		5		(8)
Less: amortization of prior service costs		(5)		3		(2)
Net SERP liability adjustment		18		(8)		10
Other comprehensive income	$	195	$	(77)	$	118

Components of Comprehensive Income (in thousands)	Before Tax Amount		Tax (Expense) Benefit		Net
For the three months ended September 30, 2014
Available for sale (AFS) securities with OTTI:
Unrealized holding gains	$	748	$	(300)	$	448
Less:  accretable yield recognized in income		170		(68)		102
Net unrealized gains on investments with OTTI		578		(232)		346
Available for sale securities – all other:
Unrealized holding gains		3		(2)		1
Less:  gains recognized in income		147		(59)		88
Net unrealized losses on all other AFS securities		(144)		57		(87)
Held to maturity securities:
Unrealized holding gains		0		0		0
Less:  amortization recognized in income		(95)		38		(57)
Net unrealized gains on HTM securities		95		(38)		57
Cash flow hedges:
Unrealized holding gains		44		(18)		26
Pension Plan:
Unrealized net actuarial loss		(1,233)		494		(739)
Less: amortization of unrecognized loss		(93)		37		(56)
Less: amortization of transition asset		10		(4)		6
Less: amortization of prior service costs		(3)		1		(2)
Net pension plan liability adjustment		(1,147)		460		(687)
SERP:
Unrealized net actuarial loss		0		0		0
Less: amortization of unrecognized gain		4		(1)		3
Less: amortization of prior service costs		(5)		2		(3)
Net SERP liability adjustment		1		(1)		0
Other comprehensive loss	$	(573)	$	228	$	(345)

Reclassification Out of Accumulated Other Comprehensive Income

The following table presents the details of amount reclassified from accumulated other comprehensive loss for the nine- and three-month periods ended September 30, 2015 and 2014:

Amounts Reclassified From Accumulated Other Comprehensive Loss (in thousands)	For the nine months ended September 30, 2015		For the Nine months ended September 30, 2014		Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on investment securities with OTTI:
Accretable yield	$	479	$	501	Interest income on taxable investment securities
Taxes		(191)		(200)	Tax expense
	$	288	$	301	Net of tax
Unrealized gains and losses on available for sale investment securities - all others:
Gains/(losses) on sales	$	62	$	(7)	Net gains/(losses) - other
Taxes		(25)		2	Tax (expense)/benefit
	$	37	$	(5)	Net of tax
Unrealized losses on held to maturity securities:
Amortization	$	(374)	$	(127)	Interest income on taxable investment securities
Taxes		149		51	Tax benefit
	$	(225)	$	(76)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss		(576)		(280)	Salaries and employee benefits
Amortization of transition asset		15		30	Salaries and employee benefits
Amortization of prior service costs		(9)		(9)	Salaries and employee benefits
Taxes		227		103	Tax benefit
	$	(343)	$	(156)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized (loss)/gain		(37)		13	Salaries and employee benefits
Amortization of prior service costs		(15)		(15)	Salaries and employee benefits
Taxes		21		1	Tax benefit
	$	(31)	$	(1)	Net of tax
Total reclassifications for the period	$	(274)	$	63	Net of tax

Amounts Reclassified From Accumulated Other Comprehensive Loss (in thousands)	For the Three months ended September 30, 2015		For the Three months ended September 30, 2014		Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on investment securities with OTTI:
Accretable Yield	$	139	$	170	Interest income on taxable investment securities
Taxes		(55)		(68)	Tax expense
	$	84	$	102	Net of tax
Unrealized gains and losses on available for sale investment securities - all others:
Gains on sales	$	79	$	147	Net gains - other
Taxes		(33)		(59)	Tax expense
	$	46	$	88	Net of tax
Unrealized losses on held to maturity securities:
Amortization	$	(106)	$	(95)	Interest income on taxable investment securities
Taxes		42		38	Tax benefit
	$	(64)	$	(57)	Net of tax
Net pension plan liability adjustment:
Amortization of unrecognized loss		(204)		(93)	Salaries and employee benefits
Amortization of transition asset		5		10	Salaries and employee benefits
Amortization of prior service costs		(3)		(3)	Salaries and employee benefits
Taxes		79		34	Tax benefit
	$	(123)	$	(52)	Net of tax
Net SERP liability adjustment:
Amortization of unrecognized (loss)/gain		(13)		4	Salaries and employee benefits
Amortization of prior service costs		(5)		(5)	Salaries and employee benefits
Taxes		8		1	Tax benefit
	$	(10)	$	0	Net of tax
Total reclassifications for the period	$	(67)	$	81	Net of tax

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Employee Benefit Plans

9 Months Ended

Sep. 30, 2015

Employee Benefit Plans [Abstract]

Employee Benefit Plans

Note 13 – Employee Benefit Plans

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

Pension	For the nine months ended				For the three months ended
	September 30,				September 30,
(in thousands)	2015		2014		2015		2014
Service cost	$	242	$	193	$	74	$	64
Interest cost		1,177		1,106		403		369
Expected return on assets		(2,224)		(1,990)		(740)		(662)
Amortization of transition asset		(15)		(30)		(5)		(10)
Amortization of net actuarial loss		576		280		204		93
Amortization of prior service cost		9		9		3		3
Net pension credit included in employee benefits	$	(235)	$	(432)	$	(61)	$	(143)

SERP	For the nine months ended				For the three months ended
	September 30,				September 30,
(in thousands)	2015		2014		2015		2014
Service cost	$	87	$	71	$	29	$	23
Interest cost		174		172		58		58
Amortization of recognized loss/(gain)		37		(13)		13		(4)
Amortization of prior service cost		15		15		5		5
Net SERP expense included in employee benefits	$	313	$	245	$	105	$	82

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

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

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

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

The Corporation will assess the need for future annual contributions to the pension plan based upon its funded status and an evaluation of the future benefits to be provided thereunder.  There have been no contributions made as of September 30, 2015.  The Corporation expects to fund the annual projected benefit payments for the SERP from operations.

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